Elizabeth Arden (RDEN) 10-Q 2006 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2005
[]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-6370

ELIZABETH ARDEN, INC.

(Exact name of registrant as specified in its charter)

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

(954) 364-6900

(Registrant's telephone number, including area code)

14100 N.W. 60th Avenue, Miami Lakes, Florida 33014

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

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  [X]      No  [  ]

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.    Large accelerated filer  [  ]      Accelerated filer  [X]      Non-accelerated filer  [  ]

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  [  ]      No  [X].

     Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class	Outstanding at February 7, 2006
Common Stock, $.01 par value	29,642,058 Shares

ELIZABETH ARDEN, INC.

INDEX TO FORM 10-Q

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	Page No.
	Unaudited Consolidated Balance Sheets - December 31, 2005 and June 30, 2005	3
	Unaudited Consolidated Statements of Operations -- Three and six months ended December 31, 2005   and December 31, 2004	4
	Unaudited Consolidated Statement of Shareholders' Equity -- Six months ended December 31, 2005	5
	Unaudited Consolidated Statements of Cash Flow -- Six months ended December 31, 2005 and   December 31, 2004	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 4.	Submission of Matters to a Vote of Security Holders	38
Item 6.	Exhibits	39
Signatures		42
Exhibit Index		43

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PART I      FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS

ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

				As of
				December 31,			June 30,
				2005			2005
ASSETS
Current Assets
	Cash and cash equivalents			$	20,957		$	25,316
	Accounts receivable, net				221,939			149,965
	Inventories				227,261			273,343
	Deferred income taxes				7,479			18,097
	Prepaid expenses and other assets				22,208			18,672
	Assets held for sale				--			9,719
			Total current assets		499,844			495,112
	Property and equipment, net				32,625			29,184
	Other Assets
		Exclusive brand licenses, trademarks and intangibles, net			184,908			186,527
		Debt financing costs, net			7,503			7,905
		Other assets			1,105			1,169
			Total other assets		193,516			195,601
			Total assets	$	725,985		$	719,897
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Short-term debt			$	20,474		$	47,700
	Accounts payable -- trade				98,718			108,112
	Other payables and accrued expenses				70,509			63,672
	Current portion of long-term debt				8,802			--
			Total current liabilities		198,503			219,484
	Long-term debt				225,000			233,802
	Deferred income taxes and other				9,351			7,411
			Total long-term liabilities		234,351			241,213
			Total liabilities		432,854			460,697
Commitments and contingencies
Shareholders' Equity
	Common stock, $.01 par value, 50,000,000 shares authorized; 29,567,558   issued and 29,192,222 outstanding, and 29,256,560 shares issued and   outstanding, respectively				296			293
	Additional paid-in capital				244,432			249,919
	Retained earnings				49,537			15,547
	Treasury stock (375,336 shares at cost)				(7,233	)		--
	Accumulated other comprehensive income				6,099			5,730
	Unearned deferred compensation				--			(12,289	)
			Total shareholders' equity		293,131			259,200
			Total liabilities and shareholders' equity	$	725,985		$	719,897

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

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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
			Three Months Ended				Six Months Ended
			December 31, 2005		December 31, 2004		December 31, 2005		December 31, 2004
Net sales			$	345,893	$	322,951	$	573,271	$	535,107
Cost of sales (excludes depreciation of $503, $704,   $1,181 and $1,370, respectively, included below)				200,133		181,348		338,445		303,993
Gross profit				145,760		141,603		234,826		231,114
Operating expenses
	Selling, general and administrative			86,105		83,944		162,495		154,902
	Depreciation and amortization			5,376		5,449		10,649		10,982
		Total operating expenses		91,481		89,393		173,144		165,884
Income from operations				54,279		52,210		61,682		65,230
Interest expense, net				6,662		6,274		12,776		12,259
Income before income taxes				47,617		45,936		48,906		52,971
Provision for income taxes				14,523		14,210		14,916		16,462
Net income			$	33,094	$	31,726	$	33,990	$	36,509
Net income per common share:
	Basic		$	1.16	$	1.15	$	1.19	$	1.33
	Diluted		$	1.12	$	1.06	$	1.15	$	1.23
Weighted average number of common shares:
	Basic			28,461		27,519		28,519		27,430
	Diluted			29,484		29,888		29,615		29,743

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

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ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(Unaudited)

(Amounts in thousands)

			Common Stock Outstanding					Additional Paid-in			Retained		Treasury			Accumulated Other Comprehensive			Unearned Deferred			Total Shareholders'
			Shares			Amount		Capital			Earnings		Stock			Income			Compensation			Equity
Balance at June 30, 2005				29,257		$	293	$	249,919		$	15,547	$			$	5,730		$	(12,289	)	$	259,200
Change in accounting principle for adoption of   SFAS 123R share-based payment awards   (See Note 3)									(12,150	)										12,289			139
Issuance of common stock upon exercise of   stock options				65			1		772														773
Issuance of common stock from employee stock   purchase plan				50			--		808														808
Issuance of restricted stock, net of forfeitures				196			2		(2	)													--
Amortization of share-based awards									5,085														5,085
Repurchase of common stock				(375	)									(7,233	)								(7,233	)
Comprehensive income:
	Net income											33,990											33,990
	Foreign currency translation adjustments																355						355
	Disclosure of reclassification amount, net of   taxes (8% tax rate):
		Unrealized hedging gains arising during the   period															1,406						1,406
		Less: reclassification adjustment for   hedging gains included in net income															(1,392	)					(1,392	)
		Net unrealized cash flow hedging gain															14						14
	Total comprehensive income											33,990					369						34,359
Balance at December 31, 2005				29,193		$	296	$	244,432		$	49,537	$	(7,233	)	$	6,099		$	--		$	293,131

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

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ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

					Six Months Ended
					December 31,			December 31,
					2005			2004
Operating Activities:
		Net income			$	33,990		$	36,509
		Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation and amortization			10,649			10,982
			Amortization of senior note offering costs			602			927
			Amortization of share-based awards			5,085			3,517
			Cumulative effect of a change in accounting for share-based payment   awards			139			--
			Deferred income taxes and other			12,343			13,351
		Changes in assets and liabilities:
			Increase in accounts receivable			(71,974	)		(95,668	)
			Decrease (increase) in inventories			47,711			(1,071	)
			Increase in prepaid expenses and other assets			(4,237	)		(281	)
			(Decrease) increase in accounts payable			(8,739	)		5,607
			Increase in other payables, accrued expenses and other liabilities			5,111			27,186
			Other			459			1,333
				Net cash provided by operating activities		31,139			2,392
Investing Activities:
	Additions to property and equipment					(10,905	)		(8,706	)
	Proceeds from disposals of property and equipment					9,945			--
	Acquisition of distributor assets					(1,583	)		--
				Net cash used in investing activities		(2,543	)		(8,706	)
Financing Activities:
	(Payments on) proceeds from short-term debt					(27,226	)		17,196
	Payments on long-term debt					--			(4,764	)
	Proceeds from the exercise of stock options					773			3,015
	Proceeds for issuance of common stock from employee stock purchase   plan					808			810
	Repurchase of common stock					(7,233	)		--
	Other					--			(71	)
				Net cash (used in) provided by financing activities		(32,878	)		16,186
Effect of exchange rate changes on cash and cash equivalents						(77	)		945
Net (decrease) increase in cash and cash equivalents						(4,359	)		10,817
Cash and cash equivalents at beginning of period						25,316			23,494
Cash and cash equivalents at end of period					$	20,957		$	34,311
Supplemental Disclosure of Cash Flow Information:
	Interest paid during the period				$	12,307		$	13,138
	Income taxes paid during the period				$	3,441		$	1,792

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

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

NOTE 1.    BUSINESS AND BASIS OF PRESENTATION

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

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

      The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission") for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the year ended June 30, 2005 (the "Annual Report"), filed with the Commission.

      The consolidated balance sheet of the Company as of June 30, 2005 is derived from the financial statements included in the Annual Report. The consolidated financial statements presented in this quarterly report are unaudited but include all adjustments that are of a normal recurring nature that management considers necessary for the fair statement of the results for the interim periods. Results for interim periods are not necessarily indicative of results for the full fiscal year.

NOTE 2.    INCOME PER SHARE

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

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

(Amounts in thousands, except per  share data)			Three Months Ended				Six Months Ended
			December 31,		December 31,		December 31,		December 31,
			2005		2004		2005		2004
Basic
	Net income attributable to common   shareholders		$	33,094	$	31,726	$	33,990	$	36,509
	Weighted average shares outstanding			28,461		27,519		28,519		27,430
	Net income per basic share		$	1.16	$	1.15	$	1.19	$	1.33
Diluted
	Net income attributable to common   shareholders		$	33,094	$	31,726	$	33,990	$	36,509
	Weighted average shares outstanding			28,461		27,519		28,519		27,430
	Potential common shares - treasury   method			1,023		2,369		1,096		2,313
	Weighted average shares and potential   dilutive shares			29,484		29,888		29,615		29,743
		Net income per diluted share	$	1.12	$	1.06	$	1.15	$	1.23

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

      The following table shows the options to purchase shares of Common Stock that were outstanding during the three and six months ended December 31, 2005 and 2004 where the option exercise price was greater than the average market price of the Common Stock over the applicable period:

	Three Months Ended				Six Months Ended
	December 31, 2005		December 31, 2004		December 31, 2005		December 31, 2004
Number of shares		819,175		--		418,700		--
Range of exercise price	$	20.30-23.40	$	--	$	21.67-23.40	$	--

NOTE 3.    STOCK-BASED COMPENSATION

      In December 2004, the Financial Accounting Standards Board ("FASB") issued a final standard, SFAS 123R, "Share-Based Payment," ("SFAS 123R"), which requires companies to expense the value of employee stock options and similar awards. Under SFAS 123R, share-based payment awards result in a cost that will be measured at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest. Compensation cost for awards that vest would not be reversed if the awards expire without being exercised. SFAS 123R was effective for the Company beginning on July 1, 2005 and applied to all outstanding and unvested share-based payment awards at the adoption date. The Company adopted the modified prospective approach as its implementation method under this pronouncement. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the market-based restricted stock awards was determined using a Monte Carlo simulation model, and the fair value of all other restricted stock awards was based on the closing price of the Company's Common Stock on the date of grant. For the quarter ended December 31, 2005, the Company recorded costs related to this pronouncement, which include the effects of any grants made during the quarter, of approximately $1.4 million (approximately $0.9million, net of taxes) or $0.03 per basic share and diluted share. For the six-month period ended December 31, 2005, the Company recorded costs related to this pronouncement, which include the effects of any grants made during the period, of approximately $2.8 million (approximately $1.9 million, net of taxes) or $0.07 per basic share and $0.06 per diluted share. Included in the $1.4 million and $2.8 million of total costs recorded is a charge of approximately $0.1 million relating to a change in the valuation method of certain restricted stock awards as a result of the adoption of this standard.

      At December 31, 2005, the Company had outstanding stock awards under five share-based compensation plans, which are described in Note 9. For the three and six months ended December 31, 2005, the compensation cost that has been charged against income was $2.6 million and $5.1 million, respectively.For the three and six months ended December 31, 2004, the compensation cost that has been charged against income was $2.0 million and $3.5 million, respectively.The tax benefit related to the compensation cost charged to income for the three and six months ended December 31, 2005 was approximately $0.8 million and $1.6 million, respectively. The tax benefit related to the compensation cost charged to income for the three and six months ended December 31, 2004 was approximately $0.6 million and $1.1 million, respectively.

      On August 10, 2005, in recognition of individual performance for the year ended June 30, 2005, the Board of Directors (the "Board") granted stock options to 127 managerial employees for approximately 417,700 shares of Common Stock under the 2004 Stock Incentive Plan ("2004 Incentive Plan"). The stock options are due to vest over three years in thirds on each succeeding year from the date of grant, assuming the person receiving the grant is employed by the Company at the time of vesting. The exercise price of those stock options is $23.40 per share, which was the closing price of the Common Stock on the date of grant. The weighted-average grant-date fair value of options granted was $8.81 per share based on the Black-Scholes option-pricing model. The options expire ten years from the date of grant.

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

       On November 16, 2005, the Company granted stock options for an aggregate of 35,000 shares of Common Stock to five non-employee directors under the 2004 Non-Employee Director Plan (the"2004 Director Plan"), which are exercisable three years from the date of grant if such persons continue to serve as a director on that date. The exercise price of those stock options is $19.39 per share, which was the closing price of the Common Stock on the date of grant. The weighted-average grant-date fair value of options granted was $7.32 per share based on the Black-Scholes option-pricing model. The options expire ten years from the date of grant.

      The weighted average grant date fair value of options granted during the six months ended December 31, 2005 were estimated on the grant date using the Black-Scholes option-pricing model with the assumptions noted in the following table.  Expected volatilities are based on implied volatilities from traded options on the Common Stock, historical volatility of the Common Stock, and other factors.  The expected term of options represents the period of time that options granted are expected to be outstanding and is derived from historical terms and other factors.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Six Months Ended
	December 31, 2005
Expected dividend yield	0.00	%
Expected price volatility	35.00	%
Risk-free interest rate	4.03% - 4.09	%
Expected life of options in years	5

      A summary of stock option activity under the Company's share-based compensation plans for the six months ended December 31, 2005 is presented below:

					Weighted
			Weighted		Average	Aggregate
			Average		Remaining	Intrinsic
	Shares		Exercise		Contractual	Value(1)
Options	(000)		Price		Term	(000)
Outstanding at July 1, 2005	3,221		$	13.65
New grants	455		$	23.08
Exercised	(63	)	$	11.75
Forfeited or expired	(9	)	$	16.73
Outstanding at December 31, 2005	3,604		$	14.87	6.0	$	24,307
Exercisable at December 31, 2005	2,729		$	12.95	5.1	$	23,647

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

      The total intrinsic value of stock options exercised during the six months ended December 31, 2005 and 2004, based upon the average market price during the period, was approximately $0.6 million and $3.7 million, respectively.

      On August 10, 2005, in recognition of individual performance for the year ended June 30, 2005, the Board granted 195,949 shares of performance-based restricted stock to 118 managerial employees, one third of which vests two years from the date of grant and the remaining two thirds vest three years from the date of grant if the Company achieves a 10% cumulative average annualized increase in earnings per share, excluding any one-time or extraordinary events (as determined by the compensation committee of the Board), over the relevant measurement periods. The fair value of the restricted stock granted was based on the closing price of the Common Stock on the date of grant. The restricted stock is recorded as additional paid-in capital in shareholders' equity as amortization occurs over the two- and three-year vesting periods using the graded vesting method.

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

      A summary of the Company's restricted stock activity for the six months ended December 31, 2005, is presented below:

			Weighted Average
	Shares		Grant-Date
Restricted Stock	(000)		Fair Value
Non-vested at July 1, 2005	695		$	19.73
Granted	197		$	23.40
Vested	(62	)	$	23.39
Forfeited	(3	)	$	19.16
Non-vested at December 31, 2005	827		$	22.32

      As of December 31, 2005, there were approximately $17.5 million of unrecognized compensation costs related to non-vested share-based arrangements granted under the Company's stock plans. Those costs are expected to be recognized over a weighted-average period of approximately three years.

      Prior to July 1, 2005, the Company accounted for its stock incentive plans under the recognition and measurement principles prescribed by Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations, under which no employee compensation costs were required to be recognized for the periods presented as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and net income per common share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock option compensation for the three and six months ended December 31, 2004:

(Amounts in thousands, except per share data)		December 31, 2004
			Three Months Ended		Six Months Ended
Net income as reported		$	31,726	$	36,509
Add:  Restricted stock-based employee   compensation costs, net of tax, currently included   in net income		��	1,310		2,392
Less:  Stock-based employee compensation expense,   net of tax, determined under fair value-based   method			2,197		4,165
Pro forma net income		$	30,839	$	34,736
Net income per common share
Basic
	As reported	$	1.15	$	1.33
	Pro forma	$	1.12	$	1.27
Diluted
	As reported	$	1.06	$	1.23
	Pro forma	$	1.03	$	1.17

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

NOTE 4.    RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS AND RECENT LEGISLATION

American Jobs Creation Act of 2004

      In October 2004, the American Jobs Creation Act of 2004 (the "Act") was signed into law. The Act contains a number of provisions that might affect the Company's future effective tax rate. A significant provision of the Act allows the Company to elect to deduct from its taxable income 85% of certain eligible dividends received by the Company from non-U.S. subsidiaries before either the year ended June 30, 2005 or the year ending June 30, 2006, if those dividends are reinvested in the U.S. for eligible purposes under the Act. Another significant provision replaces the extraterritorial income exclusion with a domestic manufacturing deduction. In September 2005, the Company repatriated $3.2 million of undistributed international earnings from a foreign subsidiary. In anticipation of making such repatriation, the Company had accrued a net provision of $146,000 for estimated deferred taxes during the year ended June 30, 2005.

Inventory Costs - An Amendment of ARB No. 43, Chapter 4

      In November 2004, the FASB issued SFAS No. 151, "Inventory Costs -- An Amendment of ARB No. 43, Chapter 4" ("SFAS 151"). SFAS 151 amends the guidance in ARB No. 43, Chapter 4 "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal" as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company adopted SFAS 151 on July 1, 2005. The adoption of SFAS 151 did not have an impact on the Company's results of operations, financial position or cash flows.

NOTE 5.    INVENTORIES

      The components of inventory were as follows:

	December 31,		June 30,
(Dollars in thousands)	2005		2005
Raw materials and components	$	51,797	$	51,999
Work in progress	24,753		43,037
Finished goods	150,711		178,307
Total	$	227,261	$	273,343

NOTE 6.    SHORT-TERM DEBT

      The Company has a revolving credit facility with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, that provides for borrowings on a revolving basis of up to $200 million with a $25 million sublimit for letters of credit (the "Credit Facility"). On November 2, 2005, the Company entered into an amendment to the Credit Facility that (i) extends the maturity of the Credit Facility to December 2010 from June 2009, (ii) reduces the interest rates and commitment fees based on the Company's debt service coverage ratio, (iii) permits the Company to increase the size of the Credit Facility by up to $100 million without entering into a formal amendment requiring the consent of all of the banks, and (iv) permits the Company to pay cash dividends on the Common Stock, repurchase Common Stock or make other distributions to the common shareholders if the Company maintains borrowing availability after the applicable payment of at least $2 5 million from June 1 to November 30 and at least $35 million from December 1 to May 31.

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

      The Credit Facility is guaranteed by all of the Company's U.S. subsidiaries. Borrowings under the Credit Facility are limited to 85% of eligible accounts receivable and 75% (65% December 1 through May 31) of eligible finished goods inventory and are collateralized by a first priority lien on all of the Company's U.S. accounts receivable and inventory. The Company's obligations under the Credit Facility rank pari passu, or equal in right of payment, with the Company's remaining 11 3/4% Senior Secured Notes due 2011 (the "11 3/4 % Senior Notes") and rank senior to the Company's 7 3/4% Senior Subordinated Notes due 2014 (the "7 3/4% Senior Subordinated Notes").

      The Credit Facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if average borrowing availability declines to less than $25 million ($35 million from December 1 through May 31). No financial maintenance covenant was applicable for the three-month period ended December 31, 2005. The Credit Facility restricts the Company from incurring additional non-trade indebtedness (other than refinancing and certain small amounts of indebtedness).

      Borrowings under the revolving credit portion of the Credit Facility bear interest at a floating rate based on the "Applicable Margin," which is determined by reference to a specific financial ratio. At the Company's option, the Applicable Margin may be applied to either the London InterBank Offered Rate ("LIBOR") or the prime rate. The reference ratio for determining the Applicable Margin is a debt service coverage ratio. As a result of the November 2005 amendment to the Credit Facility, the interest rates charged on LIBOR loans and prime rate loans were reduced to a range of 1.00% to 1.75% from a range of 1.50% to 2.25% for LIBOR loans, and to 0% from a range of 0% to 0.50% for prime rate loans. As of December 31, 2005, the Applicable Margin was 1.25% for LIBOR loans and 0% for prime rate loans. The commitment fee on the unused portion of the Credit Facility is 0.25%.

      As of December 31, 2005, the Company had approximately $20 million in outstanding borrowings and approximately $4 million in letters of credit outstanding under the Credit Facility, compared with approximately $48 million in outstanding borrowings under the Credit Facility at June 30, 2005. As of December 31, 2005,the Company had approximately $142 million of eligible receivables and inventories available as collateral under the Credit Facility, resulting in remaining borrowing availability of approximately $117 million. The Company classifies the Credit Facility as short-term debt on its balance sheet since it expects to reduce outstanding borrowings during the months of December, January and February.

NOTE 7.    LONG-TERM DEBT

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

(Dollars in thousands)	December 31,		June 30,
Description	2005		2005
11 3/4% Senior Secured Notes due May 2011	$	8,802	$	8,802
7 3/4% Senior Subordinated Notes due January 2014		225,000		225,000
Total	$	233,802	$	233,802
Less:  Current portion of long-term debt		8,802		--
Total long-term debt	$	225,000	$	233,802

      Redemption of 11 3/4% Senior Notes. On November 2, 2005, the Board authorized the Company's redemption of the remaining $8.8 million aggregate principal amount of 11 3/4% Senior Notes when such notes are redeemable on February 1, 2006 at the redemption price of 105.875% of their par amount plus accrued interest. On December 23, 2005, the Company issued a notice to the trustee under the indentures calling for the redemption of the remaining $8.8 million aggregate principal amount of 11 3/4% Senior Notes effective February 1, 2006. The redemption price was 105.875% of the principal amount, plus accrued interest and the redemption date was February 1, 2006. The Company utilized borrowings under the Credit Facility to repurchase the 11 3/4% Senior Notes. As a result of this transaction, the Company will incur a pre-tax charge of approximately $0.5 million related to the early extinguishment of the remaining 11 3/4% Senior Notes in the third quarte r ending March 31, 2006.

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

NOTE 8.    COMMITMENTS AND CONTINGENCIES

      At December 31, 2005, the Company had commitments to incur promotional and advertising expenses, which are either fixed commitments or based on net sales for licensed brands, and minimum royalty guarantees in an aggregate amount of $40.0 million through 2010 compared with $33.8 million at June 30, 2005.

      In February 2004, the Company entered into an interest rate swap agreement to swap $50.0 million of the outstanding 7 3/4% Senior Subordinated Notes to a floating interest rate based on LIBOR. In the short term, this will provide the Company with a lower level of interest expense related to a portion of the 7 3/4% Senior Subordinated Notes based on current LIBOR rates; however, over the life of the notes, interest expense may be greater than 7 3/4% based upon fluctuations in LIBOR. The swap agreement matures in February 2014. The Company can terminate the swap agreement at its option at any time and the counter party can call the swap agreement any time after January 2009. The Company has designated the swap agreement as a fair value hedge.

      Assets held for sale on the consolidated balance sheet at June 30, 2005, relate to the Company's formercorporate headquarters and former distribution facility located on a 13-acre tract of land in Miami Lakes, Florida (the "Miami Lakes Facility"). The sale of the Miami Lakes Facility closed on August 1, 2005 and the Company received approximately $9.9 million in net proceeds relating to the sale of the Miami Lakes Facility and associated equipment.

      In September 2005, the Company entered into an operating lease for approximately 35,000 square feet of office space in Miramar, Florida. The term of the lease commenced on December 1, 2005 and expires on May 31, 2011. Aggregate payments under this lease are approximately $4.7 million through the term of the lease.

      In August 2005, a wholly-owned subsidiary of the Company acquired certain assets, including inventory and certain intangibles of the distributor of Elizabeth Arden brands in the People's Republic of China in order to operate the business in China. The purchase price was approximately $4.5 million, comprised of $2.6 million payable in cash, of which approximately $1.6 million was paid as of December 31, 2005, and $1.9 million of which was credited against an account receivable due a subsidiary of the Company. The purchase price was allocated as follows: $2.0 million for inventory, $0.2 million for fixed assets and $2.3 million for intangible assets. The allocation of purchase price is preliminary and the Company is continuing to evaluate the final allocation of the purchase price. Net sales and operating income related to the Chinese operations were not significant to the overall consolidated results for the three and six months ended December 31, 2005.

      In January 2006, a wholly-owned subsidiary of the Company acquired certain assets, including inventory, retailer fixtures and other fixed assets and certain intangibles of the distributor of the Elizabeth Arden brands in Taiwan in order to operate the business in Taiwan. The purchase price was approximately $3.2 million, comprised of $2.1 million payable in cash, of which approximately $0.5 million was paid in January 2006 and $1.1 million was credited against an account receivable due a subsidiary of the Company.

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

      The Company is a party to a number of other legal actions, proceedings or claims. While any action, proceeding or claim contains an element of uncertainty; management of the Company believes that the outcome of such actions, proceedings or claims will not have a material adverse effect on the Company's business, financial position or results of operations.

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

      As of December 31, 2005, the Company had notional amounts of 28.8 million Euros and 16.8 million Britishpounds under foreign currency contracts that expire between January 31, 2006 and June 29, 2007 to reduce the exposure of its foreign subsidiary revenues to fluctuations in currency rates. The Company has designated each qualifying foreign currency contract as a cash flow hedge. The gains and losses of these contracts will only be recognized in earnings in the period in which the contracts expire. At December 31, 2005, the unrealized gain, net of taxes, associated with these contracts of approximately $3.0 million, is included in accumulated other comprehensive income. The unrealized gain, net of taxes, incurred during the three and six months ended December 31, 2005, was approximately $33,500 and approximately $13,800, respectively. In addition, as of December 31, 2005, the Company had 9.5 million Euros under foreign currency contracts tha t expire on January 31, 2006 to reduce exposure of the Company's foreign subsidiaries net balance sheet to fluctuations in foreign currency rates.

      In addition, during December 2005, the Company entered into and settled 13.6 million Euros and 6.1 British pounds under foreign currency contracts to reduce exposure of the Company's foreign subsidiaries net balance sheet to fluctuations in foreign currency rates. The realized gain, net of taxes, recognized during the three and six months ended December 31, 2005 was approximately $0.4 million.

      The Company does not utilize foreign exchange contracts for trading or speculative purposes. There can be no assurance that the Company's hedging operations or other exchange rate practices, if any, will eliminate or substantially reduce risks associated with fluctuating exchange rates.

NOTE 9.     SHAREHOLDERS' EQUITY

Stock Incentive Plans and Awards

      At December 31, 2005, the Company had outstanding stock awards under five stock incentive plans, two for the benefit of non-employee directors (the 1995 Non-Employee Director Plan and the 2004 Director Plan) and three for the benefit of eligible employees and independent contractors (the 1995 Stock Option Plan, the 2000 Stock Incentive Plan and the 2004 Incentive Plan). All five plans were adopted by the Board and approved by the Company's shareholders. The shareholders of the Company approved the 2004 Incentive Plan on June 22, 2004, as there remained no shares of Common Stock available for grant under the 1995 Stock Option Plan and the 2000 Stock Incentive Plan. The 2004 Director Plan was also approved by the shareholders of the Company on June 22, 2004 and replaced the 1995 Non-Employee Director Plan. No further grants of stock options will occur under the 1995 Non-Employee Director Plan. Shares issued as a result of stock option exercises will be funded with the issuance of new shares.

      The 2004 Director Plan authorizes the Company to grant non-qualified stock options for 350,000 shares of Common Stock under such plan to non-employee directors of the Company. Each year on the date of the annual meeting of the shareholders and provided that a sufficient number of shares remain available under the 2004 Director Plan, there will automatically be granted to each eligible director who is re-elected to the Board an option to purchase 7,000 shares of Common Stock or such other amount as the Board determines based on a competitive review of comparable companies. Unless service is terminated due to death, disability or retirement in good standing after age 70, each option granted under the 2004 Director Plan on an annual shareholder meeting date will become exercisable three years from the date of grant if such person has continued to serve as a director until that date. No option may be exercisable after the expiration of ten years from the date of grant. The exercise price will represent the closing price of the Common Stock on the date of grant. At December 31, 2005, 280,000 shares of Common Stock remained available for grant under the 2004 Director Plan.

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

     The Company currently has an Employee Stock Purchase Plan ("ESPP") under which employees in certain countries are permitted to deposit after tax funds from their wages for purposes of purchasing Common Stock at a 15% discount from the lowest of the closing price of the Common Stock at either the start of the contribution period or the end of the contribution period. On November 30, 2005, a purchase of Common Stock occurred under this plan for 49,961 shares. Beginning in the three-month period ending September 30, 2005, the Company began expensing the discount taken and the fair value of the "look-back" feature realized by employees upon purchases of Common Stock under the ESPP. For the three and six months ended December 31, 2005, the Company recorded costs associated with the ESPP of approximately $0.1 million and $0.3 million, respectively. The next purchase under the ESPP will be consummated on June 1, 2006.

      For information on stock option and restricted stock grants during the six months ended December 31, 2005, see Note 3. There were no stock option or restricted stock grants during the six months ended December 31, 2004.

      In March 2005, the Board approved the granting of up to 423,800 shares of market-based restricted stock ("MBRS"). As a result of such approval, the Company issued 410,800 shares of MBRS to 17 managerial employees. The MBRS will only vest if the Company's total shareholder return surpasses the total shareholder return of the Russell 2000 Index over a three, four, five or six-year period from the date of grant, in which case the MBRS will vest at that time. On the date of issuance, these grants were recorded as unearned deferred compensation in shareholders' equity in the amount of approximately $9.6 million and are being amortized over a six-year vesting period. Upon adoption of SFAS 123R on July 1, 2005, the Company revalued the MBRS using a Monte Carlo simulation model using the assumptions presented below:

	Three Months Ended
	September 30, 2005
Expected dividend yield	0.00	%
Expected price volatility	40.00	%
Risk-free interest rate	3.72	%
Derived service period in years	3

Repurchase of Common Stock.

      On November 2, 2005, the Board authorized the Company to implement a stock repurchase program to repurchase up to $40 million of Common Stock through March 31, 2007. As of December 31, 2005, the Company repurchased 375,336 shares of Common Stock on the open market at a cost of $7.2 million, including sales commissions. These repurchases are accounted for under the treasury method.

Amendment to Articles of Incorporation.

      At the annual shareholders meeting held on November 16, 2005, the shareholders of the Company approved the Amended and Restated Articles of Incorporation, which eliminated the Series D convertible preferred stock and reinstituted the Board's authority to determine the designations, preferences, limitations and other rights of the serial preferred stock. The Series D convertible preferred stock had been authorized in connection with the acquisition of the Elizabeth Arden business in January 2001 but there were no outstanding shares at the time of the amendment.

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

NOTE 10.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION

      The following condensed financial statements as of December 31, 2005 and for the three- and six- month periods then ended, and as of June 30, 2005, show the consolidated financial statements of the Company, and, in separate financial statements, (i) the financial statements of those subsidiaries that are guarantors of the 7 3/4% Senior Subordinated Notes issued in January 2004, plus, in each case, the financial statements of non-guarantor entities, elimination adjustments and the consolidated total, and (ii) the financial statements of those subsidiaries that are guarantors of the 11 3/4% Senior Notes which were issued in January 2001 to finance a portion of the purchase price for the acquisition of the Elizabeth Arden business plus, in each case, the financial statements of non-guarantor entities, elimination adjustments and the consolidated total. The following condensed financial statements for the three and six month period ended December 31, 2004 s how the consolidated financial statements of the Company, and, in separate financial statements, (i) the financial statements of those subsidiaries that are guarantors of the 7 3/4% Senior Subordinated Notes plus, in each case, the financial statements of non-guarantors entities, elimination adjustments and the consolidated total, and (ii) the financial statements of those subsidiaries that are guarantors of the 11 3/4% Senior Notes. The Company's subsidiaries, DF Enterprises, Inc., FD Management, Inc., Elizabeth Arden International Holding, Inc. and Elizabeth Arden (Zug) GmbH, are guarantors of the 11 3/4% Senior Notes. DF Enterprises, Inc., FD Management, Inc., Elizabeth Arden International Holding, Inc., Elizabeth Arden (Financing), Inc., RDEN Management, Inc. and Elizabeth Arden Travel Retail, Inc. are guarantors of the 7 3/4% Senior Subordinated Notes. Equity income of the guarantor subsidiaries is included in other (expense) income, net. All subsidiaries listed in this note are wholly owned subsidi aries of the Company and their guarantees are joint and several, full and unconditional. All information presented is in thousands.

[Remainder of Page Intentionally Left Blank]

- 16 -

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

Balance Sheet				As of December 31, 2005
					Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets
	Cash and cash equivalents				$	17		$	20,141		$	86		$	713		$	20,957
	Accounts receivable, net					120,624			101,315			--			--			221,939
	Inventories					140,926			86,335			--			--			227,261
	Intercompany receivable					101,315			128,961			331,590			(561,866	)		--
	Deferred income taxes					5,767			1,704			--			8			7,479
	Prepaid expenses and other assets					7,302			14,851			31			24			22,208
			Total current assets			375,951			353,307			331,707			(561,121	)		499,844
Property and equipment, net						20,114			12,511			--			--			32,625
Other Assets:
	Investment in subsidiaries					28,931			--			--			(28,931	)		--
	Exclusive brand licenses, trademarks and   intangibles, net					18,050			7,703			159,155			--			184,908
	Debt financing costs, net					7,503			--			--			--			7,503
	Other assets					247,966			(257,011	)		9,136			1,014			1,105
		Total other assets				302,450			(249,308	)		168,291			(27,917	)		193,516
		Total assets			$	698,515		$	116,510		$	499,998		$	(589,038	)	$	725,985
LIABILITIES AND SHAREHOLDERS'   EQUITY
Current Liabilities:
	Short-term debt				$	20,474		$	--		$	--		$	--		$	20,474
	Accounts payable - trade					81,694			17,019			--			5			98,718
	Intercompany payable					30,352			261,169			268,747			(560,268	)		--
	Other payables and accrued expenses					41,284			27,658			1,568			(1	)		70,509
	Current portion of long-term debt					8,802			--			--			--			8,802
			Total current liabilities			182,606			305,846			270,315			(560,264	)		198,503
	Long-term debt, net					225,000			--			--			--			225,000
	Deferred income taxes and other					(2,222	)		5,966			5,450			157			9,351
			Total liabilities			405,384			311,812			275,765			(560,107	)		432,854
Shareholders' Equity
	Common stock					296			--			--			--			296
	Additional paid-in capital					244,432			(247,812	)		247,106			706			244,432
	Retained earnings (accumulated deficit)					49,537			45,916			(22,873	)		(23,043	)		49,537
	Treasury Stock					(7,233	)		--			--			--			(7,233	)
	Accumulated other comprehensive income					6,099			6,594			--			(6,594	)		6,099
			Total shareholders' equity			293,131			(195,302	)		224,233			(28,931	)		293,131
			Total liabilities and shareholders' equity		$	698,515		$	116,510		$	499,998		$	(589,038	)	$	725,985

- 17-

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

Balance Sheet			As of December 31, 2005
				Company			Non- Guarantors			11 3/4% Senior Notes Guarantors			Eliminations			Total
ASSETS
Current Assets
	Cash and cash equivalents			$	17		$	20,197		$	30		$	713		$	20,957
	Accounts receivable, net				120,624			101,315			--			--			221,939
	Inventories				140,926			86,335			--			--			227,261
	Intercompany receivable				101,315			381,613			78,937			(561,865	)		--
	Deferred income taxes				5,767			1,704			--			8			7,479
	Prepaid expenses and other assets				7,302			14,839			43			24			22,208
		Total current assets			375,951			606,003			79,010			(561,120	)		499,844
Property and equipment, net					20,114			12,511			--			--			32,625
Other Assets:
	Investment in subsidiaries				28,931			--			--			(28,931	)		--
	Exclusive brand licenses, trademarks and   intangibles, net				18,050			2,258			164,600			--			184,908
	Debt financing costs, net				7,503			--			--			--			7,503
	Other assets				247,966			(257,011	)		9,136			1,014			1,105
		Total other assets			302,450			(254,753	)		173,736			(27,917	)		193,516
		Total assets		$	698,515		$	363,761		$	252,746		$	(589,037	)	$	725,985
LIABILITIES AND SHAREHOLDERS'   EQUITY
Current Liabilities:
	Short-term debt			$	20,474		$	--		$	--		$	--		$	20,474
	Accounts payable - trade				81,694			17,017			2			5			98,718
	Intercompany payable				30,352			253,042			276,873			(560,267	)		--
	Other payables and accrued expenses				41,284			27,658			1,569			(2	)		70,509
	Current portion of long-term debt				8,802			--			--			--			8,802
		Total current liabilities			182,606			297,717			278,444			(560,264	)		198,503
	Long-term debt, net				225,000			--			--			--			225,000
	Deferred income taxes and other				(2,222	)		12,690			(1,275	)		158			9,351
		Total liabilities			405,384			310,407			277,169			(560,106	)		432,854
Shareholders' Equity
	Common stock				296			--			--			--			296
	Additional paid-in capital				244,432			(749	)		43			706			244,432
	Retained earnings (accumulated deficit)				49,537			47,518			(24,475	)		(23,043	)		49,537
	Treasury Stock				(7,233	)		--			--			--			(7,233	)
	Accumulated other comprehensive income				6,099			6,585			9			(6,594	)		6,099
		Total shareholders' equity			293,131			53,354			(24,423	)		(28,931	)		293,131
		Total liabilities and shareholders' equity		$	698,515		$	363,761		$	252,746		$	(589,037	)	$	725,985

- 18 -

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

Balance Sheet			As of June 30, 2005
				Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets:
	Cash and cash equivalents			$	6,409		$	18,864		$	43		$	--		$	25,316
	Accounts receivable, net				77,064			72,901			--			--			149,965
	Inventories				191,693			81,650			--			--			273,343
	Intercompany receivable				77,757			111,059			319,783			(508,599	)		--
	Deferred income taxes				17,797			1,119			--			(819	)		18,097
	Prepaid expenses and other assets				5,412			13,260			--			--			18,672
	Assets held for sale				9,719			--			--			--			9,719
		Total current assets			385,851			298,853			319,826			(509,418	)		495,112
Property and equipment, net					17,356			11,828			--			--			29,184
Other Assets:
	Investment in subsidiaries				9,312			--			--			(9,312	)		--
	Exclusive brand licenses, trademarks and    intangibles, net				20,870			5,502			160,155			--			186,527
	Debt financing costs, net				7,905			--			--			--			7,905
	Other assets				262,200			(259,196	)		9,136			(10,971	)		1,169
		Total other assets			300,287			(253,694	)		169,291			(20,283	)		195,601
		Total assets		$	703,494		$	56,987		$	489,117		$	(529,701	)	$	719,897
LIABILITIES AND SHAREHOLDERS'    EQUITY
Current Liabilities:
	Short-term debt			$	47,700		$	--		$	--		$	--		$	47,700
	Accounts payable - trade				98,355			9,757			--			--			108,112
	Intercompany payable				18,705			225,617			264,271			(508,593	)		--
	Other payables and accrued expenses				34,533			29,238			(94	)		(5	)		63,672
		Total current liabilities			199,293			264,612			264,177			(508,598	)		219,484
	Long-term debt				233,802			--			--			--			233,802
	Deferred income taxes and other				11,199			4,268			3,735			(11,791	)		7,411
		Total liabilities			444,294			268,880			267,912			(520,389	)		460,697
Shareholders' Equity
	Common stock				293			--			--			--			293
	Additional paid-in capital				249,919			(250,969	)		250,279			690			249,919
	Retained earnings (accumulated deficit)				15,547			33,225			(29,074	)		(4,151	)		15,547
	Accumulated other comprehensive income				5,730			5,851			--			(5,851	)		5,730
	Unearned deferred compensation				(12,289	)		--			--			--			(12,289	)
		Total shareholders' equity			259,200			(211,893	)		221,205			(9,312	)		259,200
		Total liabilities and shareholders' equity		$	703,494		$	56,987		$	489,117		$	(529,701	)	$	719,897

- 19 -

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

Balance Sheet				As of June 30, 2005
						Company				Non- Guarantors				11 3/4% Senior Subordinated Notes Guarantors				Eliminations				Total
ASSETS
Current Assets:
		Cash and cash equivalents			$		6,409		$		18,857		$		50		$		--		$		25,316
		Accounts receivable, net					77,064				72,901				--				--				149,965
		Inventories					191,693				81,650				--				--				273,343
		Intercompany receivable					77,757				361,951				68,891				(508,599	)			--
		Deferred income taxes					17,797				1,119				--				(819	)			18,097
		Prepaid expenses and other assets					5,412				13,260				--				--				18,672
		Assets held for sale					9,719				--				--				--				9,719
			Total current assets				385,851				549,738				68,941				(509,418	)			495,112
Property and equipment, net							17,356				11,828				--				--				29,184
Other Assets:
	Investment in subsidiaries						9,312				--				--				(9,312	)			--
	Exclusive brand licenses, trademarks and    intangibles, net						20,870				54				165,603				--				186,527
	Debt financing costs, net						7,905				--				--				--				7,905
	Other assets						262,200				(259,196	)			9,136				(10,971	)			1,169
			Total other assets				300,287				(259,142	)			174,739				(20,283	)			195,601
			Total assets		$		703,494		$		302,424		$		243,680		$		(529,701	)	$		719,897
LIABILITIES AND SHAREHOLDERS'    EQUITY
Current Liabilities:
	Short-term debt				$		47,700		$		--		$		--		$		--		$		47,700
	Accounts payable - trade						98,355				9,757				--				--				108,112
	Intercompany payable						18,705				217,542				272,346				(508,593	)			--
	Other payables and accrued expenses						34,533				29,239				(94	)			(6	)			63,672
			Total current liabilities				199,293				256,538				272,252				(508,599	)			219,484
	Long-term debt						233,802				--				--				--				233,802
	Deferred income taxes and other						11,199				9,210				(1,208	)			(11,790	)			7,411
			Total liabilities				444,294				265,748				271,044				(520,389	)			460,697
Shareholders' Equity
	Common stock						293				--				--				--				293
	Additional paid-in capital						249,919				(734	)			44				690				249,919
	Retained earnings (accumulated deficit)						15,547				31,568				(27,417	)			(4,151	)			15,547
	Accumulated other comprehensive income						5,730				5,842				9				(5,851	)			5,730
	Unearned deferred compensation						(12,289	)			--				--				--				(12,289	)
			Total shareholders' equity				259,200				36,676				(27,364	)			(9,312	)			259,200
			Total liabilities and shareholders' equity		$		703,494		$		302,424		$		243,680		$		(529,701	)	$		719,897

- 20 -

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

Statement of Operations		Three Months Ended December 31, 2005
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	231,930		$	113,963	$	4,913		$	(4,913	)	$	345,893
Cost of sales				147,277			52,856		--			--			200,133
Gross profit				84,653			61,107		4,913			(4,913	)		145,760
Selling, general and administrative costs				50,825			40,364		(171	)		(4,913	)		86,105
Depreciation and amortization				2,911			1,753		712			--			5,376
Income from operations				30,917			18,990		4,372			--			54,279
Other expense (income):
	Interest expense (income)			6,665			426		(429	)		--			6,662
	Other			(19,476	)		135		2,352			16,989			--
Income before income taxes				43,728			18,429		2,449			(16,989	)		47,617
Provision for income taxes				10,634			3,004		885			--			14,523
Net income			$	33,094		$	15,425	$	1,564		$	(16,989	)	$	33,094

Statement of Operations		Six Months Ended December 31, 2005
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	378,984		$	194,287	$	8,402		$	(8,402	)	$	573,271
Cost of sales				244,708			93,737		--			--			338,445
Gross profit				134,276			100,550		8,402			(8,402	)		234,826
Selling, general and administrative costs				93,971			77,523		(597	)		(8,402	)		162,495
Depreciation and amortization				5,893			3,333		1,423			--			10,649
Income from operations				34,412			19,694		7,576			--			61,682
Other expense (income):
	Interest expense (income)			12,790			871		(885	)		--			12,776
	Other			(22,679	)		295		3,717			18,667			--
Income before income taxes				44,301			18,528		4,744			(18,667	)		48,906
Provision for income taxes				10,311			2,890		1,715			--			14,916
Net income			$	33,990		$	15,638	$	3,029		$	(18,667	)	$	33,990

- 21 -

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

Statement of Operations		Three Months Ended December 31, 2005
			Company			Non- Guarantors			11 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	231,930		$	113,963		$	4,913		$	(4,913	)	$	345,893
Cost of sales				147,277			52,856			--			--			200,133
Gross profit				84,653			61,107			4,913			(4,913	)		145,760
Selling, general and administrative costs				50,825			40,371			(178	)		(4,913	)		86,105
Depreciation and amortization				2,911			1,752			713			--			5,376
Income from operations				30,917			18,984			4,378			--			54,279
Other expense (income):
	Interest expense (income)			6,665			(2,061	)		2,058			--			6,662
	Other			(19,476	)		135			2,352			16,989			--
Income before income taxes				43,728			20,910			(32	)		(16,989	)		47,617
Provision for income taxes				10,634			3,882			7			--			14,523
Net income (loss)			$	33,094		$	17,028		$	(39	)	$	(16,989	)	$	33,094

Statement of Operations		Six Months Ended December 31, 2005
			Company			Non- Guarantors			11 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	378,984		$	194,287		$	8,402		$	(8,402	)	$	573,271
Cost of sales				244,708			93,737			--			--			338,445
Gross profit				134,276			100,550			8,402			(8,402	)		234,826
Selling, general and administrative costs				93,971			77,529			(603	)		(8,402	)		162,495
Depreciation and amortization				5,893			3,329			1,427			--			10,649
Income from operations				34,412			19,692			7,578			--			61,682
Other expense (income):
	Interest expense (income)			12,790			(4,173	)		4,159			--			12,776
	Other			(22,679	)		295			3,717			18,667			--
Income (loss) before income taxes				44,301			23,570			(298	)		(18,667	)		48,906
Provision for (benefit from) income taxes				10,311			4,672			(67	)		--			14,916
Net income (loss)			$	33,990		$	18,898		$	(231	)	$	(18,667	)	$	33,990

- 22 -

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

Statement of Operations		Three Months Ended December 31, 2004
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	218,078		$	104,873	$	5,391		$	(5,391	)	$	322,951
Cost of sales				135,571			45,777		--			--			181,348
Gross profit				82,507			59,096		5,391			(5,391	)		141,603
Selling, general and administrative costs				50,711			39,033		(409	)		(5,391	)		83,944
Depreciation and amortization				3,316			1,457		676			--			5,449
Income from operations				28,480			18,606		5,124			--			52,210
Other expense (income):
	Interest expense (income)			6,249			707		(682	)		--			6,274
	Other			(20,420	)		87		2,597			17,736			--
Income before income taxes				42,651			17,812		3,209			(17,736	)		45,936
Provision for income taxes				10,925			3,285		--			--			14,210
Net income			$	31,726		$	14,527	$	3,209		$	(17,736	)	$	31,726

Statement of Operations		Six Months Ended December 31, 2004
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	355,890		$	179,217	$	8,988		$	(8,988	)	$	535,107
Cost of sales				224,574			79,419		--			--			303,993
Gross profit				131,316			99,798		8,988			(8,988	)		231,114
Selling, general and administrative costs				91,753			72,961		(824	)		(8,988	)		154,902
Depreciation and amortization				6,662			2,963		1,357			--			10,982
Income from operations				32,901			23,874		8,455			--			65,230
Other expense (income):
	Interest expense (income)			12,227			1,385		(1,353	)		--			12,259
	Other			(28,296	)		223		4,093			23,980			--
Income before income taxes				48,970			22,266		5,715			(23,980	)		52,971
Provision for income taxes				12,461			4,001		--			--			16,462
Net income			$	36,509		$	18,265	$	5,715		$	(23,980	)	$	36,509

- 23 -

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

Statement of Operations		Three Months Ended December 31, 2004
			Company			Non- Guarantors			11 3/4% Senior Notes Guarantors			Eliminations			Total
Net sales			$	218,078		$	104,873		$	5,391		$	(5,391	)	$	322,951
Cost of sales				135,571			45,777			--			--			181,348
Gross profit				82,507			59,096			5,391			(5,391	)		141,603
Selling, general and administrative costs				50,711			38,987			(363)			(5,391	)		83,944
Depreciation and amortization				3,316			1,456			677			--			5,449
Income from operations				28,480			18,653			5,077			--			52,210
Other expense (income):
	Interest expense (income)			6,249			(3,497	)		3,522			--			6,274
	Other			(20,420	)		87			2,597			17,736			--
Income (loss) before income taxes				42,651			22,063			(1,042	)		(17,736	)		45,936
Provision for income taxes				10,925			3,285			--			--			14,210
Net income (loss)			$	31,726		$	18,778		$	(1,042	)	$	(17,736	)	$	31,726

Statement of Operations		Six Months Ended December 31, 2004
			Company					Non- Guarantors				11 3/4% Senior Notes Guarantors					Eliminations				Total
Net sales			$		355,890			$	179,217			$		8,988			$	(8,988		)		535,107
Cost of sales					224,574				79,419					--				--				303,993
Gross profit					131,316				99,798					8,988				(8,988		)		231,114
Selling, general and administrative costs					91,753				72,911					(774		)		(8,988		)		154,902
Depreciation and amortization					6,662				2,960					1,360				--				10,982
Income from operations					32,901				23,927					8,402				--				65,230
Other expense (income):
	Interest expense (income)				12,227				(7,046		)			7,078				--				12,259
	Other				(28,296		)		223					4,093				23,980				--
Income (loss) before income taxes					48,970				30,750					(2,769		)		(23,980		)		52,971
Provision for income taxes					12,461				4,001					--				--				16,462
Net income (loss)				$		36,509				26,749			$		(2,769	)	$		(23,980	)	$		36,509

- 24 -

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

Statement of Cash Flows		Six Months Ended December 31, 2005
			Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Operating activities:
Net cash provided by (used in) operating activities			$	36,130		$	(10,845	)	$	7,374		$	(1,520	)	$	31,139
Investing activities:
	Additions to property and equipment			(6,961	)		(3,944	)		--			--			(10,905	)
	Proceeds from disposals of property and   equipment			9,945			--			--			--			9,945
	Acquisition of assets			--			(1,583	)		--			--			(1,583	)
Net cash provided by (used in) investing activities				2,984			(5,527	)		--			--			(2,543	)
Financing activities:
	Payments on short-term debt			(27,226	)		--			--			--			(27,226	)
	Proceeds from the exercise of stock options			773			--			--			--			773
	Proceeds from employee stock purchase plan			808			--			--			--			808
	Repurchase of common stock			(7,233	)		--			--			--			(7,233	)
	Net change in intercompany obligations			(12,552	)		17,650			(7,331	)		2,233			--
Net cash (used in) provided by financing activities				(45,430	)		17,650			(7,331	)		2,233			(32,878	)
Effect of exchange rate changes on cash and cash   equivalents				(77	)		--			--			--			(77	)
Net (decrease) increase in cash and cash equivalents				(6,393	)		1,278			43			713			(4,359	)
Cash and cash equivalents at beginning of period				6,410			18,863			43			--			25,316
Cash and cash equivalents at end of period			$	17		$	20,141		$	86		$	713		$	20,957

Statement of Cash Flows		Six Months Ended December 31, 2005
			Company			Non- Guarantors			11 3/4% Senior Notes Guarantors			Eliminations			Total
Operating activities:
Net cash provided by (used in) operating activities			$	36,130		$	(8,969	)	$	5,498		$	(1,520	)	$	31,139
Investing activities:
	Additions to property and equipment			(6,961	)		(3,944	)		--			--			(10,905	)
	Proceeds from disposals of property and   equipment			9,945			--			--			--			9,945
	Acquisition of assets			--			(1,583	)		--			--			(1,583	)
Net cash provided by (used in) investing activities				2,984			(5,527	)		--			--			(2,543	)
Financing activities:
	Payments on short-term debt			(27,226	)		--			--			--			(27,226	)
	Proceeds from the exercise of stock options			773			--			--			--			773
	Proceeds from employee stock purchase plan			808			--			--			--			808
	Repurchase of common stock			(7,233	)		--			--			--			(7,233	)
	Net change in intercompany obligations			(12,552	)		15,837			(5,518	)		2,233			--
Net cash (used in) provided by financing activities				(45,430	)		15,837			(5,518	)		2,233			(32,878	)
Effect of exchange rate changes on cash and cash   equivalents				(77	)		--			--			--			(77	)
Net (decrease) increase in cash and cash equivalents				(6,393	)		1,341			(20	)		713			(4,359	)
Cash and cash equivalents at beginning of period				6,410			18,856			50			--			25,316
Cash and cash equivalents at end of period			$	17		$	20,197		$	30		$	713		$	20,957

- 25 -

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

Statement of Cash Flows		Six Months Ended December 31, 2004
			Company			Non-Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Operating activities:
Net cash provided by (used in) operating activities			$	150		$	(5,672	)	$	7,918		$	(4	)	$	2,392
Investing activities:
	Additions to property and equipment			(3,856	)		(4,850	)		--			--			(8,706	)
Net cash used in investing activities				(3,856	)		(4,850	)		--			--			(8,706	)
Financing activities:
	Proceeds from short-term debt			17,196			--			--			--			17,196
	Payments on long-term debt			(4,764	)		--			--			--			(4,764	)
	Proceeds from the exercise of stock options			3,015			--			--			--			3,015
	Proceeds from issuance of common stock for   Employee stock purchase plan			810			--			--			--			810
	Other			(71	)		--			--			--			(71	)
	Net change in intercompany obligations			(12,244	)		20,097			(7,857	)		4			--
Net cash provided by (used in) financing activities				3,942			20,097			(7,857	)		4			16,186
Effect of exchange rate changes on cash and cash   equivalents				945			--			--			--			945
Net increase in cash and cash equivalents				1,181			9,575			61			--			10,817
Cash and cash equivalents at beginning of period				7,251			16,202			41			--			23,494
Cash and cash equivalents at end of period			$	8,432		$	25,777		$	102		$	--		$	34,311

Statement of Cash Flows		Six Months Ended December 31, 2004
			Company			Non-Guarantors			11 3/4% Senior Notes Guarantors			Eliminations			Total
Operating activities:
Net cash provided by (used in) used in operating activities			$	150		$	6,797		$	(4,551	)	$	(4	)	$		2,392
Investing activities:
	Additions to property and equipment			(3,856	)		(4,850	)		--			--				(8,706	)
Net cash used in investing activities				(3,856	)		(4,850	)		--			--				(8,706	)
Financing activities:
	Proceeds from short-term debt			17,196			--			--			--				17,196
	Payments on long-term debt			(4,764	)		--			--			--				(4,764	)
	Proceeds from the exercise of stock options			3,015			--			--			--				3,015
	Proceeds from issuance of common stock for   employee stock purchase plan			810			--			--			--				810
	Other			(71	)		--			--			--				(71	)
	Net change in intercompany obligations			(12,244	)		7,673			4,567			4				--
Net cash provided by financing activities				3,942			7,673			4,567			4				16,186
Effect of exchange rate changes on cash and cash   equivalents				945			--			--			--				945
Net increase in cash and cash equivalents				1,181			9,620			16			--				10,817
Cash and cash equivalents at beginning of period				7,251			16,213			30			--				23,494
Cash and cash equivalents at end of period			$	8,432		$	25,833		$	46		$	--			$	34,311

- 26 -

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

Cautionary Note Regarding Forward-Looking Statements

      In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Elizabeth Arden, Inc., is hereby providing cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements (as defined in such Act) made in this quarterly report on Form 10-Q. Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "intends," "plans" and "projects") may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Accordingly, any su ch statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations: our absence of contracts with customers or suppliers and our ability to maintain and develop relationships with customers and suppliers; international and domestic economic and business changes that could impact consumer confidence or operations; the impact of competitive products andpricing; risks of international operations, including foreign currency fluctuations, economic and political consequences of terrorist attacks, political instability in certain regions of the world, and unexpected factors affecting customer purchasing patterns; our ability to successfully launch new products and implement our growth strategy; our ability to successfully and cost-effectively integrate acquired businesses or new brands; our substantial indebtedness, debt service obligations and restrictive coven ants in our revolving credit facility and our indenture for our 7 3/4% senior subordinated notes; our customers' financial condition; our ability to access capital for acquisitions; changes in product mix to less profitable products; the retention and availability of key personnel; the assumptions underlying our critical accounting estimates; delays in shipments, inventory shortages and higher costs of production due to interruption of operations at key third party manufacturing or fulfillment facilities that manufacture or provide logistic services for the majority of our supply of certain products; changes in the retail, fragrance and cosmetic industries, including the consolidation of retailers and the associated closing of retail doors; our ability to protect our intellectual property rights; changes in the legal, regulatory and political environment that impact, or will impact, our business, including changes to customs or trade regulations or accounting standards; and other risks and uncertainties. We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

General

      This discussion should be read in conjunction with the Notes to Unaudited Consolidated Financial Statements contained herein and the Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year ended June 30, 2005. The results of operations for an interim period may not give a true indication of results for the year. In the following discussions, all comparisons are with the corresponding items in the prior year period.

      Our operations have historically been seasonal, with higher sales generally occurring during the first half of the fiscal year (July through December) as a result of increased demand by retailers in anticipation of, and during, the holiday season. During the fiscal year ended June 30, 2005, approximately 58% of our net sales were made during those months. Due to the size and timing of certain orders from our customers, sales, results of operations, working capital requirements and cash flows can vary between quarters of the same and different years. As a result, we expect to experience variability in net sales, net income, working capital requirements and cash flows on a quarterly basis.

- 27 -

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

Overview

      For the three- and six-month periods ended December 31, 2005, net sales increased 7.1% compared to the three- and six-month periods ended December 31, 2004 as a result of initial brand launches, including thefantasyBritney Spears fragrance and the Prevage skin care line,partially offset by the unfavorable impact of foreign exchange rates. In addition, for the six months ended December 31, 2005, net sales of brands initially launched last year were flat as the continued strength and distribution of thecurious Britney Spears fragrance in other levels of retail offset the lower sales volume ofElizabeth Arden Provocative Woman, which is not as fully distributed.Gross profit dollars increased from higher sales volumes while gross margins as a percentage of sales decreased to 42.1% and 41.0% for the three- and six-month periods ended December 31, 2005, from 43.8% an d 43.2% for the three- and six-month periods ended December 31, 2004, respectively, primarily due to higher costs on new product launches and retailer mix. Selling, general and administrative expenses increased 2.6% and 4.9% for the three- and six-month periods ended December 31, 2005 compared to the three- and six-month periods ended December 31, 2004, primarily due to the adverse impact of foreign currency rates, higher national media advertising costs and higher royalty costs associated with increased sales of licensed brands, partially offset by lower employee-related costs, primarily incentive related, and lower other promotional costs. Cash flow from operations improved by $28.7 million for the six months ended December 31, 2005 as compared to the prior year period, primarily due to working capital initiatives that resulted in a $46.1 million reduction in inventory and a $23.7 million reduction in accounts receivable build-up.

Critical Accounting Policies and Estimates

      We believe the accounting policies below represent our critical accounting policies. See our Annual Report on Form 10-K for the year ended June 30, 2005 for a detailed discussion on the application of these and other accounting policies.

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

      The judgments made in determining the estimated fair value and expected useful lives assigned to each class of assets and liabilities acquired can significantly affect net income. For example, different classes of assets will have useful lives that differ - the useful life of property, plant, and equipment acquired will differ substantially from the useful life of brand licenses and trademarks. Consequently, to the extent a longer-lived asset is ascribed greater value under the purchase method than a shorter-lived asset, net income in a given period may be higher.

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

      Our intangible assets generally consist of exclusive brand licenses and trademarks. We do not carry any goodwill. The value of our intangible assets, including brand licenses, trademarks and intangibles, is exposed to future adverse changes if we experience declines in operating results or experience significant negative industry or economic trends. We periodically review intangible assets, at least annually or more often as circumstances dictate, for impairment and the useful life assigned using the guidance of applicable accounting literature.

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      We have determined that the Elizabeth Arden trademarks acquired in the January 2001 acquisition of the Elizabeth Arden business have indefinite useful lives, as cash flows from the use of the trademarks are expected to be generated indefinitely. In April 2005, we completed our annual impairment testing of these assets with the assistance of a third party valuation firm. The analysis and assessments of these assets indicated that no impairment adjustment was required.

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

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

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

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

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

      Hedge Contracts.    Under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, we designated each qualifying foreign currency contract we have entered into as a cash flow hedge. Unrealized gains or losses, net of taxes, associated with these contracts are included in accumulated other comprehensive income on the balance sheet. Gains and losses will only be recognized in earnings in the period in which the contracts expire.

      Stock-Based Compensation.    In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123R, a standard on accounting for share-based payments that requires companies to expense the value of employee stock options and similar awards. Under SFAS 123R, share-based payment awards result in a cost that will be measured at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest. Compensation cost for awards that vest would not be reversed if the awards expire without being exercised. SFAS 123R was effective for us beginning July 1, 2005. We have adopted the modified prospective approach as our implementation method under this pronouncement. For the three months ended December 31, 2005 we recorded costs related to this pronouncement of approximately $1.4 million (approximately $0.9 million, net of taxes) or $0.03 per basic and diluted share. For the six months ended December 31, 2005 we recorded costs related to this pronouncement of approximately $2.8 million (approximately $1.9 million, net of taxes) or $0.07 per basic share and $0.06 per diluted share. For the year ended June 30, 2006, the Company is estimating it will record costs related to this pronouncement of approximately $5.7 million ($4.0 million, net of taxes) or $0.13 per diluted share.

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      Income Taxes and Valuation Reserves.    A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. We consider projected future taxable income and ongoing tax planning strategies in assessing a potential valuation allowance. In the event we determine that we may not be able to realize all or part of our deferred tax asset in the future, or that new estimates indicate that a previously recorded valuation allowance is no longer required, an adjustment to the deferred tax asset would be charged or credited to net income in the period of such determination.

Results of Operations

      The following discussion compares the historical results of operations for the three and six months ended December 31, 2005 and December 31, 2004. Results of operations, in thousands and as a percentage of net sales, were as follows (percentages may not add due to rounding):

		Three Months Ended								Six Months Ended
		December 31, 2005				December 31, 2004				December 31, 2005				December 31, 2004
Net sales		$	345,893	100.0	%	$	322,951	100.0	%	$	573,271	100.0	%	$	535,107	100.0	%
Cost of sales			200,133	57.9			181,348	56.2			338,445	59.0			303,993	56.8
	Gross profit		145,760	42.1			141,603	43.8			234,826	41.0			231,114	43.2
Selling, general and   administrative expenses			86,105	24.9			83,944	26.0			162,495	28.3			154,902	28.9
Depreciation and amortization			5,376	1.6			5,449	1.7			10,649	1.9			10,982	2.1
	Income from operations		54,279	15.7			52,210	16.2			61,682	10.8			65,230	12.2
Interest expense, net			6,662	1.9			6,274	1.9			12,776	2.2			12,259	2.3
	Income before income taxes		47,617	13.8			45,936	14.2			48,906	8.5			52,971	9.9
Provision for income taxes			14,523	4.2			14,210	4.4			14,916	2.6			16,462	3.1
	Net income		33,094	9.6			31,726	9.8			33,990	5.9			36,509	6.8
Other data
EBITDA and EBITDA margin (1)		$	59,655	17.2	%	$	57,659	17.9	%	$	72,331	12.6	%	$	76,212	14.2	%

(1)  For a definition of EBITDA and a reconciliation of net income to EBITDA, see "EBITDA" under Results of Operations - Three Months Ended December 31, 2005 Compared to Three Months Ended December 30, 2004. EBITDA margin represents EBITDA divided by net sales.

Three Months Ended December 31, 2005 Compared to Three Months Ended December 31, 2004

      Net Sales.  Net sales increased approximately 7.1% for the three months ended December 31, 2005 over the three months ended December 31, 2004. The sales increase was primarily driven by initial brand launches, including approximately $29 million related to thefantasyBritney Spears fragrance and the Prevage skin care line, partially offset by the unfavorable impact of foreign currency rates. Excluding the impact of foreign currency translation, net sales increased 8.2%. Pricing changes had an immaterial effect on the net sales increase.

      Gross Profit.  Gross profit dollars increased by 2.9% for the three months ended December 31, 2005 over the three months ended December 31, 2004. The increase in gross profit dollars was primarily due to higher sales volumes. Gross margin decreased to 42.1% for the three months ended December 31, 2005, from 43.8% for the three months ended December 31, 2004, due to higher cost of goods on new product launches and retailer mix, as a higher proportion of our sales was promotional-related, and an increase in sales to mass retailers. Additionally, gross margin was adversely affected by the unfavorable impact of foreign currency rates.

      SG&A.  Selling, general and administrative expenses increased 2.6% for the three months ended December 31, 2005 over the three months ended December 31, 2004. The small increase was principally due to the unfavorable impact of foreign currency rates of $3.3 million, a $2.3 million increase in national media advertising and smaller increases in royalty costs associated with licensed brands, partially offset by a $4.7 million decrease in employee-related costs, primarily incentive related, and a $3.3 million reduction of other promotional costs.

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      Interest Expense.  Interest expense, net of interest income, increased by approximately 6.2% for the three months ended December 31, 2005 compared to the three months ended December 31, 2004. The increase is a result of higher interest rates on our revolving credit facility and interest rate swap agreement.

      Provision for Income Taxes.  The provision for income taxes increased by approximately $0.3 million for the three months ended December 31, 2005 compared to the three months ended December 31, 2004 due to higher income from operations, partially offset by a lower effective tax rate. The effective tax rate for the three months ended December 31, 2005 is 30.5% as compared to 30.9% in the prior year period.

      Net Income.  Net income for the three months ended December 31, 2005 increased by approximately $1.4 million as compared to the three months ended December 31, 2004. The increase was primarily a result of higher income from operations.

      EBITDA.  EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) increased by approximately $2.0 million to $59.7 million for the three months ended December 31, 2005 compared to $57.7 million for the three months ended December 31, 2004. The increase in EBITDA was primarily the result of higher net sales and gross profit, partially offset by higher selling, general and administrative expenses.

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

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

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

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

(Amounts in thousands)			Three Months Ended
			December 31, 2005		December 31, 2004
Net income			$	33,094	$	31,726
Plus:
	Provision for income taxes			14,523		14,210
	Interest expense, net			6,662		6,274
	Depreciation and amortization			5,376		5,449
		EBITDA	$	59,655	$	57,659

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Six Months Ended December 31, 2005 Compared to Six Months Ended December 31, 2004

      Net Sales.  Net sales increased approximately 7.1% for the six months ended December 31, 2005 over the six months ended December 31, 2004. The sales increase was primarily driven by approximately $41 million of sales related to initial brand launches, including thefantasy Britney Spears fragrance and the Prevage skin care line. In addition, net sales of brands initially launched last year were flat as the continued strength and distribution of thecurious Britney Spears fragrance in other levels of retail offset the lower sales volume ofElizabeth Arden Provocative Woman, which is not as fully distributed. There are no assurances these trends will continue.Excluding the impact of foreign currency translation, net sales increased 7.4%. Pricing changes had an immaterial effect on the net sales increase.

      Gross Profit.  Gross profit increased by 1.6% for the six months ended December 31, 2005 over the six months ended December 31, 2004. The increase in gross profit dollars was primarily due to higher sales volumes. Gross margin decreased to 41.0% for the six months ended December 31, 2005, from 43.2% for the six months ended December 31, 2004 due to higher cost of goods on new product launches and product mix, as a higher proportion of our sales were promotional-related, and an increase in sales to mass retailers.

      SG&A.  Selling, general and administrative expenses increased 4.9% for the six months ended December 31, 2005 over the six months ended December 31, 2004. The increase was primarily due to the unfavorable impact of foreign currency rates of $4.3 million, a $2.5 million increase in royalty costs related to higher sales of licensed brands and a $2.4 million increase in national media advertising, partially offset by a $1.2 million decrease in employee-related costs, primarily incentive related, and, a $3.1 million reduction of other promotional costs.

      Interest Expense.  Interest expense, net of interest income, increased by approximately 4.2% for the six months ended December 31, 2005, compared to the six months ended December 31, 2004. The increase is a result of higher interest rates on our revolving credit facility and interest rate swap agreement.

      Provision for Income Taxes.  The provision for income taxes decreased by approximately $1.5 million for the six months ended December 31, 2005 compared to the six months ended December 31, 2004 due to lower income from operations and a lower effective tax rate. The effective tax rate for the six months ended December 31, 2005 is 30.5% as compared to 31.0% in the prior year period.

      Net Income.  Net income for the six months ended December 31, 2005 decreased by approximately $2.5 million as compared to the six months ended December 31, 2004. The decrease was primarily a result of a lower gross margin and higher selling, general and administrative expenses.

      EBITDA.  EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) decreased by approximately $3.9 million to $72.3 million for the six months ended December 31, 2005 compared to $76.2 million for the six months ended December 31, 2004. The decrease in EBITDA was primarily the result of a lower gross margin and higher selling, general and administrative expenses.

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

(Amounts in thousands)			Six Months Ended
			December 31, 2005		December 31, 2004
Net income			$	33,990	$	36,509
Plus:
	Provision for income taxes			14,916		16,462
	Interest expense, net			12,776		12,259
	Depreciation and amortization			10,649		10,982
		EBITDA	$	72,331	$	76,212

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Financial Condition

(Amounts in thousands)	Six Months Ended
	December 31, 2005			December 31, 2004
Net cash provided by operating activities	$	31,139		$	2,392
Net cash used in investing activities		(2,543	)		(8,706	)
Net cash (used in) provided by financing activities		(32,877	)		16,186
Net (decrease) increase in cash and cash equivalents		(4,359	)		10,817

      Cash Flows.  Net cash provided by operating activities improved by $28.7 million for the six months ended December 31, 2005 as compared to the six months ended December 31, 2004. The improvement for the six months ended December 31, 2005 is primarily due to an approximately $50 million reduction in inventory, mainly as a result of inventory reduction initiatives, and an approximately $23 million reduction in the build-up of accounts receivable as compared to the prior year, mainly as a result of timing of sales, partially offset by a decrease in payables and an increase in prepaid expenses.

      For the six months ended December 31, 2005, net cash used in investing activities was $2.5 million as compared to net cash used in investing activities for the six months ended December 31, 2004 of $8.7 million. The decrease in net cash used in investing activities is a result of the sale of the Miami Lakes facility and related equipment that closed on August 1, 2005 and resulted in approximately $9.9 million of cash proceeds.

      Net cash used in financing activities increased by approximately $49 million for the six months ended December 31, 2005 as compared to the six months ended December 31, 2004. The increase in net cash used in financing activities for the six months ended December 31, 2005 was primarily due to payments on the credit facility, due to a decrease in working capital requirements, partially offset by repurchases of common stock.

      Interest paid during the six months ended December 31, 2005 included an $8.6 million interest payment on the 7 3/4% senior subordinated notes that covered the period from February 16, 2005 through August 15, 2005. Interest paid during the six months ended December 31, 2004 included a $9.6 million interest payment on the 7 3/4% senior subordinated notes that covered the period from the January 13, 2004 date of issuance through August 15, 2004.

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

      We have a revolving credit facility with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, which provides for borrowings on a revolving basis of up to $200 million with a $25 million sublimit for letters of credit. On November 2, 2005, we entered into an amendment to the credit facility that (i) extends the maturity of the credit facility to December 2010 from June 2009, (ii) reduces the interest rates and commitment fees based on our debt service coverage ratio, (iii) permits us to increase the size of the credit facility by up to $100 million without the consent of all of the banks, and (iv) permits us to pay cash dividends on the common stock, repurchase common stock or make other distributions to the common shareholders if we maintain borrowing availability after the applicable payment of at least $25 million from June 1 to November 30 and at least $35 million from December 1 to May 31. The credit facility is g uaranteed by all of our U.S. subsidiaries. Borrowings under the credit facility are limited to 85% of eligible accounts receivable and 75% (65% December 1 through May 31) of eligible finished goods inventory and are collateralized by a first priority lien on all of the our U.S. accounts receivable and inventory. Our obligations under the credit facility rank senior to our 7 3/4% Senior Subordinated Notes due 2014.

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      The credit facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if average borrowing availability declines to less than $25 million ($35 million from December 1 through May 31). No financial maintenance covenant was applicable for the three- and six-month periods ended December 31, 2005. The credit facility restricts us from incurring additional non-trade indebtedness (other than refinancing and certain small amounts of indebtedness).

      Borrowings under the revolving credit portion of the credit facility bear interest at a floating rate based on the "Applicable Margin," which is determined by reference to a specific financial ratio. At our option, the Applicable Margin may be applied to either the London InterBank Offered Rate (LIBOR) or the prime rate. The reference ratio for determining the Applicable Margin is a debt service coverage ratio. As a result of the November 2005 amendment to the credit facility, the interest rates charged on LIBOR loans and prime rate loans were reduced to a range of 1.00% to 1.75% from a range of 1.50% to 2.25% for LIBOR loans, and to 0% from a range of 0% to 0.50% for prime rate loans. As of December 31, 2005, the Applicable Margin was 1.25% for LIBOR loans and 0% for prime rate loans. The commitment fee on the unused portion of the Credit Facility is 0.25%.

      Based upon our internal projections, we believe that the credit facility, as currently amended and restated, provides sufficient flexibility so that we will remain in compliance with its terms. If our actual results deviate significantly from our projections, we may not remain in compliance with the debt service coverage ratio and would not be allowed to borrow under the credit facility. In addition, a default under our credit facility that causes acceleration of the debt under this facility could trigger a default on our senior notes. In the event we are not able to borrow under our credit facility, we would be required to develop an alternative source of liquidity. There is no assurance that we could obtain replacement financing or what the terms of such financing, if available, would be. As of December 31, 2005, we had $20 million in outstanding borrowings and approximately $4 million in letters of credits under our credit facility and ap proximately $142 million of eligible receivables and inventories available as collateral under the credit facility, resulting in remaining borrowing availability of approximately $117 million.

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

     Repurchase of Common Stock.  On November 2, 2005, our board of directors authorized us to implement a stock repurchase program to repurchase up to $40 million of our common stock through March 31, 2007. As of December 31, 2005, we repurchased 375,336 shares of Common Stock on the open market at a cost of $7.2 million, including sales commission.

      Redemption of 11 3/4% Senior Notes.  On November 2, 2005, our board of directors authorized us to redeem the remaining $8.8 million aggregate principal amount of 11 3/4% senior notes when such notes are redeemable on February 1, 2006 at the redemption price of 105.875% of their par amount plus accrued interest. On December 23, 2005, we issued a notice to the trustee under the indentures calling for the redemption of the remaining $8.8 million aggregate principal amount of 11 3/4% senior notes effective February 1, 2006. The redemption price was 105.875% of the principal amount, plus accrued interest and the redemption date was February 1, 2006. We utilized borrowings under the Credit Facility to repurchase the 11 3/4% senior notes. As a result of this transaction, we will incur a pre-tax charge of approximately $0.5 million related to the early extinguishment of the remaining 11 3/4% senior notes in the third quarter ending March 31, 2 006.

      Contractual Obligations.  At December 31, 2005, we had commitments to incur promotional and advertising expenses, which are either fixed commitments or based on net sales for licensed brands, and minimum royalty guarantees in an aggregate amount of $40.0 million through 2010 compared with $33.8 million through 2010 at June 30, 2005.

      In September 2005, the Company entered into a lease for approximately 35,000 square feet of office space in Miramar, Florida. The term of the lease commenced on December 1, 2005 and expires on May 31, 2011. Aggregate payments under this lease are approximately $4.7 million through the term of the lease.

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Recently Adopted Accounting Pronouncements and Recent Legislation

American Jobs Creation Act of 2004

      In October 2004, the American Jobs Creation Act of 2004 was signed into law. This act contains a number of provisions that might affect our future effective tax rate. A significant provision of this act allows us to elect to deduct from our taxable income 85% of certain eligible dividends received by us from our non-U.S. subsidiaries before either the year ended June 30, 2005 or the year ending June 30, 2006, if those dividends are reinvested in the U.S. for eligible purposes under this act. Another significant provision replaces the extraterritorial income exclusion with a domestic manufacturing deduction. In September 2005, we repatriated $3.2 million of undistributed international earnings from a foreign subsidiary. In anticipation of making such repatriation, we accrued a net provision of $146,000 for estimated deferred taxes during the year ended June 30, 2005.

Inventory Costs - An Amendment of ARB No. 43, Chapter 4

      In November 2004, the FASB issued SFAS No. 151, "Inventory Costs -- An Amendment of ARB No. 43, Chapter 4." SFAS 151 amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal" as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. We adopted SFAS 151 on July 1, 2005. The adoption of SFAS 151 did not have an impact on results of operations, financial position or cash flows.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

      As of December 31, 2005, we had $20 million in borrowings outstanding under our credit facility. Borrowings under our credit facility are seasonal, with peak borrowings in the months of September, October and November. Borrowings under the credit facility are subject to variable rates and, accordingly, our earnings and cash flow will be affected by changes in interest rates. In February 2004, we entered into two interest rate swap transactions to swap $50.0 million of our fixed rate 7 3/4% senior subordinated notes due 2014 to a floating rate of interest based on LIBOR to better balance our mix of fixed and floating rate debt. In the short term, this will provide us with a lower level of interest expense related to a portion of the 7 3/4% senior subordinated notes based on current LIBOR rates; however, over the life of the notes, interest expense may be greater than 7 3/4% based upon fluctuations in LIBOR. In the event of an adverse change in interest rates, our results could be negatively affected. We can terminate the swap at our option at any time and the counter party can call the swap any time after January 2009. We designated the swap as a fair value hedge.

Foreign Currency Risk

      We sell our products in approximately 90 countries around the world. During the three- and six-month periods ended December 31, 2005, we derived approximately 33%and 35%, respectively, of our net sales from our international operations. We conduct our international operations in a variety of different countries and derive our sales in various currencies including the Euro, British pound, Swiss franc, Canadian dollar and Australian dollar, as well as the U.S. dollar. Our operations may be subject to volatility because of currency changes, inflation changes and changes in political and economic conditions in the countries in which we operate. With respect to international operations, our sales, cost of goods sold and expenses are typically denominated in a combination of local currency and the U.S. dollar. Our results of operations are reported in U.S. dollars. Fluctuations in currency rates can affect our reported sales, margins, oper ating costs and the anticipated settlement of our foreign denominated receivables and payables. Most of our skin care and cosmetic products are produced in a third-party manufacturing facility located in Roanoke, Virginia. A weakening of the foreign currencies in which we generate sales relative to the currencies in which our costs are denominated, which is primarily the U.S. dollar, may decrease our reported cash flow and operating profits.

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Our competitors may or may not be subject to the same fluctuations in currency rates, and our competitive position could be affected by these changes. The cumulative effect of translating balance sheet accounts from the functional currency into the U.S. dollar at current exchange rates is included in "Accumulated other comprehensive income" in our consolidated balance sheets.

      As of December 31, 2005, we had notional amounts of 28.8 million Euros and 16.8 million British pounds under foreign currency contracts that expire between January 31, 2006 and June 29, 2007 to reduce the exposure of our foreign subsidiary revenues to fluctuations in currency rates. We have designated each qualifying foreign currency contract as a cash flow hedge. The gains and losses of these contracts will only be recognized in earnings in the period in which the contracts expire. At December 31, 2005, the unrealized gain, net of taxes associated with these contracts of approximately $3.0 million, is included in accumulated other comprehensive income. The unrealized gain, net of taxes, incurred during the three and six months ended December 31, 2005, was approximately $33,500 and approximately $13,800, respectively.

      In addition, during December 2005, we entered into and settled 13.6 million Euros and 6.1 British pounds under foreign currency contracts to reduce exposure of our foreign subsidiaries net balance sheet to fluctuations in foreign currency rates. The realized gain, net of taxes, recognized during the three and six months ended December 31, 2005 was approximately $0.4 million.

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

ITEM 4.    CONTROLS AND PROCEDURES

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

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

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PART II.   OTHER INFORMATION

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

      This table provides information with respect to purchases by the Company of shares of its common stock, $01. par value per share, "Common Stock" during the three months ended December 31, 2005:

Issuer Purchases of Equity Securities

	(a)	(b)		(c)	(d)
				Total Number	Approximate
				of Shares	Dollar Value
				Purchased as	that May Yet
	Total	Average		Part of Publicly	Be Purchased
	Number	Price		Announced	Under the
	of Shares	Per		Plans	Plans or
Period (1)	Purchased (1)	Share		or Programs	Programs (2)
November 2, 2005 through November 30, 2005	375,336	$	19.27	375,336	$	32,767,276
December 1, 2005 through December 31, 2005	0	$	0	375,336	$	32,767,276
Total	375,336	$	19.27	0	$	32,767,276

(1)  On November 2, 2005, the Board authorized the Company to implement a stock repurchase program to repurchase up to $40 million of Common Stock (the "2005 Stock Repurchase Program") through March 31, 2007. The 2005 Stock Repurchase Program was announced on November 3, 2005. Shares purchased were purchased on the open market by the Company.

(2)  Amounts reflect the remaining dollar value of shares that may be purchased under the 2005 Stock Repurchase Program.

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

(a)	The Annual Meeting of Shareholders (the "Annual Meeting") of the Company was held on November 16, 2005, in Miami Lakes, Florida.
(b)	The following directors were elected at the Annual Meeting:
		E. Scott Beattie
		Fred Berens
		Maura J. Clark
		Richard C.W. Mauran
		William M. Tatham
		J. W. Nevil Thomas
(c)	The shareholders voted at the Annual Meeting on the following matters:

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

	Votes Cast
		Against or
	For	Withheld
E. Scott Beattie	22,789,247	698,350
Fred Berens	22,984,872	502,725
Maura J. Clark	23,275,165	212,432
Richard C.W. Mauran	22,984,817	502,780
William M. Tatham	23,276,804	210,793
J. W. Nevil Thomas	22,850,799	636,798

2. The vote on the approval of the Amended and Restated Articles of Incorporation was as follows:

Votes Cast
	Against or	Broker
For	Withheld	Non-Votes	Abstentions
16,653,446	3,755,980	3,030,042	48,129

3. The vote on the approval of the 2005 Management Bonus Plan was as follows:

Votes Cast
	Against or	Broker
For	Withheld	Non-Votes	Abstentions
19,169,526	1,273,615	3,032,342	12,114

4. The vote on the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the fiscal year ending June 30, 2006, was as follows:

Votes Cast
	Against or	Broker
For	Withheld	Non-Votes	Abstentions
23,390,494	95,850	--	1,253

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ITEM 6.    EXHIBITS

Exhibit Number	Description
3.1	Amended and Restated Articles of Incorporation of the Company dated November 17, 2005.
3.2	Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit 3.2 filed as part of the Company's Form 10-Q for the transition period from February 1, 2004 to June 30, 2004 (Commission File No. 1-6370)).
4.1	Indenture dated as of January 23, 2001, among the Company and FD Management, Inc., DF Enterprises, Inc., Elizabeth Arden International Holding, Inc., Elizabeth Arden (Zug) GmbH, as guarantors, and HSBC Bank USA, as trustee (incorporated herein by reference to Exhibit 4.1 filed as part of the Company's Form 8-K dated February 7, 2001 (Commission File No. 1-6370)).
4.2	Supplemental Indenture dated as of January 8, 2004, among the Company and FD Management, Inc., DF Enterprises, Inc., Elizabeth Arden International Holding, Inc., Elizabeth Arden (Zug) GmbH, as guarantors, and HSBC Bank USA, as trustee (incorporated herein by reference to Exhibit 4.2 filed as part of the Company's Form 10-K for the year ended January 31, 2004 (Commission File No. 1-6370)).
4.3	Indenture dated as of January 13, 2004, among the Company and FD Management, Inc., DF Enterprises, Inc., Elizabeth Arden International Holding, Inc., RDEN Management, Inc., Elizabeth Arden (Financing), Inc., Elizabeth Arden Travel Retail, Inc., as guarantors, and HSBC Bank USA, as trustee (incorporated herein by reference to Exhibit 4.3 filed as part of the Company's Form 10-K for the year ended January 31, 2004 (Commission File No. 1-6370)).
4.4	Second Amended and Restated Credit Agreement dated as of December 24, 2002 among the Company, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed as part of the Company's Form 8-K dated December 30, 2002 (Commission File No. 1-6370)).
4.5	First Amendment to Second Amended and Restated Credit Agreement dated as of February 25, 2004, among the Company, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.5 filed as part of the Company's Form 10-K for the year ended January 31, 2004 (Commission File No. 1-6370)).
4.6	Second Amendment to Second Amended and Restated Credit Agreement dated as of June 2, 2004, among the Company, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.6 filed as part of the Company's Form 10-Q for the quarter ended May 1, 2004 (Commission File No. 1-6370)).
4.7	Third Amendment to Second Amended and Restated Credit Agreement dated as of September 30, 2004, among the Company, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed as part of the Company's Form 8-K dated October 1, 2004 (Commission File No. 1-6370)).
4.8	Fourth Amendment to Second Amended and Restated Credit Agreement dated as of November 2, 2005, among the Company, JPMorgan Chase Bank, as administrative agent, Bank of America (formerly Fleet National Bank), as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.8 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2005 (Commission File No. 1-6370)).
4.9	Amended and Restated Security Agreement dated as of January 29, 2001, made by the Company and certain of its subsidiaries in favor of Fleet National Bank, as administrative agent (incorporated herein by reference to Exhibit 4.5 filed as part of the Company's Form 8-K dated February 7, 2001 (Commission File No. 1-6370)).

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Exhibit Number	Description
10.1	2004 Stock Incentive Plan (incorporated herein by reference to Annex E filed as part of the Company's Proxy Statement on May 14, 2004 (Commission File No. 1-6370)).
10.2	2004 Non-Employee Director Stock Option Plan (incorporated herein by reference to Annex F filed as part of the Company's Proxy Statement on May 14, 2004 (Commission File No. 1-6370)).
10.3	Amended 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 filed as a part of the Company's Form 10-Q for the quarter ended July 26, 2003 (Commission File No. 1-6370)).
10.4	Amended 1995 Stock Option Plan (incorporated herein by reference to Exhibit 4.12 filed as a part of the Company's Registration Statement on Form S-8 dated July 7, 1999 (Commission File No. 1-6370)).
10.5	Amended 2002 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.4 filed as part of the Company's Form 10-Q for the quarter ended April 26, 2003 (Commission File No. 1-6370)).
10.6	Amended Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.2 filed as a part of the Company's Form 10-Q for the quarter ended April 26, 2003 (Commission File No. 1-6370)).
10.7	Amended and Restated Deed of Lease dated as of January 17, 2003, between the Company and Liberty Property Limited Partnership (incorporated herein by referenced to Exhibit 10.5 filed as a part of the Company's Form 10-Q for the quarter ended April 26, 2003 (Commission File No. 1-6370)).
10.8	Form of Nonqualified Stock Option Agreement for stock option awards under the Company's Amended Non-Employee Director Stock Option Plan(incorporated herein by reference to Exhibit 10.8 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.9	Form of Incentive Stock Option Agreement for stock option awards under the Company's Amended 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.9 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.10	Form of Nonqualified Stock Option Agreement for stock option awards under the Company's Amended 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.10 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.11	Form of Stock Option Agreement for stock option awards under the Company's 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.11 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.12	Form of Restricted Stock Agreement for regular restricted stock awards under the Company's Amended 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.12 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.13	Form of Restricted Stock Agreement for the performance-based restricted stock awards under the Company's Amended 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.13 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.14	Form of Stock Option Agreement for stock option awards under the Company's 2004 Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.14 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.15	Form of Restricted Stock Agreement for the market-based restricted stock awards under the Company's 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.15 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).

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Exhibit Number	Description
10.16	Compensation Arrangements for Named Executive Officers (incorporated herein by reference to Exhibit 10.16 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).
10.17	Board of Directors Compensation Arrangements (incorporated herein by reference to Exhibit 10.17 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.18	Agreement for Sale and Purchase dated as of March 29, 2005 between Elizabeth Arden, Inc. and Nina Elazar (incorporated herein by reference to Exhibit 10.18 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).
10.19	Form of Stock Option Agreement for stock option awards under the Company's 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.19 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).
10.20	Form of Restricted Stock Agreement for the restricted stock awards under the Company's 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.20 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).
10.21	2005 Management Bonus Plan (incorporated herein by reference to Exhibit 10.21 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).
10.22	2005 Performance Bonus Plan (incorporated herein by reference to Exhibit 10.22 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).
31.1	Section 302 Certification of Chief Executive Officer.
31.2	Section 302 Certification of Chief Financial Officer.
32	Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer.

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

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SIGNATURES

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

	ELIZABETH ARDEN, INC.
Date:  February 8, 2006	/s/ E. Scott Beattie
	E. Scott Beattie
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
Date:   February 8, 2006	/s/ Stephen J. Smith
	Stephen J. Smith
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description
3.1	Amended and Restated Articles of Incorporation dated November 17, 2005.
31.1	Section 302 Certification of Chief Executive Officer.
31.2	Section 302 Certification of Chief Financial Officer.
32	Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer.

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