Elizabeth Arden (RDEN) 10-Q 2007 Q3 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 March 31, 2007
[]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-6370

ELIZABETH ARDEN, INC.

(Exact name of registrant as specified in its charter)

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

(954) 364-6900

(Registrant's telephone number, including area code)

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

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

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

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

Class	Outstanding at May 8, 2007
Common Stock, $.01 par value	28,522,245

ELIZABETH ARDEN, INC.

INDEX TO FORM 10-Q

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	Page No.
	Unaudited Consolidated Balance Sheets -- March 31, 2007 and June 30, 2006	3
	Unaudited Consolidated Statements of Operations -- Three and nine months ended March 31, 2007 and March 31, 2006	4
	Unaudited Consolidated Statement of Shareholders' Equity -- Nine months ended March 31, 2007	5
	Unaudited Consolidated Statements of Cash Flow -- Nine months ended March 31, 2007 and March 31, 2006	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 6.	Exhibits	32
Signatures		35
Exhibit Index		36

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PART I      FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS

ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except share and per share data)

			As of
			March 31, 2007			June 30, 2006
ASSETS
Current Assets
	Cash and cash equivalents		$	37,761		$	28,466
	Accounts receivable, net			213,484			181,080
	Inventories			327,184			269,270
	Deferred income taxes			11,745			15,471
	Prepaid expenses and other assets			23,836			21,633
		Total current assets		614,010			515,920
Property and Equipment, net				38,662			34,681
Other Assets
	Exclusive brand licenses, trademarks and intangibles, net			219,084			201,534
	Debt financing costs, net			6,042			6,741
	Other assets			768			1,027
		Total other assets		225,894			209,302
		Total assets	$	878,566		$	759,903
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Short-term debt		$	114,840		$	40,000
	Accounts payable -- trade			126,565			134,006
	Other payables and accrued expenses			80,748			60,409
	Current portion of long-term debt			1,125			563
		Total current liabilities		323,278			234,978
Long-term Liabilities
	Long-term debt, net			224,468			225,388
	Deferred income taxes and other liabilities			23,957			21,690
		Total long-term liabilities		248,425			247,078
		Total liabilities		571,703			482,056
Commitments and Contingencies
Shareholders' Equity
	Common stock, $.01 par value per share, 50,000,000 shares   authorized; 30,340,944 issued and 28,478,775 outstanding, and   29,869,458 issued and 28,531,331 outstanding, respectively			304			299
	Additional paid-in capital			261,756			252,565
	Retained earnings			76,040			48,341
	Treasury stock (1,862,169 and 1,338,127 shares at cost, respectively)			(33,879	)		(25,339	)
	Accumulated other comprehensive income			2,642			1,981
		Total shareholders' equity		306,863			277,847
		Total liabilities and shareholders' equity	$	878,566		$	759,903

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					Nine Months Ended
			March 31, 2007		March 31, 2006			March 31, 2007		March 31, 2006
Net sales			$	219,223	$	191,344		$	884,802	$	764,615
Cost of sales (excludes depreciation of $1,268,   $641, $2,979 and $1,822 respectively, included   below)				120,744		105,094			529,143		443,539
Gross profit				98,479		86,250			355,659		321,076
Operating expenses:
	Selling, general and administrative			82,090		75,929			277,696		238,424
	Depreciation and amortization			6,042		5,438			18,740		16,087
		Total operating expenses		88,132		81,367			296,436		254,511
Income from operations				10,347		4,883			59,223		66,565
Other expenses:
Interest expense, net				6,552		5,344			22,441		18,120
Debt extinguishment charge				--		758			--		758
Other expense, net				6,552		6,102			22,441		18,878
Income (loss) before income taxes				3,795		(1,219	)		36,782		47,687
Provision for (benefit from) income taxes				638		(1,921	)		9,083		12,995
Net income			$	3,157	$	702		$	27,699	$	34,692
Net income per common share:
	Basic		$	0.11	$	0.02		$	1.00	$	1.22
	Diluted		$	0.11	$	0.02		$	0.97	$	1.17
Weighted average number of common shares:
	Basic			27,455		28,412			27,566		28,487
	Diluted			28,754		29,636			28,581		29,633

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				Additional Paid-in			Retained		Treasury Stock						Accumulated Other Comprehensive			Total Shareholders'
			Shares		Amount		Capital			Earnings		Shares			Amount			Income			Equity
Balance at June 30, 2006				29,869	$	299	$	252,565		$	48,341		(1,338	)	$	(25,339	)	$	1,981		$	277,847
Issuance of common stock upon exercise of   stock options				175		2		2,082														2,084
Issuance of common stock under the employee stock   purchase plan				45		--		696														696
Issuance of restricted stock, net of forfeitures				252		3		(3	)													--
Amortization of share-based awards								6,416														6,416
Repurchase of common stock													(524	)		(8,540	)					(8,540	)
Comprehensive income:
	Net income										27,699											27,699
	Foreign currency translation adjustments																		1,132			1,132
	Disclosure of reclassification amount, net of   taxes (8% tax rate):
		Unrealized hedging loss arising during the   period																	(1,811	)		(1,811	)
		Less: reclassification adjustment for   hedging losses included in net income																	1,340			1,340
		Net unrealized cash flow hedging loss																	(471	)		(471	)
	Total comprehensive income										27,699								661			28,360
Balance at March 31, 2007				30,341	$	304	$	261,756		$	76,040		(1,862	)	$	(33,879	)	$	2,642		$	306,863

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)

				Nine Months Ended
				March 31, 2007			March 31, 2006
Operating Activities:
	Net income			$	27,699		$	34,692
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			18,740			16,087
		Amortization of senior note offering costs			992			891
		Amortization of share-based awards			6,416			7,926
		Cumulative effect of a change in accounting for share-based payments			--			139
		Deferred income taxes			5,170			10,016
		Debt extinguishment charge			--			758
	Changes in assets and liabilities, net of acquisitions:
		Increase in accounts receivable			(32,650	)		(37,988	)
		Decrease in inventories			10,176			35,344
		Increase in prepaid expenses and other assets			(2,791	)		(4,810	)
		Decrease in accounts payable			(7,441	)		(9,336	)
		Increase (decrease) in other payables, accrued expenses and other liabilities			18,667			(12,732	)
		Other			859			216
			Net cash provided by operating activities		45,837			41,203
Investing Activities:
	Additions to property and equipment				(13,870	)		(14,257	)
	Proceeds from disposals of property and equipment				--			9,945
	Acquisitions				(91,487	)		(3,583	)
			Net cash used in investing activities		(105,357	)		(7,895	)
Financing Activities:
	Proceeds from (payments on) short-term debt				74,840			(17,404	)
	Payments on long-term debt				(538	)		(9,320	)
	Proceeds from the exercise of stock options				2,084			2,579
	Proceeds from issuance of common stock under the employee stock purchase plan				696			808
	Repurchase of common stock				(8,540	)		(8,059	)
			Net cash provided by (used in) financing activities		68,542			(31,396	)
Effect of exchange rate changes on cash and cash equivalents					273			81
Net increase in cash and cash equivalents					9,295			1,993
Cash and cash equivalents at beginning of period					28,466			25,316
Cash and cash equivalents at end of period				$	37,761		$	27,309
Supplemental Disclosure of Cash Flow Information:
	Interest paid during the period			$	25,869		$	24,828
	Income taxes paid during the period			$	1,479		$	4,779

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 care and cosmetic products to retailers in the United States and approximately 90 countries internationally.

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

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

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

NOTE 2.   INCOME PER SHARE

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

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

(Amounts in thousands, except per  share data)			Three Months Ended				Nine Months Ended
			March 31,		March 31,		March 31,		March 31,
			2007		2006		2007		2006
Basic
	Net income		$	3,157	$	702	$	27,699	$	34,692
	Weighted average shares outstanding			27,455		28,412		27,566		28,487
	Net income per basic share		$	0.11	$	0.02	$	1.00	$	1.22
Diluted
	Net income		$	3,157	$	702	$	27,699	$	34,692
	Weighted average shares outstanding			27,455		28,412		27,566		28,487
	Potential common shares - treasury   method			1,299		1,224		1,015		1,146
	Weighted average shares and potential   dilutive shares			28,754		29,636		28,581		29,633
		Net income per diluted share	$	0.11	$	0.02	$	0.97	$	1.17

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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 nine months ended March 31, 2007 and 2006 where the option exercise price was greater than the average market price of the Common Stock over the applicable period:

	Three Months Ended				Nine Months Ended
	March 31, 2007		March 31, 2006		March 31, 2007		March 31, 2006
Number of shares		729,959		416,200		847,959		416,200
Range of exercise price	$	20.75-23.40	$	23.40	$	18.35-23.40	$	23.40

NOTE 3.    SHARE-BASED COMPENSATION

          At March 31, 2007, the Company had outstanding several share-based compensation plans. For the three and nine months ended March 31, 2007, the compensation cost charged against income was $2.1 million and $6.4 million, respectively. For the three and nine months ended March 31, 2006, the compensation cost charged against income was $2.8 million and $7.9 million, respectively. The tax benefit related to the compensation cost charged against income for the three and nine months ended March 31, 2007 was approximately $0.5 million and $1.6 million, respectively. The tax benefit related to the compensation cost charged against income for the three and nine months ended March 31, 2006 was approximately $0.8 million and $2.2 million, respectively.

          As of March 31, 2007, there were approximately $9.6 million of unrecognized compensation costs related to non-vested share-based arrangements granted under the Company's share-based compensation plans. Those costs are expected to be recognized over a weighted-average period of approximately 2.0 years.

Stock Options

         On January 31, 2007, the Company's Board of Directors (the "Board") granted stock options for an aggregate of 6,000 shares of Common Stock to an employee director under the 2004 Stock Incentive Plan (the "2004 Incentive Plan"). The stock options are exercisable three years from the date of grant if the director continues to serve as a director until that date. The exercise price of the stock options is $18.90 per share, which was the closing price of the Common Stock on the date of grant. The weighted-average grant-date fair value of the options granted was $7.39 per share based on the Black-Scholes option-pricing model. The options expire ten years from the date of grant.

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

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

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

          The weighted-average grant date fair value of options granted during the nine months ended March 31, 2007 was estimated on the grant date using the Black-Scholes option-pricing model with the assumptions noted in the following table.  Expected volatilities are based on historical volatility of the Common Stock and other factors.  The expected term of options represents the period of time that options granted are expected to be outstanding and is derived from historical terms and other factors.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Nine Months Ended
	March 31, 2007
Expected dividend yield		0.00	%
Expected price volatility		35.00	%
Risk-free interest rate		4.87-4.93	%
Expected life of options in years		5

           A summary of stock option activity under the Company's share-based compensation plans for the nine months ended March 31, 2007 is presented below:

Options	Common Stock Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (1)
Outstanding at July 1, 2006	3,366,469		$	15.10	5.6
New grants	352,000		$	15.36
Exercised	(175,143	)	$	11.90
Forfeited or expired	(57,159	)	$	16.64
Outstanding at March 31, 2007	3,486,167		$	15.23	5.3	$	23,592,275
Exercisable at March 31, 2007	2,816,454		$	14.34	3.9	$	21,179,005

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

          The total intrinsic value of stock options exercised during the nine months ended March 31, 2007 and 2006, based upon the average market price during the period, was approximately $1.6 million and $1.4 million, respectively.

Restricted Common Stock

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

          A summary of the Company's restricted stock activity for the nine months ended March 31, 2007, is presented below:

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

Restricted Stock	Shares		Weighted Average Grant-Date Fair Value
Non-vested at July 1, 2006	774,175		$	20.07
Granted	280,800		$	15.00
Vested	(61,445	)	$	21.57
Forfeited	(29,735	)	$	18.44
Non-vested at March 31, 2007	963,795		$	18.91

Employee Stock Purchase Plan

          The Company currently has an Employee Stock Purchase Plan ("ESPP") under which employees in certain countries are permitted to deposit after tax funds from their wages for purposes of purchasing Common Stock at a 15% discount from the lower of the closing price of the Common Stock at either the start of the contribution period or the end of the contribution period. The Company expenses the discount taken and the fair value of the "look-back" feature realized by employees upon purchases of Common Stock under the ESPP. For the three and nine months ended March 31, 2007, the Company recorded costs associated with the ESPP of approximately $0.2 million and $0.4 million, respectively. For the three and nine months ended March 31, 2006, the Company recorded costs associated with the ESPP of approximately $0.2 million and $0.4 million, respectively. The next purchase under the ESPP will be consummated on June 1, 2007.

NOTE 4.    NEW ACCOUNTING STANDARDS

Accounting for Uncertainty in Income Taxes

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

Fair Value Measurements

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

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

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

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

NOTE 5.    INVENTORIES

          The components of inventory were as follows:

(Amounts in thousands)	March 31, 2007		June 30, 2006
Raw materials and components	$	53,727	$	53,929
Work in progress	23,225		35,775
Finished goods	250,232		179,566
Total	$	327,184	$	269,270

NOTE 6.    SHORT-TERM DEBT

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

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

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

          The Credit Facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if average borrowing availability declines to less than $25 million ($35 million from December 1 through May 31). No financial maintenance covenant was applicable for the nine months ended March 31, 2007. Under the terms of the Credit Facility, the Company may pay dividends or repurchase Common Stock if the Company maintains borrowing availability after the applicable payment of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31. The Credit Facility restricts the Company from incurring additional non-trade indebtedness (other than refinancings and certain small amounts of indebtedness).

          Borrowings under the credit portion of the Credit Facility bear interest at a floating rate based on the "Applicable Margin," which is determined by reference to a specific financial ratio. At the Company's option, the Applicable Margin may be applied to either the London InterBank Offered Rate ("LIBOR") or the prime rate. The reference ratio for determining the Applicable Margin is a debt service coverage ratio. The Applicable Margin charged on LIBOR loans ranges from 1% to 1.75% and is 0% for prime rate loans. As of March 31, 2007, the Applicable Margin was 1.25% for LIBOR loans and 0% for prime rate loans. The commitment fee on the unused portion of the Credit Facility is 0.25%. As a result of the August 2006 amendment, the interest rate charged on the first $25 million of borrowings was set at LIBOR plus 2.5% through November 30, 2006.

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

          As of March 31, 2007, the Company had $115 million in outstanding borrowings and approximately $4 million in letters of credit outstanding under the Credit Facility, compared with approximately $40 million in outstanding borrowings under the Credit Facility at June 30, 2006. As of March 31, 2007, the Company had approximately $184 million of eligible receivables and inventories available as collateral under the Credit Facility and remaining borrowing availability of approximately $65 million. The Company classifies the Credit Facility as short-term debt on its balance sheet since it expects to reduce outstanding borrowings over the next twelve months.

NOTE 7.    LONG-TERM DEBT

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

(Amounts in thousands)	March 31, 2007			June 30, 2006
7 3/4% Senior Subordinated Notes due January 2014	$	225,000		$	225,000
Termination costs on interest rate swap relating to the    7 3/4% Senior Subordinated Notes, net		(2,244	)		(2,425	)
Riviera Term Note		2,837			3,376
Total debt		225,593			225,951
Less: Current portion of long-term debt		1,125			563
Total long-term debt	$	224,468		$	225,388

NOTE 8.    COMMITMENTS AND CONTINGENCIES

          At March 31, 2007, the Company had contractual obligations to incur promotional and advertising expenses, which are either fixed commitments or based on net sales for licensed brands, and minimum royalty guarantees in an aggregate amount of $70.7 million through 2011, compared with$75.2 million through 2011 at June 30, 2006.

          In October 2006, the Company received a demand from a licensee of certain of the Company's patents alleging the Company had breached the license agreement, indicating that it would not pay any further royalties and requesting that the Company return approximately $3 million in royalty payments already made. The Company believes that it has not breached the license agreement and that the licensee is obligated to continue to make royalty payments. The Company has filed a lawsuit against the licensee seeking recovery of its damages for breach of contract. In April 2007, the licensee filed a counterclaim for breach of contract, negligence, unjust enrichment and other related counts, and also seeks declaratory relief that the licensee is not obligated to make further royalty payments and is entitled to recover approximately $3 million in royalty payments already made plus interest. The Company is not able to determine the ultimate outc ome of this action or estimate the possible loss or range of loss relating to the licensee's claim.

          In August 2006, the Company was served with a complaint from a dermatologist alleging that the Company's use of her quote in product advertisements was unauthorized and constituted a false endorsement, false advertising, invasion of privacy, trademark dilution and disparagement, a violation of the right to publicity, fraud and unjust enrichment. In October 2006, the plaintiff filed an amended complaint adding the licensor of the product name to the lawsuit. The plaintiff sought to enjoin the Company's use of her name and advertising and damages of no less than $2 million, including payments of profits associated with the relevant product, and exemplary and treble damages. In May 2007, the parties agreed to settle the action. Under the terms of the settlement, and without admitting any liability, the Company agreed to pay the plaintiff $95,000.

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

- 12 -

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

          As of March 31, 2007, the Company had notional amounts of 41.5 million Euros and 26.6 million Britishpounds under foreign currency contracts that expire between April 30, 2007 and June 30, 2008 to reduce the exposure of its foreign subsidiary revenues to fluctuations in currency rates. The Company has designated each qualifying foreign currency contract as a cash flow hedge. The gains and losses of these contracts will only be recognized in earnings in the period in which the contracts expire. At March 31, 2007, the unrealized loss, net of taxes, associated with these contracts of approximately $0.8 million, is included in accumulated other comprehensive income. The unrealized gain, net of taxes, generated during the three months ended March 31, 2007 was approximately $0.7 million, and the unrealized loss, net of taxes, generated during the nine months ended March 31, 2007 was approximately $ 0.5 million.

          When appropriate, the Company also enters into and settles foreign currency contracts for Euros, British pounds and Canadian dollars to reduce exposure of the Company's foreign subsidiaries' net balance sheets to fluctuations in foreign currency rates. As of March 31, 2007, there were no such foreign currency contracts outstanding. The realized loss, net of taxes, recognized from contracts in place during the three and nine months ended March 31, 2007 was approximately $0.1 million and $0.6 million, respectively.

Acquisitions

          In June 2006, the Company acquired certain assets of Riviera, including inventory, accounts receivable and certain brand licenses. The net purchase price was approximately $14.3 million and was allocated as follows: $8.2 million for inventory, $1.8 million for accounts receivable, $0.5 million for prepaid, deferred and fixed assets, and $21.3 million for intangible assets, offset by liabilities of $17.5 million (including the assumption of a term note in the principal amount of approximately $3.4 million of which $ 0.6 million has been paid, a contingent performance liability of $8.6 million and other assumed liabilities). The contingent performance liability is payable subject to the satisfaction of certain sales targets over the three year period after the closing date and was recorded as a result of the negative goodwill resulting from this acquisition. The Company has finalized its allocation of the net purchase price amon g the assets acquired. In addition to the debt issued and liabilities assumed, the Company paid $11.5 million in cash at closing of the acquisition and held $1.6 million in escrow pending satisfaction of certain obligations, of which $0.9 million remained in escrow at March 31, 2007.

          In August 2006, the Company acquired the fragrance business of Sovereign. The assets acquired included inventory and certain intangible assets. In addition, the Company assumed a portion of the lease payments on Sovereign's distribution facility and entered into a short-term services agreement. The net purchase price consisted of (i) approximately $90.2 million in cash, comprised of $87.7 million paid in cash at closing and approximately $2.5 million in cash paid in five installments after the closing; and (ii) $12.0 million in the form of contingent consideration, substantially all of which may be paid over two years from the date of closing if certain financial targets and other conditions are satisfied. The net purchase price has been preliminarily allocated as follows: $67.2 million for inventory, $23.8 million for certain intangible assets, and $0.8 million of other assets, offset by approximately $1.6 mil lion of assumed lease payments and the services agreement. In addition, if the contingent consideration is paid, the Company intends to allocate that amount to intangible assets. The Company used the Credit Facility to fund the cash portion of the purchase price. The Company has not finalized its allocation of the purchase price among the net assets acquired.

Disposals of Property and Equipment

          On August 1, 2006, the Company sold its formercorporate headquarters and former distribution facility located on a 13-acre tract of land in Miami Lakes, Florida (the "Miami Lakes Facility"). The Company received approximately $9.9 million in net proceeds relating to the sale of the Miami Lakes Facility and associated equipment.

NOTE 9.    REPURCHASE OF COMMON STOCK

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

- 13 -

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

          As of March 31, 2007, the Company had repurchased 1,862,169 shares of Common Stock on the open market at a cost of $33.9 million, including sales commissions. For the nine months ended March 31, 2007, the Company repurchased 524,042 shares of Common Stock, at an average price of $16.30 per share on the open market, at a cost of $8.5 million, including sales commissions. These repurchases are accounted for under the treasury method. There were no repurchases of Common Stock during the three months ended March 31, 2007.

NOTE 10.    INCOME TAXES

  ��       The Company reviews its estimated annual effective tax rate on a quarterly basis and makes necessary changes if information or events warrant such changes. The annual effective tax rate is forecasted quarterly using historical information and forward-looking estimates. The estimated annual effective tax rate may fluctuate due to changes in forecasted annual operating income by jurisdiction, changes to the valuation allowance for deferred tax assets, changes to actual or forecasted permanent book to tax differences, impacts from future tax settlements with state, federal or foreign tax authorities, or impacts from tax law changes, among other things. The income tax provision for the three months ended March 31, 2007, reflects an adjustment to the effective tax rate for changes in expected earnings contributions from the Company's worldwide affiliates as well as to record on a discrete basis a benefit from research and developme nt tax credits attributable to prior years. The income tax benefit for the three months ended March 31, 2006, reflects an adjustment to the effective tax rate for increased earnings contributions from the Company's worldwide affiliates. The effective tax rate for the nine months ended March 31, 2007 and 2006 of 24.7% and 27.3%, respectively, reflects the impact of the adjustments noted above.

NOTE 11.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION

          The following condensed financial statements as of March 31, 2007 and as of June 30, 2006, and for the three and nine-month periods ended March 31, 2007 and 2006, show the consolidated financial statements of the Company, and, in separate financial statements, the financial statements of those subsidiaries that are guarantors of the 7 3/4% Senior Subordinated Notes, plus, in each case, the financial statements of non-guarantor entities, elimination adjustments and the consolidated total. The Company's subsidiaries, DF Enterprises, Inc., FD Management, Inc., Elizabeth Arden International Holding, Inc., Elizabeth Arden (Financing), Inc., RDEN Management, Inc. and Elizabeth Arden Travel Retail, Inc., are guarantors of the 7 3/4% Senior Subordinated Notes. Equity income of the guarantor subsidiaries is included in other expense (income), net. All subsidiaries listed in this note are wholly owned subsidiaries of the Company and the ir guarantees are joint and several, full and unconditional. All information presented is in thousands.

[Remainder of Page Intentionally Left Blank]

- 14 -

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

Balance Sheet				As of March 31, 2007
					Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets
	Cash and cash equivalents				$	8,422		$	29,182		$	157		$	--		$	37,761
	Accounts receivable, net					113,051			100,433			--			--			213,484
	Inventories					231,353			95,831			--			--			327,184
	Intercompany receivable					90,094			143,333			294,863			(528,290	)		--
	Deferred income taxes					9,833			1,912			--			--			11,745
	Prepaid expenses and other assets					11,367			12,371			12			86			23,836
			Total current assets			464,120			383,062			295,032			(528,204	)		614,010
Property and equipment, net						23,451			15,211			--			--			38,662
Other Assets:
	Investment in subsidiaries					50,848			--			--			(50,848	)		--
	Exclusive brand licenses, trademarks and   intangibles, net					54,123			8,548			156,413			--			219,084
	Debt financing costs, net					6,042			--			--			--			6,042
	Other assets					223,251			(232,876	)		9,136			1,257			768
		Total other assets				334,264			(224,328	)		165,549			(49,591	)		225,894
		Total assets			$	821,835		$	173,945		$	460,581		$	(577,795	)	$	878,566
LIABILITIES AND SHAREHOLDERS'   EQUITY
Current Liabilities:
	Short-term debt				$	114,840		$	--			--		$	--		$	114,840
	Accounts payable -- trade					107,659			18,906			--			--			126,565
	Intercompany payable					21,296			254,644			251,135			(527,075	)		--
	Other payables and accrued expenses					35,225			45,589			(71	)		5			80,748
	Current portion of long-term debt					1,125			--			--			--			1,125
			Total current liabilities			280,145			319,139			251,064			(527,070	)		323,278
	Long-term debt, net					224,468			--			--			--			224,468
	Deferred income taxes and other liabilities					10,359			6,677			6,798			123			23,957
			Total liabilities			514,972			325,816			257,862			(526,947	)		571,703
Shareholders' Equity
	Common stock					304			--			--			--			304
	Additional paid-in capital					261,756			(223,545	)		222,581			964			261,756
	Retained earnings (accumulated deficit)					76,040			68,535			(19,862	)		(48,673	)		76,040
	Treasury Stock					(33,879	)		--			--			--			(33,879	)
	Accumulated other comprehensive income					2,642			3,139			--			(3,139	)		2,642
			Total shareholders' equity			306,863			(151,871	)		202,719			(50,848	)		306,863
			Total liabilities and shareholders' equity		$	821,835		$	173,945		$	460,581		$	(577,795	)	$	878,566

- 15-

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

Balance Sheet			As of June 30, 2006
				Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets:
	Cash and cash equivalents			$	4,931		$	23,529		$	6		$	--		$	28,466
	Accounts receivable, net				94,385			86,695			--			--			181,080
	Inventories				183,972			85,298			--			--			269,270
	Intercompany receivable				91,356			157,675			272,799			(521,830	)		--
	Deferred income taxes				14,792			679			--			--			15,471
	Prepaid expenses and other assets				9,136			12,497			--			--			21,633
		Total current assets			398,572			366,373			272,805			(521,830	)		515,920
Property and equipment, net					21,373			13,308			--			--			34,681
Other Assets:
	Investment in subsidiaries				23,173			--			--			(23,173	)		--
	Exclusive brand licenses, trademarks and    intangibles, net				34,228			9,212			158,094			--			201,534
	Debt financing costs, net				6,741			--			--			--			6,741
	Other				223,352			(232,443	)		9,136			982			1,027
		Total other assets			287,494			(223,231	)		167,230			(22,191	)		209,302
		Total assets		$	707,439		$	156,450		$	440,035		$	(544,021	)	$	759,903
LIABILITIES AND SHAREHOLDERS'    EQUITY
Current Liabilities:
	Short-term debt			$	40,000		$	--		$	--		$	--		$	40,000
	Accounts payable -- trade				116,613			17,382			--			11			134,006
	Intercompany payable				7,820			274,152			239,008			(520,980	)		--
	Other payables and accrued expenses				29,444			30,953			13			(1	)		60,409
	Current portion of long-term debt				563			--			--			--			563
		Total current liabilities			194,440			322,487			239,021			(520,970	)		234,978
	Long-term debt				225,388			--			--			--			225,388
	Deferred income taxes and other liabilities				9,764			5,058			6,746			122			21,690
		Total liabilities			429,592			327,545			245,767			(520,848	)		482,056
Shareholders' Equity
	Common stock				299			--			--			--			299
	Additional paid-in capital				252,565			(223,543	)		222,570			973			252,565
	Retained earnings (accumulated deficit)				48,341			49,972			(28,302	)		(21,670	)		48,341
	Treasury stock				(25,339	)		--			--			--			(25,339	)
	Accumulated other comprehensive income				1,981			2,476			--			(2,476	)		1,981
		Total shareholders' equity			277,847			(171,095	)		194,268			(23,173	)		277,847
		Total liabilities and shareholders' equity		$	707,439		$	156,450		$	440,035		$	(544,021	)	$	759,903

- 16 -

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

Statement of Operations		Three Months Ended March 31, 2007
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	119,320		$	99,903	$	3,279		$	(3,279	)	$	219,223
Cost of sales				74,572			46,172		--			--			120,744
Gross profit				44,748			53,731		3,279			(3,279	)		98,479
Selling, general and administrative costs				39,791			45,862		(284	)		(3,279	)		82,090
Depreciation and amortization				3,659			1,644		739			--			6,042
Income from operations				1,298			6,225		2,824			--			10,347
Other expense (income):
	Interest expense (income)			6,539			425		(412	)		--			6,552
	Other			(5,473	)		991		3,968			514			--
(Loss) income before income taxes				232			4,809		(732	)		(514	)		3,795
(Benefit from) provision for income taxes				(2,925	)		2,635		928			--			638
Net income (loss)			$	3,157		$	2,174	$	(1,660	)	$	(514	)	$	3,157

Statement of Operations		Nine Months Ended March 31, 2007
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	565,753		$	319,049	$	12,503		$	(12,503	)	$	884,802
Cost of sales				377,503			151,640		--			--			529,143
Gross profit				188,250			167,409		12,503			(12,503	)		355,659
Selling, general and administrative costs				154,808			136,308		(917	)		(12,503	)		277,696
Depreciation and amortization				11,436			5,118		2,186			--			18,740
Income from operations				22,006			25,983		11,234			--			59,223
Other expense (income):
	Interest expense (income)			22,431			1,247		(1,237	)		--			22,441
	Other			(28,848	)		991		3,968			23,889			--
Income before income taxes				28,423			23,745		8,503			(23,889	)		36,782
Provision for income taxes				724			5,285		3,074			--			9,083
Net income			$	27,699		$	18,460	$	5,429		$	(23,889	)	$	27,699

- 17 -

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

Statement of Operations		Three Months Ended March 31, 2006
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	100,184		$	91,160	$	2,803		$	(2,803	)	$	191,344
Cost of sales				60,581			44,513		--			--			105,094
Gross profit				39,603			46,647		2,803			(2,803	)		86,250
Selling, general and administrative costs				38,365			40,414		(47	)		(2,803	)		75,929
Depreciation and amortization				2,989			1,737		712			--			5,438
(Loss) income from operations				(1,751	)		4,496		2,138			--			4,883
Other expense (income):
	Interest expense (income)			5,342			429		(427	)		--			5,344
	Debt extinguishment charge			758			--		--			--			758
	Other			(5,651	)		273		797			4,581			--
(Loss) income before income taxes				(2,200	)		3,794		1,768			(4,581	)		(1,219	)
(Benefit from) provision for income taxes				(2,902	)		342		639			--			(1,921	)
Net income			$	702		$	3,452	$	1,129		$	(4,581	)	$	702

Statement of Operations		Nine Months Ended March 31, 2006
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	479,168		$	285,447	$	11,204		$	(11,204	)	$	764,615
Cost of sales				305,289			138,250		--			--			443,539
Gross profit				173,879			147,197		11,204			(11,204	)		321,076
Selling, general and administrative costs				132,310			117,962		(644	)		(11,204	)		238,424
Depreciation and amortization				8,882			5,070		2,135			--			16,087
Income from operations				32,687			24,165		9,713			--			66,565
Other expense (income):
	Interest expense (income)			18,116			1,316		(1,312	)		--			18,120
	Debt extinguishment charge			758			--		--			--			758
	Other			(28,289	)		568		4,514			23,207			--
Income before income taxes				42,102			22,281		6,511			(23,207	)		47,687
Provision for income taxes				7,410			3,231		2,354			--			12,995
Net income			$	34,692		$	19,050	$	4,157		$	(23,207	)	$	34,692

- 18 -

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

Statement of Cash Flows		Nine Months Ended March 31, 2007
		Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Operating activities:
Net cash provided by operating activities		$	19,942		$	16,906		$	10,088		$	(1,099	)	$	45,837
Investing activities:
	Additions to property and equipment		(7,510	)		(6,360	)		--			--			(13,870	)
	Acquisitions		(91,487	)		--			--			--			(91,487	)
Net cash used in investing activities			(98,997	)		(6,360	)		--			--			(105,357	)
Financing activities:
	Proceeds from short-term debt		74,840			--			--			--			74,840
	Payments on long-term debt		(538	)											(538	)
	Proceeds from the exercise of stock options		2,084			--			--			--			2,084
	Proceeds from issuance of common stock under the employee stock purchase plan		696			--			--			--			696
	Repurchase of common stock		(8,540	)		--			--			--			(8,540	)
	Net change in intercompany obligations		13,731			(4,893	)		(9,937	)		1,099			--
Net cash provided by (used in) financing activities			82,273			(4,893	)		(9,937	)		1,099			68,542
Effect of exchange rate changes on cash and cash equivalents			273			--			--			--			273
Net increase in cash and cash equivalents			3,491			5,653			151			--			9,295
Cash and cash equivalents at beginning of period			4,931			23,529			6			--			28,466
Cash and cash equivalents at end of period		$	8,422		$	29,182		$	157		$	--		$	37,761

Statement of Cash Flows		Nine Months Ended March 31, 2006
			Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Operating activities:
Net cash provided by (used in) operating activities			$	40,451		$	(5,896	)	$	8,156		$	(1,508	)	$	41,203
Investing activities:
	Additions to property and equipment			(8,732	)		(5,525	)		--			--			(14,257	)
	Proceeds from disposals of property and equipment			9,945			--			--			--			9,945
	Acquisition of assets			--			(3,583	)		--			--			(3,583	)
Net cash provided by (used in) investing activities				1,213			(9,108	)		--			--			(7,895	)
Financing activities:
	Payments on short-term debt			(17,404	)		--			--			--			(17,404	)
	Payments on long-term debt			(9,320	)		--			--			--			(9,320	)
	Proceeds from the exercise of stock options			2,579			--			--			--			2,579
	Proceeds from the issuance of common stock under the   employee stock purchase plan			808			--			--			--			808
	Repurchase of common stock			(8,059	)		--			--			--			(8,059	)
	Net change in intercompany obligations			(9,981	)		16,652			(8,179	)		1,508			--
Net cash (used in) provided by financing activities				(41,377	)		16,652			(8,179	)		1,508			(31,396	)
Effect of exchange rate changes on cash and cash equivalents				81			--			--			--			81
Net increase (decrease) in cash and cash equivalents				368			1,648			(23	)		--			1,993
Cash and cash equivalents at beginning of period				6,410			18,863			43			--			25,316
Cash and cash equivalents at end of period			$	6,778		$	20,511		$	20		$	--		$	27,309

- 19 -

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, indicated through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "intends," "plans," "believes," and "projects") may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statem ents. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations:

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

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

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General

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

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

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

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

Overview

          For the three and nine months ended March 31, 2007, net sales increased 14.6% and 15.7%, respectively, compared to the comparable prior year periods. Excluding the impact of foreign currency translation, net sales increased 12.6% and 14.5%, respectively. These increases are from higher fragrance sales, primarily due to the Sovereign acquisition and new brands, including thewith Love...Hilary Duff fragrance and the acquired Riviera brands, and higher sales of Elizabeth Arden branded products. These increases were partially offset by lower sales of the Britney Spears fragrances due to the absence of a major product launch this fiscal year and for the nine-month period, the loss of distributed brands previously manufactured by Unilever Cosmetics. Gross margin for the nine months ended March 31, 2007, decreased to 40.2% from 42.0% for the prior year period, due to an increased proportion of net sales coming from distribute d fragrances and transition costs related to our recent acquisitions. For the three and nine months ended March 31, 2007, selling, general and administrative expenses increased 8.1% and 16.5%, respectively, compared to the prior year period principally due to higher compensation costs that were primarily incentive related, the unfavorable effect of foreign exchange rates, and for the nine-month period, higher advertising, promotional and product development costs related to new fragrance launches, transition costs related to the recent acquisitions and restructuring costs, primarily in our European operations.

Critical Accounting Policies and Estimates

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

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

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

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

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

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

          We have determined that the Elizabeth Arden trademarks have indefinite useful lives, as cash flows from the use of the trademarks are expected to be generated indefinitely. In May 2006, we performed our annual impairment testing of these assets with the assistance of a third party valuation firm. The analyses and assessments of these assets indicated that no impairment adjustment was required. During the quarter ending June 30, 2007, we will perform our annual impairment testing of these assets with the assistance of a third party valuation firm.

          We have not finalized the allocation of the purchase price among the net assets acquired as part of the recent Sovereign acquisition.

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

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

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

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

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

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

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

          Share-Based Compensation.    All share-based payments to employees, including the grants of employee stock options, are recognized in the financial statements based on their fair values. Compensation cost for awards that vest will not be reversed if the awards expire without being exercised. The fair value of stock options is determined using the Black-Scholes option-pricing model. The fair value of the market-based restricted stock awards is determined using a Monte Carlo simulation model, and the fair value of all other restricted stock awards is based on the closing price of our common stock on the date of grant. Compensation costs for awards are amortized using the straight-line method. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggr egate compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions are based on or determined from external data and other assumptions may be derived from our historical experience with share-basedarrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.

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

          Income Taxes and Valuation Reserves.    A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. We consider projected future taxable income and ongoing tax planning strategies in assessing a potential valuation allowance. In the event we determine that we may not beable 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 nine months ended March 31, 2007 and March 31, 2006. Results of operations as a percentage of net sales were as follows (dollar amounts in thousands, percentages may not add due to rounding):

[Remainder of Page Intentionally Left Blank]

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		Three Months Ended									Nine Months Ended
		March 31, 2007				March 31, 2006					March 31, 2007				March 31, 2006
Net sales		$	219,223	100.0	%	$	191,344		100.0	%	$	884,802	100.0	%	$	764,615	100.0	%
Cost of sales			120,744	55.1			105,094		54.9			529,143	59.8			443,539	58.0
	Gross profit		98,479	44.9			86,250		45.1			355,659	40.2			321,076	42.0
Selling, general and   administrative expenses			82,090	37.4			75,929		39.7			277,696	31.4			238,424	31.2
Depreciation and amortization			6,042	2.8			5,438		2.8			18,740	2.1			16,087	2.1
	Income from operations		10,347	4.7			4,883		2.6			59,223	6.7			66,565	8.7
Interest expense, net			6,552	3.0			5,344		2.8			22,441	2.5			18,120	2.4
Debt extinguishment charge			--	--			758		0.4			--	--			758	0.1
	Income (loss) before income   taxes		3,795	1.7			(1,219	)	(0.6	)		36,782	4.2			47,687	6.2
Provision for (benefit from)     income taxes			638	0.3			(1,921	)	(1.0	)		9,083	1.0			12,995	1.7
	Net income		3,157	1.4			702		0.4			27,699	3.1			34,692	4.5
Other data
EBITDA and EBITDA margin (1)		$	16,389	7.5	%	$	9,563		5.0	%	$	77,963	8.8	%	$	81,894	10.7	%

(1)  For a definition of EBITDA and a reconciliation of net income to EBITDA, see "EBITDA" under Results of Operations - Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006. EBITDA margin represents EBITDA divided by net sales.

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006

          Net Sales.    Net sales increased 14.6%, or approximately $28 million, for the three months ended March 31, 2007, compared to the three months ended March 31, 2006. Excluding the impact of foreign currency translation, net sales increased 12.6%. The increase is due to approximately $20 million of higher fragrance sales primarily from the Sovereign acquisition and new brands, including thewith Love...Hilary Dufffragrance and the Riviera brands, and approximately $10 million of higher sales of Elizabeth Arden branded skin care products. The increased fragrance sales reflect lower sales of Britney Spears fragrances as we did not have a major product launch this fiscal year compared to last year. Pricing changes had an immaterial effect on net sales.

          Gross Profit.    Gross profit increased by 14.2% for the three months ended March 31, 2007, compared to the three months ended March 31, 2006. The increase in gross profit was primarily due to the higher sales volumes. Gross margin remained relatively constant at 44.9% for the three months ended March 31, 2007, compared to 45.1% for the three months ended March 31, 2006.

          SG&A.    Selling, general and administrative expenses increased 8.1%, or approximately $6.2 million, for the three months ended March 31, 2007, over the three months ended March 31, 2006. The increase was principally due to higher employee compensation costs that were primarily incentive related of $4.4 million and the unfavorable effect of foreign exchange rates of $1.2 million.

          Depreciation and Amortization.    Depreciation and amortization increased by 11.1% for the three months ended March 31, 2007, compared to the three months ended March 31, 2006. The increase is primarily a result of the amortization of intangible assets associated with the Riviera and Sovereign acquisitions and higher depreciation costs due to the higher level of capital additions during the fiscal year ended June 30, 2006 as compared to the previous year.

          Interest Expense.    Interest expense, net of interest income, increased by 22.6% for the three months ended March 31, 2007, compared to the three months ended March 31, 2006. The increase is a result of higher average borrowings under our credit facility primarily due to the approximately $87.7 million of cash paid at closing for the Sovereign acquisition in August 2006.

          Provision for (Benefit from) Income Taxes.    A provision for income taxes of approximately $0.6 million was recorded for the three months ended March 31, 2007, compared to a benefit from income taxes of approximately $1.9 million for the three months ended March 31, 2006, due to lower income from operations and higher interest expense.

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The income tax provision for the three months ended March 31, 2007, reflects an adjustment to the estimated annual effective tax rate for changes in earnings contributions from our worldwide affiliates, as well as to record on a discrete basis a benefit from research and development tax credits attributable to prior years. The income tax benefit for the three months ended March 31, 2006, reflects an adjustment to the effective tax rate for changes in contributions from our worldwide affiliates. Our worldwide affiliates generally have lower tax rates than our U.S. operations. Based on current estimated earnings contributions from our worldwide affiliates, our expected annualized effective tax rate for the year ending June 30, 2007 is currently 25.6%.

          Net Income.    Net income for the three months ended March 31, 2007, was $3.2 million as compared to $0.7 million for the three months ended March 31, 2006. The increase was primarily a result of higher income from operations due to the higher net sales and gross profit, partially offset by higher selling, general and administrative expenses, interest expense and the provision for income taxes.

          EBITDA.    EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) increased by $6.8 million to $16.4 million for the three months ended March 31, 2007, compared to $9.6 million for the three months ended March 31, 2006. 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 disclosed here to permit a more complete comparative analysis of our operating performance relative to other companies and of our debt servicing ability. EBITDA may not, however, be comparable in all instances to other similar types of measures.

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

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

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

(Amounts in thousands)			Three Months Ended
			March 31, 2007		March 31, 2006
Net income			$	3,157	$	702
Plus:
	Provision for (benefit from) income taxes			638		(1,921	)
	Interest expense, net			6,552		5,344
	Depreciation and amortization			6,042		5,438
		EBITDA	$	16,389	$	9,563

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Nine Months Ended March 31, 2007 Compared to Nine Months Ended March 31, 2006

          Net Sales.    Net sales increased 15.7%, or approximately $120 million, for the nine months ended March 31, 2007, compared to the nine months ended March 31, 2006. Excluding the impact of foreign currency translation, net sales increased 14.5%. The increase is due to approximately $89 million of higher fragrance sales primarily from the Sovereign acquisition and new brands, including thewith Love...Hilary Dufffragrance, theDanielle by Danielle Steel fragrance and the Riviera brands, and approximately $32 million of higher sales of Elizabeth Arden branded skin care and color products. The increased fragrance sales reflect the loss of distributed brands previously manufactured by Unilever Cosmetics and lower sales of Britney Spears fragrances, as we did not launch a major product this fiscal year as compared to last year. Pricing changes had an immaterial effect on net sales.

          Gross Profit.    Gross profit increased by 10.8% for the nine months ended March 31, 2007, compared to the nine months ended March 31, 2006. The increase in gross profit was primarily due to the higher sales volumes. Gross margin decreased to 40.2% for the nine months ended March 31, 2007, from 42.0% for the nine months ended March 31, 2006 due to (i) a higher proportion of our net sales coming from distributed fragrances, which traditionally operate at lower gross margins than our owned and licensed fragrance brands, primarily as a result of the Sovereign acquisition, and (ii) transition costs associated with the Riviera and Sovereign acquisitions.

          SG&A.    Selling, general and administrative expenses increased 16.5%, or approximately $39.3 million, for the nine months ended March 31, 2007, over the nine months ended March 31, 2006. The increase was principally due to higher advertising, promotional, royalty and product development costs of $11.8 million mainly related to new fragrance launches, employee compensation costs that were primarily incentive related of $15.4 million, the unfavorable effect of foreign exchange rates of $3.4 million, and costs of $1.8 million associated with our restructuring plans announced in May 2006, primarily in our European operations. Also contributing to the increase were transition costs associated with the Riviera and Sovereign acquisitions.

          Depreciation and Amortization.    Depreciation and amortization increased by 16.5% for the nine months ended March 31, 2007, compared to the nine months ended March 31, 2006. The increase is primarily a result of the amortization of intangible assets associated with the Riviera and Sovereign acquisitions and higher depreciation costs due to the higher level of capital additions during the fiscal year ended June 30, 2006 as compared to the previous years.

          Interest Expense.    Interest expense, net of interest income, increased by 23.8% for the nine months ended March 31, 2007 compared to the nine months ended March 31, 2006. The increase is a result of higher average borrowings under our credit facility primarily due to the approximately $87.7 million of cash paid at closing for the Sovereign acquisition in August 2006.

          Provision for Income Taxes.    A provision for income taxes of approximately $9.1 million was recorded for the nine months ended March 31, 2007, compared to approximately $13.0 million for the nine months ended March 31, 2006, due to lower income from operations, higher interest expense and a lower effective tax rate. The income tax provision for the nine months ended March 31, 2007, reflects an adjustment to the estimated annual effective tax rate for earnings contributions from our worldwide affiliates, as well as to record on a discrete basis a benefit from research and development tax credits attributable to prior years. The income tax benefit for the nine months ended March 31, 2006, reflects an adjustment to the effective tax rate for increased earnings contributions from our worldwide affiliates. Our worldwide affiliates generally have lower tax rates than our U.S. operations. The effective tax ra te for the nine months ended March 31, 2007 and 2006 of 24.7% and 27.3%, respectively, reflects the impact of the adjustments noted above. Based on current estimated earnings contributions from our worldwide affiliates, our expected annualized effective tax rate for the year ended June 30, 2007 is currently 25.6%.

          Net Income.    Net income for the nine months ended March 31, 2007, was $27.7 million as compared to $34.7 million for the nine months ended March 31, 2006. The decrease was primarily a result of lower income from operations due to the higher selling, general and administrative expenses and depreciation and amortization expenses and higher interest costs, partially offset by higher net sales, gross profit and a decrease in the provision for income taxes.

          EBITDA.    EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) decreased by $3.9 million to $78.0 million for the nine months ended March 31, 2007, compared to $81.9 million for the nine months ended March 31, 2006. The decrease in EBITDA was primarily the result of higher selling, general and administrative expenses, partially offset by higher net sales and gross profit.

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

(Amounts in thousands)			Nine Months Ended
			March 31, 2007		March 31, 2006
Net income			$	27,699	$	34,692
Plus:
	Provision for income taxes			9,083		12,995
	Interest expense, net			22,441		18,120
	Depreciation and amortization			18,740		16,087
		EBITDA	$	77,963	$	81,894

Financial Condition

(Amounts in thousands)	Nine Months Ended
	March 31, 2007			March 31, 2006
Net cash provided by operating activities	$	45,837		$	41,203
Net cash used in investing activities		(105,357	)		(7,895	)
Net cash provided by (used in) financing activities		68,542			(31,396	)
Net increase in cash and cash equivalents		9,295			1,993

          Cash Flows.    Net cash provided by operating activities increased by approximately $4.6 million or 11.2% for the nine months ended March 31, 2007, as compared to the nine months ended March 31, 2006. The increase for the nine months ended March 31, 2007 is primarily due to increases of approximately $30.2 million in other payables and accrued expenses as a result of the timing of payments of operating expenses and higher compensation accruals. This increase was partially offset by a lower decrease in inventory of approximately $25.1 million due to investment in new supplier relationships and new product launches.

          For the nine months ended March 31, 2007, net cash used in investing activities was approximately $105.4 million, as compared to approximately $7.9 million for the nine months ended March 31, 2006. The increase in net cash used in investing activities is primarily a result of approximately $87.7 million in cash paid at closing and $2.5 million in cash paid in installments in connection with the Sovereign acquisition. Additionally, we realized approximately $9.9 million of cash proceeds from the sale of our Miami Lakes facility in the prior year period.

          For the nine months ended March 31, 2007, net cash provided by financing activities was approximately $68.5 million, as compared to approximately $31.4 million of net cash used in financing activities for the nine months ended March 31, 2006. The increase was primarily due to additional borrowings under our credit facility used to fund a portion of the purchase price for the Sovereign acquisition in August 2006 and the Riviera acquisition in June 2006. Share repurchases totaled $8.5 million and $8.1 million, in each of the nine months ended March 31, 2007 and 2006, respectively. See Note 8 to Notes to Unaudited Consolidated Financial Statements.

          Interest paid during the nine months ended March 31, 2007, included $17.4 million of interest payments on the 7 3/4% senior subordinated notes due 2014, which is paid semi-annually on February 15 and August 15 of each year, and $8.3 million of interest paid on the borrowings under our credit facility. Interest paid during the nine months ended March 31, 2006 included $17.4million of interest payments, swap termination costs of approximately $2.5 million related to the 7 3/4% senior subordinated notes and $3.9 million paid on the borrowings under our credit facility.

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

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

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

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

          The credit facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if average borrowing availability declines to less than $25 million ($35 million from December 1 through May 31). No financial maintenance covenant was applicable for the nine months ended March 31, 2007. Under the terms of the credit facility, we may pay dividends or repurchase common stock if we maintain borrowing availability after the applicable payment of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31. The credit facility restricts us from incurring additional non-trade indebtedness (other than refinancings and certain small amounts of indebtedness).

          Borrowings under the credit portion of the credit facility bear interest at a floating rate based on the "Applicable Margin," which is determined by reference to a specific financial ratio. At our option, the Applicable Margin may be applied to either the London InterBank Offered Rate (LIBOR) or the prime rate. The reference ratio for determining the Applicable Margin is a debt service coverage ratio. The Applicable Margin charged on LIBOR loans ranges from 1.00% to 1.75% and is 0% for prime rate loans. As of March 31, 2007, the Applicable Margin was 1.25% for LIBOR loans and 0% for prime rate loans. The commitment fee on the unused portion of the credit facility is 0.25%. As a result of the August 2006 amendment, the interest rate charged on the first $25 million of borrowings was LIBOR plus 2.5% through November 30, 2006.

          As of March 31, 2007, we had $115 million in outstanding borrowings and approximately $4 million in letters of credit outstanding under the credit facility, approximately $184 million of eligible receivables and inventories available as collateral under the credit facility, and remaining borrowing availability of approximately $65 million. We used approximately $88 million of borrowings under our credit facility to pay a majority of the purchase price for the acquisition of certain assets of Sovereign in August 2006.

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

          Repurchases of Common Stock.    On November 2, 2005, our board of directors authorized us to implement a stock repurchase program to repurchase up to $40.0 million of our common stock through March 31, 2007. On November 2, 2006, our board of directors authorized the repurchase of an additional $40.0 million of our common stock under the terms of our existing stock repurchase program and extended the term of the stock repurchase program from March 31, 2007 to November 30, 2008. As of March 31, 2007, we have repurchased 1,862,169 shares of common stock on the open market at a cost of approximately $33.9 million, including sales commissions. For the nine months ended March 31, 2007, we repurchased 524,042 shares of common stock, at an average price of $16.30 per share on the open market, at a cost of approximately $8.5 million, including sales commissions. These repurchases are accounted for under the treas ury method. There were no repurchases of common stock during the three months ended March 31, 2007.

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          Contractual Obligations.    At March 31, 2007, we had contractual obligations to incur promotional and advertising expenses, which are either fixed commitments or based on net sales for licensed brands, and minimum royalty guarantees in an aggregate amount of $70.7 million through 2011, compared with $75.2 million through 2011 at June 30, 2006.

New Accounting Standards

Accounting for Uncertainty in Income Taxes

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

Fair Value Measurements

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

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

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

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

          As of March 31, 2007, we had $114.8 million in borrowings outstanding under our credit facility. Borrowings under our credit facility are seasonal, with peak borrowings in the months of September, October and November. Borrowings under the credit facility are subject to variable rates and, accordingly, our earnings and cash flow will be affected by changes in interest rates. Based upon our average borrowings under our credit facility during the quarter ended March 31, 2007, and assuming there had been a two percentage point change in the average interest rate for these borrowings, it is estimated that our interest expense for the three and nine months ended March 31, 2007, would have increased or decreased by approximately $0.6 and $2.4 million, respectively. See Note 6 to the Notes to Unaudited Consolidated Financial Statements.

Foreign Currency Risk

          We sell our products in approximately 90 countries around the world. During the three and nine months ended March 31, 2007, we derived approximately 45.6%and 36.1%, respectively,of our net sales from our international operations. We conduct our international operations in a variety of different countries and derive our sales in various currencies including the Euro, British pound, Swiss franc, Canadian dollar and Australian dollar, as well as the U.S. dollar. Most of our skin care and cosmetic products are produced in a U.S. third-party manufacturing facility located in Roanoke, Virginia. Our operations may be subject to volatility because of currency changes, inflation changes and

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changes in political and economic conditions in the countries in which we operate. With respect to international operations, our sales, cost of goods sold and expenses are typically denominated in a combination of local currency and the U.S. dollar. Our results of operations are reported in U.S. dollars. Fluctuations in currency rates can affect our reported sales, margins, operating costs and the anticipated settlement of our foreign denominated receivables and payables. A weakening of the foreign currencies in which we generate sales relative to the currencies in which our costs are denominated, which is primarily the U.S. dollar, may decrease our reported cash flow and operating profits. Our competitors may or may not be subject to the same fluctuations in currency rates, and our competitive position could be affected by these changes. The cumulative effect of translating balance sheet accounts from the functional currency into the U.S. dollar at current exchange rates is i ncluded in "Accumulated other comprehensive income" in our consolidated balance sheets.

          As of March 31, 2007, we had notional amounts of 41.5 million Euros and 26.6 million British pounds under foreign currency contracts that expire between April 30, 2007 and June 30, 2008 to reduce the exposure of our foreign subsidiary revenues to fluctuations in currency rates. We have designated each qualifying foreign currency contract as a cash flow hedge. The gains and losses of these contracts will only be recognized in earnings in the period in which the contracts expire. At March 31, 2007, the unrealized loss, net of taxes associated with these contracts of approximately $0.8 million, is included in accumulated other comprehensive income. The unrealized gain, net of taxes, generated during the three months ended March 31, 2007, was approximately $0.7 million, and the unrealized loss, net of taxes, generated during the nine months ended March 31, 2007 was approximately $0.5 million.

          When appropriate, we also enter into and settle foreign currency contracts for Euros, British pounds and Canadian dollars to reduce exposure of our foreign subsidiaries' net balance sheets to fluctuations in foreign currency rates. As of March 31, 2007, there were no such foreign currency contracts outstanding. The realized loss, net of taxes, recognized from contracts in place during the three and nine months ended March 31, 2007, was approximately $0.1 million and $0.6 million, respectively.

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

ITEM 4.    CONTROLS AND PROCEDURES

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

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

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PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

          In October 2006, we received a demand from Mystic Tan, Inc., a licensee of certain of our patents alleging we had breached the license agreement, indicating that it would not pay any further royalties and requesting that we return approximately $3 million in royalty payments already made. We believe that we have not breached the license agreement and that the licensee is obligated to continue to make royalty payments. In November 2006, we filed a lawsuit against the licensee in the U.S. District Court for the Southern District of New York seeking recovery of our damages for breach of contract. In April 2007, the licensee filed a counterclaim for breach of contract, negligence, unjust enrichment and other related counts, and also seeks declaratory relief that the licensee is not obligated to make further royalty payments and is entitled to recover approximately $3 million in royalty payments already made plus interest. We are n ot able to determine the ultimate outcome of this action or estimate the possible loss or range of loss relating to the licensee's claim.

         In May 2007, we settled an action filed against us in August 2006 by Dr. Amy Lewis. Dr. Lewis filed the action in the U.S. District Court for the Southern District of New York, alleging that our use of her quote in product advertisements was unauthorized and constituted a false endorsement, false advertising, invasion of privacy, trademark dilution and disparagement, a violation of the right to publicity, fraud and unjust enrichment. Dr Lewis sought to enjoin our use of her name and advertising, and damages of no less than $2,000,000, including payments of profits associated with the relevant product, and exemplary and treble damages. Under the terms of the settlement, and without admitting any liability, we agreed to pay Dr. Lewis $95,000.

ITEM 1A.    RISK FACTORS

          Risk factors describing the major risks to our business can be found under Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.

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ITEM 6.    EXHIBITS

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

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

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

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

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SIGNATURES

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

	ELIZABETH ARDEN, INC.
Date:  May 9, 2007	/s/ E. Scott Beattie
	E. Scott Beattie
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
Date:  May 9, 2007	/s/ Stephen J. Smith
	Stephen J. Smith
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

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

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