Elizabeth Arden (RDEN) 10-Q 2008 Q2 Quarterly report

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

FORM 10-Q

(Mark One)
[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 February 7, 2008
Common Stock, $.01 par value	28,929,117

ELIZABETH ARDEN, INC.

INDEX TO FORM 10-Q

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	Page No.
	Consolidated Balance Sheets -- December 31, 2007 and June 30, 2007	3
	Consolidated Statements of Income -- Three and six months ended December 31, 2007 and December 31, 2006	4
	Consolidated Statement of Shareholders' Equity -- Six months ended December 31, 2007	5
	Consolidated Statements of Cash Flow -- Six months ended December 31, 2007 and December 31, 2006	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
PART II	OTHER INFORMATION
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 4.	Submission of Matters to a Vote of Security Holders	33
Item 6.	Exhibits	34
Signatures		37
Exhibit Index		38

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PART I      FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS

ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

			As of
			December 31, 2007			June 30, 2007
ASSETS			(Unaudited)
Current Assets
	Cash and cash equivalents		$	24,692		$	30,287
	Accounts receivable, net			298,368			214,972
	Inventories			341,196			380,232
	Deferred income taxes			11,255			17,427
	Prepaid expenses and other assets			24,788			22,675
		Total current assets		700,299			665,593
Property and equipment, net				45,466			42,471
Exclusive brand licenses, trademarks and intangibles, net				225,368			224,611
Debt financing costs, net				5,426			5,777
Other assets				664			723
		Total assets	$	977,223		$	939,175
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Short-term debt		$	124,450		$	97,640
	Accounts payable - trade			123,684			180,532
	Other payables and accrued expenses			119,736			88,131
	Current portion of long-term debt			1,284			1,125
		Total current liabilities		369,154			367,428
Long-term Liabilities
	Long-term debt, net			224,226			224,530
	Deferred income taxes and other liabilities			28,018			26,290
		Total long-term liabilities		252,244			250,820
		Total liabilities		621,398			618,248
Commitments and Contingencies
Shareholders' Equity
	Common stock, $.01 par value per share, 50,000,000 shares   authorized; 30,892,205 and 30,473,294 issued, respectively			309			305
	Additional paid-in capital			274,032			265,245
	Retained earnings			119,824			85,675
	Treasury stock (1,963,599 and 1,862,169 shares at cost, respectively)			(36,482	)		(33,879	)
	Accumulated other comprehensive (loss) income			(1,858	)		3,581
		Total shareholders' equity		355,825			320,927
		Total liabilities and shareholders' equity	$	977,223		$	939,175

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 INCOME

(Unaudited)

(Amounts in thousands, except per share data)

			Three Months Ended				Six Months Ended
			December 31, 2007		December 31, 2006		December 31, 2007		December 31, 2006
Net sales			$	422,444	$	410,771	$	694,232	$	665,579
Cost of sales (excludes depreciation of $1,061   $1,227, $2,020 and $1,710 respectively, included   below)				243,584		252,817		408,992		408,399
Gross profit				178,860		157,954		285,240		257,180
Operating expenses:
	Selling, general and administrative			119,361		108,322		211,833		195,606
	Depreciation and amortization			6,210		6,350		12,164		12,698
		Total operating expenses		125,571		114,672		223,997		208,304
Income from operations				53,289		43,282		61,243		48,876
Interest expense, net				8,266		8,529		15,754		15,889
Income before income taxes				45,023		34,753		45,489		32,987
Provision for income taxes				11,224		8,897		11,340		8,445
Net income			$	33,799	$	25,856	$	34,149	$	24,542
Net income per common share:
	Basic		$	1.20	$	0.94	$	1.22	$	0.89
	Diluted		$	1.15	$	0.91	$	1.16	$	0.86
Weighted average number of common shares:
	Basic			28,061		27,380		27,992		27,613
	Diluted			29,494		28,410		29,464		28,482

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 (Loss)			Equity
Balance at July 1, 2007				30,473	$	305	$	265,245		$	85,675		(1,862	)	$	(33,879	)	$	3,581		$	320,927
Issuance of common stock upon exercise of   stock options				317		3		4,239					(81	)		(2,188	)					2,054
Issuance of common stock for employee stock    purchase plan				41		--		837														837
Issuance of restricted stock, net of forfeitures				61		1		(1	)													--
Amortization of share-based awards								3,712														3,712
Repurchase of common stock													(21	)		(415	)					(415	)
Comprehensive income (loss):
	Net income										34,149											34,149
	Foreign currency translation adjustments																		1,291			1,291
	Disclosure of reclassification amount, net of   taxes (11% tax rate):
		Unrealized hedging loss arising during the   period																	(9,880	)		(9,880	)
		Reclassification adjustment for   hedging losses included in net income																	3,150			3,150
		Net unrealized cash flow hedging loss																	(6,730	)		(6,730	)
	Total comprehensive loss										34,149								(5,439	)		28,710
Balance at December 31, 2007				30,892	$	309	$	274,032		$	119,824		(1,964	)	$	(36,482	)	$	(1,858	)	$	355,825

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

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ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

				Six Months Ended
				December 31, 2007			December 31, 2006
Operating Activities:
	Net income			$	34,149		$	24,542
	Adjustments to reconcile net income to net cash (used in) provided by    operating activities:
		Depreciation and amortization			12,164			12,698
		Amortization of senior note offering and credit facility costs			611			660
		Amortization of share-based awards			3,712			4,359
		Deferred income taxes			3,779			5,804
	Changes in assets and liabilities, net of acquisitions:
		Increase in accounts receivable			(83,396	)		(82,441	)
		Decrease in inventories			39,036			28,549
		Increase in prepaid expenses and other assets			(2,470	)		(1,015	)
		(Decrease) increase in accounts payable			(54,683	)		2,514
		Increase in other payables, accrued expenses and other liabilities			29,995			43,808
		Other			1,344			1,027
			Net cash (used in) provided by operating activities		(15,759	)		40,505
Investing Activities:
	Additions to property and equipment				(12,423	)		(10,352	)
	Acquisition of licenses and other assets				(6,378	)		(91,359	)
			Net cash used in investing activities		(18,801	)		(101,711	)
Financing Activities:
	Proceeds from short-term debt				26,810			74,600
	Payments on long-term debt				(601	)		--
	Proceeds from the exercise of stock options				2,054			393
	Proceeds from the issuance of new common stock under    the employee stock purchase plan				837			696
	Repurchase of common stock				(415	)		(8,540	)
	Other				--			1,235
			Net cash provided by financing activities		28,685			68,384
Effect of exchange rate changes on cash and cash equivalents					280			300
Net (decrease) increase in cash and cash equivalents					(5,595	)		7,478
Cash and cash equivalents at beginning of period					30,287			28,466
Cash and cash equivalents at end of period				$	24,692		$	35,944
Supplemental Disclosure of Cash Flow Information:
	Interest paid during the period			$	15,604		$	14,937
	Income taxes paid during the period			$	4,351		$	1,258

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 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission") for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statement presentation and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the year ended June 30, 2007 (the "Annual Report"), filed with the Commission.

          The consolidated balance sheet of the Company as of June 30, 2007 is derived from the financial statements included in the Annual Report but does not include all disclosures required by accounting principles generally accepted in the United States. The other consolidated financial statements presented in this quarterly report are unaudited but include all adjustments that are of a normal recurring nature that management considers necessary for the fair statement of the results for the interim periods. Results for interim periods are not necessarily indicative of results for the full fiscal year.

          To conform to the current year presentation, the consolidated statement of cash flow as of December 31, 2006 reflects a reclassification from cash and cash equivalents to accounts payable related to book overdrafts.

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				Six Months Ended
			December 31,		December 31,		December 31,		December 31,
			2007		2006		2007		2006
Basic
	Net income		$	33,799	$	25,856	$	34,149	$	24,542
	Weighted average shares outstanding			28,061		27,380		27,992		27,613
	Net income per basic share		$	1.20	$	0.94	$	1.22	$	0.89
Diluted
	Net income		$	33,799	$	25,856	$	34,149	$	24,542
	Weighted average shares outstanding			28,061		27,380		27,992		27,613
	Potential common shares - treasury   method			1,433		1,030		1,472		869
	Weighted average shares and potential   dilutive common shares			29,494		28,410		29,464		28,482
		Net income per diluted share	$	1.15	$	0.91	$	1.16	$	0.86

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

          The following table shows the number of shares of potentially dilutive Common Stock for the three and six months ended December 31, 2007 and 2006, that were not included in the diluted income per share calculation because to do so would have been anti-dilutive:

	Three Months Ended				Six Months Ended
	December 31, 2007		December 31, 2006		December 31, 2007		December 31, 2006
Number of shares		383,150		1,179,059		540,850		1,560,075

          The following table shows the options to purchase shares of Common Stock that were outstanding during the three and six months ended December 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				Six Months Ended
	December 31, 2007		December 31, 2006		December 31, 2007		December 31, 2006
Number of shares		--		863,059		36,000		963,059
Range of exercise price	$	--	$	18.45-23.40	$	24.31	$	18.16-23.40

NOTE 3.    SHARE-BASED COMPENSATION

          At December 31, 2007, the Company had outstanding several share-based compensation plans. For the three and six months ended December 31, 2007 and 2006, the compensation cost charged against income and the tax benefit related to the compensation cost charged against income are presented below:

(Amounts in thousands)	Three Months Ended				Six Months Ended
	December 31, 2007		December 31, 2006		December 31, 2007		December 31, 2006
Share-based compensation cost	$	2,113	$	2,363	$	3,712	$	4,359
Tax benefit related to share-    based compensation cost	$	526	$	605	$	924	$	1,116

          As of December 31, 2007, there were approximately $10.8 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 November 14, 2007, 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") and 6,000 shares of Common Stock to an employee director under the 2004 Stock Incentive 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 Company's board of directors (the "Board") at the annual meeting. All of the stock options granted on November 14, 2007, 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 $24.31 per share, which was the closing price of the Common Stock on the date of grant. The weighted-average grant-date fair value of t he options granted was $8.75 per share based on the Black-Scholes option-pricing model. The options expire ten years from the date of grant.

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

         On August 20, 2007, the Board granted stock options to 24 managerial employees for 347,150 shares of Common Stock under the 2004 Stock Incentive Plan. The stock options are due to vest in equal thirds over a three-year period on dates that are two business days after the Company's financial results for each of the fiscal years ending June 30, 2008, 2009 and 2010, 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 $23.59 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 the options granted was $8.76 per share based on the Black-Scholes option-pricing model. The options expire ten years from the date of grant.

          The weighted-average grant date fair value of options granted during the six months ended December 31, 2007 was estimated on the grant date using the Black-Scholes option-pricing model with the assumptions noted in the table below. Expected volatilities are based on historical volatility of the Common Stock 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. The expected life of options represents the period of time that options granted are expected to be outstanding and is derived from historical terms and other factors.

	Six Months Ended
	December 31, 2007
Expected dividend yield		0.00	%
Expected price volatility		32.7	%
Risk-free interest rate		4.06-4.66	%
Expected life of options in years		5

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

Options	Common Stock Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (1)
Outstanding at June 30, 2007	3,397,968		$	15.31	5.1
New grants	383,150		$	23.66
Exercised	(316,930	)	$	13.38
Forfeited or expired	(13,500	)	$	17.18
Outstanding at December 31, 2007	3,450,688		$	16.40	5.4	$	16,449,175
Exercisable at December 31, 2007	2,674,336		$	15.06	4.3	$	15,319,075

(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 six months ended December 31, 2007 and 2006, based upon the average market price during the period, was approximately $1.7 million and $0.2 million, respectively.

          In September 2007, the Company accepted the tender of 81,230 shares of Common Stock at a fair market value of $26.93 per share, representing a cost of approximately $2.2 million, as payment for the exercise price of stock options exercised by the Company's chief executive officer as permitted under the 1995 Stock Option Plan. The fair market value of the tendered shares was equal to the closing price of the Common Stock on the date that the Company was given notice of the tender of shares and the tender of shares was approved by the compensation committee of the Board. The acquisition of these shares by the Company was accounted for under the treasury method.

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

Restricted Common Stock

         On August 20, 2007, the Board granted 68,700 shares of performance-based restricted stock to 20 managerial employees and 80,300 shares of service-based restricted stock to 28 managerial employees. The performance-based restricted stock will vest in full on a date that is two business days after the Company's financial results for fiscal 2010 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 its specified cumulative earnings per diluted share target. The service-based restricted stock will vest in equal thirds over a three-year period on dates that are two business days after the Company's financial results for each of the fiscal years ending June 30, 2008, 2009 and 2010 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 pric e 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 six months ended December 31, 2007, is presented below:

Restricted Stock	Shares		Weighted Average Grant-Date Fair Value
Non-vested at June 30, 2007	920,921		$	18.82
Granted	149,000		$	23.59
Vested	(104,170	)	$	18.72
Forfeited	(88,145	)	$	21.99
Non-vested at December 31, 2007	877,606		$	19.32

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. On November 30, 2007, 41,126 shares of Common Stock were purchased under this plan. For the three and six months ended December 31, 2007, the Company recorded costs associated with the ESPP of approximately $0.1 million and $0.2 million, respectively. For the three and six months ended December 31, 2006, the Company recorded costs associated with the ESPP of approximately $0.1 million and $0.2 million, respectivel y. The next purchase under the ESPP will be consummated on June 1, 2008.

NOTE 4.    NEW ACCOUNTING STANDARDS

Business Combinations

          In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 (revised 2007),Business Combinations (SFAS 141R). SFAS 141R significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, restructuring costs and income taxes. SFAS 141R will be effective for the Company on July 1, 2009. The Company is currently evaluating the impact of SFAS 141R on its consolidated financial statements.

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

Fair Value Measurements

          In September 2006, the FASB issued Statement of Financial Accounting Standards 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 us on July 1, 2008. The Company is currently evaluating the impact of SFAS 157 on its consolidated financial statements.

The Fair Value Option for Financial Assets and Financial Liabilities

          In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159,The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. This option is only available for select financial instruments and is irrevocable once applied. SFAS 159 will be effective for the Company beginning July 1, 2008. The Company is currently evaluating the impact of SFAS 159 on its consolidated financial statements.

NOTE 5.    INVENTORIES

          The components of inventory were as follows:

(Amounts in thousands)	December 31, 2007		June 30, 2007
Raw materials and components	$	63,618	$	61,297
Work in progress	22,216		32,681
Finished goods	255,362		286,254
Total	$	341,196	$	380,232

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 generally provides for borrowings on a revolving basis of up to $250 million with a $25 million sub limit for letters of credit (the "Credit Facility"). Pursuant to amendments to the Credit Facility entered into in August and November 2007, the credit facility was increased to $300 million until October 31, 2007, and to $275 million from November 1, 2007 until December 15, 2007. After December 15, 2007, the Credit Facility provides for borrowings up to $250 million. Under the terms of the Credit Facility the Company may, at any time, 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. In addition, from August 15, 2007 until October 31, 2007, t he Credit Facility provided temporary additional borrowing availability of $25 million above the borrowing availability that was supported by the Company's level of eligible accounts receivable and inventory (as described below). The Credit Facility expires in December 2012.

          The Credit Facility is guaranteed by all of the Company's U.S. subsidiaries and is collateralized by a first priority lien on all of the Company's U.S., Canada and Puerto Rico accounts receivable and U.S. inventory. Except for the temporary additional borrowing availability described above, borrowings under the Credit Facility are limited to 85% of eligible accounts receivable and 85% of the appraised net liquidation value of the Company's inventory, as determined pursuant to the terms of the Credit Facility. 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").

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

          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 as of December 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 1.00% to 1.75% and is 0% for prime rate loans. As of December 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 of December 31, 2007, the Company had approximately $124million in outstanding borrowings and approximately $5 million in letters of credit outstanding under the Credit Facility, compared with approximately $98 million in outstanding borrowings under the Credit Facility at June 30, 2007. As of December 31, 2007, the Company had approximately $246million of eligible receivables and inventories available as collateral under the Credit Facility and remaining borrowing availability of approximately $117 million. For the six months ended December 31, 2007 and 2006, the weighted average annual interest rate on borrowings under the Company's Credit Facility was 6.8% and 7.2%, respectively. The Company classifies the Credit Facility as short-term debt on its balance sheet because it expects to reduce outstanding borrowings over the next twelve months.

NOTE 7.    LONG-TERM DEBT

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

(Amounts in thousands)	December 31, 2007			June 30, 2007
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		(2,058	)		(2,182	)
Riviera Term Note		2,568			2,837
Total debt		225,510			225,655
Less: Current portion of long-term debt		1,284			1,125
Total long-term debt	$	224,226		$	224,530

NOTE 8.    COMMITMENTS AND CONTINGENCIES

          At December 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 $60.6 million through 2011, compared with$60.3 million through 2011 at June 30, 2007.

          In October 2005, the Company received a demand from a licensee of certain of the Company's patents alleging the Company had breached the license agreement, indicating that it would not pay any further royalties and requesting that the Company return approximately $3 million in royalty payments already made. The Company believes that it has not breached the license agreement and that the licensee is obligated to continue to make royalty payments. The Company 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

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

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 outcome of this action or estimate the possible loss or range of loss relating to the licensee's claim, but believes the ultimate outcome will not have a material adverse effect on the Company's financial position, results of operations or cash flows.

          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 ongoing business, financial position or results of operations.

          In June 2006, the Company acquired certain assets of Riviera Concepts Inc. ("Riviera"), including inventory, accounts receivable and certain brand licenses (the "Riviera Acquisition"). In connection with the Riviera Acquisition, the Company entered into a contingent performance liability to Riviera in the amount of $8.6 million. This contingent performance liability does not bear interest, is recorded in "other liabilities" on the Company's Consolidated Balance Sheet and is payable in annual installments beginning July 31, 2007 and ending on July 31, 2009, provided that certain net sales targets are achieved on the licensed brands acquired in the Riviera Acquisition over the three year period after the closing date. If the targets for the first or second annual installments are not satisfied, such installments may still be payable, based on cumulative targets, in the subsequent year or years, as the case may be. The target for the first installment due on July 31, 2007, was not achieved. The contingent performance liability was recorded as a result of the negative goodwill resulting from this acquisition.

          In August 2006, the Company acquired the fragrance business of Sovereign Sales, LLC ("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, consisting primarily 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 in two installments over two years from the date of closing if certain financial targets and other conditions are satisfied. At June 30, 2007, the conditions for the first installment were satisfied, and the Company recognized a liability of $6.3 million in the consolidated balance sheet. Th e first installment was paid in September 2007. Based on financial results for the six months ended December 31, 2007, the conditions for the second installment have been satisfied. Accordingly, the Company recognized a liability of $5.3 million in the consolidated balance sheet at December 31, 2007. The payment of the second installment of contingent consideration is expected to be made in September 2008.

          As of December 31, 2007, the Company had notional amounts of 96.2 million Euros and 53.5 million Britishpounds under foreign currency contracts that expire between January 31, 2008 and June 29, 2009 to reduce the exposure of its foreign subsidiary revenues to fluctuations in currency rates. As of December 31, 2007, the Company had notional amounts of 13.3 million Canadian dollars under foreign currency contracts that expire between January 31, 2008 and June 29, 2009 to reduce the exposure of the Company's Canadian subsidiary's cost of sales 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. The realized loss, net of taxes, recognized during the three and six months ended December 31, 2007, was approximately $2.4 million and $3 .1 million, and the realized loss, net of taxes, recognized during the three and six months ended December 31, 2006, was approximately $0.4and$0.6million. At December 31, 2007, the unrealized loss, net of taxes, associated with these contracts of approximately $8.1 million, is included in accumulated other comprehensive (loss) income.

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

          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 December 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 six months ended December 31, 2007, was approximately $0.5 million and $1.5 million, respectively. The realized loss, net of taxes, recognized from contracts in place during the three and six months ended December 31, 2006 was approximately$0.7 million and $0.5 million, respectively.

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. As of December 31, 2007, the Company had repurchased under the stock repurchase program 1,882,369 shares of Common Stock on the open market, at an average price of $18.22 per share, at a cost of approximately $34.3 million, including sales commissions. For the six months ended December 31, 2007, the Company repurchased 20,200 shares of Common Stock at an average price of $20.52 per share on the open market at a cost of $0.4 million, including sales commissions. The acquisition of these shares by the C ompany was accounted for under the treasury method.

NOTE 10.    INCOME TAXES

          In June 2006, the FASB issued Financial Interpretation No. 48,Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 ("FIN 48"), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize in its consolidated financial statements the impact of a tax position if it is more likely than not that such position will be sustained on audit based on its technical merits. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. Effective July 1, 2007, the Company adopted FIN 48.

          Prior to July 1, 2007, the Company recognized income tax accruals with respect to uncertain tax positions based upon Statement of Financial Accounting Standards No. 5, Accounting for Contingencies ("SFAS 5"). Under SFAS 5, the Company recorded a liability associated with an uncertain tax position if the liability was both probable and estimable.

          The adoption of FIN 48 resulted in no change to the opening balance of the Company's retained earnings. The Company's balance of unrecognized tax benefits at July 1, 2007 was $5.3 million, and during the six months ended December 31, 2007, an additional $0.7 million of unrecognized tax benefits were recorded for positions taken during such period. These unrecognized tax benefits could favorably affect the effective tax rate in a future period, if and to the extent recognized. In addition, as a result of the adoption of FIN 48, $2.8 million relating to the Company's uncertain tax positions were reclassified from income taxes payable to deferred taxes.

          The Company and its domestic subsidiaries file income tax returns with federal, state and local tax authorities within the United States. The Company also files tax returns for its international affiliates in various foreign jurisdictions. The statute of limitations for the Company's U.S. federal tax return years remains open for the fiscal year ended January 31, 2004 and subsequent fiscal years. The Internal Revenue Service is currently examining the Company's federal income tax return for the fiscal year ended June 30, 2005. The fiscal year ended January 31, 2003 and subsequent fiscal years remain subject to examination for various state tax jurisdictions. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of limitations generally ranging from one to ten years. The fiscal year ended January 31, 2002 and subsequent fiscal years remain subject to examination for various foreign juri sdictions.

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

          The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and related penalties in the provision for income taxes in the Consolidated Statements of Operations, which is consistent with the recognition of these items in prior reporting periods. The Company recorded no significant penalties or interest for the three and six months ended December 31, 2007, as a result of the Company's net operating loss carryforwards.

           The Company does not expect changes in the amount of unrecognized tax benefits to have a significant impact on its results of operations over the next 12 months.

NOTE 11.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION

          The following condensed financial statements as of December 31, 2007 and June 30, 2007, and for the three and six months ended December 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 their gu arantees are joint and several, full and unconditional. All information presented is in thousands.

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

Balance Sheet			As of December 31, 2007
			Company			Non-Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets
	Cash and cash equivalents		$	4,151		$	20,445		$	96		$	--		$	24,692
	Accounts receivable, net			154,524			143,844			--			--			298,368
	Inventories			246,900			94,296			--			--			341,196
	Intercompany receivable			69,618			118,601			302,243			(490,462	)		--
	Deferred income taxes			11,467			(212	)		--			--			11,255
	Prepaid expenses and other assets			11,356			13,267			21			144			24,788
		Total current assets		498,016			390,241			302,360			(490,318	)		700,299
Property and equipment, net				29,419			16,047			--			--			45,466
Investment in subsidiaries				92,795			--			--			(92,795	)		--
Exclusive brand licenses, trademarks   and intangibles, net				62,988			7,897			154,483			--			225,368
Debt financing costs, net				5,426			--			--			--			5,426
Other assets				217,466			(227,195	)		9,136			1,257			664
		Total assets	$	906,110		$	186,990		$	465,979		$	(581,856	)	$	977,223
LIABILITIES AND SHAREHOLDERS'    EQUITY
Current Liabilities
	Short-term debt		$	124,450		$	--		$	--		$	--		$	124,450
	Accounts payable - trade			101,258			22,426			--			--			123,684
	Intercompany payable			24,692			210,770			253,421			(488,883	)		--
	Other payables and accrued expenses			59,697			58,615			1,380			44			119,736
	Current portion of long-term debt			1,284			--			--			--			1,284
		Total current liabilities		311,381			291,811			254,801			(488,839	)		369,154
	Long-term debt, net			224,226			--			--			--			224,226
	Deferred income taxes and other liabilities			14,349			4,134			9,428			107			28,018
		Total liabilities		549,956			295,945			264,229			(488,732	)		621,398
Shareholders' Equity
	Common stock			309			--			--			--			309
	Additional paid-in capital			274,032			(218,251	)		217,015			1,236			274,032
	Retained earnings (accumulated deficit)			119,824			110,654			(15,265	)		(95,389	)		119,824
	Treasury stock			(36,482	)		--			--			--			(36,482	)
	Accumulated other comprehensive loss			(1,529	)		(1,358	)		--			1,029			(1,858	)
		Total shareholders' equity		356,154			(108,955	)		201,750			(93,124	)		355,825
		Total liabilities and shareholders' equity	$	906,110		$	186,990		$	465,979		$	(581,856	)	$	977,223

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

Balance Sheet			As of June 30, 2007
			Company			Non-Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets
	Cash and cash equivalents		$	7,278		$	23,001		$	8		$	--		$	30,287
	Accounts receivable, net			116,360			98,612			--			--			214,972
	Inventories			291,536			88,696			--			--			380,232
	Intercompany receivable			66,931			137,561			287,063			(491,555	)		--
	Deferred income taxes			18,221			(794	)		--			--			17,427
	Prepaid expenses and other assets			9,611			13,003			--			61			22,675
		Total current assets		509,937			360,079			287,071			(491,494	)		665,593
Property and equipment, net				25,445			17,026			--			--			42,471
Investment in subsidiaries				65,969			--			--			(65,969	)		--
Exclusive brand licenses, trademarks   and intangibles, net				60,494			8,332			155,785			--			224,611
Debt financing costs, net				5,777			--			--			--			5,777
Other assets				217,658			(227,328	)		9,136			1,257			723
		Total assets	$	885,280		$	158,109		$	451,992		$	(556,206	)	$	939,175
LIABILITIES AND SHAREHOLDERS'    EQUITY
Current Liabilities
	Short-term debt		$	97,640		$	--		$	--		$	--		$	97,640
	Accounts payable - trade			161,188			19,344			--			--			180,532
	Intercompany payable			19,646			224,636			246,180			(490,462	)		--
	Other payables and accrued expenses			45,605			42,294			197			35			88,131
	Current portion of long-term debt			1,125			--			--			--			1,125
		Total current liabilities		325,204			286,274			246,377			(490,427	)		367,428
	Long-term debt, net			224,530			--			--			--			224,530
	Deferred income taxes and other liabilities			14,619			4,062			7,419			190			26,290
		Total liabilities		564,353			290,336			253,796			(490,237	)		618,248
Shareholders' Equity
	Common stock			305			--			--			--			305
	Additional paid-in capital			265,245			(218,251	)		217,015			1,236			265,245
	Retained earnings (accumulated deficit)			85,675			81,946			(18,819	)		(63,127	)		85,675
	Treasury stock			(33,879	)		--			--			--			(33,879	)
	Accumulated other comprehensive loss			3,581			4,078			--			(4,078	)		3,581
		Total shareholders' equity		320,927			(132,227	)		198,196			(65,969	)		320,927
		Total liabilities and shareholders' equity	$	885,280		$	158,109		$	451,992		$	(556,206	)	$	939,175

- 17 -

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

Statement of Income		Three Months Ended December 31, 2007
			Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	268,315		$	154,129		$	5,278		$	(5,278	)	$	422,444
Cost of sales				177,276			66,308			--			--			243,584
Gross profit				91,039			87,821			5,278			(5,278	)		178,860
Selling, general and administrative costs				68,251			56,736			(348	)		(5,278	)		119,361
Depreciation and amortization				3,666			1,804			740			--			6,210
Income from operations				19,122			29,281			4,886			--			53,289
Other expense (income):
	Interest expense (income)			8,220			459			(413	)		--			8,266
	Other			(27,159	)		(227	)		3,294			24,092			--
Income before income taxes				38,061			29,049			2,005			(24,092	)		45,023
Provision for income taxes				4,262			5,808			1,154			--			11,224
Net income			$	33,799		$	23,241		$	851		$	(24,092	)	$	33,799

Statement of Income		Six Months Ended December 31, 2007
			Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	436,984		$	257,248		$	8,863		$	(8,863	)	$	694,232
Cost of sales				295,293			113,699			--			--			408,992
Gross profit				141,691			143,549			8,863			(8,863	)		285,240
Selling, general and administrative costs				117,540			103,807			(651	)		(8,863	)		211,833
Depreciation and amortization				7,132			3,552			1,480			--			12,164
Income from operations				17,019			36,190			8,034			--			61,243
Other expense (income):
	Interest expense (income)			15,718			861			(825	)		--			15,754
	Other			(35,329	)		(227	)		3,294			32,262			--
Income before income taxes				36,630			35,556			5,565			(32,262	)		45,489
Provision for income taxes				2,481			6,847			2,012			--			11,340
Net income			$	34,149		$	28,709		$	3,553		$	(32,262	)	$	34,149

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

Statement of Income		Three Months Ended December 31, 2006
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	281,210		$	129,561	$	5,502		$	(5,502	)	$	410,771
Cost of sales				192,736			60,081		--			--			252,817
Gross profit				88,474			69,480		5,502			(5,502	)		157,954
Selling, general and administrative costs				66,047			48,099		(322	)		(5,502	)		108,322
Depreciation and amortization				4,013			1,609		728			--			6,350
Income from operations				18,414			19,772		5,096			--			43,282
Other expense (income):
	Interest expense (income)			8,526			415		(412	)		--			8,529
	Other			(20,930	)		671		3,300			16,959			--
Income before income taxes				30,818			18,686		2,208			(16,959	)		34,753
Provision for income taxes				4,962			2,712		1,223			--			8,897
Net income			$	25,856		$	15,974	$	985		$	(16,959	)	$	25,856

Statement of Income		Six Months Ended December 31, 2006
			Company			Non- Guarantors		7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Net sales			$	446,434		$	219,145	$	9,223		$	(9,223	)	$	665,579
Cost of sales				302,931			105,468		--			--			408,399
Gross profit				143,503			113,677		9,223			(9,223	)		257,180
Selling, general and administrative costs				115,018			90,446		(635	)		(9,223	)		195,606
Depreciation and amortization				7,776			3,475		1,447			--			12,698
Income from operations				20,709			19,756		8,411			--			48,876
Other expense (income):
	Interest expense (income)			15,893			821		(825	)		--			15,889
	Other			(23,374	)		671		3,300			19,403			--
Income before income taxes				28,190			18,264		5,936			(19,403	)		32,987
Provision for income taxes				3,649			2,649		2,147			--			8,445
Net income			$	24,541		$	15,615	$	3,789		$	(19,403	)	$	24,542

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

Statement of Cash Flows		Six Months Ended December 31, 2007
		Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Operating activities:
Net cash (used in) provided by operating activities		$	(14,946	)	$	(7,925	)	$	8,027		$	(915	)	$	(15,759	)
Investing activities:
	Additions to property and equipment		(12,423	)		--			--			--			(12,423	)
	Acquisition of licenses and other assets		(6,378	)		--			--			--			(6,378	)
Net cash used in investing activities			(18,801	)		--			--			--			(18,801	)
Financing activities:
	Proceeds from short-term debt		26,810			--			--			--			26,810
	Payments on long-term debt		(601	)		--			--			--			(601	)
	Proceeds from the exercise of stock options		2,054			--			--			--			2,054
	Proceeds from the issuance of common stock under the    employee stock purchase plan		837			--			--			--			837
	Repurchase of common stock		(415	)		--			--			--			(415	)
	Net change in intercompany obligations		1,655			5,369			(7,939	)		915			--
Net cash provided by (used in) financing activities			30,340			5,369			(7,939	)		915			28,685
Effect of exchange rate changes on cash and cash equivalents			280			--			--			--			280
Net (decrease) increase in cash and cash equivalents			(3,127	)		(2,556	)		88			--			(5,595	)
Cash and cash equivalents at beginning of period			7,278			23,001			8			--			30,287
Cash and cash equivalents at end of period		$	4,151		$	20,445		$	96		$	--		$	24,692

Statement of Cash Flows		Six Months Ended December 31, 2006
		Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
Operating activities:
Net cash provided by operating activities		$	28,202		$	4,958		$	8,403		$	(1,058	)	$	40,505
Investing activities:
	Additions to property and equipment		(5,647	)		(4,705	)		--			--			(10,352	)
	Acquisition of licenses and other assets		(91,359	)		--			--			--			(91,359	)
Net cash used in investing activities			(97,006	)		(4,705	)		--			--			(101,711	)
Financing activities:
	Proceeds from short-term debt		74,600			--			--			--			74,600
	Proceeds from the exercise of stock options		393			--			--			--			393
	Proceeds from issuance of common stock under employee    stock purchase plan		696			--			--			--			696
	Repurchase of common stock		(8,540	)		--			--			--			(8,540	)
	Other		1,235			--			--			--			1,235
	Net change in intercompany obligations		1,842			5,434			(8,334	)		1,058			--
Net cash provided by (used in) financing activities			70,226			5,434			(8,334	)		1,058			68,384
Effect of exchange rate changes on cash and cash equivalents			300			--			--			--			300
Net increase in cash and cash equivalents			1,722			5,687			69			--			7,478
Cash and cash equivalents at beginning of period			4,931			23,529			6			--			28,466
Cash and cash equivalents at end of period		$	6,653		$	29,216		$	75		$	--		$	35,944

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

          This discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and related notes contained in this quarterly report and the Consolidated Financial Statements and related notes and the Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year ended June 30, 2007. The results of operations for an interim period may not give a true indication of results for the year. In the following discussion, all comparisons are with the corresponding items in the prior year period.

Overview

       We are a global prestige beauty products company. We sell fragrance, skin care and color cosmetic products in the United States primarily to department stores and mass retailers, as well as internationally in prestige department stores, perfumeries, boutiques and travel retail locations. We have established ourselves as a source of over 400 fragrance, skin care and cosmetic brands through brand ownership, brand licensing and distribution arrangements. In addition to approximately 100 prestige brands that we own or license, we also distribute over 300 additional prestige fragrance brands manufactured by other beauty companies principally to mass retailers in the United States. Our portfolio of owned and licensed fragrance brands includes the Elizabeth Arden fragrance brands:Red Door, Elizabeth Arden 5^th Avenue,Elizabeth Arden Provocative Woman, Elizabeth Arden green tea,and Elizabeth Arden Mediterranean; the Elizabeth Taylor fragrance brands:White DiamondsandElizabeth Taylor's Passion; the Britney Spears fragrance brands: curious Britney Spears, fantasy Britney Spears andBritney Spears believe; the Mariah Carey fragranceM by Mariah Carey; the Hilary Duff fragrancewith Love...Hilary Duff;the Danielle Steel fragranceDanielle by Danielle Steel;the fragrance brandsWhite Shoulders, Giorgio andGiorgio Red;the men's fragrancesDaytona 500,HUMMER®Fragrance for Men, andPS Fine Cologne for Men; and the designer fragrance brands of Alfred Sung, Badgley Mischka, Bob Mackie, GANT, Lulu Guinness, Nanette Lepore, Geoffrey Beeneand Halston. Our skin care brands include Ceramide, Intervene, Eight Hour CreamandPREVAGE®, and our cosmetic products include the Elizabeth Arden brand lipstick, foundation and color cosmetic products.

          Our business strategy to increase net sales, operating margins and earnings is based on (a) growing the sales of our existing brand portfolio through new product launches and increased advertising and marketing activities, (b) acquiring control of additional prestige brands through licensing opportunities and acquisitions, (c) expanding the offering of prestige fragrance products that we distribute on behalf of other beauty companies to mass retail customers, (d) implementing initiatives to improve our cost structure and working capital efficiencies, and (e) expanding our presence in established international markets such as Europe and Travel Retail, and developing our presence in emerging markets.

          We manage our business by evaluating net sales, EBITDA and working capital utilization (including monitoring our levels of inventory, accounts receivable and operating cash flow). We encounter a variety of challenges that may affect our business and should be considered as described in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended June 30, 2007 and in the section of this quarterly report captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results."

          In fiscal 2008, our key focus is on improving our operating margins, cash flow from operations and return on invested capital. For the six months ended December 31, 2007, our operating margin improved by approximately 150 basis points compared to the prior year period. We are implementing a variety of initiatives relating to our extended supply chain, logistics functions and enterprise information systems that we believe will provide improved operating and financial performance.

          Our financial results for the remainder of the fiscal year ending June 30, 2008, will also depend on our ability to successfully launch new products, successfully introduce our fragrance brands to additional retailers, and continue to grow our international sales, and on the impact that a slowing U.S. economy may have on consumer demand for our products. New product introductions require additional upfront spending for marketing, development and promotional expenses. To the extent one or more of our new product introductions or our efforts to expand operating margins or grow international sales are not as successful as we had planned, or if a slowing U.S. economy negatively affects consumer demand for our products, we could experience a reduction of our profitability and cash flow.

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Seasonality

         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, 2007, approximately 59% of our net sales were made during those months. Due to the size and timing of certain orders from our customers and new product launches, 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, operating margin, net income, working capital requirements and cash flows on a quarterly basis. Increased sales of skin care and cosmetic products relative to fragrances may reduce the seasonality of our business.

          We experience seasonality in our working capital, with peak inventory levels 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.

Critical Accounting Policies and Estimates

          As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently actual results could differ from those estimates and assumptions. Our most critical accounting policies relate to revenue recognition, provisions for inventory obsolescence, allowances for sales returns, markdowns and doubtful accounts, long-lived assets, income taxes, hedging contracts and share-based compensation. Since June 30, 2007, other than t he adoption of Financial Interpretation No. 48,Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (FIN 48), as described below, there have been no significant changes to the assumptions and estimates related to those critical accounting policies.

          Income Taxes. In June 2006, the Financial Accounting Standards Board ("FASB") issued FIN 48, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that we recognize in our consolidated financial statements, the impact of a tax position if it is more likely than not that such position will be sustained on audit based on its technical merits. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. Effective July 1, 2007, we adopted FIN 48. The adoption of FIN 48 resulted in no change to the opening balance of our retained earnings.

          Prior to July 1, 2007, we recognized income tax accruals with respect to uncertain tax positions based upon Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (SFAS 5). Under SFAS 5, we recorded a liability associated with an uncertain tax position if the liability was both probable and estimable.

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Results of Operations

          The following discussion compares the historical results of operations for the three and six months ended December 31, 2007 and December 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):

		Three Months Ended								Six Months Ended
		December 31, 2007				December 31, 2006				December 31, 2007				December 31, 2006
Net sales		$	422,444	100.0	%	$	410,771	100.0	%	$	694,232	100.0	%	$	665,579	100.0	%
Cost of sales			243,584	57.7			252,817	61.5			408,992	58.9			408,399	61.4
	Gross profit		178,860	42.3			157,954	38.5			285,240	41.1			257,180	38.6
Selling, general and administrative   expenses			119,361	28.3			108,322	26.4			211,833	30.5			195,606	29.4
Depreciation and amortization			6,210	1.5			6,350	1.5			12,164	1.8			12,698	1.9
	Income from operations		53,289	12.6			43,282	10.5			61,243	8.8			48,876	7.3
Interest expense, net			8,266	2.0			8,529	2.1			15,754	2.3			15,889	2.4
	Income before income taxes		45,023	10.7			34,753	8.5			45,489	6.6			32,987	5.0
Provision for income taxes			11,224	2.7			8,897	2.2			11,340	1.6			8,445	1.3
	Net income		33,799	8.0			25,856	6.3			34,149	4.9			24,542	3.7
Other data
EBITDA and EBITDA margin (1)		$	59,499	14.1	%	$	49,632	12.1	%	$	73,407	10.6	%	$	61,574	9.3	%

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

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

         Net Sales.    Net sales increased 2.8%, or approximately $11.7 million, for the three months ended December 31, 2007, compared to the three months ended December 31, 2006. The increase is due to approximately $11 million of higher sales of Elizabeth Arden branded skin care products primarily in international markets. Incremental fragrance sales from the launch ofM by Mariah Careyand sales of Giorgio brands resulting from the new license agreement signed in December 2006 were mostly offset by lower sales of distributed fragrance brands to U.S. mass customers. Excluding the impact of foreign currency translation, net sales increased 0.5%.

          Gross Profit.    Gross profit increased by 13.2% for the three months ended December 31, 2007, compared to the three months ended December 31, 2006, primarily due to the higher sales and gross margin. Gross margin increased to 42.3% for the three months ended December 31, 2007, compared to 38.5% for the three months ended December 31, 2006 due to a higher proportion of our net sales coming from owned and licensed brands, which traditionally operate at higher gross margins than our distributed fragrance brands.

          SG&A.    Selling, general and administrative expenses increased 10.2%, or approximately $11.0 million, for the three months ended December 31, 2007, compared to the three months ended December 31, 2006. The increase was principally due to higher advertising and royalty costs of $8.7 million mainly related to new product launches, and higher marketing and sales overhead costs of $2.5 million mainly related to investments in our European operations, e-commerce activities and our Fifth Avenue store in New York City. These amounts include the unfavorable effect of foreign currency translation of approximately $3.1 million. We also incurred costs related to our extended supply chain and logistics functions initiatives, which offset the prior year period transition costs related to the Rivera and Sovereign acquisitions.

          Depreciation and Amortization.    Depreciation and amortization decreased by 2.2% for the three months ended December 31, 2007, compared to the three months ended December 31, 2006. The decrease is primarily a result of reduced amortization related to certain intangible assets that were fully amortized during fiscal 2007 partially offset by higher depreciation costs due to the higher level of capital additions during the fiscal years ended June 30, 2007 and 2006.

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          Interest Expense.    Interest expense, net of interest income decreased by 3.1% for the three months ended December 31, 2007, compared to the three months ended December 31, 2006. The decrease is primarily a result of lower interest rates under our credit facility.

         Provision forIncome Taxes.    A provision for income taxes of approximately $11.2 million was recorded for the three months ended December 31, 2007, compared to approximately $8.9 million for the three months ended December 31, 2006, primarily due to higher income from operations. The effective tax rate for the three months ended December 31, 2007 and 2006 was 24.9% and 25.6%, respectively.

          Net Income.    Net income increased by 30.7% to approximately $33.8 million for the three months ended December 31, 2007 compared to approximately $25.9 million for the three months ended December 31, 2006. The increase in net income was driven by higher net sales and gross profit, partially offset by higher selling, general and administrative expenses.

          EBITDA.    EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) increased by $9.9 million to $59.5 million for the three months ended December 31, 2007, compared to $49.6 million for the three months ended December 31, 2006. The increase in EBITDA was driven by 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 or financing activities (as determined in accordance with generally accepted accounting principles) or as a measure of our ability to meet cash needs. We believe that EBITDA is a measure commonly reported and widely used by investors and other interested parties as a measure of a company's operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to capital structure (particularly when acquisitions are involved), depreciation and amortization, or non-operating factors such as historical cost. Accordingly, as a result of our capital structure, we believe EBITDA is a relevant measure. This informatio n 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
			December 31, 2007		December 31, 2006
Net income			$	33,799	$	25,856
Plus:
	Provision for income taxes			11,224		8,897
	Interest expense, net			8,266		8,529
	Depreciation and amortization			6,210		6,350
		EBITDA	$	59,499	$	49,632

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Six Months Ended December 31, 2007 Compared to Six Months Ended December 31, 2006

          Net Sales.    Net sales increased 4.3%, or approximately $28.7 million, for the six months ended December 31, 2007, compared to the six months ended December 31, 2006. Fragrance sales increased approximately $18 million due to the launch ofM by Mariah Careyand sales of the Giorgio brands resulting from the new license agreement signed in December 2006, partially offset by lower sales of distributed fragrance brands to U.S. mass customers. Sales of Elizabeth Arden branded skin care products increased approximately $12 million, primarily in international markets. Excluding the impact of foreign currency translation, net sales increased 1.9%.

          Gross Profit.    Gross profit increased by 10.9% for the six months ended December 31, 2007, compared to the six months ended December 31, 2006, primarily due to the higher sales and gross margin. Gross margin was 41.1% for the six months ended December 31, 2007, compared to 38.6% for the six months ended December 31, 2006 due to a higher proportion of our net sales coming from owned and licensed brands, which traditionally operate at higher gross margins than our distributed fragrance brands.

          SG&A.    Selling, general and administrative expenses increased 8.3%, or approximately $16.2 million, for the six months ended December 31, 2007, compared to the six months ended December 31, 2006. The increase was principally due to higher advertising and royalty costs of $11.9 million mainly related to new product launches and higher marketing and sales overhead costs of $4.6 million mainly related to investments in our European operations, e-commerce activities and our Fifth Avenue store in New York City. These amounts include the unfavorable effect of foreign currency translation of approximately $4.7 million. We also incurred costs related to our extended supply chain and logistics functions initiatives, which offset the prior year period transition costs related to the Rivera and Sovereign acquisitions.

          Depreciation and Amortization.    Depreciation and amortization decreased by 4.2% for the six months ended December 31, 2007, compared to the six months ended December 31, 2006. The decrease is primarily a result of reduced amortization related to certain intangible assets that were fully amortized during fiscal 2007 mostly offset by higher depreciation costs due to the higher level of capital additions during the fiscal years ended June 30, 2007 and 2006.

         Provision forIncome Taxes.    A provision for income taxes of approximately $11.3 million was recorded for the six months ended December 31, 2007, compared to approximately $8.4 million for the six months ended December 31, 2006, primarily due to higher income from operations. The effective tax rate for the six months ended December 31, 2007 and 2006 was 24.9% and 25.6%, respectively.

           Net Income.    Net income increased by 39.1% to approximately $34.1 million for the six months ended December 31, 2007, as compared to approximately $24.5 million for the six months ended December 31, 2006. The increase in net income was driven by higher net sales and gross profit, partially offset by higher selling, general and administrative expenses.

          EBITDA.    EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) increased by $11.8 million to $73.4 million for the six months ended December 31, 2007, compared to $61.6 million for the six months ended December 31, 2006. The increase in EBITDA was driven by higher net sales and gross profit, partially offset by higher selling, general and administrative expenses.

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

(Amounts in thousands)			Six Months Ended
			December 31, 2007		December 31, 2006
Net income			$	34,149	$	24,542
Plus:
	Provision for income taxes			11,340		8,445
	Interest expense, net			15,754		15,889
	Depreciation and amortization			12,164		12,698
		EBITDA	$	73,407	$	61,574

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Financial Condition

(Amounts in thousands)	Six Months Ended
	December 31, 2007			December 31, 2006
Net cash (used in) provided by operating activities	$	(15,759	)	$	40,505
Net cash used in investing activities		(18,801	)		(101,711	)
Net cash provided by financing activities		28,685			68,384
Net (decrease) increase in cash and cash equivalents		(5,595	)		7,478

          Cash Flows.     For the six months ended December 31, 2007, net cash used in operating activities was approximately $15.8 million, as compared to net cash provided by operating activities of approximately $40.5 million for the six months ended December 31, 2006. This increase in cash used for operating activities is primarily due to the prior year acquisition of the fragrance business of Sovereign Sales, LLC in which we acquired $68 million of inventory and which was reflected as an investing activity in our consolidated statement of cash flows, as required by generally accepted accounting principles (GAAP). If the inventory had been acquired in the ordinary course of our business, it would have resulted in a net use of cash from operating activities of $27.5 million ($40.5 million of cash provided by operating activities in the prior period less $68 million of inventory acquired and reported as a n investing activity). The Company believes this additional information provides investors a more comparable measure to evaluate our operating cash flow performance for the six months ended December 31, 2007 as compared to the prior year period.

          Also contributing to the increase in cash used during the current period were higher payments of approximately $57.2 million due in part to investments in new supplier relationships coming from the Sovereign acquisition and higher incentive bonus payments made in August 2007 related to fiscal 2007 performance. Cash generated in the current period from the prior year build up of accounts receivable related to the Sovereign acquisition was offset by an increase in accounts receivable from non-U.S. customers which generally have longer collection cycles.

          For the six months ended December 31, 2007, net cash used in investing activities was approximately $18.8 million, as compared to approximately $101.7 million for the six months ended December 31, 2006. The decrease in net cash used in investing activities is primarily a result of approximately $91.4 million in cash paid in connection with the Sovereign acquisition in August 2006. Cash used in investing activities for the six months ended December 31, 2007, also includes $6.3 million paid to settle the first installment of contingent consideration associated with the Sovereign acquisition, and $12.4 million related to capital expenditures, primarily for computer hardware and software, tools and molds, in-store counters, and leasehold improvements.

          Net cash provided by financing activities decreased by approximately $39.7 million or 58.0% for the six months ended December 31, 2007, as compared to the six months ended December 31, 2006. The decrease was primarily due to additional borrowings under our credit facility during the six months ended December 31, 2006, used to fund a portion of the purchase price for the Sovereign acquisition.

          Interest paid during the six months ended December 31, 2007, included $8.7 million of interest payments on the 7-3/4% senior subordinated notes due 2014 and $6.7 million of interest paid on the borrowings under our credit facility. Interest paid during the six months ended December 31, 2006 included $8.7million of interest payments on the 7 3/4% senior subordinated notes and $6.2 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 senior subordinated 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.

          We have a revolving credit facility with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, which generally provides for borrowings on a revolving basis of up to $250 million with a $25 million sub-limit for letters of credit. Pursuant to amendments to the credit facility entered into in August and November 2007, the credit facility was increased to $300 million until October 31, 2007, and to $275 million from November 1, 2007 until December 15, 2007. After December 15, 2007, the credit facility provides for borrowings up to $250 million.

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Under the terms of the credit facility we may, at any time, 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. In addition, from August 15, 2007 until October 31, 2007, we had temporary additional borrowing availability of $25 million above the borrowing availability that was supported by our level of eligible accounts receivable and inventory (as described below). The credit facility expires in December 2012.

          The credit facility is guaranteed by all of our U.S. subsidiaries and is collateralized by a first priority lien on all of our U.S., Canada and Puerto Rico accounts receivable and U.S. inventory. Except for the temporary additional borrowing availability described above, borrowings under the credit facility are limited to 85% of eligible accounts receivable and 85% of the appraised net liquidation value of our inventory, as determined pursuant to the terms of the credit facility. 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 as of December 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 December 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%. For the six months ended December 31, 2007 and 2006, the weighted average annual interest rate on borrowings under the Credit Facility was 6.8% and 7.2%, respectively.

          As of December 31, 2007, we had approximately $124million in outstanding borrowings and approximately $5 million in letters of credit outstanding under the credit facility, approximately $246 million of eligible receivables and inventories available as collateral under the credit facility, and remaining borrowing availability of approximately $117 million.

           As of December 31, 2007, we had outstanding $225 million aggregate principal amount of 7 3/4% senior subordinated notes. The 7 3/4% senior subordinated notes are guaranteed by our U.S. subsidiaries. See Note 11 to Notes to Unaudited Consolidated Financial Statements. The indentures pursuant to which the 7 3/4% senior subordinated notes were issued provide that such notes will be our senior subordinated obligations. The 7 3/4% senior subordinated notes rank junior to all of our existing and future senior indebtedness, including indebtedness under the credit facility, and pari passu in right of payment to all of our senior subordinated indebtedness. Interest on the 7 3/4% senior subordinated notes is payable semi-annually on February 15 and August 15 of each year. The indentures generally permit us (subject to the satisfaction of a fixed charge coverage ratio and, in certain cases, also a net income test) to incur additi onal indebtedness, pay dividends, purchase or redeem our common stock or redeem subordinated indebtedness. The indentures generally limit our ability to create liens, merge or transfer or sell assets. The indentures also provide that the holders of the 7 3/4% senior subordinated notes have the option to require us to repurchase their notes in the event of a change of control involving us (as defined in the indentures).

          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, 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,

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2007 to November 30, 2008. As of December 31, 2007, we had repurchased under the stock repurchase program 1,882,369 shares of common stock on the open market, at an average price of $18.22 per share, at a cost of approximately $34.3 million, including sales commissions. For the six months ended December 31, 2007, we repurchased 20,200 shares of Common Stock at an average price of $20.52 per share on the open market at a cost of $0.4 million, including sales commissions. Our acquisition of these shares was accounted for under the treasury method.

          Contractual Obligations.    At December 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 $60.6 million through 2011, compared with $60.3 million through 2011 at June 30, 2007.

New Accounting Standards

Business Combinations

          In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007),Business Combinations (SFAS 141R). SFAS 141R significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, restructuring costs and income taxes. SFAS 141R will be effective for us on July 1, 2009. We are currently evaluating the impact of SFAS 141R on our consolidated financial statements.

Fair Value Measurements

          In September 2006, the FASB issued Statement of Financial Accounting Standards 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 us on July 1, 2008. We are currently evaluating the impact of SFAS 157 on our consolidated financial statements.

The Fair Value Option for Financial Assets and Financial Liabilities

          In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159,The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. This option is only available for select financial instruments and is irrevocable once applied. SFAS 159 will be effective for us beginning July 1, 2008. We are currently evaluating the impact of SFAS 159 on our consolidated financial statements.

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

          The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management's plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will" and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products, future performance or results of current and anticipated products, sales efforts, expenses, interest rates, for eign exchange rates, the outcome of contingencies, such as legal proceedings, and financial results. A list of factors that could cause our actual results of operations and financial condition to differ materially is set forth below, and these factors are discussed in greater detail under Item 1A -- "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2007:

—	factors affecting our relationships with our customers or our customers' businesses, including the absence of contracts with customers, our customers' financial condition, and changes in the retail, fragrance and cosmetic industries, such as the consolidation of retailers and the associated closing of retail doors as well as retailer inventory control practices, including but not limited to levels of inventory carried at point of sale and practices used to control inventory shrinkage;
—	our reliance on third-party manufacturers for substantially all of our owned and licensed products and our absence of contracts with suppliers;
—	delays in shipments, inventory shortages and higher costs of production due to the loss of or disruption in our distribution facilities or at key third party manufacturing or fulfillment facilities that manufacture or provide logistic services for our products;
—	our ability to respond in a timely manner to changing consumer preferences and purchasing patterns and other international and domestic conditions and events that impact consumer confidence and demand, such as economic downturns;
—	our ability to protect our intellectual property rights;
—	the success, or changes in the timing or scope, of our new product launches, advertising and merchandising programs;
—	the quality, safety and efficacy of our products;
—	the impact of competitive products and pricing;
—	risks of international operations, including foreign currency fluctuations, hedging activities, economic and political consequences of terrorist attacks, and political instability in certain regions of the world;
—	our ability to implement our growth strategy and acquire or license additional brands or secure additional distribution arrangements, to successfully and cost-effectively integrate acquired businesses or new brands, and to finance our growth strategy and our working capital requirements;
—	our level of indebtedness, debt service obligations and restrictive covenants in our revolving credit facility and the indenture for our 7 3/4% senior subordinated notes;
��	changes in product mix to less profitable products;
—	the retention and availability of key personnel;
—	changes in the legal, regulatory and political environment that impact, or will impact, our business, including changes to customs or trade regulations or accounting standards or critical accounting estimates; and
—	other unanticipated risks and uncertainties.

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

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

          As of December 31, 2007, we had approximately $124 million in borrowings outstanding under our revolving credit facility. Borrowings under our revolving credit facility are seasonal, with peak borrowings typically in the months of September, October and November. Borrowings under the credit facility are subject to variable rates and, accordingly, our earnings and cash flow will be affected by changes in interest rates. Based upon our average borrowings under our revolving credit facility during the six months ended December 31, 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 six months ended December 31, 2007 would have increased or decreased by approximately $1.1 million and $1.9 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 six months ended December 31, 2007, we derived approximately 36.5% and 37.1%, 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 third-party manufacturing facility located in Roanoke, Virginia. Our operations may be subject to volatility because of currency changes, inflation changes and changes in political and economic conditions in the countries in which we operate. With respect to international operations, our sales, cost of goods sold and expenses are typically denominated in a combination of local currency and the U.S. dollar. O ur 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 included in "Accumulated other comprehensive (loss) income" in our consolidated balance sheets.

          As of December 31, 2007, we had notional amounts of 96.2 million Euros and 53.5 million British pounds under foreign currency contracts that expire between January 31, 2008 and June 29, 2009 to reduce the exposure of our foreign subsidiary revenues to fluctuations in currency rates. As of December 31, 2007, we had notional amounts of 13.3 million Canadian dollars under foreign currency contracts that expire between January 31, 2008 and June 29, 2009 to reduce the exposure of our Canadian subsidiary's cost of sales to fluctuations in currency rates. We have designated each qualifying foreign currency contract as a cash flow hedge. The gains and losses of these contracts will only be recognized in earnings in the period in which the contracts expire. The realized loss, net of taxes, recognized during the three and six months ended December 31, 2007, was approximately $2.4 million and $3.1 million. At December 31, 2007, the unre alized loss, net of taxes associated with these contracts of approximately $8.1 million, is included in accumulated other comprehensive (loss) income.

          When appropriate, we also enter into and settle foreign currency contracts for Euros, British pounds and Canadian dollars to reduce the exposure of our foreign subsidiaries' net balance sheets to fluctuations in foreign currency rates. As of December 31, 2007, there were no such foreign currency contracts outstanding. The realized loss, net of taxes, recognized during the three and six months ended December 31, 2007 was approximately $0.5 million and $1.5 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.

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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 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, 2007. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.

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

          This table provides information with respect to our purchases of shares of our common stock, $.01 par value per share, during the three months ended December 31, 2007.

Issuer Purchases of Equity Securities

	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs(2)
October 1, 2007 through October 31, 2007	--		N/A	--	$	46,120,572
November 1, 2007 through November 30, 2007	--		N/A	--	$	46,120,572
December 1, 2007 through December 31, 2007	20,200	$	20.52	20,200	$	45,705,460
Totals	20,200	$	20.52	20,200	$	45,705,460

(1)   On November 2, 2005, our board of directors authorized us to implement a stock repurchase program to repurchase up to $40 million of our common stock through March 31, 2007. The stock repurchase program was announced on November 3, 2005. On November 2, 2006, our board of directors authorized the repurchase of an additional $40 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. The extension of the stock repurchase program was announced on November 3, 2006.

(2)   Amounts reflect the remaining dollar value of shares that may be purchased under the stock repurchase program described above.

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

(a)	The Annual Meeting of Shareholders (the "Annual Meeting") of the Company was held on November 14, 2007, in Miramar, Florida.
(b)	The following directors were elected at the Annual Meeting:
		E. Scott Beattie
		Fred Berens
		Maura J. Clark
		Richard C. W. Mauran
		William M. Tatham
		J. W. Nevil Thomas
		Paul West
(c)	The shareholders voted at the Annual Meeting on the following matters:

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

	Votes Cast
	For	Withheld
E. Scott Beattie	25,575,361	401,269
Fred Berens	25,585,186	391,444
Maura J. Clark	25,654,363	322,267
Richard C. W. Mauran	25,296,758	679,872
William M. Tatham	25,662,226	314,404
J. W. Nevil Thomas	25,572,986	403,644
Paul West	25,574,531	402,099

2. The vote on the approval of the amendment to our 2004 Stock Incentive Plan to (i) increase the number of shares of our common stock, par value $.01 per share, which may be granted under the 2004 Stock Incentive Plan from 2,000,000 to 2,700,000, (ii) re-approve the business criteria and limits that may be used in establishing performance-based awards, and (iii) to make certain other administrative changes, was as follows:

Votes Cast
		Broker
For	Against	Non-Votes	Abstentions
19,960,999	1,951,847	4,046,941	16,843

3. The vote on the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2008, was as follows:

Votes Cast
		Broker
For	Against	Non-Votes	Abstentions
25,184,348	790,755	0	1,527

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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)).
10.1	Second Amended and Restated Credit Agreement dated as of December 24, 2002 among the Company, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed as part of the Company's Form 8-K dated December 30, 2002 (Commission File No. 1-6370)).
10.2	First Amendment to Second Amended and Restated Credit Agreement dated as of February 25, 2004, among the Company, 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 filed as part of the Company's Form 10-Q for the quarter ended May 1, 2004 (Commission File No. 1-6370)).
10.3	Second Amendment to Second Amended and Restated Credit Agreement dated as of June 2, 2004, among the Company, 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)).
10.4	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)).
10.5	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 September 30, 2005 (Commission File No. 1-6370)).
10.6	Fifth Amendment to Second Amended and Restated Credit Agreement dated as of August 11, 2006, among the Company, 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 4.7 filed as part of the Company's Form 10-K for the year ended June 30, 2006 (Commission File No.1-6370)).
10.7	Sixth Amendment to Second Amended and Restated Credit Agreement dated as of August 15, 2007, among the Company, 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 10.7 filed as part of the Company's Form 10-K for the year ended June 30, 2007 (Commission File No. 1-6370)).

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Exhibit Number	Description
10.8 *	Seventh Amendment to Second Amended and Restated Credit Agreement dated as of November 13, 2007, 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.
10.9	Amended and Restated Security Agreement dated as of January 29, 2001, made by the Company and certain of its subsidiaries in favor of Fleet National Bank, as administrative agent (incorporated herein by reference to Exhibit 4.5 filed as part of the Company's Form 8-K dated February 7, 2001 (Commission File No. 1-6370)).
10.10	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)).
10.11	Asset Purchase Agreement dated August 11, 2006 between the Company and Sovereign Sales, LLC (incorporated herein 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)).
10.12 + *	2004 Stock Incentive Plan, as amended and restated.
10.13 +	2004 Non-Employee Director Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.2 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission File No. 1-6370)).
10.14 + *	2000 Stock Incentive Plan, as amended.
10.15 +	1995 Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.4 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission File No. 1-6370)).
10.16 +	Amended 2002 Employee Stock Purchase Plan (incorporated herein 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)).
10.17 +	Non-Employee Director Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.6 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission File No. 1-6370)).
10.18 +	Form of Nonqualified Stock Option Agreement for stock option awards under the Company's Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.8 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.19 +	Form of Incentive Stock Option Agreement for stock option awards under the Company's 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.9 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.20 +	Form of Nonqualified Stock Option Agreement for stock option awards under the Company's 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.10 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.21 +	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)).

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Exhibit Number	Description
10.22 +	Form of Restricted Stock Agreement for service-based restricted stock awards (one-year vesting) under the Company's 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.12 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.23 +	Form of Restricted Stock Agreement for the performance-based restricted stock awards under the Company's 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.13 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.24 +	Form of Stock Option Agreement for stock option awards under the Company's 2004 Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.14 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
10.25 +	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)).
10.26 +	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)).
10.27 +	Form of Restricted Stock Agreement for the restricted stock awards under the Company's 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.20 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).
10.28 + *	2005 Management Bonus Plan, as amended.
10.29 + *	2005 Performance Bonus Plan, as amended.
10.30 +	Compensation Arrangements for Named Executive Officers (incorporated herein by reference to Exhibit 10.29 filed as a part of the Company's Form 10-K for the year ended June 30, 2007 (Commission File No. 1-6370)).
10.31 +	Board of Directors Compensation Arrangements (incorporated herein by reference to Exhibit 10.17 filed as a part of the Company's Form 10-K for the year ended June 30, 2006 (Commission File No. 1-6370)).
10.32 +	Elizabeth Arden, Inc. Severance Policy (incorporated herein by reference to Exhibit 10.31 filed as part of the Company's Form 10-K for the year ended June 30, 2007 (Commission File No. 1-6370)).
10.33 +	Form of Restricted Stock Agreement for service-based restricted stock awards (three-year vesting period) under the Company's 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.32 filed as part of the Company's Form 10-K for the year ended June 30, 2007 (Commission File No. 1-6370)).
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.

+ Management contract or compensatory plan or arrangement.

* Filed herewith.

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SIGNATURES

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

	ELIZABETH ARDEN, INC.
Date:  February 8, 2008	/s/ E. Scott Beattie
	E. Scott Beattie
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
Date:  February 8, 2008	/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
10.8	Seventh Amendment to Second Amended and Restated Credit Agreement dated as of November 13, 2007, 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.
10.12	2004 Stock Incentive Plan, as amended and restated.
10.14	2000 Stock Incentive Plan, as amended.
10.28	2005 Management Bonus Plan, as amended.
10.29	2005 Performance Bonus Plan, as amended.
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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