Elizabeth Arden (RDEN) 10-Q 2009 Q3 Quarterly report

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

FORM 10-Q

(Mark One)
[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
[]	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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes  [ ]      No  [  ]

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
    Large accelerated filer  [  ]                                                                                        Accelerated filer                [X]
    Non-accelerated filer    [  ]  (Do not check if a smaller reporting company)         Smaller reporting company  [  ]

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

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

Class	Outstanding at May 4, 2009
Common Stock, $.01 par value per share	28,576,335

ELIZABETH ARDEN, INC.

INDEX TO FORM 10-Q

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	Page No.
	Consolidated Balance Sheets -- March 31, 2009 and June 30, 2008	3
	Consolidated Statements of Operations -- Three and nine months ended March 31, 2009 and March 31, 2008	4
	Consolidated Statement of Shareholders' Equity -- Nine months ended March 31, 2009	5
	Consolidated Statements of Cash Flow -- Nine months ended March 31, 2009 and March 31, 2008	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
PART II	OTHER INFORMATION
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	45
Signatures		48
Exhibit Index		49

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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
			March 31, 2009			June 30, 2008
ASSETS			(Unaudited)
Current Assets
	Cash and cash equivalents		$	17,255		$	26,396
	Accounts receivable, net			205,127			217,446
	Inventories			360,973			408,563
	Deferred income taxes			17,853			14,785
	Prepaid expenses and other assets			33,687			24,607
		Total current assets		634,895			691,797
Property and equipment, net				57,419			52,148
Exclusive brand licenses, trademarks and intangibles, net				217,688			221,253
Debt financing costs, net				4,995			4,952
Other assets				619			584
		Total assets	$	915,616		$	970,734
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Short-term debt		$	128,200		$	119,000
	Accounts payable - trade			126,610			170,440
	Other payables and accrued expenses			86,418			94,361
	Current portion of long-term debt			503			1,261
		Total current liabilities		341,731			385,062
Long-term Liabilities
	Long-term debt, net			223,293			223,696
	Deferred income taxes and other liabilities			13,203			25,375
		Total long-term liabilities		236,496			249,071
		Total liabilities		578,227			634,133
Commitments and Contingencies
Shareholders' Equity
	Common stock, $.01 par value per share, 50,000,000 shares authorized; 31,349,931    and 31,157,057 issued, respectively			314			312
	Additional paid-in capital			283,948			280,973
	Retained earnings			103,022			105,576
	Treasury stock (2,728,329 and 2,475,129 shares at cost, respectively)			(47,334	)		(45,768	)
	Accumulated other comprehensive loss			(2,561	)		(4,492	)
		Total shareholders' equity		337,389			336,601
		Total liabilities and shareholders' equity	$	915,616		$	970,734

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

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ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in thousands, except per share data)

			Three Months Ended						Nine Months Ended
			March 31, 2009			March 31, 2008			March 31, 2009			March 31, 2008
Net sales			$	203,471		$	210,554		$	857,663		$	904,786
Cost of sales (excludes depreciation of $1,118, $1,105,    $3,366 and $3,125, respectively, included below)				115,796			119,800			511,962			528,792
Gross profit				87,675			90,754			345,701			375,994
Operating expenses:
	Selling, general and administrative			86,398			83,004			316,123			294,837
	Depreciation and amortization			6,392			6,298			19,205			18,461
		Total operating expenses		92,790			89,302			335,328			313,298
(Loss) income from operations				(5,115	)		1,452			10,373			62,696
Interest expense, net				5,643			6,067			19,244			21,821
(Loss) income before income taxes				(10,758	)		(4,615	)		(8,871	)		40,875
(Benefit from) provision for income taxes				(7,054	)		(803	)		(6,317	)		10,538
Net (loss) income			$	(3,704	)	$	(3,812	)	$	(2,554	)	$	30,337
Net (loss) income per common share:
	Basic		$	(0.13	)	$	(0.14	)	$	(0.09	)	$	1.08
	Diluted		$	(0.13	)	$	(0.14	)	$	(0.09	)	$	1.04
Weighted average number of common shares:
	Basic			27,805			27,894			27,901			27,961
	Diluted			27,805			27,894			27,901			29,292

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			(Loss) Income			Equity
Balance at July 1, 2008				31,157	$	312	$	280,973		$	105,576			(2,475	)	$	(45,768	)	$	(4,492	)	$	336,601
Issuance of common stock upon exercise of    stock options				40		--		510			--			--			--			--			510
Issuance of common stock for employee stock    purchase plan				56		1		670			--			--			--			--			671
Issuance of restricted stock, net of forfeitures				97		1		(1	)		--			--			--			--			--
Amortization of share-based awards				--		--		1,796			--			--			--			--			1,796
Repurchase of common stock				--		--		--			--			(253	)		(1,566	)		--			(1,566	)
Comprehensive income:
	Net loss			--		--		--			(2,554	)		--			--			--			(2,554	)
	Foreign currency translation adjustments			--		--		--			--						--			(11,364	)		(11,364	)
	Disclosure of reclassification amount, net of    taxes (10% tax rate):			--		--		--			--			--			--			--
		Unrealized hedging gain arising during the    period		--		--		--			--			--			--			22,472			22,472
		Reclassification adjustment for hedging gains    included in net loss		--		--		--			--			--			--			(9,177	)		(9,177	)
		Net unrealized cash flow hedging gain		--		--		--			--			--			--			13,295			13,295
	Total comprehensive income (loss)			--		--		--			(2,254	)		--			--			1,931			(623	)
Balance at March 31, 2009				31,350	$	314	$	283,948		$	103,022			(2,728	)	$	(47,334	)	$	(2,561	)	$	337,389

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

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ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

				Nine Months Ended
				March 31, 2009			March 31, 2008
Operating Activities:
	Net (loss) income			$	(2,554	)	$	30,337
	Adjustments to reconcile net (loss) income to net cash provided by operating activities:
		Depreciation and amortization			19,205			18,461
		Amortization of senior note offering and credit facility costs			1,076			920
		Amortization of share-based awards			1,796			5,746
		Deferred income taxes			(7,072	)		1,457
Changes in assets and liabilities, net of acquisitions:
		Decrease (increase) in accounts receivable			4,257			(7,663	)
		Decrease in inventories			43,056			40,195
		(Increase) decrease in prepaid expenses and other assets			(11,469	)		27
		Decrease in accounts payable			(41,628	)		(60,199	)
		Increase (decrease) in other payables, accrued expenses and other liabilities			6,669			(3,694	)
		Other			(1,489	)		274
			Net cash provided by operating activities		11,847			25,861
Investing Activities:
	Additions to property and equipment				(18,739	)		(15,506	)
	Acquisition of other assets				(5,333	)		(6,433	)
			Net cash used in investing activities		(24,072	)		(21,939	)
Financing Activities:
	Proceeds from short-term debt				9,200			160
	Payments on long-term debt				(1,149	)		(1,227	)
	Payments under capital lease obligations				(1,629	)		--
	Proceeds from the exercise of stock options				510			2,378
	Proceeds from the issuance of new common stock under the employee stock    purchase plan				671			837
	Repurchase of common stock				(1,566	)		(7,439	)
	Financing fees paid				(863	)		--
			Net cash provided by (used in) financing activities		5,174			(5,291	)
Effect of exchange rate changes on cash and cash equivalents					(2,090	)		(526	)
Net decrease in cash and cash equivalents					(9,141	)		(1,895	)
Cash and cash equivalents at beginning of period					26,396			30,287
Cash and cash equivalents at end of period				$	17,255		$	28,392
Supplemental Disclosure of Cash Flow Information:
	Interest paid during the period			$	23,710		$	25,876
	Income taxes paid during the period			$	1,409		$	7,365

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 global prestige beauty products company that sells fragrance, 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 domestic and international subsidiaries. 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 fiscal year ended June 30, 2008 (the "2008 Annual Report"), filed with the Commission.

          The consolidated balance sheet of the Company as of June 30, 2008 is derived from the financial statements included in the 2008 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 presentation of the quarter ended March 31, 2009, certain reclassifications were made to the prior years' Consolidated Financial Statements and the accompanying footnotes.

NOTE 2.    ACCUMULATED OTHER COMPREHENSIVE LOSS

          The Company's accumulated other comprehensive loss shown on the accompanying consolidated balance sheets consists of foreign currency translation adjustments, which are not adjusted for income taxes since they relate to indefinite investments in non-U.S. subsidiaries, and the unrealized gains (losses), net of taxes, related to the Company's foreign currency contracts.

          The components of accumulated other comprehensive loss were as follows:

(Amounts in thousands)	March 31, 2009			June 30, 2008
Cumulative foreign currency translation adjustments	$	(6,323	)	$	5,041
Unrealized hedging gain (loss), net of taxes		3,762			(9,533	)
Accumulated other comprehensive loss	$	(2,561	)	$	(4,492	)

NOTE 3.   (LOSS) INCOME PER SHARE

          Basic (loss) income per share is computed by dividing the net (loss) income by the weighted average number of shares of the Company's 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. For the three months ended March 31, 2009 and 2008, and for the nine months ended March 31, 2009, diluted loss per share equals basic loss per share, as the assumed exercise of outstanding options, non-vested restricted stock, and the assumed purchases under the employee stock purchase plan would have an anti-dilutive effect.

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

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

(Amounts in thousands, except per  share data)			Three Months Ended						Nine Months Ended
			March 31, 2009			March 31, 2008			March 31, 2009			March 31, 2008
Basic
	Net (loss) income		$	(3,704	)	$	(3,812	)	$	(2,554	)	$	30,337
	Weighted average shares outstanding			27,805			27,894			27,901			27,961
	Net (loss) income per basic share		$	(0.13	)	$	(0.14	)	$	(0.09	)	$	1.08
Diluted
	Net (loss) income		$	(3,704	)	$	(3,812	)	$	(2,554	)	$	30,337
	Weighted average shares outstanding			27,805			27,894			27,901			27,961
	Potential common shares - treasury method(1)			--			--			--			1,331
	Weighted average shares and potential dilutive common    shares			27,805			27,894			27,901			29,292
		Net (loss) income per diluted share	$	(0.13	)	$	(0.14	)	$	(0.09	)	$	1.04
(1)   For the three months ended March 31, 2009 and 2008, 647,554 shares and 1,057,676 shares, respectively, of potentially dilutive Common Stock were not included in the diluted net loss per share calculation because to do so would have been anti-dilutive. For the nine months ended March 31, 2009, 690,478 shares of potentially dilutive Common Stock were not included in the diluted net loss per share calculation because to do so would have been anti-dilutive.

          The following table shows the number of shares subject to option awards that were outstanding for the three and nine months ended March 31, 2009 and 2008 that were not included in the diluted net (loss) income per share calculation because to do so would have been anti-dilutive:

	Three Months Ended				Nine Months Ended
	March 31, 2009		March 31, 2008		March 31, 2009		March 31, 2008
Number of shares		3,426,360		3,233,677		2,605,495		796,351

NOTE 4.    RESTRUCTURING CHARGES

          In fiscal 2007, the Company commenced a comprehensive review of its global business processes to re-engineer its extended supply chain, logistics and transaction processing systems. In May 2008, the Company announced a decision to accelerate the re-engineering of its extended supply chain functions as well as the realignment of other parts of its organization to better support its new business processes. This initiative includes a migration to a shared services model to simplify transaction processing by consolidating the Company's global transaction processing functions and the implementation of a new financial accounting and order processing system. The Company refers to this initiative as the Global Efficiency Re-engineering initiative (the "Initiative").

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

          As a result, the Company has implemented a plan that will result in restructuring and one-time expenses, including severance, relocation, recruiting and temporary staffing expenditures totaling approximately $12 million to $14 million through June 30, 2010. The following table summarizes the restructuring costs related to the Initiative:

(Amounts in thousands)	Three Months Ended March 31, 2009		Nine Months Ended March 31, 2009		Cumulative Since Inception
Restructuring expenses under the Initiative	$	1,093	$	2,292	$	2,965

          Unrelated to the Initiative, for the three months ended March 31, 2009 and 2008, the Company incurred approximately $0.1 million and $1.1 million, respectively, of other restructuring expenses related to the reorganization of certain of its departments. For the nine months ended March 31, 2009 and 2008, the Company incurred approximately $1.0 million and $2.1 million, respectively, of other restructuring expenses unrelated to the Initiative.

          Aggregate amounts paid during the three and nine months ended March 31, 2009 for restructuring were $1.4 million and $3.1 million, respectively.  All of the restructuring expenses discussed above are included in selling, general and administrative expenses in the Company's consolidated statement of operations and, as described in Note 17, have not been attributed to any of the Company's reportable segments and are included in unallocated corporate expenses. At March 31, 2009 and June 30, 2008, the Company had a restructuring liability of $0.6 million and $0.4 million, respectively.

NOTE 5.    SHARE-BASED COMPENSATION

          At March 31, 2009, the Company had outstanding several share-based compensation plans. For the three and nine months ended March 31, 2009 and 2008, the compensation cost charged against income and the tax benefit related to the compensation cost charged against income are presented below:

	Three Months Ended					Nine Months Ended
(Amounts in thousands)	March 31, 2009			March 31, 2008		March 31, 2009			March 31, 2008
Share-based compensation cost	$	895	(1)	$	2,034	$	1,796	(1)(2)	$	5,746
Tax benefit related to share-based compensation cost	$	587		$	354	$	1,279		$	1,482
(1)   Reflects $0.5 million of share-based compensation previously recognized, that was reversed in the three months ended March 31, 2009, relating to August 2008 performance based restricted stock grants, whose vesting the Company has determined is not probable.
(2)   Reflects $2.0 million of share-based compensation cost previously recognized, that was reversed in the three months ended December 31, 2008, relating to August 2006 and August 2007 performance-based restricted stock grants, whose vesting the Company has determined is not probable.

          As of March 31, 2009, there were approximately $6.5 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 1.9years.

Stock Options

          On November 12, 2008, the date of the Company's most recent annual shareholders meeting, the Company granted stock options for an aggregate of 30,000 shares of Common Stock to five non-employee directors under the Company's 2004 Non-Employee Director Stock Option Plan. In addition, the Company's Board of Directors (the "Board") on that date granted 6,000 shares of Common Stock to an employee director under the Company's 2004 Stock Incentive Plan. All of the stock options granted on November 12, 2008, 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 $13.88 per share, which was the closing price of the Common Stock on the date of grant. The weighted-average grant-date fair value of the options granted was $4.99 per share based on the Black-Scholes option-pricing model. The options expire ten years from the date of gra nt.

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

          On August 18, 2008, the Board granted to employees stock options for 294,600 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, 2009, 2010 and 2011, 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 $18.88 per share, which was the closing price of the Common Stock on the effective date of grant. The weighted-average grant-date fair value of options granted was $7.10 per share based on the Black-Scholes option-pricing model as discussed below. The options expire ten years from the date of grant.

          The weighted-average grant date fair value of options granted during the nine months ended March 31, 2009 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.

	Nine Months Ended March 31, 2009
Expected dividend yield		0.00	%
Expected price volatility		37.4	%
Risk-free interest rate		2.37-3.17	%
Expected life of options in years		5

          A summary of stock option activity under the Company's share-based compensation plans for the nine months ended March 31, 2009 is presented below:

Options	Common Stock Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (1)
Outstanding at June 30, 2008	3,191,393		$	16.59	5.2
New grants	330,600		$	18.34
Exercised	(39,716	)	$	12.85
Forfeited or expired	(55,917	)	$	22.32
Outstanding at March 31, 2009	3,426,360		$	16.73	4.8	$	--
Exercisable at March 31, 2009	2,708,882		$	15.91	3.8	$	--
(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. At March 31, 2009, all outstanding and exercisable stock options had an aggregate intrinsic value of zero as the option exercise prices were greater than the average market price of the Common Stock.

          The total intrinsic value of stock options exercised during the nine months ended March 31, 2009 and 2008, based upon the average market price during the period, was approximately $0.2 million and $1.7 million, respectively.

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

Restricted Common Stock

          On August 18, 2008, the Board granted to employees 117,800 shares of performance-based restricted stock and 121,133 shares of service-based restricted stock. All or part of the performance-based restricted stock will vest on a date that is two business days after the Company's financial results for fiscal 2011 are released to the public, but only if (i) the person receiving the grant is still employed by the Company, and (ii) the Company achieves a cumulative earnings per diluted share target. During the three months ended March 31, 2009, the Company determined that it was not probable that the August 2008 grant of performance-based restricted stock would vest. As a result, in the three months ended March 31, 2009 the Company reversed $0.5 million of compensation expense recognized during the six months ended December 31, 2008 with respect to the August 2008 grant of performance based restricted stock. The service-based restri cted stock granted in August 2008 will vest in equal thirds over a three-year period on a date that is two business days after the Company's financial results for each of the fiscal years ending June 30, 2009, 2010 and 2011, 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 price of the Common Stock on the date of grant. The restricted stock is recorded as additional paid-in capital in shareholders' equity as amortization occurs over the three-year vesting period.

          A summary of the Company's restricted stock activity for the nine months ended March 31, 2009, is presented below:

Restricted Stock	Common Stock Shares		Weighted Average Grant-Date Fair Value
Non-vested at June 30, 2008	866,068		$	19.34
Granted	238,933		$	18.88
Vested	(66,691	)	$	18.25
Forfeited	(148,492	)	$	22.75
Non-vested at March 31, 2009	889,818		$	18.79

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 15.0% discount from the lower of the closing price of the Common Stock at either the start of the contribution period or the end of the contribution period. The Company expenses the discount taken and the fair value of the "look-back" feature realized by employees upon purchases of Common Stock under the ESPP. For each of the three months ended March 31, 2009 and 2008, the Company recorded costs associated with the ESPP of approximately $0.1 million. For the nine months ended March 31, 2009 and 2008, the Company recorded costs associated with the ESPP of approximately $0.3 million and $0.2 million, respectively. The next purchase under the ESPP will be consummated on May 29, 2009.

NOTE 6.    INCOME TAXES

          The Company's effective tax rate, which is calculated as a percentage of the loss before income taxes, for the three months ended March 31, 2009, was 65.6 % compared to 17.4% for the three months ended March 31, 2008. The effective tax rate, which is calculated as a percentage of the loss before income taxes for the nine months ended March 31, 2009, was 71.2 % compared to 25.8% for the nine months ended March 31, 2008. The increase in the effective tax rates were mainly due to increased losses before income taxes in the Company's U.S. operations in the current periods, which are tax-effected at a higher rate, as well as tax adjustments recorded on a discrete basis. These discrete items include a benefit for cumulative prior year foreign tax credits and research and development tax credits generated pursuant to the 2008 Extenders Act in the U.S. and a benefit for the deduction of a transaction loss in a foreign jurisdiction, par tially offset by U.S. and foreign taxes on the repatriation of undistributed earnings from an international subsidiary.

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

NOTE 7.    NEW ACCOUNTING STANDARDS

Interim Disclosures About Fair Value of Financial Instruments

          In April 2009, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position No. 107-1 and APB 28-1 ("FSP 107-1 and 28-1"), amending the disclosure requirements in FASB Statement of Financial Accounting Standards No. 107 and Opinion 28. FSP 107-1 and 28-1 require disclosures about the fair value of financial instruments for interim reporting periods. FSP 107-1 and 28-1 will be effective for the Company in its fiscal quarter beginning April 1, 2009. The Company is evaluating the impact of FSP 107-1 and 28-1 on its consolidated financial statements.

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

          In June 2008, the FASB issued FSP Emerging Issues Task Force ("EITF') 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP EITF 03-6-1").  FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, "Earnings per Share." Under the guidance in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 will be effective for the Company in its fiscal quarter beginning July 1, 2009. The Company is eval uating the impact of FSP EITF 03-6-1 on its consolidated financial statements.

Hierarchy of Generally Accepted Accounting Principles

          In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162,The Hierarchy of Generally Accepted Accounting Principles ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS 162 was effective for the Company on November 17, 2008. The adoption of SFAS 162 did not have a material impact on the Company's financial statements.

Disclosures About Derivative Instruments and Hedging Activities

         In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161,Disclosures About Derivative Instruments and Hedging Activities ("SFAS 161"). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 was effective for the Company on January 1, 2009. The adoption of SFAS 161 did not have a material impact on the Company's financial statements. See Note 15.

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 the Company on July 1, 2009. The Company is 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. In February 2008, the FASB issued FASB Staff Position 157-2 which delayed the effective date of SFAS 157 for those non-financial assets and non-financial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis until fiscal years beginning after November 15, 2008. With respect to financial assets and liabilities, SFAS 157 became effective for the Company on July 1, 2008. For non-financial assets and liabilities, SFAS 157 will be effective for the Company on July 1, 2009. The adoption of SFAS 157 with respect to financial assets and liabilities did not hav e a material impact on the Company's consolidated financial statements. See Note 14. The Company is evaluating the impact on the Company's consolidated financial statements of the application of SFAS 157 with respect to non-financial assets and liabilities.

Useful Life of Intangible Assets

          In April 2008, the FASB issued FASB Staff Position No. 142-3,Determination of the Useful Life of Intangible Assets ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets. FSP 142-3 is effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008. Early adoption is prohibited. The Company is evaluating the impact, if any, of FSP 142-3 on its consolidated financial statements.

NOTE 8.    INVENTORIES

          The components of inventory were as follows:

(Amounts in thousands)	March 31, 2009		June 30, 2008
Raw materials	$	76,725	$	94,500
Work in progress	26,030		40,195
Finished goods	258,218		273,868
Total	$	360,973	$	408,563

NOTE 9.    EXCLUSIVE BRAND LICENSES, TRADEMARKS AND INTANGIBLES, NET

          The following summarizes the cost basis amortization and weighted average estimated life associated with the Company's intangible assets:

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

(Amounts in thousands)		March 31, 2009			June 30, 2008			June 30, 2008 Weighted Average Estimated Life
Elizabeth Arden brand trademarks		$	122,415		$	122,415			Indefinite
Exclusive brand licenses and related trademarks			90,309			87,358			17
Exclusive brand trademarks			43,049			42,668			9
Other intangibles(1)			20,330			20,489			11
Goodwill(2)			21,054			20,721			Indefinite
Exclusive brand licenses, trademarks and intangibles, gross			297,157			293,651
Accumulated amortization:
Exclusive brand licenses and related trademarks			(38,299	)		(33,967	)
Exclusive brand trademarks			(36,058	)		(34,457	)
Other intangibles			(5,112	)		(3,974	)
Exclusive brand license, trademarks and intangibles, net		$	217,688		$	221,253
(1)	Primarily consists of customer relationships, customer lists and non-compete agreements.
(2)	The $0.3 million increase from the year ended June 30, 2008 to March 31, 2009 is due to the satisfaction of the condition for the payment of the $0.3 million final installment of the contingent consideration relating to the acquisition of certain assets comprising the fragrance business of Sovereign Sales, LLC. The entire amount of the goodwill relates to the North America Fragrance segment.

          The Company has determined that the Elizabeth Arden trademarks have indefinite useful lives as cash flows from the use of the trademarks are expected to be generated indefinitely.

          In accordance with Statement of Financial Accounting Standards No.142,Goodwill and Other Intangible Assets (SFAS 142), goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually. An annual impairment test is performed during the Company's fourth fiscal quarter or more frequently if events or changes in circumstances indicate the carrying value of goodwill may not fully be recoverable. There is a two step process for impairment testing of goodwill. The first step, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. The second step, if necessary, measures the amount of the impairment. Owned trademarks that have been determined to have indefinite lives are not subject to amortization but are reviewed at least annually for potential impairment in accordance with SFAS 142. The fair va lues are estimated and compared to their carrying values.

          Since March 31, 2009, the Company completed its annual impairment testing of the Elizabeth Arden brand trademarks and goodwill. The analysis and assessments of these intangible assets indicated that no impairment adjustment was required as the estimated fair value of these intangible assets significantly exceeded the recorded carrying value.

          Due to the ongoing uncertainty in capital market conditions, which may continue to negatively impact the Company's market value, the Company will continue to monitor and evaluate the expected future cash flows of its reporting units and the long-term trends of its market capitalization for the purposes of assessing the carrying value of its goodwill and indefinite-lived Elizabeth Arden trademarks, other trademarks and intangible assets. If market and economic conditions deteriorate further, this could increase the likelihood of future material non-cash impairment charges to the Company's results of operations related to the Company's goodwill, indefinite-lived Elizabeth Arden trademarks, other trademarks and intangible assets.

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

NOTE 10.    SHORT-TERM DEBT

          The Company has a revolving bank credit facility (the "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. In order to accommodate increased working capital requirements associated with the growth of the Company's business, on July 21, 2008, the Credit Facility was amended to increase its size from $250 million to $325 million, with a $25 million sub-limit for letters of credit. Under the terms of the Credit Facility, as amended by the July 2008 amendment, the Company may, at any time, increase the size of the Credit Facility up to $375 million without entering into a formal amendment requiring the consent of all of the banks, subject to the Company's satisfaction of certain conditions. 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. Borrowings under the Credit Facility are limited to 85.0% of eligible accounts receivable and 85.0% of the appraised net liquidation value of the Company's inventory, as determined pursuant to the terms of the Credit Facility; provided, however, that pursuant to the terms of the July 2008 amendment, from August 15 to October 31 of each year the borrowing base is temporarily increased by $25 million. The Company's obligations under the Credit Facility rank senior to the Company's 7 3/4% Senior Subordinated Notes due 2014 (the "7 3/4% Senior Subordinated Notes").

          The Credit Facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if average borrowing base capacity declines to less than $25 million ($35 million from December 1 through May 31). Under the terms of the Credit Facility, the Company may pay dividends or repurchase Common Stock if the Company maintains borrowing base capacity of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31, after making the applicable payment. The Credit Facility restricts the Company from incurring additional non-trade indebtedness (other than refinancings and certain small amounts of indebtedness). The Company was in compliance with all applicable covenants under the Credit Facility during the nine months ended March 31, 2009.

          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, except that the Applicable Margin on the first $25.0 million of borrowings from August 15 to October 31 of each year, while the temporary increase in the Company's borrowing base is in effect, is 1.00% higher. At March 31, 2009, the Applicable Margin was 1.50% 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 nine months ended March 31, 20 09 and 2008, the weighted average annual interest rate on borrowings under the Credit Facility was 2.6% and 3.6%, respectively.

          At March 31, 2009, the Company had $128.2 million in outstanding borrowings and approximately $4.2 million in letters of credit outstanding under the Credit Facility, compared with $119 million in outstanding borrowings and approximately $5 million in letters of credit under the Credit Facility at June 30, 2008. At March 31, 2009, the Company had approximately $187.3 million of eligible accounts receivable and inventories available as collateral under the Credit Facility's borrowing base certificate in effect for that date, and the remaining borrowing availability was $54.9 million. The borrowing availability under the Credit Facility typically declines in the second half of the Company's fiscal year as the Company's higher accounts receivable balances resulting from holiday season sales are likely to decline due to cash collections. The Company classifies the Credit Facility as short-term debt on its balance sheet because it e xpects to reduce outstanding borrowings over the next twelve months.

          Based upon the Company's internal projections, it believes that existing cash and cash equivalents, internally generated funds and borrowings under the 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 the Company's operations through acquisitions of additional brands, new product launches or distribution arrangements. A further deterioration in the economic and retail environment, however, could cause the Company to fail to satisfy the financial maintenance covenant under the Credit Facility that applies only in the event that the Company does not have the requisite average borrowing base capacity as set forth under the Credit Facility. In such an event, the Company would not be allowed to borrow under the Credit Facility. In addition, a default u nder the Credit Facility that causes acceleration of the debt under this facility could trigger a default under its outstanding 7 3/4% Senior Subordinated Notes. In the event the Company is not able to borrow under the Credit Facility, the Company would be required to develop an alternative source of liquidity. There is no assurance that the Company could obtain replacement financing or what the terms of such financing, if available, would be.

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

NOTE 11.    LONG-TERM DEBT

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

(Amounts in thousands)	March 31, 2009			June 30, 2008
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		(1,707	)		(1,919	)
Riviera Term Note		503			1,876
Total debt		223,796			224,957
Less: Current portion of long-term debt		503			1,261
Total long-term debt	$	223,293		$	223,696

          At March 31, 2009, the Company estimates that the $225.0 million of outstanding 7 3/4% Senior Subordinated Notes had a fair value of approximately $165.4 million. The Company believes that this decrease in fair value from the carrying amounts is primarily due to the current state of the credit markets for similar debt instruments. The Company determined the estimated fair value amounts at March 31, 2009 by using available market information and commonly accepted valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value, primarily due to the illiquid nature of the capital markets in which the 7 3/4% Senior Subordinated Notes are traded. Accordingly, the fair value estimates presented herein are not necessarily indicative of the amount that the Company or the debt holders could realize in a current market exchange. The use of different assumptions and/or e stimation methodologies may have a material effect on the estimated fair value.

NOTE 12.    COMMITMENTS AND CONTINGENCIES

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

          In connection with the June 2006 acquisition by the Company of certain assets of Riviera Concepts Inc. (the "Riviera Acquisition"), the Company recorded a contingent performance liability in the amount of $8.6 million. This contingent performance liability does not bear interest, is recorded in "other payables, and accrued expenses" 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 over the three-year period after the closing date on the licensed brands acquired in the Riviera Acquisition. 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 targets for the first and second installment due on July 31, 2007 and July 31, 2008, respectively, were not achieved. The contingent performance liability was recorded as a result of the negative goodwill resulting from this acquisition. If the final cumulative net sales targets are not achieved, this will result in a reversal of the $8.6 million of contingent performance liability and a corresponding reduction of the carrying value of exclusive brand licenses, trademarks and intangibles, net, on the Company's Consolidated Balance Sheet.

          In connection with the August 2006 acquisition of certain assets comprising the fragrance business of Sovereign Sales LLC ("Sovereign"), $12 million of the purchase price was in the form of contingent consideration, the majority of which was to be paid in two installments over two years from the date of closing if certain financial targets and other conditions are satisfied. The conditions for the first and second installments were satisfied, and the Company recognized a liability of $6.3 million and $5.3 million in the consolidated balance sheets at June 30, 2007 and June 30, 2008, respectively. The first installment was paid in September 2007, and the second installment was paid in July 2008. The financial target for the final installment of $0.3 million has also been satisfied, and it is scheduled to be paid in September 2009.

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

NOTE 13.    REPURCHASE OF COMMON STOCK

          On November 5, 2008, the Board authorized the Company to extend its existing $80 million Common Stock repurchase program through November 30, 2010. As of March 31, 2009, the Company had repurchased 2,526,238 shares of Common Stock on the open market under the stock repurchase program, at an average price of $16.98per share, at a cost of $42.9 million, including sales commissions, leaving $37.1 million available for additional Common Stock repurchases under the program. During the three and nine months ended March 31, 2009, the Company repurchased 240,000 and 253,300, shares of Common Stock, respectively, on the open market under the stock repurchase program at an average price of $5.92 and $6.18 per share, respectively, and at a cost of $1.4 million and $1.6 million, respectively, including sales commissions. The Company accounted for the acquisition of these shares under the treasury method.

NOTE 14.    FAIR VALUE MEASUREMENTS

          The Company adopted SFAS 157 as of July 1, 2008, with the exception of the application of the statement to its long-lived non-financial assets, including goodwill and intangibles. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. SFAS 157 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used in measuring fair value into three broad levels as follows:

Level 1 -	Quoted prices in active markets for identical assets or liabilities
Level 2 -	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly
Level 3 -	Unobservable inputs based on the Company's own assumptions

          The Company's derivative assets and liabilities are currently comprised of foreign currency contracts. Fair values are based on market prices or determined using valuation models that use as their basis readily observable market data that is actively quoted and can be validated through external sources, including independent pricing services, brokers and market transactions.

          The following table presents the fair value hierarchy for those of the Company's financial assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2009:

(Amounts in thousands)
Assets	Level 1		Level 2		Level 3		Total
Foreign currency contracts	$	--	$	3,503	$	--	$	3,503

          As of June 30, 2008 the Company's foreign currency contracts were measured at fair value under Level 2 as a liability of $10.5 million. See Note 15 for a discussion of the Company's foreign currency contracts.

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

NOTE 15.    DERIVATIVE FINANCIAL INSTRUMENTS

          The Company operates in several foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company's risk management policy is to hedge a significant portion of its forecasted net sales to reduce the exposure of the Company's foreign subsidiaries' revenues to fluctuations in currency rates using foreign currency forward contracts. The Company also hedges a significant portion of its forecasted inventory purchases to reduce the exposure of its Canadian subsidiary's cost of sales to such fluctuations. Additionally, when appropriate, the Company enters into and settles foreign currency contracts to reduce the exposure of the Company's foreign subsidiaries' net balance sheets to fluctuations in currency rates. The principal currencies hedged are British pounds, Euros and Canadian dollars. The Company does not enter into derivative financial contracts for speculative or trading purposes. The Company's derivative financial instruments are recorded in the Consolidated Balance Sheets at fair value determined using pricing models using market prices or determined using valuation models that use as their basis readily observable market data that is actively quoted and can be validated through external sources, including independent pricing services, brokers and market transactions. Cash flows from derivative financial instruments are classified as cash flows from operating activities in the Consolidated Statements of Cash Flows.

          Forward contracts used to hedge forecasted revenues are designated as cash flow hedges. These contracts are used to hedge forecasted subsidiary revenues generally over approximately 12 to 18 months. In accordance with Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), changes to fair value of the forward contracts are recorded as a component of accumulated other comprehensive income within stockholders' equity, to the extent such contracts are effective, and are recognized in net sales in the period the contracts expire. Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately. There were no amounts recorded in fiscal 2009, 2008, or 2007 relating to foreign currency contracts used to hedge forecasted revenues resulting from hedge ineffectiveness. As of March 31, 2009, the Company had notional amounts of 15. 0 million Euro and 4.6 million British pounds under foreign currency contracts used to hedge forecasted revenues that expire between April 30, 2009 and June 30, 2009.

          Forward contracts used to hedge forecasted cost of sales are designated as cash flow hedges. These contracts are used to hedge forecasted Canadian subsidiary cost of sales generally over approximately 12 to 18 months. Changes to fair value of the forward contracts are recorded as a component of accumulated other comprehensive income within stockholders' equity, to the extent such contracts are effective, and are recognized in cost of sales in the period the contracts expire. Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately. There were no amounts recorded in fiscal 2009, 2008, or 2007 relating to foreign currency contracts used to hedge forecasted cost of sales resulting from hedge ineffectiveness. As of March 31, 2009, the Company had notional amounts of 1.4 million Canadian dollars under foreign currency contracts used to hedge forecasted cost of sales that expire bet ween April 30, 2009 and June 30, 2009.

          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. Forward contracts used to hedge subsidiaries' net balance sheets are designated as cash flow hedges. These contracts are used to hedge balance sheet exposure generally over one month and are settled before the end of the month in which they are entered into. Changes to fair value of the forward contracts are recognized in selling, general and administrative expense in the period in which the contracts expire. As of March 31, 2009, there were no such foreign currency contracts outstanding. There were no amounts recorded in fiscal 2009, 2008, or 2007 relating to foreign currency contracts to hedge subsidiary balance sheets resulting from hedge ineffectiveness.

	Fair Value of Derivative Instruments
(Amounts in thousands)	Asset Derivatives As of March 31, 2009			Liability Derivatives As of March 31, 2009
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as effective hedges
Foreign Exchange Contracts	Other assets	$	3,503		--
Total		$	3,503		--

- 18 -

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

          The following illustrates the fair value of outstanding foreign currency contracts and the gains (losses), net of taxes, associated with the settlement of these contracts:

(Amounts in thousands)		Amount of Gain (Loss) in OCI on Derivative, Net of Tax (Effective Portion) As of March 31, 2009	Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) For the Three Months Ended March 31, 2009		Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) For the Nine Months Ended March 31, 2009
Derivatives designated as effective hedges
Currency Contracts - Sales	$	3,642	Net Sales	$	3,804	$	9,543
Currency Contracts - Cost of Sales		120	Cost of Sales		260		709
Currency Contracts - Net balance sheet		--	SG&A		299		3,243
Totals	$	3,762		$	4,363	$	13,495

NOTE 16.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION

          The following condensed financial statements as of March 31, 2009 and June 30, 2008, and for the three and nine months ended March 31, 2009 and 2008, 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 guarantees are joint and several, full and unconditional. All information presented is in thousands.

[Remainder of Page Intentionally Left Blank]

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

Balance Sheet			As of March 31, 2009
			Company			Non-Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets
	Cash and cash equivalents		$	1,403		$	15,771		$	81		$	--		$	17,255
	Accounts receivable, net			117,297			87,830			--			--			205,127
	Inventories			251,716			109,257			--			--			360,973
	Intercompany receivable			62,323			8,179			281,788			(352,290	)		--
	Deferred income taxes			15,134			2,719			--			--			17,853
	Prepaid expenses and other assets			14,390			18,988			309			--			33,687
		Total current assets		462,263			242,744			282,178			(352,290	)		634,895
Property and equipment, net				38,856			18,563			--			--			57,419
Other Assets:
Investment in subsidiaries				305,327			--			9,136			(314,463	)		--
Exclusive brand licenses, trademarks and intangibles, net				59,494			6,815			151,379			--			217,688
Debt financing costs, net				4,995			--			--			--			4,995
Total other assets				23,383			124			11			(22,899	)		619
		Total assets	$	894,318		$	268,246		$	442,704		$	(689,652	)	$	915,616
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Short-term debt		$	128,200		$	--		$	--		$	--		$	128,200
	Accounts payable - trade			109,877			16,733			--			--			126,610
	Intercompany payable			38,214			91,519			254,603			(384,336	)		--
	Other payables and accrued expenses			50,618			35,789			--			11			86,418
	Current portion of long-term debt			503			--			--			--			503
		Total current liabilities		327,412			144,041			254,603			(384,325	)		341,731
	Long-term debt, net			223,293			--			--			--			223,293
	Deferred income taxes and other liabilities			6,224			6,990			(11	)		--			13,203
		Total liabilities		556,929			151,031			254,592			(384,325	)		578,227
Shareholders' Equity
	Common stock			314			--			--			--			314
	Additional paid-in capital			283,948			9,136			197,411			(206,547	)		283,948
	Retained earnings (accumulated deficit)			103,022			110,518			(9,299	)		(101,219	)		103,022
	Treasury stock			(47,334	)		--			--			--			(47,334	)
	Accumulated other comprehensive loss			(2,561	)		(2,439	)		--			2,439			(2,561	)
		Total shareholders' equity		337,389			117,215			188,112			(305,327	)		337,389
		Total liabilities and shareholders' equity	$	894,318		$	268,246		$	442,704		$	(689,652	)	$	915,616

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

Balance Sheet					As of June 30, 2008
						Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations			Total
ASSETS
Current Assets:
	Cash and cash equivalents					$	3,487		$	22,801		$	108		$	--		$	26,396
	Accounts receivable, net						121,489			95,957			--			--			217,446
	Inventories						310,912			97,651			--			--			408,563
	Intercompany receivable						52,555			203,515			274,285			(530,355	)		--
	Deferred income taxes						15,186			(401	)		--			--			14,785
	Prepaid expenses and other assets						9,436			15,032			--			139			24,607
			Total current assets				513,065			434,555			274,393			(530,216	)		691,797
Property and equipment, net							34,269			17,879			--			--			52,148
Other Assets:
		Investment in subsidiaries					295,404			--			9,136			(304,540	)		--
		Exclusive brand licenses, trademarks and intangibles, net					60,517			7,464			153,272			--			221,253
		Debt financing costs, net					4,952			--			--			--			4,952
		Other					12,235			(11,385	)		11			(277	)		584
				Total other assets			373,108			(3,921	)		162,419			(304,817	)		226,789
				Total assets		$	920,442		$	448,513		$	436,812		$	(835,033	)	$	970,734
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
		Short-term debt				$	119,000		$	--		$	--		$	--		$	119,000
		Accounts payable - trade					147,971			22,469			--			--			170,440
		Intercompany payable					35,288			263,445			240,573			(539,306	)		--
		Other payables and accrued expenses					46,480			47,770			81			30			94,361
		Current portion of long-term debt					1,261			--			--			--			1,261
				Total current liabilities			350,000			333,684			240,654			(539,276	)		385,062
		Long-term debt					223,696			--			--			--			223,696
		Deferred income taxes and other liabilities					10,145			4,505			11,078			(353	)		25,375
				Total liabilities			583,841			338,189			251,732			(539,629	)		634,133
Shareholders' Equity
		Common stock					312			--			--			--			312
		Additional paid-in capital					280,973			9,136			197,411			(206,547	)		280,973
		Retained earnings (accumulated deficit)					105,576			105,166			(12,331	)		(92,835	)		105,576
		Treasury stock					(45,768	)		--			--			--			(45,768	)
		Accumulated other comprehensive loss					(4,492	)		(3,978	)		--			3,978			(4,492	)
				Total shareholders' equity			336,601			110,324			185,080			(295,404	)		336,601
				Total liabilities and shareholders' equity		$	920,442		$	448,513		$	436,812		$	(835,033	)	$	970,734

- 21 -

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

Statement of Operations			Three Months Ended March 31, 2009
				Company				Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors				Eliminations							Total
Net sales				$	117,498			$	85,973		$	2,523			$			(2,523		)		$		203,471
Cost of sales					73,833				41,963			--						--						115,796
Gross profit					43,665				44,010			2,523						(2,523		)				87,675
Selling, general and administrative costs					44,967				44,342			(388		)				(2,523		)				86,398
Depreciation and amortization					3,757				1,882			753						--						6,392
(Loss) income from operations					(5,059		)		(2,214	)		2,158						--						(5,115		)
Other expense (income):
	Interest expense (income)				5,638				199			(194		)				--						5,643
	Other				(1,133		)		546			564						23						--
(Loss) income before income taxes					(9,564		)		(2,959	)		1,788						(23		)				(10,758		)
(Benefit from) provision for income taxes					(5,860		)		(1,840	)		646						--						(7,054		)
Net (loss) income				$	(3,704		)	$	(1,119	)	$	1,142			$			(23		)		$		(3,704		)
Statement of Operations			Nine Months Ended March 31, 2009
				Company				Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors					Eliminations					Total
Net sales				$		534,510		$	323,153		$	9,870				$	(9,870		)		$		857,663
Cost of sales						349,195			162,767			--					--						511,962
Gross profit						185,315			160,386			9,870					(9,870		)				345,701
Selling, general and administrative costs						182,214			144,804			(1,025	)				(9,870		)				316,123
Depreciation and amortization						11,410			5,535			2,260					--						19,205
(Loss) income from operations						(8,309	)		10,047			8,635					--						10,373
Other expense (income):
		Interest expense (income)				19,216			827			(799	)				--						19,244
		Other				(15,641	)		700			3,121					11,820						--
(Loss) income before income taxes						(11,884	)		8,520			6,313					(11,820		)				(8,871		)
(Benefit from) provision for income taxes						(9,330	)		731			2,282					--						(6,317		)
Net (loss) income				$		(2,554	)	$	7,789		$	4,031				$	(11,820		)		$		(2,554		)

- 22 -

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

Statement of Operations		Three Months Ended March 31, 2008
			Company				Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors				Eliminations			Total
Net sales			$	113,567			$	96,987		$		2,852		$	(2,852	)	$	210,554
Cost of sales				74,782				45,018				--			--			119,800
Gross profit				38,785				51,969				2,852			(2,852	)		90,754
Selling, general and administrative costs				37,365				48,817				(326	)		(2,852	)		83,004
Depreciation and amortization				3,725				1,832				741			--			6,298
(Loss) income from operations				(2,305	)			1,320				2,437			--			1,452
Other expense (income):
	Interest expense (income)			6,092				387				(412	)		--			6,067
	Other			(2,552	)			489				640			1,423			--
(Loss) income before income taxes				(5,845	)			444				2,209			(1,423	)		(4,615	)
(Benefit from) provision for income taxes				(2,033	)			431				799			--			(803	)
Net (loss) income			$	(3,812	)		$	13		$		1,410		$	(1,423	)	$	(3,812	)
Statement of Operations		Nine Months Ended March 31, 2008
			Company			Non- Guarantors				7 3/4% Senior Subordinated Notes Guarantors				Eliminations			Total
Net sales			$	550,551		$			354,235	$	11,715			$	(11,715	)	$	904,786
Cost of sales				370,075					158,717		--				--			528,792
Gross profit				180,476					195,518		11,715				(11,715	)		375,994
Selling, general and administrative costs				154,905					152,623		(976		)		(11,715	)		294,837
Depreciation and amortization				10,855					5,385		2,221				--			18,461
Income from operations				14,716					37,510		10,470				--			62,696
Other expense (income):
	Interest expense (income)			21,810					1,248		(1,237		)		--			21,821
	Other			(37,880	)				262		3,934				33,684			--
Income before income taxes				30,786					36,000		7,773				(33,684	)		40,875
Provision for income taxes				449					7,279		2,810				--			10,538
Net income			$	30,337		$			28,721	$	4,963			$	(33,684	)	$	30,337

- 23 -

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

Statement of Cash Flows			Nine Months Ended March 31, 2009
			Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors				Eliminations						Total
Operating activities:
Net cash provided by (used in) operating activities			$	15,347		$	(12,387	)	$	6,816			$		2,071				$		11,847
Investing activities:
	Additions to property and equipment			(11,807	)		(6,932	)		--					--						(18,739	)
	Acquisition of other assets			(5,333	)		--			--					--						(5,333	)
Net cash used in investing activities				(17,140	)		(6,932	)		--					--						(24,072	)
Financing activities:
	Proceeds from short-term debt			9,200			--			--					--						9,200
	Payments on long-term debt			(1,149	)		--			--					--						(1,149	)
	Payments under capital lease obligations			(1,629	)		--			--					--						(1,629	)
	Proceeds from the exercise of stock options			510			--			--					--						510
	Financing fees			(863	)		--			--					--						(863	)
	Proceeds from the issuance of common stock under the    employee stock purchase plan			671			--			--					--						671
	Repurchase of common stock			(1,566	)		--			--					--						(1,566	)
	Net change in intercompany obligations			(3,375	)		12,289			(6,843	)				(2,071		)				--
Net cash provided by (used in) financing activities				1,799			12,289			(6,843	)				(2,071		)				5,174
Effect of exchange rate changes on cash and cash equivalents				(2,090	)		--			--					--						(2,090	)
Net decrease in cash and cash equivalents				(2,084	)		(7,030	)		(27	)				--						(9,141	)
Cash and cash equivalents at beginning of period				3,487			22,801			108					--						26,396
Cash and cash equivalents at end of period			$	1,403		$	15,771		$	81			$		--				$		17,255
Statement of Cash Flows			Nine Months Ended March 31, 2008
			Company			Non- Guarantors			7 3/4% Senior Subordinated Notes Guarantors			Eliminations						Total
Operating activities:
Net cash (used in) provided by operating activities			$	(2,058	)	$	19,562		$	9,359		$		(1,002		)		$		25,861
Investing activities:
		Additions to property and equipment		(12,370	)		(3,136	)		--				--						(15,506		)
		Acquisition of licenses and other assets		(6,433	)		--			--				--						(6,433		)
Net cash used in investing activities				(18,803	)		(3,136	)		--				--						(21,939		)
Financing activities:
		Proceeds from short-term debt		160			--			--				--						160
		Payments on long-term debt		(1,227	)		--			--				--						(1,227		)
		Proceeds from the exercise of stock options		2,378			--			--				--						2,378
		Proceeds from the issuance of common stock under the    employee stock purchase plan		837			--			--				--						837
		Repurchase of common stock		(7,439	)		--			--				--						(7,439		)
		Net change in intercompany obligations		20,786			(12,429	)		(9,359	)			1,002						--
Net cash provided by (used in) financing activities				15,495			(12,429	)		(9,359	)			1,002						(5,291		)
Effect of exchange rate changes on cash and cash equivalents				(526	)															(526		)
Net (decrease) increase in cash and cash equivalents				(5,892	)		3,997			--				--						(1,895		)
Cash and cash equivalents at beginning of period				7,278			23,001			8				--						30,287
Cash and cash equivalents at end of period			$	1,386		$	26,998		$	8		$		--				$		28,392

- 24 -

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

NOTE 17.    SEGMENT DATA AND RELATED INFORMATION

          Reportable operating segments, as defined by Statement of Financial Accounting Standards No. 131,Disclosures about Segments of an Enterprise and Related Information, include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the "Chief Executive") in deciding how to allocate resources and in assessing performance. As a result of the similarities in the procurement, marketing and distribution processes for all of the Company's products, much of the information provided in the consolidated financial statements is similar to, or the same as, that reviewed on a regular basis by the Chief Executive.

          The Company's operations are organized into the following reportable segments:

— North America Fragrance -The North America Fragrance segment sells the Company's portfolio of owned, licensed and distributed fragrance brands to department stores, mass retailers and distributors in the United States, Canada and Puerto Rico. This segment also sells the Company's Elizabeth Arden products in prestige department stores in Canada and Puerto Rico and to other selected retailers.

— International -The International segment sells the Company's portfolio of owned and licensed brands, including the Elizabeth Arden products, in approximately 90 countries outside of North America through perfumeries, boutiques, department stores and travel retail outlets worldwide.

— Other-The Other reportable segment sells the Company's Elizabeth Arden products in prestige department stores in the United States and through the Red Door beauty salons, which are owned and operated by an unrelated third party.

          Prior to June 30, 2008, the Company reported its operations under one segment. Effective June 30, 2008, the Company changed its segment reporting and, accordingly, amounts shown for the three and nine months ended March 31, 2008, have been revised to conform to the current period presentation.

          The Chief Executive evaluates segment profit based upon income from operations, which represents earnings before income taxes, interest expense and depreciation and amortization charges. The accounting policies for each of the reportable segments are the same as those described in the Company's 2008 Annual Report under Note 1 -- "General Information and Summary of Significant Accounting Policies." The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information regarding assets and liabilities of the Company's reportable segments is produced for the Chief Executive or included herein.

          Segment profit excludes depreciation and amortization, interest expense and unallocated corporate expenses, which are shown in the table below reconciling segment profit to consolidated net (loss) income before income taxes. Included in unallocated corporate expenses are (i) adjustments to eliminate intercompany mark-up, (ii) employee incentive costs, (iii) restructuring charges, and (iv) costs related to the Initiative. Unallocated corporate expenses for the nine months ended March 31, 2009, also include $23.3 million of expenses related to the recent Liz Claiborne license agreement ($18.9 million of which did not require the use of cash in the current period), due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement and transition expenses. No such expenses related to the Liz Claiborne license agreement wer e incurred during the three months ended March 31, 2009. Restructuring charges, costs related to the Initiative and expenses related to the Liz Claiborne license agreement are recorded in unallocated corporate expenses as these decisions are centrally directed and controlled, and are not included in internal measures of segment operating performance. The Company does not have intersegment sales.

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

          The following table is a comparative summary of the Company's net sales and segment profit by reportable segment for the three and nine months ended March 31, 2009 and 2008:

(Amounts in thousands)	Three Months Ended						Nine Months Ended
	March 31, 2009			March 31, 2008			March 31, 2009			March 31, 2008
Segment Net Sales:
North America Fragrance	$	120,056		$	114,481		$	545,804		$	552,682
International		75,210			85,711			281,135			308,789
Other		8,205			10,362			30,724			43,315
Total	$	203,471		$	210,554		$	857,663		$	904,786
Segment Profit:
North America Fragrance	$	20,845		$	17,296		$	89,782		$	86,565
International		(4,549	)		(4,939	)		(2,829	)		22,562
Other		(5,576	)		(1,446	)		(10,614	)		(4,085	)
Total	$	10,720		$	10,911		$	76,339		$	105,042
Reconciliation:
Segment Profit	$	10,720		$	10,911		$	76,339		$	105,042
Less:
Depreciation and Amortization		6,392			6,298			19,205			18,461
Interest Expense, net		5,643			6,067			19,244			21,821
Unallocated Corporate Expenses		9,443			3,161			46,761	(1)		23,885
(Loss) Income Before Income Taxes	$	(10,758	)	$	(4,615	)	$	(8,871	)	$	40,875
(1)  In May 2008, we entered into an exclusive long-term global licensing agreement for the Liz Claiborne fragrance brands, which became effective on June 9, 2008. Amounts shown for the nine months ended March 31, 2009 reflect $23.3 million of expenses related to the Liz Claiborne license agreement ($18.9 million of which did not require the use of cash in the current period), due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement and transition expenses. No such expenses were incurred during the three months ended March 31, 2009.

- 26 -

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, 2008. 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 with an extensive portfolio of prestige fragrance, skin care and cosmetic brands. Our branded products include the Elizabeth Arden fragrances:Red Door, Elizabeth Arden 5th Avenue, Elizabeth Arden Provocative Woman, Elizabeth Arden green tea, Elizabeth Arden Mediterranean, andPretty Elizabeth Arden; the Elizabeth Arden skin care brands:Ceramide,Intervene andPREVAGE®; and the Elizabeth Arden branded lipstick, foundation and other color cosmetic products. Our prestige fragrance portfolio also includes the following celebrity, lifestyle and designer fragrances:

Celebrity Fragrances	Elizabeth Taylor'sWhite Diamonds andPassion,curiousBritney Spears, fantasyBritney Spears andBritney Spears believe,with Love...Hilary Duff,Danielle by Danielle Steel,M by Mariah Carey, andUsher
Lifestyle Fragrances	Curve, Giorgio Beverly Hills, Lucky, PS Fine Cologne for Men, Designand White Shoulders
Designer Fragrances	Juicy Couture, Badgley Mischka, Rocawear, Alberta Ferretti, Alfred Sung, Nannette Lepore, Geoffrey Beene, Halston, Bob Mackie,andGANT

          In addition to our owned and licensed fragrance brands, we distribute over 400 additional prestige fragrance brands, primarily in the United States, through distribution agreements and other purchasing arrangements.

          Our business strategy is to increase net sales, operating margins and earnings by (a) growing the sales of our existing brand portfolio, including the Elizabeth Arden brand, through new product innovation and targeting additional demographics and geographic markets, (b) acquiring prestige beauty brands through licensing opportunities and acquisitions, (c) expanding the prestige fragrance category at mass retail customers in the U.S., and (d) implementing initiatives to improve our cost structure and working capital efficiencies. We manage our business by evaluating net sales, EBITDA (as defined under Results of Operations -- Three Months Ended March 31, 2009 compared to Three Months Ended March 31, 2008), EBITDA margin (EBITDA divided by net sales), segment profit and working capital utilization (including monitoring our levels of inventory, accounts receivable and operating cash flow). We encounter a variety of challenges that m ay affect our business and that should be considered as described in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended June 30, 2008, in Part II, Item 1A, "Risk Factors" of this quarterly report, 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."

          Effective June 9, 2008, we became the exclusive, global licensee for the sale, manufacture, distribution and marketing of the Liz Claiborne fragrance brands under a long-term license agreement with Liz Claiborne, Inc. and certain of its affiliates. The Liz Claiborne fragrance portfolio consists of theJuicy Couture, Curveby Liz Claiborne,Lucky, Liz, Realities, Bora BoraandMambo fragrances. In connection with the Liz Claiborne license agreement we also assumed a license for theUsher celebrity fragrances. We anticipate that the Liz Claiborne license arrangement will, in the long term, allow us to (i) increase our market share in our North America Fragrance segment, particularly in department stores, (ii) gain efficiencies from a larger fragrance business, particularly by leveraging our supply chain, logistics and sales organizations, (iii) increase our gross margins by converting North America mass customer sales from distribution margins to owned/licensed margins, and (iv) provide additional sales volume for our International segment. The current challenging economic and retail environment has hindered our ability to fully realize these anticipated benefits.

- 27 -

          During the nine months ended March 31, 2009, we incurred transition expenses relating to the Liz Claiborne license agreement of $4.4 million. No transition expenses related to the Liz Claiborne license agreement were incurred during the three months ended March 31, 2009, and we do not expect to incur additional transition expenses related to this agreement. In addition, our gross margins for the first half of fiscal 2009 were impacted by expenses relating to Liz Claiborne inventory that we purchased at a higher cost prior to the effective date of the license agreement. During the nine months ended March 31, 2009, we recognized a charge related to this inventory of approximately $18.9 million, before taxes, which did not require the use of cash in the current period. This charge is in line with the estimate of $19.0 million disclosed in our quarterly report on Form 10-Q for the quarterly period ended September 30, 2008.

          In fiscal 2007, we commenced a comprehensive review of our global business processes to re-engineer our extended supply chain, logistics and transaction processing systems. We call this initiative our Global Efficiency Re-engineering initiative (the Initiative). In May 2008, we announced that we had decided to accelerate the re-engineering of our extended supply chain functions as well as the realignment of other parts of our organization to better support our new business processes.

          In connection with the Initiative, we are also migrating to an Oracle financial accounting and order processing system to improve key transaction processes and accommodate anticipated growth of our business. We expect this infrastructure investment to simplify our transaction processing by utilizing a common platform to centralize all of our global transaction processing functions.

          As a result of the acceleration of the re-engineering of our extended supply chain functions and the implementation of the Oracle financial accounting and order processing system, we continue to implement a restructuring plan that will result in restructuring and one-time expenses, including severance, relocation, recruiting and temporary staffing expenditures. We expect these expenses to be incurred primarily in fiscal years 2009 and 2010 and currently estimate that they will total $12.0 million to $14.0 million before taxes, of which $3.0million has been incurred to date and $1.1 million was incurred during the quarter ended March 31, 2009.

          Given the difficult economic and retail environment, our priorities for the remainder of the fiscal year ending June 30, 2009 are to (i) reduce inventory in order to maximize cash flow, (ii) focus our advertising and promotional expenditures on the brands, markets and channels of distribution that provide the best return and eliminate marginal spending, (iii) re-assess new product innovation, and (iv) accelerate the business process re-engineering initiatives related to the Initiative.

Seasonality

          Our operations have historically been seasonal, with higher sales generally occurring in 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, 2008, approximately 61.0% of our net sales were made during the first half of the fiscal year. Due to product innovation and new product launches, the size and timing of certain orders from our customers and additions or losses of brand distribution rights, 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 normally from July to October and peak receivable balances normally from September to December. Our working capital borrowings are also seasonal and are normally highest in the months of September, October and November. During the months of December, January, February of each year, cash is normally generated as customer payments on holiday season orders are received.

- 28 -

Critical Accounting Policies and Estimates

          As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008, 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. We base our estimates on historical experience and other factors that we believe are most likely to occur. Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known. Our most critical accounting policies relate to revenue recognition, provisions for inventory obsolescence, allowances for sales returns, markdowns and doubtful accounts, intangib le and long-lived assets, income taxes, hedging contracts and share-based compensation. Since June 30, 2008, other than the adoption of Statement of Financial Accounting Standards No.157,Fair Value, as described below, there have been no significant changes to the assumptions and estimates related to those critical accounting policies.

          In September 2006, the Financial Accounting Standards Board (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. In February 2008, the FASB issued FASB Staff Position 157-2 which delayed the effective date of SFAS 157 for those non-financial assets and non-financial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis until fiscal years beginning after November 15, 2008. With respect to financial assets and liabilities, SFAS 157 became effective for us on July 1, 2008. For non-financial assets and liabilities, SFAS 157 will be effective for us on July 1, 2009. The adoption of SFAS 157 with respect to financial assets and liab ilities did not have a material impact on our consolidated financial statements. See Note 14 to the Notes to Unaudited Consolidated Financial Statements. We are evaluating the impact on our consolidated financial statements of the application of SFAS 157 with respect to non-financial assets and liabilities.

          We have determined that the Elizabeth Arden trademarks have indefinite useful lives as cash flows from the use of the trademarks are expected to be generated indefinitely.

          In accordance with Statement of Financial Accounting Standards No.142,Goodwill and Other Intangible Assets (SFAS 142), goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually. We typically perform our annual impairment test during the fourth quarter of our fiscal year or more frequently if events or changes in circumstances indicate the carrying value of goodwill may not fully be recoverable. There is a two step process for impairment testing of goodwill. The first step, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. The second step, if necessary, measures the amount of the impairment. Owned trademarks that have been determined to have indefinite lives are not subject to amortization but are reviewed at least annually for potential impairment in accordance with SFAS 142, as mentioned above. The fair values are estimated and compared to their carrying values.

          Since March 31, 2009, we completed our annual impairment testing of the Elizabeth Arden brand trademarks and goodwill. The analysis and assessments of these intangible assets indicated that no impairment adjustment was required as the estimated fair value of these intangible assets significantly exceeded their recorded carrying value. On April 1, 2009, the date of our annual impairment test, and subsequent to that date, our net book value exceeded our market capitalization. In management's judgment, a significant portion of the recent decline in our stock price is related to the deterioration of macroeconomic conditions, including substantial volatility of the capital markets, and is not reflective of the expected underlying cash flows of our reporting units. See Note 9 of the Notes to Unaudited Consolidated Financial Statements.

          Due to the ongoing uncertainty in capital market conditions, which may continue to negatively impact our market value, we will continue to monitor and evaluate the expected future cash flows of our reporting units and the long-term trends of our market capitalization for the purposes of assessing the carrying value of our goodwill and indefinite-lived Elizabeth Arden trademarks, other trademarks and intangible assets. If market and economic conditions deteriorate further, this could increase the likelihood of future material non-cash impairment charges to our results of operations related to our goodwill, indefinite-lived Elizabeth Arden trademarks, other trademarks and intangible assets.

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Results of Operations

          The following discussion compares the historical results of operations for the three and nine months ended March 31, 2009 and March 31, 2008. 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										Nine Months Ended
		March 31, 2009					March 31, 2008					March 31, 2009					March 31, 2008
Net sales		$	203,471		100.0	%	$	210,554		100.0	%	$	857,663		100.0	%	$	904,786		100.0	%
Cost of sales			115,796		56.9			119,800		56.9			511,962		59.7			528,792		58.4
	Gross profit		87,675		43.1			90,754		43.1			345,701		40.3			375,994		41.6
Selling, general and administrative    expenses			86,398		42.5			83,004		39.4			316,123		36.9			294,837		32.6
Depreciation and amortization			6,392		3.1			6,298		3.0			19,205		2.2			18,461		2.0
	(Loss) income from operations		(5,115	)(2)	(2.5	)(2)		1,452	(2)	0.7	(2)		10,373	(3)	1.2	(3)		62,696	(3)	6.9	(3)
Interest expense, net			5,643		2.8			6,067		2.9			19,244		2.2			21,821		2.4
	(Loss) income before income taxes		(10,758	)	(5.3	)		(4,615	)	(2.2	)		(8,871	)	(1.0	)		40,875		4.5
(Benefit from) provision for income    taxes			(7,054	)	(3.5	)		(803	)	(0.4	)		(6,317	)	(0.7	)		10,538		1.2
	Net (loss) income		(3,704	)	(1.8	)		(3,812	)	(1.8	)		(2,554	)	(0.3	)		30,337		3.4
Other data
EBITDA and EBITDA margin(1)		$	1,277	(2)	0.6	%(2)	$	7,750	(2)	3.7	%(2)	$	29,578	(3)	3.4	%(3)	$	81,157	(3)	9.0	%(3)
(1)  For a definition of EBITDA and a reconciliation of net income to EBITDA, see "EBITDA" under Results of Operations -- Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008 and Nine Months Ended March 31, 2009 compared to Nine Months Ended March 31, 2008. EBITDA margin represents EBITDA divided by net sales.
(2)  The three months ended March 31, 2009 include $1.0 million related to implementation of our new Oracle accounting and order processing systems and $1.1 million of restructuring expenses related to the Initiative. No such expenses were incurred during the three months ended March 31, 2008. In addition, the three months ended March 31, 2009 and 2008 include $0.1 million and $1.1 million, respectively, of restructuring expenses that are not related to the Initiative. For the three months ended March 31, 2009 and 2008, the various expenses described above reduced operating margin by 1.0% and 0.5%, respectively, and EBITDA margin by 1.1% and 0.5%, respectively.
(3)  The nine months ended March 31, 2009 include (i) $23.3 million of expenses related to the Liz Claiborne license agreement ($18.9 million of which did not require the use of cash in the current period) due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement and transition expenses, (ii) $1.7 million related to implementation of our new Oracle accounting and order processing systems, and (iii) $2.3 million of restructuring expenses related to the Initiative. In addition, the nine months ended March 31, 2009 and 2008 include $1.0 million and $2.1 million, respectively, of restructuring expenses that are not related to the Initiative. For the nine months ended March 31, 2009 and 2008, the various expenses described above reduced operating margin by 3.3% and 0.3%, respectively, and EBITDA margin by 3.4% and 0.2%, respectively.

          Our operations are organized into the following reportable segments:

— North America Fragrance - Our North America Fragrance segment sells our portfolio of owned, licensed and distributed fragrance brands to department stores, mass retailers and distributors in the United States, Canada and Puerto Rico. This segment also sells our Elizabeth Arden products in prestige department stores in Canada and Puerto Rico and to other selected retailers.

— International - Our International segment sells our portfolio of owned and licensed brands, including our Elizabeth Arden products, in approximately 90 countries outside of North America through perfumeries, boutiques, department stores and travel retail outlets worldwide.

— Other- The Other reportable segment sells our Elizabeth Arden products in prestige department stores in the United States and through the Red Door beauty salons, which are owned and operated by an unrelated third party.

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          Our segment reporting has been revised in accordance with the FASB Statement of Financial Accounting Standards No. 131,Disclosures about Segments of an Enterprise and Related Information. Prior to June 30, 2008, we reported our operations under one reporting segment. Effective June 30, 2008, we changed our segment reporting and, accordingly, amounts shown for the three and nine months ended March 31, 2008, have been revised to conform to the current period presentation. See Note 17 to the Notes to Unaudited Consolidated Financial Statements.

          Segment profit excludes depreciation and amortization, interest expense and unallocated corporate expenses, which are shown in the table below reconciling segment profit to consolidated net (loss) income before income taxes. Included in unallocated corporate expenses are (i) adjustments to eliminate intercompany mark-up, (ii) employee incentive costs, (iii) restructuring charges, and (iv) costs related to the Initiative. Unallocated corporate expenses for the nine months ended March 31, 2009, also include $23.3 million of expenses related to the recent Liz Claiborne license agreement ($18.9 million of which did not require the use of cash in the current period), due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement and transition expenses. No expenses related to the Liz Claiborne license agreement were incurred during the three months ended March 31, 200 9. Restructuring charges, costs related to the Initiative and expenses related to the Liz Claiborne license agreement are recorded in unallocated corporate expenses as these decisions are centrally directed and controlled, and are not included in internal measures of segment operating performance. We do not have intersegment sales.

          The following table is a comparative summary of our net sales and segment profit by reportable segment for the three and nine months ended March 31, 2009 and 2008 and reflects the basis of presentation described in Note 17 -- "Segment Data and Related Information" to the Notes to Unaudited Consolidated Financial Statements for all periods presented.

(Amounts in thousands)	Three Months Ended						Nine Months Ended
	March 31, 2009			March 31, 2008			March 31, 2009			March 31, 2008
Segment Net Sales:
North America Fragrance	$	120,056		$	114,481		$	545,804		$	552,682
International		75,210			85,711			281,135			308,789
Other		8,205			10,362			30,724			43,315
Total	$	203,471		$	210,554		$	857,663		$	904,786
Segment Profit:
North America Fragrance	$	20,845		$	17,296		$	89,782		$	86,565
International		(4,549	)		(4,939	)		(2,829	)		22,562
Other		(5,576	)		(1,446	)		(10,614	)		(4,085	)
Total	$	10,720		$	10,911		$	76,339		$	105,042
Reconciliation:
Segment Profit	$	10,720		$	10,911		$	76,339		$	105,042
Less:
Depreciation and Amortization		6,392			6,298			19,205			18,461
Interest Expense, net		5,643			6,067			19,244			21,821
Unallocated Corporate Expenses		9,443			3,161			46,761	(1)		23,885
(Loss) Income Before Income Taxes	$	(10,758	)	$	(4,615	)	$	(8,871	)	$	40,875
(1)  In May 2008, we entered into an exclusive long-term global licensing agreement for the Liz Claiborne fragrance brands, which became effective on June 9, 2008. Amounts shown for the nine months ended March 31, 2009 reflect $23.3 million of expenses related to the Liz Claiborne license agreement ($18.9 million of which did not require the use of cash in the current period), due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement and transition expenses. No such expenses were incurred during the three months ended March 31, 2009.

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Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

          Net Sales.    Net sales decreased 3.4%, or $7.1 million, for the three months ended March 31, 2009, compared to the three months ended March 31, 2008. Pricing changes had an immaterial effect on net sales. Excluding the unfavorable impact of foreign currency translation, net sales increased 1.3%, or $2.8 million. The decrease in net sales is primarily due to the unfavorable impact of foreign currency translation and lower sales to travel retail outlets due to a sharp reduction in passenger traffic at airports, as well as to distributor markets. The sales declines affected most distributed and owned or licensed fragrance brands and our skin care and color products. These declines were partially offset by $16.2 million in sales of fragrances launched since the prior year period, including theJuicy Couture fragrancesVivaLa Juicy andDirty English, the Elizabeth Arden fragrancePretty, and the9IXRocawear fragrance. Additionally, net sales of other Liz Claiborne fragrance brands and theUsher fragrance brands, which we distributed in the prior year period but now manufacture, increased $19.6 million as a result of the June 2008 Liz Claiborne license agreement.

North America Fragrance

          Net sales increased by 4.9%, or $5.6 million. Excluding the unfavorable impact of foreign currency translation, net sales increased 6.5%, or $7.4 million. The higher net sales were primarily due to sales of fragrances launched since the prior year period, including theJuicy Couture fragrancesVivaLa Juicy andDirty English, and the9IXRocawear fragrance, which collectively generated a total of $9.7 million of net sales for this segment. Net sales of other Liz Claiborne fragrance brands and the Usher fragrance brands, which we distributed in the prior year period but now manufacture, increased $17.7 million as a result of the June 2008 Liz Claiborne license agreement. These increases were mostly offset by declines in net sales across our brand portfolio and customer base, and attributable to continued weakness in the North American economy and the related credit constrain ts of several of our customers.

International

          Net sales decreased 12.3%, or $10.5 million. Excluding the unfavorable impact of foreign currency translation, International net sales decreased 2.8%, or $2.4 million. The sales declines were primarily a result of the unfavorable impact of foreign currency translation, $6.4 million of lower sales to travel retail outlets due to a sharp reduction in passenger traffic at airports, and lower sales to distributor markets associated with credit constraints and continued weakness in the global economy. Partially offsetting the decrease were approximately $3.3 million of increased fragrance sales of Liz Claiborne fragrances internationally.

          Gross Margin.    For the three months ended March 31, 2009 and 2008, gross margins were 43.1%. Increased net sales of Liz Claiborne brands, which as licensed brands reflect higher gross margins than when they were distributed brands, were offset by lower net sales in higher margin international markets and the unfavorable impact of foreign currency translation.

          SG&A.   Selling, general and administrative expenses increased 4.1%, or $3.4 million, for the three months ended March 31, 2009, compared to the three months ended March 31, 2008. The increase was principally due to higher advertising costs of $3.0 million primarily to support fragrance launches and higher royalty costs of $2.0 million, primarily related to the recently licensed Liz Claiborne fragrance brands. Partially offsetting the increases were lower sales promotion and direct selling costs of approximately $2.1 million. We also incurred costs of $2.1 million related to restructuring expenses and implementation expenses for our new Oracle accounting and order processing system compared to $1.1 million of restructuring expenses in the prior year period.

Segment Profit

North America Fragrance

          Segment profit increased 20.5%, or $3.5 million, primarily due to higher net sales of the recently licensed Liz Claiborne fragrance brands, which now have higher gross margins as licensed brands, and new fragrance launches, partially offset by advertising costs to support these activities and royalty costs.

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International

          Segment profit was relatively flat. Net sales declines and the unfavorable impact of foreign currency translation in the International segment were largely offset by reductions in advertising, direct selling and sales promotion expenses of approximately $9.1 million, and reductions in overhead expenses of approximately $2.9 million.

         Interest Expense.    Interest expense, net of interest income, decreased 7.0%, or $0.4 million, for the three months ended March 31, 2009, compared to the three months ended March 31, 2008. The decrease was due to lower interest rates under our revolving bank credit facility, mostly offset by higher average borrowings under such credit facility.

          Benefit from Income Taxes.    The effective tax rate, which is calculated as a percentage of the loss before income taxes for the three months ended March 31, 2009, was 65.6 % compared to 17.4% for the three months ended March 31, 2008. The increase in the effective tax rate was mainly due to increased losses before income taxes in our U.S. operations, which are tax-effected at a higher rate, as well as tax adjustments recorded on a discrete basis totaling a net tax benefit of $0.9 million. Based on current estimated earnings contributions from our worldwide affiliates, our expected annualized effective tax rate for the year ending June 30, 2009, will be approximately 70.2%.

          Net Loss.    Net loss for the three months ended March 31, 2009, was approximately $3.7 million, compared to $3.8 million for the three months ended March 31, 2008.

          EBITDA.     EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) decreased by $6.4 million to $1.3 million for the three months ended March 31, 2009, compared to $7.8 million for the three months ended March 31, 2008. The decrease in EBITDA was primarily the result of the lower sales volumes as compared to the prior year, including the unfavorable impact of foreign currency translation, and increased selling, general and administrative costs related to royalties associated with the Liz Claiborne license and advertising costs associated with fragrance launches.

          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.

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

(Amounts in thousands)			Three Months Ended
			March 31, 2009			March 31, 2008
Net loss			$	(3,704	)	$	(3,812	)
Plus:
	Benefit from income taxes			(7,054	)		(803	)
	Interest expense, net			5,643			6,067
	Depreciation and amortization			6,392			6,298
		EBITDA	$	1,277		$	7,750

Nine Months Ended March 31, 2009 Compared to Nine Months Ended March 31, 2008

          Net Sales.   Net sales decreased 5.2%, or $47.1 million, for the nine months ended March 31, 2009, compared to the nine months ended March 31, 2008. Pricing changes had an immaterial effect on net sales. Excluding the unfavorable impact of foreign currency translation, net sales decreased 2.3%, or $20.8 million. In addition to the unfavorable impact of the foreign currency translation, the lower net sales were primarily due to certain North American customers reducing basic stock replenishment orders in the second and third quarters of fiscal 2009 to reduce inventory levels in light of current economic conditions. Also contributing to the net sales decline were the credit constraints of various global distributors and customers. The sales declines affected most distributed and owned or licensed fragrance brands and our skin care and color products. Fragrances launched since the prior year period, including theJuicy Couture fragrancesVivaLa Juicy andDirty English, the9IXRocawear fragrance, and the Elizabeth Arden fragrancePretty, generated a total of $43.2 million of net sales. Net sales of other Liz Claiborne fragrance brands and theUsher fragrance brands that we distributed in the prior year period but now manufacture increased $63.5 million as a result of the June 2008 Liz Claiborne license agreement.

North America Fragrance

          Net sales decreased by 1.2%, or $6.9 million. Excluding the unfavorable impact of foreign currency translation, net sales decreased 0.4%, or $2.3 million. The lower net sales were primarily due to certain North America customers reducing basic stock replenishment orders in the second and third quarters of fiscal 2009 to reduce inventory levels in light of current economic conditions. Also contributing to the net sales decline were credit constraints of certain customers. The sales declines affected most of our distributed and owned or licensed fragrance brands. These declines were partially offset by net sales of fragrances launched since the prior year period, including theJuicy Couture fragrancesVivaLa Juicy andDirty English, and the9IXRocawear fragrance, which collectively generated a total of $32.8 million of net sales. Net sales of other Liz Claiborne fragrance brands and theUsher fragrance brands that we distributed in the prior year period but now manufacture, increased $54.9 million as a result the June 2008 Liz Claiborne license agreement.

International

          Net sales decreased by 9.0%, or $27.7 million. Excluding the unfavorable impact of foreign currency translation, International net sales decreased 1.9%, or $5.9 million. The sales declines were a result of the unfavorable impact of foreign currency translation, $11.6 million of lower net sales to travel retail outlets due to a sharp reduction in passenger traffic at airports, and lower sales associated with the credit constraints of various global distributors. Partially offsetting the decrease were approximately $12.9 million of increased fragrance sales of Liz Claiborne fragrances internationally.

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         Gross Margin.     For the nine months ended March 31, 2009 and 2008, gross margins were 40.3% and 41.6%, respectively. Gross margins decreased primarily due to lower sales volumes in our higher margin European and travel retail markets, and a higher proportionate level of lower margin promotional product sales as compared to basic stock products. Gross margins were positively impacted by higher sales of Liz Claiborne brands which, as licensed brands, reflect higher gross margins than when they were distributed brands, net of the $18.9 million charge which did not require the use of cash in the current period and which relates to the Liz Claiborne inventory purchased prior to the June 2008 effective date of the Liz Claiborne licensing agreement.

          SG&A.    Selling, general and administrative expenses increased 7.2%, or $21.3 million, for the nine months ended March 31, 2009, compared to the nine months ended March 31, 2008. The increase was principally due to (i) higher advertising, promotional and royalty costs of $17.6 million, most of which relate to the Liz Claiborne fragrance brands and new fragrance launches, (ii) restructuring and other costs of $4.0 million related to the Initiative, (iii) transition expenses of $3.4 million related to the June 2008 license of Liz Claiborne fragrance brands, and (iv) the unfavorable impact of foreign currency translation of $3.2 million. These increases were partially offset by lower professional services and payroll related costs of approximately $3.6 million and $1.4 million, respectively.

Segment Profit

North America Fragrance

          Segment profit increased 3.7%, or $3.2 million. The increase in segment profit was mostly due to higher sales of the recently licensed Liz Claiborne fragrance brands, which carry higher gross margins as licensed brands than our distributed fragrance brands, and new fragrance launches. These increases were mostly offset by $21.9 million of (i) higher royalty costs associated with the Liz Claiborne andUsher licenses, and (ii) advertising and promotional costs to support the Liz Claiborne fragrance brands and new product launches.

International

          Segment profit decreased by $25.4 million. The decrease was due to the unfavorable impact of foreign currency translation, lower sales volumes primarily in our higher gross margin European and travel retail markets, and lower gross margins due to a higher proportionate level of promotional product sales as compared to basic stock products.

          Interest Expense.     Interest expense, net of interest income, decreased 11.8%, or $2.6 million, for the nine months ended March 31, 2009, compared to the nine months ended March 31, 2008. The decrease was due to lower interest rates under our revolving bank credit facility, partially offset by higher average borrowings under such credit facility.

          Benefit from / Provision for Income Taxes.    The effective tax rate, which is calculated as a percentage of the loss before income taxes for the nine months ended March 31, 2009, was 71.2 % compared to 25.8% for the nine months ended March 31, 2008. The increase in the effective tax rate was mainly due to increased losses before income taxes in our U.S. operations which are tax-effected at a higher rate, as well as tax adjustments recorded on a discrete basis totaling a net tax benefit of $1.2 million. Based on current estimated earnings contributions from our worldwide affiliates, our expected annualized effective tax rate for the year ending June 30, 2009 will be approximately 70.2%.

          Net (Loss) Income.   Net loss for the nine months ended March 31, 2009 was approximately $2.6 million compared to net income of $30.3 million for the nine months ended March 31, 2008. The decrease in net income was mainly driven by overall sales and gross margin declines, $23.3 million of high cost inventory charges ($18.9 million of which did not require the use of cash in the current period) and transition expenses related to the recent Liz Claiborne license agreement, and the unfavorable impact of foreign currency translation, partially offset by increased sales of the Liz Claiborne andUsher brands and our newly launched fragrances.

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          EBITDA.     EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) decreased by $51.6 million to $29.6 million for the nine months ended March 31, 2009, compared to $81.2 million for the nine months ended March 31, 2008. The decrease in EBITDA was primarily the result of overall net sales and gross margin declines, and $23.3 million of high cost inventory charges and transition expenses related to the Liz Claiborne license agreement and the unfavorable impact of foreign currency translation as discussed above.

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

(Amounts in thousands)			Nine Months Ended
			March 31, 2009			March 31, 2008
Net (loss) income			$	(2,554	)	$	30,337
Plus:
	(Benefit from) provision for income taxes			(6,317	)		10,538
	Interest expense, net			19,244			21,821
	Depreciation and amortization			19,205			18,461
		EBITDA	$	29,578		$	81,157

Liquidity and Capital Resources

(Amounts in thousands)	Nine Months Ended
	March 31, 2009			March 31, 2008
Net cash provided by operating activities	$	11,847		$	25,861
Net cash used in investing activities		(24,072	)		(21,939	)
Net cash provided by (used in) financing activities		5,174			(5,291	)
Net decrease in cash and cash equivalents		(9,141	)		(1,895	)

          Cash Flows.    For the nine months ended March 31, 2009, net cash provided by operating activities was $11.9 million, as compared to $25.9 million for the nine months ended March 31, 2008. This decrease in cash provided by operating activities was due to lower net income, partially offset by less cash used for working capital requirements. The reduction in working capital requirements during the nine months ended March 31, 2009, resulted from (i) inventory purchases made in June 2008 in connection with the Liz Claiborne license agreement that resulted in reduced purchases in the nine months ended March 31, 2009, and (ii) reductions of other inventory purchases and accounts receivable associated with the lower net sales.

          For the nine months ended March 31, 2009, net cash used in investing activities of $24.1 million was composed of $18.7 million of capital expenditures and the $5.3 million payment of the second installment of contingent consideration associated with our acquisition of the fragrance business of Sovereign Sales, LLC. For the nine months ended March 31, 2008, net cash used in investing activities of $21.9 million was composed of $15.5 million of capital expenditures and the $6.4 million payment of the first installment of the Sovereign contingent consideration. The remaining Sovereign contingent consideration of $0.3 million is expected to be paid in September 2009.

          For the nine months ended March 31, 2009, net cash provided by financing activities was $5.2 million, as compared to $5.3 million of net cash used in financing activities for the nine months ended March 31, 2008. During the nine months ended March 31, 2009, borrowings under our credit facility increased by $9.2 million to $128.2 million at March 31, 2009. During the nine months ended March 31, 2008, borrowings under our credit facility increased by $0.2 million to $97.8 million at March 31, 2008. For the nine months ended March 31, 2009, repurchases of common stock totaled $1.6 million compared to $7.4 million for the nine months ended March 31, 2008.

          Interest paid during the nine months ended March 31, 2009, included $17.4 million of interest payments on the 7 3/4% senior subordinated notes due 2014 and $6.3 million of interest paid on the borrowings under our credit facility. Interest paid during the nine months ended March 31, 2008, included $17.4 million of interest payments on the 7 3/4% senior subordinated notes due 2014 and $8.3 million of interest paid on the borrowings under our credit facility.

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          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 our working capital 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. In order to accommodate the increased working capital requirements associated with the growth of our business, on July 21, 2008, the credit facility was amended to increase its size from $250 million to $325 million, with a $25 million sub-limit for letters of credit. Under the terms of the credit facility, as amended by the July 2008 amendment, we may, at any time, increase the size of the credit facility up to $375 million without entering into a formal amendment requiring the consent of all of the banks, subject to our satisfaction of certain conditions. 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. Borrowings under the credit facility are limited to 85.0% of eligible accounts receivable and 85.0% of the appraised net liquidation value of our inventory, as determined pursuant to the terms of the credit facility; provided, however, that pursuant to the terms of the July 2008 amendment, from August 15 to October 31 of each year our borrowing base is temporarily increased by $25 million. 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 base capacity declines to less than $25 million ($35 million from December 1 through May 31). Under the terms of the credit facility, we may pay dividends or repurchase common stock if we maintain borrowing base capacity of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31, after making the applicable payment. The credit facility restricts us from incurring additional non-trade indebtedness (other than refinancings and certain small amounts of indebtedness). We were in compliance with all applicable covenants under the credit facility during the nine months ended March 31, 2009.

          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, except that the Applicable Margin on the first $25 million of borrowings from August 15 to October 31 of each year, while the temporary increase in our borrowing base is in effect, is 1.00% higher. At March 31, 2009, the Applicable Margin was 1.50% 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 nine months ended March 31, 2009 and 2008, the weighte d average annual interest rate on borrowings under our credit facility was 2.6% and 3.6%, respectively.

          At March 31, 2009, we had (i) $128.2 million in borrowings and $4.2 million in letters of credit outstanding under the credit facility, (ii) $187.3million of eligible accounts receivable and inventories available as collateral under the credit facility, and (iii) remaining borrowing availability of $54.9 million. The borrowing availability under the credit facility typically declines in the second half of our fiscal year as our higher accounts receivable balances resulting from holiday season sales are likely to decline due to cash collections.

          At March 31, 2009, we had outstanding $225.0 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 Notes 11 and 16 to the 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 addi tional 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).

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          Based upon our internal projections, 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. A further deterioration in the economic and retail environment, however, could cause us to fail to satisfy the financial maintenance covenant under our bank credit facility that applies only in the event we do not have the requisite average borrowing base capacity as set forth under the credit facility. In such an event, we would not be allowed to borrow under the revolving credit facility and may not have access to the capital necessary for our business. In addition, a default under our credit facility that causes acceleration of the debt under this facility could trigger a default under our outstanding 7 3/4% senior subordinated notes. In the event we are not able to borrow under our credit facility, we would be required to develop an alternative source of liquidity. There is no assurance that we could obtain replacement financing or what the terms of such financing, if available, would be.

          Repurchases of Common Stock.    On November 5, 2008, our board of directors authorized us to extend our existing $80 million common stock repurchase program through November 30, 2010. As of March 31, 2009, we had repurchased 2,526,238 shares of common stock on the open market under the stock repurchase program, at an average price of $16.98 per share, at a cost of $42.9 million, including sales commissions, leaving $37.1 million available for additional common stock repurchases under the program. During the three months ended March 31, 2009, we purchased 240,000 shares of Common Stock on the open market under the stock repurchase program at an average price of $5.92 per share and at a cost of $1.4 million, including sales commissions. The acquisition of these shares by us was accounted for under the treasury method.

New Accounting Standards

Interim Disclosures About Fair Value of Financial Instruments

          In April 2009, the FASB issued FASB Staff Position No. 107-1 and APB 28-1 (FSP 107-1 and 28-1), amending the disclosure requirements in FASB Statement of Financial Accounting Standards No. 107 and Opinion 28. FSP 107-1 and 28-1 require disclosures about the fair value of financial instruments for interim reporting periods. FSP 107-1 and 28-1 will be effective for us in our fiscal quarter beginning April 1, 2009. We are evaluating the impact of FSP 107-1 and 28-1 on our consolidated financial statements.

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

          In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1).  FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, "Earnings per Share."  Under the guidance in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method.  FSP EITF 03-6-1 will be effective for us in our fiscal quarter beginning July 1, 2009.  We are evaluating the impact of FSP EITF 03-6-1 on our consolidated financial statements.

Hierarchy of Generally Accepted Accounting Principles

          In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162,The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS 162 was effective for us on November 17, 2008. The adoption of SFAS 162 did not have a material impact on our financial statements.

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Disclosures about Derivative Instruments and Hedging Activities

          In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161,Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 was effective for us on January 1, 2009. The adoption of SFAS 161 did not have a material impact on our financial statements. See Note 15 to the Notes to Unaudited Consolidated Financial Statements.

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 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.  In February 2008, the FASB issued FASB Staff Position 157-2 which delayed the effective date of SFAS 157 for those non-financial assets and non-financial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis until fiscal years beginning after November 15, 2008. With respect to financial assets and liabilities, SFAS 157 became effective for us on July 1, 2008. For non-financial assets and liabilities, SFAS 157 will be effective for us on July 1, 2009. The adoption of SFAS 157 with respect to financial assets and liabilities did not have a material im pact on our consolidated financial statements. See Note 14 to the Notes to Unaudited Consolidated Financial Statements. We are evaluating the impact on our consolidated financial statements of the application of SFAS 157 with respect to non-financial assets and liabilities.

Useful Life of Intangible Assets

          In April 2008, the FASB issued FASB Staff Position No. 142-3,Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142,Goodwill and Other Intangible Assets. FSP 142-3 is effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008. Early adoption is prohibited. We are evaluating the impact, if any, of FSP 142-3 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 and/or cost savings, interest rates, foreign 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, 2008, and Part II, Item 1A -- "Risk Factors" of this quarterly report:

*	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 of distributed brands and components for manufacturing of owned and licensed brands;
*	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 retailer and/or consumer confidence and demand, such as the current economic downturn;
*	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, unfavorable changes in U.S. or international tax laws or regulations, diseases and pandemics, and political instability in certain regions of the world;
*	our ability to (i) implement our growth strategy and acquire or license additional brands or secure additional distribution arrangements, (ii) successfully and cost-effectively integrate acquired businesses or new brands, such as the Liz Claiborne fragrance brands, and (iii) finance our growth strategy and our working capital requirements;
*	our level of indebtedness, our ability to realize sufficient cash flows from operations to meet our debt service obligations and working capital requirements, 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;
*	the success of, and costs associated with, our Global Efficiency Re-engineering initiative and related restructuring plan;
*	the potential for significant impairment charges relating to our trademarks, goodwill or other intangible assets that could result from a number of factors, including downward pressure on our stock price; 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 from 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 March 31, 2009, we had approximately $128.2 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 three months ended March 31, 2009, 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 months ended March 31, 2009 would have increased or decreased by approximately $2.9 million. See Note 10 to the Notes to Unaudited Consolidated Financial Statements.

Foreign Currency Risk

          We sell our products in approximately 90 countries around the world. During the three and nine months ended March 31, 2009, we derived approximately 42.3% and 37.7%,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 third-party manufacturing facilities located in the U.S. Our operations may be subject to volatility because of currency changes, inflation changes and changes in political and economic conditions in the countries in which we operate. With respect to international operations, our sales, cost of goods sold and expenses are typically denominated in a combination of local currency and the U.S. dollar. Our results of operations are reported in U.S. dollars. Fluctuations in currency rates can affect our reported sales, margins, 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 adversely affect our ability to meet our obligations and could adversely affect our results of operations and cash flows used to fund working capital. 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 in our consolidated balance sheets.

          As of March 31, 2009, we had notional amounts of 15.0 million Euros and 4.6 million British pounds under open foreign currency contracts that expire between April 30, 2009 and June 30, 2009 to reduce the exposure of our foreign subsidiary revenues to fluctuations in currency rates. As of March 31, 2009, we had notional amounts of 1.4 million Canadian dollars under foreign currency contracts that expire between April 30, 2009 and June 30, 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 gain, net of taxes, recognized during the three and nine months ended March 31, 2009 from the settlements of these contracts, was approximately $3.6 million and $9.2 million, respectively. At March 31, 2009, the unrealized gain associated with these open contracts of approximately $3.5 million (net of taxes of $0.4 million) is included in accumulated other comprehensive loss in our consolidated balance sheet. See Note 15 to the Notes to Unaudited Consolidated Financial Statements.

          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 March 31, 2009, there were no such foreign currency contracts outstanding. The realized gain, net of taxes, recognized during the three and nine months ended March 31, 2009, was approximately $0.3million and $2.9 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 Company's 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 functioning effectively.

          There have been no changes in the Company's internal control over financial reporting during the Company's most recent fiscal quarter that have materially affected, or are 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, 2008. Except for the additional risk factors set forth below, there has been no material change in our risk factors from those previously discussed in that Annual Report on Form 10-K.

The recent turmoil in the U.S. and global economies and credit markets could negatively impact our business, prospects, results of operations, financial condition or cash flows.

          The recent, unprecedented turmoil in the U.S. and global economies and credit markets poses various risks to our business, including negatively impacting retailer and consumer confidence and demand for our products, limiting our and our customers' and suppliers' access to credit markets, and interfering with our ability to manage normal commercial relationships with our customers and suppliers. A continued decrease in retailer and consumer confidence and demand for our products could significantly negatively impact our net sales and profitability. The current credit crisis could cause some of our customers to experience cash flow problems, which could adversely affect product orders, payment patterns and default rates and increase our bad debt expense and could adversely affect our access to the capital necessary for our business and our ability to remain in compliance with the financial covenant in our revolving credit faci lity that applies only in the event that we do not have the requisite average borrowing base capacity as set forth in our credit facility. The general economic slowdown may force our suppliers to reduce production, shut down their operations or file for bankruptcy protection, which could disrupt and have an adverse effect on our business. If the current U.S. and global economic conditions persist or deteriorate further, our business, prospects, results of operations, financial condition or cash flows could be negatively impacted.

If our intangible assets, such as trademarks and goodwill, become impaired we may be required to record a significant non-cash charge to earnings which would negatively impact our results of operations.

          Under accounting principles generally accepted in the United States, we review our intangible assets, including our trademarks, licenses and goodwill, for impairment annually in the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate the carrying value of our intangible assets may not be fully recoverable. The carrying value of our intangible assets may not be recoverable due to factors such as a decline in our stock price and market capitalization, reduced estimates of future cash flows, including those associated with the specific brands to which intangibles relate, or slower growth rates in our industry. Estimates of future cash flows are based on a long-term financial outlook of our operations and the specific brands to which the intangible assets relate. However, actual performance in the near-term or long-term could be materially different from these fo recasts, which could impact future estimates and the recorded value of the intangibles. For example, a significant sustained decline in our stock price and market capitalization may result in impairment of certain of our intangible assets, including goodwill, and a significant charge to earnings in our financial statements during the period in which an impairment is determined to exist. Any such impairment charge could materially reduce our results of operations.

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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 March 31, 2009.

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)
January 1, 2009 through January 31, 2009	200,000	$	5.95	200,000	$	37,346,787
February 1, 2009 through February 28, 2009	40,000	$	5.78	40,000	$	37,115,550
March 1, 2009 through March 31, 2009	--	$	--	--	$	37,115,550
Totals	240,000	$	5.92	240,000	$	37,115,550

(1)	On November 5, 2008, our board of directors authorized us to extend our existing $80 million stock repurchase program through November 30, 2010. The stock repurchase program was set to expire on November 30, 2008. The extension of the stock repurchase program was announced on November 6, 2008. All shares purchased during the quarter ended March 31, 2009 were purchased on the open market.
(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 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, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.6 filed as part of the Company's Form 10-Q for the quarter ended May 1, 2004 (Commission File No. 1-6370)).
10.3	Second Amendment to Second Amended and Restated Credit Agreement dated as of June 2, 2004, among the Company, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.6 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, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed as part of the Company's Form 8-K dated October 1, 2004 (Commission File No. 1-6370)).
10.5	Fourth Amendment to Second Amended and Restated Credit Agreement dated as of November 2, 2005, among the Company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to 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, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to 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, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to 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)).
10.8	Seventh Amendment to Second Amended and Restated Credit Agreement dated as of November 13, 2007, among the Company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 10.8 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).

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Exhibit Number	Description
10.9	Eighth Amendment to Second Amended and Restated Credit Agreement dated as of July 21, 2008, among the company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 10.1 filed as part of the Company's Form 8-K dated July 21, 2008 (Commission File No. 1-6370)).
10.10	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)).
10.11	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)).
10.12 +	2004 Stock Incentive Plan, as amended and restated (incorporated herein by reference to Exhibit 10.12 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).
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 (incorporated herein by reference to Exhibit 10.14 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).
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)).
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)).

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Exhibit Number	Description
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 (incorporated herein by reference to Exhibit 10.28 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).
10.29 +	2005 Performance Bonus Plan, as amended (incorporated herein by reference to Exhibit 10.29 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).
10.30 +	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)).
10.31 +	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)).
10.32 +	Termination Agreement between Elizabeth Arden International Sàrl and Jacobus A. J. Steffens dated November 5, 2008 (incorporated herein by reference to Exhibit 10.32 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2008 (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: May 8, 2009	/s/ E. Scott Beattie
	E. Scott Beattie
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
Date:  May 8, 2009	/s/ Stephen J. Smith
	Stephen J. Smith
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

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

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