(c)   For the three months ended December 31, 2013, gross profit and net income includes $8.6 million (pre-tax) of non-recurring product changeover costs related to the repositioning of the Elizabeth Arden brand and $0.5 million (pre-tax) of transition costs incurred related to the restructuring discussed in the following sentence. In addition, net income includes (i) a credit of $17.2 million (pre-tax) for the complete reversal of the remaining balance of the contingent liability for potential payments to Give Back Brands LLC, (ii) $0.9 million (pre-tax) of restructuring and related transition expenses primarily incurred with respect to the elimination of sales and other staff positions, and (iii) $0.7 million (pre-tax) of non-recurring product changeover expenses related to the repositioning of the Elizabeth Arden brand. For the six months ended December 31, 2013, gross profit and net income includes $12.4 million (pre-tax) of non-recurring product changeover costs related to the repositioning of the Elizabeth Arden brand and $0.5 million (pre-tax) of transition costs incurred related to the restructuring discussed above. In addition, net income includes (i) a credit of $17.2 million (pre-tax) for the complete reversal of the remaining balance of the contingent liability for potential payments to Give Back Brands LLC, (ii) $3.3 million (pre-tax) of restructuring expenses and related transition expenses, and (iii) $1.1 million (pre-tax) of non-recurring product changeover expenses related to the repositioning of the Elizabeth Arden brand.

(d)   For the three months ended December 31, 2012, gross profit and net income include (i) $1.9 million (pre-tax) of inventory-related costs primarily for inventory purchased by us from New Wave Fragrances LLC and Give Back Brands LLC prior to the acquisitions and other transition costs, and (ii) $3.6 million (pre-tax) of non-recurring product changeover costs related to the repositioning of the Elizabeth Arden brand. In addition, net income for the three months ended December 31, 2012, includes $0.3 million (pre-tax) of non-recurring product changeover expenses related to the repositioning of the Elizabeth Arden brand. For the six months ended December 31, 2012, gross profit and net income include $13.2 million (pre-tax) of inventory-related costs primarily for inventory purchased by us from New Wave Fragrances LLC and Give Back Brands LLC discussed above, and $7.0 million (pre-tax) of non-recurring product changeover costs related to the repositioning of the Elizabeth Arden brand. In addition, net income includes $0.3 million (pre-tax) in transition costs associated with the New Wave Fragrances LLC and Give Back Brands LLC acquisitions and $0.4 million (pre-tax) of non-recurring product changeover expenses related to the repositioning of the Elizabeth Arden brand.

(e)    Our effective tax rate on a reported basis, which is calculated as a percentage of income before income taxes, was 23.1% and 23.0% for the three and six months ended December 31, 2013, respectively. On a reported basis, for the three and six months ended December 31, 2012, our effective tax rate, was 22.0% and 21.8%, respectively. On an adjusted basis, our effective tax rate was 16.1%.and 17.3% for the three and six months ended December 31, 2013, respectively. On an adjusted basis, for both the three and six months ended December 31, 2012, our effective tax rate was 24.0%.

(In thousands)

Three Months Ended

% Decrease

Six Months Ended

% Increase
(Decrease)

December 31,
2013

December 31,
2012

GAAP

Constant
Rates (f)

December 31,
2013

December 31,
2012

GAAP

Constant
Rates (f)

Segment Net Sales

North America

$

269,647

$

311,077

(13.3

)%

(13.1

)%

$

494,306

$

542,634

(8.9

)%

(8.6

)%

International

148,490

156,842

(5.3

)%

(4.4

)%

267,440

269,826

(0.9

)%

0.5

%

Total

$

418,137

$

467,919

(10.6

)%

(10.2

)%

$

761,746

$

812,460

(6.2

)%

(5.6

)%

(In thousands)

Three Months Ended

% Decrease

Six Months Ended

% Increase
(Decrease)

December 31,
2013

December 31,
2012

GAAP

Constant
Rates (f)

December 31,
2013

December 31,
2012

GAAP

Constant
Rates (f)

Product Category
Net Sales

Elizabeth Arden
  Brand

$

142,158

$

147,957

(3.9

)%

(3.6

)%

$

262,682

$

256,436

2.4

%

3.1

%

Celebrity,
  Lifestyle,
  Designer and
  Other Fragrances

275,979

319,962

(13.7

)%

(13.2

)%

499,064

556,024

(10.2

)%

(9.6

)%

Total

$

418,137

$

467,919

(10.6

)%

(10.2

)%

$

761,746

$

812,460

(6.2

)%

(5.6

)%

(f)    Constant currency information compares results between periods assuming exchange rates had remained constant period-over-period and excludes gains and losses from foreign currency contracts in all periods. We calculate constant currency information by translating current-period results using prior-year GAAP foreign currency exchange rates. The gains and/or losses from foreign currency contracts were not material for all periods presented.

*

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;

*

risks of international operations, including foreign currency fluctuations, hedging activities, economic and political consequences of terrorist attacks, disruptions in travel, unfavorable changes in U.S. or international laws or regulations, diseases and pandemics, and political instability in certain regions of the world;

*

our reliance on license agreements with third parties for the rights to sell most of our prestige fragrance brands;

*

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 supply chain costs 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 domestic or international recessions or economic uncertainty;

*

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;

*

our ability to successfully manage our inventories;

*

the quality, safety and efficacy of our products;

*

the impact of competitive products and pricing;

*

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, 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, second lien facility and the indenture for our 7 3/8% senior 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, laws or regulations relating to ingredients or other chemicals or raw materials contained in products or packaging, or accounting standards or critical accounting estimates;

*

the success of our global Elizabeth Arden brand repositioning efforts;

*

the impact of tax audits, including the ultimate outcome of the pending Internal Revenue Service examination of our U.S. federal tax returns for the fiscal years ended June 30, 2008 and June 30, 2009, changes in tax laws or tax rates, and our ability to utilize our deferred tax assets;

*

our ability to effectively implement, manage and maintain our global information systems and maintain the security of our confidential data and our employees' and customers' personal information, including our ability to successfully and cost effectively implement the last phase of our Oracle global enterprise system;

*

our reliance on third parties for certain outsourced business services, including information technology operations, logistics management and employee benefit plan administration;

*

the potential for significant impairment charges relating to our trademarks, goodwill, investments in other entities or other intangible assets that could result from a number of factors, including such entities' business performance or downward pressure on our stock price; and

*

other unanticipated risks and uncertainties.