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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-Q

|           |  |                                                                                        
|---------- |  | ---------------------------------------------------------------------------------------
|(Mark One)
|          
|          
|          
|          
|(X BOX)    |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|(BOX) |  | 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 333-62989

CDRJ INVESTMENTS (LUX) S.A.




(Exact name of Registrant as specified in its charter)


|                                                                          |  |                                                   
|------------------------------------------------------------------------- |  | --------------------------------------------------
|Luxembourg
(State or other jurisdiction of
incorporation or organization) |  | 98-0185444
(I.R.S. Employer
Identification Number)

174 Route de Longwy
L-1941 Luxembourg
Luxembourg
(Address, including zip code, of registrants principal executive offices)

(352) 226027
(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 3 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 BOX) NO (BOX)

APPLICABLE ONLY TO CORPORATE ISSUERS

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

Common stock, par value $2.00 per share, outstanding at May 10, 2002
831,888 shares



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TABLE OF CONTENTS



|                              |                                                                                               |                                            |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II. OTHER INFORMATION   
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 2. Changes in Securities and Use of Proceeds                                            
|                              | Item 3. Defaults Upon Senior Securities                                                      
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 5. Other Information                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                    



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##### Table of Contents



CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES

Index to Financial Statements and Exhibits

Filed with the Quarterly Report of the Company on Form 10-Q

For the Three Months Ended March 31, 2002

PART I  FINANCIAL INFORMATION

|                            |  |                                                                                                  |  |         
|--------------------------- |  | ------------------------------------------------------------------------------------------------ |  | --------
|Item 1. (*)                 |  | Financial Statements (Unaudited):                                                                |  | Page No.
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|                            |  | Consolidated Financial Statements  CDRJ Investments (Lux) S.A. and Subsidiaries                 |  |         
|                           
|                           
|                           
|                           
|                            |  | Consolidated Balance Sheets                                                                      |  | 3       
|                           
|                           
|                           
|                           
|                            |  | Consolidated Statements of Operations                                                            |  | 4       
|                           
|                           
|                           
|                           
|                            |  | Consolidated Statements of Cash Flows                                                            |  | 5       
|                           
|                           
|                           
|                           
|                            |  | Notes to Consolidated Financial Statements                                                       |  | 6       
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|                            |  | Consolidated Financial Statements  Jafra Cosmetics International, Inc. and Subsidiaries         |  |         
|                           
|                           
|                           
|                           
|                            |  | Consolidated Balance Sheets                                                                      |  | 11      
|                           
|                           
|                           
|                           
|                            |  | Consolidated Statements of Operations                                                            |  | 12      
|                           
|                           
|                           
|                           
|                            |  | Consolidated Statements of Cash Flows                                                            |  | 13      
|                           
|                           
|                           
|                           
|                            |  | Notes to Consolidated Financial Statements                                                       |  | 14      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|                            |  | Consolidated Financial Statements  Jafra Cosmetics International,
S.A. de C.V. and Subsidiaries |  |         
|                           
|                           
|                           
|                           
|                            |  | Consolidated Balance Sheets                                                                      |  | 18      
|                           
|                           
|                           
|                           
|                            |  | Consolidated Statements of Operations                                                            |  | 19      
|                           
|                           
|                           
|                           
|                            |  | Consolidated Statements of Cash Flows                                                            |  | 20      
|                           
|                           
|                           
|                           
|                            |  | Notes to Consolidated Financial Statements                                                       |  | 21      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 2.                     |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations            |  | 25      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 3.                     |  | Quantitative and Qualitative Disclosures about Market Risk                                       |  | 32      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|PART II  OTHER INFORMATION
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 1.                     |  | Legal Proceedings                                                                                |  | 35      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 2.                     |  | Changes in Securities and Use of Proceeds                                                        |  | 35      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 3.                     |  | Defaults Upon Senior Securities                                                                  |  | 35      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 4.                     |  | Submission of Matters to a Vote of Security Holders                                              |  | 35      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 5.                     |  | Other Information                                                                                |  | 35      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|Item 6.                     |  | Exhibits and Reports on Form 8-K                                                                 |  | 35      
|                           
|                           
|                           
|                           
|                            |  |                                                                                                  |  |         
|                           
|                           
|                           
|                           
|                            |  | Signature                                                                                        |  | 36      

*     Jafra S.A. and JCI have fully and unconditionally guaranteed the obligations
of the other under the Notes on a senior subordinated basis, subject to a
30-day standstill period prior to enforcement of such guarantees. As the
cross-guarantees, Jafra S.A. and JCI are subject to a 30-day standstill period. As
such, the Parent is filing separate financial statements of JCI and Jafra S.A.
in its Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2002.

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)

|                              |                                                                                                                        |                                      |                            |        |   |           |        |              |   |         |  | 
|----------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | -------------------------- | ------ | - | --------- | ------ | ------------ | - | ------- |  | 
|                              |                                                                                                                        |                                      |                            |        |   | March 31, |        | December 31,
|                              |                                                                                                                        |                                      |                            |        |   | 2002      |        | 2001        
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        |                                      |                            | ASSETS |   |           |        |              |   |         |  | 
|                             
|                             
|                             
|                             
|Current assets:               |                                                                                                                        |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Cash and cash equivalents                                                                                              |                                      | $                          | 9,764  |   |           | $      | 6,748        |  
|                             
|                             
|                             
|                             
|                              | Receivables, net                                                                                                       |                                      |                            | 48,763 |   |           |        | 43,898       |  
|                             
|                             
|                             
|                             
|                              | Inventories                                                                                                            |                                      |                            | 39,593 |   |           |        | 40,515       |  
|                             
|                             
|                             
|                             
|                              | Prepaid income taxes                                                                                                   |                                      |                            | 79     |   |           |        |             |  
|                             
|                             
|                             
|                             
|                              | Prepaid expenses and other current assets (including value-added tax
receivables of $1,562 in 2002 and $2,308 in 2001) |                                      |                            | 6,582  |   |           |        | 7,851        |  
|                             
|                             
|                             
|                             
|                              | Deferred income taxes                                                                                                  |                                      |                            | 1,305  |   |           |        | 55           |  
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        |                                      | Total current assets       |        |   | 106,086   |        |              |   | 99,067  | 
|                             
|                             
|                             
|                             
|Property and equipment, net   |                                                                                                                        |                                      | 60,759                     |        |   |           | 59,598 |             
|                             
|                             
|                             
|                             
|Other assets:                 |                                                                                                                        |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Goodwill                                                                                                               |                                      |                            | 71,633 |   |           |        | 71,148       |  
|                             
|                             
|                             
|                             
|                              | Trademarks                                                                                                             |                                      |                            | 51,259 |   |           |        | 50,560       |  
|                             
|                             
|                             
|                             
|                              | Deferred financing fees and other, net                                                                                 |                                      |                            | 9,617  |   |           |        | 10,763       |  
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        |                                      | Total                      |        | $ | 299,354   |        |              | $ | 291,136 | 
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        | LIABILITIES AND STOCKHOLDERS EQUITY |                            |        |   |           |        |              |   |        
|                             
|                             
|                             
|                             
|Current liabilities:          |                                                                                                                        |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Short term debt, including current portion of long-term debt                                                           |                                      | $                          | 6,460  |   |           | $      | 6,188        |  
|                             
|                             
|                             
|                             
|                              | Accounts payable                                                                                                       |                                      |                            | 15,815 |   |           |        | 26,516       |  
|                             
|                             
|                             
|                             
|                              | Accrued liabilities                                                                                                    |                                      |                            | 42,285 |   |           |        | 40,916       |  
|                             
|                             
|                             
|                             
|                              | Income taxes payable                                                                                                   |                                      |                            | 10,626 |   |           |        | 7,130        |  
|                             
|                             
|                             
|                             
|                              | Deferred income taxes                                                                                                  |                                      |                            | 3,758  |   |           |        | 4,094        |  
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        |                                      | Total current liabilities  |        |   | 78,944    |        |              |   | 84,844  | 
|                             
|                             
|                             
|                             
|Long-term debt                |                                                                                                                        |                                      | 92,332                     |        |   |           | 86,901 |             
|                             
|                             
|                             
|                             
|Deferred income taxes         |                                                                                                                        |                                      | 19,365                     |        |   |           | 20,311 |             
|                             
|                             
|                             
|                             
|Other long-term liabilities   |                                                                                                                        |                                      | 3,333                      |        |   |           | 3,088  |             
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        |                                      | Total liabilities          |        |   | 193,974   |        |              |   | 195,144 | 
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|Commitments and contingencies |                                                                                                                        |                                      |                           |        |   |           |       |             
|                             
|                             
|                             
|                             
|Stockholders equity:         |                                                                                                                        |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Common stock, par value $2.00; authorized, 1,020,000 shares;
issued and outstanding, 831,888 shares in 2002 and 2001   |                                      |                            | 1,664  |   |           |        | 1,664        |  
|                             
|                             
|                             
|                             
|                              | Additional paid-in capital                                                                                             |                                      |                            | 81,921 |   |           |        | 81,921       |  
|                             
|                             
|                             
|                             
|                              | Retained earnings                                                                                                      |                                      |                            | 28,518 |   |           |        | 18,373       |  
|                             
|                             
|                             
|                             
|                              | Accumulated other comprehensive loss                                                                                   |                                      |                            | (6,723 | ) |           |        | (5,966       | )
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        |                                      | Total stockholders equity |        |   | 105,380   |        |              |   | 95,992  | 
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             
|                              |                                                                                                                        |                                      | Total                      |        | $ | 299,354   |        |              | $ | 291,136 | 
|                              |                                                                                                                        |                                      |                            |        |   |           |        |             

See accompanying notes to consolidated financial statements.

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##### Table of Contents






CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)

|                                                                                 |                           |   |                    |        |      |   |        |        |  
|-------------------------------------------------------------------------------- | ------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                                                                                 |                           |   | Three Months Ended
|                                                                                 |                           |   | March 31,         
|                                                                                 |                           |   |                   
|                                                                                 |                           |   | 2002               |        | 2001
|                                                                                 |                           |   |                    |        |     
|Net sales                                                                        |                           | $ | 99,104             |        |      | $ | 86,174 |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Cost of sales                                                                    |                           |   | 22,998             |        |      |   | 20,319 |       
|                                                                                 |                           |   |                    |        |      |   |        |       
|                                                                                 | Gross profit              |   |                    | 76,106 |      |   |        | 65,855 |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Selling, general and administrative expenses                                     |                           |   | 60,362             |        |      |   | 54,683 |       
|                                                                                 |                           |   |                    |        |      |   |        |       
|                                                                                 | Income from operations    |   |                    | 15,744 |      |   |        | 11,172 |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Other income (expense):                                                          |                           |   |                    |        |      |   |        |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Exchange gain (loss), net |   |                    | 486    |      |   |        | (2,180 | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Interest expense, net     |   |                    | (2,931 | )    |   |        | (3,487 | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other, net                |   |                    | 10     |      |   |        | (115   | )
|                                                                                 |                           |   |                    |        |      |   |        |       
|Income before income taxes and cumulative effect
of accounting change            |                           |   | 13,309             |        |      |   | 5,390  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Income tax expense                                                               |                           |   | 3,164              |        |      |   | 2,944  |       
|                                                                                 |                           |   |                    |        |      |   |        |       
|Income before cumulative effect of accounting change                             |                           |   | 10,145             |        |      |   | 2,446  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Cumulative effect of accounting change, net of income
tax expense of $82 in 2001 |                           |   |                   |        |      |   | 126    |       
|                                                                                 |                           |   |                    |        |      |   |        |       
|Net income                                                                       |                           | $ | 10,145             |        |      | $ | 2,572  |       
|                                                                                 |                           |   |                    |        |      |   |        |       

See accompanying notes to consolidated financial statements.

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##### Table of Contents






CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |        |       |         |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ----------------------------------------- | --------------------------------------------------- | ------ | ------------------ | ------ | ------ | ----- | ------- | ------ | -
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        | Three Months Ended
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        | March 31,         
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                   
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        | 2002               |        | 2001  
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash flows from operating activities:            |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                                                                                                            |                                                        | $                                         | 10,145                                              |        |                    | $      | 2,572  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Cumulative effect of accounting change, net of taxes   |                                           |                                                     |       |                    |        |        | (126  | )      
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 | Income before cumulative effect of accounting change                                                                                  |                                                        |                                           | 10,145                                              |        |                    |        | 2,446  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile income before cumulative effect of accounting change
to net cash provided by (used in) operating activities: |                                                        |                                           |                                                     |        |                    |        |        |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Gain on sale of property and equipment                 |                                           |                                                     | (43    | )                  |        |        |      |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Depreciation and amortization                          |                                           |                                                     | 1,143  |                    |        |        | 1,830 |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Amortization of deferred financing fees                |                                           |                                                     | 364    |                    |        |        | 352   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Provision for uncollectible accounts receivable        |                                           |                                                     | 2,343  |                    |        |        | 886   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Unrealized foreign exchange and derivative (gain) loss |                                           |                                                     | (789   | )                  |        |        | 822   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Deferred realized foreign exchange loss                |                                           |                                                     | 21     |                    |        |        |      |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Deferred income taxes                                  |                                           |                                                     | (2,417 | )                  |        |        |      |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Changes in operating assets and liabilities:           |                                           |                                                     |        |                    |        |        |       |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Receivables                               |                                                     |        | (6,657             | )      |        |       | (7,622  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Inventories                               |                                                     |        | 1,303              |        |        |       | 2,726   |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Prepaid expenses and other current assets |                                                     |        | 1,334              |        |        |       | 3,579   |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Other assets                              |                                                     |        | 1,067              |        |        |       | 904     |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Accounts payable and accrued liabilities  |                                                     |        | (11,241            | )      |        |       | (13,488 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Income taxes payable/prepaid              |                                                     |        | 3,294              |        |        |       | 3,277   |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Other long-term liabilities               |                                                     |        | 245                |        |        |       | (9      | )     
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 |                                                                                                                                       |                                                        |                                           | Net cash provided by (used in) operating activities |        |                    | 112    |        |       |         | (4,297 | )
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash flows from investing activities:            |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sale of property and equipment                                                                                          |                                                        |                                           | 183                                                 |        |                    |        |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of property and equipment                                                                                                   |                                                        |                                           | (1,995                                              | )      |                    |        | (1,609 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                                                                                 |                                                        |                                           | (275                                                | )      |                    |        | (50    | )    
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 |                                                                                                                                       |                                                        |                                           | Net cash used in investing activities               |        |                    | (2,087 | )      |       |         | (1,659 | )
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash flows from financing activities:            |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayments under term loan facility                                                                                                   |                                                        |                                           | (1,375                                              | )      |                    |        | (1,125 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Net borrowings under revolving credit facility                                                                                        |                                                        |                                           | 7,200                                               |        |                    |        | 8,000  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Net (repayments) borrowings under bank debt                                                                                           |                                                        |                                           | (122                                                | )      |                    |        | 1,102  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Issuance of common stock                                                                                                              |                                                        |                                           |                                                    |        |                    |        | 99     |      
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 |                                                                                                                                       |                                                        |                                           | Net cash provided by financing activities           |        |                    | 5,703  |        |       |         | 8,076  |  
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Effect of exchange rate changes on cash          |                                                                                                                                       |                                                        | (712                                      | )                                                   |        |                    | (500   | )     
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Net increase in cash and cash equivalents        |                                                                                                                                       |                                                        | 3,016                                     |                                                     |        |                    | 1,620  |       
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                                                                       |                                                        | 6,748                                     |                                                     |        |                    | 5,838  |       
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash and cash equivalents at end of period       |                                                                                                                                       | $                                                      | 9,764                                     |                                                     |        | $                  | 7,458  |       
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       

See accompanying notes to consolidated financial statements.

5



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##### Table of Contents






CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Basis of Presentation

The unaudited interim consolidated financial statements of CDRJ
Investments (Lux) S.A. (the Parent) and subsidiaries (the Company) as of
March 31, 2002 and for the three months ended March 31, 2002 and 2001 have been
prepared in accordance with Article 10 of the Securities and Exchange
Commissions Regulation S-X. In the opinion of management, the accompanying
unaudited interim financial statements contain all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the Companys
consolidated financial statements as of March 31, 2002 and for the interim
periods presented. All significant intercompany accounts and transactions have
been eliminated in consolidation.

The Parent, a Luxembourg société anonyme, Jafra Cosmetics International,
Inc., a Delaware corporation (JCI), Jafra Cosmetics International, S.A. de
C.V., a sociedad anonima de capital variableorganized under the laws of the
United Mexican States (Jafra S.A.), and certain other subsidiaries of the
Parent were organized by Clayton, Dubilier & Rice Fund V Limited Partnership, a
Cayman Islands exempted limited partnership managed by Clayton, Dubilier &
Rice, Inc. (CD&R), to acquire (the Acquisition) the worldwide Jafra
Cosmetics business (the Jafra Business). JCI and Jafra S.A. are indirect, wholly-owned subsidiaries of
the Parent. The Parent is a holding company that conducts all its operations
through its subsidiaries. The Parent and its subsidiaries are collectively
referred to as the Company.

In July 2001, the Financial Accounting Standards Board (FASB) approved
two new statements: Statement of Financial Accounting Standards (SFAS) No.
141, Business Combinations and SFAS No. 142, Goodwill and other Intangible
Assets. SFAS No. 141 requires business combinations
entered into after June 30, 2001 to be
accounted for using the purchase method of accounting. SFAS No. 142 requires
that goodwill not be amortized, but be tested for impairment at least annually.
SFAS No. 142 was effective for fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized in an entitys statement
of financial position at that date, regardless of when those assets were
initially recognized. The Company adopted SFAS No. 142 on January 1, 2002.
The Company identified all reporting units in conjunction with the provisions
of SFAS No. 142 and allocated all goodwill accordingly. However, in accordance
with SFAS No. 142, the Company is not required to complete the transitional
goodwill impairment test until June 30, 2002. The Company is currently
evaluating, but has not yet determined, whether the adoption of this statement
will result in an impairment of goodwill.
There were no changes, except for translation effects, to the carrying
amount of goodwill for the three months ended March 31, 2002.
The Companys other intangible
assets consist principally of trademarks. During the quarter
ended March 31, 2002, the Company determined trademarks to have an indefinite life and
performed the transitional impairment test as required under SFAS No. 142.
Based upon the valuation, the Company determined that there was no impairment
of trademarks. The net carrying value of trademarks was
$51,259,000 as of March 31, 2002.

In accordance with SFAS No. 142, the Company discontinued amortization of
goodwill and other intangible assets with an indefinite life. A reconciliation
of previously reported net income to amounts adjusted for the exclusion of
goodwill and trademark amortization, net of the related income tax
effects, where applicable, is as follows (in thousands):

|                                   |  |                              |        |      |  |   |       | 
|---------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ----- | 
|                                   |  | Three Months Ended March 31,
|                                   |  |                             
|                                   |  | 2002                         |        | 2001
|                                   |  |                              |        |     
|Net income                         |  | $                            | 10,145 |      |  | $ | 2,572 | 
|                                  
|                                  
|                                  
|                                  
|Goodwill amortization, net of tax  |  |                              |       |      |  |   | 335   | 
|                                  
|                                  
|                                  
|                                  
|Trademark amortization, net of tax |  |                              |       |      |  |   | 155   | 
|                                   |  |                              |        |      |  |   |       | 
|Adjusted net income                |  | $                            | 10,145 |      |  | $ | 3,062 | 
|                                   |  |                              |        |      |  |   |       | 

6



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##### Table of Contents



CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. SFAS No. 144 retains substantially all of the
requirements of SFAS No. 121, while resolving certain implementation issues and
addressing the accounting for a component of a business accounted for as a
discontinued operation. SFAS No. 144 was adopted with no significant impact on
the financial position or results of operations of the Company.

In November 2001, the Emerging Issues Task Force (EITF) issued EITF
Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer
or a Reseller of the Vendors Products. This new guidance provides that consideration from a vendor to a
reseller is generally presumed to be a reduction of the selling prices of the
vendors products, and, therefore, should be characterized as a reduction of
revenue when recognized in the vendors income statement. On January 1, 2002,
the Company adopted EITF Issue No. 01-9 and reclassified
commissions paid to consultants of $922,000 on
their personal sales, previously reported as a component of selling,
general and administrative expenses, as a reduction in net sales for the three
months ended March 31, 2001.

Certain
reclassifications were made to the prior year financial statements to
conform to current year presentation.

(2) Property and Equipment

Property and equipment consist of the following (in thousands):

|                              |  |           |        |              |  |   |        | 
|----------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                              |  | March 31, |        | December 31,
|                              |  | 2002      |        | 2001        
|                              |  |           |        |             
|Land                          |  | $         | 17,997 |              |  | $ | 17,833 | 
|                             
|                             
|                             
|                             
|Buildings                     |  |           | 18,632 |              |  |   | 18,523 | 
|                             
|                             
|                             
|                             
|Machinery and equipment       |  |           | 36,506 |              |  |   | 34,640 | 
|                              |  |           |        |              |  |   |        | 
|                              |  |           | 73,135 |              |  |   | 70,996 | 
|                             
|                             
|                             
|                             
|Less accumulated depreciation |  |           | 12,376 |              |  |   | 11,398 | 
|                              |  |           |        |              |  |   |        | 
|Property and equipment, net   |  | $         | 60,759 |              |  | $ | 59,598 | 
|                              |  |           |        |              |  |   |        | 

(3) Income Taxes

The actual income tax rate differs from the expected income tax rate
(computed by applying the U.S. federal corporate rate of 35% to income before
income taxes) for the three months ended March 31, 2002 principally as a result
of (i) a lower effective tax rate in the Mexico entity, Jafra S.A., as the
result of the enactment of changes in the Mexico corporate statutory tax rate
and the related impact on Jafra S.A.s net deferred income tax
liabilities of $1,167,000 and
(ii) the release of valuation allowances of $1,250,000 against certain deferred income tax
assets in the United States, partially offset by
state income taxes in the United States and valuation allowances provided
against certain operating losses in South America and Europe. The enactment in Mexico will reduce the Mexico corporate income tax rate annually
in one-percent increments from 35% to 32% beginning January 1, 2003 through
2005.

7



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##### Table of Contents



CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(4) Comprehensive Income

Comprehensive income is summarized as follows (in thousands):

|                                                                      |  |                    |        |      |  |   |       |  
|--------------------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ----- | -
|                                                                      |  | Three Months Ended
|                                                                      |  | March 31,         
|                                                                      |  |                   
|                                                                      |  | 2002               |        | 2001
|                                                                      |  |                    |        |     
|Net income                                                            |  | $                  | 10,145 |      |  | $ | 2,572 |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrealized and deferred realized losses on
derivatives                |  |                    | (2,195 | )    |  |   | (916  | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Reclassification to exchange gain (loss)                              |  |                    | 135    |      |  |   |      |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Reclassification to cost of sales                                     |  |                    | 937    |      |  |   | 27    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Tax benefit on unrealized and deferred realized
losses on derivatives |  |                    | 393    |      |  |   |      |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Foreign currency translation adjustment                               |  |                    | (27    | )    |  |   | (81   | )
|                                                                      |  |                    |        |      |  |   |       |  
|Comprehensive income                                                  |  | $                  | 9,388  |      |  | $ | 1,602 |  
|                                                                      |  |                    |        |      |  |   |       |  

(5) Financial Reporting for Business Segments

The Companys business is comprised of one industry segment, direct
selling, with worldwide operations. The Company is organized into geographical
business units that each sell the full line of Jafra cosmetics, skin care, body
care, fragrances, and other products. Jafra has three reportable business
segments: Mexico, the United States, and Europe. Business results for
subsidiaries in South America, the Dominican Republic, and Thailand are
combined and included in the following table under the caption All Others.

The accounting policies used to prepare the information reviewed by the
Companys chief operating decision makers are the same as those described in
the summary of significant accounting policies included in the Companys
audited consolidated financial statements as of and for the year ended December
31, 2001 included in the Companys Annual Report on Form 10-K. The Company
evaluates performance based on segment operating income, excluding
restructuring and impairment charges, unusual gains and losses, and
amortization of goodwill and intangibles. Consistent with the information
reviewed by the Companys chief operating decision makers, corporate costs,
foreign exchange gains and losses, interest expense, other nonoperating income
or expense, and income taxes are not allocated to operating segments for
purposes of this presentation. The effects of intersegment sales (net sales
and related gross profit) are excluded from the related captions below and from
the computation of segment operating income.

|                                                    |  |                |        |        |  |        |         |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |        |   |  |   |         | 
|--------------------------------------------------- |  | -------------- | ------ | ------ |  | ------ | ------- | ------ |  | -------- | ------ | --------- |  | ----- | ------ | ----------- |  | ------------ | ------- |  |  | ---------- | ------ | - |  | - | ------- | 
|                                                    |  |                |        |        |  |        |         |        |  |          |        |           |  |       |        |             |  |              |         |  |  | Corporate, |        |   |  |  
|                                                    |  | United         |        |        |  |        |         |        |  |          |        | All       |  | Total |        | Unallocated |  | Consolidated
|                                                    |  | States         |        | Mexico |  | Europe |         | Others |  | Segments |        | and Other |  | Total
|                                                    |  |                |        |        |  |        |         |        |  |          |        |           |  |      
|                                                    |  | (in thousands)
|As of and for the Three
Months Ended March 31, 2002 |  |                |        |        |  |        |         |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |        |   |  |   |         | 
|                                                   
|                                                   
|                                                   
|                                                   
|Net sales                                           |  | $              | 20,875 |        |  | $      | 66,487  |        |  | $        | 5,810  |           |  | $     | 5,932  |             |  | $            | 99,104  |  |  | $          |       |   |  | $ | 99,104  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Operating profit (loss)                             |  |                | 2,862  |        |  |        | 17,589  |        |  |          | 48     |           |  |       | (831   | )           |  |              | 19,668  |  |  |            | (3,924 | ) |  |   | 15,744  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Depreciation and amortization                       |  |                | 565    |        |  |        | 443     |        |  |          | 65     |           |  |       | 70     |             |  |              | 1,143   |  |  |            |       |   |  |   | 1,143   | 
|                                                   
|                                                   
|                                                   
|                                                   
|Capital expenditures                                |  |                | 1,626  |        |  |        | 357     |        |  |          | 3      |           |  |       | 9      |             |  |              | 1,995   |  |  |            |       |   |  |   | 1,995   | 
|                                                   
|                                                   
|                                                   
|                                                   
|Segment assets                                      |  |                | 71,651 |        |  |        | 198,324 |        |  |          | 18,369 |           |  |       | 12,351 |             |  |              | 300,695 |  |  |            | (1,341 | ) |  |   | 299,354 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Goodwill                                            |  |                | 32,188 |        |  |        | 32,857  |        |  |          | 6,009  |           |  |       | 579    |             |  |              | 71,633  |  |  |            |       |   |  |   | 71,633  | 
|                                                   
|                                                   
|                                                   
|                                                   
|As of and for the Three
Months Ended March 31, 2001 |  |                |        |        |  |        |         |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |        |   |  |   |         | 
|                                                   
|                                                   
|                                                   
|                                                   
|Net sales                                           |  | $              | 18,230 |        |  | $      | 56,078  |        |  | $        | 6,229  |           |  | $     | 5,637  |             |  | $            | 86,174  |  |  | $          |       |   |  | $ | 86,174  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Operating profit (loss)                             |  |                | 791    |        |  |        | 16,984  |        |  |          | 91     |           |  |       | (1,571 | )           |  |              | 16,295  |  |  |            | (5,123 | ) |  |   | 11,172  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Depreciation and amortization                       |  |                | 545    |        |  |        | 1,084   |        |  |          | 91     |           |  |       | 106    |             |  |              | 1,826   |  |  |            | 4      |   |  |   | 1,830   | 
|                                                   
|                                                   
|                                                   
|                                                   
|Capital expenditures                                |  |                | 1,550  |        |  |        |        |        |  |          | 26     |           |  |       | 33     |             |  |              | 1,609   |  |  |            |       |   |  |   | 1,609   | 
|                                                   
|                                                   
|                                                   
|                                                   
|Segment assets                                      |  |                | 68,604 |        |  |        | 178,402 |        |  |          | 16,958 |           |  |       | 13,467 |             |  |              | 277,431 |  |  |            | (278   | ) |  |   | 277,153 | 

8



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##### Table of Contents



CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(6) Restructuring Charges and Related Accruals

At December 31, 2001, restructuring liabilities of approximately $200,000
were reflected on the Companys consolidated balance sheet. During the three
months ended March 31, 2002, payments of approximately $100,000 related to
restructuring items have been charged against this accrual. As of March 31,
2002, the remaining restructuring liability is approximately $100,000.

(7) Foreign Currency Forward and Option Contracts

The Company is exposed to currency risk relating to its forecasted U.S.
dollar-denominated expenditures at Jafra S.A. As part of its overall strategy
to reduce the risk of potential adverse exchange rate fluctuations in Mexico,
the Company enters into foreign currency exchange contracts (forward
contracts). Beginning in 2002, the Company also enters into foreign currency
option contracts (option contracts or options). The Company places forward
contracts or option contracts based on its rolling 12 month forecasted U.S.
dollar cash outflows from Jafra S.A. and hedges transactions included in the
forecast on the date the forward contract or option contract is initiated. As
a matter of policy, the Company does not hold or issue forward contracts or
option contracts for trading or speculative purposes nor does it enter into
contracts or agreements containing embedded derivative features.

Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS No. 133, as amended
and interpreted, establishes accounting and reporting standards for derivative
instruments and hedging activities and requires that all derivative instruments
be recorded based on fair value. In connection with the adoption of SFAS No.
133, at January 1, 2001, the Company recorded a net gain of $126,000 (net of a
tax effect of $82,000) as a cumulative transition adjustment to earnings. This
adjustment relates to derivatives not designated as hedges prior to adoption of
SFAS No. 133, and represents the difference between the carrying value and the
fair value of such instruments. Under SFAS No. 133, the Companys use of
forward contracts or option contracts to hedge certain forecasted transactions
qualifies for hedge accounting. Gains and losses from such derivatives are
deferred as a separate component of other comprehensive income, and are
recognized in income at the same time that the underlying hedged exposure is
recognized in income. This accounting treatment results in the matching of
gains and losses from such forward contracts with the corresponding gains and
losses generated by the underlying hedged transactions. Contracts that do not
qualify for hedge accounting under SFAS No. 133 are remeasured based on fair
value and the gains and losses included as a component of net income.

The Company currently designates certain of its forward contracts and
option contracts as cash flow hedges of forecasted U.S. dollar-denominated
inventory purchases, forecasted U.S. dollar-denominated intercompany charges
from JCI to Jafra S.A., forecasted management fee charges from JCI to Jafra
S.A., and U.S. dollar-denominated interest payments. For all qualifying and
highly effective cash flow hedges, the changes in the fair value of the
derivative are deferred as a component of other comprehensive income. Such
amounts will be reclassified from other comprehensive income into net income
when the underlying hedged exposure is recognized in income. For U.S.
dollar-denominated inventory purchases, this will occur upon sale to an outside
party of the related inventory. For intercompany charges and interest, this
will occur at the date such charges are paid by Jafra S.A.

9



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##### Table of Contents



CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

During the three months ended March 31, 2002 and 2001, the Company
recognized losses on forward contracts of approximately $355,000 and
$3,408,000, respectively, as a component of exchange gain (loss) on the
accompanying consolidated statements of operations. As of December 31, 2001,
the Company had deferred as a component of other comprehensive income
$3,746,000 of losses on forward contracts. During the three months ended March
31, 2002, the Company deferred as a component of other comprehensive income an
additional $2,244,000 of losses on forward contracts and $49,000 of gains on
option contracts qualifying for hedge accounting under SFAS No. 133. During the
three months ended March 31, 2002, approximately $135,000 was reclassified as
exchange gain (loss) and $937,000 was reclassified as cost of sales upon
recognition of the underlying hedged exposure. The Company expects that
substantially all of the remaining loss of $4,869,000 deferred as a component
of other comprehensive income at March 31, 2002 will be recognized into net
income within the next twelve months. The fair value of the forward contracts
was $4,986,000 and $4,292,000 at March 31, 2002 and 2001,
respectively and has
been recorded in accrued liabilities in the consolidated balance sheets. The
fair value of the option contacts was $49,000 at March 31, 2002, and was
recorded as an offset to accrued liabilities in the consolidated
balance sheets.

During the three months ended March 31, 2002 and 2001, the ineffectiveness
generated by the Companys forward contracts designated as hedges was
insignificant. Certain hedged forecasted transactions do not appear probable
of occurring due to timing differences between the original and current
forecasts, and accordingly during the three months ended March 31, 2002,
$206,000 of gains were reclassified into earnings.

The
outstanding foreign currency forward contracts had notional
values denominated in Mexican pesos of $579,000,000 in equal
offsetting buy and sell positions at March 31, 2002 and
$862,000,000 in a buy position at
March 31, 2001. The
contracts outstanding at March 31, 2002 mature at various dates extending to
November 2002 and the contracts outstanding at March 31, 2001 matured at
various dates through December 2001. The outstanding foreign currency option
contracts had a notional value denominated in Mexican pesos of $703,500,000 in offsetting put and call positions at March 31, 2002. Notional
amounts do not quantify market or credit exposure or represent assets or
liabilities of the Company, but are used in the calculation of cash settlements
under the contracts. (See Item 3 Quantitative and Qualitative Disclosures
About Market Risk).

10



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##### Table of Contents






JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)

|                              |                                                                                                 |                                      |                            |        |   |           |         |              |   |        |         | 
|----------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------ | -------------------------- | ------ | - | --------- | ------- | ------------ | - | ------ | ------- | 
|                              |                                                                                                 |                                      |                            |        |   | March 31, |         | December 31,
|                              |                                                                                                 |                                      |                            |        |   | 2002      |         | 2001        
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 |                                      |                            | ASSETS |   |           |         |              |   |        |         | 
|                             
|                             
|                             
|                             
|Current assets:               |                                                                                                 |                                      |                            |        |   |           |         |             
|                             
|                             
|                             
|                             
|                              | Cash and cash equivalents                                                                       |                                      | $                          | 5,169  |   |           | $       | 4,081        |  
|                             
|                             
|                             
|                             
|                              | Receivables, net                                                                                |                                      |                            | 5,253  |   |           |         | 6,447        |  
|                             
|                             
|                             
|                             
|                              | Inventories                                                                                     |                                      |                            | 10,926 |   |           |         | 8,677        |  
|                             
|                             
|                             
|                             
|                              | Receivables from affiliates                                                                     |                                      |                            | 20,424 |   |           |         | 23,633       |  
|                             
|                             
|                             
|                             
|                              | Prepaid expenses and other current assets                                                       |                                      |                            | 1,359  |   |           |         | 1,665        |  
|                             
|                             
|                             
|                             
|                              | Deferred income taxes                                                                           |                                      |                            | 1,305  |   |           |         | 55           |  
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 |                                      | Total current assets       |        |   | 44,436    |         |              |   | 44,558 |        
|                             
|                             
|                             
|                             
|Property and equipment, net   |                                                                                                 |                                      | 23,693                     |        |   |           | 22,742  |             
|                             
|                             
|                             
|                             
|Other assets:                 |                                                                                                 |                                      |                            |        |   |           |         |             
|                             
|                             
|                             
|                             
|                              | Goodwill                                                                                        |                                      |                            | 38,197 |   |           |         | 38,125       |  
|                             
|                             
|                             
|                             
|                              | Notes receivable from affiliates                                                                |                                      |                            | 5,502  |   |           |         | 3,902        |  
|                             
|                             
|                             
|                             
|                              | Deferred financing fees, net                                                                    |                                      |                            | 2,846  |   |           |         | 3,004        |  
|                             
|                             
|                             
|                             
|                              | Other                                                                                           |                                      |                            | 3,913  |   |           |         | 3,716        |  
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 |                                      |                            | Total  |   | $         | 118,587 |              |   | $      | 116,047 | 
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 | LIABILITIES AND STOCKHOLDERS EQUITY |                            |        |   |           |         |              |   |       
|                             
|                             
|                             
|                             
|Current liabilities:          |                                                                                                 |                                      |                            |        |   |           |         |             
|                             
|                             
|                             
|                             
|                              | Current portion of long-term debt                                                               |                                      | $                          | 3,250  |   |           | $       | 3,000        |  
|                             
|                             
|                             
|                             
|                              | Accounts payable                                                                                |                                      |                            | 4,188  |   |           |         | 5,591        |  
|                             
|                             
|                             
|                             
|                              | Accrued liabilities                                                                             |                                      |                            | 12,753 |   |           |         | 12,709       |  
|                             
|                             
|                             
|                             
|                              | Income taxes payable                                                                            |                                      |                            | 1,287  |   |           |         | 965          |  
|                             
|                             
|                             
|                             
|                              | Payables to affiliates                                                                          |                                      |                            | 6,023  |   |           |         | 2,639        |  
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 |                                      | Total current liabilities  |        |   | 27,501    |         |              |   | 24,904 |        
|                             
|                             
|                             
|                             
|Long-term debt                |                                                                                                 |                                      | 50,108                     |        |   |           | 52,908  |             
|                             
|                             
|                             
|                             
|Deferred income taxes         |                                                                                                 |                                      | 3,353                      |        |   |           | 3,353   |             
|                             
|                             
|                             
|                             
|Other long-term liabilities   |                                                                                                 |                                      | 2,680                      |        |   |           | 3,088   |             
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 |                                      | Total liabilities          |        |   | 83,642    |         |              |   | 84,253 |        
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|Commitments and contingencies |                                                                                                 |                                      |                           |        |   |           |        |             
|                             
|                             
|                             
|                             
|Stockholders equity:         |                                                                                                 |                                      |                            |        |   |           |         |             
|                             
|                             
|                             
|                             
|                              | Common stock, par value $.01; authorized, issued
and outstanding, 1,000 shares in 2002 and 2001 |                                      |                            |       |   |           |         |             |  
|                             
|                             
|                             
|                             
|                              | Additional paid-in capital                                                                      |                                      |                            | 39,649 |   |           |         | 39,649       |  
|                             
|                             
|                             
|                             
|                              | Retained deficit                                                                                |                                      |                            | (2,231 | ) |           |         | (5,376       | )
|                             
|                             
|                             
|                             
|                              | Accumulated other comprehensive loss                                                            |                                      |                            | (2,473 | ) |           |         | (2,479       | )
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 |                                      | Total stockholders equity |        |   | 34,945    |         |              |   | 31,794 |        
|                              |                                                                                                 |                                      |                            |        |   |           |         |             
|                              |                                                                                                 |                                      |                            | Total  |   | $         | 118,587 |              |   | $      | 116,047 | 
|                              |                                                                                                 |                                      |                            |        |   |           |         |             

See accompanying notes to consolidated financial statements.

11



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##### Table of Contents






JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)

|                                             |                           |   |                    |        |      |   |        |        |  
|-------------------------------------------- | ------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                                             |                           |   | Three Months Ended
|                                             |                           |   | March 31,         
|                                             |                           |   |                   
|                                             |                           |   | 2002               |        | 2001
|                                             |                           |   |                    |        |     
|Net sales to third parties                   |                           | $ | 28,671             |        |      | $ | 25,284 |       
|                                            
|                                            
|                                            
|                                            
|Sales to affiliates                          |                           |   | 3,540              |        |      |   | 2,504  |       
|                                             |                           |   |                    |        |      |   |        |       
|Net sales                                    |                           |   | 32,211             |        |      |   | 27,788 |       
|                                            
|                                            
|                                            
|                                            
|Cost of sales                                |                           |   | 9,301              |        |      |   | 7,937  |       
|                                             |                           |   |                    |        |      |   |        |       
|                                             | Gross profit              |   |                    | 22,910 |      |   |        | 19,851 |  
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |                           |   | 24,628             |        |      |   | 24,100 |       
|                                            
|                                            
|                                            
|                                            
|Management fee income from affiliates        |                           |   | (2,125             | )      |      |   | (2,253 | )     
|                                            
|                                            
|                                            
|                                            
|Royalty income from affiliates, net          |                           |   | (4,638             | )      |      |   | (4,692 | )     
|                                             |                           |   |                    |        |      |   |        |       
|                                             | Income from operations    |   |                    | 5,045  |      |   |        | 2,696  |  
|                                            
|                                            
|                                            
|                                            
|Other income (expense):                      |                           |   |                    |        |      |   |        |       
|                                            
|                                            
|                                            
|                                            
|                                             | Exchange (loss) gain, net |   |                    | (136   | )    |   |        | 200    |  
|                                            
|                                            
|                                            
|                                            
|                                             | Interest expense, net     |   |                    | (1,587 | )    |   |        | (1,736 | )
|                                            
|                                            
|                                            
|                                            
|                                             | Other, net                |   |                    | 13     |      |   |        | (94    | )
|                                             |                           |   |                    |        |      |   |        |       
|Income before income taxes                   |                           |   | 3,335              |        |      |   | 1,066  |       
|                                            
|                                            
|                                            
|                                            
|Income tax expense                           |                           |   | 190                |        |      |   | 674    |       
|                                             |                           |   |                    |        |      |   |        |       
|Net income                                   |                           | $ | 3,145              |        |      | $ | 392    |       
|                                             |                           |   |                    |        |      |   |        |       

See accompanying notes to consolidated financial statements.

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##### Table of Contents






JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |        |     |        |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | --------------------------------------------------- | ------ | ------------------ | ------ | ------ | --- | ------ | ------ | -
|                                                     |                                                                                             |                                                 |                                           |                                                     |        | Three Months Ended
|                                                     |                                                                                             |                                                 |                                           |                                                     |        | March 31,         
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   
|                                                     |                                                                                             |                                                 |                                           |                                                     |        | 2002               |        | 2001  
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|Cash flows from operating activities:                |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                                                                                  |                                                 | $                                         | 3,145                                               |        |                    | $      | 392    |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |                                                 |                                           |                                                     |        |                    |        |        |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Depreciation and amortization                   |                                           |                                                     | 661    |                    |        |        | 651 |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Provision for uncollectible accounts receivable |                                           |                                                     | 153    |                    |        |        | 108 |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Amortization of deferred financing fees         |                                           |                                                     | 158    |                    |        |        | 157 |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Unrealized foreign exchange loss                |                                           |                                                     | 164    |                    |        |        | 22  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Deferred income taxes                           |                                           |                                                     | (1,250 | )                  |        |        |    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Changes in operating assets and liabilities:    |                                           |                                                     |        |                    |        |        |     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Receivables                               |                                                     |        | 1,041              |        |        |     | (549   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Inventories                               |                                                     |        | (2,249             | )      |        |     | 472    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Prepaid expenses and other current assets |                                                     |        | 306                |        |        |     | 187    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Intercompany receivables and payables     |                                                     |        | 6,429              |        |        |     | (5,168 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Other assets                              |                                                     |        | 78                 |        |        |     |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Accounts payable and accrued liabilities  |                                                     |        | (1,359             | )      |        |     | (1,544 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Income taxes payable/prepaid              |                                                     |        | 322                |        |        |     | 529    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                 | Other long-term liabilities               |                                                     |        | (408               | )      |        |     | (10    | )     
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|                                                     |                                                                                             |                                                 |                                           | Net cash provided by (used in) operating activities |        |                    | 7,191  |        |     |        | (4,753 | )
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|Cash flows from investing activities:                |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property and equipment                                                         |                                                 |                                           | (1,630                                              | )      |                    |        | (1,576 | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                                       |                                                 |                                           | (275                                                | )      |                    |        | (50    | )  
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|                                                     |                                                                                             |                                                 |                                           | Net cash used in investing activities               |        |                    | (1,905 | )      |     |        | (1,626 | )
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|Cash flows from financing activities:                |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments under term loan facility                                                         |                                                 |                                           | (750                                                | )      |                    |        | (625   | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net repayments under revolving credit facility                                              |                                                 |                                           | (1,800                                              | )      |                    |        | (2,000 | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | (Lending) repayment of note receivable from affiliate                                       |                                                 |                                           | (1,600                                              | )      |                    |        | 8,376  |    
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|                                                     |                                                                                             |                                                 |                                           | Net cash (used in) provided by financing activities |        |                    | (4,150 | )      |     |        | 5,751  |  
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|Effect of exchange rate changes on cash              |                                                                                             |                                                 | (48                                       | )                                                   |        |                    | (457   | )     
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|Net increase (decrease) in cash and cash equivalents |                                                                                             |                                                 | 1,088                                     |                                                     |        |                    | (1,085 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of period     |                                                                                             |                                                 | 4,081                                     |                                                     |        |                    | 3,382  |       
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       
|Cash and cash equivalents at end of period           |                                                                                             | $                                               | 5,169                                     |                                                     |        | $                  | 2,297  |       
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                    |        |       

See accompanying notes to consolidated financial statements.

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JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Basis of Presentation

Jafra Cosmetics International, Inc., a Delaware corporation (JCI or the
Company) is an indirect wholly-owned subsidiary of CDRJ North Atlantic (Lux)
S.a.r.L., a Luxembourg société a responsabilité
limitée, which is a wholly-owned subsidiary of CDRJ Investments (Lux) S.A., a Luxembourg société anonyme
(the Parent). JCI, its subsidiaries, and certain other subsidiaries of the
Parent were organized by Clayton, Dubilier & Rice Fund V Limited Partnership, a
Cayman Islands exempted limited partnership managed by Clayton, Dubilier &
Rice, Inc. (CD&) to acquire (the Acquisition) the worldwide Jafra
Cosmetics business (the Jafra Business) of The Gillette Company
(Gillette).

The accompanying unaudited interim consolidated financial statements as of
March 31, 2002 and for the three months ended March 31, 2002 and 2001 reflect
the operations of JCI and have been prepared in accordance with Article 10 of
the Securities and Exchange Commissions Regulation S-X. In the opinion of
management, the accompanying unaudited interim financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly JCIs consolidated financial statements as of March 31, 2002 and for the
interim periods presented. All significant intercompany accounts and
transactions between entities comprising JCI have been eliminated in
consolidation.

The functional currency of certain of the Companys subsidiaries consists
of currencies other than the U.S. dollar. For presentation purposes, assets
and liabilities are translated into U.S. dollars at current exchange rates, and
related revenues and expenses are translated at average exchange rates in
effect during the period. Resulting translation adjustments are recorded as a
component of other comprehensive income (loss).

In July 2001, the Financial Accounting Standards Board (FASB) approved
two new statements: Statement of Financial Accounting Standards (SFAS) No.
141, Business Combinations and SFAS No. 142, Goodwill and other Intangible
Assets. SFAS No. 141 requires business combinations
entered into after June 30, 2001 to be
accounted for using the purchase method of accounting. SFAS No. 142 requires
that goodwill not be amortized, but be tested for impairment at least annually.
SFAS No. 142 was effective for fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized in an entitys statement
of financial position at that date, regardless of when those assets were
initially recognized. The Company adopted SFAS No. 142 on January 1, 2002.
The Company identified all reporting units in conjunction with the provisions
of SFAS No. 142 and allocated all goodwill accordingly. However, in accordance
with SFAS No. 142, the Company is not required to complete the transitional
goodwill impairment test until June 30, 2002. The Company is currently
evaluating, but has not yet determined, whether the adoption of this statement
will result in an impairment of goodwill.
There were no changes, except for translation effects, to the carrying
amount of goodwill for the three months ended March 31, 2002.
The Companys other intangible
assets consist principally of trademarks. During the quarter ended March
31, 2002, the Company determined trademarks to have an indefinite life and
performed the transitional impairment test as required under SFAS No. 142.
Based upon the valuation, the Company determined that there was no impairment
of trademarks. The trademark valuation was performed in conjunction with
the valuation of the Parents consolidated trademarks. The net
carrying value of trademarks is $197,000 as of March 31, 2002.

14



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JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In accordance with SFAS No. 142, the Company discontinued amortization of
goodwill and other intangible assets with an indefinite life. A reconciliation
of previously reported net income to amounts adjusted for the exclusion of
goodwill and trademark amortization, net of the related income tax effects
follows, where applicable, is as (in thousands):

|                                  |  |                              |       |      |  |   |     | 
|--------------------------------- |  | ---------------------------- | ----- | ---- |  | - | --- | 
|                                  |  | Three Months Ended March 31,
|                                  |  |                             
|                                  |  | 2002                         |       | 2001
|                                  |  |                              |       |     
|Net income                        |  | $                            | 3,145 |      |  | $ | 392 | 
|                                 
|                                 
|                                 
|                                 
|Goodwill amortization, net of tax |  |                              |      |      |  |   | 119 | 
|                                 
|                                 
|                                 
|                                 
|Trademark amortization            |  |                              |      |      |  |   | 11  | 
|                                  |  |                              |       |      |  |   |     | 
|Adjusted net income               |  | $                            | 3,145 |      |  | $ | 522 | 
|                                  |  |                              |       |      |  |   |     | 

On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. SFAS No. 144 retains substantially all of the
requirements of SFAS No. 121, while resolving certain implementation issues and
addressing the accounting for a component of a business accounted for as a
discontinued operation. SFAS No. 144 was adopted with no significant impact on
the financial position or results of operations of the Company.

In November 2001, the Emerging Issues Task Force (EITF) issued EITF
Issue no. 01-9, Accounting for Consideration Given by a Vendor to a Customer
or a Reseller of the Vendors Products. This new guidance provides that consideration from a vendor to a
reseller is generally presumed to be a reduction of the selling prices of the
vendors products, and, therefore, should be characterized as a reduction of
revenue when recognized in the vendors income statement. On January 1, 2002,
the Company adopted EITF Issue No. 01-9 and reclassified commissions paid to consultants of $340,000 on
their personal sales, previously reported as a component of selling,
general and administrative expenses, as a reduction in net sales for the three
months ended March 31, 2001.

Certain reclassifications were made to the
prior year financial statements to conform to current year presentation.

(2) Property and Equipment

Property and equipment consist of the following (in thousands):

|                              |  |           |        |              |  |   |        | 
|----------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                              |  | March 31, |        | December 31,
|                              |  | 2002      |        | 2001        
|                              |  |           |        |             
|Land                          |  | $         | 6,188  |              |  | $ | 6,188  | 
|                             
|                             
|                             
|                             
|Buildings                     |  |           | 6,765  |              |  |   | 6,763  | 
|                             
|                             
|                             
|                             
|Machinery and equipment       |  |           | 17,421 |              |  |   | 15,971 | 
|                              |  |           |        |              |  |   |        | 
|                              |  |           | 30,374 |              |  |   | 28,922 | 
|                             
|                             
|                             
|                             
|Less accumulated depreciation |  |           | 6,681  |              |  |   | 6,180  | 
|                              |  |           |        |              |  |   |        | 
|Property and equipment, net   |  | $         | 23,693 |              |  | $ | 22,742 | 
|                              |  |           |        |              |  |   |        | 

(3) Income Taxes

The actual income tax rate differs from the expected income tax rate
(computed by applying the U.S. federal corporate rate of 35% to income before
income taxes) for the three months ended March 31, 2002 principally as a result
of the release of valuation allowances against certain deferred income tax
assets in the United States, partially offset by state income tax and
valuation allowances provided against certain operating losses in
Europe.

15



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JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(4) Comprehensive Income (Loss)

Comprehensive income (loss) is summarized as follows (in thousands):

|                                        |  |                    |       |      |  |   |      |  
|--------------------------------------- |  | ------------------ | ----- | ---- |  | - | ---- | -
|                                        |  | Three Months Ended
|                                        |  | March 31,         
|                                        |  |                   
|                                        |  | 2002               |       | 2001
|                                        |  |                    |       |     
|Net income                              |  | $                  | 3,145 |      |  | $ | 392  |  
|                                       
|                                       
|                                       
|                                       
|Foreign currency translation adjustment |  |                    | 6     |      |  |   | (905 | )
|                                        |  |                    |       |      |  |   |      |  
|Comprehensive income (loss)             |  | $                  | 3,151 |      |  | $ | (513 | )
|                                        |  |                    |       |      |  |   |      |  

(5) Related Party Transactions

The Company distributes skin and body products to other affiliates of the
Parent (Affiliates). Sales to Affiliates, primarily in Mexico and South
America, were $3,540,000 and $2,504,000 for the three months ended March 31,
2002 and 2001, respectively. These sales were made at cost plus a
markup ranging from 0 to 11%. The Company purchased color and fragrance
products from the Parents Mexico affiliate totaling $4,924,000 and $2,237,000
for the three months ended March 31, 2002 and 2001, respectively.

In addition, the Company provides certain management services, such as
legal, accounting and treasury, management oversight, and other administrative
functions to Affiliates. The cost of these services is included in selling,
general and administrative expenses in the accompanying consolidated statements
of operations. The Company charges out a portion of these management expenses
to its Affiliates based upon charges identified to specific Affiliates and a
formula using the percentage of revenues of each Affiliate to the total
consolidated revenues of the Parent. The Company believes the amounts and
methods of allocation are reasonable and approximate the cost of the actual
services provided. Management fee income, which consists of amounts billed to
Affiliates in Mexico and South America, was $2,125,000 and $2,253,000 for the
three months ended March 31, 2002 and 2001, respectively.

The Company is charged a royalty by Jafra S.A. for the right to use the
Jafra trademark in the United States and Europe. The total royalty expense
charged by Jafra S.A. to the Company was $552,000 and $402,000 for the three
months ended March 31, 2002 and 2001, respectively, and is offset against
royalty income from affiliates in the accompanying consolidated statements of
operations.

The Company owns the worldwide rights to its multi-level sales know-how
(referred to as the Jafra Way). The Jafra Way was initially developed in the
United States for lineage, training, and compensation of consultants. The
royalty fees charged by the Company to Jafra S.A. were $5,190,000 and
$5,094,000 for the three months ended March 31, 2002 and 2001,
respectively, and are based upon a percentage of Jafra S.A.s sales.

The Company has granted loans to certain Affiliates at annual interest
rates ranging from 6% to 9%. Such loans are due to be repaid five years from
the date of grant, with no prepayment penalty. Notes receivable from
Affiliates at December 31, 2001 and March 31, 2002 consist primarily of loans
the Company has made to indirect subsidiaries of the Parent to fund certain of
their operations in South America. Net interest income from Affiliates was
$56,000 and $289,000 for the three months ended March 31, 2002
and 2001, respectively.

(6) Financial Reporting for Business Segments

The Companys business is comprised of one industry segment, direct
selling, with worldwide operations, principally in the United States and
Europe. The Company is organized into geographical business units that each
sell the full line of Jafra cosmetics, skin care, body care, fragrances, and
other products. The Company has two reportable business segments: the United
States and Europe. Business results for subsidiaries in the Dominican Republic
and Thailand are combined and included in the following table under the caption
All Others.

16



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##### Table of Contents



JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The accounting policies used to prepare the information reviewed by the
Companys chief operating decision makers are the same as those described in
the summary of significant accounting policies included in the Companys
audited consolidated financial statements as of and for the year ended December
31, 2001 included in the Parents Annual Report on Form 10-K. The Company
evaluates performance based on segment operating income, excluding
restructuring and impairment charges, unusual gains and losses, and
amortization of goodwill and intangibles. Consistent with the information
reviewed by the Companys chief operating decision makers, corporate costs,
foreign exchange gains and losses, interest expense, other nonoperating income
or expense, and income taxes are not allocated to operating segments for
purposes of this presentation. The effects of intersegment sales (net sales
and related gross profit) are excluded from the computation of segment
operating income. Sales and gross profit related to Affiliates (primarily in
Mexico and South America) is included in the following table under the caption
Corporate, Unallocated and Other. Segment assets exclude notes and accounts
receivable from Affiliates.

|                                                    |  |                |        |            |  |        |        |          |  |           |       |             |  |              |        |  |  |            |       |  |  |   |        | 
|--------------------------------------------------- |  | -------------- | ------ | ---------- |  | ------ | ------ | -------- |  | --------- | ----- | ----------- |  | ------------ | ------ |  |  | ---------- | ----- |  |  | - | ------ | 
|                                                    |  |                |        |            |  |        |        |          |  |           |       |             |  |              |        |  |  | Corporate, |       |  |  |  
|                                                    |  | United         |        |            |  |        |        | All      |  | Total     |       | Unallocated |  | Consolidated
|                                                    |  | States         |        | Europe (1) |  | Others |        | Segments |  | And Other |       | Total      
|                                                    |  |                |        |            |  |        |        |          |  |           |       |            
|                                                    |  | (in thousands)
|As of and for the Three
Months ended March 31, 2002 |  |                |        |            |  |        |        |          |  |           |       |             |  |              |        |  |  |            |       |  |  |   |        | 
|                                                   
|                                                   
|                                                   
|                                                   
|Net sales                                           |  | $              | 20,875 |            |  | $      | 5,810  |          |  | $         | 1,986 |             |  | $            | 28,671 |  |  | $          | 3,540 |  |  | $ | 32,211 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Operating profit                                    |  |                | 2,862  |            |  |        | 48     |          |  |           | 113   |             |  |              | 3,023  |  |  |            | 2,022 |  |  |   | 5,045  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Depreciation and amortization                       |  |                | 565    |            |  |        | 62     |          |  |           | 34    |             |  |              | 661    |  |  |            |      |  |  |   | 661    | 
|                                                   
|                                                   
|                                                   
|                                                   
|Capital expenditures                                |  |                | 1,626  |            |  |        | 3      |          |  |           | 1     |             |  |              | 1,630  |  |  |            |      |  |  |   | 1,630  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Segment assets                                      |  |                | 71,651 |            |  |        | 18,119 |          |  |           | 2,891 |             |  |              | 92,661 |  |  |            |      |  |  |   | 92,661 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Goodwill                                            |  |                | 32,188 |            |  |        | 6,009  |          |  |           |      |             |  |              | 38,197 |  |  |            |      |  |  |   | 38,197 | 
|                                                   
|                                                   
|                                                   
|                                                   
|As of and for the Three
Months ended March 31, 2001 |  |                |        |            |  |        |        |          |  |           |       |             |  |              |        |  |  |            |       |  |  |   |        | 
|                                                   
|                                                   
|                                                   
|                                                   
|Net sales                                           |  | $              | 18,230 |            |  | $      | 6,195  |          |  | $         | 859   |             |  | $            | 25,284 |  |  | $          | 2,504 |  |  | $ | 27,788 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Operating profit (loss)                             |  |                | 791    |            |  |        | 91     |          |  |           | (323  | )           |  |              | 559    |  |  |            | 2,137 |  |  |   | 2,696  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Depreciation and amortization                       |  |                | 545    |            |  |        | 90     |          |  |           | 16    |             |  |              | 651    |  |  |            |      |  |  |   | 651    | 
|                                                   
|                                                   
|                                                   
|                                                   
|Capital expenditures                                |  |                | 1,550  |            |  |        | 26     |          |  |           |      |             |  |              | 1,576  |  |  |            |      |  |  |   | 1,576  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Segment assets                                      |  |                | 68,604 |            |  |        | 16,865 |          |  |           | 2,459 |             |  |              | 87,928 |  |  |            |      |  |  |   | 87,928 | 



---

|(1) |  | excludes Poland, an indirect
wholly-owned subsidiary of the Parent, an
affiliate of JCI
|--- |  | ---------------------------------------------------------------------------------------

(7) Restructuring Charges and Related Accruals

At December 31, 2001, restructuring liabilities of approximately $100,000
were reflected on the Companys consolidated balance sheet. During the three
months ended March 31, 2002, nominal payments have been charged against this
accrual. As of March 31, 2002, the remaining restructuring liability is
approximately $100,000.

17



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##### Table of Contents






JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)

|                              |                                                                                                      |                                      |                            |        |   |           |        |              |   |         |  | 
|----------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------------------ | -------------------------- | ------ | - | --------- | ------ | ------------ | - | ------- |  | 
|                              |                                                                                                      |                                      |                            |        |   | March 31, |        | December 31,
|                              |                                                                                                      |                                      |                            |        |   | 2002      |        | 2001        
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      |                                      |                            | ASSETS |   |           |        |              |   |         |  | 
|                             
|                             
|                             
|                             
|Current assets:               |                                                                                                      |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Cash and cash equivalents                                                                            |                                      | $                          | 3,360  |   |           | $      | 920          |  
|                             
|                             
|                             
|                             
|                              | Receivables, net                                                                                     |                                      |                            | 40,389 |   |           |        | 34,430       |  
|                             
|                             
|                             
|                             
|                              | Inventories                                                                                          |                                      |                            | 26,865 |   |           |        | 29,622       |  
|                             
|                             
|                             
|                             
|                              | Receivables from affiliates                                                                          |                                      |                            | 7,720  |   |           |        | 5,938        |  
|                             
|                             
|                             
|                             
|                              | Value-added tax receivables                                                                          |                                      |                            | 1,375  |   |           |        | 2,308        |  
|                             
|                             
|                             
|                             
|                              | Prepaid expenses and other current assets                                                            |                                      |                            | 3,191  |   |           |        | 3,206        |  
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      |                                      | Total current assets       |        |   | 82,900    |        |              |   | 76,424  | 
|                             
|                             
|                             
|                             
|Property and equipment, net   |                                                                                                      |                                      | 36,397                     |        |   |           | 36,121 |             
|                             
|                             
|                             
|                             
|Other assets:                 |                                                                                                      |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Goodwill                                                                                             |                                      |                            | 32,857 |   |           |        | 32,401       |  
|                             
|                             
|                             
|                             
|                              | Trademarks, net                                                                                      |                                      |                            | 51,113 |   |           |        | 50,402       |  
|                             
|                             
|                             
|                             
|                              | Deferred financing fees, net                                                                         |                                      |                            | 1,080  |   |           |        | 1,270        |  
|                             
|                             
|                             
|                             
|                              | Other                                                                                                |                                      |                            | 1,697  |   |           |        | 2,699        |  
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      |                                      | Total                      |        | $ | 206,044   |        |              | $ | 199,317 | 
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      | LIABILITIES AND STOCKHOLDERS EQUITY |                            |        |   |           |        |              |   |        
|                             
|                             
|                             
|                             
|Current liabilities:          |                                                                                                      |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Short-term debt, including current portion of long-term debt                                         |                                      | $                          | 3,210  |   |           | $      | 3,188        |  
|                             
|                             
|                             
|                             
|                              | Accounts payable                                                                                     |                                      |                            | 11,609 |   |           |        | 20,205       |  
|                             
|                             
|                             
|                             
|                              | Accrued liabilities                                                                                  |                                      |                            | 28,089 |   |           |        | 27,299       |  
|                             
|                             
|                             
|                             
|                              | Income taxes payable                                                                                 |                                      |                            | 9,304  |   |           |        | 6,122        |  
|                             
|                             
|                             
|                             
|                              | Payables to affiliates                                                                               |                                      |                            | 17,241 |   |           |        | 21,373       |  
|                             
|                             
|                             
|                             
|                              | Deferred income taxes                                                                                |                                      |                            | 3,758  |   |           |        | 4,094        |  
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      |                                      | Total current liabilities  |        |   | 73,211    |        |              |   | 82,281  | 
|                             
|                             
|                             
|                             
|Long-term debt                |                                                                                                      |                                      | 42,224                     |        |   |           | 33,993 |             
|                             
|                             
|                             
|                             
|Deferred income taxes         |                                                                                                      |                                      | 16,012                     |        |   |           | 16,958 |             
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      |                                      | Total liabilities          |        |   | 131,447   |        |              |   | 133,232 | 
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|Commitments and contingencies |                                                                                                      |                                      |                           |        |   |           |       |             
|                             
|                             
|                             
|                             
|Stockholders equity:         |                                                                                                      |                                      |                            |        |   |           |        |             
|                             
|                             
|                             
|                             
|                              | Series B common stock, no par value; authorized, issued
and outstanding, 151 shares in 2002 and 2001 |                                      |                            |       |   |           |        |             |  
|                             
|                             
|                             
|                             
|                              | Additional paid-in capital                                                                           |                                      |                            | 34,184 |   |           |        | 34,184       |  
|                             
|                             
|                             
|                             
|                              | Retained earnings                                                                                    |                                      |                            | 40,407 |   |           |        | 32,194       |  
|                             
|                             
|                             
|                             
|                              | Accumulated other comprehensive income (loss)                                                        |                                      |                            | 6      |   |           |        | (293         | )
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      |                                      | Total stockholders equity |        |   | 74,597    |        |              |   | 66,085  | 
|                              |                                                                                                      |                                      |                            |        |   |           |        |             
|                              |                                                                                                      |                                      | Total                      |        | $ | 206,044   |        |              | $ | 199,317 | 
|                              |                                                                                                      |                                      |                            |        |   |           |        |             

See accompanying notes to consolidated financial statements.

18



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JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)

|                                                                         |                           |   |                    |        |      |   |        |        |  
|------------------------------------------------------------------------ | ------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                                                                         |                           |   | Three Months Ended
|                                                                         |                           |   | March 31,         
|                                                                         |                           |   |                   
|                                                                         |                           |   | 2002               |        | 2001
|                                                                         |                           |   |                    |        |     
|Net sales to third parties                                               |                           | $ | 66,487             |        |      | $ | 56,078 |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Sales to affiliates                                                      |                           |   | 5,198              |        |      |   | 2,732  |       
|                                                                         |                           |   |                    |        |      |   |        |       
|Net sales                                                                |                           |   | 71,685             |        |      |   | 58,810 |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cost of sales                                                            |                           |   | 21,102             |        |      |   | 15,956 |       
|                                                                         |                           |   |                    |        |      |   |        |       
|                                                                         | Gross profit              |   |                    | 50,583 |      |   |        | 42,854 |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Selling, general and administrative expenses                             |                           |   | 31,724             |        |      |   | 26,198 |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Management fee expense to affiliates                                     |                           |   | 2,125              |        |      |   | 2,240  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Royalty expense to affiliates, net                                       |                           |   | 4,638              |        |      |   | 4,692  |       
|                                                                         |                           |   |                    |        |      |   |        |       
|                                                                         | Income from operations    |   |                    | 12,096 |      |   |        | 9,724  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other income (expense):                                                  |                           |   |                    |        |      |   |        |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Exchange gain (loss), net |   |                    | 347    |      |   |        | (2,158 | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Interest expense, net     |   |                    | (1,294 | )    |   |        | (1,682 | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Other, net                |   |                    |       |      |   |        | 6      |  
|                                                                         |                           |   |                    |        |      |   |        |       
|Income before income taxes and cumulative effect of accounting change    |                           |   | 11,149             |        |      |   | 5,890  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Income tax expense        |   |                    | 2,936  |      |   |        | 2,263  |  
|                                                                         |                           |   |                    |        |      |   |        |       
|Income before cumulative effect of accounting
change                     |                           |   | 8,213              |        |      |   | 3,627  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cumulative effect of accounting change, net of income
tax expense of $82 |                           |   |                   |        |      |   | 126    |       
|                                                                         |                           |   |                    |        |      |   |        |       
|Net income                                                               |                           | $ | 8,213              |        |      | $ | 3,753  |       
|                                                                         |                           |   |                    |        |      |   |        |       

See accompanying notes to consolidated financial statements.

19



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##### Table of Contents






JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |        |       |         |       | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ----------------------------------------- | --------------------------------------------------- | ------ | ------------------ | ------ | ------ | ----- | ------- | ----- | 
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        | Three Months Ended
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        | March 31,         
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                   
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        | 2002               |        | 2001  
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash flows from operating activities:            |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                                                                                                            |                                                        | $                                         | 8,213                                               |        |                    | $      | 3,753  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Cumulative effect of accounting change, net of taxes   |                                           |                                                     |       |                    |        |        | (126  | )      
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 | Income before cumulative effect of accounting change                                                                                  |                                                        |                                           | 8,213                                               |        |                    |        | 3,627  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile income before cumulative effect of
accounting change to net cash (used in) provided by operating activities: |                                                        |                                           |                                                     |        |                    |        |        |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Gain on sale of property and equipment                 |                                           |                                                     | (43    | )                  |        |        |      |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Depreciation and amortization                          |                                           |                                                     | 443    |                    |        |        | 1,084 |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Amortization of deferred financing fees                |                                           |                                                     | 206    |                    |        |        | 195   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Provision for uncollectible accounts receivable        |                                           |                                                     | 1,971  |                    |        |        | 778   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Unrealized foreign exchange and derivative (gain) loss |                                           |                                                     | (601   | )                  |        |        | 800   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Deferred realized derivative loss                      |                                           |                                                     | 21     |                    |        |        |      |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Deferred income taxes                                  |                                           |                                                     | (1,167 | )                  |        |        |      |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       | Changes in operating assets and liabilities:           |                                           |                                                     |        |                    |        |        |       |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Receivables                               |                                                     |        | (7,379             | )      |        |       | (6,349  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Inventories                               |                                                     |        | 3,138              |        |        |       | 2,088   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Prepaid expenses and other current assets |                                                     |        | 59                 |        |        |       | 4,646   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Value-added tax receivables               |                                                     |        | 954                |        |        |       | (1,463  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Intercompany receivables and payables     |                                                     |        | (5,836             | )      |        |       | 4,848   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Other assets                              |                                                     |        | 1,027              |        |        |       | 857     |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Accounts payable and accrued liabilities  |                                                     |        | (9,715             | )      |        |       | (11,757 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Income taxes payable/prepaid              |                                                     |        | 3,059              |        |        |       | 2,779   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                                                       |                                                        | Other long-term liabilities               |                                                     |        |                   |        |        |       | (10     | )    
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 |                                                                                                                                       |                                                        |                                           | Net cash (used in) provided by operating activities |        |                    | (5,650 | )      |       |         | 2,123 | 
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash flows from investing activities:            |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sale of property and equipment                                                                                          |                                                        |                                           | 183                                                 |        |                    |        |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of property and equipment                                                                                                   |                                                        |                                           | (357                                                | )      |                    |        |       |      
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 |                                                                                                                                       |                                                        |                                           | Net cash used in investing activities               |        |                    | (174   | )      |       |         |      | 
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash flows from financing activities:            |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayments under term loan facility                                                                                                   |                                                        |                                           | (625                                                | )      |                    |        | (500   | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Net borrowings under revolving credit facility                                                                                        |                                                        |                                           | 9,000                                               |        |                    |        | 10,000 |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Net (repayments) borrowings under bank debt                                                                                           |                                                        |                                           | (122                                                | )      |                    |        | 1,102  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Payment of note payable to affiliate                                                                                                  |                                                        |                                           |                                                    |        |                    |        | (9,539 | )    
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|                                                 |                                                                                                                                       |                                                        |                                           | Net cash provided by financing activities           |        |                    | 8,253  |        |       |         | 1,063 | 
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Effect of exchange rate changes on cash          |                                                                                                                                       |                                                        | 11                                        |                                                     |        |                    | (191   | )     
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Net increase in cash and cash equivalents        |                                                                                                                                       |                                                        | 2,440                                     |                                                     |        |                    | 2,995  |       
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                                                                       |                                                        | 920                                       |                                                     |        |                    | 561    |       
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       
|Cash and cash equivalents at end of period       |                                                                                                                                       | $                                                      | 3,360                                     |                                                     |        | $                  | 3,556  |       
|                                                 |                                                                                                                                       |                                                        |                                           |                                                     |        |                    |        |       

See accompanying notes to consolidated financial statements.

20



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##### Table of Contents






JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Basis of Presentation

Jafra Cosmetics International, S.A. de C.V., a sociedad anomina de capital
variableorganized under the laws of the United Mexican States (Jafra S.A.)
is an indirect wholly-owned subsidiary of CDRJ Investments (Lux) S.A., a
Luxembourg société anonyme(the Parent). Jafra S.A., its subsidiaries, and
certain other subsidiaries of the Parent were organized by Clayton, Dubilier &
Rice Fund V Limited Partnership, a Cayman Islands exempted limited partnership
managed by Clayton, Dubilier & Rice, Inc. (CD&) to acquire (the
Acquisition) the worldwide Jafra Cosmetics business (the Jafra
Business) of The Gillette Company (Gillette).

The accompanying unaudited interim consolidated financial statements as of
March 31, 2002 and March 31, 2001 and for the three months ended March 31, 2002
and 2001 reflect the operations of Jafra S.A. and its subsidiaries
(collectively, the Company) and have been prepared in accordance with Article
10 of the Securities and Exchange Commissions Regulation S-X. In the opinion
of management, the accompanying unaudited interim financial statements contain
all adjustments, consisting of normal recurring adjustments, necessary to
present fairly Jafra S.A.s consolidated financial statements as of March 31,
2002 and for the interim periods presented. All significant intercompany
accounts and transactions between entities comprising the Company have been
eliminated in consolidation.

The functional currency for the Company is the Mexican peso. For
presentation purposes, assets and liabilities are translated into U.S. dollars
at current exchange rates, and related revenues and expenses are translated at
average exchange rates in effect during the period. Resulting translation
adjustments are recorded as a component of other comprehensive income.

In July 2001, the Financial Accounting Standards Board (FASB) approved
two new statements: Statement of Financial Accounting Standards (SFAS) No.
141, Business Combinations and SFAS No. 142, Goodwill and other Intangible
Assets. SFAS No. 141 requires business combinations
entered into after June 30, 2001 to be
accounted for using the purchase method of accounting. SFAS No. 142 requires
that goodwill not be amortized, but be tested for impairment at least annually.
SFAS No. 142 was effective for fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized in an entitys statement
of financial position at that date, regardless of when those assets were
initially recognized. The Company adopted SFAS No. 142 on January 1, 2002.
The Company identified all reporting units in conjunction with the provisions
of SFAS No. 142 and allocated all goodwill accordingly. However, in accordance
with SFAS No. 142, the Company is not required to complete the transitional
goodwill impairment test until June 30, 2002. The Company is currently
evaluating, but has not yet determined, whether the adoption of this statement
will result in an impairment of goodwill.
There were no changes, except for translation effects, to the carrying
amount of goodwill for the three months ended March 31, 2002.
The Companys other intangible
assets consist principally of trademarks. During the quarter ended March
31, 2002, the Company determined trademarks to have an indefinite life and
performed the transitional impairment test as required under SFAS No. 142.
Based upon the valuation, the Company determined that there was no impairment
of trademarks. The net carrying value of trademarks was
$51,113,000 as of March 31, 2002.

21



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##### Table of Contents



JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In accordance with SFAS No. 142, the Company discontinued amortization of
goodwill and other intangible assets with an indefinite life. A reconciliation
of previously reported net income to amounts adjusted for the exclusion of
goodwill and trademark amortization, net of the related income tax effects, where applicable, is as follows (in thousands):

|                                   |  |                              |       |      |  |   |       | 
|---------------------------------- |  | ---------------------------- | ----- | ---- |  | - | ----- | 
|                                   |  | Three Months Ended March 31,
|                                   |  |                             
|                                   |  | 2002                         |       | 2001
|                                   |  |                              |       |     
|Net income                         |  | $                            | 8,213 |      |  | $ | 3,753 | 
|                                  
|                                  
|                                  
|                                  
|Goodwill amortization              |  |                              |      |      |  |   | 211   | 
|                                  
|                                  
|                                  
|                                  
|Trademark amortization, net of tax |  |                              |      |      |  |   | 203   | 
|                                   |  |                              |       |      |  |   |       | 
|Adjusted net income                |  | $                            | 8,213 |      |  | $ | 4,167 | 
|                                   |  |                              |       |      |  |   |       | 

On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. SFAS No. 144 retains substantially all of the
requirements of SFAS No. 121, while resolving certain implementation issues and
addressing the accounting for a component of a business accounted for as a
discontinued operation. SFAS No. 144 was adopted with no significant impact on
the financial position or results of operations of the Company.

In November 2001, the Emerging Issues Task Force (EITF) issued EITF
Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer
or a Reseller of the Vendors Products. This new guidance provides that consideration from a vendor to a
reseller is generally presumed to be a reduction of the selling prices of the
vendors products, and, therefore, should be characterized as a reduction of
revenue when recognized in the vendors income statement. On January 1, 2002,
the Company adopted EITF Issue No. 01-9 and reclassified
commissions paid to consultants of $525,000 on
their personal sales, previously reported as a component of selling,
general and administrative expenses, as a reduction in net sales for the three
months ended March 31, 2001.

(2) Property and Equipment

Property and equipment consist of the following (in thousands):

|                              |  |           |        |              |  |   |        | 
|----------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                              |  | March 31, |        | December 31,
|                              |  | 2002      |        | 2001        
|                              |  |           |        |             
|Land                          |  | $         | 11,809 |              |  | $ | 11,645 | 
|                             
|                             
|                             
|                             
|Buildings                     |  |           | 11,868 |              |  |   | 11,703 | 
|                             
|                             
|                             
|                             
|Machinery and equipment       |  |           | 17,804 |              |  |   | 17,532 | 
|                              |  |           |        |              |  |   |        | 
|                              |  |           | 41,481 |              |  |   | 40,880 | 
|                             
|                             
|                             
|                             
|Less accumulated depreciation |  |           | 5,084  |              |  |   | 4,759  | 
|                              |  |           |        |              |  |   |        | 
|Property and equipment, net   |  | $         | 36,397 |              |  | $ | 36,121 | 
|                              |  |           |        |              |  |   |        | 

(3) Income Taxes

The actual income tax rate differs from the expected income tax rate
(computed by applying the Mexican federal corporate rate of 35% to income
before income taxes) for the three months ended March 31, 2002 principally as
the result of the enactment of changes in the Mexico corporate statutory tax
rate and the related impact on the Companys net deferred income tax
liabilities. The enactment will reduce the corporate income tax rate annually
in one-percent increments from 35% to 32% beginning January 1, 2003 through
2005.

(4) Comprehensive Income

Comprehensive income is summarized as follows (in thousands):

22



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JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

|                                                                      |  |                    |        |      |  |   |       |  
|--------------------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ----- | -
|                                                                      |  | Three Months Ended
|                                                                      |  | March 31,         
|                                                                      |  |                   
|                                                                      |  | 2002               |        | 2001
|                                                                      |  |                    |        |     
|Net income                                                            |  | $                  | 8,213  |      |  | $ | 3,753 |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrealized and deferred realized losses on
derivatives                |  |                    | (2,195 | )    |  |   | (916  | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Reclassification to exchange gain (loss)                              |  |                    | 135    |      |  |   |      |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Reclassification to cost of sales                                     |  |                    | 937    |      |  |   | 27    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Tax benefit on unrealized and deferred realized
losses on derivatives |  |                    | 393    |      |  |   |      |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Foreign currency translation adjustments                              |  |                    | 1,029  |      |  |   | 951   |  
|                                                                      |  |                    |        |      |  |   |       |  
|Comprehensive income                                                  |  | $                  | 8,512  |      |  | $ | 3,815 |  
|                                                                      |  |                    |        |      |  |   |       |  

(5) Related Party Transactions

The Company manufactures and distributes color cosmetics and fragrance
products to other affiliates of the Parent (Affiliates). Sales to
Affiliates, primarily in the United States and Germany, were $5,198,000 and
$2,732,000 for the three months ended March 31, 2002 and 2001, respectively.
These sales were made at cost plus a markup ranging from 0 to 11%. The Company
purchased skin and body products from the Parents United States affiliate.
Purchases were $3,258,000 and $2,218,000 for the three months ended March 31,
2002 and 2001, respectively.

In addition, the Company is provided with certain management services,
such as legal, accounting and treasury, management oversight, and other
administrative functions from an Affiliate. The cost of these services is
included in management fee expense to affiliate in the accompanying
consolidated statements of operations. JCI charges out a portion of these
management expenses to its Affiliates based upon charges identified to specific
Affiliates and a formula using the percentage of revenues of each Affiliate to
the total consolidated revenues of the Parent. The Company believes the
amounts and methods of allocation are reasonable and approximate the cost of
the actual services provided. The management fee expense charged by JCI to the
Company was $2,125,000 and $2,240,000 for the three months ended March 31, 2002
and 2001, respectively.

Jafra S.A. charges JCI a royalty for the right to use the Jafra trademark
in the United States and Europe. The total royalty income earned by Jafra S.A.
from JCI and Jafra Germany was $552,000 and $402,000 for the three months ended
March 31, 2002 and 2001, respectively, and is offset against royalty expense to
affiliates in the accompanying consolidated statements of operations.

JCI owns the worldwide rights to its multi-level sales know-how (referred
to as the Jafra Way). The Jafra Way was initially developed in the United
States for lineage, training, and compensation of consultants. The royalty fees
charged by JCI to Jafra S.A. for the use of the Jafra Way were $5,190,000 and
$5,094,000 for the three months ended March 31, 2002 and 2001, respectively,
and are based upon a percentage of Jafra S.A.s sales.

The Company has obtained loans from certain Affiliates at annual interest
rates ranging from 6% to 9%. Such loans are due to be repaid five years from
the date of grant, with no prepayment penalty. For the three months ended March
31, 2002, the Company did not incur any interest expense to Affiliates. Net
interest expense to Affiliates, primarily JCI, was $210,000 for the three
months ended March 31, 2001, which resulted primarily from notes payable to
Affiliates as a result amounts billed to Jafra S.A. in connection with the
Jafra Way royalty.

(6) Foreign Currency Forward and Option Contracts

The Company is exposed to currency risk relating to its forecasted U.S.
dollar-denominated expenditures. As part of the Parents overall strategy to
reduce the risk of potential adverse exchange rate fluctuations in Mexico, the
Company enters into foreign currency exchange contracts (forward contracts).
Beginning in 2002, the Company
also enters into foreign currency option contracts (option contracts or
options). The Company places forward contracts or option contracts based on
its rolling 12 month forecasted U.S. dollar cash outflows and hedges
transactions included in the forecast on the date the forward contract or
option contract is initiated. As a matter of policy, the Company does not hold
or issue forward contracts or option contracts for trading or speculative
purposes nor does it enter into contracts or agreements containing embedded
derivative features.

23



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JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS No. 133, as amended
and interpreted, establishes accounting and reporting standards for derivative
instruments and hedging activities and requires that all derivative instruments
be recorded based on fair value. In connection with the adoption of SFAS No.
133, at January 1, 2001, the Company recorded a net gain of $126,000 (net of a
tax effect of $82,000) as a cumulative transition adjustment to earnings. This
adjustment relates to derivatives not designated as hedges prior to adoption of
SFAS No. 133, and represents the difference between the carrying value and the
fair value of such instruments. Under SFAS No. 133, the Companys use of
forward contracts or option contracts to hedge certain forecasted transactions
qualifies for hedge accounting. Gains and losses from such derivatives are
deferred as a separate component of other comprehensive income, and are
recognized in income at the same time that the underlying hedged exposure is
recognized in income. This accounting treatment results in the matching of
gains and losses from such forward contracts with the corresponding gains and
losses generated by the underlying hedged transactions. Contracts that do not
qualify for hedge accounting under SFAS No. 133 are remeasured based on fair
value and the gains and losses included as a component of net income.

The Company currently designates certain of its forward contracts and
option contracts as cash flow hedges of forecasted U.S. dollar-denominated
inventory purchases, forecasted U.S. dollar-denominated intercompany charges
from JCI, forecasted management fee charges from JCI, and U.S.
dollar-denominated interest payments. For all qualifying and highly effective
cash flow hedges, the changes in the fair value of the derivative are deferred
as a component of other comprehensive income. Such amounts will be
reclassified from other comprehensive income into net income when the
underlying hedged exposure is recognized in income. For U.S.
dollar-denominated inventory purchases, this will occur upon sale to an outside
party of the related inventory. For intercompany charges and interest, this
will occur at the date such charges are paid.

During the three months ended March 31, 2002 and 2001, the Company
recognized losses on forward contracts of approximately $355,000 and
$3,408,000, respectively, as a component of exchange gain (loss) on the
accompanying consolidated statements of operations. As of December 31, 2001,
the Company had deferred as a component of other comprehensive income
$3,746,000 of losses on forward contracts. During the three months ended March
31, 2002, the Company deferred as a component of other comprehensive income an
additional $2,244,000 of losses on forward contracts and $49,000 of gains on
option contracts qualifying for hedge accounting under SFAS No. 133. During the
three months ended March 31, 2002, approximately $135,000 was reclassified as
exchange gain (loss) and $937,000 was reclassified as cost of sales upon
recognition of the underlying hedged exposure. The Company expects that
substantially all of the remaining loss of $4,869,000 deferred as a component
of other comprehensive income at March 31, 2002 will be recognized into net
income within the next twelve months. The fair value of the forward contracts
was $4,986,000 and $4,292,000 at March 31, 2002 and 2001, respectively and as
been recorded in accrued liabilities in the consolidated balance sheets. The
fair value of the option contacts was $49,000 at March 31, 2002, and was
recorded as an offset to accrued liabilities in the consolidated balance sheet.

During the three months ended March 31, 2002 and 2001, the ineffectiveness
generated by the Companys forward contracts designated as hedges was
insignificant. Certain hedged forecasted transactions do not appear probable
of occurring due to timing differences between the original and current
forecasts, and accordingly during the three months ended March 31, 2002,
$206,000 of gains were reclassified into earnings.

The
outstanding foreign currency forward contracts had notional values
denominated in Mexican pesos of $579,000,000 in equal offsetting buy
and sell positions at March 31, 2002 and $862,000,000 in a buy position at March 31, 2001. The
contracts outstanding at March 31, 2002 mature at various dates extending to
November 2002 and the contracts outstanding at March 31, 2001 matured at
various dates through December 2001. The outstanding foreign currency option
contracts had a notional value denominated in Mexican pesos of
$703,500,000 in offsetting put and call positions at March
31, 2002. Notional amounts do not quantify market or credit exposure or
represent assets or liabilities of the Company, but are used in the calculation
of cash settlements under the contracts. (See Item 3 Quantitative and
Qualitative Disclosures About Market Risk).

24



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##### Table of Contents






|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following discussion of the results of operations, financial condition
and liquidity of the Company should be read in conjunction with the
accompanying unaudited interim consolidated financial statements and notes
thereto and with the Companys audited consolidated financial statements as of
and for the year ended December 31, 2001, included in the Companys Annual
Report on Form 10-K. The results of operations for the three months ended
March 31, 2002 are not necessarily indicative of results that may be expected
for future periods.

Results of Operations

The following table represents selected components of the Companys
results of operations, in millions of dollars and as percentages of net sales.
The table reflects the operations of the Company for the three months ended
March 31, 2002 and 2001.

|                                                                          |  |                              |      |          |  |  |       |   |  |   |      |   |  |  |      
|------------------------------------------------------------------------- |  | ---------------------------- | ---- | -------- |  |  | ----- | - |  | - | ---- | - |  |  | -----
|                                                                          |  | Three Months Ended March 31,
|                                                                          |  |                             
|                                                                          |  | 2002                         |      | 2001 (1)
|                                                                          |  |                              |      |         
|Net sales                                                                 |  | $                            | 99.1 |          |  |  | 100.0 | % |  | $ | 86.2 |   |  |  | 100.0
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Cost of sales                                                             |  |                              | 23.0 |          |  |  | 23.2  |   |  |   | 20.3 |   |  |  | 23.5 
|                                                                          |  |                              |      |          |  |  |       |   |  |   |      |   |  |  |      
|Gross profit                                                              |  |                              | 76.1 |          |  |  | 76.8  |   |  |   | 65.9 |   |  |  | 76.5 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Selling, general and administrative expenses                              |  |                              | 60.4 |          |  |  | 61.0  |   |  |   | 54.7 |   |  |  | 63.5 
|                                                                          |  |                              |      |          |  |  |       |   |  |   |      |   |  |  |      
|Income from operations                                                    |  |                              | 15.7 |          |  |  | 15.8  |   |  |   | 11.2 |   |  |  | 13.0 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Exchange
gain (loss), net                                                 |  |                              | 0.5  |          |  |  | 0.5   |   |  |   | (2.2 | ) |  |  | (2.6 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Interest, net                                                             |  |                              | (2.9 | )        |  |  | (2.9  | ) |  |   | (3.5 | ) |  |  | (4.0 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Other (expense) income, net                                               |  |                              | 0.0  |          |  |  | 0.0   |   |  |   | (0.1 | ) |  |  | (0.1 
|                                                                          |  |                              |      |          |  |  |       |   |  |   |      |   |  |  |      
|Income before income taxes and cumulative
effect of
accounting change     |  |                              | 13.3 |          |  |  | 13.4  |   |  |   | 5.4  |   |  |  | 6.3  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Income tax expense                                                        |  |                              | 3.2  |          |  |  | 3.2   |   |  |   | 2.9  |   |  |  | 3.4  
|                                                                          |  |                              |      |          |  |  |       |   |  |   |      |   |  |  |      
|Income before cumulative effect of accounting
change                      |  |                              | 10.1 |          |  |  | 10.2  |   |  |   | 2.5  |   |  |  | 2.9  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Cumulative effect of accounting change, net
of income tax expense of $0.1 |  |                              |     |          |  |  |      |   |  |   | 0.1  |   |  |  | 0.1  
|                                                                          |  |                              |      |          |  |  |       |   |  |   |      |   |  |  |      
|Net income                                                                |  | $                            | 10.1 |          |  |  | 10.2  | % |  | $ | 2.6  |   |  |  | 3.0  
|                                                                          |  |                              |      |          |  |  |       |   |  |   |      |   |  |  |      



---

|(1) |  | On January 1, 2002, the Company adopted Emerging Issues Task Force Issue
No. 01-9, Accounting for Consideration Given by a Vendor to a Customer or
a Reseller of the Vendors Products. As a result of the adoption, the
Company reclassified $0.9 million of commissions paid on personal sales as
a reduction of net sales, previously reported as selling, general and
administrative expenses, in the consolidated statement of operations for
the three months ended March 31, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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Three months ended March 31, 2002 compared to the three months ended March 31, 2001

|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|-------------------------------------------- |  | ------ | ---- | ------ |  | ------ | ---- | ---------- |  | -------- | --- | --------- |  | ----- | ---- | ----- |  | ----------- | ---- | ------------ |  | ---------- | ---- | - |  | - | ---- | 
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  | Corporate, |      |   |  |  
|                                             |  | United |      |        |  |        |      |            |  |          |     |           |  |       |      | Total |  | Unallocated |      | Consolidated
|Dollars in millions                          |  | States |      | Mexico |  | Europe |      | All others |  | Segments |     | and Other |  | Total
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |      
|Three Months Ended March 31, 2002            |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|                                            
|                                            
|                                            
|                                            
|Net sales                                    |  | $      | 20.9 |        |  | $      | 66.5 |            |  | $        | 5.8 |           |  | $     | 5.9  |       |  | $           | 99.1 |              |  | $          |     |   |  | $ | 99.1 | 
|                                            
|                                            
|                                            
|                                            
|Cost of sales                                |  |        | 4.3  |        |  |        | 16.8 |            |  |          | 1.3 |           |  |       | 1.6  |       |  |             | 24.0 |              |  |            | (1.0 | ) |  |   | 23.0 | 
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|Gross profit                                 |  |        | 16.6 |        |  |        | 49.7 |            |  |          | 4.5 |           |  |       | 4.3  |       |  |             | 75.1 |              |  |            | 1.0  |   |  |   | 76.1 | 
|                                            
|                                            
|                                            
|                                            
|Selling, general and
administrative
expenses |  |        | 13.7 |        |  |        | 32.1 |            |  |          | 4.5 |           |  |       | 5.1  |       |  |             | 55.4 |              |  |            | 5.0  |   |  |   | 60.4 | 
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|Operating income (loss)                      |  | $      | 2.9  |        |  | $      | 17.6 |            |  | $        | 0.0 |           |  | $     | (0.8 | )     |  | $           | 19.7 |              |  | $          | (4.0 | ) |  | $ | 15.7 | 
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|Three Months Ended March 31, 2001            |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|                                            
|                                            
|                                            
|                                            
|Net sales                                    |  | $      | 18.2 |        |  | $      | 56.1 |            |  | $        | 6.2 |           |  | $     | 5.7  |       |  | $           | 86.2 |              |  | $          |     |   |  | $ | 86.2 | 
|                                            
|                                            
|                                            
|                                            
|Cost of sales                                |  |        | 4.2  |        |  |        | 13.6 |            |  |          | 1.2 |           |  |       | 1.8  |       |  |             | 20.8 |              |  |            | (0.5 | ) |  |   | 20.3 | 
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|Gross profit                                 |  |        | 14.0 |        |  |        | 42.5 |            |  |          | 5.0 |           |  |       | 3.9  |       |  |             | 65.4 |              |  |            | 0.5  |   |  |   | 65.9 | 
|                                            
|                                            
|                                            
|                                            
|Selling, general and
administrative
expenses |  |        | 13.2 |        |  |        | 25.5 |            |  |          | 4.9 |           |  |       | 5.5  |       |  |             | 49.1 |              |  |            | 5.6  |   |  |   | 54.7 | 
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 
|Operating income (loss)                      |  | $      | 0.8  |        |  | $      | 17.0 |            |  | $        | 0.1 |           |  | $     | (1.6 | )     |  | $           | 16.3 |              |  | $          | (5.1 | ) |  | $ | 11.2 | 
|                                             |  |        |      |        |  |        |      |            |  |          |     |           |  |       |      |       |  |             |      |              |  |            |      |   |  |   |      | 

Net sales. Net sales in the first quarter of 2002 increased to $99.1
million from $86.2 million in the first quarter of 2001, an increase of $12.9
million or 15.0%. Net sales in local currencies in the first quarter of 2002
increased by 10.4% over the comparable prior year period. The sales increase
in U.S. dollars was higher than the increase measured in local currencies,
primarily as a result of the stronger average exchange rates of the Mexican
peso in the first quarter of 2002. The Companys average number of consultants
(who perform the duties of sales representatives) worldwide for the first
quarter increased to approximately 374,000 or 10.5% over the 2001 average.
Consultant productivity for the first quarter of 2002 increased 4.1% compared to the first quarter of
2001. Consultant productivity for the quarter is generally defined as
annualized quarterly sales divided by the average number of consultants.

In Mexico, net sales in the first quarter of 2002 increased to $66.5
million from $56.1 million in the first quarter of 2001, an increase of $10.4
million, or 18.5%. Sales in Mexico in local currency increased by 12.3% over
the comparable 2001 period. The year-to-year increase was due primarily to a
larger consultant base and increased consultant productivity. In Mexico the
average number of consultants for the first quarter of 2002 increased to
approximately 239,000, or by 13.6% over the average number of consultants in
the comparable prior year period. Consultant productivity increased
approximately 4.3%, primarily due to the strengthening of the Mexican
peso, over consultant productivity in the first quarter of 2001.
Additionally, the average number of leaders or branches during the first
quarter of 2002 increased 17.9%.

In the United States, net sales in the first quarter of 2002 increased to
$20.9 million from $18.2 million in the first quarter of 2001, an increase of
$2.7 million or 14.8%. The increase was due to a combination of an increase in
the average consultant base achieved by improved retention, increased ordering
activity and improved consultant productivity. In the U.S., the average number
of consultants increased to 67,000 from 64,000, an increase of 4.7%. The
number of ordering consultants increased 5.6% in the Hispanic Division and 1.9%
in the General Division. Productivity increased by 4.0% in the Hispanic
Division and 12.9% in the General Division, primarily due to new products and
an increased number of promotional offers.

In Europe, net sales decreased to $5.8 million in the first quarter of
2002, from $6.2 million in the first quarter of 2001, a decrease of $0.4
million, or 6.5%. The decrease was the result of reduced consultant
productivity, partially offset by increased consultant activity. Consultant productivity
in Europe decreased 7.9%, over approximately half of which was due to weakening
of the euro in the first quarter of 2002 compared to 2001. However, during the
first quarter of 2002, 62.0% of consultants were considered to be active,
compared to 60.8% in the comparable prior year period. The average number of
consultants remained constant at approximately 17,000.

Sales in South America and Thailand increased 3.5% compared to the first
quarter of the prior year, primarily due to a larger average consultant base.
In local currencies, sales in South America increased 19.3% and sales in
Thailand increased 26.0%.

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Gross profit.Consolidated gross profit in the first quarter of 2002
increased to $76.1 million from $65.9 million in the comparable prior year
period, an increase of $10.2 million, or 15.5%. Gross profit as a percentage of
sales (gross margin) increased to 76.8% from 76.5%. The increase in gross
margin in the first quarter of 2002 was due primarily to favorable direct cost
variances in the Companys manufacturing units and a more favorable product mix
in the United States, partially offset by reduced margins in Mexico and Europe.

In Mexico, gross margin in the first quarter of 2002 decreased to 74.7%
from 75.8% in the first quarter of 2001. The decrease in gross margin was
primarily due to the amortization of deferred exchange losses into cost of
sales, partially offset by a more favorable product mix. During the three
months ended March 31, 2002, $0.9 million of exchange losses were reclassified
into cost of sales from other comprehensive income in conjunction with hedge
accounting pursuant to Statement of Financial Accounting Standards
("SFAS") No. 133, compared to a nominal amount for the three
months ended March 31, 2001. Excluding the impact of SFAS No. 133, gross
margin for the three months ended March 31, 2002 was 76.1% due to an improved
mix of non-promotional products which contribute a greater gross margin.

In the United States, gross margin in the first quarter of 2002 increased
to 79.4% from 76.9% in the first quarter of 2001, due to a more favorable
product mix. Resale sale products sold during the first quarter of 2002
contributed a greater gross margin than those sold during the first quarter of
2001 due to an increased amount of new products.

In
Europe, gross margin in the first quarter of 2002 decreased to 77.6%
from 80.6% in the first quarter of 2001 due to a higher mix of promotional or
discounted products as compared to non-discounted products.

Selling, general and administrative expenses.SG&A expenses in the first
quarter of 2002 increased to $60.4 million from $54.7 million in the first
quarter of 2001, an increase of $5.7 million, or 10.4%. SG&A expenses, as a
percentage of net sales, decreased in the first quarter of 2002 to 61.0% from
63.5% in the first quarter of 2001, due primarily to cost savings in the United
States and in the Companys corporate headquarters, and the discontinuation of
amortization of goodwill and trademarks pursuant to SFAS No. 142 (See Recent Accounting Pronouncements.)

In Mexico, SG&A expenses in the first quarter of 2002 increased by $6.6
million, or 25.9% compared to the first quarter of 2001. SG&A expenses, as a
percentage of net sales, in Mexico were 48.3% in the first quarter of 2002,
compared to 45.5% in the first quarter of 2001. The increased SG&A expenses in
Mexico related primarily to sales promotional expenses, freight expenses and
certain administrative expenses. Sales promotional expenses and freight
expenses tend to increase proportionally with sales. However, sales
promotional expenses increased proportionally more than sales due to increased
promotional activity. Freight expenses increased proportionally more than
sales due to increased orders, average higher packaging costs and certain
transitional expenses related to opening a new distribution center.
Administrative expenses increased primarily due to $1.2 million incremental bad
debt expense in the first quarter of 2002, compared to the first quarter of
2001, due to declining consultant liquidity as a result of the general economic
condition. The increased expenses were partially offset by no goodwill or
trademark amortization expense pursuant to SFAS No. 142 (See Recent Accounting
Pronouncements) in the first quarter of 2002, compared to $0.5 million of
amortization expense in the first quarter of 2001.

In the United States, SG&A expenses in the first quarter of 2002 increased
by $0.5 million, or 3.8% from the first quarter of 2001. SG&A expenses, as a
percentage of net sales, in the U.S. were 65.6% in the first quarter of 2002,
compared to 72.5% in the first quarter of 2001. The increased SG&A expenses
were primarily attributable to additional selling expenses related to the
expanded e-commerce platform during the first quarter of 2002 compared to the
first quarter of 2001. Override payments also increased in the first quarter
of 2002 compared to the first quarter of 2001 but were relatively constant as a
percentage of sales. Sales promotional expenses decreased in total and as a
percentage of sales due to timing and mix of promotional programs, and
administrative expenses remained relatively constant quarter to quarter. The
increased expenses were partially offset by no goodwill amortization expense
pursuant to SFAS No. 142 (See Recent Accounting Pronouncements) in the first
quarter of 2002, compared to $0.2 million of amortization expense in the first
quarter of 2001.

In Europe, SG&A expenses in the first quarter of 2002 decreased by $0.4
million, or 8.2% from the first quarter of 2001 primarily due to reduced sales
promotional expenses.

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SG&A expenses in other selling markets (South America and Thailand) and at
corporate headquarters in the first quarter of 2002 decreased $1.0 million, or
9.0%, primarily as the result of administrative cost savings in corporate
headquarters and reduced sales promotional and administrative expenses in the
South American market.

Exchange
gain (loss).The Companys foreign exchange gain was $0.5 million
in the first quarter of 2002 compared to an exchange loss of $2.2 million in
the first quarter of the prior year, a favorable difference of $2.7 million.
Foreign exchange losses and gains result from three primary sources; gains and
losses on forward contracts, gains and losses due to the remeasurement of U.S.
dollar-denominated debt, and gains and losses arising from other foreign
currency denominated transactions. Most of the Companys foreign exchange
gains and losses result from its foreign currency exposure to the
Mexican peso. During the first quarter of 2002, the Company recognized $0.5
million of exchange losses on forward contracts, $0.6 million of exchange gains
on the remeasurement of U.S. dollar-denominated debt and $0.4 million of
exchange gains on other foreign currency transactions. During the first
quarter of 2001, the Company recognized $2.4 million of exchange losses on
forward contracts, resulting from the strengthening of the Mexican peso against
the U.S. dollar during the period. These exchange losses were partially offset
by an exchange gain of $1.0 million on the remeasurement of U.S.
dollar-denominated debt, and exchange gains on other foreign currency
transactions during the first quarter of 2001 of $0.2 million. See Item 3,
Quantitative and Qualitative Disclosures about Market Risk.

Interest expense.Net interest expense (including amortization of
deferred financing fees) in the first quarter of 2002 decreased to $2.9 million
from $3.5 million, a decrease of $0.6 million, or 17.1%. The decrease was due
to a combination of lower average balances on the term loan and revolving
credit line, and lower interest rates on those borrowings.The lower interest
rates reflected a decrease in the general market interest rates.

Income tax expense.Income tax expense increased to $3.2 million in the
first quarter of 2002, compared to $2.9 million in the first quarter of 2001,
an increase of $0.3 million, or 10.3%. The Companys effective income tax rate
decreased to approximately 24.1% compared to 53.7% for the comparable period of
the prior year. The increase in the income tax expense was due to higher
taxable income in the Companys U.S. and Mexico subsidiaries during 2002. The
reduced effective tax rate was primarily due to the release of valuation
allowances against certain deferred tax assets in the United States and the
impact of the enactment of changes in the Mexico corporate statutory tax rate
on net deferred tax liabilities during the first quarter of 2002.
Excluding the impact of the release of the valuation allowance of
$1.3 million and
the impact of the enactment of changes in the Mexico rate of $1.2
million, the effective
tax rate would have been 42.0% for the three months ended
March 31, 2002.

Net income.Net income was $10.1 million for the first quarter of 2002, a
$7.5 million increase compared to $2.6 million in 2001. The increase was due
to a $10.2 million increase in gross profit, a $2.7 million increase in
exchange gains, a $0.6 million decrease in interest expense, the absence of
$0.1 million of other expense in 2002, partially offset by a $5.7 million
increase in SG&A, a $0.3 million increase in income tax expense and the absence
of a $0.1 million gain related to the cumulative effect of accounting change,
net of tax in 2002.

Liquidity and Capital Resources

The Companys liquidity needs arise primarily from principal and interest
payments under its 11.75% Subordinated Notes due 2008 (Notes), and the Senior
Credit Agreement consisting of the Term Loan Facility and the Revolving Credit
Facility. The Notes represent several obligations of Jafra Cosmetics
International, Inc. (JCI) and Jafra Cosmetics International, S.A. de C.V.
(Jafra S.A.) in the original amount of $60 million and $40 million (currently
at $45.1 million and $30.1 million), respectively, with each participating on a
pro rata basis upon redemption. The Notes mature in 2008 and bear a fixed
interest rate of 11.75% payable semi-annually.

The Notes are unsecured and are generally non-callable for five years.
Thereafter, the Notes will be callable at premiums declining to par in the
eighth year. The Company may from time to time repurchase the Notes in the
open market. The Company has obtained Consent and Waivers to the Senior Credit
Agreement that allow the Company to repurchase the Notes in the open market,
with the aggregate purchase price for all such Notes repurchased not to exceed
$50.0 million. Aggregate repurchases as of March 31, 2002 were $24.8 million.

Borrowings under the Senior Credit Agreement are payable in quarterly
installments of principal and interest through April 30, 2004. Scheduled term
loan principal payments under the Term Loan Facility will be approximately $5.5
million, $6.5 million, and $2.5 million for each of the years from 2002 through
2004, respectively. Borrowings under the Revolving Credit Facility ($9.0
million as of March 31, 2002) mature on April 30, 2004. Borrowings under the
Senior Credit Agreement bear interest at an annual rate of LIBOR plus a margin
not to exceed 1.625% or an alternate base rate (the higher of the prime rate or
federal funds rate plus 0.5%, plus an

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applicable margin not to exceed 0.625%).
The interest rate in effect at March 31, 2002 was approximately 3.6% for the
LIBOR-based borrowings, and approximately 5.4% for the prime-based borrowings.
Borrowings under the Senior Credit Agreement are secured by substantially all
of the assets of JCI and Jafra S.A. During the three months ended March 31,
2002, cash paid for interest was approximately $0.3 million.

Both the indenture (the Indenture), dated as of April 30, 1998, under
which the Notes were issued, and the Senior Credit Agreement contain certain
covenants that limit the Companys ability to incur additional indebtedness,
pay cash dividends and make certain other payments. The Indenture and the
Senior Credit Agreement also require the Company to maintain certain financial
ratios including a minimum EBITDA to cash interest expense coverage ratio and a
maximum debt to EBITDA ratio. As of March 31, 2002, the Company was in
compliance with all covenants. As of March 31, 2002, the Company had
irrevocable standby letters of credit outstanding totaling $3.6 million.

The
Company's Mexican subsidiary, Jafra S.A., is party to an unsecured bank loan agreement. As of March 31,
2002, Jafra S.A. had an outstanding balance under the bank loan agreement of
the peso equivalent of $1.5 million at a weighted average annual interest rate
of 18.6%. Principal and interest payments are due monthly through
January 5, 2005. As of March 31, 2002, $0.7 million of this loan is classified as
short-term debt and $0.8 million of this loan is classified as long-term debt
in the accompanying consolidated balance sheet.

The Company believes, but no assurance can be given, that its existing
cash, cash flow from operations and availability under the Senior Credit
Agreement will provide sufficient liquidity to meet the Companys cash
requirements and working capital needs over the next twelve months.

Cash Flows

Net cash provided by operating activities was $0.1 million for the three
months ended March 31, 2002, consisting of $10.8 million provided by net income
plus depreciation, amortization, and other non-cash items included in net
income, partially offset by $10.7 million used in changes in operating assets
and liabilities. The significant elements of net cash used in changes in
operating assets and liabilities during the three months ended March 31, 2002
were an increase of $6.7 million in accounts receivable, a
reduction of $11.2
million in accounts payable and accrued liabilities, partially offset by an
increase in payable/prepaid income taxes of $3.3 million, a reduction in
inventories of $1.3 million and a reduction in prepaid and other assets of $1.3
million.

Net cash used in investing activities was $2.1 million for the three
months ended March 31, 2002, of which $2.0 million was used for capital
expenditures, consisting primarily of information system upgrades. Capital
expenditures in 2002 are expected to be approximately $11.0 million.

Net cash provided by financing activities was $5.7 million for the three
months ended March 31, 2002, and primarily consisted of $7.2 of net borrowings
under the Revolving Credit Facility, offset by $1.4 million of
repayment under the Term Loan Facility and net repayment of other bank debt of
$0.1 million.

The effect of exchange rate changes on cash was $0.7 million for the three
months ended March 31, 2002, relating primarily to fluctuations in the exchange
rates in South America.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) approved
two new statements: Statement of Financial Accounting Standards (SFAS) No.
141, Business Combinations and SFAS No. 142, Goodwill and other Intangible
Assets. SFAS No. 141 requires business combinations
entered into after June 30, 2001 to be
accounted for using the purchase method of accounting. SFAS No. 142 requires
that goodwill not be amortized, but be tested for impairment at least annually.
SFAS No. 142 was effective for fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized in an entitys statement
of financial position at that date, regardless of when those assets were
initially recognized. The Company adopted SFAS No. 142 on January 1, 2002.
The Company identified all reporting units in conjunction with the provisions
of SFAS No. 142 and allocated all goodwill accordingly. However, in accordance
with SFAS No. 142, the Company is not required to complete the transitional
goodwill impairment test until June 30, 2002. The Company is currently
evaluating, but has not yet determined, whether the adoption of this statement
will result in an impairment of goodwill.
There were no changes, except for translation effects, to the carrying
amount of goodwill for the three months ended March 31, 2002.
The Companys other intangible
assets consist principally of trademarks. During the quarter ended

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March 31, 2002, the Company determined the
trademarks to have an indefinite life and
performed the transitional impairment test as required under SFAS No. 142.
Based upon the valuation, the Company determined that there was no impairment
of the trademarks. The net carrying value of the trademarks was
$51,259,000 as of March 31, 2002.

In accordance with SFAS No. 142, the Company discontinued amortization of
goodwill and other intangible assets with an indefinite life. A reconciliation
of previously reported net income to amounts adjusted for the exclusion of
goodwill and trademark amortization, net of the related income tax
effects, where applicable, is as follows (in thousands):

|                                   |  |                              |        |      |  |   |       | 
|---------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ----- | 
|                                   |  | Three Months Ended March 31,
|                                   |  |                             
|                                   |  | 2002                         |        | 2001
|                                   |  |                              |        |     
|Net income                         |  | $                            | 10,145 |      |  | $ | 2,572 | 
|                                  
|                                  
|                                  
|                                  
|Goodwill amortization, net of tax  |  |                              |       |      |  |   | 335   | 
|                                  
|                                  
|                                  
|                                  
|Trademark amortization, net of tax |  |                              |       |      |  |   | 155   | 
|                                   |  |                              |        |      |  |   |       | 
|Adjusted net income                |  | $                            | 10,145 |      |  | $ | 3,062 | 
|                                   |  |                              |        |      |  |   |       | 

On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. SFAS No. 144 retains substantially all of the
requirements of SFAS No. 121, while resolving certain implementation issues and
addressing the accounting for a component of a business accounted for as a
discontinued operation. SFAS No. 144 was adopted with no significant impact on
the financial position or results of operations of the Company.

In
November 2001, the Emerging Issues Task Force (EITF) issued EITF
Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer
or a Reseller of the Vendors Products. This new guidance provides that consideration from a vendor to a
reseller is generally presumed to be a reduction of the selling prices of the
vendors products, and, therefore, should be characterized as a reduction of
revenue when recognized in the vendors income statement. On January 1, 2002,
the Company adopted EITF Issue No. 01-9 and reclassified
commissions paid to consultants of $922,000 on their
personal sales, previously reported as a component of selling,
general and administrative expenses, as a reduction in net sales for the three
months ended March 31, 2001.

Foreign Operations

Sales outside of the United States aggregated approximately 79% of the
Companys total net sales for each of the three month periods ended March 31,
2002 and 2001. In addition, as of March 31, 2002, international subsidiaries
comprised approximately 76% of the Companys consolidated total assets.
Accordingly, the Company has experienced and continues to be exposed to foreign
exchange risk. In 2001 and 2002, the Company entered into foreign currency
forward contracts in Mexican pesos and in 2002, the Company entered into
foreign currency option contracts in Mexican pesos to reduce the effect of
potentially adverse exchange rate fluctuations in Mexico.

The Companys subsidiary in Mexico, Jafra S.A., generated approximately
67% and 65% of the Companys net sales for the three months ended March 31,
2002 and 2001, respectively, all of which were

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denominated in Mexican
pesos. Jafra S.A. had $43.9 million of U.S. dollar-denominated third party
debt. Gains and losses from remeasuring such debt to the U.S. dollar from the
peso are included as a component of net income. Jafra S.A. recognized an
unrealized gain of $0.6 million and $1.0 million for the three months ended
March 31, 2002 and 2001, respectively, on the remeasurement of this
U.S. dollar-denominated debt and a net loss of $0.5 and $2.4 on foreign
currency forward contracts for the three months ended March 31, 2002 and 2001,
respectively.

European Economic and Monetary Union

On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and the euro. The participating countries adopted the euro as their
common legal currency on that day. The euro traded on currency exchanges and
was available for non-cash transactions during the transition period between
January 1, 1999 and January 1, 2002. During the transition period, the Company
continued to utilize the respective countrys existing currency as the
functional currency. The Companys European subsidiaries, except for
Switzerland, adopted the euro as the functional currency on January 1, 2002
without any material adverse affects on the business or operations.

Business Trends and Initiatives

The Company has experienced significant sales growth and an increased
concentration of sales in Mexico over the last three years, due primarily to
increases in the number of consultants. The Companys Mexican subsidiary
generated 67% of the Companys consolidated net sales for the three months
ended March 31, 2002, compared to 66% for the full year in 2001. The
year-to-year sales growth in Mexico for the three months ended March 31, 2002
was approximately 18% in U.S. dollars and 12% in local currency. Assuming a
continued stable economic environment, the Company intends to continue to grow
its revenues and consultant base in Mexico, but at rates in the range of 10-12%
per year.

The Company is employing a strategy to leverage diversification through
growth in other markets besides Mexico. The U.S. subsidiary has created
distinct business divisions to recognize the distinct elements of its General
and Hispanic customer groups. Net sales in the U.S. for the three months ended
March 31, 2002 increased 15% versus the comparable period of the prior year.
The U.S. plans to implement a number of strategies in 2002, including continued
focus on doing business via e-commerce and an emphasis on sponsoring new
consultants, retaining current consultants and strengthening consultant
leadership to stimulate sales growth in the low double digits over 2001 levels.

Net sales in Europe have been on a downward trend for the past three
years. European sales have declined from approximately 11% of the Companys
business in 1999 to 6% of the Companys business in the three months ended
March 31, 2002. In the first three months of 2002, net sales
decreased approximately 6%
compared to the first three months of 2001. However, the European operations
have reported stability in some key operating indicators including a relatively
constant number of consultants compared to 2001. While no assurance can be
given, the Company expects to achieve a slightly higher level of European sales
in year 2002 than was achieved in 2001.

Sales in U.S. dollars in the South American region grew by over 5% in
three months ended March 31, 2002 compared to the prior year, and were up over
19% in local currencies. In 2001, net sales generated by subsidiaries in the
South American region were approximately 5% of consolidated sales. The Company
expects the region to contribute approximately 6% of consolidated sales for
2002.

The Company expects, but no assurance can be given, that all major markets
will report increases in sales in 2002, compared to 2001. The Company expects,
but no assurance can be given, that as a percentage of 2002 consolidated net
sales, sales in the U.S., Mexico, Europe and South America will remain
relatively constant.

Information Concerning Forward-Looking Statements

Certain of the statements contained in this report (other than the
Companys consolidated financial statements and other statements of historical
fact) are forward-looking statements, including, without limitation, (i) the
statements in Liquidity and Capital Resources concerning the Companys
belief that it will have sufficient liquidity to meet its cash requirements and
working capital needs over the next twelve months; (ii) the statement in Cash
Flows that total capital expenditures in 2002 are expected to be approximately
$11.0 million; (iii) the

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statements in Business Trends and Initiatives that
(a) assuming a continued stable economic environment, the Company intends to
continue to grow its revenues and consultant base in Mexico, but at rates in
the range of 10-12% per year; (b) the Companys expectation that U.S. sales
growth will be in the low double digits in 2002; (c) the Company expects to
achieve a slightly higher level of European sales in year 2002 than was
achieved in 2001; (d) the Companys expectation that the percentage of net
sales in South America will increase to approximately 6% of consolidated sales
for 2002; (e) the Companys expectation that all major markets will report
increases in sales in 2002; and (f) the Companys expectation that as a
percentage of 2002 consolidated net sales, sales in the U.S., Mexico, Europe
and South America will remain relatively constant; and (iv) other statements as
to managements or the Companys expectations or beliefs presented in this
Managements Discussion and Analysis of Financial Condition and Results of
Operations.

Forward-looking statements are based upon managements current
expectations and beliefs concerning future developments and their potential
effects upon the Company. There can be no assurance that future developments
will be in accordance with managements expectations or that the effect of
future developments on the Company will be those anticipated by management.
The factors described in the Companys Annual Report on Form 10-K for the year
ended December 31, 2001(including, without limitation, those discussed in
BusinessStrategy, International Operations, Distribution,
Manufacturing, Management Information Systems, Environmental
Matters, Properties, Legal Proceedings and Managements Discussion
and Analysis of Financial Condition and Results of Operations Results of
Operations, Liquidity and Capital Resources, Foreign Operations,
and European Economic and Monetary Union), or in other Securities and
Exchange Commission filings, could affect (and in some cases have affected) the
Companys actual results and could cause such results to differ materially from
estimates or expectations reflected in such forward-looking statements.

While the Company periodically reassesses material trends and
uncertainties affecting the Companys results of operations and financial
condition in connection with its preparation of managements discussion and
analysis of results of operations and financial condition contained in its
quarterly and annual reports, the Company does not intend to review or revise
any particular forward-looking statement referenced in this report in light of
future events.




ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain market risks arising from transactions
in the normal course of its business, and from debt incurred in connection with
the Acquisition. Such risk is principally associated with interest rate and
foreign exchange fluctuations, as well as changes in the Companys credit
standing. See disclosures under Item 7a, Quantitative and Qualitative
Disclosures About Market Risks in the Companys annual report on Form 10-K for
the year ended December 31, 2001. No significant changes have occurred during
the first quarter of 2002 in relation to the interest rate risk or its credit
standing.

Foreign Currency Risk

The Company operates globally, with manufacturing facilities in Mexico and
distribution facilities in various locations around the world. All
intercompany product sales are denominated in U.S. dollars. In addition, 79%
of the Companys revenue for first three months of 2002 was generated in
countries with a functional currency other than the U.S. dollar. As a result,
the Companys earnings and cash flows for the three months ended March 31, 2002
are exposed to fluctuations in foreign currency exchange rates.

The Company may reduce its primary market exposures to fluctuations in
foreign exchange rates and hedge contractual foreign currency cash flows or
obligations (including third party and intercompany foreign currency
transactions) by creating offsetting positions through the use of forward
exchange contracts or option contracts. The Company regularly monitors its
foreign currency exposures and ensures that contract amounts do not exceed the
amounts of the underlying exposures. The Company does not use derivative
financial instruments for trading or speculative purposes, nor is the Company a
party to leveraged derivatives.

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##### Table of Contents



The outstanding foreign currency forward contracts had notional values
denominated in Mexican pesos of $579,000,000 in equal offsetting buy and sell
positions at March 31, 2002 and $862,000,000 in a buy position at March 31, 2001. The contracts outstanding at March 31, 2002
mature at various dates extending to November 2002 and the contracts
outstanding at March 31, 2001 matured at various dates through December 2001.
Notional amounts do not quantify market or credit exposure or represent assets
or liabilities of the Company, but are used in the calculation of cash
settlements under the contracts. The table below describes the forward
contracts that were outstanding at March 31, 2002 and 2001 (in thousands):

March 31, 2002:

|                                |  |               |          |          |  |          |          |                |  |          |       |  |  |   |       |  
|------------------------------- |  | ------------- | -------- | -------- |  | -------- | -------- | -------------- |  | -------- | ----- |  |  | - | ----- | -
|                                |  |               |          |          |  |          |          |                |  | Weighted |       |  |  |  
|                                |  | Forward       |          |          |  |          |          | Average        |  |          |       | 
|                                |  | Position in   |          | Maturity |  | Contract |          | Fair Value in 
|Foreign Currency                |  | Mexican Pesos |          | Date     |  | Rate     |          | U.S.Dollars(1)
|                                |  |               |          |          |  |          |          |               
|Buy US Dollar/sell Mexican Peso |  | $             | 85,000   |          |  |          | 4/30/02  |                |  |          | 10.23 |  |  | $ | 1,064 |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (85,000  | )        |  |          | 4/30/02  |                |  |          | 9.24  |  |  |   | (177  | )
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 81,000   |          |  |          | 5/31/02  |                |  |          | 10.11 |  |  |   | 874   |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (81,000  | )        |  |          | 5/31/02  |                |  |          | 9.26  |  |  |   | (150  | )
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 80,000   |          |  |          | 6/28/02  |                |  |          | 9.95  |  |  |   | 610   |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (80,000  | )        |  |          | 6/28/02  |                |  |          | 9.36  |  |  |   | (115  | )
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 48,000   |          |  |          | 7/31/02  |                |  |          | 10.07 |  |  |   | 425   |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (48,000  | )        |  |          | 7/31/02  |                |  |          | 9.16  |  |  |   | 37    |  
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 100,000  |          |  |          | 8/30/02  |                |  |          | 10.05 |  |  |   | 842   |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (100,000 | )        |  |          | 8/30/02  |                |  |          | 9.21  |  |  |   | 39    |  
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 45,000   |          |  |          | 9/30/02  |                |  |          | 10.09 |  |  |   | 371   |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (45,000  | )        |  |          | 9/30/02  |                |  |          | 9.25  |  |  |   | 20    |  
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 110,000  |          |  |          | 10/31/02 |                |  |          | 10.09 |  |  |   | 844   |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (110,000 | )        |  |          | 10/31/02 |                |  |          | 9.31  |  |  |   | 24    |  
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 30,000   |          |  |          | 11/29/02 |                |  |          | 10.27 |  |  |   | 265   |  
|                               
|                               
|                               
|                               
|Sell US Dollar/buy Mexican Peso |  |               | (30,000  | )        |  |          | 11/29/02 |                |  |          | 9.33  |  |  |   | 13    |  
|                                |  |               |          |          |  |          |          |                |  |          |       |  |  |   |       |  
|                                |  | $             |         |          |  |          |          |                |  |          |       |  |  | $ | 4,986 |  
|                                |  |               |          |          |  |          |          |                |  |          |       |  |  |   |      

March 31, 2001:

|                                |  |               |         |          |  |          |          |                |  |          |       |  |  |   |       | 
|------------------------------- |  | ------------- | ------- | -------- |  | -------- | -------- | -------------- |  | -------- | ----- |  |  | - | ----- | 
|                                |  |               |         |          |  |          |          |                |  | Weighted |       |  |  |  
|                                |  | Forward       |         |          |  |          |          | Average        |  |          |       | 
|                                |  | Position in   |         | Maturity |  | Contract |          | Fair Value in 
|Foreign Currency                |  | Mexican Pesos |         | Date     |  | Rate     |          | U.S.Dollars(1)
|                                |  |               |         |          |  |          |          |               
|Buy US Dollar/sell Mexican Peso |  | $             | 95,000  |          |  |          | 4/30/01  |                |  |          | 10.34 |  |  | $ | 753   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 71,000  |          |  |          | 5/31/01  |                |  |          | 10.37 |  |  |   | 499   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 103,000 |          |  |          | 6/29/01  |                |  |          | 10.27 |  |  |   | 537   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 95,000  |          |  |          | 7/31/01  |                |  |          | 10.38 |  |  |   | 494   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 122,000 |          |  |          | 8/31/01  |                |  |          | 10.32 |  |  |   | 457   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 126,000 |          |  |          | 9/28/01  |                |  |          | 10.39 |  |  |   | 430   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 25,000  |          |  |          | 10/30/01 |                |  |          | 10.70 |  |  |   | 130   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 110,000 |          |  |          | 10/31/01 |                |  |          | 10.71 |  |  |   | 574   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 30,000  |          |  |          | 11/30/01 |                |  |          | 10.43 |  |  |   | 58    | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 44,000  |          |  |          | 12/27/01 |                |  |          | 10.71 |  |  |   | 153   | 
|                               
|                               
|                               
|                               
|Buy US Dollar/sell Mexican Peso |  |               | 41,000  |          |  |          | 12/31/01 |                |  |          | 10.90 |  |  |   | 207   | 
|                                |  |               |         |          |  |          |          |                |  |          |       |  |  |   |       | 
|                                |  | $             | 862,000 |          |  |          |          |                |  |          |       |  |  | $ | 4,292 | 
|                                |  |               |         |          |  |          |          |                |  |          |       |  |  |   |       | 



---

|(1) |  | The Fair Value of the forward positions presented above, an unrealized
loss of $4,986,000 and $4,292,000 at March 31, 2002 and 2001,
respectively, has been
recorded in accrued liabilities in the consolidated balance sheets.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



The Company had no option contracts in 2001. The following table provides
information about the details of the Companys option contracts as of March 31,
2002 (in thousands):

|                                                   |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 
|-------------------------------------------------- |  | ----------- | ------- | ------------ |  | ------------- | ------------ | ------------- |  | - | --- | - |  | ----------------- |  | 
|                                                   |  | Coverage in |         |              |  |               |              |               |  |   |     |   |  |                  
|                                                   |  | Mexican     |         | Average      |  | Fair Value in |              |               |  |  
|Foreign Currency                                   |  | Pesos       |         | Strike Price |  | U.S. Dollars  |              | Maturity Date
|                                                   |  |             |         |              |  |               |              |              
|At March 31, 2002:                                 |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Purchased Puts (Company may sell Peso/buy USD)     |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  | $           | 136,000 |              |  |               | 9.18 - 9.44  |               |  | $ | (6  | ) |  | April - June 2002
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  |             | 193,000 |              |  |               | 9.60 - 9.83  |               |  |   | 12  |   |  | July - Sept. 2002
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  |             | 323,500 |              |  |               | 9.97 - 10.15 |               |  |   | 69  |   |  | Oct. - Dec. 2002 
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  |             | 51,000  |              |  |               | 10.48        |               |  |   | 13  |   |  | Mar-02           
|                                                   |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 
|                                                   |  | $           | 703,500 |              |  |               |              |               |  | $ | 88  |   |  |                   |  | 
|                                                   |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 
|Written Calls (Counterparty may buy Peso/sell USD) |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  | $           | 136,000 |              |  |               | 9.02         |               |  | $ | (13 | ) |  | April - June 2002
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  |             | 193,000 |              |  |               | 9.02         |               |  |   | (30 | ) |  | July - Sept. 2002
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  |             | 323,500 |              |  |               | 9.01-9.02    |               |  |   | 9   |   |  | Oct. - Dec. 2002 
|                                                  
|                                                  
|                                                  
|                                                  
|Mexican Peso                                       |  |             | 51,000  |              |  |               | 9.02         |               |  |   | (5  | ) |  | Mar-02           
|                                                   |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 
|                                                   |  | $           | 703,500 |              |  |               |              |               |  | $ | (39 | ) |  |                   |  | 
|                                                   |  |             |         |              |  |               |              |               |  |   |     |   |  |                   |  | 

34



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##### Table of Contents






PART II. OTHER INFORMATION




Item 1.    Legal Proceedings

See discussion under Legal Proceedings in the Companys Annual Report on
Form 10-K for the year ended December 31, 2001.




Item 2.    Changes in Securities and Use of Proceeds

None.




Item 3.    Defaults Upon Senior Securities

None.




Item 4.    Submission of Matters to a Vote of Security Holders

None.




Item 5.    Other Information

None.




Item 6.    Exhibits and Reports on Form 8-K

(a)    Exhibits

None.

(b)    Reports on Form 8-K

During the quarter ended March 31, 2002, the Company filed no reports on
Form 8-K.

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##### Table of Contents






SIGNATURE

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.



| | CDRJ Investments (Lux) S.A.
| | ---------------------------



| | /s/    MICHAEL A. DIGREGORIO
Michael A. DiGregorio                                                       
| | ---------------------------------------------------------------------------------------------------------
| | Senior Vice President and Chief Financial Officer of the
Advisory Committee (Principal Financial Officer)

May 15, 2002

36