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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549 FORM 10-Q


(Mark One)

|                                             |  |                                                                                         
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------
|x                                            |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 
|                                            
|For the quarterly period ended June 30, 2002
|                                            
|OR                                          
|                                            
| ̈                                            |  | 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] NO [ ]

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 August 9, 2002
831,888 shares



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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                               
|                              |                                                                                               | CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS                     
|                              |                                                                                               | CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                              |                                                                                               | CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|                              |                                                                                               | JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS             
|                              |                                                                                               | JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS             
|                              |                                                                                               | JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        
|                              |                                                                                               | JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V. AND SUBSIDIARIES 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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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 and Six Months Ended June 30, 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                                                                      |  | 12      
|                               |  | Consolidated Statements of Operations                                                            |  | 13      
|                               |  | Consolidated Statements of Cash Flows                                                            |  | 14      
|                               |  | Notes to Consolidated Financial Statements                                                       |  | 15      
|                              
|                               |  | Consolidated Financial Statements  Jafra Cosmetics International, S.A. de C.V. and Subsidiaries |  |         
|                               |  | Consolidated Balance Sheets                                                                      |  | 19      
|                               |  | Consolidated Statements of Operations                                                            |  | 20      
|                               |  | Consolidated Statements of Cash Flows                                                            |  | 21      
|                               |  | Notes to Consolidated Financial Statements                                                       |  | 22      
|                              
|Item 2.                        |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations            |  | 27      
|                              
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                       |  | 38      
|                              
|PART
II  OTHER INFORMATION   
|                              
|Item 1.                        |  | Legal Proceedings                                                                                |  | 41      
|                              
|Item 2.                        |  | Changes in Securities and Use of Proceeds                                                        |  | 41      
|                              
|Item 3.                        |  | Defaults Upon Senior Securities                                                                  |  | 41      
|                              
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                              |  | 41      
|                              
|Item 5.                        |  | Other Information                                                                                |  | 41      
|                              
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                 |  | 41      
|                              
|                               |  | Signature                                                                                        |  | 42      



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|* |  | 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
cross-guarantors, 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 June 30, 2002.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




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

|                                     |                                                                                                                      |                            |        |             |         |              |        |        |         | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ----------- | ------- | ------------ | ------ | ------ | ------- | 
|                                     |                                                                                                                      |                            |        | June 30,    |         | December 31,
|                                     |                                                                                                                      |                            |        | 2002        |         | 2001        
|                                     |                                                                                                                      |                            |        |             |         |             
|                                     |                                                                                                                      |                            |        | (Unaudited) |         |              |        |        |        
|ASSETS                              
|Current assets:                      |                                                                                                                      |                            |        |             |         |              |        |       
|                                     | Cash and cash equivalents                                                                                            |                            | $      | 10,051      |         |              | $      | 6,748  |        
|                                     | Receivables, net                                                                                                     |                            |        | 38,611      |         |              |        | 43,898 |        
|                                     | Inventories                                                                                                          |                            |        | 36,270      |         |              |        | 40,515 |        
|                                     | Prepaid income taxes                                                                                                 |                            |        | 58          |         |              |        |       |        
|                                     | Prepaid expenses and other current assets                                                                            |                            |        | 6,095       |         |              |        | 7,851  |        
|                                     | Deferred income taxes                                                                                                |                            |        | 2,392       |         |              |        | 55     |        
|                                     |                                                                                                                      |                            |        |             |         |              |        |       
|                                     |                                                                                                                      | Total current assets       |        |             | 93,477  |              |        |        | 99,067  | 
|Property and equipment, net          |                                                                                                                      |                            | 59,071 |             |         |              | 59,598 |       
|Other assets:                        |                                                                                                                      |                            |        |             |         |              |        |       
|                                     | Goodwill                                                                                                             |                            |        | 67,762      |         |              |        | 71,148 |        
|                                     | Trademarks                                                                                                           |                            |        | 46,466      |         |              |        | 50,560 |        
|                                     | Deferred financing fees and other, net                                                                               |                            |        | 8,994       |         |              |        | 10,763 |        
|                                     |                                                                                                                      |                            |        |             |         |              |        |       
|                                     |                                                                                                                      | Total                      |        | $           | 275,770 |              |        | $      | 291,136 | 
|                                     |                                                                                                                      |                            |        |             |         |              |        |       
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                      |                            |        |             |         |              |        |       
|                                     | Current portion of long-term debt                                                                                    |                            | $      | 6,516       |         |              | $      | 6,188  |        
|                                     | Accounts payable                                                                                                     |                            |        | 16,187      |         |              |        | 26,516 |        
|                                     | Accrued liabilities                                                                                                  |                            |        | 34,366      |         |              |        | 40,916 |        
|                                     | Income taxes payable                                                                                                 |                            |        | 4,302       |         |              |        | 7,130  |        
|                                     | Deferred income taxes                                                                                                |                            |        | 4,653       |         |              |        | 4,094  |        
|                                     |                                                                                                                      |                            |        |             |         |              |        |       
|                                     |                                                                                                                      | Total current liabilities  |        |             | 66,024  |              |        |        | 84,844  | 
|Long-term debt                       |                                                                                                                      |                            | 84,224 |             |         |              | 86,901 |       
|Deferred income taxes                |                                                                                                                      |                            | 17,861 |             |         |              | 20,311 |       
|Other long-term liabilities          |                                                                                                                      |                            | 3,464  |             |         |              | 3,088  |       
|                                     |                                                                                                                      |                            |        |             |         |              |        |       
|                                     |                                                                                                                      | Total liabilities          |        |             | 171,573 |              |        |        | 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                                                                                                    |                            |        | 32,246      |         |              |        | 18,373 |        
|                                     | Accumulated other comprehensive loss                                                                                 |                            |        | (11,634     | )       |              |        | (5,966 | )      
|                                     |                                                                                                                      |                            |        |             |         |              |        |       
|                                     |                                                                                                                      | Total stockholders equity |        |             | 104,197 |              |        |        | 95,992  | 
|                                     |                                                                                                                      |                            |        |             |         |              |        |       
|                                     |                                                                                                                      | Total                      |        | $           | 275,770 |              |        | $      | 291,136 | 
|                                     |                                                                                                                      |                            |        |             |         |              |        |       

See accompanying notes to consolidated financial statements

3



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

|                                                                                 |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------- | ---------------------- | - | ------------------ | ------ | ---------------- | - | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                 |                        |   | Three Months Ended |        | Six Months Ended
|                                                                                 |                        |   | June 30,           |        | June 30,        
|                                                                                 |                        |   |                    |        |                 
|                                                                                 |                        |   | 2002               |        | 2001             |   | 2002   |        | 2001
|                                                                                 |                        |   |                    |        |                  |   |        |        |     
|Net sales                                                                        |                        | $ | 98,091             |        |                  | $ | 95,827 |        |      | $ | 197,195 |         |   | $ | 182,000 |        
|Cost of sales                                                                    |                        |   | 22,889             |        |                  |   | 22,311 |        |      |   | 45,887  |         |   |   | 42,630  |        
|                                                                                 |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |        
|                                                                                 | Gross profit           |   |                    | 75,202 |                  |   |        | 73,516 |      |   |         | 151,308 |   |   |         | 139,370 |  
|Selling, general and administrative expenses                                     |                        |   | 61,043             |        |                  |   | 60,418 |        |      |   | 121,406 |         |   |   | 115,102 |        
|                                                                                 |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |        
|                                                                                 | Income from operations |   |                    | 14,159 |                  |   |        | 13,098 |      |   |         | 29,902  |   |   |         | 24,268  |  
|Other income (expense):                                                          |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |        
|                                                                                 | Exchange loss, net     |   |                    | (5,909 | )                |   |        | (4,522 | )    |   |         | (5,423  | ) |   |         | (6,702  | )
|                                                                                 | Interest expense, net  |   |                    | (2,925 | )                |   |        | (3,359 | )    |   |         | (5,855  | ) |   |         | (6,847  | )
|                                                                                 | Other, net             |   |                    | 285    |                  |   |        | (117   | )    |   |         | 295     |   |   |         | (229    | )
|                                                                                 |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |        
|Income before income taxes and cumulative effect
of accounting change            |                        |   | 5,610              |        |                  |   | 5,100  |        |      |   | 18,919  |         |   |   | 10,490  |        
|Income tax expense                                                               |                        |   | 1,638              |        |                  |   | 3,123  |        |      |   | 4,802   |         |   |   | 6,067   |        
|                                                                                 |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |        
|Income before cumulative effect of accounting change                             |                        |   | 3,972              |        |                  |   | 1,977  |        |      |   | 14,117  |         |   |   | 4,423   |        
|Cumulative effect of accounting change, net of income
tax expense of $82 in 2001 |                        |   |                   |        |                  |   |       |        |      |   | (244    | )       |   |   | 126     |        
|                                                                                 |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |        
|Net income                                                                       |                        | $ | 3,972              |        |                  | $ | 1,977  |        |      | $ | 13,873  |         |   | $ | 4,549   |        
|                                                                                 |                        |   |                    |        |                  |   |        |        |      |   |         |         |   |   |         |        

See accompanying notes to consolidated financial statements

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

|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |        |      |       |         |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | --- | ---------------- | ------- | ------ | ---- | ----- | ------- | -
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     | Six Months Ended
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     | June 30,        
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                 
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     | 2002             |         | 2001  
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|Cash
flows from operating activities:                        |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|                                                             | Net income                                                                                                                  |                                                      | $                                               | 13,873                                    |     |                  | $       | 4,549  |     
|                                                             |                                                                                                                             | Cumulative effect of accounting change, net of taxes |                                                 |                                           | 244 |                  |         |        | (126 | )    
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|                                                             | Income before cumulative effect of accounting change                                                                        |                                                      |                                                 | 14,117                                    |     |                  |         | 4,423  |     
|                                                             | Adjustments to reconcile income before cumulative effect of accounting change
to net cash provided by operating activities: |                                                      |                                                 |                                           |     |                  |         |        |     
|                                                             |                                                                                                                             |                                                      | Gain on sale of property and equipment          |                                           |     | (65              | )       |        |      |      |        
|                                                             |                                                                                                                             |                                                      | Depreciation and amortization                   |                                           |     | 2,411            |         |        |      | 3,933 |        
|                                                             |                                                                                                                             |                                                      | Amortization of deferred financing fees         |                                           |     | 717              |         |        |      | 713   |        
|                                                             |                                                                                                                             |                                                      | Provision for uncollectible accounts receivable |                                           |     | 6,103            |         |        |      | 2,746 |        
|                                                             |                                                                                                                             |                                                      | Unrealized foreign exchange and derivative loss |                                           |     | 4,311            |         |        |      | 2,398 |        
|                                                             |                                                                                                                             |                                                      | Deferred realized foreign exchange loss         |                                           |     | 385              |         |        |      | (550  | )      
|                                                             |                                                                                                                             |                                                      | Deferred income taxes                           |                                           |     | (3,504           | )       |        |      |      |        
|                                                             |                                                                                                                             |                                                      | Changes in operating assets and liabilities:    |                                           |     |                  |         |        |      |       |        
|                                                             |                                                                                                                             |                                                      |                                                 | Receivables                               |     |                  | (3,418  | )      |      |       | (7,175  | )
|                                                             |                                                                                                                             |                                                      |                                                 | Inventories                               |     |                  | 2,121   |        |      |       | 5,879   |  
|                                                             |                                                                                                                             |                                                      |                                                 | Prepaid expenses and other current assets |     |                  | 2,046   |        |      |       | 4,016   |  
|                                                             |                                                                                                                             |                                                      |                                                 | Other assets                              |     |                  | 852     |        |      |       | 1,724   |  
|                                                             |                                                                                                                             |                                                      |                                                 | Accounts payable and accrued liabilities  |     |                  | (12,107 | )      |      |       | (14,116 | )
|                                                             |                                                                                                                             |                                                      |                                                 | Income taxes payable/prepaid              |     |                  | (2,344  | )      |      |       | 4,303   |  
|                                                             |                                                                                                                             |                                                      |                                                 | Other long-term liabilities               |     |                  | 376     |        |      |       | 229     |  
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|                                                             |                                                                                                                             |                                                      |                                                 | Net cash provided by operating activities |     |                  | 12,001  |        |      |       | 8,523   |  
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|Cash
flows from investing activities:                        |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|                                                             | Proceeds from sale of property and equipment                                                                                |                                                      |                                                 | 211                                       |     |                  |         |       |     
|                                                             | Purchases of property and equipment                                                                                         |                                                      |                                                 | (4,885                                    | )   |                  |         | (4,360 | )   
|                                                             | Other                                                                                                                       |                                                      |                                                 | (265                                      | )   |                  |         | (123   | )   
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|                                                             |                                                                                                                             |                                                      |                                                 | Net cash used in investing activities     |     |                  | (4,939  | )      |      |       | (4,483  | )
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|Cash
flows from financing activities:                        |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|                                                             | Repayments under term loan facility                                                                                         |                                                      |                                                 | (4,625                                    | )   |                  |         | (2,250 | )   
|                                                             | Net borrowings (repayments) under revolving credit facility                                                                 |                                                      |                                                 | 2,700                                     |     |                  |         | (2,100 | )   
|                                                             | Net (repayments) borrowings under bank debt                                                                                 |                                                      |                                                 | (318                                      | )   |                  |         | 2,584  |     
|                                                             | Issuance of common stock                                                                                                    |                                                      |                                                 |                                          |     |                  |         | 33     |     
|                                                             | Net repurchase of common stock                                                                                              |                                                      |                                                 |                                          |     |                  |         | (575   | )   
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|                                                             |                                                                                                                             |                                                      |                                                 | Net cash used in financing activities     |     |                  | (2,243  | )      |      |       | (2,308  | )
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                                             |                                                      | (1,516                                          | )                                         |     |                  | 256     |       
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|Net increase in cash and cash equivalents                    |                                                                                                                             |                                                      | 3,303                                           |                                           |     |                  | 1,988   |       
|Cash and cash equivalents at beginning of period             |                                                                                                                             |                                                      | 6,748                                           |                                           |     |                  | 5,838   |       
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       
|Cash and cash equivalents at end of period                   |                                                                                                                             | $                                                    | 10,051                                          |                                           |     | $                | 7,826   |       
|                                                             |                                                                                                                             |                                                      |                                                 |                                           |     |                  |         |       

See accompanying notes to consolidated financial statements

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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
June 30, 2002 and for the three and six months ended June 30, 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 June 30, 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.

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 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 with regards 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. In accordance with such adoption, the Company
identified all reporting units in conjunction with the provisions of SFAS No.
142 and allocated all goodwill accordingly. During the six months ended June
30, 2002, the Company completed the transitional goodwill impairment test
required by SFAS No. 142. Due to the general market uncertainty in Colombia,
the Company revised its projections and recorded an impairment loss of $244,000
associated with its Colombia reporting unit. No other impairment was
identified. The impairment loss was recorded as a cumulative effect of
accounting change on the accompanying Consolidated Statements of Operations.
The changes in the carrying amount of goodwill for the six months ended June
30, 2002 were as follows (in thousands):

|                                |  |        |        |        |  |        |        |        |  |       |       |     |  |              |      |   |  |   |        |  
|------------------------------- |  | ------ | ------ | ------ |  | ------ | ------ | ------ |  | ----- | ----- | --- |  | ------------ | ---- | - |  | - | ------ | -
|                                |  | United |        |        |  |        |        |        |  |       |       | All |  | Consolidated
|Goodwill                        |  | States |        | Mexico |  | Europe |        | Others |  | Total
|                                |  |        |        |        |  |        |        |        |  |      
|Balance as of December 31, 2001 |  | $      | 32,188 |        |  | $      | 32,401 |        |  | $     | 5,937 |     |  | $            | 622  |   |  | $ | 71,148 |  
|Translation effect              |  |        |       |        |  |        | (2,630 | )      |  |       | (403  | )   |  |              | (109 | ) |  |   | (3,142 | )
|Impairment losses               |  |        |       |        |  |        |       |        |  |       |      |     |  |              | (244 | ) |  |   | (244   | )
|                                |  |        |        |        |  |        |        |        |  |       |       |     |  |              |      |   |  |   |        |  
|Balance as of June 30, 2002     |  | $      | 32,188 |        |  | $      | 29,771 |        |  | $     | 5,534 |     |  | $            | 269  |   |  | $ | 67,762 |  
|                                |  |        |        |        |  |        |        |        |  |       |       |     |  |              |      |   |  |   |        |  

The Companys other intangible assets consist of trademarks. During the
six months ended June 30, 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 transitional test, the Company determined
that there was no impairment of trademarks. The carrying value of trademarks
was $46,466,000 as of June 30, 2002.

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CDRJ INVESTMENTS (LUX) S.A. 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 |       | Six Months Ended
|                                   |  | June 30,           |       | June 30,        
|                                   |  |                    |       |                 
|                                   |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                                   |  |                    |       |                  |  |      |       |     
|Net income                         |  | $                  | 3,972 |                  |  | $    | 1,977 |      |  | $ | 13,873 |  |  | $ | 4,549 | 
|Goodwill amortization, net of tax  |  |                    |      |                  |  |      | 464   |      |  |   |       |  |  |   | 819   | 
|Trademark amortization, net of tax |  |                    |      |                  |  |      | 223   |      |  |   |       |  |  |   | 439   | 
|                                   |  |                    |       |                  |  |      |       |      |  |   |        |  |  |   |       | 
|Adjusted net income                |  | $                  | 3,972 |                  |  | $    | 2,664 |      |  | $ | 13,873 |  |  | $ | 5,807 | 
|                                   |  |                    |       |                  |  |      |       |      |  |   |        |  |  |   |       | 

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 $994,000 and
$1,916,000 on their personal sales, previously reported as a component of
selling, general and administrative expenses, as a reduction in net sales for
the three and six months ended June 30, 2001, respectively.

In June 2002, the FASB approved SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
The provisions of this statement are effective for exit or disposal activities
that are initiated after December 31, 2002, with early application encouraged.
The Company is currently evaluating the impact that this statement may have on
any potential future exit or disposal activities.

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

(2) Property and Equipment

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

|                               |  |          |        |              |  |   |        | 
|------------------------------ |  | -------- | ------ | ------------ |  | - | ------ | 
|                               |  | June 30, |        | December 31,
|                               |  | 2002     |        | 2001        
|                               |  |          |        |             
|Land                           |  | $        | 16,888 |              |  | $ | 17,833 | 
|Buildings                      |  |          | 17,543 |              |  |   | 18,523 | 
|Machinery, equipment and other |  |          | 37,699 |              |  |   | 34,640 | 
|                               |  |          |        |              |  |   |        | 
|                               |  |          | 72,130 |              |  |   | 70,996 | 
|Less accumulated depreciation  |  |          | 13,059 |              |  |   | 11,398 | 
|                               |  |          |        |              |  |   |        | 

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

|                            |  |   |        |  |  |   |        | 
|--------------------------- |  | - | ------ |  |  | - | ------ | 
|Property and equipment, net |  | $ | 59,071 |  |  | $ | 59,598 | 
|                            |  |   |        |  |  |   |        | 

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

(3) Income Taxes

The actual income tax rate of the Company differs from the U.S. and Mexico federal
corporate rates of 35% to income before income taxes, for the three and six
months ended June 30, 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 Mexicos future corporate statutory tax rates 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 $2,337,000 against certain foreign tax
credits in the United States. These were 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.

(4) Comprehensive Income (Loss)

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

|                                                                                     |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                     |  | Three Months Ended |        | Six Months Ended
|                                                                                     |  | June 30,           |        | June 30,        
|                                                                                     |  |                    |        |                 
|                                                                                     |  | 2002               |        | 2001             |  | 2002 |        | 2001
|                                                                                     |  |                    |        |                  |  |      |        |     
|Net income                                                                           |  | $                  | 3,972  |                  |  | $    | 1,977  |      |  | $ | 13,873 |   |  | $ | 4,549  |  
|Unrealized and deferred realized (loss)
gain on derivatives                          |  |                    | 2,535  |                  |  |      | (3,111 | )    |  |   | 340    |   |  |   | (4,027 | )
|Reclassification to exchange loss                                                    |  |                    | 208    |                  |  |      | 295    |      |  |   | 343    |   |  |   | 295    |  
|Reclassification to cost of sales                                                    |  |                    | 962    |                  |  |      | (14    | )    |  |   | 1,899  |   |  |   | 13     |  
|Tax benefit (expense) on unrealized and
deferred realized (loss) gain on
derivatives |  |                    | (2,607 | )                |  |      | 1,109  |      |  |   | (903   | ) |  |   | 1,442  |  
|Foreign currency translation adjustments                                             |  |                    | (6,009 | )                |  |      | 2,838  |      |  |   | (7,347 | ) |  |   | 2,757  |  
|                                                                                     |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|Comprehensive income (loss)                                                          |  | $                  | (939   | )                |  | $    | 3,094  |      |  | $ | 8,205  |   |  | $ | 5,029  |  
|                                                                                     |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  

(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.

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

|                                                 |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|------------------------------------------------ |  | ------ | ------ | ------ |  | ------ | ------- | ------ |  | -------- | ------ | --------- |  | -------------- | ------ | ----------- |  | ------------ | ------- |  |  | ---------- | ------- | - |  | - | ------- | 
|                                                 |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  | Corporate, |         |   |  |  
|                                                 |  | United |        |        |  |        |         |        |  |          |        | All       |  | Total          |        | Unallocated |  | Consolidated
|                                                 |  | States |        | Mexico |  | Europe |         | Others |  | Segments |        | and Other |  | Total         
|                                                 |  |        |        |        |  |        |         |        |  |          |        |           |  |               
|                                                 |  |        |        |        |  |        |         |        |  |          |        |           |  | (in thousands) |        |             |  |              |         |  |  |           
|For the Three Months Ended
June 30, 2002         |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                        |  | $      | 23,909 |        |  | $      | 61,392  |        |  | $        | 7,245  |           |  | $              | 5,545  |             |  | $            | 98,091  |  |  | $          |        |   |  | $ | 98,091  | 
|Operating income (loss)                          |  |        | 4,206  |        |  |        | 16,634  |        |  |          | 274    |           |  |                | (1,927 | )           |  |              | 19,187  |  |  |            | (5,028  | ) |  |   | 14,159  | 
|Depreciation and amortization                    |  |        | 565    |        |  |        | 470     |        |  |          | 101    |           |  |                | 132    |             |  |              | 1,268   |  |  |            |        |   |  |   | 1,268   | 
|                                                 |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|For the Three Months Ended
June 30, 2001         |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                        |  | $      | 20,646 |        |  | $      | 63,116  |        |  | $        | 6,498  |           |  | $              | 5,567  |             |  | $            | 95,827  |  |  | $          |        |   |  | $ | 95,827  | 
|Operating income (loss)                          |  |        | 3,186  |        |  |        | 18,069  |        |  |          | 358    |           |  |                | (1,617 | )           |  |              | 19,996  |  |  |            | (6,898  | ) |  |   | 13,098  | 
|Depreciation and amortization                    |  |        | 627    |        |  |        | 1,143   |        |  |          | 190    |           |  |                | 43     |             |  |              | 2,003   |  |  |            | 100     |   |  |   | 2,103   | 
|                                                 |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|As of and for the Six Months
Ended June 30, 2002 |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                        |  | $      | 44,784 |        |  | $      | 127,879 |        |  | $        | 13,056 |           |  | $              | 11,476 |             |  | $            | 197,195 |  |  | $          |        |   |  | $ | 197,195 | 
|Operating income (loss)                          |  |        | 7,068  |        |  |        | 34,222  |        |  |          | 321    |           |  |                | (2,755 | )           |  |              | 38,856  |  |  |            | (8,954  | ) |  |   | 29,902  | 
|Depreciation and amortization                    |  |        | 1,130  |        |  |        | 912     |        |  |          | 166    |           |  |                | 203    |             |  |              | 2,411   |  |  |            |        |   |  |   | 2,411   | 
|Capital expenditures                             |  |        | 3,637  |        |  |        | 1,025   |        |  |          | 30     |           |  |                | 193    |             |  |              | 4,885   |  |  |            |        |   |  |   | 4,885   | 
|Segment assets                                   |  |        | 73,620 |        |  |        | 172,710 |        |  |          | 19,673 |           |  |                | 11,132 |             |  |              | 277,135 |  |  |            | (1,365  | ) |  |   | 275,770 | 
|Goodwill                                         |  |        | 32,188 |        |  |        | 29,771  |        |  |          | 5,534  |           |  |                | 269    |             |  |              | 67,762  |  |  |            |        |   |  |   | 67,762  | 
|                                                 |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|As of and for the Six Months
Ended June 30, 2001 |  |        |        |        |  |        |         |        |  |          |        |           |  |                |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                        |  | $      | 38,875 |        |  | $      | 119,194 |        |  | $        | 12,728 |           |  | $              | 11,203 |             |  | $            | 182,000 |  |  | $          |        |   |  | $ | 182,000 | 
|Operating income (loss)                          |  |        | 3,977  |        |  |        | 35,053  |        |  |          | 449    |           |  |                | (3,188 | )           |  |              | 36,291  |  |  |            | (12,023 | ) |  |   | 24,268  | 
|Depreciation and amortization                    |  |        | 1,172  |        |  |        | 2,227   |        |  |          | 283    |           |  |                | 148    |             |  |              | 3,830   |  |  |            | 103     |   |  |   | 3,933   | 
|Capital expenditures                             |  |        | 3,276  |        |  |        | 935     |        |  |          | 78     |           |  |                | 71     |             |  |              | 4,360   |  |  |            |        |   |  |   | 4,360   | 
|Segment assets                                   |  |        | 70,002 |        |  |        | 179,902 |        |  |          | 17,100 |           |  |                | 14,067 |             |  |              | 281,071 |  |  |            | (674    | ) |  |   | 280,397 | 

(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 six
months ended June 30, 2002, payments of approximately $100,000 related to
restructuring items have been charged against this accrual. As of June 30,
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.

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CDRJ INVESTMENTS (LUX) S.A. 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 (loss), 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 (loss).
Such amounts will be reclassified from other comprehensive income (loss) 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.

The Company recognized losses on forward contracts of approximately
$511,000 and $866,000 during the three and six months ended June 30, 2002,
respectively, and approximately $6,206,000 and $9,614,000 during the three and
six months ended June 30, 2001, respectively, as a component of exchange loss
on the accompanying consolidated statements of operations. The Company
recognized gains on option contracts of approximately $737,000 during
each of the three
and six month periods ended June 30, 2002. As of December 31, 2001, the Company had
deferred as a component of other comprehensive income (loss) $3,746,000 of
losses on forward contracts. During the six months ended June 30, 2002, the
Company deferred as a component of other comprehensive income (loss) an
additional $1,814,000 of losses on forward contracts and $2,154,000 of gains on
option contracts qualifying for hedge accounting under SFAS No. 133. During the
six months ended June 30, 2002, approximately $343,000 of other comprehensive
income (loss) was reclassified as exchange loss and $1,899,000 was reclassified
as cost of sales upon recognition of the underlying hedged exposure. The
Company expects that substantially all of the remaining loss of $1,164,000
deferred as a component of other comprehensive income (loss) at June 30, 2002
will be recognized into net income within the next twelve months. The fair
value of the forward contracts was $2,936,000 and $10,103,000 at June 30, 2002
and 2001, respectively and has been recorded in accrued liabilities in the
consolidated balance sheets. The fair value of the option contacts was
$2,390,000 at June 30, 2002, and was recorded as an offset to accrued
liabilities in the consolidated balance sheets.

During the three and six months ended June 30, 2002 and 2001, the
ineffectiveness generated by the Companys forward and option contracts
designated as hedges was insignificant. Certain hedged forecasted transactions
appear probable of not occurring due to timing differences between the original
and current forecasts, and accordingly during the six months ended June 30,
2002 and 2001, approximately $123,000 of gains and $456,000 of losses,
respectively, were reclassified into earnings.

The outstanding foreign currency forward contracts had notional values
denominated in Mexican pesos of $333,000,000 in equal offsetting buy and sell
positions at June 30, 2002 and $976,000,000 in a buy position at June 30, 2001.
The contracts outstanding at June 30, 2002 mature at various dates extending
to November 2002 and the contracts outstanding at June 30, 2001 matured at
various dates through June 2002. The outstanding foreign currency option
contracts had a notional value denominated in Mexican pesos of $644,000,000 in
put and call positions at June 30, 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).

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##### Table of Contents



JAFRA COSMETICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


|                                     |                                                                                                 |                            |        |        |             |         |              |        |        |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------ | ----------- | ------- | ------------ | ------ | ------ | ------- | 
|                                     |                                                                                                 |                            |        |        | June 30,    |         | December 31,
|                                     |                                                                                                 |                            |        |        | 2002        |         | 2001        
|                                     |                                                                                                 |                            |        |        |             |         |             
|                                     |                                                                                                 |                            |        |        | (Unaudited) |         |              |        |       
|ASSETS                               |                                                                                                
|Current assets:                      |                                                                                                 |                            |        |        |             |         |              |       
|                                     | Cash and cash equivalents                                                                       |                            | $      | 4,050  |             |         | $            | 4,081  |       
|                                     | Receivables, net                                                                                |                            |        | 6,762  |             |         |              | 6,447  |       
|                                     | Inventories                                                                                     |                            |        | 10,613 |             |         |              | 8,677  |       
|                                     | Receivables from affiliates                                                                     |                            |        | 22,298 |             |         |              | 23,633 |       
|                                     | Prepaid expenses and other current assets                                                       |                            |        | 2,336  |             |         |              | 1,665  |       
|                                     | Deferred income taxes                                                                           |                            |        | 2,392  |             |         |              | 55     |       
|                                     |                                                                                                 |                            |        |        |             |         |              |       
|                                     |                                                                                                 | Total current assets       |        |        | 48,451      |         |              |        | 44,558 |        
|Property and equipment, net          |                                                                                                 |                            | 25,322 |        |             |         | 22,742       |       
|Other assets:                        |                                                                                                 |                            |        |        |             |         |              |       
|                                     | Goodwill                                                                                        |                            |        | 37,722 |             |         |              | 38,125 |       
|                                     | Notes receivable from affiliates                                                                |                            |        | 7,724  |             |         |              | 3,902  |       
|                                     | Deferred financing fees, net                                                                    |                            |        | 2,689  |             |         |              | 3,004  |       
|                                     | Other                                                                                           |                            |        | 3,943  |             |         |              | 3,716  |       
|                                     |                                                                                                 |                            |        |        |             |         |              |       
|                                     |                                                                                                 |                            | Total  |        | $           | 125,851 |              |        | $      | 116,047 | 
|                                     |                                                                                                 |                            |        |        |             |         |              |       
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                 |                            |        |        |             |         |              |       
|                                     | Current portion of long-term debt                                                               |                            | $      | 3,500  |             |         | $            | 3,000  |       
|                                     | Accounts payable                                                                                |                            |        | 4,563  |             |         |              | 5,591  |       
|                                     | Accrued liabilities                                                                             |                            |        | 13,256 |             |         |              | 12,709 |       
|                                     | Income taxes payable                                                                            |                            |        | 2,055  |             |         |              | 965    |       
|                                     | Payables to affiliates                                                                          |                            |        | 4,224  |             |         |              | 2,639  |       
|                                     |                                                                                                 |                            |        |        |             |         |              |       
|                                     |                                                                                                 | Total current liabilities  |        |        | 27,598      |         |              |        | 24,904 |        
|Long-term debt                       |                                                                                                 |                            | 50,608 |        |             |         | 52,908       |       
|Deferred income taxes                |                                                                                                 |                            | 3,353  |        |             |         | 3,353        |       
|Other long-term liabilities          |                                                                                                 |                            | 3,464  |        |             |         | 3,088        |       
|                                     |                                                                                                 |                            |        |        |             |         |              |       
|                                     |                                                                                                 | Total liabilities          |        |        | 85,023      |         |              |        | 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 earnings (deficit)                                                                     |                            |        | 3,817  |             |         |              | (5,376 | )     
|                                     | Accumulated other comprehensive loss                                                            |                            |        | (2,638 | )           |         |              | (2,479 | )     
|                                     |                                                                                                 |                            |        |        |             |         |              |       
|                                     |                                                                                                 | Total stockholders equity |        |        | 40,828      |         |              |        | 31,794 |        
|                                     |                                                                                                 |                            |        |        |             |         |              |       
|                                     |                                                                                                 |                            | Total  |        | $           | 125,851 |              |        | $      | 116,047 | 
|                                     |                                                                                                 |                            |        |        |             |         |              |       

See accompanying notes to consolidated financial statements

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

|                                             |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |        |  
|-------------------------------------------- | ------------------------- | - | ------------------ | ------ | ---------------- | - | ------ | ------ | ---- | - | ------- | ------ | - | - | ------ | ------ | -
|                                             |                           |   | Three Months Ended |        | Six Months Ended
|                                             |                           |   | June 30,           |        | June 30,        
|                                             |                           |   |                    |        |                 
|                                             |                           |   | 2002               |        | 2001             |   | 2002   |        | 2001
|                                             |                           |   |                    |        |                  |   |        |        |     
|Net sales to third parties                   |                           | $ | 32,746             |        |                  | $ | 28,033 |        |      | $ | 61,419  |        |   | $ | 53,317 |       
|Sales to affiliates                          |                           |   | 4,368              |        |                  |   | 3,677  |        |      |   | 7,908   |        |   |   | 6,181  |       
|                                             |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |       
|Net sales                                    |                           |   | 37,114             |        |                  |   | 31,710 |        |      |   | 69,327  |        |   |   | 59,498 |       
|Cost of sales                                |                           |   | 11,505             |        |                  |   | 9,421  |        |      |   | 20,806  |        |   |   | 17,359 |       
|                                             |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |       
|                                             | Gross profit              |   |                    | 25,609 |                  |   |        | 22,289 |      |   |         | 48,521 |   |   |        | 42,139 |  
|Selling, general and administrative expenses |                           |   | 25,896             |        |                  |   | 25,327 |        |      |   | 50,526  |        |   |   | 49,427 |       
|Management fee income from affiliates        |                           |   | (2,241             | )      |                  |   | (2,182 | )      |      |   | (4,366  | )      |   |   | (4,436 | )     
|Royalty income from affiliates, net          |                           |   | (5,390             | )      |                  |   | (5,281 | )      |      |   | (10,028 | )      |   |   | (9,973 | )     
|                                             |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |       
|                                             | Income from operations    |   |                    | 7,344  |                  |   |        | 4,425  |      |   |         | 12,389 |   |   |        | 7,121  |  
|Other income (expense):                      |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |       
|                                             | Exchange (loss) gain, net |   |                    | 678    |                  |   |        | (203   | )    |   |         | 543    |   |   |        | (3     | )
|                                             | Interest expense, net     |   |                    | (1,529 | )                |   |        | (1,714 | )    |   |         | (3,117 | ) |   |        | (3,450 | )
|                                             | Other, net                |   |                    | 281    |                  |   |        | (322   | )    |   |         | 295    |   |   |        | (416   | )
|                                             |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |       
|Income before income taxes                   |                           |   | 6,774              |        |                  |   | 2,186  |        |      |   | 10,110  |        |   |   | 3,252  |       
|Income tax expense                           |                           |   | 727                |        |                  |   | 1,219  |        |      |   | 917     |        |   |   | 1,893  |       
|                                             |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |       
|Net income                                   |                           | $ | 6,047              |        |                  | $ | 967    |        |      | $ | 9,193   |        |   | $ | 1,359  |       
|                                             |                           |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        |       

See accompanying notes to consolidated financial statements

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

|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |        |       |        |        |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------------- | --------------------------------------------------- | ------ | ---------------- | ------ | ------ | ----- | ------ | ------ | -
|                                                             |                                                                                             |                                                 |                                             |                                                     |        | Six Months Ended
|                                                             |                                                                                             |                                                 |                                             |                                                     |        | June 30,        
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                 
|                                                             |                                                                                             |                                                 |                                             |                                                     |        | 2002             |        | 2001  
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|Cash
flows from operating activities:                        |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|                                                             | Net income                                                                                  |                                                 | $                                           | 9,193                                               |        |                  | $      | 1,359  |      
|                                                             | Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |                                                 |                                             |                                                     |        |                  |        |        |      
|                                                             |                                                                                             | Depreciation and amortization                   |                                             |                                                     | 1,392  |                  |        |        | 1,427 |       
|                                                             |                                                                                             | Provision for uncollectible accounts receivable |                                             |                                                     | 441    |                  |        |        | 265   |       
|                                                             |                                                                                             | Amortization of deferred financing fees         |                                             |                                                     | 314    |                  |        |        | 314   |       
|                                                             |                                                                                             | Unrealized foreign exchange loss                |                                             |                                                     | (540   | )                |        |        | 58    |       
|                                                             |                                                                                             | Deferred income taxes                           |                                             |                                                     | (2,337 | )                |        |        |      |       
|                                                             |                                                                                             | Changes in operating assets and liabilities:    |                                             |                                                     |        |                  |        |        |       |       
|                                                             |                                                                                             |                                                 | Receivables                                 |                                                     |        | (756             | )      |        |       | (641   | )     
|                                                             |                                                                                             |                                                 | Inventories                                 |                                                     |        | (1,936           | )      |        |       | 403    |       
|                                                             |                                                                                             |                                                 | Prepaid expenses and other current assets   |                                                     |        | (671             | )      |        |       | (366   | )     
|                                                             |                                                                                             |                                                 | Receivables from and Payables to affiliates |                                                     |        | 3,460            |        |        |       | (9,930 | )     
|                                                             |                                                                                             |                                                 | Other assets                                |                                                     |        | 38               |        |        |       | 566    |       
|                                                             |                                                                                             |                                                 | Accounts payable and accrued liabilities    |                                                     |        | (481             | )      |        |       | (828   | )     
|                                                             |                                                                                             |                                                 | Income taxes payable/prepaid                |                                                     |        | 1,090            |        |        |       | 465    |       
|                                                             |                                                                                             |                                                 | Other long-term liabilities                 |                                                     |        | 376              |        |        |       | 228    |       
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|                                                             |                                                                                             |                                                 |                                             | Net cash provided by (used in) operating activities |        |                  | 9,583  |        |       |        | (6,680 | )
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|Cash
flows from investing activities:                        |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|                                                             | Purchases of property and equipment                                                         |                                                 |                                             | (3,808                                              | )      |                  |        | (3,354 | )    
|                                                             | Other                                                                                       |                                                 |                                             | (265                                                | )      |                  |        | (123   | )    
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|                                                             |                                                                                             |                                                 |                                             | Net cash used in investing activities               |        |                  | (4,073 | )      |       |        | (3,477 | )
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|Cash
flows from financing activities:                        |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|                                                             | Repayments under term loan facility                                                         |                                                 |                                             | (1,500                                              | )      |                  |        | (1,250 | )    
|                                                             | Net repayments under revolving credit facility                                              |                                                 |                                             | (300                                                | )      |                  |        | (4,100 | )    
|                                                             | (Lending) repayment of note receivable from affiliate                                       |                                                 |                                             | (3,822                                              | )      |                  |        | 15,986 |      
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|                                                             |                                                                                             |                                                 |                                             | Net cash (used in) provided by financing activities |        |                  | (5,622 | )      |       |        | 10,636 |  
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                             |                                                 | 81                                          |                                                     |        |                  | (816   | )     
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|Net decrease in cash and cash equivalents                    |                                                                                             |                                                 | (31                                         | )                                                   |        |                  | (337   | )     
|Cash and cash equivalents at beginning of period             |                                                                                             |                                                 | 4,081                                       |                                                     |        |                  | 3,382  |       
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       
|Cash and cash equivalents at end of period                   |                                                                                             | $                                               | 4,050                                       |                                                     |        | $                | 3,045  |       
|                                                             |                                                                                             |                                                 |                                             |                                                     |        |                  |        |       

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) 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&R) to acquire (the Acquisition) the worldwide Jafra Cosmetics
business (the Jafra Business).

The accompanying unaudited interim consolidated financial statements as of
June 30, 2002 and for the three and six months ended June 30, 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 June 30, 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 JCI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 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 with regards 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. JCI adopted SFAS
No. 142 on January 1, 2002. In accordance with such adoption, JCI identified
all reporting units in conjunction with the provisions of SFAS No. 142 and
allocated all goodwill accordingly. During the six months ended June 30, 2002,
JCI completed the transitional goodwill impairment test required by SFAS No.
142. No impairment was identified. There were no changes, except for
translation effects, to the carrying amount of goodwill for the six months
ended June 30, 2002. JCIs other intangible assets consist of trademarks.
During the six months ended June 30, 2002, JCI determined trademarks to have an
indefinite life and performed the transitional impairment test as required
under SFAS No. 142. Based upon the transitional test, JCI 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
carrying value of trademarks is $223,000 as of June 30, 2002 and is included in
other on the accompanying consolidated balance sheets.

In accordance with SFAS No. 142, JCI 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 |       | Six Months Ended
|                                   |  | June 30,           |       | June 30,        
|                                   |  |                    |       |                 
|                                   |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                                   |  |                    |       |                  |  |      |       |     
|Net income                         |  | $                  | 6,047 |                  |  | $    | 967   |      |  | $ | 9,193 |  |  | $ | 1,359 | 
|Goodwill amortization, net of tax  |  |                    |      |                  |  |      | 126   |      |  |   |      |  |  |   | 248   | 
|Trademark amortization, net of tax |  |                    |      |                  |  |      | 8     |      |  |   |      |  |  |   | 19    | 
|                                   |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Adjusted net income                |  | $                  | 6,047 |                  |  | $    | 1,101 |      |  | $ | 9,193 |  |  | $ | 1,626 | 
|                                   |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 

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

On January 1, 2002, JCI 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 JCI.

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, JCI adopted EITF Issue No. 01-9
and reclassified commissions paid to consultants of $365,000 and $705,000 on
their personal sales, previously reported as a component of selling, general
and administrative expenses, as a reduction in net sales for the three and six
months ended June 30, 2001, respectively.

In June 2002, the FASB approved SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
The provisions of this statement are effective for exit or disposal activities
that are initiated after December 31, 2002, with early application encouraged.
JCI is currently evaluating the impact that this statement may have on any
potential future exit or disposal activities.

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

(2) Property and Equipment

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

|                               |  |          |        |              |  |   |        | 
|------------------------------ |  | -------- | ------ | ------------ |  | - | ------ | 
|                               |  | June 30, |        | December 31,
|                               |  | 2002     |        | 2001        
|                               |  |          |        |             
|Land                           |  | $        | 6,188  |              |  | $ | 6,188  | 
|Buildings                      |  |          | 6,790  |              |  |   | 6,763  | 
|Machinery, equipment and other |  |          | 19,927 |              |  |   | 15,971 | 
|                               |  |          |        |              |  |   |        | 
|                               |  |          | 32,905 |              |  |   | 28,922 | 
|Less accumulated depreciation  |  |          | 7,583  |              |  |   | 6,180  | 
|                               |  |          |        |              |  |   |        | 
|Property and equipment, net    |  | $        | 25,322 |              |  | $ | 22,742 | 
|                               |  |          |        |              |  |   |        | 

(3) Income Taxes

The actual income tax rate of JCI differs from the U.S. federal corporate
rate of 35% to income before income taxes, for the three and six months ended
June 30, 2002 principally as a result of the release of valuation allowances
against certain foreign tax credits in the United States, partially offset by
state income tax and valuation allowances provided against certain operating
losses in Europe.

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

(4) Comprehensive Income

Comprehensive income is summarized as follows (in thousands):

|                                         |  |                    |       |                  |  |      |      |      |  |   |       |   |  |   |        |  
|---------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ---- | ---- |  | - | ----- | - |  | - | ------ | -
|                                         |  | Three Months Ended |       | Six Months Ended
|                                         |  | June 30,           |       | June 30,        
|                                         |  |                    |       |                 
|                                         |  | 2002               |       | 2001             |  | 2002 |      | 2001
|                                         |  |                    |       |                  |  |      |      |     
|Net income                               |  | $                  | 6,047 |                  |  | $    | 967  |      |  | $ | 9,193 |   |  | $ | 1,359  |  
|Foreign currency translation adjustments |  |                    | (165  | )                |  |      | (440 | )    |  |   | (159  | ) |  |   | (1,345 | )
|                                         |  |                    |       |                  |  |      |      |      |  |   |       |   |  |   |        |  
|Comprehensive income                     |  | $                  | 5,882 |                  |  | $    | 527  |      |  | $ | 9,034 |   |  | $ | 14     |  
|                                         |  |                    |       |                  |  |      |      |      |  |   |       |   |  |   |        |  

(5) Related Party Transactions

JCI distributes skin and body products to other affiliates of the Parent
(Affiliates). Sales to Affiliates, primarily in Mexico and South America,
were $4,368,000 and $7,908,000 for the three and six months ended June 30,
2002, respectively, and $3,677,000 and $6,181,000 for the three and six months
ended June 30, 2001, respectively. These sales were made at cost plus a markup
ranging from 0 to 11%. JCI purchased color and fragrance products from Jafra
S.A. (the indirect wholly owned Mexican subsidiary of the Parent) totaling
$2,719,000 and $7,643,000 for the three and six months ended June 30, 2002,
respectively, and $2,670,000 and $4,907,000 for the three and six months ended
June 30, 2001, respectively.

In addition, JCI 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. 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. JCI 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 $2,241,000 and $4,366,000 for the three and six months
ended June 30, 2002, respectively, and $2,182,000 and $4,436,000 for the three
and six months ended June 30, 2001, respectively.

JCI 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 JCI was $640,000 and $1,192,000 for the three and six months
ended June 30, 2002, respectively, and $449,000 and $851,000 for the three and
six months ended June 30, 2001, respectively, and is offset against royalty
income from 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. were $6,030,000 and $11,220,000 for the three and
six months ended June 30, 2002, respectively, and $5,730,000 and $10,824,000
for the three and six months ended June 30, 2001, respectively, and are based
upon a percentage of Jafra S.A.s sales.

JCI 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 June 30, 2002 consist primarily of loans JCI has made to
indirect subsidiaries of the Parent to fund certain of their operations in
South America. Net interest income from Affiliates was $80,000 and $135,000
for the three and six months ended June 30, 2002, respectively, and $176,000
and $465,000 for the three and six months ended June 30, 2001, respectively,
and is included in interest expense, net on the accompanying consolidated
statements of operations..

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

(6) Financial Reporting for Business Segments

JCIs business is comprised of one industry segment, direct selling, with
worldwide operations, principally in the United States and Europe. JCI is
organized into geographical business units that each sell the full line of
Jafra cosmetics, skin care, body care, fragrances, and other products. JCI 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.

The accounting policies used to prepare the information reviewed by JCIs
chief operating decision makers are the same as those described in the summary
of significant accounting policies included in JCI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. JCI 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 JCI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) |       |             |  |              |        |  |  |           
|For the Three Months ended June 30, 2002         |  |        |        |            |  |        |        |          |  |                |       |             |  |              |        |  |  |            |       |  |  |   |        | 
|Net sales                                        |  | $      | 23,909 |            |  | $      | 7,245  |          |  | $              | 1,592 |             |  | $            | 32,746 |  |  | $          | 4,368 |  |  | $ | 37,114 | 
|Operating income (loss)                          |  |        | 4,206  |            |  |        | 320    |          |  |                | (89   | )           |  |              | 4,437  |  |  |            | 2,907 |  |  |   | 7,344  | 
|Depreciation and amortization                    |  |        | 565    |            |  |        | 99     |          |  |                | 67    |             |  |              | 731    |  |  |            |      |  |  |   | 731    | 
|                                                
|For the Three Months ended June 30, 2001         |  |        |        |            |  |        |        |          |  |                |       |             |  |              |        |  |  |            |       |  |  |   |        | 
|Net sales                                        |  | $      | 20,646 |            |  | $      | 6,498  |          |  | $              | 889   |             |  | $            | 28,033 |  |  | $          | 3,677 |  |  | $ | 31,710 | 
|Operating income (loss)                          |  |        | 3,186  |            |  |        | 358    |          |  |                | (471  | )           |  |              | 3,073  |  |  |            | 1,352 |  |  |   | 4,425  | 
|Depreciation and amortization                    |  |        | 627    |            |  |        | 187    |          |  |                | (38   | )           |  |              | 776    |  |  |            |      |  |  |   | 776    | 
|                                                
|As of and for the Six Months ended June
30, 2002 |  |        |        |            |  |        |        |          |  |                |       |             |  |              |        |  |  |            |       |  |  |   |        | 
|Net sales                                        |  | $      | 44,784 |            |  | $      | 13,056 |          |  | $              | 3,579 |             |  | $            | 61,419 |  |  | $          | 7,908 |  |  | $ | 69,327 | 
|Operating income                                 |  |        | 7,068  |            |  |        | 368    |          |  |                | 24    |             |  |              | 7,460  |  |  |            | 4,929 |  |  |   | 12,389 | 
|Depreciation and amortization                    |  |        | 1,130  |            |  |        | 161    |          |  |                | 101   |             |  |              | 1,392  |  |  |            |      |  |  |   | 1,392  | 
|Capital expenditures                             |  |        | 3,637  |            |  |        | 30     |          |  |                | 141   |             |  |              | 3,808  |  |  |            |      |  |  |   | 3,808  | 
|Segment assets                                   |  |        | 73,620 |            |  |        | 19,433 |          |  |                | 2,776 |             |  |              | 95,829 |  |  |            |      |  |  |   | 95,829 | 
|Goodwill                                         |  |        | 32,188 |            |  |        | 5,534  |          |  |                |      |             |  |              | 37,722 |  |  |            |      |  |  |   | 37,722 | 
|                                                
|As of and for the Six Months ended June
30, 2001 |  |        |        |            |  |        |        |          |  |                |       |             |  |              |        |  |  |            |       |  |  |   |        | 
|Net sales                                        |  | $      | 38,875 |            |  | $      | 12,693 |          |  | $              | 1,749 |             |  | $            | 53,317 |  |  | $          | 6,181 |  |  | $ | 59,498 | 
|Operating income (loss)                          |  |        | 3,977  |            |  |        | 448    |          |  |                | (793  | )           |  |              | 3,632  |  |  |            | 3,489 |  |  |   | 7,121  | 
|Depreciation and amortization                    |  |        | 1,172  |            |  |        | 277    |          |  |                | (22   | )           |  |              | 1,427  |  |  |            |      |  |  |   | 1,427  | 
|Capital expenditures                             |  |        | 3,276  |            |  |        | 78     |          |  |                |      |             |  |              | 3,354  |  |  |            |      |  |  |   | 3,354  | 
|Segment assets                                   |  |        | 70,002 |            |  |        | 16,738 |          |  |                | 2,727 |             |  |              | 89,467 |  |  |            |      |  |  |   | 89,467 | 

(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 JCIs consolidated balance sheet. During the six months
ended June 30, 2002, nominal payments have been charged against this accrual.
As of June 30, 2002, the remaining restructuring liability is approximately
$100,000.

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

|                                     |                                                                                                      |  |                            |        |             |         |              |        |   |         | 
|------------------------------------ | ---------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | ----------- | ------- | ------------ | ------ | - | ------- | 
|                                     |                                                                                                      |  |                            |        | June 30,    |         | December 31,
|                                     |                                                                                                      |  |                            |        | 2002        |         | 2001        
|                                     |                                                                                                      |  |                            |        |             |         |             
|                                     |                                                                                                      |  |                            |        | (Unaudited)
|ASSETS                              
|Current assets:                      |                                                                                                      |  |                            |        |             |         |              |       
|                                     | Cash and cash equivalents                                                                            |  | $                          | 4,826  |             |         | $            | 920    |  
|                                     | Receivables, net                                                                                     |  |                            | 29,392 |             |         |              | 34,430 |  
|                                     | Inventories                                                                                          |  |                            | 23,913 |             |         |              | 29,622 |  
|                                     | Receivables from affiliates                                                                          |  |                            | 6,323  |             |         |              | 5,938  |  
|                                     | Value-added tax receivables                                                                          |  |                            |       |             |         |              | 2,308  |  
|                                     | Prepaid expenses and other current assets                                                            |  |                            | 2,900  |             |         |              | 3,206  |  
|                                     |                                                                                                      |  |                            |        |             |         |              |       
|                                     |                                                                                                      |  | Total current assets       |        |             | 67,354  |              |        |   | 76,424  | 
|Property and equipment, net          |                                                                                                      |  | 33,224                     |        |             |         | 36,121       |       
|Other assets:                        |                                                                                                      |  |                            |        |             |         |              |       
|                                     | Goodwill                                                                                             |  |                            | 29,771 |             |         |              | 32,401 |  
|                                     | Trademarks                                                                                           |  |                            | 46,312 |             |         |              | 50,402 |  
|                                     | Deferred financing fees, net                                                                         |  |                            | 790    |             |         |              | 1,270  |  
|                                     | Other                                                                                                |  |                            | 1,582  |             |         |              | 2,699  |  
|                                     |                                                                                                      |  |                            |        |             |         |              |       
|                                     |                                                                                                      |  | Total                      |        | $           | 179,033 |              |        | $ | 199,317 | 
|                                     |                                                                                                      |  |                            |        |             |         |              |       
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                      |  |                            |        |             |         |              |       
|                                     | Current portion of long-term debt                                                                    |  | $                          | 3,016  |             |         | $            | 3,188  |  
|                                     | Accounts payable                                                                                     |  |                            | 10,837 |             |         |              | 20,205 |  
|                                     | Accrued liabilities                                                                                  |  |                            | 20,107 |             |         |              | 27,299 |  
|                                     | Income taxes payable                                                                                 |  |                            | 2,223  |             |         |              | 6,122  |  
|                                     | Payables to affiliates                                                                               |  |                            | 19,114 |             |         |              | 21,373 |  
|                                     | Deferred income taxes                                                                                |  |                            | 4,653  |             |         |              | 4,094  |  
|                                     |                                                                                                      |  |                            |        |             |         |              |       
|                                     |                                                                                                      |  | Total current liabilities  |        |             | 59,950  |              |        |   | 82,281  | 
|Long-term debt                       |                                                                                                      |  | 33,616                     |        |             |         | 33,993       |       
|Deferred income taxes                |                                                                                                      |  | 14,508                     |        |             |         | 16,958       |       
|                                     |                                                                                                      |  |                            |        |             |         |              |       
|                                     |                                                                                                      |  | Total liabilities          |        |             | 108,074 |              |        |   | 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                                                                                    |  |                            | 42,054 |             |         |              | 32,194 |  
|                                     | Accumulated other comprehensive loss                                                                 |  |                            | (5,279 | )           |         |              | (293   | )
|                                     |                                                                                                      |  |                            |        |             |         |              |       
|                                     |                                                                                                      |  | Total stockholders equity |        |             | 70,959  |              |        |   | 66,085  | 
|                                     |                                                                                                      |  |                            |        |             |         |              |       
|                                     |                                                                                                      |  | Total                      |        | $           | 179,033 |              |        | $ | 199,317 | 
|                                     |                                                                                                      |  |                            |        |             |         |              |       

See accompanying notes to consolidated financial statements

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

|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |         |        |  
|----------------------- | ------------------------------------------------------------------------ | --------------------------- | - | ------------------ | ------ | ---------------- | - | ------ | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                        |                                                                          |                             |   | Three Months Ended |        | Six Months Ended
|                        |                                                                          |                             |   | June 30,           |        | June 30,        
|                        |                                                                          |                             |   |                    |        |                 
|                        |                                                                          |                             |   | 2002               |        | 2001             |   | 2002   |        | 2001
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |     
|                        | Net
sales to third parties                                               |                             | $ | 61,392             |        |                  | $ | 63,116 |        |      | $ | 127,879 |        |   | $ | 119,194 |       
|                        | Sales to affiliates                                                      |                             |   | 3,211              |        |                  |   | 3,288  |        |      |   | 8,409   |        |   |   | 6,021   |       
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        
|                        | Net sales                                                                |                             |   | 64,603             |        |                  |   | 66,404 |        |      |   | 136,288 |        |   |   | 125,215 |       
|                        | Cost of sales                                                            |                             |   | 17,684             |        |                  |   | 18,285 |        |      |   | 38,786  |        |   |   | 34,242  |       
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        
|                        |                                                                          | Gross profit                |   |                    | 46,919 |                  |   |        | 48,119 |      |   |         | 97,502 |   |   |         | 90,973 |  
|                        | Selling, general and administrative expenses                             |                             |   | 30,734             |        |                  |   | 30,242 |        |      |   | 62,459  |        |   |   | 56,440  |       
|                        | Management fee expense to affiliates                                     |                             |   | 2,238              |        |                  |   | 2,197  |        |      |   | 4,364   |        |   |   | 4,437   |       
|                        | Royalty expense to affiliates, net                                       |                             |   | 5,390              |        |                  |   | 5,281  |        |      |   | 10,028  |        |   |   | 9,973   |       
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        
|                        |                                                                          | Income from operations      |   |                    | 8,557  |                  |   |        | 10,399 |      |   |         | 20,651 |   |   |         | 20,123 |  
|Other income (expense): |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        
|                        |                                                                          | Exchange loss, net          |   |                    | (4,714 | )                |   |        | (4,084 | )    |   |         | (4,367 | ) |   |         | (6,242 | )
|                        |                                                                          | Interest expense, net       |   |                    | (1,320 | )                |   |        | (1,541 | )    |   |         | (2,613 | ) |   |         | (3,224 | )
|                        |                                                                          | Other, net                  |   |                    |       |                  |   |        | (95    | )    |   |         |       |   |   |         | (89    | )
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        
|                        | Income before income taxes and cumulative                                |                             |   | 2,523              |        |                  |   | 4,679  |        |      |   | 13,671  |        |   |   | 10,568  |       
|                        |                                                                          | effect of accounting change |   |                    |        |                  |   |        |        |      |   |         |        |   |   |         |        |  
|                        | Income tax expense                                                       |                             |   | 876                |        |                  |   | 1,835  |        |      |   | 3,811   |        |   |   | 4,098   |       
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        
|                        | Income before cumulative effect of
accounting change                     |                             |   | 1,647              |        |                  |   | 2,844  |        |      |   | 9,860   |        |   |   | 6,470   |       
|                        | Cumulative effect of accounting change,
net of income tax expense of $82 |                             |   |                   |        |                  |   |       |        |      |   |        |        |   |   | 126     |       
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        
|                        | Net income                                                               |                             | $ | 1,647              |        |                  | $ | 2,844  |        |      | $ | 9,860   |        |   | $ | 6,596   |       
|                        |                                                                          |                             |   |                    |        |                  |   |        |        |      |   |         |        |   |   |        

See accompanying notes to consolidated financial statements

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

|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |         |      |       |         |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------- | - | ---------------- | ------- | ------- | ---- | ----- | ------- | -
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   | Six Months Ended
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   | June 30,        
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                 
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   | 2002             |         | 2001   
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|Cash
flows from operating activities:                        |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|                                                             | Net income                                                                                                                  |                                                      | $                                                      | 9,860                                       |   |                  | $       | 6,596   |     
|                                                             |                                                                                                                             | Cumulative effect of accounting change, net of taxes |                                                        |                                             |  |                  |         |         | (126 | )    
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|                                                             | Income before cumulative effect of accounting change                                                                        |                                                      |                                                        | 9,860                                       |   |                  |         | 6,470   |     
|                                                             | Adjustments to reconcile income before cumulative effect of
accounting change to net cash provided by operating activities: |                                                      |                                                        |                                             |   |                  |         |         |     
|                                                             |                                                                                                                             |                                                      | Gain on sale of property and equipment                 |                                             |   | (65              | )       |         |      |      |        
|                                                             |                                                                                                                             |                                                      | Depreciation and amortization                          |                                             |   | 912              |         |         |      | 2,227 |        
|                                                             |                                                                                                                             |                                                      | Amortization of deferred financing fees                |                                             |   | 403              |         |         |      | 399   |        
|                                                             |                                                                                                                             |                                                      | Provision for uncollectible accounts receivable        |                                             |   | 5,082            |         |         |      | 2,175 |        
|                                                             |                                                                                                                             |                                                      | Unrealized foreign exchange and derivative (gain) loss |                                             |   | 3,347            |         |         |      | 2,299 |        
|                                                             |                                                                                                                             |                                                      | Deferred realized derivative loss                      |                                             |   | 385              |         |         |      | (550  | )      
|                                                             |                                                                                                                             |                                                      | Deferred income taxes                                  |                                             |   | (1,167           | )       |         |      |      |        
|                                                             |                                                                                                                             |                                                      | Changes in operating assets and liabilities:           |                                             |   |                  |         |         |      |       |        
|                                                             |                                                                                                                             |                                                      |                                                        | Receivables                                 |   |                  | (2,646  | )       |      |       | (5,432  | )
|                                                             |                                                                                                                             |                                                      |                                                        | Inventories                                 |   |                  | 3,585   |         |      |       | 5,185   |  
|                                                             |                                                                                                                             |                                                      |                                                        | Prepaid expenses and other current assets   |   |                  | 49      |         |      |       | (210    | )
|                                                             |                                                                                                                             |                                                      |                                                        | Value-added tax receivables                 |   |                  | 2,900   |         |      |       | 4,753   |  
|                                                             |                                                                                                                             |                                                      |                                                        | Receivables from and Payables to affiliates |   |                  | (2,794  | )       |      |       | 11,081  |  
|                                                             |                                                                                                                             |                                                      |                                                        | Other assets                                |   |                  | 974     |         |      |       | 1,193   |  
|                                                             |                                                                                                                             |                                                      |                                                        | Accounts payable and accrued liabilities    |   |                  | (11,788 | )       |      |       | (13,109 | )
|                                                             |                                                                                                                             |                                                      |                                                        | Income taxes payable/prepaid                |   |                  | (3,402  | )       |      |       | 4,064   |  
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|                                                             |                                                                                                                             |                                                      |                                                        | Net cash provided by operating activities   |   |                  | 5,635   |         |      |       | 20,545  |  
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|Cash
flows from investing activities:                        |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|                                                             | Proceeds from sale of property and equipment                                                                                |                                                      |                                                        | 211                                         |   |                  |         |        |     
|                                                             | Purchases of property and equipment                                                                                         |                                                      |                                                        | (1,025                                      | ) |                  |         | (935    | )   
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|                                                             |                                                                                                                             |                                                      |                                                        | Net cash used in investing activities       |   |                  | (814    | )       |      |       | (935    | )
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|Cash
flows from financing activities:                        |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|                                                             | Repayments under term loan facility                                                                                         |                                                      |                                                        | (3,125                                      | ) |                  |         | (1,000  | )   
|                                                             | Net borrowings under revolving credit facility                                                                              |                                                      |                                                        | 3,000                                       |   |                  |         | 2,000   |     
|                                                             | Net (repayments) borrowings under bank debt                                                                                 |                                                      |                                                        | (318                                        | ) |                  |         | 2,584   |     
|                                                             | Payment of note payable to affiliate                                                                                        |                                                      |                                                        |                                            |   |                  |         | (21,276 | )   
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|                                                             |                                                                                                                             |                                                      |                                                        | Net cash used in financing activities       |   |                  | (443    | )       |      |       | (17,692 | )
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                                             |                                                      | (472                                                   | )                                           |   |                  | 585     |        
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|Net increase in cash and cash equivalents                    |                                                                                                                             |                                                      | 3,906                                                  |                                             |   |                  | 2,503   |        
|Cash and cash equivalents at beginning of period             |                                                                                                                             |                                                      | 920                                                    |                                             |   |                  | 561     |        
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        
|Cash and cash equivalents at end of period                   |                                                                                                                             | $                                                    | 4,826                                                  |                                             |   | $                | 3,064   |        
|                                                             |                                                                                                                             |                                                      |                                                        |                                             |   |                  |         |        

See accompanying notes to consolidated financial statements

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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 anonima 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&R) to acquire (the
''Acquisition) the worldwide Jafra Cosmetics business (the ''Jafra
Business).

The accompanying unaudited interim consolidated financial statements as of
June 30, 2002 and for the three and six months ended June 30, 2002 and 2001
reflect the operations of Jafra S.A. and its subsidiaries (collectively, Jafra
S.A.) 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 June 30, 2002 and for the
interim periods presented. All significant intercompany accounts and
transactions between entities comprising Jafra S.A. have been eliminated in
consolidation.

The functional currency for Jafra S.A. 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 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 with regards 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. Jafra S.A. adopted
SFAS No. 142 on January 1, 2002. In accordance with such adoption, Jafra S.A.
identified all reporting units in conjunction with the provisions of SFAS No.
142 and allocated all goodwill accordingly. During the six months ended June
30, 2002, Jafra S.A. completed the transitional goodwill impairment test
required by SFAS No. 142. No impairment was identified. There were no
changes, except for translation effects, to the carrying amount of goodwill for
the six months ended June 30, 2002. Jafra S.A.s other intangible assets
consist of trademarks. During the six months ended June 30, 2002, Jafra S.A.
determined trademarks to have an indefinite life and performed the transitional
impairment test as required under SFAS No. 142. Based upon the transitional
test, Jafra S.A. 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
carrying value of trademarks was $46,312,000 as of June 30, 2002.

In accordance with SFAS No. 142, Jafra S.A. 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 |       | Six Months Ended
|                                   |  | June 30,           |       | June 30,        
|                                   |  |                    |       |                 
|                                   |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                                   |  |                    |       |                  |  |      |       |     
|Net income                         |  | $                  | 1,647 |                  |  | $    | 2,844 |      |  | $ | 9,860 |  |  | $ | 6,596 | 
|Goodwill amortization              |  |                    |      |                  |  |      | 220   |      |  |   |      |  |  |   | 431   | 
|Trademark amortization, net of tax |  |                    |      |                  |  |      | 209   |      |  |   |      |  |  |   | 411   | 
|                                   |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Adjusted net income                |  | $                  | 1,647 |                  |  | $    | 3,273 |      |  | $ | 9,860 |  |  | $ | 7,438 | 
|                                   |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 

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

On January 1, 2002, Jafra S.A. 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 Jafra S.A..

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, Jafra S.A. adopted EITF Issue
No. 01-9 and reclassified commissions paid to consultants of $550,000 and
$1,075,000 on their personal sales, previously reported as a component of
selling, general and administrative expenses, as a reduction in net sales for
the three and six months ended June 30, 2001, respectively.

In June 2002, the FASB approved SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
The provisions of this statement are effective for exit or disposal activities
that are initiated after December 31, 2002, with early application encouraged.
Jafra S.A. is currently evaluating the impact that this statement may have on
any potential future exit or disposal activities.

(2) Property and Equipment

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

|                               |  |          |        |              |  |   |        | 
|------------------------------ |  | -------- | ------ | ------------ |  | - | ------ | 
|                               |  | June 30, |        | December 31,
|                               |  | 2002     |        | 2001        
|                               |  |          |        |             
|Land                           |  | $        | 10,700 |              |  | $ | 11,645 | 
|Buildings                      |  |          | 10,753 |              |  |   | 11,703 | 
|Machinery, equipment and other |  |          | 16,736 |              |  |   | 17,532 | 
|                               |  |          |        |              |  |   |        | 
|                               |  |          | 38,189 |              |  |   | 40,880 | 
|Less accumulated depreciation  |  |          | 4,965  |              |  |   | 4,759  | 
|                               |  |          |        |              |  |   |        | 
|Property and equipment, net    |  | $        | 33,224 |              |  | $ | 36,121 | 
|                               |  |          |        |              |  |   |        | 

(3) Income Taxes

The actual income tax rate of Jafra S.A. differs from the Mexican federal
corporate rate of 35% to income before income taxes, for the three and six
months ended June 30, 2002 principally 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. The enactment will reduce
the corporate income tax rate annually in one-percent increments from 35% to
32% beginning January 1, 2003 through 2005.

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

(4) Comprehensive Income (Loss)

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

|                                                                                     |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                     |  | Three Months Ended |        | Six Months Ended
|                                                                                     |  | June 30,           |        | June 30,        
|                                                                                     |  |                    |        |                 
|                                                                                     |  | 2002               |        | 2001             |  | 2002 |        | 2001
|                                                                                     |  |                    |        |                  |  |      |        |     
|Net income                                                                           |  | $                  | 1,647  |                  |  | $    | 2,844  |      |  | $ | 9,860  |   |  | $ | 6,596  |  
|Unrealized and deferred realized (loss) gain on
derivatives                          |  |                    | 2,535  |                  |  |      | (3,111 | )    |  |   | 340    |   |  |   | (4,027 | )
|Reclassification to exchange loss                                                    |  |                    | 208    |                  |  |      | 295    |      |  |   | 343    |   |  |   | 295    |  
|Reclassification to cost of sales                                                    |  |                    | 962    |                  |  |      | (14    | )    |  |   | 1,899  |   |  |   | 13     |  
|Tax benefit (expense) on unrealized and
deferred realized (loss) gain on derivatives |  |                    | (2,607 | )                |  |      | 1,109  |      |  |   | (903   | ) |  |   | 1,442  |  
|Foreign currency translation adjustments                                             |  |                    | (6,383 | )                |  |      | 3,301  |      |  |   | (6,665 | ) |  |   | 4,252  |  
|                                                                                     |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|Comprehensive income (loss)                                                          |  | $                  | (3,638 | )                |  | $    | 4,424  |      |  | $ | 4,874  |   |  | $ | 8,571  |  
|                                                                                     |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  

(5) Related Party Transactions

Jafra S.A. 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 $3,211,000 and
$8,409,000 for the three and six months ended June 30, 2002, respectively, and
$3,288,000 and $6,021,000 for the three and six months ended June 30, 2001,
respectively. These sales were made at cost plus a markup ranging from 0 to
11%. Jafra S.A. purchased skin and body products from JCI (the indirect,
wholly owned United States subsidiary of the Parent). Purchases were
$4,075,000 and $7,333,000 for the three and six months ended June 30, 2002,
respectively, and $3,204,000 and $5,422,000 for the three and six months ended
June 30, 2001, respectively.

In addition, Jafra S.A. 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 affiliates in the accompanying
consolidated statements of operations. Jafra S.A. is charged a portion of
these management expenses based upon charges identified to Jafra S.A. and a
formula using the percentage of revenues of Jafra S.A. to the total
consolidated revenues of the Parent. Jafra S.A. believes the amounts and
methods of allocation are reasonable and approximate the cost of the actual
services received. The management fee expense charged by JCI to Jafra S.A. was
$2,238,000 and $4,364,000 for the three and six months ended June 30, 2002,
respectively, and $2,197,000 and $4,437,000 for the three and six months ended
June 30, 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 its Germany affiliate was $640,000 and $1,192,000 for the three
and six months ended June 30, 2002, respectively, and $449,000 and $851,000 for
the three and six months ended June 30, 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 $6,030,000 and
$11,220,000 for the three and six months ended June 30, 2002, respectively, and
$5,730,000 and $10,824,000 for the three and six months ended June 30, 2001,
respectively, and are based upon a percentage of Jafra S.A.s sales.

Jafra S.A. 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 six months ended June
30, 2002, Jafra S.A. did not incur any interest expense to Affiliates. Net
interest expense to Affiliates, primarily JCI, was $47,000 and $257,000 for the
three months and six months ended June 30, 2001, respectively, which

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

resulted primarily from notes payable to Affiliates as a result amounts
billed to Jafra S.A. in connection with the Jafra Way royalty. In the second
quarter of 2001, notes payable to Affiliates were repaid.

(6) Foreign Currency Forward and Option Contracts

Jafra S.A. is exposed to currency risk relating to its forecasted U.S.
dollar-denominated expenditures. As part of its overall strategy to reduce the
risk of potential adverse exchange rate fluctuations, Jafra S.A. enters into
foreign currency exchange contracts (forward contracts). Beginning in 2002,
Jafra S.A. also enters into foreign currency option contracts (option
contracts or options). Jafra S.A. 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, Jafra S.A.
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, Jafra S.A. 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, Jafra S.A. 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, Jafra S.A.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 (loss), 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.

Jafra S.A. 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 (loss).
Such amounts will be reclassified from other comprehensive income (loss) 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.

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

Jafra S.A. recognized losses on forward contracts of approximately
$511,000 and $866,000 during the three and six months ended June 30, 2002,
respectively, and approximately $6,206,000 and $9,614,000 during the three and
six months ended June 30, 2001, respectively, as a component of exchange loss
on the accompanying consolidated statements of operations. Jafra S.A.
recognized gains on option contracts of approximately $737,000 during
each of the three
and six month periods ended June 30, 2002. As of December 31, 2001, Jafra S.A. had
deferred as a component of other comprehensive income (loss) $3,746,000 of
losses on forward contracts. During the six months ended June 30, 2002, Jafra
S.A. deferred as a component of other comprehensive income (loss) an additional
$1,814,000 of losses on forward contracts and $2,154,000 of gains on option
contracts qualifying for hedge accounting under SFAS No. 133. During the six
months ended June 30, 2002, approximately $343,000 of other comprehensive
income (loss) was reclassified as exchange loss and $1,899,000 was reclassified
as cost of sales upon recognition of the underlying hedged exposure. Jafra
S.A. expects that substantially all of the remaining loss of $1,164,000
deferred as a component of other comprehensive income (loss) at June 30, 2002
will be recognized into net income within the next twelve months. The fair
value of the forward contracts was $2,936,000 and $10,103,000 at June 30, 2002
and 2001, respectively, and has been recorded in accrued liabilities in the
consolidated balance sheets. The fair value of the option contacts was
$2,390,000 at June 30, 2002, and was recorded as an offset to accrued
liabilities in the consolidated balance sheets.

During the three and six months ended June 30, 2002 and 2001, the
ineffectiveness generated by Jafra S.A.s forward and option contracts
designated as hedges was insignificant. Certain hedged forecasted transactions
appear probable of not occurring due to timing differences between the original
and current forecasts, and accordingly during the six months ended June 30,
2002 and 2001, approximately $123,000 of gains and $456,000 of losses were
reclassified into earnings.

The outstanding foreign currency forward contracts had notional values
denominated in Mexican pesos of $333,000,000 in equal offsetting buy and sell
positions at June 30, 2002 and $976,000,000 in a buy position at June 30, 2001.
The contracts outstanding at June 30, 2002 mature at various dates extending
to November 2002 and the contracts outstanding at June 30, 2001 matured at
various dates through June 2002. The outstanding foreign currency option
contracts had a notional value denominated in Mexican pesos of $644,000,000 in
put and call positions at June 30, 2002. Notional amounts do not quantify
market or credit exposure or represent assets or liabilities of Jafra S.A., but
are used in the calculation of cash settlements under the contracts. (See Item
3 Quantitative and Qualitative Disclosures About Market Risk).

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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 and six months
ended June 30, 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 and six months
ended June 30, 2002 and 2001.

|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |   |  |  |  | 
|--------------------------------------------------------------------------------- |  | --------------------------- | ---- | ------------------------- |  | ---- | ----- | -------- |  | - | ---- | - |  |  | ----- | - |  | - | ----- | - |  |  | ----- | - |  | - | ----- | - |  |  | ----- | - |  |  |  | 
|                                                                                  |  | Three Months Ended June 30, |      | Six Months Ended June 30, |  |      |       |         
|                                                                                  |  |                             |      |                           |  |      |       |         
|                                                                                  |  | 2002                        |      | 2001 (1)                  |  | 2002 |       | 2001 (1) |  |   |      |  
|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |  
|Net sales                                                                         |  | $                           | 98.1 |                           |  |      | 100.0 | %        |  | $ | 95.8 |   |  |  | 100.0 | % |  | $ | 197.2 |   |  |  | 100.0 | % |  | $ | 182.0 |   |  |  | 100.0 | % |  |  |  | 
|Cost of sales                                                                     |  |                             | 22.9 |                           |  |      | 23.3  |          |  |   | 22.3 |   |  |  | 23.3  |   |  |   | 45.9  |   |  |  | 23.3  |   |  |   | 42.6  |   |  |  | 23.4  |   |  |  |  | 
|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |   |  |  |  | 
|Gross profit                                                                      |  |                             | 75.2 |                           |  |      | 76.7  |          |  |   | 73.5 |   |  |  | 76.7  |   |  |   | 151.3 |   |  |  | 76.7  |   |  |   | 139.4 |   |  |  | 76.6  |   |  |  |  | 
|Selling, general and administrative expenses                                      |  |                             | 61.0 |                           |  |      | 62.2  |          |  |   | 60.4 |   |  |  | 63.0  |   |  |   | 121.4 |   |  |  | 61.6  |   |  |   | 115.1 |   |  |  | 63.2  |   |  |  |  | 
|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |   |  |  |  | 
|Income from operations                                                            |  |                             | 14.2 |                           |  |      | 14.5  |          |  |   | 13.1 |   |  |  | 13.7  |   |  |   | 29.9  |   |  |  | 15.1  |   |  |   | 24.3  |   |  |  | 13.4  |   |  |  |  | 
|Exchange loss                                                                     |  |                             | (5.9 | )                         |  |      | (6.0  | )        |  |   | (4.5 | ) |  |  | (4.7  | ) |  |   | (5.4  | ) |  |  | (2.7  | ) |  |   | (6.7  | ) |  |  | (3.7  | ) |  |  |  | 
|Interest, net                                                                     |  |                             | (2.9 | )                         |  |      | (3.0  | )        |  |   | (3.4 | ) |  |  | (3.6  | ) |  |   | (5.9  | ) |  |  | (3.0  | ) |  |   | (6.9  | ) |  |  | (3.8  | ) |  |  |  | 
|Other, net                                                                        |  |                             | 0.2  |                           |  |      | 0.2   |          |  |   | (0.1 | ) |  |  | (0.1  | ) |  |   | 0.3   |   |  |  | 0.2   |   |  |   | (0.2  | ) |  |  | (0.1  | ) |  |  |  | 
|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |   |  |  |  | 
|Income before income taxes and cumulative
effect of accounting change             |  |                             | 5.6  |                           |  |      | 5.7   |          |  |   | 5.1  |   |  |  | 5.3   |   |  |   | 18.9  |   |  |  | 9.6   |   |  |   | 10.5  |   |  |  | 5.8   |   |  |  |  | 
|Income tax expense                                                                |  |                             | 1.6  |                           |  |      | 1.6   |          |  |   | 3.1  |   |  |  | 3.2   |   |  |   | 4.8   |   |  |  | 2.4   |   |  |   | 6.1   |   |  |  | 3.4   |   |  |  |  | 
|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |   |  |  |  | 
|Income before cumulative effect of
accounting change                              |  |                             | 4.0  |                           |  |      | 4.1   |          |  |   | 2.0  |   |  |  | 2.1   |   |  |   | 14.1  |   |  |  | 7.2   |   |  |   | 4.4   |   |  |  | 2.4   |   |  |  |  | 
|Cumulative effect of accounting change, net
of income tax expense of $0.1 in 2001 |  |                             |     |                           |  |      |      |          |  |   |     |   |  |  |      |   |  |   | (0.2  | ) |  |  | (0.2  | ) |  |   | 0.1   |   |  |  | 0.1   |   |  |  |  | 
|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |   |  |  |  | 
|Net income                                                                        |  | $                           | 4.0  |                           |  |      | 4.1   | %        |  | $ | 2.0  |   |  |  | 2.1   | % |  | $ | 13.9  |   |  |  | 7.0   | % |  | $ | 4.5   |   |  |  | 2.5   | % |  |  |  | 
|                                                                                  |  |                             |      |                           |  |      |       |          |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |   |  |  |  | 



---

|(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 $1.0 million and $1.9 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 and six months ended June 30, 2001,
respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Three months ended June 30, 2002 compared to the three months ended June 30,2001

|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|-------------------------------------------- |  | ------------- | ---- | ------ |  | ------ | ---- | ---------- |  | -------------- | --- | -------------------------------- |  | ------------------ | ---- | - |  | - | ---- |  |  | - | ---- | - |  | - | ---- | 
|Dollars in millions                          |  | United
States |      | Mexico |  | Europe |      | All
others |  | Total
Segments |     | Corporate,
Unallocated
and Other |  | Consolidated
Total
|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                   
|Three Months Ended
June 30, 2002             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|Net sales                                    |  | $             | 23.9 |        |  | $      | 61.4 |            |  | $              | 7.2 |                                  |  | $                  | 5.6  |   |  | $ | 98.1 |  |  | $ |     |   |  | $ | 98.1 | 
|Cost of sales                                |  |               | 5.5  |        |  |        | 14.0 |            |  |                | 1.6 |                                  |  |                    | 1.6  |   |  |   | 22.7 |  |  |   | 0.2  |   |  |   | 22.9 | 
|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|Gross profit                                 |  |               | 18.4 |        |  |        | 47.4 |            |  |                | 5.6 |                                  |  |                    | 4.0  |   |  |   | 75.4 |  |  |   | (0.2 | ) |  |   | 75.2 | 
|Selling, general and
administrative
expenses |  |               | 14.2 |        |  |        | 30.8 |            |  |                | 5.3 |                                  |  |                    | 5.9  |   |  |   | 56.2 |  |  |   | 4.8  |   |  |   | 61.0 | 
|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|Operating income (loss)                      |  | $             | 4.2  |        |  | $      | 16.6 |            |  | $              | 0.3 |                                  |  | $                  | (1.9 | ) |  | $ | 19.2 |  |  | $ | (5.0 | ) |  | $ | 14.2 | 
|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|Three Months Ended
June 30, 2001             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|Net sales                                    |  | $             | 20.6 |        |  | $      | 63.1 |            |  | $              | 6.5 |                                  |  | $                  | 5.6  |   |  | $ | 95.8 |  |  | $ |     |   |  | $ | 95.8 | 
|Cost of sales                                |  |               | 4.5  |        |  |        | 15.5 |            |  |                | 1.2 |                                  |  |                    | 1.2  |   |  |   | 22.4 |  |  |   | (0.1 | ) |  |   | 22.3 | 
|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|Gross profit                                 |  |               | 16.1 |        |  |        | 47.6 |            |  |                | 5.3 |                                  |  |                    | 4.4  |   |  |   | 73.4 |  |  |   | 0.1  |   |  |   | 73.5 | 
|Selling, general and
administrative
expenses |  |               | 12.9 |        |  |        | 29.5 |            |  |                | 4.9 |                                  |  |                    | 6.1  |   |  |   | 53.4 |  |  |   | 7.0  |   |  |   | 60.4 | 
|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 
|Operating income (loss)                      |  | $             | 3.2  |        |  | $      | 18.1 |            |  | $              | 0.4 |                                  |  | $                  | (1.7 | ) |  | $ | 20.0 |  |  | $ | (6.9 | ) |  | $ | 13.1 | 
|                                             |  |               |      |        |  |        |      |            |  |                |     |                                  |  |                    |      |   |  |   |      |  |  |   |      |   |  |   |      | 

Net sales. Net sales in the second quarter of 2002 increased to $98.1
million from $95.8 million in the second quarter of 2001, an increase of $2.3
million or 2.4%. Net sales in local currencies in the second quarter of 2002
increased by 4.3% over the comparable prior year period. The sales increase in
local currencies was higher than the increase measured in U.S. dollars
primarily as a result of the weaker average exchange rates of the Mexican peso
in the second quarter of 2002. The Companys average number of consultants
worldwide for the second quarter of 2002 increased to approximately
384,000, or 5.2% over the 2001 average. Consultant
productivity for the second quarter of 2002 decreased 2.7% compared to the
second quarter of 2001, a significant portion of which related to weaker local
currencies compared to U.S. dollars. Consultant productivity is generally defined as annualized sales divided by the average
number of consultants.

In Mexico, net sales in the second quarter of 2002 decreased to $61.4
million from $63.1 million in the second quarter of 2001, a decrease of $1.7
million, or 2.7%. The decrease in sales measured in U.S. dollars was primarily
due to weaker exchange rates in the second quarter of 2002, as sales in local
currency were relatively constant compared to the second quarter of 2001.
In Mexico, the average number of consultants for the second quarter of 2002
increased to approximately 242,000, or by 5.4% over the average number of
consultants in the comparable prior year period. In local currency, consultant
productivity decreased approximately 5.3% over consultant productivity in the
second quarter of 2001, largely due to declining liquidity as a result of a
slow-down in the economy.

In the United States, net sales in the second quarter of 2002 increased to
$23.9 million from $20.6 million in the second quarter of 2001, an increase of
$3.3 million or 16.0%. The increase was primarily driven by the Hispanic
Division. Net sales in the second quarter of 2002 for the Hispanic Division
increased 22.4% to $16.2 million due to a combination of improved consultant
productivity, an increase in the average consultant base achieved by improved
sponsoring and retention and increased ordering activity. Net sales
in the second quarter of 2002 for the General Division increased
3.9% to $7.7 million. In the U.S., the
average number of consultants remained constant at 68,000, however, in the
Hispanic Division, the average number of consultants increased 7.6% to
approximately 38,000. Productivity in the Hispanic Division increased 13.8%
and the number of ordering consultants improved in the Hispanic Division, as
approximately 62.3% of all consultants were considered active during the
period, largely due to productivity based changes in the program during the
period.

In Europe, net sales increased to $7.2 million in the second quarter of
2002, from $6.5 million in the second quarter of 2001, an increase of $0.7
million, or 10.8%. The increase was the result of increased activity and
productivity, partially offset by a smaller average consultant base. The
number of ordering consultants increased 5.4%, and 66.7% of all consultants
were considered active. Consultant productivity increased 16.1% in the
second quarter of 2002 compared to the second quarter of 2001, a portion of
which was attributable to the

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strengthening of the euro compared to the U.S. dollar. The average consultant
base decreased approximately 3.5% to 16,000.

Sales in South America and Thailand remained constant at $5.6 million. In
local currencies, sales in South America increased 20.3% and sales in Thailand
increased 25.1%.

Gross profit.Consolidated gross profit in the second quarter of 2002
increased to $75.2 million from $73.5 million in the comparable prior year
period, an increase of $1.7 million, or 2.3%. Gross profit as a percentage of
sales (gross margin) remained constant at 76.7%.

In Mexico, gross margin in the second quarter of 2002 increased to 77.2%
from 75.4% in the second quarter of 2001. The increase in gross margin was a
due to a more favorable product mix. Resale sale products, specifically
regular and redesigned products, and set promotions sold during the second
quarter of 2002 contributed a greater gross margin than those sold during the
second quarter of 2001.

In the United States, gross margin in the second quarter of 2002 decreased
to 77.0% from 78.2% in the second quarter of 2001. The difference was due to
incrementally greater charges to cost of sales for the slow moving inventory
reserve during the second quarter of 2002 compared to the second quarter of
2001. Excluding the impact of these charges, gross margin would have been 77.8% in the second quarter of 2002 compared to
77.7% in the second quarter of 2001.

In Europe, gross margin in the second quarter of 2002 decreased to 77.8%
from 81.5% in the second quarter of 2001 due to more favorable product mix in
2001.

Selling, general and administrative expenses.SG&A expenses in the
second quarter of 2002 increased to $61.0 million from $60.4 million in the
second quarter of 2001, an increase of $0.6 million, or 1.0%. SG&A expenses,
as a percentage of net sales, decreased in the second quarter of 2002 to 62.2%
from 63.0% in the second quarter of 2001, due primarily to cost reductions in
the United States and in the Companys corporate headquarters, and the
discontinuation of amortization of goodwill and trademarks pursuant
to Statement of Financial Accounting Standards (SFAS) No.
142 (See Recent Accounting Pronouncements.)

In Mexico, SG&A expenses in the second quarter of 2002 increased by $1.3
million, or 4.4% compared to the second quarter of 2001. SG&A expenses, as a
percentage of net sales, in Mexico were 50.2% in the second quarter of 2002,
compared to 46.8% in the second quarter of 2001. The increased SG&A expenses
in Mexico related primarily to certain administrative expenses which increased
primarily due to $1.8 million incremental bad debt expense in the second
quarter of 2002, compared to the second quarter of 2001, due to declining
consultant liquidity as a result of the general economic condition.

In the United States, SG&A expenses in the second quarter of 2002
increased by $1.3 million, or 10.1% from the second quarter of 2001. SG&A
expenses, as a percentage of net sales, in the U.S. were 59.4% in the second
quarter of 2002, compared to 62.6% in the second quarter of 2001. The
increased SG&A expenses were primarily attributable to additional selling
expenses related to the expanded e-commerce platform during the second quarter
of 2002 compared to the second quarter of 2001. Override expense also
increased in total and as a percentage of sales in the second quarter of 2002
compared to the second quarter of 2001 due to increased sales of resale
products and improved collections. Sales promotional expenses increased due to
timing and mix of promotional programs. Administrative expenses decreased as a
result of cost savings measures employed during the second quarter of 2002,
compared to the second quarter of 2001.

In Europe, SG&A expenses in the second quarter of 2002 increased by $0.4
million, or 8.2% from the second quarter of 2001 primarily due to increased
administrative expenses partially related to increased bad debt expenses in
Italy and the unfavorable impact of strengthening local currencies compared to
U.S. dollars on expenses.

SG&A expenses in other selling markets (South America and Thailand) and at
corporate headquarters in the second quarter of 2002 decreased $2.4 million, or
18.3%, primarily as the result of administrative cost savings in corporate
headquarters, the favorable impact of weakening South American currencies
compared to U.S. dollars on

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expenses, and no trademark or goodwill amortization expense pursuant to SFAS
No. 142 (See Recent Accounting Pronouncements) in the second quarter of 2002,
compared to $0.9 million of amortization expense in the second quarter of 2001.

Exchange loss.The Companys foreign exchange loss was $5.9 million in
the second quarter of 2002 compared to $4.5 million in the second quarter of
the prior year, an increase of $1.4 million, or 31.1%. Foreign exchange losses
and gains result from three primary sources; gains and losses on forward and
option contracts, including the amortization of other comprehensive income (loss) into
exchange loss, 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 second quarter of 2002, the Company recognized $4.0 million of
exchange losses on the remeasurement of U.S. dollar-denominated debt, $1.9
million of exchange losses on other foreign currency transactions, $0.9 million
of exchange losses (including amortization of other comprehensive income (loss)) on
forward contracts and $0.9 million of exchange gains (including amortization of
other comprehensive income (loss)) on option contracts. During the second quarter of
2001, the Company recognized $6.2 million of exchange losses on forward
contracts, resulting from the strengthening of the Mexican peso against the
U.S. dollar during the period and exchange losses of $0.3 million on other
foreign currency transactions. These exchange losses were partially offset by
an exchange gain of $2.0 million on the remeasurement of U.S.
dollar-denominated debt. See Item 3, Quantitative and Qualitative Disclosures about
Market Risk.

Interest expense.Net interest expense (including amortization of
deferred financing fees) in the second quarter of 2002 decreased to $2.9
million from $3.4 million, a decrease of $0.5 million, or 14.7%. 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 decreased to $1.6 million in the
second quarter of 2002, compared to $3.1 million in the second quarter of 2001,
a decrease of $1.5 million, or 48.4%. The Companys effective income tax rate
decreased to approximately 28.6% compared to 60.8% for the comparable period of
the prior year. The reduced effective tax rate was primarily due to the
release of valuation allowances against certain deferred tax assets in the
United States. Excluding the impact of the release of the valuation allowance
of $1.1 million, the effective tax rate would have been 48.2% for the three
months ended June 30, 2002.

Net income.Net income was $4.0 million for the second quarter of 2002, a
$2.0 million increase compared to $2.0 million in 2001. The increase was due
to a $1.7 million increase in gross profit, a $0.5 million decrease in interest
expense, $0.3 million of increase in other, net, a $1.5 million decrease in
income tax expense, partially offset by a $0.6 million increase in SG&A, and a
$1.4 million increase in exchange loss.

Six months ended June 30, 2002 compared to the Six months ended June 30, 2001

|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 
|-------------------------------------------- |  | ------ | ---- | ------ |  | ------ | ----- | ------ |  | -------- | ---- | --------- |  | ----- | ---- | ----------- |  | ------------ | ----- |  |  | ---------- | ---- | - |  | - | ----- | 
|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  | Corporate, |      |   |  |  
|                                             |  | United |      |        |  |        |       |        |  |          |      | All       |  | Total |      | Unallocated |  | Consolidated
|Dollars in millions                          |  | States |      | Mexico |  | Europe |       | others |  | Segments |      | and Other |  | Total
|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |      
|Six Months Ended
June 30, 2002               |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 
|Net sales                                    |  | $      | 44.8 |        |  | $      | 127.9 |        |  | $        | 13.0 |           |  | $     | 11.5 |             |  | $            | 197.2 |  |  | $          |     |   |  | $ | 197.2 | 
|Cost of sales                                |  |        | 9.8  |        |  |        | 30.8  |        |  |          | 2.8  |           |  |       | 3.4  |             |  |              | 46.8  |  |  |            | (0.9 | ) |  |   | 45.9  | 
|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 
|Gross profit                                 |  |        | 35.0 |        |  |        | 97.1  |        |  |          | 10.2 |           |  |       | 8.1  |             |  |              | 150.4 |  |  |            | 0.9  |   |  |   | 151.3 | 
|Selling, general and
administrative
expenses |  |        | 27.9 |        |  |        | 62.8  |        |  |          | 9.9  |           |  |       | 10.9 |             |  |              | 111.5 |  |  |            | 9.9  |   |  |   | 121.4 | 
|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 
|Operating income (loss)                      |  | $      | 7.1  |        |  | $      | 34.3  |        |  | $        | 0.3  |           |  | $     | (2.8 | )           |  | $            | 38.9  |  |  | $          | (9.0 | ) |  | $ | 29.9  | 
|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 
|Six Months Ended
June 30, 2001               |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 
|Net sales                                    |  | $      | 38.9 |        |  | $      | 119.2 |        |  | $        | 12.7 |           |  | $     | 11.2 |             |  | $            | 182.0 |  |  | $          |     |   |  | $ | 182.0 | 
|Cost of sales                                |  |        | 8.7  |        |  |        | 29.1  |        |  |          | 2.4  |           |  |       | 3.0  |             |  |              | 43.2  |  |  |            | (0.6 | ) |  |   | 42.6  | 
|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 
|Gross profit                                 |  |        | 30.2 |        |  |        | 90.1  |        |  |          | 10.3 |           |  |       | 8.2  |             |  |              | 138.8 |  |  |            | 0.6  |   |  |   | 139.4 | 
|Selling, general and
administrative
expenses |  |        | 26.2 |        |  |        | 55.0  |        |  |          | 9.9  |           |  |       | 11.4 |             |  |              | 102.5 |  |  |            | 12.6 |   |  |   | 115.1 | 
|                                             |  |        |      |        |  |        |       |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |      |   |  |   |       | 

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|                        |  |               |     |        |  |        |      |            |  |                |     |       |  |                    |      |   |  |   |      |  |  |                 |       |   |  |   |      | 
|----------------------- |  | ------------- | --- | ------ |  | ------ | ---- | ---------- |  | -------------- | --- | ----- |  | ------------------ | ---- | - |  | - | ---- |  |  | --------------- | ----- | - |  | - | ---- | 
|                        |  |               |     |        |  |        |      |            |  |                |     |       |  |                    |      |   |  |   |      |  |  | Corporate,      |       |   |  |  
|                        |  |               |     |        |  |        |      |            |  |                |     |       |  |                    |      |   |  |   |      |  |  | Unallocated and |       |   |  |  
|Dollars in millions     |  | United States |     | Mexico |  | Europe |      | All others |  | Total Segments |     | Other |  | Consolidated Total
|                        |  |               |     |        |  |        |      |            |  |                |     |       |  |                   
|Operating income (loss) |  | $             | 4.0 |        |  | $      | 35.1 |            |  | $              | 0.4 |       |  | $                  | (3.2 | ) |  | $ | 36.3 |  |  | $               | (12.0 | ) |  | $ | 24.3 | 
|                        |  |               |     |        |  |        |      |            |  |                |     |       |  |                    |      |   |  |   |      |  |  |                 |       |   |  |   |      | 

Net sales. Net sales for the six months ended June 30, 2002 increased to
$197.2 million from $182.0 million for the six months ended June 30, 2001, an
increase of $15.2 million or 8.4%. The effects of foreign currency translation
had no material impact on total sales growth during the first six months of
2002 compared to the first six months of 2001. The Companys average number of
consultants worldwide for the six months ended June 30, 2002 increased to
approximately 379,000 or 7.7% over the 2001 average. Consultant productivity
remained constant for each period.

In Mexico, net sales for the six months ended June 30, 2002 increased to
$127.9 million from $119.2 million for the six months ended June 30, 2001, an
increase of $8.7 million or 7.3%. In local currency, sales increased 5.8% over
the comparable prior year period. In Mexico, the average number of consultants
for the six months ended June 30, 2002 increased to approximately 240,000, or
by 9.3% over the average number of consultants in the comparable prior year
period. In local currency, consultant productivity decreased 3.2% over
consultant productivity during the first six months of 2001 and the number of
ordering consultants decreased to 47.2% of consultants compared to 51.1% in the
prior year.

In the United States, net sales for the six months ended June 30, 2002
increased to $44.8 million from $38.9 million for the six months ended June 30,
2001, an increase of $5.9 million or 15.2%. Sales in the Hispanic Division
increased 19.1% and sales in the General Division increased 8.6% for the first
six months of 2002 compared to the first six months of 2001. The period to
period sales increase was primarily due to a larger consultant base and
improved consultant productivity. In the U.S., the average number of
consultants increased 2.9% to 68,000. Consultant productivity increased 10.5%
for the six months ended June 30, 2002, compared to the six months ended June
30, 2001. The increased productivity was due to certain productivity related
changes in the program during the second quarter of 2002, as well as the
favorable impact on productivity from the e-commerce program launched in June
2001. The number of ordering consultants also increased to 61.0% of
consultants in the Hispanic Division and 49.8% of consultants in the General
Division.

In Europe, net sales for the six months ended June 30, 2002 increased to
$13.0 million from $12.7 million for the six months ended June 30, 2001, an
increase of $0.3 million, or 2.4%. The increase was the result of increased
activity and productivity, partially offset by a smaller average consultant
base. Consultant productivity increased 3.8% in the first six months of 2002,
compared to the first six months of 2001, partially due to more favorable
exchange rates. The number of ordering consultants increased and 64.3% of all
consultants were considered active. The average number of consultants
decreased 1.1% to approximately 16,000 for the six months ended June 30, 2002.

Sales in South America and Thailand for the six months ended June 30, 2002
increased to $11.5 million from $11.2 million for the six months ended June 30,
2001, an increase of $0.3 million, or 2.7%. In local currencies, sales in
South America increased 20.0% and sales in Thailand increased 25.5%.

Gross profit.Consolidated gross profit for the six months ended June
30, 2002 increased to $151.3 million from $139.4 million in the comparable
prior year period, an increase of $11.9 million, or 8.5%. Gross profit as a
percentage of sales (gross margin) increased to 76.7% from 76.6%.

In Mexico, gross margin for the six months ended June 30, 2002 increased
to 75.9% from 75.6% in the comparable prior year period. The increase in gross
margin was primarily attributable to a more favorable product mix. Resale sale
products, including new products, contributed a greater gross margin during the
six months ended June 30, 2002, than those sold during the six months ended
June 30, 2001. The increased margin due to a more favorable product mix was
partially offset by the amortization of deferred exchange losses into cost of
sales and incrementally higher expenses related to slow moving inventory
reserve charges. During the first six months of 2002, approximately $0.6
million of losses were reclassified into cost of sales from other comprehensive
income in conjunction with hedge accounting pursuant to SFAS 133, compared to a
nominal amount for the first six months of 2001. Additionally, during the first
six months of 2002, $0.4 million of incremental slow moving inventory reserve
charges were recorded.

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In the United States, gross margin for the six months ended June 30, 2002
increased to 78.1% from 77.6% in the comparable prior year period. The
increase in gross margin was related to increased sales of new products, which
contributed a greater gross margin.

In Europe, gross margin for the six months ended June 30, 2002 decreased
to 78.5% from 81.1% for the comparable prior year period. The decrease in
gross margin was due to more favorable product mix in 2001.

Selling, general and administrative expenses.SG&A expenses for the six
months ended June 30, 2002 increased to $121.4 million from $115.1 million for
the six months ended June 30, 2001, an increase of $6.3 million, or 5.5%. SG&A
expenses, as a percentage of net sales, decreased for the first six months of
2002 to 61.6% from 63.2% for the first six months 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 for the six months ended June 30, 2002 increased
by $7.8 million, or 14.2% compared to the six months ended June 30, 2001. SG&A
expenses, as a percentage of net sales, in Mexico were 49.1% during the first
six months of 2002, compared to 46.1% for the first six months 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, sale promotional expenses increased proportionally more than
sales due to increased promotional activity to combat the difficult economic
environment. 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 $2.9 million incremental bad debt expense in the
first six months of 2002, compared to the first six months of 2001, due to
declining consultant liquidity as a result of the general economic condition.

In the United States, SG&A expenses for six months ended June 30, 2002
increased by $1.7 million, or 6.5% compared to the six months ended June 30,
2001. SG&A expenses, as a percentage of net sales, in the U.S. were 62.3%
during the first six months of 2002, compared to 67.4% for the first six months
of 2001. The increased SG&A expenses were primarily attributable to additional
selling expenses, additional override expenses, partially offset by decreased
sales promotional and administrative expenses. The expanded e-commerce
platform was launched in June 2001, which resulted in incrementally more
selling expenses for the six months ended June 30, 2002 compared to the six
months ended June 30, 2001. Override payments, which tend to increase
proportionally with sales, also increased in total, 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 sales promotional
programs. Administrative expenses decreased due to cost saving measures implemented during
the six months ended June 30, 2002.

In Europe, SG&A expenses in the first half of 2002 were relatively
constant in total at $9.9 million. SG&A expenses, as a percentage of net
sales, were 76.1% for the six months ended June 30, 2002,
compared to 80.0% for
the six months ended June 30, 2001.

SG&A expenses in other selling markets (South America and Thailand) and at
corporate headquarters for the six months ended June 30, 2002 decreased $3.2
million, or 13.3%, primarily as the result of reduced sales promotional
expenses and administrative expenses in the South American entities,
administrative cost savings in corporate headquarters and no goodwill or
trademark amortization expense pursuant to SFAS No. 142 (See Recent Accounting
Pronouncements) in 2002, compared to $1.7 million of amortization expense in
2001.

Exchange loss.The Companys foreign exchange loss was $5.4 million for
the six months ended June 30, 2002 compared to $6.7 million for the six months
ended June 30, 2001, a decrease of $1.3 million, or 19.4%. During the six
months ended June 30, 2002, the Company recognized $1.4 million of exchange
losses related to forward contracts, $0.9 million of exchange gains related to
option contracts, $3.4 million of exchange losses on the remeasurement of U.S.
dollar-denominated debt and $1.5 million of exchange losses on other foreign
currency transactions. During the first six months of 2001, the Company
recognized $9.6 million of exchange losses on forward contracts, resulting from
the strengthening of the Mexican peso against the U.S. dollar, and exchange
losses on other foreign currency

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transactions of $0.1 million, partially offset by an unrealized exchange gain
of $3.0 million on the remeasurement of U.S. dollar-denominated debt. See
Item 3, Quantitative and Qualitative Disclosures about Market Risk.

Interest expense.Net interest expense (including amortization of
deferred financing fees) for the first six months of 2002 decreased to $5.9
million from $6.9 million for the first six months of 2001, a decrease of $1.0
million, or 14.5%. 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 decreased to $4.8 million for the
first six months of 2002, compared to $6.1 million for the first six months of
2001, a decrease of $1.3 million, or 21.3%. The Companys effective income tax
rate decreased to approximately 25.7% compared to 56.6% for the comparable
period of the prior year. 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 Mexicos future
corporate statutory rates on net deferred tax liabilities during the first
quarter of 2002. Excluding the impact of the release of the valuation
allowance of $2.3 million and the impact of the enactment of changes in the
Mexico rate of $1.2 million, the effective tax rate would have been 44.4% compared to 25.7% for
the six months ended June 30, 2002.

Net income.Net income was $13.9 million for the first six months of
2002, a $9.4 million increase, compared to $4.5 million for the first six
months of 2001. The increase was due to an $11.9 million increase in gross
profit, a $1.3 million decrease in exchange loss, a $1.0 million decrease in
interest expense, $0.5 million increase in other, net, a $1.3 million decrease
in income tax expense, partially offset by $6.3 million increase in SG&A, and a
$0.3 million increase in the cumulative effect of accounting change. .

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 principal 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 June 30, 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, $4.5 million, and $2.0 million for each of the years from 2002 through
2004, respectively. During the six months ended June 30, 2002 the Company
made an additional unscheduled principal payment on the term loan of $2.5
million. Borrowings under the revolving credit facility ($4.5 million as of
June 30, 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 applicable margin not to exceed 0.625%). The interest
rate in effect at June 30, 2002 was approximately 3.5% 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 and six  months ended June 30, 2002, cash
paid for interest was approximately $4.7 million and
$5.0 million, respectively.

Both the indenture dated as of April 30, 1998 (the Indenture), 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

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ratio and a maximum debt to EBITDA ratio. As of June 30, 2002, the Company was
in compliance with all covenants. As of June 30, 2002, the Company had
irrevocable standby letters of credit outstanding totaling $2.9 million.

The Companys Mexican subsidiary, Jafra S.A., is party to an unsecured
bank loan agreement. As of June 30, 2002, Jafra S.A. had an outstanding
balance under the bank loan agreement of the peso equivalent of $1.2 million at
a weighted average annual interest rate of 18.6%. Principal and interest
payments are due monthly through January 25, 2005. As of June 30, 2002, $0.6
million of this loan is classified as short-term debt and $0.6 million of this
loan is classified as long-term debt in the accompanying consolidated balance
sheets.

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 $12.0 million for the six
months ended June 30, 2002, consisting of $24.5 million provided by net income
plus depreciation, amortization, and other non-cash items included in net
income, partially offset by $12.5 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 six months ended June 30, 2002 were
an increase of $3.4 million in accounts receivable, a reduction of $12.1
million in accounts payable and accrued liabilities, and a reduction of $2.3
million in income taxes payable/prepaid, partially offset by a reduction in
inventories of $2.1 million and a reduction in prepaid expenses and other current assets of $2.0
million.

Net cash used in investing activities was $4.9 million for the six months
ended June 30, 2002, of which $4.9 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 used in financing activities was $2.2 million for the six months
ended June 30, 2002, and consisted of $4.6 million of repayment under the term loan
facility, and $0.3 million net repayment of other bank debt, partially offset by $2.7
million of borrowings under the revolving credit facility.

The effect of exchange rate changes on cash was $1.5 million for the six
months ended June 30, 2002, relating primarily to fluctuations in the exchange
rates in Mexico and South America.

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Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) approved
two new statements: 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 with regards 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. In accordance with such adoption, the Company
identified all reporting units in conjunction with the provisions of SFAS No.
142 and allocated all goodwill accordingly. During the six months ended June
30, 2002, the Company completed the transitional goodwill impairment test
required by SFAS No. 142. Due to the general market uncertainty in Colombia,
the Company revised its projections and recorded an impairment loss of $0.2
million associated with its Colombia reporting unit. No other impairment was
identified. The impairment loss was recorded as a cumulative effect of
accounting change on the accompanying Consolidated Statements of Operations.
The changes in the carrying amount of goodwill for the six months ended June
30, 2002 were as follows (in millions):

|                                |  |        |      |        |  |        |      |        |  |       |      |     |  |              |      |   |  |   |      |  
|------------------------------- |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | ----- | ---- | --- |  | ------------ | ---- | - |  | - | ---- | -
|                                |  | United |      |        |  |        |      |        |  |       |      | All |  | Consolidated
|Goodwill                        |  | States |      | Mexico |  | Europe |      | Others |  | Total
|                                |  |        |      |        |  |        |      |        |  |      
|Balance as of December 31, 2001 |  | $      | 32.2 |        |  | $      | 32.4 |        |  | $     | 5.9  |     |  | $            | 0.6  |   |  | $ | 71.1 |  
|Translation effect              |  |        |     |        |  |        | (2.6 | )      |  |       | (0.4 | )   |  |              | (0.1 | ) |  |   | (3.1 | )
|Impairment losses               |  |        |     |        |  |        |     |        |  |       |     |     |  |              | (0.2 | ) |  |   | (0.2 | )
|                                |  |        |      |        |  |        |      |        |  |       |      |     |  |              |      |   |  |   |      |  
|Balance as of June 30, 2002     |  | $      | 32.2 |        |  | $      | 29.8 |        |  | $     | 5.5  |     |  | $            | 0.3  |   |  | $ | 67.8 |  
|                                |  |        |      |        |  |        |      |        |  |       |      |     |  |              |      |   |  |   |      |  

The Companys other intangible assets consist of trademarks. During the
six months ended June 30, 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 transitional test, the Company determined
that there was no impairment of trademarks. The carrying value of trademarks
was $46.5 million as of June 30, 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 millions):

|                                   |  |                    |     |                  |  |      |     |      |  |   |      |  |  |   |     | 
|---------------------------------- |  | ------------------ | --- | ---------------- |  | ---- | --- | ---- |  | - | ---- |  |  | - | --- | 
|                                   |  | Three Months Ended |     | Six Months Ended
|                                   |  | June 30,           |     | June 30,        
|                                   |  |                    |     |                 
|                                   |  | 2002               |     | 2001             |  | 2002 |     | 2001
|                                   |  |                    |     |                  |  |      |     |     
|Net income                         |  | $                  | 4.0 |                  |  | $    | 2.0 |      |  | $ | 13.9 |  |  | $ | 4.5 | 
|Goodwill amortization, net of tax  |  |                    |    |                  |  |      | 0.5 |      |  |   |     |  |  |   | 0.8 | 
|Trademark amortization, net of tax |  |                    |    |                  |  |      | 0.2 |      |  |   |     |  |  |   | 0.5 | 
|                                   |  |                    |     |                  |  |      |     |      |  |   |      |  |  |   |     | 
|Adjusted net income                |  | $                  | 4.0 |                  |  | $    | 2.7 |      |  | $ | 13.9 |  |  | $ | 5.8 | 
|                                   |  |                    |     |                  |  |      |     |      |  |   |      |  |  |   |     | 

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.

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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 $1.0 million and
$1.9 million on their personal sales, previously reported as a component of
selling, general and administrative expenses, as a reduction in net sales for
the three and six months ended June 30, 2001, respectively.

In June 2002, the FASB approved SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
The provisions of this statement are effective for exit or disposal activities
that are initiated after December 31, 2002, with early application encouraged.
The Company is currently evaluating the impact that this statement may have on
any potential future exit or disposal activities.

Non-U.S. Operations

Sales outside of the United States aggregated approximately 76% and 77% of
the Companys total net sales for the three and six months ended June 30, 2002,
respectively, and 78% and 79% for the three and six months ended June 30, 2001,
respectively. In addition, as of June 30, 2002, non-U.S. subsidiaries
comprised approximately 73% 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
63% and 65% of the Companys net sales for the three and six months ended June
30, 2002, respectively, and 66% for each of the three and six month periods
ended June 30, 2001, all of which were denominated in Mexican pesos. At June
30, 2002, Jafra S.A. had $35.4 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
a loss of $4.0 million and $3.4 million for the three and six months
ended June 30, 2002, respectively, on the remeasurement of this U.S.
dollar-denominated debt and a net loss of $0.5 on foreign currency forward and
option contracts for each of the three and six months periods ended June 30,
2002.

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 63% and 65% of the Companys consolidated net sales for the three and
six months ended June 30, 2002, respectively, compared to 66% for the full year
in 2001. The year-to-year sales growth in Mexico for the six months ended June
30, 2002 was approximately 7% in U.S. dollars and 6% in local currency. Mexico
reported a quarter-to-quarter sales decline for the three months ended June 30,
2002 of 3% in U.S. dollars, and relatively constant sales in local currency.
Assuming a continued stable economic environment, the Company intends to
continue to grow its revenues and consultant base in Mexico at approximately 10% per year.

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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 and six
months ended June 30, 2002 increased 16% and 15%, respectively, 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,
productivity related changes in the program and strengthening consultant
leadership to stimulate sales growth in the mid double digits over 2001 levels.

Net sales in Europe had been on a downward trend for the past three years
until this year. European sales have declined from approximately 11% of the
Companys business in 1999 to 7% of the Companys business in the six months
ended June 30, 2002. However, the European operations reported sales
increases of 11% and 2% for the three and six months ended June 30, 2002,
respectively and have reported stability in some key operating indicators
including only a slight decline in the 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 approximately
1% in six months ended June 30, 2002 compared to the prior year, and were up
approximately 20% 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 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 at approximately 10% per year; (b) the Companys expectation that U.S. sales
growth will be in the mid double digits over 2001 levels; (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.

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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 risks are 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. During the first six months 2002, the
Company received a favorable upgrade to its outlook rating from a particular
credit agency. No other significant changes have occurred during the first six
months 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, 77%
of the Companys revenue for first six 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 six months ended June 30, 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.

The outstanding foreign currency forward contracts had notional values
denominated in Mexican pesos of $333,000,000 in equal offsetting buy and sell
positions at June 30, 2002 and $976,000,000 in a buy position at June 30, 2001.
The contracts outstanding at June 30, 2002 mature at various dates extending to
November 2002 and the contracts outstanding at June 30, 2001 matured at various
dates through June 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. The table below describes
the forward contracts that were outstanding at June 30, 2002 and 2001 (in
thousands):
38Table of Contents

June 30, 2002:

|                                |  |                  |          |          |  |          |          |                 |  |          |       |  |  |   |       |  
|------------------------------- |  | ---------------- | -------- | -------- |  | -------- | -------- | --------------- |  | -------- | ----- |  |  | - | ----- | -
|                                |  |                  |          |          |  |          |          |                 |  | Weighted |       |  |  |  
|                                |  | Forward          |          |          |  |          |          | Average         |  |          |       | 
|                                |  | Position in      |          | Maturity |  | Contract |          | Fair Value in  
|Foreign Currency                |  | Mexican Pesos(1) |          | Date     |  | Rate     |          | U.S. Dollars(1)
|                                |  |                  |          |          |  |          |          |                
|Buy US Dollar/sell Mexican Peso |  | $                | 48,000   |          |  |          | 7/31/02  |                 |  |          | 10.07 |  |  | $ | 36    |  
|Sell US Dollar/buy Mexican Peso |  |                  | (48,000  | )        |  |          | 7/31/02  |                 |  |          | 9.16  |  |  |   | 435   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 100,000  |          |  |          | 8/30/02  |                 |  |          | 10.05 |  |  |   | (18   | )
|Sell US Dollar/buy Mexican Peso |  |                  | (100,000 | )        |  |          | 8/30/02  |                 |  |          | 9.21  |  |  |   | 917   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 45,000   |          |  |          | 9/30/02  |                 |  |          | 10.09 |  |  |   | (20   | )
|Sell US Dollar/buy Mexican Peso |  |                  | (45,000  | )        |  |          | 9/30/02  |                 |  |          | 9.25  |  |  |   | 418   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 110,000  |          |  |          | 10/31/02 |                 |  |          | 10.09 |  |  |   | (128  | )
|Sell US Dollar/buy Mexican Peso |  |                  | (110,000 | )        |  |          | 10/31/02 |                 |  |          | 9.31  |  |  |   | 1,014 |  
|Buy US Dollar/sell Mexican Peso |  |                  | 30,000   |          |  |          | 11/29/02 |                 |  |          | 10.27 |  |  |   | (4    | )
|Sell US Dollar/buy Mexican Peso |  |                  | (30,000  | )        |  |          | 11/29/02 |                 |  |          | 9.33  |  |  |   | 286   |  
|                                |  |                  |          |          |  |          |          |                 |  |          |       |  |  |   |       |  
|                                |  | $                |         |          |  |          |          |                 |  |          |       |  |  | $ | 2,936 |  
|                                |  |                  |          |          |  |          |          |                 |  |          |       |  |  |   |       |  

June 30, 2001:

|                                |  |                  |         |          |  |          |          |                 |  |          |       |  |  |   |        | 
|------------------------------- |  | ---------------- | ------- | -------- |  | -------- | -------- | --------------- |  | -------- | ----- |  |  | - | ------ | 
|                                |  |                  |         |          |  |          |          |                 |  | Weighted |       |  |  |  
|                                |  | Forward          |         |          |  |          |          | Average         |  |          |       | 
|                                |  | Position in      |         | Maturity |  | Contract |          | Fair Value in  
|Foreign Currency                |  | Mexican Pesos(1) |         | Date     |  | Rate     |          | U.S. Dollars(1)
|                                |  |                  |         |          |  |          |          |                
|Buy US Dollar/sell Mexican Peso |  | $                | 95,000  |          |  |          | 7/31/01  |                 |  |          | 10.38 |  |  | $ | 1,293  | 
|Buy US Dollar/sell Mexican Peso |  |                  | 122,000 |          |  |          | 8/31/01  |                 |  |          | 10.32 |  |  |   | 1,490  | 
|Buy US Dollar/sell Mexican Peso |  |                  | 126,000 |          |  |          | 9/28/01  |                 |  |          | 10.39 |  |  |   | 1,525  | 
|Buy US Dollar/sell Mexican Peso |  |                  | 25,000  |          |  |          | 10/30/01 |                 |  |          | 10.70 |  |  |   | 349    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 110,000 |          |  |          | 10/31/01 |                 |  |          | 10.71 |  |  |   | 1,538  | 
|Buy US Dollar/sell Mexican Peso |  |                  | 69,716  |          |  |          | 11/30/01 |                 |  |          | 10.24 |  |  |   | 631    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 44,000  |          |  |          | 12/27/01 |                 |  |          | 10.71 |  |  |   | 545    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 41,000  |          |  |          | 12/31/01 |                 |  |          | 10.90 |  |  |   | 573    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 78,715  |          |  |          | 1/31/02  |                 |  |          | 10.30 |  |  |   | 632    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 51,787  |          |  |          | 02/28/02 |                 |  |          | 10.38 |  |  |   | 413    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 94,371  |          |  |          | 03/27/02 |                 |  |          | 10.46 |  |  |   | 745    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 49,000  |          |  |          | 04/30/02 |                 |  |          | 10.29 |  |  |   | 270    | 
|Buy US Dollar/sell Mexican Peso |  |                  | 41,000  |          |  |          | 05/31/02 |                 |  |          | 9.97  |  |  |   | 79     | 
|Buy US Dollar/sell Mexican Peso |  |                  | 28,000  |          |  |          | 06/28/02 |                 |  |          | 9.91  |  |  |   | 20     | 
|                                |  |                  |         |          |  |          |          |                 |  |          |       |  |  |   |        | 
|                                |  | $                | 975,589 |          |  |          |          |                 |  |          |       |  |  | $ | 10,103 | 
|                                |  |                  |         |          |  |          |          |                 |  |          |       |  |  |   |        | 



---

|(1) |  | The Fair Value of the forward positions presented above, an unrealized
loss of $2,936,000 and $10,103,000 at June 30, 2002 and 2001,
respectively, has been recorded in accrued liabilities in the consolidated
balance sheets.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



The following table provides information about the details of the
Companys option contracts as of June 30, 2002 (in thousands):

|                                                   |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 
|-------------------------------------------------- |  | ---------------- | ------- | -------------------- |  | --------------- | ------------- | ------------- |  | - | ------ | - |  | ----------------- |  | 
|                                                   |  | Coverage in      |         |                      |  |                 |               | Fair Value in |  |   |        |  
|Foreign Currency                                   |  | Mexican Pesos(1) |         | Average Strike Price |  | U.S. Dollars(1) |               | Maturity Date
|                                                   |  |                  |         |                      |  |                 |               |              
|At June 30, 2002:                                  |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 
|Purchased Puts (Company may sell Peso/buy USD)     |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 
|Mexican Peso                                       |  | $                | 193,000 |                      |  |                 | 9.60  9.83   |               |  | $ | (848   | ) |  | July 
Sept. 2002
|Mexican Peso                                       |  |                  | 225,000 |                      |  |                 | 9.97  10.15  |               |  |   | (863   | ) |  | Oct.  Dec. 2002 
|Mexican Peso                                       |  |                  | 149,000 |                      |  |                 | 10.31  10.48 |               |  |   | (635   | ) |  | Jan.  Mar. 2003 
|Mexican Peso                                       |  |                  | 77,000  |                      |  |                 | 11.05  11.22 |               |  |   | (155   | ) |  | Apr.  May 2003  
|                                                   |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 
|                                                   |  | $                | 644,000 |                      |  |                 |               |               |  | $ | (2,501 | ) |  |                   |  | 
|                                                   |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 
|Written Calls (Counterparty may buy Peso/sell
USD) |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 
|Mexican Peso                                       |  | $                | 193,000 |                      |  |                 | 9.02          |               |  | $ | 3      |   |  | July  Sept. 2002
|Mexican Peso                                       |  |                  | 225,000 |                      |  |                 | 9.01  9.02   |               |  |   | 10     |   |  | Oct.  Dec. 2002 
|Mexican Peso                                       |  |                  | 149,000 |                      |  |                 | 9.01  9.02   |               |  |   | 36     |   |  | Jan.  Mar. 2003 
|Mexican Peso                                       |  |                  | 77,000  |                      |  |                 | 9.50  9.58   |               |  |   | 62     |   |  | Apr.  May 2003  
|                                                   |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 
|                                                   |  | $                | 644,000 |                      |  |                 |               |               |  | $ | 111    |   |  |                   |  | 
|                                                   |  |                  |         |                      |  |                 |               |               |  |   |        |   |  |                   |  | 

40



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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

None.

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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/   RONALD B. CLARK                                                                                    
|                |  |  |  |  |  |                                                                                                          
|                |  |  |  |  |  | Ronald B. Clark                                                                                          
|                |  |  |  |  |  | Chief Executive Officer of the Advisory
Committee and Director                                           
|               
|                |  |  |  |  |  | /s/   MICHAEL A. DIGREGORIO                                                                              
|                |  |  |  |  |  |                                                                                                          
|                |  |  |  |  |  | Michael A. DiGregorio                                                                                    
|                |  |  |  |  |  | Senior Vice President and Chief
Financial Officer of the Advisory
Committee (Principal Financial Officer)
|August 13, 2002 |  |  |  |  |  |                                                                                                          

42