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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 THESECURITIES EXCHANGE ACT OF 1934 
|                                                          |   | 
|For the quarterly period ended September 30, 2002        
|                                                          |   | 
|OR                                                       
|                                                          |   | 
|                                                          | o |  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THESECURITIES EXCHANGE ACT OF 1934
|                                                          |   | 
|For the transition period from ___________ to ___________
|                                                          |   | 
|Commission File Number 333-62989                         

CDRJ INVESTMENTS (LUX) S.A.

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(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  o   NO  x

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  YES  o   NO  x

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 November 8, 2002
831,888 shares



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TABLE OF CONTENTS



|                              |                                                                                               |                                       |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS          
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                              | ITEM 4.  CONTROLS AND PROCEDURES                                                             
|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                    
|CERTIFICATIONS               



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##### Table of Contents



CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES

Index to Financial Statements and Exhibits
Filed with the Quarterly Report of the Company on Form 10-Q
For the Three and Nine Months Ended September 30, 2002

|                               |  |                                                                                       |  |                                                                                                  |    |          |    | 
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------ | -- | -------- | -- | 
|                               |  |                                                                                       |  |                                                                                                  |    | Page No.
|                               |  |                                                                                       |  |                                                                                                  |    |         
|PART I  FINANCIAL INFORMATION
|Item 1.(*)                     |  | Financial Statements (Unaudited):                                                     |  |                                                                                                  |    |         
|                               |  |                                                                                       |  | 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 |         
|Item 4.                        |  | Controls and Procedures                                                               |  |                                                                                                  | 40 |         
|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 | 
|                               |  |                                                                                       |  | Certifications                                                                                   |    |          | 43 | 



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|* |  | Jafra S.A. and JCI have fully and unconditionally guaranteed the obligations
under the Notes of the other on a senior subordinated basis, subject to a
30-day standstill period prior to enforcement of such guarantees. 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 September 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)

|                                     |                                                                                                                      |                            |        |               |         |              |        |        |         | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------------- | ------- | ------------ | ------ | ------ | ------- | 
|                                     |                                                                                                                      |                            |        | September 30, |         | December 31,
|                                     |                                                                                                                      |                            |        | 2002          |         | 2001        
|                                     |                                                                                                                      |                            |        |               |         |             
|                                     |                                                                                                                      |                            |        | (Unaudited)   |         |              |        |       
|ASSETS                              
|Current assets:                      |                                                                                                                      |                            |        |               |         |              |        |       
|                                     | Cash and cash equivalents                                                                                            |                            | $      | 11,009        |         |              | $      | 6,748  |        
|                                     | Receivables, net                                                                                                     |                            |        | 45,506        |         |              |        | 43,898 |        
|                                     | Inventories                                                                                                          |                            |        | 39,220        |         |              |        | 40,515 |        
|                                     | Prepaid income taxes                                                                                                 |                            |        | 75            |         |              |        |       |        
|                                     | Prepaid expenses and other current assets                                                                            |                            |        | 5,468         |         |              |        | 7,851  |        
|                                     | Deferred income taxes                                                                                                |                            |        | 2,392         |         |              |        | 55     |        
|                                     |                                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                                      | Total current assets       |        |               | 103,670 |              |        |        | 99,067  | 
|Property and equipment, net          |                                                                                                                      |                            | 59,540 |               |         |              | 59,598 |       
|Other assets:                        |                                                                                                                      |                            |        |               |         |              |        |       
|                                     | Goodwill                                                                                                             |                            |        | 66,981        |         |              |        | 71,148 |        
|                                     | Trademarks                                                                                                           |                            |        | 45,224        |         |              |        | 50,560 |        
|                                     | Deferred financing fees and other, net                                                                               |                            |        | 8,067         |         |              |        | 10,763 |        
|                                     |                                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                                      | Total                      |        | $             | 283,482 |              |        | $      | 291,136 | 
|                                     |                                                                                                                      |                            |        |               |         |              |        |       
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                      |                            |        |               |         |              |        |       
|                                     | Current portion of long-term debt                                                                                    |                            | $      | 6,748         |         |              | $      | 6,188  |        
|                                     | Accounts payable                                                                                                     |                            |        | 19,807        |         |              |        | 26,516 |        
|                                     | Accrued liabilities                                                                                                  |                            |        | 41,171        |         |              |        | 40,916 |        
|                                     | Income taxes payable                                                                                                 |                            |        | 5,806         |         |              |        | 7,130  |        
|                                     | Deferred income taxes                                                                                                |                            |        | 4,914         |         |              |        | 4,094  |        
|                                     |                                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                                      | Total current liabilities  |        |               | 78,446  |              |        |        | 84,844  | 
|Long-term debt                       |                                                                                                                      |                            | 78,554 |               |         |              | 86,901 |       
|Deferred income taxes                |                                                                                                                      |                            | 17,477 |               |         |              | 20,311 |       
|Other long-term liabilities          |                                                                                                                      |                            | 3,496  |               |         |              | 3,088  |       
|                                     |                                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                                      | Total liabilities          |        |               | 177,973 |              |        |        | 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                                                                                                    |                            |        | 33,211        |         |              |        | 18,373 |        
|                                     | Accumulated other comprehensive loss                                                                                 |                            |        | (11,287       | )       |              |        | (5,966 | )      
|                                     |                                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                                      | Total stockholders equity |        |               | 105,509 |              |        |        | 95,992  | 
|                                     |                                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                                      | Total                      |        | $             | 283,482 |              |        | $      | 291,136 | 
|                                     |                                                                                                                      |                            |        |               |         |              |        |       

See accompanying notes to consolidated financial statements

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

|                                                                                 |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|-------------------------------------------------------------------------------- | ---------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | -------
|                                                                                 |                        |   | Three
Months Ended |        | Nine Months Ended
|                                                                                 |                        |   | September 30,      |        | September 30,    
|                                                                                 |                        |   |                    |        |                  
|                                                                                 |                        |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                                                                                 |                        |   |                    |        |                   |   |        |        |     
|Net sales                                                                        |                        | $ | 94,926             |        |                   | $ | 92,423 |        |      | $ | 292,123 |         |   | $ | 274,423 |        
|Cost of sales                                                                    |                        |   | 21,991             |        |                   |   | 20,194 |        |      |   | 67,878  |         |   |   | 62,824  |        
|                                                                                 |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                 | Gross profit           |   |                    | 72,935 |                   |   |        | 72,229 |      |   |         | 224,245 |   |   |         | 211,599
|Selling, general and administrative expenses                                     |                        |   | 59,048             |        |                   |   | 57,871 |        |      |   | 180,456 |         |   |   | 172,973 |        
|                                                                                 |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                 | Income from operations |   |                    | 13,887 |                   |   |        | 14,358 |      |   |         | 43,789  |   |   |         | 38,626 
|Other income (expense):                                                          |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                 | Exchange loss, net     |   |                    | (5,049 | )                 |   |        | (1,261 | )    |   |         | (10,472 | ) |   |         | (7,963 
|                                                                                 | Interest expense, net  |   |                    | (2,878 | )                 |   |        | (3,160 | )    |   |         | (8,735  | ) |   |         | (10,006
|                                                                                 | Other, net             |   |                    | (28    | )                 |   |        | 32     |      |   |         | 268     |   |   |         | (198   
|                                                                                 |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Income before income taxes and cumulative effect
of accounting change            |                        |   | 5,932              |        |                   |   | 9,969  |        |      |   | 24,850  |         |   |   | 20,459  |        
|Income tax expense                                                               |                        |   | 4,966              |        |                   |   | 4,582  |        |      |   | 9,768   |         |   |   | 10,649  |        
|                                                                                 |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Income before cumulative effect of accounting change                             |                        |   | 966                |        |                   |   | 5,387  |        |      |   | 15,082  |         |   |   | 9,810   |        
|Cumulative effect of accounting change, net of income
tax expense of $82 in 2001 |                        |   |                   |        |                   |   |       |        |      |   | (244    | )       |   |   | 126     |        
|                                                                                 |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Net income                                                                       |                        | $ | 966                |        |                   | $ | 5,387  |        |      | $ | 14,838  |         |   | $ | 9,936   |        
|                                                                                 |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        

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)

|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        |       |         |        |  
|------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ------ | ----------------- | ------ | ------ | ----- | ------- | ------ | -
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        | Nine Months Ended
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        | September 30,    
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                  
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        | 2002              |        | 2001  
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|Cash
flows from operating activities:            |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|                                                 | Net income                                                                                                                  |                                                      | $                                         | 14,838                                    |        |                   | $      | 9,936  |      
|                                                 |                                                                                                                             | Cumulative effect of accounting change, net of taxes |                                           |                                           | 244    |                   |        |        | (126  | )      
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|                                                 | Income before cumulative effect of accounting change                                                                        |                                                      |                                           | 15,082                                    |        |                   |        | 9,810  |      
|                                                 | Adjustments to reconcile income before cumulative effect of accounting change
to net cash provided by operating activities: |                                                      |                                           |                                           |        |                   |        |        |      
|                                                 |                                                                                                                             | Gain on sale of property and equipment               |                                           |                                           | (88    | )                 |        |        |      |        
|                                                 |                                                                                                                             | Depreciation and amortization                        |                                           |                                           | 3,834  |                   |        |        | 5,983 |        
|                                                 |                                                                                                                             | Amortization of deferred financing fees              |                                           |                                           | 1,063  |                   |        |        | 1,073 |        
|                                                 |                                                                                                                             | Provision for uncollectible accounts receivable      |                                           |                                           | 9,831  |                   |        |        | 4,087 |        
|                                                 |                                                                                                                             | Unrealized foreign exchange and derivative loss      |                                           |                                           | 9,042  |                   |        |        | 1,320 |        
|                                                 |                                                                                                                             | Deferred
realized foreign exchange gain (loss)       |                                           |                                           | 515    |                   |        |        | (721  | )      
|                                                 |                                                                                                                             | Deferred income taxes                                |                                           |                                           | (3,504 | )                 |        |        |      |        
|                                                 |                                                                                                                             | Changes in operating assets and liabilities:         |                                           |                                           |        |                   |        |        |       |        
|                                                 |                                                                                                                             |                                                      | Receivables                               |                                           |        | (15,117           | )      |        |       | (15,529 | )     
|                                                 |                                                                                                                             |                                                      | Inventories                               |                                           |        | (1,604            | )      |        |       | (594    | )     
|                                                 |                                                                                                                             |                                                      | Prepaid expenses and other current assets |                                           |        | 3,086             |        |        |       | 4,158   |       
|                                                 |                                                                                                                             |                                                      | Other assets                              |                                           |        | 1,323             |        |        |       | 1,067   |       
|                                                 |                                                                                                                             |                                                      | Accounts payable and accrued liabilities  |                                           |        | (528              | )      |        |       | (6,748  | )     
|                                                 |                                                                                                                             |                                                      | Income taxes payable/prepaid              |                                           |        | (517              | )      |        |       | 6,428   |       
|                                                 |                                                                                                                             |                                                      | Other long-term liabilities               |                                           |        | 408               |        |        |       | 626     |       
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|                                                 |                                                                                                                             |                                                      |                                           | Net cash provided by operating activities |        |                   | 22,826 |        |       |         | 10,960 |  
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|Cash
flows from investing activities:            |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|                                                 | Proceeds from sale of property and equipment                                                                                |                                                      |                                           | 231                                       |        |                   |        |       |      
|                                                 | Purchases of property and equipment                                                                                         |                                                      |                                           | (7,605                                    | )      |                   |        | (6,463 | )    
|                                                 | Other                                                                                                                       |                                                      |                                           | (303                                      | )      |                   |        | (160   | )    
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|                                                 |                                                                                                                             |                                                      |                                           | Net cash used in investing activities     |        |                   | (7,677 | )      |       |         | (6,623 | )
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|Cash
flows from financing activities:            |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|                                                 | Repayments under term loan facility                                                                                         |                                                      |                                           | (5,375                                    | )      |                   |        | (3,375 | )    
|                                                 | Net borrowings (repayments) under revolving credit facility                                                                 |                                                      |                                           | (1,800                                    | )      |                   |        | 200    |      
|                                                 | Net (repayments) borrowings under bank debt                                                                                 |                                                      |                                           | (479                                      | )      |                   |        | 1,367  |      
|                                                 | Issuance of common stock                                                                                                    |                                                      |                                           |                                          |        |                   |        | 33     |      
|                                                 | Net repurchase of common stock                                                                                              |                                                      |                                           |                                          |        |                   |        | (654   | )    
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|                                                 |                                                                                                                             |                                                      |                                           | Net cash used in financing activities     |        |                   | (7,654 | )      |       |         | (2,429 | )
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|Effect of exchange rate changes on cash          |                                                                                                                             |                                                      | (3,234                                    | )                                         |        |                   | (1,261 | )     
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|Net increase in cash and cash equivalents        |                                                                                                                             |                                                      | 4,261                                     |                                           |        |                   | 647    |       
|Cash and cash equivalents at beginning of period |                                                                                                                             |                                                      | 6,748                                     |                                           |        |                   | 5,838  |       
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       
|Cash and cash equivalents at end of period       |                                                                                                                             | $                                                    | 11,009                                    |                                           |        | $                 | 6,485  |       
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |       

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., a Luxembourgsociété anonyme, (the Parent) and subsidiaries (together with the
Parent, the Company) as of September 30, 2002 and for the three and nine
months ended September 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, including normal recurring adjustments, necessary to
present fairly the Companys consolidated financial statements as of September 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 functional currency of certain of the Companys foreign subsidiaries
generally 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 respect 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 nine months ended
September 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 has been 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 nine months ended
September 30, 2002 are 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               |  |        |       |        |  |        | (3,418 | )      |  |       | (389  | )   |  |              | (116 | ) |  |   | (3,923 | )
|Impairment losses                |  |        |       |        |  |        |       |        |  |       |      |     |  |              | (244 | ) |  |   | (244   | )
|                                 |  |        |        |        |  |        |        |        |  |       |       |     |  |              |      |   |  |   |        |  
|Balance as of September 30, 2002 |  | $      | 32,188 |        |  | $      | 28,983 |        |  | $     | 5,548 |     |  | $            | 262  |   |  | $ | 66,981 |  
|                                 |  |        |        |        |  |        |        |        |  |       |       |     |  |              |      |   |  |   |        |  

The Companys other intangible assets consist of trademarks. During the
nine months ended September 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 $45,224,000 as of September 30, 2002.

6



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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 |     | Nine Months Ended
|                                   |  | September 30,      |     | September 30,    
|                                   |  |                    |     |                  
|                                   |  | 2002               |     | 2001              |  | 2002 |       | 2001
|                                   |  |                    |     |                   |  |      |       |     
|Net income                         |  | $                  | 966 |                   |  | $    | 5,387 |      |  | $ | 14,838 |  |  | $ | 9,936  | 
|Goodwill amortization, net of tax  |  |                    |    |                   |  |      | 387   |      |  |   |       |  |  |   | 1,206  | 
|Trademark amortization, net of tax |  |                    |    |                   |  |      | 230   |      |  |   |       |  |  |   | 669    | 
|                                   |  |                    |     |                   |  |      |       |      |  |   |        |  |  |   |        | 
|Adjusted net income                |  | $                  | 966 |                   |  | $    | 6,004 |      |  | $ | 14,838 |  |  | $ | 11,811 | 
|                                   |  |                    |     |                   |  |      |       |      |  |   |        |  |  |   |        | 

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 $877,000 and
$2,793,000 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 nine months ended September 30, 2001, respectively.

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 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) Inventories

Inventories consist of the following (in thousands):

|                           |  |               |        |              |  |   |        | 
|-------------------------- |  | ------------- | ------ | ------------ |  | - | ------ | 
|                           |  | September 30, |        | December 31,
|                           |  | 2002          |        | 2001        
|                           |  |               |        |             
|Raw materials and supplies |  | $             | 4,922  |              |  | $ | 7,780  | 
|Finished goods             |  |               | 34,298 |              |  |   | 32,735 | 
|                           |  |               |        |              |  |   |        | 
|Total inventories          |  | $             | 39,220 |              |  | $ | 40,515 | 
|                           |  |               |        |              |  |   |        | 

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

(3) Property and Equipment

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

|                               |  |               |        |              |  |   |        | 
|------------------------------ |  | ------------- | ------ | ------------ |  | - | ------ | 
|                               |  | September 30, |        | December 31,
|                               |  | 2002          |        | 2001        
|                               |  |               |        |             
|Land                           |  | $             | 16,605 |              |  | $ | 17,833 | 
|Buildings                      |  |               | 17,450 |              |  |   | 18,523 | 
|Machinery, equipment and other |  |               | 39,438 |              |  |   | 34,640 | 
|                               |  |               |        |              |  |   |        | 
|                               |  |               | 73,493 |              |  |   | 70,996 | 
|Less accumulated depreciation  |  |               | 13,953 |              |  |   | 11,398 | 
|                               |  |               |        |              |  |   |        | 
|Property and equipment, net    |  | $             | 59,540 |              |  | $ | 59,598 | 
|                               |  |               |        |              |  |   |        | 

(4) Income Taxes

The actual income tax rate of the Company differs from the U.S. and Mexico
federal corporate rate of 35% to income before income taxes, for the three and
nine months ended September 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 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 the current 35% to 32% beginning January 1, 2003 through 2005.

(5) Comprehensive Income

Comprehensive income is summarized as follows (in thousands):

|                                                                                     |  |                    |       |                   |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ------------------ | ----- | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                     |  | Three Months Ended |       | Nine Months Ended
|                                                                                     |  | September 30,      |       | September 30,    
|                                                                                     |  |                    |       |                  
|                                                                                     |  | 2002               |       | 2001              |  | 2002 |        | 2001
|                                                                                     |  |                    |       |                   |  |      |        |     
|Net income                                                                           |  | $                  | 966   |                   |  | $    | 5,387  |      |  | $ | 14,838 |   |  | $ | 9,936  |  
|Unrealized and deferred realized (loss) gain on
derivatives                          |  |                    | (137  | )                 |  |      | 1,429  |      |  |   | 203    |   |  |   | (2,598 | )
|Reclassification of deferred realized (loss)
gain to
exchange loss                   |  |                    | 539   |                   |  |      | 186    |      |  |   | 882    |   |  |   | 481    |  
|Reclassification of deferred realized (loss)
gain to
cost of sales                   |  |                    | 522   |                   |  |      | 227    |      |  |   | 2,421  |   |  |   | 240    |  
|Tax benefit (expense) on unrealized and deferred
realized (loss) gain on derivatives |  |                    | (323  | )                 |  |      | (721   | )    |  |   | (1,227 | ) |  |   | 721    |  
|Foreign currency translation adjustments                                             |  |                    | (254  | )                 |  |      | (2,819 | )    |  |   | (7,600 | ) |  |   | (62    | )
|                                                                                     |  |                    |       |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Comprehensive income                                                                 |  | $                  | 1,313 |                   |  | $    | 3,689  |      |  | $ | 9,517  |   |  | $ | 8,718  |  
|                                                                                     |  |                    |       |                   |  |      |        |      |  |   |        |   |  |   |        |  

(6) 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.

8



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

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

|                                                       |  |                |         |        |  |        |        |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|------------------------------------------------------ |  | -------------- | ------- | ------ |  | ------ | ------ | ------ |  | -------- | ------ | --------- |  | ----- | ------ | ----------- |  | ------------ | ------- |  |  | ---------- | ------- | - |  | - | ------- | 
|                                                       |  |                |         |        |  |        |        |        |  |          |        |           |  |       |        |             |  |              |         |  |  | Corporate, |         |   |  |  
|                                                       |  |                |         |        |  | United |        |        |  |          |        | All       |  | Total |        | Unallocated |  | Consolidated
|                                                       |  | Mexico         |         | States |  | Europe |        | Others |  | Segments |        | And Other |  | Total
|                                                       |  |                |         |        |  |        |        |        |  |          |        |           |  |      
|                                                       |  | (in thousands)
|For the Three Months Ended
September 30, 2002          |  |                |         |        |  |        |        |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                              |  | $              | 62,622  |        |  | $      | 22,098 |        |  | $        | 5,544  |           |  | $     | 4,662  |             |  | $            | 94,926  |  |  | $          |        |   |  | $ | 94,926  | 
|Operating income (loss)                                |  |                | 15,731  |        |  |        | 3,797  |        |  |          | (137   | )         |  |       | (1,497 | )           |  |              | 17,894  |  |  |            | (4,007  | ) |  |   | 13,887  | 
|Depreciation and amortization                          |  |                | 599     |        |  |        | 589    |        |  |          | 123    |           |  |       | 112    |             |  |              | 1,423   |  |  |            |        |   |  |   | 1,423   | 
|For the Three Months Ended
September 30, 2001          |  |                |         |        |  |        |        |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                              |  | $              | 62,172  |        |  | $      | 18,812 |        |  | $        | 5,703  |           |  | $     | 5,736  |             |  | $            | 92,423  |  |  | $          |        |   |  | $ | 92,423  | 
|Operating income (loss)                                |  |                | 17,924  |        |  |        | 2,852  |        |  |          | (60    | )         |  |       | (1,420 | )           |  |              | 19,296  |  |  |            | (4,938  | ) |  |   | 14,358  | 
|Depreciation and amortization                          |  |                | 1,127   |        |  |        | 759    |        |  |          | 25     |           |  |       | 128    |             |  |              | 2,039   |  |  |            | 11      |   |  |   | 2,050   | 
|As of and for the Nine Months
Ended September 30, 2002 |  |                |         |        |  |        |        |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                              |  | $              | 190,502 |        |  | $      | 66,882 |        |  | $        | 18,599 |           |  | $     | 16,140 |             |  | $            | 292,123 |  |  | $          |        |   |  | $ | 292,123 | 
|Operating income (loss)                                |  |                | 49,953  |        |  |        | 10,865 |        |  |          | 185    |           |  |       | (4,253 | )           |  |              | 56,750  |  |  |            | (12,961 | ) |  |   | 43,789  | 
|Depreciation and amortization                          |  |                | 1,511   |        |  |        | 1,719  |        |  |          | 289    |           |  |       | 315    |             |  |              | 3,834   |  |  |            |        |   |  |   | 3,834   | 
|Capital expenditures                                   |  |                | 2,026   |        |  |        | 5,197  |        |  |          | 78     |           |  |       | 304    |             |  |              | 7,605   |  |  |            |        |   |  |   | 7,605   | 
|Segment assets                                         |  |                | 176,641 |        |  |        | 79,712 |        |  |          | 18,332 |           |  |       | 10,445 |             |  |              | 285,130 |  |  |            | (1,648  | ) |  |   | 283,482 | 
|Goodwill                                               |  |                | 28,983  |        |  |        | 32,188 |        |  |          | 5,548  |           |  |       | 262    |             |  |              | 66,981  |  |  |            |        |   |  |   | 66,981  | 
|As of and for the Nine Months
Ended September 30, 2001 |  |                |         |        |  |        |        |        |  |          |        |           |  |       |        |             |  |              |         |  |  |            |         |   |  |   |         | 
|Net sales                                              |  | $              | 181,365 |        |  | $      | 57,687 |        |  | $        | 18,431 |           |  | $     | 16,940 |             |  | $            | 274,423 |  |  | $          |        |   |  | $ | 274,423 | 
|Operating income (loss)                                |  |                | 52,977  |        |  |        | 6,829  |        |  |          | 389    |           |  |       | (4,608 | )           |  |              | 55,587  |  |  |            | (16,961 | ) |  |   | 38,626  | 
|Depreciation and amortization                          |  |                | 3,354   |        |  |        | 1,931  |        |  |          | 308    |           |  |       | 276    |             |  |              | 5,869   |  |  |            | 114     |   |  |   | 5,983   | 
|Capital expenditures                                   |  |                | 2,039   |        |  |        | 4,060  |        |  |          | 200    |           |  |       | 164    |             |  |              | 6,463   |  |  |            |        |   |  |   | 6,463   | 
|Segment assets                                         |  |                | 181,885 |        |  |        | 70,490 |        |  |          | 18,118 |           |  |       | 14,312 |             |  |              | 284,805 |  |  |            | (974    | ) |  |   | 283,831 | 

(7) 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 nine
months ended September 30, 2002, all payments related to restructuring items
have been charged against this accrual. As of September 30, 2002, there is no
remaining restructuring liability.

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

(8) Foreign Currency Forward and Option Contracts

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

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

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

The Company recognized losses on forward contracts of approximately
$83,000 and $949,000 during the three and nine months ended September 30, 2002,
respectively, as a component of exchange loss on the accompanying consolidated
statements of operations. During the three months ended September 30, 2001,
the Company recognized approximately $1,544,000 of gains, and during the nine
months ended September 30, 2001, the Company recognized approximately
$8,070,000 of losses on forward contracts as a component of exchange loss on
the accompanying consolidated statements of operations. The Company recognized
gains on option contracts of approximately $22,000 and $755,000 during the
three and nine months ended September 30, 2002, respectively, as a component of
exchange loss on the accompanying consolidated statements of operations. 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 nine months ended September 30, 2002, the Company deferred as a component
of other comprehensive income (loss) an additional $1,779,000 of losses on
forward contracts and $1,982,000 of gains on option contracts qualifying for
hedge accounting under SFAS No. 133. During the nine months ended September 30,
2002, approximately $882,000 of other comprehensive income (loss) was
reclassified as exchange loss and $2,421,000 was reclassified as cost of sales
upon recognition of the underlying hedged exposure. The Company expects that
substantially all of the remaining loss of $240,000 deferred as a component of
other comprehensive income (loss) at September 30, 2002 will be recognized into
net income within the next twelve months. The fair value of the forward
contracts was $1,191,000 at September 30, 2002 and has been recorded as an
offset to other receivables in the consolidated balance sheets. The fair value
of the forward contracts was $3,427,000 at September 30, 2001 and has been
recorded in accrued liabilities in the consolidated balance sheets. The fair
value of the option contacts was $1,655,000 at September 30, 2002 and has been
recorded as other receivables in the consolidated balance sheets.

During the three and nine months ended September 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 nine months ended September 30,
2002 and 2001, approximately $162,000 of gains and $382,000 of losses,
respectively, were reclassified into earnings.

The outstanding foreign currency forward contracts had notional values
denominated in Mexican pesos of $140,000,000 in equal offsetting buy and sell
positions at September 30, 2002 and $899,000,000 in a buy position at September
30, 2001. The contracts outstanding at September 30, 2002 mature at various
dates extending to November 2002 and the contracts outstanding at September 30,
2001 matured at various dates through August 2002. The outstanding foreign
currency option contracts had a notional value denominated in Mexican pesos of
$545,000,000 in put and call positions at September 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)

|                                     |                                                                                                 |                            |        |        |               |         |              |        |        |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------ | ------------- | ------- | ------------ | ------ | ------ | ------- | 
|                                     |                                                                                                 |                            |        |        | September 30, |         | December 31,
|                                     |                                                                                                 |                            |        |        | 2002          |         | 2001        
|                                     |                                                                                                 |                            |        |        |               |         |             
|                                     |                                                                                                 |                            |        |        | (Unaudited)   |         |              |        |       
|ASSETS                              
|Current assets:                      |                                                                                                 |                            |        |        |               |         |              |       
|                                     | Cash and cash equivalents                                                                       |                            | $      | 5,806  |               |         | $            | 4,081  |       
|                                     | Receivables, net                                                                                |                            |        | 5,990  |               |         |              | 6,447  |       
|                                     | Inventories                                                                                     |                            |        | 14,063 |               |         |              | 8,677  |       
|                                     | Receivables from affiliates                                                                     |                            |        | 19,641 |               |         |              | 23,633 |       
|                                     | Prepaid expenses and other current assets                                                       |                            |        | 2,359  |               |         |              | 1,665  |       
|                                     | Deferred income taxes                                                                           |                            |        | 2,392  |               |         |              | 55     |       
|                                     |                                                                                                 |                            |        |        |               |         |              |       
|                                     |                                                                                                 | Total current assets       |        |        | 50,251        |         |              |        | 44,558 |        
|Property and equipment, net          |                                                                                                 |                            | 26,261 |        |               |         | 22,742       |       
|Other assets:                        |                                                                                                 |                            |        |        |               |         |              |       
|                                     | Goodwill                                                                                        |                            |        | 37,736 |               |         |              | 38,125 |       
|                                     | Notes receivable from affiliates                                                                |                            |        | 9,027  |               |         |              | 3,902  |       
|                                     | Deferred financing fees, net                                                                    |                            |        | 2,532  |               |         |              | 3,004  |       
|                                     | Other                                                                                           |                            |        | 3,584  |               |         |              | 3,716  |       
|                                     |                                                                                                 |                            |        |        |               |         |              |       
|                                     |                                                                                                 |                            | Total  |        | $             | 129,391 |              |        | $      | 116,047 | 
|                                     |                                                                                                 |                            |        |        |               |         |              |       
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                 |                            |        |        |               |         |              |       
|                                     | Current portion of long-term debt                                                               |                            | $      | 3,750  |               |         | $            | 3,000  |       
|                                     | Accounts payable                                                                                |                            |        | 5,181  |               |         |              | 5,591  |       
|                                     | Accrued liabilities                                                                             |                            |        | 13,939 |               |         |              | 12,709 |       
|                                     | Income taxes payable                                                                            |                            |        | 3,338  |               |         |              | 965    |       
|                                     | Payables to affiliates                                                                          |                            |        | 5,537  |               |         |              | 2,639  |       
|                                     |                                                                                                 |                            |        |        |               |         |              |       
|                                     |                                                                                                 | Total current liabilities  |        |        | 31,745        |         |              |        | 24,904 |        
|Long-term debt                       |                                                                                                 |                            | 48,108 |        |               |         | 52,908       |       
|Deferred income taxes                |                                                                                                 |                            | 3,353  |        |               |         | 3,353        |       
|Other long-term liabilities          |                                                                                                 |                            | 3,496  |        |               |         | 3,088        |       
|                                     |                                                                                                 |                            |        |        |               |         |              |       
|                                     |                                                                                                 | Total liabilities          |        |        | 86,702        |         |              |        | 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)                                                                     |                            |        | 5,807  |               |         |              | (5,376 | )     
|                                     | Accumulated other comprehensive loss                                                            |                            |        | (2,767 | )             |         |              | (2,479 | )     
|                                     |                                                                                                 |                            |        |        |               |         |              |       
|                                     |                                                                                                 | Total stockholders equity |        |        | 42,689        |         |              |        | 31,794 |        
|                                     |                                                                                                 |                            |        |        |               |         |              |       
|                                     |                                                                                                 |                            | Total  |        | $             | 129,391 |              |        | $      | 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 |        | Nine Months Ended
|                                             |                           |   | September 30,      |        | September 30,    
|                                             |                           |   |                    |        |                  
|                                             |                           |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                                             |                           |   |                    |        |                   |   |        |        |     
|Net sales to third parties                   |                           | $ | 28,877             |        |                   | $ | 25,617 |        |      | $ | 90,296  |        |   | $ | 78,934  |       
|Sales to affiliates                          |                           |   | 4,679              |        |                   |   | 4,097  |        |      |   | 12,587  |        |   |   | 10,278  |       
|                                             |                           |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |       
|Net sales                                    |                           |   | 33,556             |        |                   |   | 29,714 |        |      |   | 102,883 |        |   |   | 89,212  |       
|Cost of sales                                |                           |   | 10,838             |        |                   |   | 9,441  |        |      |   | 31,644  |        |   |   | 26,800  |       
|                                             |                           |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |       
|                                             | Gross profit              |   |                    | 22,718 |                   |   |        | 20,273 |      |   |         | 71,239 |   |   |         | 62,412 |  
|Selling, general and administrative expenses |                           |   | 23,509             |        |                   |   | 22,679 |        |      |   | 74,035  |        |   |   | 72,106  |       
|Management fee income from affiliates        |                           |   | (1,814             | )      |                   |   | (2,119 | )      |      |   | (6,180  | )      |   |   | (6,555  | )     
|Royalty income from affiliates, net          |                           |   | (4,895             | )      |                   |   | (5,230 | )      |      |   | (14,923 | )      |   |   | (15,203 | )     
|                                             |                           |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |       
|                                             | Income from operations    |   |                    | 5,918  |                   |   |        | 4,943  |      |   |         | 18,307 |   |   |         | 12,064 |  
|Other income (expense):                      |                           |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |       
|                                             | Exchange (loss) gain, net |   |                    | (78    | )                 |   |        | 140    |      |   |         | 466    |   |   |         | 137    |  
|                                             | Interest expense, net     |   |                    | (1,540 | )                 |   |        | (1,660 | )    |   |         | (4,657 | ) |   |         | (5,110 | )
|                                             | Other, net                |   |                    | 1      |                   |   |        | 190    |      |   |         | 295    |   |   |         | (224   | )
|                                             |                           |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |       
|Income before income taxes                   |                           |   | 4,301              |        |                   |   | 3,613  |        |      |   | 14,411  |        |   |   | 6,867   |       
|Income tax expense                           |                           |   | 2,311              |        |                   |   | 1,277  |        |      |   | 3,228   |        |   |   | 3,170   |       
|                                             |                           |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |       
|Net income                                   |                           | $ | 1,990              |        |                   | $ | 2,336  |        |      | $ | 11,183  |        |   | $ | 3,697   |       
|                                             |                           |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |       

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)

|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |        |       |         |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | --------------------------------------------------- | ------ | ----------------- | ------ | ------ | ----- | ------- | ------ | -
|                                                     |                                                                                             |                                                 |                                           |                                                     |        | Nine
Months Ended
|                                                     |                                                                                             |                                                 |                                           |                                                     |        | September
30,    
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                  
|                                                     |                                                                                             |                                                 |                                           |                                                     |        | 2002              |        | 2001  
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|Cash
flows from operating activities:                |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|                                                     | Net income                                                                                  |                                                 | $                                         | 11,183                                              |        |                   | $      | 3,697  |      
|                                                     | Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |                                                 |                                           |                                                     |        |                   |        |        |      
|                                                     |                                                                                             | Depreciation and amortization                   |                                           |                                                     | 2,139  |                   |        |        | 2,265 |        
|                                                     |                                                                                             | Provision for uncollectible accounts receivable |                                           |                                                     | 535    |                   |        |        | 215   |        
|                                                     |                                                                                             | Amortization of deferred financing fees         |                                           |                                                     | 471    |                   |        |        | 471   |        
|                                                     |                                                                                             | Unrealized foreign exchange (gain) loss         |                                           |                                                     | (269   | )                 |        |        | 20    |        
|                                                     |                                                                                             | Deferred income taxes                           |                                           |                                                     | (2,337 | )                 |        |        |      |        
|                                                     |                                                                                             | Changes in operating assets and liabilities:    |                                           |                                                     |        |                   |        |        |       |        
|                                                     |                                                                                             |                                                 | Receivables                               |                                                     |        | (78               | )      |        |       | (1,301  | )     
|                                                     |                                                                                             |                                                 | Inventories                               |                                                     |        | (5,386            | )      |        |       | (1,214  | )     
|                                                     |                                                                                             |                                                 | Prepaid expenses and other current assets |                                                     |        | (694              | )      |        |       | 700     |       
|                                                     |                                                                                             |                                                 | Intercompany receivables and payables     |                                                     |        | 7,159             |        |        |       | (15,756 | )     
|                                                     |                                                                                             |                                                 | Other assets                              |                                                     |        | 435               |        |        |       | 168     |       
|                                                     |                                                                                             |                                                 | Accounts payable and accrued liabilities  |                                                     |        | 820               |        |        |       | 1,925   |       
|                                                     |                                                                                             |                                                 | Income taxes payable/prepaid              |                                                     |        | 2,373             |        |        |       | 1,039   |       
|                                                     |                                                                                             |                                                 | Other long-term liabilities               |                                                     |        | 408               |        |        |       | 626     |       
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|                                                     |                                                                                             |                                                 |                                           | Net cash provided by (used in) operating activities |        |                   | 16,759 |        |       |         | (7,145 | )
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|Cash
flows from investing activities:                |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|                                                     | Purchases of property and equipment                                                         |                                                 |                                           | (5,505                                              | )      |                   |        | (4,270 | )    
|                                                     | Other                                                                                       |                                                 |                                           | (303                                                | )      |                   |        | (160   | )    
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|                                                     |                                                                                             |                                                 |                                           | Net cash used in investing activities               |        |                   | (5,808 | )      |       |         | (4,430 | )
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|Cash
flows from financing activities:                |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|                                                     | Repayments under term loan facility                                                         |                                                 |                                           | (2,250                                              | )      |                   |        | (1,875 | )    
|                                                     | Net repayments under revolving credit facility                                              |                                                 |                                           | (1,800                                              | )      |                   |        | (3,800 | )    
|                                                     | (Lending) repayment of note receivable from affiliate                                       |                                                 |                                           | (5,125                                              | )      |                   |        | 16,988 |      
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|                                                     |                                                                                             |                                                 |                                           | Net cash (used in) provided by financing activities |        |                   | (9,175 | )      |       |         | 11,313 |  
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|Effect of exchange rate changes on cash              |                                                                                             |                                                 | (51                                       | )                                                   |        |                   | (301   | )     
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|Net increase (decrease) in cash and cash equivalents |                                                                                             |                                                 | 1,725                                     |                                                     |        |                   | (563   | )     
|Cash and cash equivalents at beginning of period     |                                                                                             |                                                 | 4,081                                     |                                                     |        |                   | 3,382  |       
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       
|Cash and cash equivalents at end of period           |                                                                                             | $                                               | 5,806                                     |                                                     |        | $                 | 2,819  |       
|                                                     |                                                                                             |                                                 |                                           |                                                     |        |                   |        |       

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
September 30, 2002 and for the three and nine months ended September 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
September 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 respect 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 nine months ended September 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 nine months
ended September 30, 2002. JCIs other intangible assets consist of trademarks.
During the nine months ended September 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 was $223,000 at September 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 |       | Nine Months Ended
|                                   |  | September 30,      |       | September 30,    
|                                   |  |                    |       |                  
|                                   |  | 2002               |       | 2001              |  | 2002 |       | 2001
|                                   |  |                    |       |                   |  |      |       |     
|Net income                         |  | $                  | 1,990 |                   |  | $    | 2,336 |      |  | $ | 11,183 |  |  | $ | 3,697 | 
|Goodwill amortization, net of tax  |  |                    |      |                   |  |      | 139   |      |  |   |       |  |  |   | 387   | 
|Trademark amortization, net of tax |  |                    |      |                   |  |      | 11    |      |  |   |       |  |  |   | 30    | 
|                                   |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |       | 
|Adjusted net income                |  | $                  | 1,990 |                   |  | $    | 2,486 |      |  | $ | 11,183 |  |  | $ | 4,114 | 
|                                   |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |       | 

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

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 $322,000 and $1,027,000 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 nine
months ended September 30, 2001, respectively.

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 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):

|                               |  |               |        |              |  |   |        | 
|------------------------------ |  | ------------- | ------ | ------------ |  | - | ------ | 
|                               |  | September 30, |        | December 31,
|                               |  | 2002          |        | 2001        
|                               |  |               |        |             
|Land                           |  | $             | 6,188  |              |  | $ | 6,188  | 
|Buildings                      |  |               | 6,982  |              |  |   | 6,763  | 
|Machinery, equipment and other |  |               | 21,336 |              |  |   | 15,971 | 
|                               |  |               |        |              |  |   |        | 
|                               |  |               | 34,506 |              |  |   | 28,922 | 
|Less accumulated depreciation  |  |               | 8,245  |              |  |   | 6,180  | 
|                               |  |               |        |              |  |   |        | 
|Property and equipment, net    |  | $             | 26,261 |              |  | $ | 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 nine months ended
September 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 |       | Nine Months Ended
|                                         |  | September 30,      |       | September 30,    
|                                         |  |                    |       |                  
|                                         |  | 2002               |       | 2001              |  | 2002 |       | 2001
|                                         |  |                    |       |                   |  |      |       |     
|Net income                               |  | $                  | 1,990 |                   |  | $    | 2,336 |      |  | $ | 11,183 |   |  | $ | 3,697 |  
|Foreign currency translation adjustments |  |                    | (129  | )                 |  |      | 812   |      |  |   | (288   | ) |  |   | (533  | )
|                                         |  |                    |       |                   |  |      |       |      |  |   |        |   |  |   |       |  
|Comprehensive income                     |  | $                  | 1,861 |                   |  | $    | 3,148 |      |  | $ | 10,895 |   |  | $ | 3,164 |  
|                                         |  |                    |       |                   |  |      |       |      |  |   |        |   |  |   |       |  

(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 $4,679,000 and $12,587,000 for the three and nine months ended September
30, 2002, respectively, and $4,097,000 and $10,278,000 for the three and nine
months ended September 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 $3,763,000 and $11,406,000 for the three and nine months ended
September 30, 2002, respectively, and $2,630,000 and $7,537,000 for the three
and nine months ended September 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 $1,814,000 and $6,180,000 for the three and nine months
ended September 30, 2002, respectively, and $2,119,000 and $6,555,000 for the
three and nine months ended September 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 $582,000 and $1,774,000 for the three and nine months
ended September 30, 2002, respectively, and $410,000 and $1,261,000 for the
three and nine months ended September 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 $5,477,000 and $16,697,000 for the three and
nine months ended September 30, 2002, respectively, and $5,640,000 and
$16,464,000 for the three and nine months ended September 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 September 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 $96,000 and $231,000
for the three and nine months ended September 30, 2002, respectively, and
$140,000 and $605,000 for the three and nine months ended September 30, 2001,
respectively, and is included in interest expense, net on the accompanying
consolidated statements of operations.

17



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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
September 30, 2002          |  |                |        |           |  |        |        |          |  |           |       |             |  |              |         |  |  |            |        |  |  |   |         | 
|Net sales                                              |  | $              | 22,098 |           |  | $      | 5,544  |          |  | $         | 1,235 |             |  | $            | 28,877  |  |  | $          | 4,679  |  |  | $ | 33,556  | 
|Operating income (loss)                                |  |                | 3,797  |           |  |        | (99    | )        |  |           | (101  | )           |  |              | 3,597   |  |  |            | 2,321  |  |  |   | 5,918   | 
|Depreciation and amortization                          |  |                | 589    |           |  |        | 100    |          |  |           | 58    |             |  |              | 747     |  |  |            |       |  |  |   | 747     | 
|For the Three Months ended
September 30, 2001          |  |                |        |           |  |        |        |          |  |           |       |             |  |              |         |  |  |            |        |  |  |   |         | 
|Net sales                                              |  | $              | 18,812 |           |  | $      | 5,703  |          |  | $         | 1,102 |             |  | $            | 25,617  |  |  | $          | 4,097  |  |  | $ | 29,714  | 
|Operating income (loss)                                |  |                | 2,852  |           |  |        | (60    | )        |  |           | (54   | )           |  |              | 2,738   |  |  |            | 2,205  |  |  |   | 4,943   | 
|Depreciation and amortization                          |  |                | 759    |           |  |        | 22     |          |  |           | 56    |             |  |              | 837     |  |  |            |       |  |  |   | 837     | 
|As of and for the Nine Months ended
September 30, 2002 |  |                |        |           |  |        |        |          |  |           |       |             |  |              |         |  |  |            |        |  |  |   |         | 
|Net sales                                              |  | $              | 66,882 |           |  | $      | 18,598 |          |  | $         | 4,816 |             |  | $            | 90,296  |  |  | $          | 12,587 |  |  | $ | 102,883 | 
|Operating income                                       |  |                | 10,865 |           |  |        | 269    |          |  |           | (78   | )           |  |              | 11,056  |  |  |            | 7,251  |  |  |   | 18,307  | 
|Depreciation and amortization                          |  |                | 1,719  |           |  |        | 260    |          |  |           | 160   |             |  |              | 2,139   |  |  |            |       |  |  |   | 2,139   | 
|Capital expenditures                                   |  |                | 5,197  |           |  |        | 78     |          |  |           | 230   |             |  |              | 5,505   |  |  |            |       |  |  |   | 5,505   | 
|Segment assets                                         |  |                | 79,712 |           |  |        | 18,093 |          |  |           | 2,918 |             |  |              | 100,723 |  |  |            | 28,668 |  |  |   | 129,391 | 
|Goodwill                                               |  |                | 32,188 |           |  |        | 5,548  |          |  |           |      |             |  |              | 37,736  |  |  |            |       |  |  |   | 37,736  | 
|As of and for the Nine Months ended
September 30, 2001 |  |                |        |           |  |        |        |          |  |           |       |             |  |              |         |  |  |            |        |  |  |   |         | 
|Net sales                                              |  | $              | 57,687 |           |  | $      | 18,397 |          |  | $         | 2,850 |             |  | $            | 78,934  |  |  | $          | 10,278 |  |  | $ | 89,212  | 
|Operating income (loss)                                |  |                | 6,829  |           |  |        | 479    |          |  |           | (848  | )           |  |              | 6,460   |  |  |            | 5,604  |  |  |   | 12,064  | 
|Depreciation and amortization                          |  |                | 1,931  |           |  |        | 300    |          |  |           | 34    |             |  |              | 2,265   |  |  |            |       |  |  |   | 2,265   | 
|Capital expenditures                                   |  |                | 4,060  |           |  |        | 200    |          |  |           | 10    |             |  |              | 4,270   |  |  |            |       |  |  |   | 4,270   | 
|Segment assets                                         |  |                | 70,490 |           |  |        | 17,830 |          |  |           | 2,873 |             |  |              | 91,193  |  |  |            | 31,652 |  |  |   | 122,845 | 



---

|(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 nine months
ended September 30, 2002, all payments related to
restructuring items have been charged against this accrual. As of September 30, 2002, there is no remaining restructuring liability.

18



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

|                                     |                                                                                                      |                            |        |               |         |              |        |        |         | 
|------------------------------------ | ---------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------------- | ------- | ------------ | ------ | ------ | ------- | 
|                                     |                                                                                                      |                            |        | September 30, |         | December 31,
|                                     |                                                                                                      |                            |        | 2002          |         | 2001        
|                                     |                                                                                                      |                            |        |               |         |             
|                                     |                                                                                                      |                            |        | (Unaudited)   |         |              |        |       
|ASSETS                              
|Current assets:                      |                                                                                                      |                            |        |               |         |              |        |       
|                                     | Cash and cash equivalents                                                                            |                            | $      | 4,301         |         |              | $      | 920    |        
|                                     | Receivables, net                                                                                     |                            |        | 37,397        |         |              |        | 34,430 |        
|                                     | Inventories                                                                                          |                            |        | 23,774        |         |              |        | 29,622 |        
|                                     | Receivables from affiliates                                                                          |                            |        | 7,734         |         |              |        | 5,938  |        
|                                     | Value-added tax receivables                                                                          |                            |        |              |         |              |        | 2,308  |        
|                                     | Prepaid expenses and other current assets                                                            |                            |        | 2,292         |         |              |        | 3,206  |        
|                                     |                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                      | Total current assets       |        |               | 75,498  |              |        |        | 76,424  | 
|Property and equipment, net          |                                                                                                      |                            | 32,786 |               |         |              | 36,121 |       
|Other assets:                        |                                                                                                      |                            |        |               |         |              |        |       
|                                     | Goodwill                                                                                             |                            |        | 28,983        |         |              |        | 32,401 |        
|                                     | Trademarks                                                                                           |                            |        | 45,085        |         |              |        | 50,402 |        
|                                     | Deferred financing fees, net                                                                         |                            |        | 585           |         |              |        | 1,270  |        
|                                     | Other                                                                                                |                            |        | 1,440         |         |              |        | 2,699  |        
|                                     |                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                      | Total                      |        | $             | 184,377 |              |        | $      | 199,317 | 
|                                     |                                                                                                      |                            |        |               |         |              |        |       
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                      |                            |        |               |         |              |        |       
|                                     | Current portion of long-term debt                                                                    |                            | $      | 2,998         |         |              | $      | 3,188  |        
|                                     | Accounts payable                                                                                     |                            |        | 13,797        |         |              |        | 20,205 |        
|                                     | Accrued liabilities                                                                                  |                            |        | 26,162        |         |              |        | 27,299 |        
|                                     | Income taxes payable                                                                                 |                            |        | 2,445         |         |              |        | 6,122  |        
|                                     | Payables to affiliates                                                                               |                            |        | 15,924        |         |              |        | 21,373 |        
|                                     | Deferred income taxes                                                                                |                            |        | 4,914         |         |              |        | 4,094  |        
|                                     |                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                      | Total current liabilities  |        |               | 66,240  |              |        |        | 82,281  | 
|Long-term debt                       |                                                                                                      |                            | 30,446 |               |         |              | 33,993 |       
|Deferred income taxes                |                                                                                                      |                            | 14,124 |               |         |              | 16,958 |       
|                                     |                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                      | Total liabilities          |        |               | 110,810 |              |        |        | 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                                                                                    |                            |        | 46,446        |         |              |        | 32,194 |        
|                                     | Accumulated other comprehensive loss                                                                 |                            |        | (7,063        | )       |              |        | (293   | )      
|                                     |                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                      | Total stockholders equity |        |               | 73,567  |              |        |        | 66,085  | 
|                                     |                                                                                                      |                            |        |               |         |              |        |       
|                                     |                                                                                                      | Total                      |        | $             | 184,377 |              |        | $      | 199,317 | 
|                                     |                                                                                                      |                            |        |               |         |              |        |       

See accompanying notes to consolidated financial statements

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

|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |         |  
|------------------------------------------------------------------------ | ---------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                         |                        |   | Three Months Ended |        | Nine Months Ended
|                                                                         |                        |   | September 30,      |        | September 30,    
|                                                                         |                        |   |                    |        |                  
|                                                                         |                        |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                                                                         |                        |   |                    |        |                   |   |        |        |     
|Net sales to third parties                                               |                        | $ | 62,622             |        |                   | $ | 62,172 |        |      | $ | 190,502 |         |   | $ | 181,365 |        
|Sales to affiliates                                                      |                        |   | 4,167              |        |                   |   | 3,015  |        |      |   | 12,576  |         |   |   | 9,036   |        
|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Net sales                                                                |                        |   | 66,789             |        |                   |   | 65,187 |        |      |   | 203,078 |         |   |   | 190,401 |        
|Cost of sales                                                            |                        |   | 18,553             |        |                   |   | 16,443 |        |      |   | 57,338  |         |   |   | 50,685  |        
|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                         | Gross profit           |   |                    | 48,236 |                   |   |        | 48,744 |      |   |         | 145,740 |   |   |         | 139,716 |  
|Selling, general and administrative expenses                             |                        |   | 31,877             |        |                   |   | 30,864 |        |      |   | 94,337  |         |   |   | 87,304  |        
|Management fee expense to affiliates                                     |                        |   | 1,814              |        |                   |   | 2,118  |        |      |   | 6,178   |         |   |   | 6,555   |        
|Royalty expense to affiliates, net                                       |                        |   | 4,895              |        |                   |   | 5,230  |        |      |   | 14,923  |         |   |   | 15,203  |        
|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                         | Income from operations |   |                    | 9,650  |                   |   |        | 10,532 |      |   |         | 30,302  |   |   |         | 30,654  |  
|Other income (expense):                                                  |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                         | Exchange loss, net     |   |                    | (1,459 | )                 |   |        | (620   | )    |   |         | (5,826  | ) |   |         | (6,862  | )
|                                                                         | Interest expense, net  |   |                    | (1,172 | )                 |   |        | (1,389 | )    |   |         | (3,785  | ) |   |         | (4,613  | )
|                                                                         | Other, net             |   |                    | 3      |                   |   |        | 47     |      |   |         | 3       |   |   |         | (41     | )
|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Income before income taxes and cumulative effect of accounting change    |                        |   | 7,022              |        |                   |   | 8,570  |        |      |   | 20,694  |         |   |   | 19,138  |        
|Income tax expense                                                       |                        |   | 2,630              |        |                   |   | 3,282  |        |      |   | 6,442   |         |   |   | 7,380   |        
|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Income before cumulative effect of accounting
change                     |                        |   | 4,392              |        |                   |   | 5,288  |        |      |   | 14,252  |         |   |   | 11,758  |        
|Cumulative effect of accounting change, net of income
tax expense of $82 |                        |   |                   |        |                   |   |       |        |      |   |        |         |   |   | 126     |        
|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Net income                                                               |                        | $ | 4,392              |        |                   | $ | 5,288  |        |      | $ | 14,252  |         |   | $ | 11,884  |        
|                                                                         |                        |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        

See accompanying notes to consolidated financial statements

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

|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |         |       |         |         |  
|------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ------ | ----------------- | ------ | ------- | ----- | ------- | ------- | -
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        | Nine Months Ended
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        | September 30,    
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                  
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        | 2002              |        | 2001   
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|Cash
flows from operating activities:            |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|                                                 | Net income                                                                                                                  |                                                      | $                                         | 14,252                                    |        |                   | $      | 11,884  |      
|                                                 |                                                                                                                             | Cumulative effect of accounting change, net of taxes |                                           |                                           |       |                   |        |         | (126  | )      
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|                                                 | Income before cumulative effect of accounting change                                                                        |                                                      |                                           | 14,252                                    |        |                   |        | 11,758  |      
|                                                 | Adjustments to reconcile income before cumulative effect of
accounting change to net cash provided by operating activities: |                                                      |                                           |                                           |        |                   |        |         |      
|                                                 |                                                                                                                             | Gain on sale of property and equipment               |                                           |                                           | (88    | )                 |        |         |      |        
|                                                 |                                                                                                                             | Depreciation and amortization                        |                                           |                                           | 1,511  |                   |        |         | 3,354 |        
|                                                 |                                                                                                                             | Amortization of deferred financing fees              |                                           |                                           | 592    |                   |        |         | 602   |        
|                                                 |                                                                                                                             | Provision for uncollectible accounts receivable      |                                           |                                           | 8,680  |                   |        |         | 3,872 |        
|                                                 |                                                                                                                             | Unrealized foreign exchange and derivative loss      |                                           |                                           | 4,325  |                   |        |         | 175   |        
|                                                 |                                                                                                                             | Deferred
realized derivative gain (loss)             |                                           |                                           | 515    |                   |        |         | (721  | )      
|                                                 |                                                                                                                             | Deferred income taxes                                |                                           |                                           | (1,167 | )                 |        |         |      |        
|                                                 |                                                                                                                             | Changes in operating assets and liabilities:         |                                           |                                           |        |                   |        |         |       |        
|                                                 |                                                                                                                             |                                                      | Receivables                               |                                           |        | (15,325           | )      |         |       | (13,630 | )      
|                                                 |                                                                                                                             |                                                      | Inventories                               |                                           |        | 2,949             |        |         |       | 102     |        
|                                                 |                                                                                                                             |                                                      | Prepaid expenses and other current assets |                                           |        | 625               |        |         |       | (41     | )      
|                                                 |                                                                                                                             |                                                      | Value-added tax receivables               |                                           |        | 3,359             |        |         |       | 3,931   |        
|                                                 |                                                                                                                             |                                                      | Intercompany receivables and payables     |                                           |        | (7,331            | )      |         |       | 15,362  |        
|                                                 |                                                                                                                             |                                                      | Other assets                              |                                           |        | 1,055             |        |         |       | 1,019   |        
|                                                 |                                                                                                                             |                                                      | Accounts payable and accrued liabilities  |                                           |        | (1,619            | )      |         |       | (7,925  | )      
|                                                 |                                                                                                                             |                                                      | Income taxes payable/prepaid              |                                           |        | (2,856            | )      |         |       | 5,489   |        
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|                                                 |                                                                                                                             |                                                      |                                           | Net cash provided by operating activities |        |                   | 9,477  |         |       |         | 23,347  |  
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|Cash
flows from investing activities:            |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|                                                 | Proceeds from sale of property and equipment                                                                                |                                                      |                                           | 231                                       |        |                   |        |        |      
|                                                 | Purchases of property and equipment                                                                                         |                                                      |                                           | (2,026                                    | )      |                   |        | (2,039  | )    
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|                                                 |                                                                                                                             |                                                      |                                           | Net cash used in investing activities     |        |                   | (1,795 | )       |       |         | (2,039  | )
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|Cash
flows from financing activities:            |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|                                                 | Repayments under term loan facility                                                                                         |                                                      |                                           | (3,125                                    | )      |                   |        | (1,500  | )    
|                                                 | Net borrowings under revolving credit facility                                                                              |                                                      |                                           |                                          |        |                   |        | 4,000   |      
|                                                 | Net (repayments) borrowings under bank debt                                                                                 |                                                      |                                           | (479                                      | )      |                   |        | 1,367   |      
|                                                 | Payment of note payable to affiliate                                                                                        |                                                      |                                           |                                          |        |                   |        | (20,712 | )    
|                                                 | Payment of dividends                                                                                                        |                                                      |                                           |                                          |        |                   |        | (2,800  | )    
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|                                                 |                                                                                                                             |                                                      |                                           | Net cash used in financing activities     |        |                   | (3,604 | )       |       |         | (19,645 | )
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|Effect of exchange rate changes on cash          |                                                                                                                             |                                                      | (697                                      | )                                         |        |                   | (245   | )      
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|Net increase in cash and cash equivalents        |                                                                                                                             |                                                      | 3,381                                     |                                           |        |                   | 1,418  |        
|Cash and cash equivalents at beginning of period |                                                                                                                             |                                                      | 920                                       |                                           |        |                   | 561    |        
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        
|Cash and cash equivalents at end of period       |                                                                                                                             | $                                                    | 4,301                                     |                                           |        | $                 | 1,979  |        
|                                                 |                                                                                                                             |                                                      |                                           |                                           |        |                   |        |        

See accompanying notes to consolidated financial statements

21



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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
September 30, 2002 and for the three and nine months ended September 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 September 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 respect 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 nine months ended
September 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 nine months ended September 30, 2002. Jafra S.A.s other intangible assets
consist of trademarks. During the nine months ended September 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 net carrying value of trademarks was $45,085,000 as of
September 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 |       | Nine Months Ended
|                                   |  | September 30,      |       | September 30,    
|                                   |  |                    |       |                  
|                                   |  | 2002               |       | 2001              |  | 2002 |       | 2001
|                                   |  |                    |       |                   |  |      |       |     
|Net income                         |  | $                  | 4,392 |                   |  | $    | 5,288 |      |  | $ | 14,252 |  |  | $ | 11,884 | 
|Goodwill amortization              |  |                    |      |                   |  |      | 220   |      |  |   |       |  |  |   | 651    | 
|Trademark amortization, net of tax |  |                    |      |                   |  |      | 213   |      |  |   |       |  |  |   | 624    | 
|                                   |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 
|Adjusted net income                |  | $                  | 4,392 |                   |  | $    | 5,721 |      |  | $ | 14,252 |  |  | $ | 13,159 | 
|                                   |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 

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

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 $497,000 and
$1,572,000 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 nine months ended September 30, 2001, respectively.

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 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) Inventories

Inventories consist of the following (in thousands):

|                           |  |               |        |              |  |   |        | 
|-------------------------- |  | ------------- | ------ | ------------ |  | - | ------ | 
|                           |  | September 30, |        | December 31,
|                           |  | 2002          |        | 2001        
|                           |  |               |        |             
|Raw materials and supplies |  | $             | 4,636  |              |  | $ | 7,574  | 
|Finished goods             |  |               | 19,138 |              |  |   | 22,048 | 
|                           |  |               |        |              |  |   |        | 
|Total inventories          |  | $             | 23,774 |              |  | $ | 29,622 | 
|                           |  |               |        |              |  |   |        | 

(3) Property and Equipment

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

|                               |  |               |        |              |  |   |        | 
|------------------------------ |  | ------------- | ------ | ------------ |  | - | ------ | 
|                               |  | September 30, |        | December 31,
|                               |  | 2002          |        | 2001        
|                               |  |               |        |             
|Land                           |  | $             | 10,417 |              |  | $ | 11,645 | 
|Buildings                      |  |               | 10,468 |              |  |   | 11,703 | 
|Machinery, equipment and other |  |               | 17,226 |              |  |   | 17,532 | 
|                               |  |               |        |              |  |   |        | 
|                               |  |               | 38,111 |              |  |   | 40,880 | 
|Less accumulated depreciation  |  |               | 5,325  |              |  |   | 4,759  | 
|                               |  |               |        |              |  |   |        | 
|Property and equipment, net    |  | $             | 32,786 |              |  | $ | 36,121 | 
|                               |  |               |        |              |  |   |        | 

(4) 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 nine
months ended September 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 the
current 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)

(5) Comprehensive Income

Comprehensive income is summarized as follows (in thousands):

|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                     |  | Three Months Ended |        | Nine Months Ended
|                                                                                     |  | September 30,      |        | September 30,    
|                                                                                     |  |                    |        |                  
|                                                                                     |  | 2002               |        | 2001              |  | 2002 |        | 2001
|                                                                                     |  |                    |        |                   |  |      |        |     
|Net income                                                                           |  | $                  | 4,392  |                   |  | $    | 5,288  |      |  | $ | 14,252 |   |  | $ | 11,884 |  
|Unrealized and deferred realized (loss) gain on
derivatives                          |  |                    | (137   | )                 |  |      | 1,429  |      |  |   | 203    |   |  |   | (2,598 | )
|Reclassification of deferred realized (loss)
gain to
exchange loss                   |  |                    | 539    |                   |  |      | 186    |      |  |   | 882    |   |  |   | 481    |  
|Reclassification of deferred realized (loss)
gain to
cost of sales                   |  |                    | 522    |                   |  |      | 227    |      |  |   | 2,421  |   |  |   | 240    |  
|Tax benefit (expense) on unrealized and deferred
realized (loss) gain on derivatives |  |                    | (323   | )                 |  |      | (721   | )    |  |   | (1,227 | ) |  |   | 721    |  
|Foreign currency translation adjustments                                             |  |                    | (2,385 | )                 |  |      | (3,797 | )    |  |   | (9,049 | ) |  |   | 455    |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Comprehensive income                                                                 |  | $                  | 2,608  |                   |  | $    | 2,612  |      |  | $ | 7,482  |   |  | $ | 11,183 |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  

(6) 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 $4,167,000 and
$12,576,000 for the three and nine months ended September 30, 2002,
respectively, and $3,015,000 and $9,036,000 for the three and nine months ended
September 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 $4,112,000 and $11,445,000 for the three and nine months ended September
30, 2002, respectively, and $3,687,000 and $9,109,000 for the three and nine
months ended September 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
$1,814,000 and $6,178,000 for the three and nine months ended September 30,
2002, respectively, and $2,118,000 and $6,555,000 for the three and nine months
ended September 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 $582,000 and $1,774,000 for the three
and nine months ended September 30, 2002, respectively, and $410,000 and
$1,261,000 for the three and nine months ended September 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 $5,477,000 and
$16,697,000 for the three and nine months ended September 30, 2002,
respectively, and $5,640,000 and $16,464,000 for the three and nine months
ended September 30, 2001, respectively, and are based upon a percentage of
Jafra S.A.s sales.

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

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 nine months ended
September 30, 2002, Jafra S.A. did not incur any interest expense to
affiliates. Net interest expense to affiliates, primarily JCI, was $257,000
for the nine months ended September 30, 2001, which resulted
primarily from
notes payable to affiliates as a result amounts billed to Jafra S.A. in
connection with the Jafra Way royalty. In the second quarter of 2001, notes
payable to affiliates were repaid.

(7) 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 or option 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 $83,000
and $949,000 during the three and nine months ended September 30, 2002,
respectively, as a component of exchange loss on the accompanying consolidated
statements of operations. During the three months ended September 30, 2001,
Jafra S.A. recognized approximately $1,544,000 of gains, and during the nine
months ended September 30, 2001, Jafra S.A. recognized approximately $8,070,000
of losses on forward contracts as a component of exchange loss in the
accompanying consolidated statements of operations. Jafra S.A. recognized
gains on option contracts of approximately $22,000 and $755,000 during the
three and nine months ended September 30, 2002, respectively, as a component of
exchange loss in the accompanying consolidated statements of operations. 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 nine months ended September 30, 2002, Jafra S.A. deferred as a component of
other comprehensive income (loss) an additional $1,779,000 of losses on forward
contracts and $1,982,000 of gains on option contracts qualifying for hedge
accounting under SFAS No. 133. During the nine months ended September 30, 2002,
approximately $882,000 of other comprehensive income (loss) was reclassified as
exchange loss and $2,421,000 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 $240,000 deferred as a component of other
comprehensive income (loss) at September 30, 2002 will be recognized into net
income within the next twelve months. The fair value of the forward contracts
was $1,191,000 at September 30, 2002 and has been recorded as an offset to
other receivables in the consolidated balance sheets. The fair value of the
forward contracts was $3,427,000 at September 30, 2001 and has been recorded in
accrued liabilities in the consolidated balance sheets. The fair value of the
option contacts was $1,655,000 at September 30, 2002, and has been recorded as
other receivables in the consolidated balance sheets.

During the three and nine months ended September 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 nine months ended September 30,
2002 and 2001, approximately $162,000 of gains and $382,000 of losses,
respectively, were reclassified into earnings.

The outstanding foreign currency forward contracts had notional values
denominated in Mexican pesos of $140,000,000 in equal offsetting buy and sell
positions at September 30, 2002 and $899,000,000 in a buy position at September 30,
2001. The contracts outstanding at September 30, 2002 mature at various
dates extending to November 2002 and the contracts outstanding at September 30,
2001 matured at various dates through August 2002. The outstanding foreign
currency option contracts had a notional value denominated in Mexican pesos of
$545,000,000 in put and call positions at September 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 CDRJ Investments (Lux) S.A., a Luxembourg
société anonyme, and its subsidiaries (together, 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 nine months ended September 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 nine months
ended September 30, 2002 and 2001.

|                                                                                  |  |                                  |      |                                 |  |      |       |         |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |  
|--------------------------------------------------------------------------------- |  | -------------------------------- | ---- | ------------------------------- |  | ---- | ----- | ------- |  | - | ---- | - |  |  | ----- | - |  | - | ----- | - |  |  | ----- | - |  | - | ----- | - |  |  | ----- | -
|                                                                                  |  | Three Months Ended September 30, |      | Nine Months Ended September 30,
|                                                                                  |  |                                  |      |                                
|                                                                                  |  | 2002                             |      | 2001(1)                         |  | 2002 |       | 2001(1)
|                                                                                  |  |                                  |      |                                 |  |      |       |        
|Net sales                                                                         |  | $                                | 94.9 |                                 |  |      | 100.0 | %       |  | $ | 92.4 |   |  |  | 100.0 | % |  | $ | 292.1 |   |  |  | 100.0 | % |  | $ | 274.4 |   |  |  | 100.0 | %
|Cost of sales                                                                     |  |                                  | 22.0 |                                 |  |      | 23.2  |         |  |   | 20.2 |   |  |  | 21.9  |   |  |   | 67.9  |   |  |  | 23.2  |   |  |   | 62.8  |   |  |  | 22.9  |  
|                                                                                  |  |                                  |      |                                 |  |      |       |         |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |  
|Gross profit                                                                      |  |                                  | 72.9 |                                 |  |      | 76.8  |         |  |   | 72.2 |   |  |  | 78.1  |   |  |   | 224.2 |   |  |  | 76.8  |   |  |   | 211.6 |   |  |  | 77.1  |  
|Selling, general and administrative expenses                                      |  |                                  | 59.0 |                                 |  |      | 62.2  |         |  |   | 57.9 |   |  |  | 62.7  |   |  |   | 180.4 |   |  |  | 61.8  |   |  |   | 173.0 |   |  |  | 63.0  |  
|                                                                                  |  |                                  |      |                                 |  |      |       |         |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |  
|Income from operations                                                            |  |                                  | 13.9 |                                 |  |      | 14.6  |         |  |   | 14.3 |   |  |  | 15.4  |   |  |   | 43.8  |   |  |  | 15.0  |   |  |   | 38.6  |   |  |  | 14.1  |  
|Exchange loss, net                                                                |  |                                  | (5.1 | )                               |  |      | (5.4  | )       |  |   | (1.3 | ) |  |  | (1.4  | ) |  |   | (10.5 | ) |  |  | (3.6  | ) |  |   | (8.0  | ) |  |  | (3.0  | )
|Interest, net                                                                     |  |                                  | (2.9 | )                               |  |      | (3.0  | )       |  |   | (3.1 | ) |  |  | (3.4  | ) |  |   | (8.7  | ) |  |  | (2.9  | ) |  |   | (10.0 | ) |  |  | (3.7  | )
|Other, net                                                                        |  |                                  | 0.0  |                                 |  |      | 0.0   |         |  |   | 0.0  |   |  |  | 0.0   |   |  |   | 0.2   |   |  |  | 0.0   |   |  |   | (0.2  | ) |  |  | (0.0  | )
|                                                                                  |  |                                  |      |                                 |  |      |       |         |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |  
|Income before income taxes and cumulative
effect of accounting change             |  |                                  | 5.9  |                                 |  |      | 6.2   |         |  |   | 9.9  |   |  |  | 10.6  |   |  |   | 24.8  |   |  |  | 8.5   |   |  |   | 20.4  |   |  |  | 7.4   |  
|Income tax expense                                                                |  |                                  | 4.9  |                                 |  |      | 5.1   |         |  |   | 4.5  |   |  |  | 4.8   |   |  |   | 9.8   |   |  |  | 3.4   |   |  |   | 10.6  |   |  |  | 3.8   |  
|                                                                                  |  |                                  |      |                                 |  |      |       |         |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |  
|Income before cumulative effect of
accounting change                              |  |                                  | 1.0  |                                 |  |      | 1.1   |         |  |   | 5.4  |   |  |  | 5.8   |   |  |   | 15.0  |   |  |  | 5.1   |   |  |   | 9.8   |   |  |  | 3.6   |  
|Cumulative effect of accounting change, net
of income tax expense of $0.1 in 2001 |  |                                  |     |                                 |  |      |      |         |  |   |     |   |  |  |      |   |  |   | (0.2  | ) |  |  | (0.0  | ) |  |   | 0.1   |   |  |  | 0.0   |  
|                                                                                  |  |                                  |      |                                 |  |      |       |         |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |  
|Net income                                                                        |  | $                                | 1.0  |                                 |  |      | 1.1   | %       |  | $ | 5.4  |   |  |  | 5.8   | % |  | $ | 14.8  |   |  |  | 5.1   | % |  | $ | 9.9   |   |  |  | 3.6   | %
|                                                                                  |  |                                  |      |                                 |  |      |       |         |  |   |      |   |  |  |       |   |  |   |       |   |  |  |       |   |  |   |       |   |  |  |       |  



---

|(1) |  | On January 1, 2002, the Company adopted Emerging Issues Task Force Issue
No. 01-9, Accounting for Consideration Given by a Vendor to a Customer or
a Reseller of the Vendors Products. As a result of the adoption, the
Company reclassified $0.9 million and $2.8 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 nine months ended September 30,
2001, respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



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

|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|-------------------------------------------- |  | ------ | ---- | ------ |  | ------ | ---- | ------ |  | -------- | ---- | --------- |  | ----- | ---- | ----------- |  | ------------ | ---- |  |  | ---------- | ---- | - |  | - | ---- | 
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  | Corporate, |      |   |  |  
|                                             |  |        |      |        |  | United |      |        |  |          |      | All       |  | Total |      | Unallocated |  | Consolidated
|Dollars in millions                          |  | Mexico |      | States |  | Europe |      | others |  | Segments |      | and Other |  | Total
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |      
|Three Months
Ended September 30, 2002        |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|Net sales                                    |  | $      | 62.6 |        |  | $      | 22.1 |        |  | $        | 5.5  |           |  | $     | 4.7  |             |  | $            | 94.9 |  |  | $          |     |   |  | $ | 94.9 | 
|Cost of sales                                |  |        | 14.9 |        |  |        | 5.0  |        |  |          | 1.4  |           |  |       | 1.4  |             |  |              | 22.7 |  |  |            | (0.7 | ) |  |   | 22.0 | 
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|Gross profit                                 |  |        | 47.7 |        |  |        | 17.1 |        |  |          | 4.1  |           |  |       | 3.3  |             |  |              | 72.2 |  |  |            | 0.7  |   |  |   | 72.9 | 
|Selling, general and
administrative expenses |  |        | 32.0 |        |  |        | 13.3 |        |  |          | 4.2  |           |  |       | 4.8  |             |  |              | 54.3 |  |  |            | 4.7  |   |  |   | 59.0 | 
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|Operating income (loss)                      |  | $      | 15.7 |        |  | $      | 3.8  |        |  | $        | (0.1 | )         |  | $     | (1.5 | )           |  | $            | 17.9 |  |  | $          | (4.0 | ) |  | $ | 13.9 | 
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|Three Months Ended
September 30, 2001        |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|Net sales                                    |  | $      | 62.2 |        |  | $      | 18.8 |        |  | $        | 5.7  |           |  | $     | 5.7  |             |  | $            | 92.4 |  |  | $          |     |   |  | $ | 92.4 | 
|Cost of sales                                |  |        | 14.1 |        |  |        | 4.1  |        |  |          | 1.3  |           |  |       | 1.9  |             |  |              | 21.4 |  |  |            | (1.2 | ) |  |   | 20.2 | 
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|Gross profit                                 |  |        | 48.1 |        |  |        | 14.7 |        |  |          | 4.4  |           |  |       | 3.8  |             |  |              | 71.0 |  |  |            | 1.2  |   |  |   | 72.2 | 
|Selling, general and
administrative expenses |  |        | 30.2 |        |  |        | 11.9 |        |  |          | 4.5  |           |  |       | 5.2  |             |  |              | 51.8 |  |  |            | 6.1  |   |  |   | 57.9 | 
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 
|Operating income (loss)                      |  | $      | 17.9 |        |  | $      | 2.8  |        |  | $        | (0.1 | )         |  | $     | (1.4 | )           |  | $            | 19.2 |  |  | $          | (4.9 | ) |  | $ | 14.3 | 
|                                             |  |        |      |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |      |  |  |            |      |   |  |   |      | 

Net sales. Net sales in the third quarter of 2002 increased to $94.9
million from $92.4 million in the third quarter of 2001, an increase of $2.5
million or 2.7%. Net sales in local currencies in the third quarter of 2002
increased by 9.7% over the comparable prior year period. The net sales
increase measured in local currencies was larger than the increase measured in
U.S. dollars primarily as a result of weaker average exchange rates of the
Mexican peso and South American currencies in the third quarter of 2002. The
Companys average number of consultants worldwide for the third quarter of 2002
increased to approximately 400,000, or 7.8% over the 2001 average. Consultant
productivity for the third quarter of 2002 decreased 4.7% compared to the third
quarter of 2001. A significant portion of the decrease in productivity related
weaker local currencies compared to U.S. dollars, partially offset by
increased productivity in the Companys United States Divisions. Consultant
productivity is generally defined as annualized quarterly sales divided by the
average number of consultants during the period.

In Mexico, net sales in the third quarter of 2002 increased to $62.6
million from $62.2 million in the third quarter of 2001, an increase of $0.4
million, or 0.6%. In local currency, net sales in the third quarter
of 2002 increased
8.9% compared to net sales in the third quarter of 2001. The increase measured
in local currency was larger than the increase measured in U.S. dollars,
primarily due to weaker exchange rates in the third quarter of 2002 compared to
the third quarter of 2001. In Mexico, the average number of consultants for
the third quarter of 2002 increased to approximately 256,000 or by 7.2% over
the average number of consultants in the comparable prior year period. In
local currency, consultant productivity increased 1.6% over consultant
productivity in the third quarter of 2001.

In the United States, net sales in the third quarter of 2002 increased to
$22.1 million from $18.8 million in the third quarter of 2001, an increase of
$3.3 million or 17.6%. The increase was primarily driven by the Hispanic
Division. Net sales in the third quarter of 2002 for the Hispanic Division
increased 23.1% to $15.2 million due to a combination of improved consultant
productivity, an increase in the average consultant base achieved by improved
sponsoring and increased ordering activity. Net sales in the third quarter of
2002 for the General Division increased 6.7% to $6.9 million. In the U.S., the
average number of consultants remained constant at 66,000, however, in the
Hispanic Division, the average number of consultants increased 10.3% to
approximately 38,000. Productivity increased 11.6% in the Hispanic Division
and 20.3% in the General Division due primarily to productivity based changes
to the program. The number of ordering consultants improved in the Hispanic
Division, as approximately 59.9% of all consultants were considered active
during the period, compared to 55.8% in the comparable prior year period.

In Europe, net sales decreased to $5.5 million in the third quarter of
2002, from $5.7 million in the third quarter of 2001, a decrease of $0.2
million, or 3.5%. In local currencies, net sales decreased 12.4% in the third
quarter of
2002 compared to the third quarter of 2001. The decrease measured in local
currencies is greater than the decrease measured in U.S. dollars due to
strengthening of local currencies

28



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##### Table of Contents



compared to U.S. dollars during the period. The decrease was the result of a smaller average consultant base, decreased
consultant activity, decreased productivity in local currencies and the impact
of natural disasters in portions of Europe. The average number of consultants
in Europe decreased 3.7% to approximately 16,000. In local currencies,
consultant productivity during the third quarter of 2002 decreased 9.1%
compared to the third quarter of 2001.

Sales in South America and Thailand decreased to $4.7 million in the third
quarter of 2002, from $5.7 million in the third quarter of 2001, a decrease of
$1.0 million, or 17.5%. In local currencies, sales in South America increased
15.2%. In South America, the average number of consultants increased 26.8% to
59,000.

Gross profit.Consolidated gross profit in the third quarter of 2002
increased to $72.9 million from $72.2 million in the comparable prior year
period, an increase of $0.7 million, or 0.1%. Gross profit as a percentage of
sales (gross margin) decreased to 76.8% in the third quarter of 2002 from 78.1%
in the third quarter of 2001.

In Mexico, gross margin in the third quarter of 2002 decreased to 76.2%
from 77.3% in the third quarter of 2001. The decrease in gross margin was a
due to incrementally greater charges to cost of sales related to the reserve
for slow moving inventory and a less favorable product mix. Excluding the
impact of the reserve for slow moving inventory, gross margin in the third
quarter of 2002 decreased to 76.7% from 77.5% in the third quarter of 2001.
Non resale sale products sold during the third quarter of 2002 contributed a
decreased gross margin than those sold during the third quarter of 2001.

In the United States, gross margin in the third quarter of 2002 decreased
to 77.4% from 78.2% in the third quarter of 2001. The difference was due to a
less favorable product mix and more aggressive promotional offers which helped
to drive the net sales increase. During the third quarter of 2002, resale sale
products, specifically new products, contributed a decreased gross margin, than
comparable products during the third quarter of 2001.

In Europe, gross margin in the third quarter of 2002 decreased to 74.5%
from 77.2% in the third quarter of 2001 due to more favorable product mix in
2001 and incrementally greater charges to cost of sales related to the reserve
for slow moving inventory.

In South America, gross margin in the third quarter of 2002 increased to
66.7% from 65.5% in the third quarter of 2001.

Selling, general and administrative expenses.SG&A expenses in the third
quarter of 2002 increased to $59.0 million from $57.9 million in the third
quarter of 2001, an increase of $1.1 million, or 1.9%. SG&A expenses, as a
percentage of net sales, decreased in the third quarter of 2002 to 62.2% from
62.7% in the third quarter of 2001, due primarily to cost savings in the United
States and in the Companys corporate headquarters, and the discontinuation of
amortization of goodwill and trademarks pursuant to Statement of Financial
Accounting Standards (SFAS) No. 142 (See
Recent Accounting Pronouncements).

In Mexico, SG&A expenses in the third quarter of 2002 increased by $1.8
million, or 6.0% compared to the third quarter of 2001. SG&A expenses, as a
percentage of net sales, in Mexico were 51.1% in the third quarter of 2002,
compared to 48.6% in the third quarter of 2001. The increased SG&A expenses in
Mexico related primarily to $1.7 million incremental bad debt expense in the
third quarter of 2002, compared to the third 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 third quarter of 2002 increased
by $1.4 million, or 11.8% from the third quarter of 2001. SG&A expenses, as a
percentage of net sales, in the U.S. were 60.2% in the third quarter of 2002,
compared to 63.3% in the third quarter of 2001. The increased SG&A expenses
were primarily attributable to increased override expenses and sales
promotional expense. Override expense increased in total and as a percentage
of net sales in the third quarter of 2002 compared to the third quarter of 2001
due to increased sales of resale products and strong collections. Sales
promotional expenses increased due to timing and mix of promotional
programs. Certain variable expenses, such as distribution and freight out
which tend to vary in proportion with sales, increased in total, but were
relatively constant as a percentage of net sales.

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In Europe, SG&A expenses in the third quarter of 2002 decreased by $0.3
million, or 6.7% from the third quarter of 2001 primarily due to increased
selling and administrative expenses. The increase is primarily due to the
impact of favorable exchange rates in 2002 on expenses, additional information
technology expenses and incremental bad debt expense.

SG&A expenses in other selling markets (South America and Thailand) and at
corporate headquarters in the third quarter of 2002 decreased $1.8 million, or
15.9%, 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 expenses, and no trademark or goodwill amortization
expense pursuant to SFAS No. 142 (See Recent Accounting Pronouncements) in
the third quarter of 2002, compared to $0.8 million of amortization expense in
the third quarter of 2001.

Exchange loss.The Companys foreign exchange loss was $5.1 million in
the third quarter of 2002 compared to $1.3 million in the third quarter of the
prior year, an increase of $3.8 million, or 292.3%. 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
and South American currencies. During the third quarter of 2002, the Company
recognized $1.2 million of exchange losses on the remeasurement of U.S.
dollar-denominated debt, $3.4 million of exchange losses on other foreign
currency transactions, primarily related to the weakening of South American
currencies, $0.8 million of exchange losses (including amortization of other
comprehensive income (loss)) on forward contracts and $0.3 million of exchange
gains (including amortization of other comprehensive income (loss)) on option
contracts. During the third quarter of 2001, the Company recognized $1.5
million of exchange gains on forward contracts, resulting from the weakening of
the Mexican peso against the U.S. dollar during the period. These exchange
gains were offset by approximately $2.3 million of exchange losses on the remeasurement
of U.S. dollar-denominated debt and other transactional losses of $0.5 million.
See Item 3, Quantitative and Qualitative Disclosures about Market Risk.

Interest expense.Net interest expense (including amortization of
deferred financing fees) in the third quarter of 2002 decreased to $2.9 million
from $3.1 million in the third quarter of 2001, a decrease of $0.2 million, or
6.5%. 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 increased to $4.9 million in the
third quarter of 2002, from $4.5 million in the third quarter of 2001. The
Companys effective income tax rate increased to approximately 83.1% compared
to 45.5% for the comparable prior year period. The increased effective tax
rate was primarily due valuation allowances against incrementally higher losses
in the Companys South American subsidiaries in 2002 as the result of the
impact of devaluation of local currencies on U.S. dollar-denominated
liabilities.

Net income.Net income was $1.0 million for the third quarter of 2002, a
$4.4 million decrease compared to $5.4 million in 2001. The decrease was due
to a $1.1 million increase in selling, general and administrative expenses, a
$3.8 million increase in exchange loss, a $0.4 million increase in income tax
expense, partially offset by a $0.7 million increase in gross profit, and a
$0.2 million decrease in interest expense.

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Nine months ended September 30, 2002 compared to the Nine months ended September 30, 2001

|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|-------------------------------------------- |  | ------ | ----- | ------ |  | ------ | ---- | ------ |  | -------- | ---- | --------- |  | ----- | ---- | ----------- |  | ------------ | ----- |  |  | ---------- | ----- | - |  | - | ----- | 
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  | Corporate, |       |   |  |  
|                                             |  |        |       |        |  | United |      |        |  |          |      | All       |  | Total |      | Unallocated |  | Consolidated
|Dollars in millions                          |  | Mexico |       | States |  | Europe |      | others |  | Segments |      | and Other |  | Total
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |      
|Nine Months Ended
September 30, 2002         |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|Net sales                                    |  | $      | 190.5 |        |  | $      | 66.9 |        |  | $        | 18.6 |           |  | $     | 16.1 |             |  | $            | 292.1 |  |  | $          |      |   |  | $ | 292.1 | 
|Cost of sales                                |  |        | 45.8  |        |  |        | 14.8 |        |  |          | 4.2  |           |  |       | 4.7  |             |  |              | 69.5  |  |  |            | (1.6  | ) |  |   | 67.9  | 
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|Gross profit                                 |  |        | 144.7 |        |  |        | 52.1 |        |  |          | 14.4 |           |  |       | 11.4 |             |  |              | 222.6 |  |  |            | 1.6   |   |  |   | 224.2 | 
|Selling, general and
administrative expenses |  |        | 94.7  |        |  |        | 41.2 |        |  |          | 14.2 |           |  |       | 15.7 |             |  |              | 165.8 |  |  |            | 14.6  |   |  |   | 180.4 | 
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|Operating income (loss)                      |  | $      | 50.0  |        |  | $      | 10.9 |        |  | $        | 0.2  |           |  | $     | (4.3 | )           |  | $            | 56.8  |  |  | $          | (13.0 | ) |  | $ | 43.8  | 
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|Nine Months Ended
September 30, 2001         |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|Net sales                                    |  | $      | 181.4 |        |  | $      | 57.7 |        |  | $        | 18.4 |           |  | $     | 16.9 |             |  | $            | 274.4 |  |  | $          |      |   |  | $ | 274.4 | 
|Cost of sales                                |  |        | 43.1  |        |  |        | 12.7 |        |  |          | 3.8  |           |  |       | 4.8  |             |  |              | 64.4  |  |  |            | (1.6  | ) |  |   | 62.8  | 
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|Gross profit                                 |  |        | 138.3 |        |  |        | 45.0 |        |  |          | 14.6 |           |  |       | 12.1 |             |  |              | 210.0 |  |  |            | 1.6   |   |  |   | 211.6 | 
|Selling, general and
administrative expenses |  |        | 85.3  |        |  |        | 38.2 |        |  |          | 14.2 |           |  |       | 16.7 |             |  |              | 154.4 |  |  |            | 18.6  |   |  |   | 173.0 | 
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 
|Operating income (loss)                      |  | $      | 53.0  |        |  | $      | 6.8  |        |  | $        | 0.4  |           |  | $     | (4.6 | )           |  | $            | 55.6  |  |  | $          | (17.0 | ) |  | $ | 38.6  | 
|                                             |  |        |       |        |  |        |      |        |  |          |      |           |  |       |      |             |  |              |       |  |  |            |       |   |  |   |       | 

Net sales. Net sales for the nine months ended September 30, 2002
increased to $292.1 million from $274.4 million for the nine months ended
September 30, 2001, an increase of $17.7 million or 6.5%. Measured in local
currencies, net sales for the nine months ended September 30, 2002 increased
8.8%. The increase measured in local currencies was greater than the increase
measured in U.S. dollars due to the weakening of the Mexican Peso and South
American currencies. The Companys average number of consultants worldwide for
the nine months ended September 30, 2002 increased to approximately 386,000 or
7.8% over the 2001 average. Annualized consultant productivity for the first
nine months of 2002 measured in U.S. dollars decreased 1.2% compared to the
first nine months of 2001.

In Mexico, net sales for the nine months ended September 30, 2002
increased to $190.5 million from $181.4 million for the nine months ended
September 30, 2001, an increase of $9.1 million or 5.0%. In local currency,
net sales increased 6.9% over the comparable prior year period. In Mexico, the
average number of consultants for the nine months ended September 30, 2002
increased to approximately 246,000, or by 8.6% over the average number of
consultants in the comparable prior year period. In local currency, annualized
consultant productivity for the first nine months of 2002 decreased 1.6% over
consultant productivity during the first nine months of 2001 and the number of
ordering consultants decreased to 47.6% of consultants compared to 50.8% in the
prior year.

In the United States, net sales for the nine months ended September 30,
2002 increased to $66.9 million from $57.7 million for the nine months ended
September 30, 2001, an increase of $9.2 million or 15.9%. In the Hispanic
Division, net sales increased 20.4% and in the General Division, net sales
increased 8.0% for the first nine months of 2002 compared to first nine months
of 2001. The period to period sales increase was primarily due to improved
consultant productivity and a larger consultant base in the Hispanic Division.
In the Hispanic Division, consultant productivity increased 9.1% and in the
General Division, consultant productivity increased 15.1% for the first nine
months of 2002 compared to the first nine months of 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. For the nine
months ended September 30, 2002, the average number of consultants in the
Hispanic Division increased 9.5%, while the average number of consultants in
the General Division decreased 6.1% compared to the nine months ended September 30,
2001. In the Hispanic Division, the average number of ordering consultants
for the nine months ended September 30, 2002 increased to 60.6% of consultants
compared to 56.4% for the nine months ended September 30, 2001 and in the
General Division, the number of ordering consultants remained constant.

In Europe, net sales for the nine months ended September 30, 2002
increased to $18.6 million from $18.4 million for the nine months ended
September 30, 2001, an increase of $0.2 million, or 1.1%. In local currencies,
net sales decreased 3.1% for the nine months ended

31



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September 30, 2002 compared to
the nine months ended September 30, 2001. The increase in net sales measured
in U.S. dollars compared to the decrease measured in local currencies
was due to
the strengthening of local currencies compared to the U.S. dollar in
comparable periods. The average number of consultants decreased 2.0% to
16,000. In local currencies, annualized consultant productivity decreased 1.1%
in the nine months ended September 30, 2002 compared to the nine months ended
September 30, 2001. Measured in U.S. dollars, consultant productivity
increased 3.0% in the comparable nine month periods.

Net sales in South America and Thailand for the nine months ended
September 30, 2002 decreased to $16.1 million from $16.9 million for the nine
months ended September 30, 2001, a decrease of $0.8 million, or 4.7%. In local
currencies, net sales in South America increased 18.9% and net sales in
Thailand increased 7.3% in the comparable nine month periods.

Gross profit.Consolidated gross profit for the nine months ended
September 30, 2002 increased to $224.2 million from $211.6 million in the
comparable prior year period, an increase of $12.6 million, or 6.0%. Gross
profit as a percentage of net sales (gross margin) decreased to 76.8% for the
nine months ended September 30, 2002 from 77.1% for the nine months ended
September 30, 2001.

In Mexico, gross margin for the nine months ended September 30, 2002
decreased to 76.0% from 76.2% in the comparable prior year period. The
decrease in gross margin was primarily attributable to increased expenses
related to the slow moving inventory reserve, and incrementally greater
amortization of deferred exchange losses into cost of sales, partially offset
by a more favorable product mix. During the nine months ended September 30,
2002, $0.6 million of incremental charges related to the reserve for slow
moving inventory were recorded compared to prior year nine month period.
Additionally, during the first nine months of 2002, $0.5 million of incremental
deferred exchange losses were reclassified into cost of sales from other
comprehensive income in conjunction with hedge accounting pursuant to SFAS No. 133 compared
to the prior year nine month period. Excluding the impact of
these charges, gross margin was 76.7% for the nine months ended September 30,
2002, compared to 76.4% for the nine months ended September 30, 2001.

In the United States, gross margin for the nine months ended September 30,
2002 decreased to 77.9% from 78.0% in the comparable prior year period. The
decrease in gross margin is due to $0.2 million of incremental charges related
to the reserve for slow moving inventory in the first nine months of 2002
compared to the first nine months of 2001, partially offset by a more favorable
product mix.

In Europe, gross margin for the nine months ended September 30, 2002
decreased to 77.4% from 79.3% for the comparable prior year period. The
decrease in gross margin was due to incrementally greater charges related to
the reserve for slow moving inventory recorded during 2002, and a more
favorable product mix in 2001.

In South America, gross margin for the nine months ended September 30,
2002 decreased to 69.7% from 70.7% for the comparable prior year period.

Selling, general and administrative expenses.SG&A expenses for the nine
months ended September 30, 2002 increased to $180.4 million from $173.0
million for the nine months ended September 30, 2001, an increase of $7.4
million, or 4.3%. SG&A expenses, as a percentage of net sales, decreased for
the first nine months of 2002 to 61.8% from 63.0% for the first nine 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 nine months ended September 30, 2002
increased by $9.4 million, or 11.0% compared to the nine months ended September
30, 2001. SG&A expenses, as a percentage of net sales, in Mexico were 49.7%
during the first nine months of 2002, compared to 47.0% for the first nine
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. Sales promotional expenses increased in
total but were relatively constant as a percentage of net sales.
However, freight
expenses increased proportionally more than net 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 $4.8 million incremental bad debt expense
in the first nine months of 2002, compared to the first nine months of 2001,
due to declining consultant liquidity as a result of the general economic
condition.

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In the United States, SG&A expenses for the nine months ended September 30,
2002 increased by $3.0 million, or 7.9% compared to the nine months ended
September 30, 2001. SG&A expenses, as a percentage of net sales, in the United
States were 61.6% during the first nine months of 2002, compared to 66.2% for
the first nine months of 2001. The increased SG&A expenses were primarily
attributable to additional selling expenses, override expenses and freight expenses, partially offset by decreased sales promotional
expenses. The expanded e-commerce platform was launched in June 2001, which
resulted in incrementally more selling expenses for the nine months ended
September 30, 2002 compared to the nine months ended September 30, 2001.
Override payments, which tend to increase proportionally with net sales,
increased in total and as a percentage of net sales due to increased sale of
resale items and better collections. Sales promotional expenses decreased in
total and as a percentage of net sales due to timing and mix of sales
promotional programs.

In Europe, SG&A expenses during the first nine months of 2002 and 2001
were relatively constant in total at $14.2 million. SG&A expenses, as a
percentage of net sales, were 76.3% for the nine months ended September 30,
2002, compared to 77.2% for the nine months ended September 30, 2001. The
decrease of SG&A expenses, as a percentage of net sales, is primarily due to reduced
distribution and sales promotional expenses, as a percentage of sales,
partially offset by incrementally greater charges related to the reserve for
uncollectible accounts receivables in Italy.

SG&A expenses in other selling markets (South America and Thailand) and at
corporate headquarters for the nine months ended September 30, 2002 decreased
$5.0 million, or 14.2%, primarily as the result of reduced sales promotional
expenses and administrative expenses in the South American entities, partially
due to the favorable impact of weaker local currencies, 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 $2.5 million of amortization expense in 2001.

Exchange loss.The Companys foreign exchange loss was $10.5 million for
the nine months ended September 30, 2002 compared to $8.0 million for the nine
months ended September 30, 2001, an increase of $2.5 million, or 31.3%. During
the nine months ended September 30, 2002, the Company recognized $2.2 million
of exchange losses related to forward contracts, $1.2 million of exchange gains
related to option contracts, $4.6 million of exchange losses on the
remeasurement of U.S. dollar-denominated debt and $4.9 million of exchange
losses on other foreign currency transactions, primarily due to the weakening
of South American currencies. During the first nine months of 2001, the
Company recognized $8.1 million of exchange losses on certain forward
contracts, resulting from the strengthening of the Mexican peso against the
U.S. dollar and exchange losses on other foreign currency transactions of $0.6
million. These exchange losses were partially offset by an exchange gain of
$0.7 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 nine months of 2002 decreased to $8.7
million from $10.0 million for the first nine months of 2001, a decrease of
$1.3 million, or 13.0%. 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 $9.8 million for the
first nine months of 2002, compared to $10.6 million for the first nine months
of 2001, a decrease of $0.8 million, or 7.5%. The Companys effective income
tax rate decreased to approximately 39.7% compared to 51.9% for the comparable
prior year period. 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, partially offset by increased pretax losses in some South
American countries, as the result of the impact of devaluation of local
currencies on U.S. dollar-denominated liabilities. 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 54.6% compared to 39.7% for the nine months
ended September 30 2002.

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Net income.Net income was $14.8 million for the first nine months of
2002, a $4.9 million increase, compared to $9.9 million for the first nine
months of 2001. The increase was due to a $12.6 million increase in gross
profit, a $1.3 million decrease in interest expense, a $0.5 million increase in
other, net, a $0.8 million decrease in income tax expense, partially offset by
a $7.4 million increase in SG&A, a $2.5 million increase in exchange loss, 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 (the
Notes), and its credit agreement, which consists of a
term loan facility and a revolving credit facility (the Senior
Credit Agreement). 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
($45.1 million and $30.1 million as of September 30, 2002), 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 September 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 nine months ended September 30, 2002 the
Company made an additional unscheduled principal payment on the term loan of
$2.5 million. Borrowings under the revolving credit facility ($0 as of
September 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 September 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
nine months ended September 30, 2002, cash paid for interest was approximately
$0.3 million and $5.3 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 ratio and a
maximum debt to EBITDA ratio. As of September 30, 2002, the Company was in
compliance with all covenants. As of September 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 September 30, 2002, Jafra S.A. had an outstanding
balance under the bank loan agreement of the peso equivalent of $1.0 million at
a weighted average annual interest rate of 18.6%. Principal and interest
payments are due monthly through January 25, 2005. As of September 30, 2002,
$0.6 million of this loan is classified as short-term debt and $0.4 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.

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Cash Flows

Net cash provided by operating activities was $22.8 million for the nine
months ended September 30, 2002, consisting of $35.8 million provided by net
income plus depreciation, amortization, and other non-cash items included in
net income, partially offset by $13.0 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 nine months ended September 30,
2002 were an increase of $15.1 million in accounts receivable, an increase in
inventories of $1.6 million, partially offset by a decrease in prepaid expenses
and other current assets of $3.1 million, and a decrease in other assets of
$1.4 million.

Net cash used in investing activities was $7.7 million for the nine months
ended September 30, 2002, of which $7.6 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 $7.7 million for the nine months
ended September 30, 2002, and consisted of $5.4 million of repayment under the
term loan facility, $1.8 million net repayment under the revolving credit
facility and $0.5 million net repayment of other bank debt.

The effect of exchange rate changes on cash was $3.2 million for the nine
months ended September 30, 2002, related primarily to fluctuations in the
exchange rates in Mexico and South America.

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 respect 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 nine months ended September 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 nine months ended September 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               |  |        |     |        |  |        | (3.4 | )      |  |       | (0.4 | )   |  |              | (0.1 | ) |  |   | (3.9 | )
|Impairment losses                |  |        |     |        |  |        |     |        |  |       |     |     |  |              | (0.2 | ) |  |   | (0.2 | )
|                                 |  |        |      |        |  |        |      |        |  |       |      |     |  |              |      |   |  |   |      |  
|Balance as of September 30, 2002 |  | $      | 32.2 |        |  | $      | 29.0 |        |  | $     | 5.5  |     |  | $            | 0.3  |   |  | $ | 67.0 |  
|                                 |  |        |      |        |  |        |      |        |  |       |      |     |  |              |      |   |  |   |      |  

The Companys other intangible assets consist of trademarks. During the
nine months ended September 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 $45.2 million as of September 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,

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net of the related income tax
effects, where applicable, is as follows (in millions):

|                                   |  |                    |     |                   |  |      |     |      |  |   |      |  |  |   |      | 
|---------------------------------- |  | ------------------ | --- | ----------------- |  | ---- | --- | ---- |  | - | ---- |  |  | - | ---- | 
|                                   |  | Three Months Ended |     | Nine Months Ended
|                                   |  | September 30,      |     | September 30,    
|                                   |  |                    |     |                  
|                                   |  | 2002               |     | 2001              |  | 2002 |     | 2001
|                                   |  |                    |     |                   |  |      |     |     
|Net income                         |  | $                  | 1.0 |                   |  | $    | 5.4 |      |  | $ | 14.8 |  |  | $ | 9.9  | 
|Goodwill amortization, net of tax  |  |                    |    |                   |  |      | 0.4 |      |  |   |     |  |  |   | 1.2  | 
|Trademark amortization, net of tax |  |                    |    |                   |  |      | 0.2 |      |  |   |     |  |  |   | 0.7  | 
|                                   |  |                    |     |                   |  |      |     |      |  |   |      |  |  |   |      | 
|Adjusted net income                |  | $                  | 1.0 |                   |  | $    | 6.0 |      |  | $ | 14.8 |  |  | $ | 11.8 | 
|                                   |  |                    |     |                   |  |      |     |      |  |   |      |  |  |   |      | 

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 $0.9 million and
$2.8 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 nine months ended September 30, 2001, respectively.

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 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

Net sales outside of the United States aggregated approximately 77% of the
Companys total net sales for each of the three and nine month periods ended
September 30, 2002 and 80% and 79% for the three and nine months ended
September 30, 2001, respectively. In addition, as of September 30, 2002,
non-U.S. subsidiaries comprised approximately 72% 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
66% and 65% of the Companys net sales for the three and nine months ended
September 30, 2002, respectively, and 67% and 66% for the three and nine month
ended September 30, 2001, respectively, all of which were denominated in
Mexican pesos. At September 30, 2002, Jafra S.A. had $32.5 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 $1.2 million and $4.6 million for the
three and nine months ended September 30, 2002, respectively, on the
remeasurement of this U.S. dollar-denominated debt and a net loss of $0.5
million and $1.0 million on foreign currency forward and option contracts for the three and nine
months ended September 30, 2002, respectively.

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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 each 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 66% and 65% of the Companys consolidated net sales for the three and
nine months ended September 30, 2002, respectively, compared to 66% for the
full year in 2001. The year-to-year sales growth in Mexico for the nine months
ended September 30, 2002 was approximately 5% measured in U.S. dollars and 7%
measured in local currency. Mexico reported a quarter-to-quarter sales growth
of 1% measured in U.S. dollars and 9% measured in local currency for the three
months ended September 30, 2002 compared to the three months ended September 30, 2001.

The Company is employing a strategy to leverage diversification through
growth in markets other than 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 nine
months ended September 30, 2002 increased 18% and 16%, respectively, versus the
comparable prior year period. The U.S. implemented 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.

Net sales in Europe had been on a downward trend for the past three years
and have improved slightly as measured in U.S. dollars in the current year.
European sales have declined from approximately 11% of the Companys business
in 1999 to 6% of the Companys business in the nine months ended September 30,
2002. The European operations reported a net sales decrease of 4% and net
sales increases of 1% measured in U.S. dollars for the three and nine months
ended September 30, 2002, respectively.

Net sales in U.S. dollars in the South American region decreased by 5% in
the nine months ended September 30, 2002 compared to the prior year, and were
up approximately 19% in local currencies. In 2001, net sales generated by
subsidiaries in the South American region were approximately 5% of consolidated
sales.

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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; and (iii) other statements as to managements or the Companys
expectations or beliefs presented in this Managements Discussion and Analysis
of Financial Condition and Results of Operations.

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

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




ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain market risks arising from transactions
in the normal course of its business, and from debt incurred in connection with
the Acquisition. Such 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 nine months of 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
nine 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 nine 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 nine months ended September 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 $140,000,000 in equal offsetting buy and sell
positions at September 30, 2002 and $899,000,000 in a buy
position at September 30, 2001. The contracts

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outstanding at September 30, 2002 mature at various
dates extending to November 2002 and the contracts outstanding at September 30,
2001 matured at various dates through August 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 September 30, 2002 and 2001 (in thousands):

September 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 |  |                  | 110,000  |          |  |          | 10/31/02 |                 |  |          | 10.09 |  |  |   | (137  | )
|Sell US Dollar/buy Mexican Peso |  |                  | (110,000 | )        |  |          | 10/31/02 |                 |  |          | 9.31  |  |  |   | 1,041 |  
|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  |  |  |   | 291   |  
|                                |  |                  |          |          |  |          |          |                 |  |          |       |  |  |   |       |  
|                                |  | $                |         |          |  |          |          |                 |  |          |       |  |  | $ | 1,191 |  
|                                |  |                  |          |          |  |          |          |                 |  |          |       |  |  |   |       |  

September 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 |  |                  | 25,000  |          |  |          | 10/30/01 |                 |  |          | 10.70 |  |  |   | 272   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 110,000 |          |  |          | 10/31/01 |                 |  |          | 10.71 |  |  |   | 1,201 |  
|Buy US Dollar/sell Mexican Peso |  |                  | 69,716  |          |  |          | 11/30/01 |                 |  |          | 10.24 |  |  |   | 412   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 44,000  |          |  |          | 12/27/01 |                 |  |          | 10.71 |  |  |   | 401   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 41,000  |          |  |          | 12/31/01 |                 |  |          | 10.90 |  |  |   | 440   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 108,715 |          |  |          | 1/31/02  |                 |  |          | 10.19 |  |  |   | 387   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 71,787  |          |  |          | 2/28/02  |                 |  |          | 10.26 |  |  |   | 247   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 94,371  |          |  |          | 3/27/02  |                 |  |          | 10.46 |  |  |   | 411   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 85,000  |          |  |          | 4/30/02  |                 |  |          | 10.23 |  |  |   | 121   |  
|Buy US Dollar/sell Mexican Peso |  |                  | 81,000  |          |  |          | 5/31/02  |                 |  |          | 10.11 |  |  |   | (40   | )
|Buy US Dollar/sell Mexican Peso |  |                  | 80,000  |          |  |          | 6/28/02  |                 |  |          | 9.95  |  |  |   | (222  | )
|Buy US Dollar/sell Mexican Peso |  |                  | 48,000  |          |  |          | 7/31/02  |                 |  |          | 10.07 |  |  |   | (115  | )
|Buy US Dollar/sell Mexican Peso |  |                  | 40,000  |          |  |          | 8/30/02  |                 |  |          | 10.17 |  |  |   | (88   | )
|                                |  |                  |         |          |  |          |          |                 |  |          |       |  |  |   |       |  
|                                |  | $                | 898,589 |          |  |          |          |                 |  |          |       |  |  | $ | 3,427 |  
|                                |  |                  |         |          |  |          |          |                 |  |          |       |  |  |   |       |  



---

|(1) |  | The Fair Value of the forward positions presented above, an unrealized
loss of $1,191,000 and $3,427,000 at September 30, 2002 and 2001,
respectively. The unrealized loss in 2002 has been recorded as an offset
to other receivables and the unrealized loss in 2001 has been recorded in
accrued liabilities in the consolidated balance sheets.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39



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##### Table of Contents



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

|                                                   |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 
|-------------------------------------------------- |  | ---------- | ------- | ------- |  | ------------ | ------------- | -------- |  | - | ------ | - |  | ---------------- |  | 
|                                                   |  | Coverage   |         | Average |  | Fair Value   |               |          |  |  
|                                                   |  | in Mexican |         | Strike  |  | in           |               | Maturity
|Foreign Currency                                   |  | Pesos      |         | Price   |  | U.S. Dollars |               | Date    
|                                                   |  |            |         |         |  |              |               |         
|At September, 2002:                                |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 
|Purchased Puts (Company may sell Peso/buy USD)     |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 
|Mexican Peso                                       |  | $          | 225,000 |         |  |              | 9.97  10.15  |          |  | $ | (778   | ) |  | Oct.  Dec. 2002
|Mexican Peso                                       |  |            | 149,000 |         |  |              | 10.31  10.48 |          |  |   | (582   | ) |  | Jan.  Mar. 2003
|Mexican Peso                                       |  |            | 100,000 |         |  |              | 11.05  12.19 |          |  |   | (238   | ) |  | Apr.  June 2003
|Mexican Peso                                       |  |            | 71,000  |         |  |              | 11.76  11.99 |          |  |   | (172   | ) |  | July  Aug 2003 
|                                                   |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 
|                                                   |  | $          | 545,000 |         |  |              |               |          |  | $ | (1,770 | ) |  |                  |  | 
|                                                   |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 
|Written Calls (Counterparty may buy Peso/sell USD) |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 
|Mexican Peso                                       |  | $          | 225,000 |         |  |              | 9.01  9.02   |          |  | $ | 1      |   |  | Oct.  Dec. 2002
|Mexican Peso                                       |  |            | 149,000 |         |  |              | 9.01  9.02   |          |  |   | 11     |   |  | Jan.  Mar. 2003
|Mexican Peso                                       |  |            | 100,000 |         |  |              | 9.50  9.84   |          |  |   | 50     |   |  | Apr.  June 2003
|Mexican Peso                                       |  |            | 71,000  |         |  |              | 9.69  9.90   |          |  |   | 53     |   |  | July  Aug 2003 
|                                                   |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 
|                                                   |  | $          | 545,000 |         |  |              |               |          |  | $ | 115    |   |  |                  |  | 
|                                                   |  |            |         |         |  |              |               |          |  |   |        |   |  |                  |  | 




ITEM 4.  CONTROLS AND PROCEDURES

The Companys principal executive officer and principal financial officer have
evaluated the effectiveness of the Companys disclosure controls and
procedures, as such term is defined in Rule 13a-14(c) of the Securities
Exchange Act of 1934, as amended, within 90 days of the filing date of this
Quarterly Report on Form 10-Q. Based upon their evaluation, the principal
executive officer and principal financial officer concluded that the Companys
disclosure controls and procedures are effective.

There have been no significant changes in the Companys internal controls or in
other factors that could significantly affect these controls subsequent to the
date the Company performed the evaluation.

40



---



##### 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

At an extraordinary general meeting of shareholders of the Company held on
July 30, 2002, the shareholders resolved that the Company shall change its
certified public accountants.




Item 5.  Other Information

None.




Item 6.  Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------

None.



|(b) |  | Reports on Form 8-K
|--- |  | -------------------

On July 11, 2002, the Company filed a Current Report on form 8-K, dated
July 10, 2002, with the Securities and Exchange Commission regarding the
Companys decision to change its certified public accountants, which
information was reported under Item 4, Changes in Certifying Accountant and
Item 7 Financial Statements and Exhibits.

On July 22, 2002, the Company filed a Current Report on form 8-K, dated
July 15, 2002, with the Securities and Exchange Commission regarding the
Companys decision to change its certified public accountants, which
information was reported under Item 4, Changes in Certifying Accountant.

On August 13, 2002, the Company filed a Current Report on form 8-K, dated
August 13, 2002, with the Securities and Exchange Commission regarding fair
disclosure, which information was reported under Item 7, Financial Statements
and Exhibits and Item 9, Regulation FD Disclosure.

41



---



##### 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)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date November 13, 2002

42



---



##### Table of Contents






CERTIFICATIONS

I, Ronald B. Clark, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of CDRJ Investments
(Lux) S.A.;                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report:                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     |                                                                                                                                                     | 
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Date | November 13, 2002                                                                                                                                   | 
|    
|     | /s/ RONALD B. CLARK
                
                Ronald B. Clark
                Chief Executive Officer of the Advisory Committee and Director | 

43



---



##### Table of Contents



CERTIFICATIONS

I, Michael A. DiGregorio, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of CDRJ Investments
(Lux) S.A.;                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report:                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     |                                                                                                                                                                          | 
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|Date | November 13, 2002                                                                                                                                                        | 
|    
|     | /s/ MICHAEL A.
DIGREGORIOMichael A. DiGregorio
        Senior Vice President and Chief Financial Officer
        of the Advisory Committee (Principal Financial Officer) | 

44