Jafra Sales Jump 14% in Third Quarter

Jafra Cosmetics International, Inc, Westlake, CA, today reported strong financial results on both an operating income and EBITDA basis for its third quarter of 2000. Net sales in the third quarter of 2000 were $76.6 million, up 14% compared to $67.1 million in the third quarter of 1999. Operating income increased 49% in the third quarter of 2000 to $9.5 million, compared to $6.4 million in the third quarter of 1999. The Company incurred $2.0 million of restructuring and impairment charges during the third quarter of 2000. Excluding the impact of these charges, operating income for the third quarter of 2000 increased 80% to $11.6 million, due to a combination of higher gross margins and operating efficiencies achieved due to higher sales volumes.

Net sales for the first nine months of 2000 were $225.1 million, up 9% compared to $206.7 million in the first nine months of 1999. The effects of foreign currency translation on sales were not material for the first nine months of 2000. Operating income increased 64% for the first nine months of 2000 to $27.3 million, compared to $16.6 million in the same period of 1999. EBITDA for the first nine months of 2000 was $34.4 million, up $12.4 million, or 56%, compared to $22.0 million in the same period of 1999. Excluding the impact of restructuring and impairment costs, EBITDA for the first nine months of 2000 increased by $12.4 million, or 49%, over the same period of 1999.

Commenting on the results, Ronald Clark, chairman and chief executive officer, said “This was another successful quarter for Jafra. Mexico and South America continue to be our fastest growing geographic markets, with both regions reporting sales growth in excess of 20% for the quarter. Mexico’s July launch of our Skin Care 2000 program proved to be very successful. In South America, we continued to achieve solid gains in Brazil and Venezuela.”

Gonzalo Rubio, Jafra’s president and chief operating officer, spoke about some of Jafra’s strategies. “Sponsoring, which is activation of new consultants, is one of the keys to our business. Our third quarter results were outstanding, up 33% over the third quarter of 1999. The sponsoring activity was strong in all regions except for Europe. During the quarter, we took a strategic step in the U.S. to recognize two distinct markets within the business, a General and a Hispanic Division. We appointed Dyan Lucero, a committed Jafra leader with 28 years of U.S. market expertise, as General Manager of the U.S. General Division. Beatriz Gutai, with 19 years of Jafra management experience, was appointed as General Manager of the U.S. Hispanic Division. Our sponsoring results in the U.S. were particularly strong, up 40% over the third quarter of 1999. Thailand, which just opened in July, has already activated 2,000 consultants and expects to finish the year with over 4,000 consultants.”

Mr. Rubio continued, “We incurred some restructuring and impairment charges this quarter, which consisted of certain repositioning activities in Europe and the writedown of certain capitalized software costs in the U.S. We are now starting to see some positive results in Europe. During this quarter, our Skin Care 2000 program was enthusiastically received in Germany, our largest European market, and during the month of September, they reported their highest sponsoring result in almost two years.”

Mr. Clark added, “Since April 1998, we have focused on increasing our profitability to enable the Company to grow and invest in new markets. We continue to achieve improved gross margins and operating efficiencies. Our strong operating performance over the last two years, and in particular, our continuing reduction of debt levels and increased earnings, was recognized this quarter by both Moody’s and Standard and Poor’s, and we received upgrades to our corporate credit and bank loan ratings.”