SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

for the Quarterly Period Ended ~~September 30, 2004~~March 31, 2005

Commission File Number 1-9608

NEWELL RUBBERMAID INC.

(Exact name of registrant as specified in its charter)


DELAWARE		36-3514169
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		~~(I.R.S. Employer~~ Identification No.)

10B Glenlake Parkway, Suite 600
Atlanta, Georgia 30328
(Address of principal executive offices)

(Zip Code)

(770) 407-3800

(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 12 months, and (2) has been subject to such filing requirements for the past 90 days.


~~Yes /x/~~		~~No / /~~

Yesþ Noo

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).


~~Yes /x/~~		~~No / /~~

Yesþ Noo

Number of shares of common stock outstanding (net of treasury shares) as of ~~October 29, 2004: 274.8~~April 30, 2005: 275.3 million.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in millions, except per share data)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2004			2003			2004			2003			2005			2004
Net sales	$	1,671.8		$	1,729.1		$	4,939.9		$	5,072.0		$	1,393.6		$	1,490.8
Cost of products sold		1,198.5			1,237.3			3,571.0			3,625.0			1,014.7			1,086.4

GROSS MARGIN		473.2			491.8			1,368.9			1,447.0			378.9			404.4
Selling, general and administrative expenses		307.1			298.8			945.5			905.5			304.0			299.8
Impairment charges		348.9			—			374.0			—
Restructuring costs		—			32.3			47.9			109.5			6.2			21.6

OPERATING (LOSS) INCOME		(182.7	)		160.7			1.5			432.0
OPERATING INCOME														68.7			83.0

Nonoperating expenses:
Interest expense, net		29.5			33.1			90.0			104.5			30.8			30.9
Other (income) expense, net		(0.8	)		1.4			(3.9	)		18.6			(2.3	)		2.3

Net nonoperating expenses		28.7			34.5			86.1			123.1			28.5			33.2

(LOSS) INCOME BEFORE INCOME TAXES		(211.4	)		126.2			(84.6	)		308.9
INCOME BEFORE INCOME TAXES														40.2			49.8
Income taxes		23.6			40.7			58.7			100.0			(46.7	)		16.2

NET (LOSS) INCOME FROM CONTINUING OPERATIONS		(235.0	)		85.5			(143.3	)		208.9
Gain/(loss) from discontinued operations, net of tax		8.6			(10.3	)		(97.0	)		(43.9	)
INCOME FROM CONTINUING OPERATIONS														86.9			33.6
Loss from discontinued operations, net of tax														(50.3	)		(108.5	)

NET (LOSS) INCOME	($	226.4	)	$	75.2		($	240.3	)	$	165.0
NET INCOME (LOSS)													$	36.6			($74.9	)

Weighted average shares outstanding:
Basic		274.4			274.4			274.4			274.0			274.4			274.4
Diluted		274.4			274.4			274.4			274.3			274.9			274.5
(Loss) Earnings per share:

Earnings (loss) per share:
Basic –
(Loss) income from continuing operations	($	0.86	)	$	0.31		($	0.52	)	$	0.76
Income (loss) from discontinued operations		0.03			(0.04	)		(0.35	)		(0.16	)
Income from continuing operations													$	0.32		$	0.12
Loss from discontinued operations														(0.18	)		(0.40	)

Net (loss) income per common share	($	0.83	)	$	0.27		($	0.88	)	$	0.60
Net earnings (loss) per common share													$	0.13			($0.27	)

Diluted –
(Loss) income from continuing operations	($	0.86	)	$	0.31		($	0.52	)	$	0.76
Income (loss) from discontinued operations		0.03			(0.04	)		(0.35	)		(0.16	)
Income from continuing operations													$	0.32		$	0.12
Loss from discontinued operations														(0.18	)		(0.40	)

Net (loss) income per common share	($	0.83	)	$	0.27		($	0.88	)	$	0.60
Net earnings (loss) per common share													$	0.13			($0.27	)


Dividends per share	$	0.21		$	0.21		$	0.63		$	0.63		$	0.21		$	0.21

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS ~~(CONT.)~~(CONTINUED)
(Amounts in millions, except ~~per share data)~~par value)


	September 30,			December 31,			March 31,			December 31,
	2004			2003			2005			2004
	(Unaudited)						(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Notes payable	$	14.0		$	21.9
Accounts payable		633.1			694.7		$	629.4		$	661.5
Accrued compensation		115.4			122.1			83.8			113.3
Other accrued liabilities		842.4			960.4			677.6			789.4
Income taxes		134.0			80.8			—			68.8
Notes payable								18.5			21.3
Current portion of long-term debt		215.0			13.5			195.4			185.6
Current liabilities of discontinued operations		—			128.6			26.4			31.4

TOTAL CURRENT LIABILITIES		1,953.9			2,022.0			1,631.1			1,871.3

LONG-TERM DEBT		2,439.6			2,868.6			2,383.8			2,424.3

OTHER NONCURRENT LIABILITIES		585.0			572.3			583.5			606.0

LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS		—			1.5			0.3			0.7

STOCKHOLDERS’ EQUITY:
Common stock, authorized shares,
800.0 million at $1.00 par value		290.1			290.1
Common stock, authorized shares, 800.0 at $1.00 par value								290.1			290.1
Outstanding shares:
2004 - 290.1 million
2003 - 290.1 million
2005 - 290.1
2004 - 290.1
Treasury stock, at cost;		(411.6	)		(411.6	)		(411.6	)		(411.6	)
Shares held:
2004 - 15.7 million
2003 - 15.7 million
2005 - 15.7
2004 - 15.7
Additional paid-in capital		437.4			439.9			446.7			437.5
Retained earnings		1,452.2			1,865.7			1,497.2			1,518.6
Accumulated other comprehensive loss		(141.4	)		(167.8	)		(89.2	)		(70.4	)

TOTAL STOCKHOLDERS’ EQUITY		1,626.7			2,016.3			1,733.2			1,764.2


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,605.2		$	7,480.7		$	6,331.9		$	6,666.5

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in millions)


							Three Months Ended
	Nine Months Ended September 30,						March 31,
	2004			2003			2005			2004
OPERATING ACTIVITIES:
Net (loss) income	($	240.3	)	$	165.0
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net income (loss)							$	36.6			($74.9	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		185.4			186.5			55.6			60.9
Deferred income taxes		85.1			9.6			10.8			7.3
Impairment charges		374.0			—
Noncash restructuring charges		25.3			73.0			3.2			8.9
(Gain)/loss on sale of assets/business		(6.5	)		20.5
Gain on sale of assets/debt extinguishment								(3.7	)		(4.1	)
Loss on discontinued businesses		90.5			—			49.1			104.6
Other		(4.8	)		30.7			(3.4	)		2.2
Changes in current accounts excluding the Effects of acquisitions:
Changes in current accounts excluding the effects of acquisitions:
Accounts receivable		211.0			47.0			183.7			150.3
Inventories		(176.8	)		(1.4	)		(116.9	)		(108.3	)
Other current assets		17.9			2.6
Accounts payable		(60.2	)		121.9			(29.9	)		(35.6	)
Accrued liabilities and other								(129.7	)		(105.4	)
Discontinued operations		(29.8	)		9.9			0.1			(12.6	)
Accrued liabilities and other		(49.0	)		(244.8	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		421.8			420.5
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES								55.5			(6.7	)


INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(3.0	)		(460.0	)
Acquisition, net of cash acquired								(30.3	)		—
Expenditures for property, plant and equipment		(95.2	)		(247.1	)		(23.1	)		(36.6	)
Sale of businesses and noncurrent assets		289.2			10.2
Disposals of noncurrent assets and sale of businesses								12.9			16.5

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		191.0			(696.9	)
NET CASH USED IN INVESTING ACTIVITIES								(40.5	)		(20.1	)


FINANCING ACTIVITIES:
Proceeds from issuance of debt		21.3			1,040.5			1.9			9.7
Proceeds from issuance of stock		—			200.1
Payments on notes payable and long-term debt		(251.9	)		(776.7	)		(31.1	)		(17.7	)
Cash dividends		(173.2	)		(173.1	)		(58.0	)		(57.7	)
Proceeds from exercised stock options and other		1.4			6.0			—			0.9

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(402.4	)		296.8
NET CASH USED IN FINANCING ACTIVITIES								(87.2	)		(64.8	)


Exchange rate effect on cash		(0.3	)		1.6			(3.6	)		(0.9	)

INCREASE IN CASH AND CASH EQUIVALENTS		210.1			22.0

DECREASE IN CASH AND CASH EQUIVALENTS								(75.8	)		(92.5	)

Cash and cash equivalents at beginning of year		144.4			55.1			505.6			144.4


CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	354.5		$	77.1		$	429.8		$	51.9

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
~~NOTES~~FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Note~~Footnote 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of Newell Rubbermaid Inc. (collectively with its subsidiaries, the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and do not include all the information and ~~notes~~footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of only normal recurring accruals, considered necessary for a fair presentation of the financial position and the results of operations. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and the ~~notes~~footnotes thereto included in the Company’s latest Annual Report on Form 10-K.

Seasonal Variations:The Company’s product groups are only moderately affected by seasonal trends. The Cleaning & Organization and Other business segments typically have higher sales in the second half of the year due to retail stocking related to the holiday season; the Tools & Hardware and Home Fashions business segments typically have higher sales in the second and third quarters due to an increased level of do-it-yourself projects completed in the summer months; and the Office Products business segment typically has higher sales in the second and third quarters due to the back-to-school season. Because these seasonal trends are moderate, the Company’s consolidated quarterly sales generally do not fluctuate significantly, unless a significant acquisition is made.

Fair Value of Stock Options:In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised) (“SFAS 123(R)”), “Share-Based Payment.” SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro forma disclosure is no longer an alternative to financial statement recognition). The Statement supersedes Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and will require adoption no later than January 1, 2006. The Company expects to adopt the provisions of the new standard effective January 1, 2006.

As of March 31, 2005, the Company’s stock option plans are accounted for under ~~Accounting Principles Board Opinion~~APB No. 25. As a result, the Company grants fixed stock options under which no compensation cost is recognized. Had compensation cost for the ~~plans~~options granted been determined consistent with ~~Statement of Financial Accounting Standard No. 123 (FAS 123)~~SFAS 123(R), ~~“Accounting for Stock Based Compensation,”~~ the Company’s net income and earnings per share would have been reduced to the following pro forma amounts under the Black Scholes method for the three ~~and nine~~ months ended ~~September 30,~~March 31,(in millions, except per share data):


	Three Months Ended						Nine Months Ended						2005			2004
	September 30,						September 30,
	2004			2003			2004			2003
Net (loss) income:
Net income (loss):
As reported	($	226.4	)	$	75.2		($	240.3	)	$	165.0		$	36.6			($74.9	)
Fair value option expense		(4.6	)		(4.7	)		(13.7	)		(14.1	)
Fair value option expense, net of tax														(2.8	)		(4.5	)

Pro forma	($	231.0	)	$	70.5		($	254.0	)	$	150.9		$	33.8			($79.4	)
Basic (loss) earnings per share:

Basic earnings/(loss) per share:
As reported	($	0.83	)	$	0.27		($	0.88	)	$	0.60		$	0.13			($0.27	)
Pro forma	($	0.84	)	$	0.26		($	0.93	)	$	0.55		$	0.12			($0.29	)
Diluted (loss) earnings per share:

Diluted earnings/(loss) per share:
As reported	($	0.83	)	$	0.27		($	0.88	)	$	0.60		$	0.13			($0.27	)
Pro forma	($	0.84	)	$	0.26		($	0.93	)	$	0.55		$	0.12			($0.29	)

~~Note~~Footnote 2 – ~~Impairment Charges~~Discontinued Operations

On January 12, 2005, the Company entered into an agreement for the intended sale of the Company’s Curver business. The Curver business manufactures and markets plastic products for home storage and garage organization, food storage, laundry, bath, cleaning, closet organization and refuse removal in various countries in Europe. The Company’s European commercial products and other European businesses would not be affected by the sale. The Curver business had 2004 sales of $151.8 million.

The contemplated sale price is $5 million, payable at closing, and a contingent note for $5 million, payable within 12 years. The sales price is subject to reduction for working capital adjustments. There could also be contingent payments received by the Company, up to an aggregate maximum of $25 million, based on the adjusted earnings before interest and taxes of the Curver business for the five years ended December 31, 2009.

The agreement contains customary representations, warranties, covenants and conditions. The agreement also contains indemnification provisions subject to specified limitations as to time and amount. The agreement is subject to termination if the transaction is not completed within four months or, in certain cases, six months.

In connection with this intended transaction, the Company expects to record a total non-cash loss related to the sale of approximately $60 to $80 million, including the $49.1 million loss recorded in the first quarter of 2005. In the first quarter, the Company wrote-off the remaining long-lived assets of the business (primarily property, plant and equipment) and recorded the charge in discontinued operations as a loss on the disposal. The remaining charge is expected to be recorded in the second quarter of 2005 when the deal is expected to close.

The following table summarizes the ~~recorded noncash pretax impairment charges~~results of the discontinued operations for the three months ended March 31,(in millions):

Three Months Ended Nine Months Ended
September 30, 2004
September 30, 2004
Goodwill $ 181.2 $ 182.7
Other indefinite-lived intangible assets 107.1 116.0
Long-lived assets 60.6 75.3

$ 348.9 $ 374.0


	2005			2004
Net sales	$	37.1		$	183.8
Loss from operations of discontinued operations, net of income tax expense (benefit) of $0.2 and ($2.5) for 2005 and 2004, respectively	$	(1.2	)	$	(3.9	)
Loss on disposal of discontinued operations	$	(49.1	)	$	(104.6	)

Loss from discontinued operations	$	(50.3	)	$	(108.5	)

The ~~Company conducts its annual test~~2005 amounts reflect only the operations of ~~impairment for goodwill~~the Curver business, while the 2004 amounts also include businesses sold in 2004 (Panex Brazilian low-end cookware division, European picture frames businesses, U.S. picture frames business (Burnes), Anchor Hocking glassware business, Mirro cookware business and ~~other indefinite-lived intangible assets in~~ the ~~third quarter. The Company also tests for impairment if events or circumstances occur subsequent~~Little Tikes Commercial Playground Systems business). No amounts related to the Company’s annual impairment tests that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company performs the annual impairment testing in the third quarter because it coincides with its annual strategic planning process for all of its businesses.interest expense have been allocated to discontinued operations.

The ~~annual strategic planning meeting provides a forum for executive management to review changes recommended by division and group management in the long-term strategy~~following table presents summarized balance sheet information of the ~~individual businesses and approve specific initiatives. At the planning session, division management teams present their long-term vision for the business and recommend changes~~ discontinued operations (in response to internal and external factors, which may impact the valuation of long-lived assets, including goodwill, other intangible assets, and fixed assets. Additionally, these meetings are used to discuss the current business environment and outlook, as well as overall brand strategy.

Subsequent to the recent planning meetings, the Company performed its impairment testing of indefinite-lived intangible assets, giving consideration to underlying strategic and economic changes in the business. Additionally, the Company tested its other long-lived assets for impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

The results of the impairment testing were reviewed and discussed with the Audit Committee of the Board of Directors, which agreed with management’s recommendations and concluded on October 22, 2004, that the impairment charges described below are required under generally accepted accounting principles.

~~Testing Approach~~

~~Goodwill~~millions

The goodwill impairment test requires that a company estimate the fair value of the business enterprise at the reporting unit level, that is, the operating segment or one reporting level below the operating segment. The fair value of a reporting unit was calculated with the assistance of an independent third party valuation specialist using discounted cash flows. The discounted cash flows were estimated utilizing various assumptions regarding future revenue and expenses, working capital, terminal value, and discount rates. The underlying assumptions used were consistent with those used in the strategic plan. If the fair value of the reporting unit was less than its carrying amount at the valuation date, an impairment loss was recognized to the extent that the implied fair value of the goodwill within the reporting unit was less than the recorded amount of goodwill.

~~Other Indefinite-Lived Intangible Assets, primarily Trademarks and Tradenames~~

The impairment test for other indefinite-lived intangible assets, primarily trademarks and tradenames (intangible assets), requires that a company determine the fair value of the intangible asset. Generally, the fair value of the intangible assets was calculated with the assistance of an independent third party valuation specialist using discounted cash flows associated with the underlying intangible asset. The discounted cash flows were estimated utilizing various assumptions regarding future revenue and expenses, working capital, terminal value, and discount rates. The underlying assumptions used were consistent with those used in the strategic plan. The fair value of the intangible asset was then compared to the carrying value. If the fair value of the intangible asset was less than its carrying amount, an impairment charge was recorded.):

March 31, December 31,
2005 2004
Accounts receivable, net $ 37.2 $ 45.7
Inventories, net 26.6 23.3
Prepaid expenses and other 1.2 1.6

Total Current Assets 65.0 70.6

Property, plant and equipment, net — 41.2
Other assets — 5.7

Total Assets $ 65.0 $ 117.5

March 31, December 31,
2005 2004
Accounts payable $ 20.5 $ 21.4
Other accrued liabilities 5.9 10.0

Total Current Liabilities 26.4 31.4

Long-term liabilities 0.3 0.7

Total Liabilities $ 26.7 $ 32.1

~~Other Long-Lived Assets, primarily Fixed Assets and Patents~~

In accordance with SFAS No. 144, the Company evaluated if there were impairment indicators present related to its fixed assets and other long-term assets. If impairment indicators were present, future cash flows related to the asset group was estimated. The sum of the undiscounted future cash flows attributable to the asset group was then compared to the carrying amount of the asset group. The cash flows were estimated utilizing various assumptions regarding future revenue and expenses, working capital, and proceeds from asset disposals on a basis consistent with the strategic plan. If the carrying amount exceeded the sum of the future undiscounted future cash flows, the Company discounted the future cash flows using a risk-free discount rate and recorded an impairment charge as the difference between the discounted cash flows and the carrying value of the asset group. Generally, the Company performed its testing of the asset group at the product-line level, as this is the lowest level for which identifiable cash flows are available.

~~As a result of the impairment testing described above, the Company recorded a noncash $348.9 million ($332.8 million, net of tax) impairment charge in the third quarter as follows:~~

Other Indefinite- Other Long-Lived
Lived Intangible Assets (Fixed
Segment
Goodwill
Assets
Assets / Patents)
Total
Cleaning & Organization $ 34.0 $ — $ 45.7 $ 79.7
Office Products 138.8 93.8 8.5 241.1
Home Fashions 8.4 13.3 3.9 25.6
Tools & Hardware — — 1.0 1.0
Other — — 1.5 1.5

Total $ 181.2 $ 107.1 $ 60.6 $ 348.9

~~Cleaning & Organization~~

The European Cleaning & Organization business was previously classified in the fix portfolio of the Company’s business, as management believed that the restructuring and other investments made in the business would produce favorable returns in the future. These expected returns have not materialized and the Company is currently exploring alternatives for this business. Accordingly, an impairment charge was recorded to write the long-lived assets down to fair value (disposal value). The write-down of fixed assets is expected to decrease depreciation expense in 2005 by approximately $5 million.

~~Office Products~~

~~The impairment charge recorded in the Office Products segment is primarily a result of three factors:~~

• Prior year restructuring activity related to a product line in the European business has not resulted in the expected returns, and management is currently exploring alternatives for this product line. Accordingly, an impairment charge was recorded to write the long-lived assets down to fair value (disposal value). The impairment charge recognized on this product line was $80.8 million, of which $8.5 million related to the write-down of fixed assets. The write-down of fixed assets is expected to decrease depreciation expense in 2005 by approximately $1 million.
• In the European business, the Company has historically promoted and supported several different brands in the everyday writing category. In the third quarter management developed a plan to consolidate certain brands in Europe in this category. This new plan results from several factors:

• The Company believes that rationalizing its brands will enable the Company to more effectively allocate capital and other resources. In this regard, the Company is focused on promoting its brands globally and reducing the reliance on local or regional brands.
• The brand that is targeted for rationalization has experienced sales declines, especially in the current year, and management believes it has more effective investment opportunities outside of this brand.

~~As a result of this plan, the Company recognized an impairment charge of $123.1 million related to this product line.~~
• In the third quarter, management decided to rationalize several trademarks and trade names (brands), primarily in the Latin America businesses. The current plan is to reduce the number of brands from 76 to 12 over the next three years.

As a result of this decision, the Company determined that certain brands that were previously considered to have indefinite lives were impaired. Accordingly, the Company wrote these trademarks and tradenames down to their fair value and will begin amortizing these brands over their remaining useful lives (generally three years). As a result of this reclassification, amortization expense is expected to increase by approximately $3 million in 2005. The total impairment charge recognized as a result of the decision to rationalize brands was $37.2 million.

~~Home Fashions~~

Management decided to rationalize certain trademarks and tradenames (brands), primarily in the United Kingdom home fashions business, in order to focus on promoting more effective brands. As a result of this decision the Company determined that these brands became impaired and accordingly, these trademarks and tradenames, as well as certain associated patents, have been written off. The impairment charge associated with this decision was $17.2 million. Additionally, primarily as a result of an increase from the prior year in the discount rate (risk adjusted rate) used in calculating the enterprises’ fair value, an impairment charge of $8.4 million was recorded on goodwill. As of September 30, 2004, there was $23.9 million of goodwill and other indefinite-lived intangible assets relating to this business.

~~Tools & Hardware / Other~~

The impairment charge recorded in the Tools & Hardware and Other segments primarily relates to patents that the Company will allow to expire and fixed assets that are currently held for sale, and accordingly, have been written down to fair value.

~~In the second quarter of 2004, the Company recorded an impairment charge of $25.1 million as follows:~~

• In the first quarter of 2004, the Company began exploring various options for certain businesses and product lines in the Home Fashions and Tools & Hardware reportable segments, including evaluating those businesses for potential sale. As this process progressed, the Company determined that the businesses had a net book value in excess of their fair value. Due to the apparent decline in value, the Company conducted an impairment test in the second quarter and recorded an impairment loss to write the net assets of these businesses and product lines to fair value.
• In 2004, the Company made the decision to exit certain product lines, which resulted in the impairment of fixed assets, primarily in the Cleaning & Organization segment. The Company determined the fair value of the fixed assets by estimating the future cash flows attributable to these fixed assets, including an estimate of the ultimate sale proceeds. Accordingly, the Company recorded a charge to write the assets to their estimated fair value.

The Company cannot predict whether certain events might occur that would adversely affect the reported value of the remaining goodwill and other identifiable intangible assets. Such events may include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on the Company’s customer base, or a material adverse change in its relationship with significant customers. Additionally, increases in the risk adjusted rate could result in additional impairment charges.

~~Note~~Footnote 3 —– Restructuring Costs

In the second quarter of 2004, the Company completed its accounting charges associated with its strategic restructuring plan (the “Plan”) announced on May 3, 2001. The specific objectives of the Plan were to streamline the Company’s supply chain to become the best-cost global provider throughout the Company’s portfolio by reducing worldwide headcount and consolidating duplicative manufacturing facilities. The Company recorded ~~$462~~$461.7 million in restructuring charges under the Plan, including ~~$84.2~~$87.4 million onin discontinued operations. ~~The following analysis excludes the restructuring amounts related to discontinued operations.~~

~~Pre-tax restructuring costs consisted of the following~~~~(in millions)~~:

Three Months Ended
September 30, Nine Months Ended
September 30,
2003
2004
2003
Facility and other exit costs $ 28.6 $ 32.8 $ 56.2
Employee severance and termination benefits 3.7 9.9 53.3
Exited contractual commitments and other — 5.2 —

Recorded as Restructuring Costs $ 32.3 $ 47.9 $ 109.5

Restructuring provisions were determined based on estimates prepared at the time the restructuring actions were approved by management, and also include amounts recognized as incurred. In the second quarter, the Company reduced its restructuring reserve by approximately $10.0 million, primarily as a result of higher proceeds received from fixed asset disposals. Cash paid for restructuring activities was $28.1 million and $16.3 million for the third quarters of 2004 and 2003, respectively. Cash paid for restructuring activities was $68.6 million and $63.4 million in the first nine months of 2004 and 2003, respectively.

~~A summary of the Company’s restructuring plan reserves is as follows~~~~(in millions)~~:

12/31/02 Costs 09/30/03
Balance
Provision
Incurred
Balance
Facility and other exit costs $ 31.4 $ 56.2 ($ 45.6 ) $ 42.0
Employee severance and termination benefits 36.4 53.3 (36.9 ) 52.8

$ 67.8 $ 109.5 ($ 82.5 ) $ 94.8

12/31/03 Costs 09/30/04
Balance
Provision
Incurred
Balance
Facility and other exit costs $ 77.5 $ 32.8 ($ 90.4 ) $ 19.9
Employee severance and termination benefits 61.8 9.9 (56.8 ) 14.9
Exited contractual commitments and other 6.5 5.2 (7.5 ) 4.2

$ 145.8 $ 47.9 ($ 154.7 ) $ 39.0

The facility and other exit cost reserves are primarily related to future minimum lease payments on vacated facilities and other closure costs. The remaining restructuring reserve will require cash payments to settle the liabilities.

Under the Plan, the Company exited 84 facilities and reduced headcount by approximately 12,000. The Company expects total annual savings of between $125 and $150 million ($105 to $115 million related to the reduced headcount, $10 to $20 million related to reduced depreciation, and $10 to $15 million related to other cash savings).

Pre-tax restructuring costs consisted of the following for the three months ended March 31,(in millions):

2005 2004

Facility and other exit costs $ 3.4 $ 13.9
Employee severance and termination benefits 1.5 5.4
Exited contractual commitments and other 1.3 2.3

Recorded as Restructuring Costs $ 6.2 $ 21.6

A summary of the Company’s restructuring plan reserves is as follows(in millions):

2005 2004

Beginning balance at January 1, $ 27.9 $ 145.5
Restructuring costs (provision) 6.2 21.6
Costs incurred (14.4 ) (31.4 )

Ending balance at March 31, $ 19.7 $ 135.7

Restructuring provisions were determined based on estimates prepared at the time the restructuring actions were approved by management, and also include amounts recognized as incurred. Cash paid for restructuring activities was $10.6 million and $15.7 million in the first three months of 2005 and 2004, respectively.

The facility and other exit cost reserves are primarily related to future minimum lease payments on vacated facilities and other closure costs and will require future cash payments.

The following table depicts the changes in accrued restructuring reserves for the ~~nine~~three months ended ~~September 30,~~March 31, aggregated by reportable business segment(in millions):

12/31/04 Costs 03/31/05
Segment Balance Provision Incurred Balance
Cleaning & Organization $ 3.5 $ (0.4 ) $ (0.7 ) $ 2.4
Office Products 12.5 0.6 (3.6 ) 9.5
Tools & Hardware 3.1 4.9 (6.0 ) 2.0
Home Fashions 0.9 (0.4 ) (0.2 ) 0.3
Other 2.3 1.7 (3.1 ) 0.9
Corporate 5.6 (0.2 ) (0.8 ) 4.6

$ 27.9 $ 6.2 $ (14.4 ) $ 19.7

108

~~On January 31,~~During the first quarters of 2005 and 2004, the Company ~~completed the sale of~~reduced its ~~Panex Brazilian low-end cookware division (previously reported in the Other operating segment)~~restructuring reserves by approximately $1.0 million and ~~European picture frames businesses (previously reported in the Home Fashions operating segment).~~

On April 13, 2004, the Company sold substantially all of its U.S. picture frame business (Burnes), its Anchor Hocking glassware business and its Mirro cookware business. Under the terms of the agreement and final adjustments relating to the transaction, the Company retained the accounts receivable of the businesses, and total proceeds, including the retained receivables,$0.6 million, respectively, primarily as a result of a change in estimate on the transaction were $304 million. The Burnes picture frame business was previously reported in the Home Fashions operating segment, while the Anchor Hocking and Mirro businesses were previously reported in the Other operating segment. In September 2004, as partamount of ~~the final adjustments relating~~proceeds to ~~the transaction, the Company recorded an additional loss of approximately $1.0 million on this sale.~~

~~On July 1, 2004, the Company completed~~be received from the sale of ~~Little Tikes Commercial Playground Systems Inc. (“LTCPS”) to PlayPower, Inc.~~fixed assets scheduled for approximately $41 million. LTCPS was previously reported in the Other operating segment, as a unit of the Company’s Little Tikes division. LTCPS is a manufacturer of commercial playground systems and contained playground environments. The Company will retain the consumer portion of its Little Tikes division. The Company recognized a gain on the sale of LTCPS of $14.3 million ($9.6 million, net of tax) in the third quarter of 2004. For the year ended December 31, 2003, LTCPS contributed approximately $60 million of sales to the Company.disposal.

~~The following table summarizes the results of the discontinued operations for the three and nine months ended September 30, 2004~~~~(in millions)~~:

Three Months Ended Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
Net sales $ — $ 215.7 $ 171.2 $ 585.2
Loss from discontinued operations, net of income taxes of ($4.7) million for the three months ended September 30, 2003, and ($3.0) and ($20.9) million for the nine months ended September 30, 2004 and 2003, respectively — ($ 10.3 ) ($ 6.5 ) ($ 43.9 )
Gain/(Loss) on disposal of discontinued operations, net of income taxes of $4.7 million for the three months ended September 30, 2004 $ 8.6 — ($ 90.5 ) —

~~No amounts related to interest expense have been allocated to discontinued operations.~~

~~The following table presents summarized balance sheet information of the discontinued operations as of December 31, 2003 (~~~~in millions~~):

December 31,
2003
Accounts receivable, net $ 45.5
Inventories, net 181.4
Prepaid expenses and other current assets 11.2

Total Current Assets 238.1
Property, plant and equipment, net 152.3
Other assets 1.7

Total Assets $ 392.1

Accounts payable $ 82.8
Other accrued liabilities 45.8

Total Current Liabilities 128.6

Long-term liabilities 1.5

Total Liabilities $ 130.1

~~There were no assets or liabilities attributable to discontinued operations as of September 30, 2004.~~

~~Note 5 – Income Taxes~~

During the nine months ended September 30, 2004, the statute of limitations on certain transactions for which the Company had provided tax reserves, in whole or in part, expired resulting in the reversal of the provisions and interest accrued thereon in the amount of $37.4 million. Accordingly, the impact was recorded in income taxes for the nine months ended September 30, 2004.

In addition, due to significant restructuring activity and certain changes in the Company’s business model affecting the utilization of net operating loss carryovers, particularly in certain European countries, the valuation allowance on certain net operating losses previously tax-benefited has been increased by $31.0 million. This amount was recorded in income taxes for the nine months ended September 30, 2004.

~~Effective March 9, 2004,~~In February 2005, the Company ~~terminated an interest rate swap agreement prior to the scheduled maturity date and received cash~~purchased 550,000 shares of ~~$9.2 million. Of this amount $5.5 million represents the fair value~~5.25% convertible preferred securities (“Preferred Securities”) that were issued by a 100%-owned finance subsidiary of the ~~swap that was terminated~~Company and are fully and unconditionally guaranteed by the ~~remainder represents net interest receivable on~~Company, from a holder for $47.375 per share. In connection with the ~~swap. The cash received relating to~~purchase of these securities, the ~~fair value~~Company negotiated the early retirement of the ~~swap has been~~corresponding junior convertible subordinated debentures with the financing subsidiary. The Company accounted for this transaction as an extinguishment of debt resulting in a net gain of $1.1 million, which was included in Other as an operating activity in the Consolidated Statement of Cash Flows. The unamortized gain on the terminated interest rate swap is accounted for as long-term debt (of which $0.7 million is classified as current). On March 9, 2004, the Company entered into a fixed to floating rate swap that effectively replaced the terminated swap.(income) expense, net.

Effective December 31, 2004, the Company froze its defined benefit pension plan for its entire non-union U.S. workforce. As a result of this curtailment, the Company reduced its pension obligation by $50.3 million and recorded a curtailment gain related to negative prior service cost of $15.8 million in the first quarter of 2005. In conjunction with this action, the Company offered special termination benefits to certain employees that accepted early retirement. The ~~following table presents~~Company replaced the ~~components~~defined benefit pension plan with an additional defined contribution plan, whereby the Company will make additional contributions to the Company sponsored employee’s profit sharing plan. The new defined contribution plan has a five-year cliff-vesting schedule, but allows credit for service rendered prior to the inception of the ~~Company’s pension expense for the nine months ended September 30, (~~~~in millions~~):

United States
International
2004
2003
2004
2003
Service cost-benefits earned during the year $ 31.2 $ 26.3 $ 5.3 $ 6.6
Interest cost on projected benefit obligation 40.4 36.3 14.8 13.5
Expected return on plan assets (49.2 ) (51.3 ) (13.6 ) (13.0 )
Curtailment, settlement cost (1.8 ) — 0.2 —
Actuarial loss 3.4 0.4 1.3 1.2

Net pension expense $ 24.0 $ 11.7 $ 8.0 $ 8.3

defined contribution plan.
The following table presents the components of the Company’s other postretirement benefits expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, (in millions):

Three Months Ended Nine Months Ended
September 30,
September 30,

2004
2003
2004
2003
2005 2004
Service cost-benefits earned during the year $ 1.0 $ 1.2 $ 3.5 $ 3.7 $ 0.9 $ 1.3
Interest cost on projected benefit obligation 3.4 4.0 11.1 12.1 3.7 4.1
Amortization of prior service cost (0.2 ) 0.1 (0.5 ) 0.2 (0.1 ) —
Actuarial loss — — 0.5 — 0.3 0.3

Net pension expense $ 4.2 $ 5.3 $ 14.6 $ 16.0 $ 4.8 $ 5.7

In ~~the third quarter of 2004,~~January 2005, the Company ~~made~~reached agreement with the Internal Revenue Service (IRS) relating to the appropriate treatment of a ~~voluntary $50.0 million cash contribution to fund~~specific transaction reflected on the Company’s ~~pension plan.~~2003 US federal income tax return. The Company requested accelerated review of the transaction under the IRS’ Pre-Filing Agreement Program that resulted in affirmative resolution in late January 2005. A $58.6 million benefit was recorded in income taxes for the three months ended March 31, 2005 related to this issue. The amount was fully reserved as of December 31, 2004.

The calculation of basic and diluted earnings (loss) per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, is shown below(in millions, except per share data):


				“In the		Convertible										Convertible
	Basic			Money”		Preferred		Diluted			Basic			Dilutive		Preferred		Diluted
	Method			Options(1)		Securities(2)		Method			Method			Securities(1)		Securities(2)		Method
Net income	$	75.2			—		—	$	75.2
Earnings per share	$	0.27			—		—	$	0.27

Weighted average shares outstanding		274.4			—		—		274.4

Nine Months Ended September 30, 2004
Loss from continuing operations	($	143.3	)		—		—	($	143.3	)
Loss per share	($	0.52	)		—		—	($	0.52	)

Loss from discontinued operations	($	97.0	)		—		—	($	97.0	)
Loss per share	($	0.35	)		—		—	($	0.35	)

Net loss	($	240.3	)		—		—	($	240.3	)
Loss per share	($	0.88	)		—		—	($	0.88	)

Weighted average shares outstanding		274.4			—		—		274.4

Nine Months Ended September 30, 2003
Three Months Ended March 31, 2005
Income from continuing operations	$	208.9			—		—	$	208.9		$	86.9			—		—	$	86.9
Earnings per share	$	0.76			—		—	$	0.76		$	0.32			—		—	$	0.32

Loss from discontinued operations	($	43.9	)		—		—	($	43.9	)	$	(50.3	)		—		—	$	(50.3	)
Loss per share	($	0.16	)		—		—	($	0.16	)	$	(0.18	)		—		—	$	(0.18	)

Net income	$	165.0			—		—	$	165.0		$	36.6			—		—	$	36.6
Earnings per share	$	0.60			—		—	$	0.60		$	0.13			—		—	$	0.13

Weighted average shares outstanding		274.0			0.3		—		274.3			274.4			0.5		—		274.9

Three Months Ended March 31, 2004
Income from continuing operations											$	33.6			—		—	$	33.6
Earnings per share											$	0.12			—		—	$	0.12

Loss from discontinued operations											$	(108.5	)		—		—	$	(108.5	)
Loss per share											$	(0.40	)		—		—	$	(0.40	)

Net loss											$	(74.9	)		—		—	$	(74.9	)
Loss per share											$	(0.27	)		—		—	$	(0.27	)

Weighted average shares outstanding												274.4			0.1		—		274.5

~~Note 10~~The Company also grants restricted stock awards to directors and certain employees. Generally, these awards are subject to three-year cliff vesting and pay dividends quarterly. As of March 31, 2005, the Company had outstanding restricted stock awards of 0.8 million shares, none of which are vested. Total compensation expense of $1.3 million and $0.7 million was recorded for the three months ended March 31, 2005 and 2004, respectively, related to the restricted shares.

Accumulated other comprehensive loss encompasses foreign currency translation adjustments, net ~~losses~~gains/(losses) on derivative instruments and net minimum pension liability adjustments and is recorded within stockholders’ equity.

The following table displays the components of accumulated other comprehensive loss(in millions):

15Total comprehensive income (loss) amounted to the following for the three months ended March 31,(in millions):

~~Total comprehensive (loss) income amounted to the following~~~~(in millions)~~:

Three Months Ended Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
Net (loss) income ($ 226.4 ) $ 75.2 ($ 240.3 ) $ 165.0
Foreign currency translation (loss) gain 12.6 (15.5 ) 38.2 54.0
After-tax derivatives hedging gain (loss) (3.2 ) 0.5 (11.8 ) 4.0
After-tax minimum pension liability — (0.2 ) — 6.7

Comprehensive (loss) income ($ 217.0 ) $ 60.0 ($ 213.9 ) $ 229.7

~~Note 11~~Footnote 10 — Industry Segments

The Company’s reporting segments reflect the Company’s focus on building large consumer brands, promoting organizational integration, achieving operating efficiencies and aligning the businesses with the Company’s strategic account management strategy. The Company reports its results in five reportable segments as follows:


Segment		Description of Products

Cleaning & Organization		Indoor/outdoor organization, storage, food storage, cleaning, refuse
Office Products		Ballpoint/roller ball pens, markers, highlighters, pencils, office products, art supplies
Tools & Hardware		Hand tools, power tool accessories, industrial tool accessories, manual paint applicators, cabinet hardware, propane torches
Home Fashions		Drapery ~~houseware,~~hardware, window treatments
Other		Operating segments that do not meet aggregation criteria, including aluminum and stainless steel cookware, hair care accessory products, infant and juvenile products, including toys, high chairs, car seats, and strollers

The Company’s segment results are as follows(in millions):


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2004			2003			2004			2003			2005			2004
Net Sales (1)
Cleaning & Organization	$	455.9		$	514.4		$	1,372.0		$	1,504.3		$	341.1		$	405.9
Office Products		424.3			428.7			1,246.3			1,258.8			332.8			332.8
Tools & Hardware		300.6			299.3			875.2			859.5			276.4			274.3
Home Fashions		228.1			223.5			679.1			670.9			198.3			226.8
Other		262.9			263.2			767.3			778.5			245.0			251.0

	$	1,671.8		$	1,729.1		$	4,939.9		$	5,072.0		$	1,393.6		$	1,490.8

Operating (Loss) Income (2)

Operating Income (2)
Cleaning & Organization	$	29.2		$	31.9		$	49.9		$	93.0		$	15.4		$	17.4
Office Products		61.5			69.9			188.7			231.8			33.5			31.8
Tools & Hardware		45.1			53.4			131.6			136.6			26.7			43.0
Home Fashions		15.9			17.5			25.0			30.1			(4.5	)		3.9
Other		24.7			31.2			55.6			74.5			13.3			15.9
Corporate (3)		(10.2	)		(10.9	)		(27.4	)		(24.5	)		(9.5	)		(7.4	)
Impairment Charges (4)		(348.9	)		—			(374.0	)		—
Restructuring Costs ~~(5)~~(4)		—			(32.3	)		(47.9	)		(109.5	)		(6.2	)		(21.6	)

	($	182.7	)	$	160.7		$	1.5		$	432.0		$	68.7		$	83.0

The Company is involved in legal proceedings in the ordinary course of its business. These proceedings include claims for damages arising out of use of the Company’s products, allegations of infringement of intellectual property, commercial disputes and employment related matters, as well as environmental matters. Some of the legal proceedings include claims for punitive as well as compensatory damages, and a few proceedings purport to be class actions.

Although management of the Company cannot predict the ultimate outcome of these legal proceedings with certainty, it believes that the ultimate resolution of the Company’s legal proceedings, including any amounts it may be required to pay in excess of amounts reserved, will not have a material effect on the Company’s financial statements.

In the normal course of business and as part of its acquisition and divestiture strategy, the Company may provide certain representations and indemnifications related to legal, environmental, product liability, tax or other types of issues. Based on the nature of these representations and indemnifications, it is not possible to predict the maximum potential payments under all of these agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements did not have a material effect on the Company’s business, financial condition or results of operation.

~~Note 13 – Subsequent Event~~

~~On October 12, 2004, the Company purchased 825,000 shares of its Preferred Securities from a holder for $43.6875 per share. The Company paid a total of $36 million.~~

On November 4, 2004, the Company declared a quarterly cash dividend of $0.21 per share on the Company’s common stock. The dividend is payable December 3, 2004 to common stockholders of record on November 16, 2004.

1714

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company made ~~significant~~ progress in the first ~~nine months~~quarter of ~~2004~~2005 toward achieving its previously announced ~~2004~~2005 key objectives. The Company’s key objectives for ~~2004,~~2005, and the progress made in the first ~~nine~~three months of ~~2004~~2005 toward achieving such priorities, are highlighted below:

~~1. Continue to divest non-strategic businesses:~~The Company has completed its previously announced plan to divest certain under-performing, non-strategic businesses in order to concentrate on leveraging brand strength and product innovation in its core portfolio of businesses. In January 2004, the Company completed the sale of its Panex Brazilian low-end cookware division and European picture frames businesses. In April 2004, the Company sold substantially all of its U.S. picture frames business (Burnes), its Anchor Hocking glassware business and its Mirro cookware business for total proceeds of approximately $304 million (after final negotiations). On July 1, 2004, the Company completed the sale of Little Tikes Commercial Playground Systems Inc. (“LTCPS”) to PlayPower, Inc. for approximately $41 million. LTCPS is a manufacturer of commercial playground systems and contained playground environments. The Company will retain the consumer portion of its Little Tikes division.
1. Strengthen/Broaden Portfolio:The Company continues to evaluate its current portfolio and intends to pursue acquisition opportunities to complement internal growth. In addition to adding businesses or product lines to the Company’s current portfolio, the Company continues to rationalize low margin product lines that do not fit within the Company’s strategic plan. In January 2005, the Company entered into an agreement for the intended sale of the Company’s Curver business. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for additional information on this transaction. In the first quarter of 2005, the Company exited approximately $60 million in low margin product lines in the Rubbermaid Home Products, Graco, Swish UK, and Office Products businesses.
2. Invest in High Margin Businesses:The Company continues to focus significant resources on enhancing its new product development pipeline, as well as strengthening the Company’s numerous brands through targeted advertising. In the first quarter of 2005, the Company made additional investments in SG&A (primarily in the Office Products and Tools & Hardware segments), which was partially offset by the positive impact of the U.S. pension curtailment (discussed in Footnote 6 to the Consolidated Financial Statements (Unaudited)). The net impact was an increase in SG&A of $4.2 million over the first quarter of 2004.
3. Address Raw Material Inflation:The Company has several businesses that are significantly impacted by commodity inflation. The Company has historically combated these cost increases through organic productivity initiatives. However, due to the continued inflation pressure within several of its core commodity purchases, the Company has implemented price increases to offset a portion of the increased costs. In the first quarter of 2005, the Company experienced raw material inflation of approximately $51 million (primarily in resin and steel), partially offset by pricing increases of approximately $30 million.
4. Reduce Manufacturing Overhead:The Company is committed to reducing its manufacturing costs by at least five percent annually. As a result of the recent divestiture and product line rationalization programs, the Company is focusing on reengineering its manufacturing overhead structure to accommodate its current manufacturing base. In connection with this goal, the Company is committed to deploying and implementing Newell Operational Excellence. The Company delivered approximately $18 million of gross productivity savings, excluding raw material inflation, during the first quarter of 2005.

In connection with these divestitures, the Company recorded an after-tax loss on the sale of these businesses of approximately $91 million in the nine months ending September 30, 2004. Total 2003 sales of the divested businesses were $851.0 million. The divestitures of these businesses are expected to reduce 2004 earnings per share by approximately $0.11 to $0.13, exclusive of the loss to be recognized in 2004. In addition, the divestitures are expected to reduce operating cash flow by $40 to $45 million, annually.

~~2. Complete the 2001 restructuring plan:~~In the second quarter of 2004, the Company completed the accounting charges associated with its 2001 restructuring plan. The 2001 restructuring plan resulted in total charges of $462 million, including previously recognized charges on discontinued operations of $84.2 million. In total, the Company exited 84 facilities and reduced headcount by approximately 12,000. The Company expects total annual savings to be approximately $125 to $150 million as a result of this restructuring program.

~~3. Continue to rationalize low-margin product lines:~~In the first nine months of 2004, the Company exited approximately $200 million in sales of low-margin product lines. The Company will continue to rationalize low-margin product lines throughout 2004. The completion of this program is expected to reduce annual sales by $275 million.

~~4. Deploy Newell Operational Excellence (NWL OPEX):~~The Company is committed to reducing costs by at least 5% annually. In connection with this goal, the Company is committed to deploying and implementing NWL OPEX, which is a methodical process focused on lean manufacturing. It includes installing the right manufacturing and distribution metrics and driving improvement quarter after quarter. In addition to cost reduction, other key components of NWL OPEX are improved quality and service levels and the reduction of inventory and lead times. The Company’s program for driving productivity throughout its manufacturing network gained traction in the first nine months of 2004. The Company delivered approximately $86 million of gross productivity savings during the first nine months of 2004.

1815

Results of Operations

The following table sets forth for the periods indicated items from the Consolidated Statements of Operations as a percentage of net sales(in millions, except percentages):


																					Three Months Ended March 31,
	Three Months Ended September 30,										Nine Months Ended September 30,										2005					2004
	2004					2003					2004					2003
Net sales	$	1,671.8		100.0	%	$	1,729.1		100.0	%	$	4,939.9		100.0	%	$	5,072.0		100.0	%	$	1,393.6		100.0	%	$	1,490.8		100.0	%
Cost of products sold		1,198.5		71.7			1,237.3		71.6			3,571.0		72.3			3,625.0		71.5			1,014.7		72.8			1,086.4		72.9

Gross margin		473.3		28.3			491.8		28.4			1,368.9		27.7			1,447.0		28.5			378.9		27.2			404.4		27.1
Selling, general and administrative expenses		307.1		18.4			298.8		17.3			945.5		19.1			905.5		17.9			304.0		21.8			299.8		20.1
Impairment charges		348.9		20.9			—		—			374.0		7.6			—		—
Restructuring costs		—		—			32.3		1.9			47.9		1.0			109.5		2.2			6.2		0.4			21.6		1.4

Operating (loss) income		(182.7	)	(10.9	)		160.7		9.3			1.5		—			432.0		8.5
Operating income																						68.7		4.9			83.0		5.6
Nonoperating expenses:
Interest expense, net		29.5		1.8			33.1		1.9			90.0		1.8			104.5		2.1			30.8		2.2			30.9		2.1
Other (income) expense, net		(0.8	)	—			1.4		0.1			(3.9	)	(0.1	)		18.6		0.4			(2.3	)	(0.2	)		2.3		0.2

Net nonoperating expenses		28.7		1.7			34.5		2.0			86.1		1.7			123.1		2.4			28.5		2.0			33.2		2.2

(Loss) Income before income taxes		(211.4	)	(12.6	)		126.2		7.3			(84.6	)	(1.7	)		308.9		6.1
Income before income taxes																						40.2		2.9			49.8		3.3
Income taxes		23.6		1.4			40.7		2.4			58.7		1.2			100.0		2.0			(46.7	)	(3.4	)		16.2		1.1

Net (loss) income from continuing operations		(235.0	)	(14.1	)		85.5		4.9			(143.3	)	(2.9	)		208.9		4.1
Income from continuing operations																						86.9		6.2			33.6		2.3

Gain/(Loss) from discontinued operations, net of tax		8.6		0.5			(10.3	)	(0.6	)		(97.0	)	(2.0	)		(43.9	)	(0.9	)
Loss from discontinued operations, net of tax																						(50.3	)	(3.6	)		(108.5	)	(7.3	)

Net (loss) income	($	226.4	)	(13.5	)%	$	75.2		4.3	%	($	240.3	)	(4.9	)%	$	165.0		3.3	%
Net income (loss)																					$	36.6		2.6	%		($74.9	)	(5.0	)%

Three Months Ended ~~September 30, 2004~~March 31, 2005 vs. Three Months Ended ~~September 30, 2003~~March 31, 2004

Net sales for the three months ended ~~September 30, 2004 (third~~March 31, 2005 (first quarter) were ~~$1,671.8~~$1,393.6 million, representing a decrease of ~~$57.3~~$97.2 million, or ~~3.3%~~6.5%, from ~~$1,729.1~~$1,490.8 million in the comparable quarter of ~~2003.~~2004. The decrease resulted from ~~product line rationalization of $75 million, or 4.3%, and~~ a decline in core sales of ~~$15~~$91 million, or ~~0.9%~~6.1%, and product line rationalization of $60 million, or 4.0%. These were partially offset by favorable foreign currency translation of ~~$30~~$24 million, or ~~1.7%,~~1.6% of net sales, and favorable pricing of $3$30 million, or ~~0.2%,~~2.0% of net sales, for the quarter. Approximately two thirds of the core sales decline occurred in the Cleaning & Organization segment, primarily in the Rubbermaid Home Products business, resulting from the aggressive pricing required to offset resin inflation. The remaining one third of the core sales decline occurred in the European Home Fashion business, primarily due to the soft economic environment in Germany and market share losses to private label suppliers in the opening price point drapery hardware product lines.

Gross margin, as a percentage of net sales, in the ~~third~~first quarter of ~~2004~~2005 was ~~28.3%~~27.2%, or ~~$473.3~~$378.9 million, versus ~~28.4%~~27.1%, or ~~$491.8~~$404.4 million, in the comparable quarter of ~~2003.~~2004. The ~~decline~~increase in gross margin percentage is primarily related to ~~raw material inflation of $31 million. This was partially offset by~~ favorable pricing of $3$30 million, or ~~0.2%,~~2.0% of net sales, and a favorable mix driven by new products and the rationalization of unprofitable product ~~lines, primarily~~lines. The decrease in the ~~Rubbermaid Home Products~~gross margin amount was caused primarily by the decrease in net sales noted above. Raw material inflation of $51 million (primarily in resin and ~~Eldon Office Products businesses. Gross~~steel) was mostly offset by favorable pricing of $30 million and gross productivity of $18 million in the ~~quarter of $29 million was partially offset by restructuring related costs of $15 million.~~quarter.

Selling, general and administrative expenses (SG&A) in the ~~third~~first quarter of ~~2004~~2005 were ~~18.4%~~21.8% of net sales, or ~~$307.1~~$304.0 million, versus ~~17.3%~~20.1%, or ~~$298.8~~$299.8 million, in the comparable quarter of ~~2003.~~2004. The ~~increase in SG&A reflects a foreign~~

~~currency~~positive impact of ~~$7 million and~~the U.S. pension ~~cost increases of $4 million. All other SG&A was essentially flat with streamlining initiatives offsetting continued investments in the business.~~

The Company recorded a non-cash pretax impairment charge of $348.9 million (332.8 million, net of tax) in the third quarter of 2004. These charges were required to write-down certain assets to fair value. See Note 2plan curtailment (see Footnote 6 to the Consolidated Financial Statements (Unaudited) for further information) was more than offset by foreign currency and additional ~~information.~~investment in the Office Products and Tools & Hardware segments.

The Company recorded pre-tax strategic restructuring charges of ~~$32.3~~$6.2 million in the ~~third~~first quarter of ~~2003.~~2005, compared to $21.6 million in the prior year. The 2005 pre-tax charge included ~~$28.6~~$3.4 million of facility and other exit costs, ~~and $3.7~~$1.5 million of employee severance and termination ~~benefits.~~benefits and $1.3 million of exited contractual commitments and other restructuring costs. The 2004 pre-tax charge included $13.9 million of facility and other exit costs, $5.4 million of employee severance and termination benefits and $2.3 million of exited contractual commitments and other restructuring costs. See ~~Note~~Footnote 3 to the Consolidated Financial Statements (Unaudited) for further information on the ~~strategic~~ restructuring plan.

Operating ~~(loss)~~ income in the ~~third~~first quarter of ~~2004~~2005 was ~~($182.7)~~$68.7 million, or ~~(10.9%)~~4.9% of net sales, versus ~~operating income of $160.7~~$83.0 million, or ~~9.3%~~5.6%, in the comparable quarter of ~~2003.~~2004. The decrease in operating margins iswas the result of the factors described above.

Net nonoperating expenses in the ~~third~~first quarter of ~~2004~~2005 were ~~1.7%~~2.0% of net sales, or ~~$28.7~~$28.5 million, versus ~~2.0%,~~2.2% of net sales, or ~~$34.5~~$33.2 million, in the comparable quarter of ~~2003. Net~~2004. The reduction in net nonoperating expenses is mainly attributable to gains recognized in 2005 on the sale of property, plant and equipment. Additionally, net interest expense decreased ~~$3.6~~$0.1 million for the ~~third~~first quarter of 2005 compared to the first quarter of 2004 ~~compared to the third quarter of 2003~~primarily as a result of ~~lower average~~cash generated from operations and divestitures which lowered debt ~~outstanding, partially~~and increased cash balances, mostly offset by ~~increased~~higher interest rates.

The effective tax rate was ~~(11.2)%~~(116.2%) in the ~~third~~first quarter of ~~2004~~2005 versus ~~32.3%~~32.5% in the ~~third~~first quarter of ~~2003.~~2004. The change in the effective tax rate is primarily related to the ~~non-deductibility associated~~$58.6 million income tax benefit recorded in the first quarter of 2005 resulting from the resolution of a tax contingency with ~~a portion~~the Internal Revenue Service. See Footnote 7 to the Consolidated Financial Statements (Unaudited) for further information.

Income from continuing operations for the first quarter of 2005 was $86.9 million, compared to $33.6 million in the ~~Company’s $348.9~~first quarter of 2004. Diluted earnings per share from continuing operations were $0.32 in the first quarter of 2005 compared to $0.12 in the first quarter of 2004.

The loss recognized from discontinued operations for the first quarter of 2005 was $50.3 million, ~~impairment charge.~~net of tax, compared to $108.5 million, net of tax, in the first quarter of 2004. Diluted loss per share from discontinued operations was $0.18 in the first quarter of 2005 compared to $0.40 in the first quarter of 2004. See ~~Notes~~Footnote 2 ~~and 5~~ to the Consolidated Financial Statements (Unaudited) for further information.

Net ~~(loss)~~ income ~~from continuing operations~~(loss) for the ~~third~~first quarter of ~~2004~~2005 was ~~($235.0)~~$36.6 million, compared to ~~$85.5~~($74.9) million in the ~~third~~first quarter of ~~2003. Diluted (loss) earnings per share from continuing operations were ($0.86) in the third quarter of 2004 compared to $0.31 in the third quarter of 2003.~~

~~The net gain recognized from discontinued operations for the third quarter of 2004 was $8.6 million, net of tax, compared to a net loss of $10.3 million, net of tax, in the third quarter of 2003.~~2004. Diluted earnings (loss) per share ~~from discontinued operations~~ was ~~$0.03~~$0.13 in the ~~third~~first quarter of ~~2004~~2005 compared to ($~~0.04)~~0.27) in the ~~third~~first quarter of ~~2003. See Note 4 to the Consolidated Financial Statements (Unaudited) for further information.~~

Net (loss) income for the third quarter of 2004 was ($226.4) million, compared to $75.2 million in the third quarter of 2003. Diluted (loss) earnings per share was ($0.83) in the third quarter of 2004 compared to $0.27 in the third quarter of 2003.2004.

Business Group Operating Results:

Net sales by reportable segment were as follows for the three months ended ~~September 30,~~March 31, (in millions, except percentages):


	2004		2003		% Change			2005		2004		% Change
Cleaning & Organization	$	455.9	$	514.4		(11.4	)%	$	341.1	$	405.9		(16.0	)%
Office Products		424.3		428.7		(1.0	)		332.8		332.8		—
Tools & Hardware		300.6		299.3		0.4			276.4		274.3		0.8
Home Fashions		228.1		223.5		2.1			198.3		226.8		(12.6	)
Other		262.9		263.2		(0.1	)		245.0		251.0		(2.4	)

Total Net Sales (1)	$	1,671.8	$	1,729.1		(3.3	)%	$	1,393.6	$	1,490.8		(6.5	)%

Operating income by segment was as follows for the three months ended ~~September 30,~~March 31, (in millions, except percentages):

(3)		~~Impairment charges~~Restructuring costs have been presented separately in this table; refer to ~~Note 2~~Footnote 3 to the Consolidated Financial Statements (Unaudited) for a breakout of the charge by reportable segment.

(4)		~~Restructuring costs have been presented separately in this table; refer to Note 3 to the Consolidated Financial Statements (Unaudited) for a breakout of the charge by reportable segment.~~

~~(5)~~		Operating income is net sales less cost of products sold, selling, general and administrative expenses, ~~impairment charges~~ and restructuring costs. Certain headquarters expenses of an operational nature are allocated to business segments and geographic areas primarily on a net sales basis.

Cleaning & Organization

Net sales for the ~~third~~first quarter of ~~2004~~2005 were ~~$455.9~~$341.1 million, a decrease of ~~$58.5~~$64.8 million, or ~~11.4%~~16.0%, from ~~$514.4~~$405.9 million in the ~~third~~first quarter of ~~2003,~~2004, driven primarily by ~~a decline~~the planned low margin product line exits in the Rubbermaid Home Products business ~~due~~and reduced volumes caused by the recent price increase action taken to ~~planned product line rationalization in certain low margin product lines.~~offset raw material inflation. These factors were partially offset by favorable pricing and foreign currency translation.

Operating income for the ~~third~~first quarter of ~~2004~~2005 was ~~$29.2~~$15.4 million, a decrease of ~~$2.7~~$2.0 million, or ~~8.5%~~11.5%, from ~~$31.9~~$17.4 million in the ~~third~~first quarter of ~~2003.~~2004. The decrease in operating income is the result of higher raw material costs and lost absorption in manufacturing facilities as a result of lower production volumes, partially offset by ~~favorable pricing,~~gross productivity and ~~mix.~~favorable pricing.

Office Products

Net sales for the ~~third~~first quarter of 2005 and 2004 were ~~$424.3 million, a decrease~~$332.8 million. Successful implementation of ~~$4.4 million, or 1.0%, from $428.7 million in the third quarter of 2003, driven primarily by the exit of certain low margin resin based~~new products ~~in the Eldon office products business, partially offset by a mid single digit sales increase~~ in the writing instruments ~~business.~~business (Sharpie® Retractables, Sharpie® Mini permanent markers, Accent® highlighters, Papermate® Flexgrip Elite pens) were offset by sales declines in the European fine writing business and everyday writing business in the United States.

Operating income for the ~~third~~first quarter of 2005 was $33.5 million, an increase of $1.7 million, or 5.3%, from $31.8 million in the first quarter of 2004, ~~was $61.5 million,~~as a ~~decrease~~result of ~~$8.4 million, or 12.0%, from $69.9 million in the third quarter of 2003, driven~~productivity and favorable pricing, partially offset by raw material inflation ~~the sales decrease at Eldon~~ and ~~an increase~~increased investment in SG~~&A spending. These were partially offset by a mid single digit sales increase in the writing instruments business.~~&A.

Tools & Hardware

Net sales for the ~~third~~first quarter of ~~2004~~2005 were ~~$300.6~~$276.4 million, an increase of ~~$1.3~~$2.1 million, or ~~0.4%~~0.8%, from ~~$299.3~~$274.3 million in the ~~third~~first quarter of ~~2003,~~2004, driven by ~~the impact of positive currency translation and a sales increase~~increases in the ~~Lenox business.~~LENOX and BernzOmatic businesses, partially offset by declines in the Amerock and IRWIN Power Tools Accessories businesses.

Operating income for the ~~third~~first quarter of ~~2004~~2005 was ~~$45.1~~$26.7 million, a decrease of ~~$8.3~~$16.3 million, or ~~15.5%~~37.9%, from ~~$53.4~~$43.0 million in the ~~third~~first quarter of ~~2003,~~2004, driven by ~~increases in raw material costs, particularly steel, and~~ restructuring related ~~costs.~~costs at the Amerock and IRWIN businesses and continued investments in SG&A in the tools business.

Home Fashions

Net sales for the ~~third~~first quarter of ~~2004~~2005 were ~~$228.1 million, an increase of $4.6 million, or 2.1%, from $223.5 million in the third quarter of 2003, driven by favorable currency translation.~~

~~Operating income for the third quarter of 2004 was $15.9~~$198.3 million, a decrease of ~~$1.6~~$28.5 million, or ~~9.1%~~12.6%, from ~~$17.5~~$226.8 million in the ~~third~~first quarter of ~~2003.~~2004, driven by planned product line exits primarily in the Douglas Kane UK business, and core sales declines in the European Home Fashions business, partially offset by favorable foreign currency translation.

Operating (loss) income for the first quarter of 2005 was ($4.5) million, a decrease of $8.4 million, from $3.9 million in the first quarter of 2004. The decrease in operating income was due primarily to ~~an increase in~~lower sales, raw materials ~~costs,~~inflation and the liquidation of Douglas Kane, partially offset by ~~productivity.~~productivity gains.

21Other

Net sales for the first quarter of 2005 were $245.0 million, a decrease of $6.0 million, or 2.4%, from $251.0 million in the first quarter of 2004. The decline is primarily the result of product line exits in the Graco business, partially offset by favorable pricing and foreign currency translation.

~~Other~~

~~Net sales~~Operating income for the ~~third~~first quarter of ~~2004 were $262.9~~2005 was $13.3 million, a decrease of ~~$0.3~~$2.6 million, or ~~0.1%~~16.4%, from ~~$263.2~~$15.9 million in the ~~third~~first quarter of ~~2003. Sales increases at Little Tikes due to new product introductions were offset by declines in the Graco and European Cookware businesses.~~

~~Operating income for the third quarter of~~ 2004, ~~was $24.7 million, a decrease of $6.5 million, or 20.8%, from $31.2 million in the third quarter of 2003,~~ driven primarily by raw material inflation and ~~increased SG&A spending in the Little Tikes business.~~

~~Nine Months Ended September 30, 2004 vs. Nine Months Ended September 30, 2003~~

~~Consolidated Operating Results:~~

Net sales for the nine months ended September 30, 2004 were $4,939.9 million, representing a decrease of $132.1 million, or 2.6%, from $5,072.0 million in the comparable period of 2003. The decrease resulted from product line rationalization of approximately $200 million, or 3.9%, and unfavorable pricing of $24 million, or 0.5%, partially offset by favorable foreign currency translation of $115 million, or 2.3%, for the period.

Gross margin as a percentage of net sales for the nine months ended September 30, 2004 was 27.7%, or $1,368.9 million, versus 28.5%, or $1,447.0 million, in the comparable period of 2003. The decline in gross margin is primarily related to unfavorable pricing of $24 million, or 0.4 points, and raw material inflation of $70 million, partially offset by favorable mix driven by the rationalization of unprofitable product lines, primarily in the Rubbermaid Home Products business. Gross productivity of $86 million was largely offset by restructuring related costs of $66 million.

Selling, general and administrative expenses (SG&A) for the nine months ended September 30, 2004 were 19.1% of net sales, or $945.5 million, versus 17.9%, or $905.5 million, in the comparable period of 2003. The increase in SG&A reflects a foreign currency impact of $31 million and pension cost increases of $12 million. All other SG&A was essentially flat with streamlining initiatives offsetting continued investments in the business.

The Company recorded total non-cash pretax impairment charges of $374.0 million for the nine months ended September 30, 2004. These charges were required to write certain assets to fair value. See Note 2 to the Consolidated Financial Statements (Unaudited) for additional information.

The Company recorded pre-tax strategic restructuring charges of $47.9 million and $109.5 million for the nine months ended September 30, 2004 and 2003, respectively. The 2004 pre-tax charge included $32.8 million of facility and other exit costs, $9.9 million of employee severance and termination benefits, and $5.2 million in other restructuring costs. The 2003 pre-tax charge included $56.2 million of facility and other exit costs and $53.3 million of employee severance and termination benefits. See Note 3 to the Consolidated Financial Statements (Unaudited) for further information on the strategic restructuring plan.

Operating income for the nine months ended September 30, 2004 was $1.5 million, versus $432.0 million, or 8.5% of net sales in the comparable period of 2003. The decrease in operating margins is the result of the factors described above.

Net nonoperating expenses for the nine months ended September 30, 2004 were 1.7% of net sales, or $86.1 million, versus 2.4%, or $123.1 million, in the comparable period of 2003. In March 2003, the Company recognized a $21.2 million non-cash pre-tax loss on the sale of the Cosmolab business. Net interest expense decreased $14.5 million for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003 as a result of lower average debt outstanding, partially offset by increased interest rates.

The effective tax rate was (69.4)% for the nine months ended September 30, 2004 versus 32.4% for the nine months ended September 30, 2003. The change in the effective tax rate is primarily related to the non-deductibility associated with a portion of the Company’s $374.0 million impairment charge. See Notes 2 and 5 to the Consolidated Financial Statements (Unaudited) for further information.

Net (loss) income from continuing operations for the nine months ended September 30, 2004 was ($143.3) million, compared to $208.9 million for the nine months ended September 30, 2003. Diluted (loss) earnings per share from continuing operations was ($0.52) for the nine months ended September 30, 2004 compared to $0.76 for the nine months ended September 30, 2003.

The net loss recognized from discontinued operations for the nine months ended September 30, 2004 was $97.0 million, net of tax, compared to $43.9 million, net of tax, for the nine months ended September 30, 2003. Diluted loss per share from discontinued operations was ($0.35) for the nine months ended September 30, 2004 compared to ($0.16) for the nine months ended September 30, 2003. See Note 4 to the Consolidated Financial Statements (Unaudited) for further information.

Net (loss) income for the nine months ended September 30, 2004 was ($240.3) million, compared to $165.0 million for the nine months ended September 30, 2003. Diluted (loss) earnings per share was ($0.88) for the nine months ended September 30, 2004 compared to $0.60 for the nine months ended September 30, 2003.

~~Business Segment Operating Results:~~

~~Net sales by reportable segment were as follows for the nine months ended September 30, (~~~~in millions~~):

2004
2003
% Change
Cleaning & Organization $ 1,372.0 $ 1,504.3 (8.8 )%
Office Products 1,246.3 1,258.8 (1.0 )
Tools & Hardware 875.2 859.5 1.8
Home Fashions 679.1 670.9 1.2
Other 767.3 778.5 (1.4 )

Total Net Sales (1) $ 4,939.9 $ 5,072.0 (2.6 )%

~~Operating income by segment was as follows for the nine months ended September 30, (~~~~in millions~~):

2004
2003
% Change
Cleaning & Organization $ 49.9 $ 93.0 (46.3 )%
Office Products 188.7 231.8 (18.6 )
Tools & Hardware 131.6 136.6 (3.7 )
Home Fashions 25.0 30.1 (16.9 )
Other 55.6 74.5 (25.4 )
Corporate Costs (2) (27.4 ) (24.5 )
Impairment Charges (3) (374.0 ) —
Restructuring Costs (4) (47.9 ) (109.5 )

Total Operating Income (5) $ 1.5 $ 432.0 (99.7 )%

~~(1)~~		All intercompany transactions have been eliminated. Sales to one customer amounted to approximately 14.3% of consolidated net sales, excluding discontinued operations, in the first nine months of 2004 and 2003. Sales to no other customer exceeded 10% of consolidated net sales for either period.

~~(2)~~		~~Corporate operating expenses consist primarily of administrative costs that cannot be allocated to a particular segment.~~

~~(3)~~		~~Impairment charges have been presented separately in this table; refer to Note 2 to the Consolidated Financial Statements (Unaudited) for a breakout of the charge by reportable segment.~~

~~(4)~~		~~Restructuring costs have been presented separately in this table; refer to Note 3 to the Consolidated Financial Statements (Unaudited) for a breakout of the charge by reportable segment.~~

~~(5)~~		Operating income is net sales less cost of products sold, selling, general and administrative expenses, impairment charges and restructuring costs. Certain headquarters expenses of an operational nature are allocated to business segments and geographic areas primarily on a net sales basis.

~~Cleaning & Organization~~

Net sales for the nine months ended September 30, 2004 were $1,372.0 million, a decrease of $132.3 million, or 8.8%, from $1,504.3 million in the comparable period of 2003, driven primarily by a decline in the Rubbermaid Home Products business due to planned product line rationalizations in low-margin products.

Operating income for the nine months ended September 30, 2004 was $49.9 million, a decrease of $43.1 million, or 46.3%, from $93.0 million in the comparable period of 2003. The decrease in operating income is the result of higher raw material costs, lost absorption in manufacturing facilities and restructuring related charges.

~~Office Products~~

Net sales for the nine months ended September 30, 2004 were $1,246.3 million, a decrease of $12.5 million, or 1.0%, from $1,258.8 million in the comparable period of 2003, driven primarily by the exit of low margin resin based products in the Eldon office products business.

~~Operating income for the nine months ended September 30, 2004 was $188.7 million, a decrease of $43.1 million, or 18.6%, from $231.8 million in the comparable period of 2003, driven by lower sales,~~ restructuring related costs in the ~~European writing instruments~~Graco business, ~~raw material inflation, primarily in resin costs in the Eldon office products division, and other cost inflation.~~

~~Tools & Hardware~~

Net sales for the nine months ended September 30, 2004 were $875.2 million, an increase of $15.7 million, or 1.8%, from $859.5 million in the comparable period of 2003. The increase in net sales was driven by increases in the Lenox and BernzOmatic businesses.

Operating income for the nine months ended September 30, 2004 was $131.6 million, a decrease of $5.0 million, or 3.7%, from $136.6 million in the comparable period of 2003. The decrease in operating income was related to increases in raw material costs, particularly steel, restructuring related costs and increased SG&A spending, partially offset by ~~the sales increases described above~~favorable pricing and ~~strong~~ productivity.

~~Home Fashions~~

Net sales for the nine months ended September 30, 2004 were $679.1 million, an increase of $8.2 million, or 1.2%, from $670.9 million in the comparable period of 2003. The increase in net sales was driven primarily by favorable foreign currency fluctuation.

Operating income for the nine months ended September 30, 2004 was $25.0 million, a decrease of $5.1 million, or 16.9%, from $30.1 million in the comparable period of 2003. The decrease in operating income was due to increases in raw material costs and lower pricing, partially offset by productivity.

~~Other~~

Net sales for the nine months ended September 30, 2004 were $767.3 million, a decrease of $11.2 million, or 1.4%, from $778.5 million in the comparable period of 2003. The decrease in net sales was primarily attributable to the sale of Cosmolab in March 2003, which contributed $10 million in sales in the first quarter of 2003.

Operating income for the nine months ended September 30, 2004 was $55.6 million, a decrease of $18.9 million, or 25.4%, from $74.5 million in the comparable period of 2003. The decrease in operating income was due primarily to raw material inflation and increased SG&A spending in the Little Tikes business.

Liquidity and Capital Resources

Cash and cash equivalents ~~increased~~decreased by ~~$210.1~~$75.8 million and $92.5 million for the ~~nine~~three months ended ~~September 30, 2004.~~March 31, 2005 and 2004, respectively. The change in cash and cash equivalents is as follows for the ~~nine~~three months ended ~~September 30,~~March 31, (in millions):

2004
2003
Cash provided by operating activities $ 421.8 $ 420.5
Cash provided by/(used in) investing activities 191.0 (696.9 )
Cash (used in)/provided by financing activities (402.4 ) 296.8
Exchange effect on cash and cash equivalents (0.3 ) 1.6

Increase in cash and cash equivalents $ 210.1 $ 22.0

2005 2004

Cash provided by/(used in) operating activities $ 55.5 ($6.7 )
Cash used in investing activities (40.5 ) (20.1 )
Cash used in financing activities (87.2 ) (64.8 )
Exchange effect on cash and cash equivalents (3.6 ) (0.9 )

Decrease in cash and cash equivalents ($75.8 ) ($92.5 )

Sources:

The Company’s primary sources of liquidity and capital resources include cash provided from operations and use of available borrowing facilities.

Cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2004~~March 31, 2005 was ~~$421.8~~$55.5 million compared to ~~$420.5~~a use of $6.7 million for the comparable period of ~~2003.~~2004. The increase in cash provided from operating activities was primarily due to ~~an increase in earnings before non-cash charges of $58.9 million (as shown in the following table), mostly offset by a reduction in the year over year improvement in~~improved working capital and ~~other assets in 2004 compared to 2003, which used an additional $22.1 million, and a reduction in~~lower cash ~~received from the termination of certain interest rate swap arrangements.~~

~~The following table reconciles earnings before non-cash charges to net (loss) income as of September 30, (~~~~in millions~~):

2004
2003
Change
Net (loss)/income ($ 240.3 ) $ 165.0
Depreciation and amortization 185.4 186.5
Impairment charges 374.0 —
Non-cash restructuring charges 25.3 73.0
Deferred income taxes 85.1 9.6
(Gain)/loss on sale of assets/business (6.5 ) 20.5
Loss on discontinued businesses 90.5 —

Earnings before non-cash charges $ 513.5 $ 454.6 $ 58.9

spent for restructuring.
The Company ~~did not renew its $650.0 million 364-day Syndicated Revolving Credit Agreement, which expired on its scheduled maturity date of June 11, 2004. The Company’s~~has a $650.0 million five-year Syndicated Revolving Credit Agreement (the “Revolver”) that is scheduled to expire in June ~~2007 remains in place.~~2007. At ~~September 30, 2004,~~March 31, 2005, there were no borrowings under the Revolver.
In lieu of borrowings under the Revolver, the Company may issue up to $650.0 million of commercial paper. The Revolver provides the committed backup liquidity required to issue commercial paper. Accordingly, commercial paper may only be issued up to the amount available for borrowing under the Revolver. At ~~September 30, 2004,~~March 31, 2005, no commercial paper was outstanding.
The Revolver permits the Company to borrow funds on a variety of interest rate terms. The Revolver requires, among other things, that the Company maintain certain Interest Coverage and Total Indebtedness to Total Capital Ratio, as defined in the agreement. The agreement also limits Subsidiary Indebtedness. As of ~~September 30, 2004,~~March 31, 2005, the Company was in compliance with this agreement.
In the first ~~nine~~three months of ~~2004,~~2005, the Company received proceeds from the issuance of debt of ~~$21.3~~$1.9 million compared to ~~$1,040.5~~$9.7 million in the year ago period.
In the first ~~nine~~three months of ~~2004,~~2005, the Company received cash proceeds of ~~$289.2~~$12.9 million related to the sale of businesses and other non-current assets, compared to ~~$10.2~~$16.5 million in the year ago period. ~~The Company used~~See Footnote 2 to the ~~proceeds from~~Consolidated Financial Statements (Unaudited) for a discussion of the ~~sale~~intended disposal of ~~these businesses~~Curver, expected to ~~reduce its commercial paper borrowings.~~be completed in the second quarter.
Uses:
The Company’s primary uses of liquidity and capital resources include acquisitions, payments on notes payable and long-term debt, dividend payments and ~~capital expenditures.~~expenditures for property, plant and equipment.
In the first ~~nine months~~quarter of ~~2004,~~2005, the Company ~~made payments for~~spent $30.3 million associated with an acquisition. The Company did not make any significant acquisitions during 2004, as the priority was the reduction of ~~$3.0 million, compared to $460.0 million used in the first nine months of 2003 relating to the acquisition of Lenox.~~debt.
19

Cash used for restructuring activities was ~~$68.6~~$10.6 million and ~~$63.4~~$15.7 million in the first ~~nine~~three months of 2005 and 2004, ~~and 2003,~~ respectively. ~~Such cash~~These payments ~~represent~~relate primarily to employee termination benefits.

~~Capital expenditures~~Expenditures for property, plant and equipment were ~~$95.2~~$23.1 million and ~~$247.1~~$36.6 million in the first ~~nine~~three months of ~~2004~~2005 and ~~2003,~~2004, respectively. The ~~reduction in~~Company is focused on capital ~~expenditures is largely due~~spending discipline and expects to ~~the Company’s decision to reduce capital investment in the Rubbermaid Home Products business, where capital expenditures decreased from $69.6~~spend between $125 and $150 million in ~~the first nine months of 2003 to $7.8 million in the first nine months of 2004.~~2005.

Aggregate dividends paid were ~~$173.2~~$58.0 million and ~~$173.1~~$57.7 million in the first ~~nine~~three months of 2005 and 2004, ~~and 2003,~~ respectively.

~~In the third quarter of 2004, the Company made a voluntary $50.0 million cash contribution to fund the Company’s pension plan.~~

Retained earnings decreased in the first ~~nine~~three months of ~~2004~~2005 by ~~$413.5~~$21.4 million. The reduction in retained earnings is due to cash dividends paid on common stock, ~~and~~offset by the current year net ~~loss.~~income.

Working capital at ~~September 30, 2004~~March 31, 2005 was ~~$923.4~~$1,155.4 million compared to ~~$978.2~~$1,141.1 million at December 31, ~~2003.~~2004. The current ratio at ~~September 30, 2004~~March 31, 2005 was ~~1.47:~~1.71:1 compared to ~~1.48:~~1.61:1 at December 31, ~~2003.~~2004. The ~~reduction~~increase in working capital is due to the ~~use~~reduction of ~~cash to pay down commercial paper~~income taxes payable and ~~the collection~~other accrued liabilities, primarily as a result of ~~accounts receivable, partially offset by seasonal inventory build.~~spending on previously announced restructuring plans.

Total debt to total capitalization (total debt is net of cash and cash equivalents, and total capitalization includes total debt and stockholders’ equity) was ~~.59:~~.56:1 at ~~September 30, 2004~~March 31, 2005 and ~~.58:~~.55:1 at December 31, ~~2003.~~2004.

~~On October 12, 2004,~~In May 2005, the Company ~~purchased 825,000 shares of its Preferred Securities from a holder for $43.6875 per share. The Company paid a total of $36 million.~~

~~On November 4, 2004, the Company declared~~expects to declare a quarterly cash dividend of $0.21 per share on the Company’s common ~~stock. The dividend is~~stock, payable ~~December 3, 2004 to common stockholders of record on November 16, 2004.~~in the second quarter.

The Company believes that cash provided from operations and available borrowing facilities will continue to provide adequate support for the cash needs of existing businesses on a short-term basis; however, certain events, such as significant acquisitions, could require additional external financing on a long-term basis.

~~Minimum Pension Liability~~

In accordance with Financial Accounting Standards Board (FASB) Statement No. 87, Employers’ Accounting for Pensions, the Company expects to record an additional minimum pension liability adjustment at December 31, 2004. Based on September 30, 2004 pension values, the approximate effect of this non-cash adjustment would be to increase the pension liability by approximately $0 to $30 million, with a corresponding charge to equity, net of taxes of approximately $0 to $20 million. The direct charge to stockholders’ equity would not affect net income, but would be included in other comprehensive income. The Company believes that its pension plan has the appropriate long-term investment strategy and the Company’s liquidity position is expected to remain strong.

Market Risk

The Company’s market risk is impacted by changes in interest rates, foreign currency exchange rates and certain commodity prices. Pursuant to the Company’s policies, natural hedging techniques and derivative financial instruments may be utilized to reduce the impact of adverse changes in market prices. The Company does not hold or issue derivative instruments for trading purposes.

The ~~Company’s primary market risk is foreign exchange and interest rate exposure.~~

~~The~~ Company manages interest rate exposure through its conservative debt ratio target and its mix of fixed and floating rate debt. Interest rate swaps may be used to adjust interest rate exposures when appropriate based on market conditions, and, for qualifying hedges, the interest differential of swaps is included in interest expense.

The Company purchases certain raw materials, ~~that~~including resin, steel and aluminum, which are subject to price volatility caused by unpredictable factors. While future movements of raw material costs are uncertain, a variety of programs, including periodic raw material purchases, purchases of raw materials for future delivery and customer price adjustments help the Company address this risk. Generally, the Company does not use derivatives to manage the volatility related to this risk.

The amounts shown below represent the estimated potential economic loss that the Company could incur from adverse changes in either interest rates or foreign exchange rates using the value-at-risk estimation model. The value-at-risk model uses historical foreign exchange rates and interest rates to estimate the volatility and correlation of these rates in future periods. ~~This model~~It estimates a loss in fair market value using statistical modeling techniques that are based on a variance/covariance approach and includes substantially all market risk exposures (specifically excluding equity-method investments). The fair value losses shown in the table below have no impact on results of operations or financial condition, ~~at September 30, 2004~~but are shown as ~~they represent hypothetical, not realized losses.~~an illustration of the impact of potential adverse changes in interest rates. The following table indicates the calculated amounts for the ~~nine~~three months ended ~~September 30,~~March 31, (in millions, except percentages):


	2004				2003							2005				2004
	Nine				Nine							Three				Three
	Month		September 30,		Month		September 30,		Confidence			Month		March 31,		Month		March 31,		Confidence
	Average		2004		Average		2003		Level			Average		2005		Average		2004		Level
Interest rates	$	12.3	$	11.3	$	22.4	$	21.1		95	%	$	9.9	$	9.9	$	12.4	$	12.4		95	%
Foreign exchange	$	2.3	$	1.6	$	1.2	$	1.1		95	%	$	1.5	$	1.5	$	3.4	$	3.4		95	%

The 95% confidence interval signifies the Company’s degree of confidence that actual losses would not exceed the estimated losses shown above. The amounts shown here disregard the possibility that interest rates and foreign currency exchange rates could move in the Company’s favor. The value-at-risk model assumes that all movements in these rates will be adverse. Actual experience has shown that gains and losses tend to offset each other over time, and it is highly unlikely that the Company could experience losses such as these over an extended period of time. These amounts should not be considered projections of future losses, because actual results may differ significantly depending upon activity in the global financial markets.

Forward-looking statements in this Report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to, but are not limited to, ~~such matters as~~information or assumptions about sales ~~income,~~(including pricing), income/(loss), earnings per share, return on equity, return on invested capital, capital expenditures, working capital, cash flow, dividends, capital structure, debt to capitalization ratios, interest rates, internal growth rates, ~~impacts~~restructuring, impairment and other charges, potential losses on divestitures, impact of changes in accounting standards, pending legal proceedings and claims (including environmental matters), future economic performance, operating income improvements, costs and cost savings (including raw material inflation, productivity and streamlining), synergies, management’s plans, goals and objectives for future operations and growth or the assumptions relating to any of the forward-looking statements. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results could differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, those matters set forth in this Report and Exhibit 99.1 to this Report.

The information required by this item is incorporated herein by reference to the section entitled “Market Risk” in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~and Financial Condition~~ (Part I, Item 2).

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information required under this Item is contained above in Part I. Financial Information, Item 1 and is incorporated herein by reference.

Item 6. Exhibits


112.1		~~Statement~~Sale and Purchase Agreement, dated as of ~~Computation~~January 12, 2005, by and among the Company and Jardin International Holding BV.

10.1		Form of ~~Earnings per Share~~Employment Security Agreement between the Company and each of ~~Common Stock.~~Steven G. Marton and Raymond J. Johnson (incorporated by reference to Exhibit 10 of the Company’s Current Report on Form 8-K dated November 10, 2004).

12		Statement of Computation of Ratio of Earnings to Fixed Charges.

31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1		Safe Harbor Statement.


	September 30,		December 31,		March 31,		December 31,
	2004		2003		2005		2004
	(Unaudited)				(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	354.5	$	144.4	$	429.8	$	505.6
Accounts receivable, net		1,184.3		1,397.1		1,037.4		1,233.0
Inventories, net		1,060.0		884.8		1,057.0		949.0
Deferred income taxes		115.3		152.7		74.0		73.8
Prepaid expenses and other		163.2		183.1		123.3		180.4
Current assets of discontinued operations		—		238.1		65.0		70.6

TOTAL CURRENT ASSETS		2,877.3		3,000.2		2,786.5		3,012.4
OTHER LONG-TERM INVESTMENTS		15.5		15.5

OTHER ASSETS		256.7		197.2		191.1		186.3

PROPERTY, PLANT AND EQUIPMENT, NET		1,341.3		1,608.8		1,211.0		1,267.0

DEFERRED INCOME TAXES		9.3		68.1		13.1		30.2

GOODWILL		1,798.0		1,989.0		1,821.0		1,824.6

OTHER INTANGIBLE ASSETS, NET		307.1		447.9		309.2		299.1

NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS		—		154.0		—		46.9


TOTAL ASSETS	$	6,605.2	$	7,480.7	$	6,331.9	$	6,666.5


	September 30,		December 31,		March 31,		December 31,
	2004		2003		2005		2004
Materials and supplies	$	251.1	$	240.4	$	231.0	$	217.3
Work in process		170.1		115.4		186.1		169.3
Finished products		638.8		529.0		639.9		562.4

	$	1,060.0	$	884.8	$	1,057.0	$	949.0


	September 30,			December 31,			March 31,			December 31,
	2004			2003			2005			2004
Medium-term notes	$	1,647.0		$	1,647.0		$	1,647.0		$	1,647.0
Commercial paper		—			217.1
Preferred debt securities		450.0			450.0			450.0			450.0
Junior convertible subordinated debentures		515.5			515.5			446.7			474.3
Terminated interest rate swaps		41.8			46.7			34.9			38.3
Other long-term debt		0.3			5.8			0.6			0.3

Total debt		2,654.6			2,882.1			2,579.2			2,609.9
Current portion of long-term debt		(215.0	)		(13.5	)		(195.4	)		(185.6	)

Long-term Debt	$	2,439.6		$	2,868.6		$	2,383.8		$	2,424.3


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2004			2003			2004			2003			2005			2004
Net Sales
United States	$	1,169.6		$	1,199.9		$	3,379.2		$	3,511.3		$	954.7		$	1,031.5
Canada		87.0			91.5			250.6			253.5			72.2			73.7

North America		1,256.6			1,291.4			3,629.8			3,764.8			1,026.9			1,105.2
Europe		331.2			344.2			1,050.2			1,045.3			288.1			306.6
Central and South America		48.2			54.4			149.0			156.5			41.5			42.2
All other		35.8			39.1			110.9			105.4			37.1			36.8

	$	1,671.8		$	1,729.1		$	4,939.9		$	5,072.0		$	1,393.6		$	1,490.8

Operating (Loss) Income (7)

Operating Income (6)
United States	$	119.8		$	145.5		$	308.1		$	401.1		$	64.0		$	69.0
Canada		19.7			17.7			52.3			48.9			10.7			12.9

North America		139.5			163.2			360.4			450.0			74.7			81.9
Europe		(290.8	)		(8.1	)		(330.8	)		(41.0	)		(10.9	)		(4.9	)
Central and South America		(38.9	)		(3.9	)		(36.4	)		9.4			(0.2	)		2.1
All other		7.5			9.5			8.3			13.6			5.1			3.9

	($	182.7	)	$	160.7		$	1.5		$	432.0		$	68.7		$	83.0


	September 30,		December 31,		March 31,		December 31,
Identifiable Assets (8)	2004		2003
					2005		2004
Identifiable Assets (7)
United States	$	4,646.0	$	5,012.1	$	4,672.7	$	4,856.3
Canada		101.0		136.2		96.0		114.1

North America		4,747.0		5,148.3		4,768.7		4,970.4
Europe		1,545.0		1,628.3		1,192.0		1,257.4
Central and South America		192.7		195.4		176.5		185.1
All other		120.5		116.6		129.7		136.1
Discontinued Operations		—		392.1		65.0		117.5

	$	6,605.2	$	7,480.7	$	6,331.9	$	6,666.5


	Three Months Ended		Nine Months Ended
	September 30, 2004		September 30, 2004
Goodwill	$	181.2	$	182.7
Other indefinite-lived intangible assets		107.1		116.0
Long-lived assets		60.6		75.3

	$	348.9	$	374.0


			Other Indefinite-		Other Long-Lived
			Lived Intangible		Assets (Fixed
Segment	Goodwill		Assets		Assets / Patents)		Total
Cleaning & Organization	$	34.0	$	—	$	45.7	$	79.7
Office Products		138.8		93.8		8.5		241.1
Home Fashions		8.4		13.3		3.9		25.6
Tools & Hardware		—		—		1.0		1.0
Other		—		—		1.5		1.5

Total	$	181.2	$	107.1	$	60.6	$	348.9

•		Prior year restructuring activity related to a product line in the European business has not resulted in the expected returns, and management is currently exploring alternatives for this product line. Accordingly, an impairment charge was recorded to write the long-lived assets down to fair value (disposal value). The impairment charge recognized on this product line was $80.8 million, of which $8.5 million related to the write-down of fixed assets. The write-down of fixed assets is expected to decrease depreciation expense in 2005 by approximately $1 million.

•		In the European business, the Company has historically promoted and supported several different brands in the everyday writing category. In the third quarter management developed a plan to consolidate certain brands in Europe in this category. This new plan results from several factors:

	•		The Company believes that rationalizing its brands will enable the Company to more effectively allocate capital and other resources. In this regard, the Company is focused on promoting its brands globally and reducing the reliance on local or regional brands.

	•		The brand that is targeted for rationalization has experienced sales declines, especially in the current year, and management believes it has more effective investment opportunities outside of this brand.

		~~As a result of this plan, the Company recognized an impairment charge of $123.1 million related to this product line.~~

•		In the third quarter, management decided to rationalize several trademarks and trade names (brands), primarily in the Latin America businesses. The current plan is to reduce the number of brands from 76 to 12 over the next three years.

	•		In the first quarter of 2004, the Company began exploring various options for certain businesses and product lines in the Home Fashions and Tools & Hardware reportable segments, including evaluating those businesses for potential sale. As this process progressed, the Company determined that the businesses had a net book value in excess of their fair value. Due to the apparent decline in value, the Company conducted an impairment test in the second quarter and recorded an impairment loss to write the net assets of these businesses and product lines to fair value.

	•		In 2004, the Company made the decision to exit certain product lines, which resulted in the impairment of fixed assets, primarily in the Cleaning & Organization segment. The Company determined the fair value of the fixed assets by estimating the future cash flows attributable to these fixed assets, including an estimate of the ultimate sale proceeds. Accordingly, the Company recorded a charge to write the assets to their estimated fair value.


	12/31/02				Costs			09/30/03
	Balance		Provision		Incurred			Balance
Facility and other exit costs	$	31.4	$	56.2	($	45.6	)	$	42.0
Employee severance and termination benefits		36.4		53.3		(36.9	)		52.8

	$	67.8	$	109.5	($	82.5	)	$	94.8


	12/31/03				Costs			09/30/04
	Balance		Provision		Incurred			Balance
Facility and other exit costs	$	77.5	$	32.8	($	90.4	)	$	19.9
Employee severance and termination benefits		61.8		9.9		(56.8	)		14.9
Exited contractual commitments and other		6.5		5.2		(7.5	)		4.2

	$	145.8	$	47.9	($	154.7	)	$	39.0


	2005			2004

Beginning balance at January 1,	$	27.9		$	145.5
Restructuring costs (provision)		6.2			21.6
Costs incurred		(14.4	)		(31.4	)

Ending balance at March 31,	$	19.7		$	135.7


	12/31/04					Costs			03/31/05
Segment	Balance		Provision			Incurred			Balance
Cleaning & Organization	$	3.5	$	(0.4	)	$	(0.7	)	$	2.4
Office Products		12.5		0.6			(3.6	)		9.5
Tools & Hardware		3.1		4.9			(6.0	)		2.0
Home Fashions		0.9		(0.4	)		(0.2	)		0.3
Other		2.3		1.7			(3.1	)		0.9
Corporate		5.6		(0.2	)		(0.8	)		4.6

	$	27.9	$	6.2		$	(14.4	)	$	19.7


	United States						International						United States						International
	2004			2003			2004			2003			2005			2004			2005			2004
Service cost-benefits earned during the year	$	10.2		$	8.8		$	1.8		$	2.2		$	0.5		$	11.0		$	2.1		$	1.8
Interest cost on projected benefit obligation		16.0			12.1			4.9			4.5			12.9			13.5			6.2			4.9
Expected return on plan assets		(19.5	)		(17.1	)		(4.5	)		(4.3	)		(16.3	)		(16.3	)		(5.6	)		(4.5	)
Amortization of:
Prior service cost														0.3			(0.2	)		—			—
Actuarial loss		1.3			0.1			0.4			0.4			1.2			1.4			1.0			0.4
Curtailment & special termination benefit costs														(16.7	)		—			—			0.2

Net pension expense	$	8.0		$	3.9		$	2.6		$	2.8
Net pension (income) expense														($18.1	)	$	9.4		$	3.7		$	2.8

(1)		Dilutive securities include “in the money options” and restricted stock awards. The weighted average shares outstanding for the three months ended ~~September 30,~~March 31, 2005 and 2004 ~~and 2003~~ exclude the dilutive effect of approximately ~~11.2~~12.7 million and ~~10.0~~8.9 million stock options, ~~respectively, and approximately 8.8 million and 8.0 million stock options for the nine months ended September 30, 2004 and 2003,~~ respectively, because such options had an exercise price in excess of the average market value of the Company’s common stock during the respective periods ~~and~~or the inclusion would ~~therefore, be~~have been anti-dilutive.

(2)		The convertible preferred securities are anti-dilutive for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2005 and 2004, ~~and 2003,~~ and therefore have been excluded from diluted earnings per share. Had the convertible preferred securities been included in the diluted earnings per share calculation, net income would be increased by $3.8 million and $4.2 million for the three months ended ~~September 30,~~March 31, 2005 and 2004, ~~and 2003, respectively, and by $12.6 million for the nine months ended September 30, 2004 and 2003,~~ respectively, and weighted average shares outstanding would have increased by 8.5 million shares and 9.9 million shares ~~in all periods.~~for 2005 and 2004, respectively.


	Foreign		After-tax			After-tax			Accumulated
	Currency		Derivatives			Minimum			Other
	Translation		Hedging			Pension			Comprehensive
	Gain		Gain/(Loss)			Liability			Loss
Balance at December 31, 2003	$	15.6	$	6.6		($	190.0	)	($	167.8	)
Current year change		38.2		(11.8	)		—			26.4

Balance at September 30, 2004	$	53.8	($	5.2	)	($	190.0	)	($	141.4	)


	September 30,		December 31,
Identifiable Assets	2004		2003
Cleaning & Organization	$	1,088.4	$	1,256.5
Office Products		1,063.0		997.5
Tools & Hardware		818.5		812.1
Home Fashions		575.6		630.2
Other		528.1		577.8
Corporate (6)		2,531.6		2,814.5
Discontinued Operations		—		392.1

	$	6,605.2	$	7,480.7

1)		All intercompany transactions have been eliminated. Sales to ~~one customer~~Wal*Mart Stores, Inc. and subsidiaries amounted to approximately ~~14.3%~~13% and 15% of consolidated net sales, excluding discontinued operations, in the first ~~nine~~three months of ~~2004~~2005 and ~~2003,~~2004, respectively. Sales to no other customer exceeded 10% of consolidated net sales for either period.

2)		Operating income is net sales less cost of products sold, selling, general and administrative expenses, ~~impairment charges,~~ and restructuring costs. Certain headquarters expenses of an operational nature are allocated to business segments and geographic areas primarily on a net sales basis.

3)		Corporate operating expenses consist primarily of administrative costs that cannot be allocated to a particular segment.

4)		~~Impairment charges~~Restructuring costs have been presented separately in this table; refer to ~~Note 2~~Footnote 3 to the Consolidated Financial Statements (Unaudited) for a breakout of the charge by reportable segment.

5)		~~Restructuring costs have been presented separately in this table; refer to Note 3 to the Consolidated Financial Statements (Unaudited) for a breakout of the charge by reportable segment~~

6)		Corporate assets primarily include trade names, goodwill ~~equity investments~~ and deferred tax assets. Accordingly, the write-down of goodwill and other intangible assets associated with the impairment charge (see Note 2 to the Consolidated Financial Statements (Unaudited)) have been reflected as reductions in Corporate assets.

7)6)		The restructuring ~~and impairment charges~~costs recorded in the ~~nine~~three months ended ~~September 30,~~March 31, 2005 and 2004 have been reflected in the appropriate geographic regions.

8)7)		Transfers of finished goods between geographic areas are not significant. Corporate assets are primarily reflected in the United States.

	1.	Strengthen/Broaden Portfolio:The Company continues to evaluate its current portfolio and intends to pursue acquisition opportunities to complement internal growth. In addition to adding businesses or product lines to the Company’s current portfolio, the Company continues to rationalize low margin product lines that do not fit within the Company’s strategic plan. In January 2005, the Company entered into an agreement for the intended sale of the Company’s Curver business. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for additional information on this transaction. In the first quarter of 2005, the Company exited approximately $60 million in low margin product lines in the Rubbermaid Home Products, Graco, Swish UK, and Office Products businesses.

	2.	Invest in High Margin Businesses:The Company continues to focus significant resources on enhancing its new product development pipeline, as well as strengthening the Company’s numerous brands through targeted advertising. In the first quarter of 2005, the Company made additional investments in SG&A (primarily in the Office Products and Tools & Hardware segments), which was partially offset by the positive impact of the U.S. pension curtailment (discussed in Footnote 6 to the Consolidated Financial Statements (Unaudited)). The net impact was an increase in SG&A of $4.2 million over the first quarter of 2004.

	3.	Address Raw Material Inflation:The Company has several businesses that are significantly impacted by commodity inflation. The Company has historically combated these cost increases through organic productivity initiatives. However, due to the continued inflation pressure within several of its core commodity purchases, the Company has implemented price increases to offset a portion of the increased costs. In the first quarter of 2005, the Company experienced raw material inflation of approximately $51 million (primarily in resin and steel), partially offset by pricing increases of approximately $30 million.

	4.	Reduce Manufacturing Overhead:The Company is committed to reducing its manufacturing costs by at least five percent annually. As a result of the recent divestiture and product line rationalization programs, the Company is focusing on reengineering its manufacturing overhead structure to accommodate its current manufacturing base. In connection with this goal, the Company is committed to deploying and implementing Newell Operational Excellence. The Company delivered approximately $18 million of gross productivity savings, excluding raw material inflation, during the first quarter of 2005.


	2004			2003
Cash provided by operating activities	$	421.8		$	420.5
Cash provided by/(used in) investing activities		191.0			(696.9	)
Cash (used in)/provided by financing activities		(402.4	)		296.8
Exchange effect on cash and cash equivalents		(0.3	)		1.6

Increase in cash and cash equivalents	$	210.1		$	22.0


	2005			2004

Cash provided by/(used in) operating activities	$	55.5			($6.7	)
Cash used in investing activities		(40.5	)		(20.1	)
Cash used in financing activities		(87.2	)		(64.8	)
Exchange effect on cash and cash equivalents		(3.6	)		(0.9	)


Decrease in cash and cash equivalents		($75.8	)		($92.5	)


	2004			2003		Change
Net (loss)/income	($	240.3	)	$	165.0
Depreciation and amortization		185.4			186.5
Impairment charges		374.0			—
Non-cash restructuring charges		25.3			73.0
Deferred income taxes		85.1			9.6
(Gain)/loss on sale of assets/business		(6.5	)		20.5
Loss on discontinued businesses		90.5			—

Earnings before non-cash charges	$	513.5		$	454.6	$	58.9


		NEWELL RUBBERMAID INC.
		Registrant

Date: ~~November 9, 2004~~May 4, 2005		/s/ J. Patrick Robinson

		J. Patrick Robinson
		Vice President – Chief Financial Officer