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~~June 30, ~~2004~~

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 incorporation or organization)		36-3514169 (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/~~þ		No ~~/ /~~o

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


Yes ~~/x/~~þ		No ~~/ /~~o

Number of shares of common stock outstanding (net of treasury shares) as of ~~October~~July 29, ~~2004: 274.8~~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
September 30,
September 30,
2004
2003
2004
2003
Net sales $ 1,671.8 $ 1,729.1 $ 4,939.9 $ 5,072.0
Cost of products sold 1,198.5 1,237.3 3,571.0 3,625.0

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

OPERATING (LOSS) INCOME (182.7 ) 160.7 1.5 432.0
Nonoperating expenses:
Interest expense, net 29.5 33.1 90.0 104.5
Other (income) expense, net (0.8 ) 1.4 (3.9 ) 18.6

Net nonoperating expenses 28.7 34.5 86.1 123.1

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

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 )

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

Weighted average shares outstanding:
Basic 274.4 274.4 274.4 274.0
Diluted 274.4 274.4 274.4 274.3
(Loss) Earnings 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 )

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

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 )

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

Dividends per share $ 0.21 $ 0.21 $ 0.63 $ 0.63


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2005			2004		2005			2004
Net sales	$	1,641.1		$	1,667.2	$	3,018.1		$	3,137.9
Cost of products sold		1,132.8			1,189.7		2,134.9			2,258.6

GROSS MARGIN		508.3			477.5		883.2			879.3
Selling, general and administrative expenses		324.4			318.8		627.3			617.2
Impairment charges		—			25.1		—			25.1
Restructuring costs		0.3			25.7		6.5			47.3

OPERATING INCOME		183.6			107.9		249.4			189.7

Nonoperating expenses:
Interest expense, net		31.0			29.5		61.9			60.4
Other expense (income), net		1.9			1.7		(0.4	)		4.0

Net nonoperating expenses		32.9			31.2		61.5			64.4

INCOME BEFORE INCOME TAXES		150.7			76.7		187.9			125.3
Income taxes		47.2			18.2		(0.4	)		34.7

INCOME FROM CONTINUING OPERATIONS		103.5			58.5		188.3			90.6
(Loss) gain from discontinued operations, net of tax		(37.3	)		2.5		(85.5	)		(104.4	)

NET INCOME (LOSS)	$	66.2		$	61.0	$	102.8		($	13.8	)

Weighted average shares outstanding:
Basic		274.4			274.4		274.4			274.4
Diluted		274.7			274.5		274.7			274.5

Earnings (Loss) per share:
Basic -
Income from continuing operations	$	0.38		$	0.21	$	0.69		$	0.33
(Loss) income from discontinued operations		(0.14	)		0.01		(0.31	)		(0.38	)

Net income (loss) per common share	$	0.24		$	0.22	$	0.37		($	0.05	)

Diluted -
Income from continuing operations	$	0.38		$	0.21	$	0.69		$	0.33
(Loss) income from discontinued operations		(0.14	)		0.01		(0.31	)		(0.38	)

Net income (loss) per common share	$	0.24		$	0.22	$	0.37		($	0.05	)


Dividends per share	$	0.21		$	0.21	$	0.42		$	0.42

See ~~Notes~~Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in millions)


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

CURRENT ASSETS:
Cash and cash equivalents	$	354.5	$	144.4	$	212.2	$	505.6
Accounts receivable, net		1,184.3		1,397.1		1,204.5		1,233.0
Inventories, net		1,060.0		884.8		1,023.7		938.1
Deferred income taxes		115.3		152.7		74.0		73.8
Prepaid expenses and other		163.2		183.1		113.6		180.3
Current assets of discontinued operations		—		238.1		11.1		81.6

TOTAL CURRENT ASSETS		2,877.3		3,000.2		2,639.1		3,012.4
OTHER LONG-TERM INVESTMENTS		15.5		15.5

OTHER ASSETS		256.7		197.2		202.1		186.4

PROPERTY, PLANT AND EQUIPMENT, NET		1,341.3		1,608.8		1,113.3		1,222.4

DEFERRED INCOME TAXES		9.3		68.1		5.2		30.2

GOODWILL		1,798.0		1,989.0		1,796.0		1,821.0

OTHER INTANGIBLE ASSETS, NET		307.1		447.9		313.3		299.1

NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS		—		154.0		14.5		95.0


TOTAL ASSETS	$	6,605.2	$	7,480.7	$	6,083.5	$	6,666.5

See ~~Notes~~Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS ~~(CONT.)~~(CONTINUED)
(Amounts in millions, except ~~per share data)~~par value)


	September 30,			December 31,			June 30,			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		$	590.2		$	661.5
Accrued compensation		115.4			122.1			106.2			113.3
Other accrued liabilities		842.4			960.4			699.5			789.4
Income taxes		134.0			80.8
Income taxes payable								20.7			68.8
Notes payable								13.0			21.3
Current portion of long-term debt		215.0			13.5			25.4			185.6
Current liabilities of discontinued operations		—			128.6			0.1			31.4

TOTAL CURRENT LIABILITIES		1,953.9			2,022.0			1,455.1			1,871.3

LONG-TERM DEBT		2,439.6			2,868.6			2,380.6			2,424.3

OTHER NONCURRENT LIABILITIES		585.0			572.3			542.8			606.0

LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS		—			1.5			—			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			448.3			437.5
Retained earnings		1,452.2			1,865.7			1,505.7			1,518.6
Accumulated other comprehensive loss		(141.4	)		(167.8	)		(127.5	)		(70.4	)

TOTAL STOCKHOLDERS’ EQUITY		1,626.7			2,016.3			1,705.0			1,764.2


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,605.2		$	7,480.7		$	6,083.5		$	6,666.5

See ~~Notes~~Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in millions)


	Nine Months Ended September 30,						Six Months Ended June 30,
	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)							$	102.8		($	13.8	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		185.4			186.5			109.9			117.6
Deferred income taxes		85.1			9.6			12.0			58.6
Impairment charges		374.0			—			—			25.1
Noncash restructuring charges		25.3			73.0
(Gain)/loss on sale of assets/business		(6.5	)		20.5
Loss on discontinued businesses		90.5			—
Noncash restructuring costs								0.8			25.3
Gain on sale of assets/debt extinguishment								(4.3	)		(5.5	)
Loss on disposal of discontinued operations								87.7			99.1
Other		(4.8	)		30.7			(6.8	)		(1.3	)
Changes in current accounts excluding the Effects of acquisitions:
Changes in current accounts excluding the effects of acquisitions:
Accounts receivable		211.0			47.0			(2.2	)		69.7
Inventories		(176.8	)		(1.4	)		(105.5	)		(151.2	)
Other current assets		17.9			2.6
Accounts payable		(60.2	)		121.9			(63.4	)		(28.9	)
Accrued liabilities and other								(44.0	)		(55.0	)
Discontinued operations		(29.8	)		9.9			4.9			(2.7	)
Accrued liabilities and other		(49.0	)		(244.8	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		421.8			420.5			91.9			137.0


INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(3.0	)		(460.0	)		(35.0	)		—
Expenditures for property, plant and equipment		(95.2	)		(247.1	)		(46.0	)		(70.1	)
Sale of businesses and noncurrent assets		289.2			10.2
Disposals of noncurrent assets and sale of businesses								22.1			247.1

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		191.0			(696.9	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES								(58.9	)		177.0


FINANCING ACTIVITIES:
Proceeds from issuance of debt		21.3			1,040.5			131.7			16.9
Proceeds from issuance of stock		—			200.1
Payments on notes payable and long-term debt		(251.9	)		(776.7	)		(335.7	)		(248.8	)
Cash dividends		(173.2	)		(173.1	)		(115.8	)		(115.7	)
Proceeds from exercised stock options and other		1.4			6.0			—			1.4

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(402.4	)		296.8
NET CASH USED IN FINANCING ACTIVITIES								(319.8	)		(346.2	)

Exchange rate effect on cash		(0.3	)		1.6

INCREASE IN CASH AND CASH EQUIVALENTS		210.1			22.0
Exchange rate effect on cash and cash equivalents								(6.6	)		(1.2	)



DECREASE IN CASH AND CASH EQUIVALENTS								(293.4	)		(33.4	)

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		$	212.2		$	111.0

See ~~Notes~~Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
~~NOTES~~

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Note~~

Footnote 1 –— Basis of Presentation

and Significant Accounting Policies

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 ~~Company’s stock option plans are accounted for under~~Statement supersedes Accounting Principles Board Opinion (“APB”) No. ~~25.~~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.

The Company’s has elected to follow the accounting provisions of APB No. 25 in accounting for its stock option plans. As a result, the Company grants fixed stock options under which no compensation cost is recognized. ~~Had~~The Company provides pro forma disclosure of stock-based compensation ~~cost for~~expense as measured under the ~~plans been determined consistent with Statement~~fair value requirements of ~~Financial Accounting Standard~~SFAS No. 123, ~~(FAS 123),~~ “Accounting for Stock Based ~~Compensation,~~Compensation.” The following table is a reconciliation of the Company’s net ~~income~~income/(loss) and ~~earnings~~earnings/(loss) per share ~~would have been reduced~~ to ~~the following pro forma amounts~~proforma net income/(loss) and proforma earnings/(loss) per share for the three and ~~nine~~six months ended ~~September~~June 30,(in millions, except per share data):


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2004			2003			2004			2003			2005			2004			2005			2004
Net (loss) income:
Net income (loss):
As reported	($	226.4	)	$	75.2		($	240.3	)	$	165.0		$	66.2		$	61.0		$	102.8		($	13.8	)
Fair value option expense		(4.6	)		(4.7	)		(13.7	)		(14.1	)		(2.8	)		(4.5	)		(5.6	)		(9.0	)

Pro forma	($	231.0	)	$	70.5		($	254.0	)	$	150.9		$	63.4		$	56.5		$	97.2		($	22.8	)
Basic (loss) earnings per share:


Basic earnings (loss) per share:
As reported	($	0.83	)	$	0.27		($	0.88	)	$	0.60		$	0.24		$	0.22		$	0.37		($	0.05	)
Pro forma	($	0.84	)	$	0.26		($	0.93	)	$	0.55		$	0.23		$	0.21		$	0.35		($	0.08	)
Diluted (loss) earnings per share:

Diluted earnings (loss) per share:
As reported	($	0.83	)	$	0.27		($	0.88	)	$	0.60		$	0.24		$	0.22		$	0.37		($	0.05	)
Pro forma	($	0.84	)	$	0.26		($	0.93	)	$	0.55		$	0.23		$	0.21		$	0.35		($	0.08	)

Reclassifications:Certain amounts in prior years have been reclassified to conform to the current year presentation. See ~~Note 4~~Footnote 2 for a discussion of discontinued operations.

~~Note~~Footnote 2 ~~– Impairment Charges~~

— Discontinued Operations

On June 1, 2005, the Company completed the sale of its Curver business. The Curver business manufactured and marketed 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 were not included in the sale. The Curver business, which was previously reported in the Cleaning & Organization segment, had 2004 sales of $151.8 million.

The sale price, which is subject to reduction for working capital adjustments, was $5 million, paid at closing, plus a note receivable for $5 million, payable within 12 years from closing. The Company may also receive contingent payments, 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. Due to anticipated shortfalls in working capital, the Company does not expect to collect any of the $5 million receivable. In addition, the Company has not included the contingent payments in the calculation of the loss on disposal of discontinued operations.

In connection with this transaction, the Company recorded a total non-cash loss related to the sale of $62.0 million, including a $15.0 million loss recorded in the second quarter of 2005.

In connection with the preparation of the Company’s second quarter 2005 financial statements, the Company recognized an impairment loss on long-lived assets of $24.5 million, net of tax, in discontinued operations associated with the anticipated disposal of a business in the Cleaning & Organization segment. This is part of the Company’s continued efforts to divest non-strategic businesses. The loss, included in the loss on disposal of discontinued operations, was recorded in order to state the assets of this business at their fair values, based upon net sales proceeds estimated as of June 30, 2005. Goodwill of $3.6 million was allocated to the disposal group based on the relative fair value of the business held for sale to the business retained. The business contributed $74 million in sales in 2004.

The following table summarizes the ~~recorded noncash pretax impairment charges~~results of the discontinued operations for the three and six months ended June 30,(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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Net sales	$	48.3		$	97.6		$	101.9		$	301.5
Income (loss) from operations of discontinued operations, net of income tax expense of $1.7 and $0.1 for the three months ended June 30, 2005 and 2004, respectively, and $2.8 and ($2.7) for the six months ended June 30, 2005 and 2004, respectively	$	1.4		($	3.1	)	$	2.3		($	5.3	)
(Loss) gain on disposal of discontinued operations, net of income tax benefit of $6.9 for the three months and six months ended June 30, 2005	($	38.7	)	$	5.6		($	87.8	)	($	99.1	)

(Loss) gain from discontinued operations, net of tax	($	37.3	)	$	2.5		($	85.5	)	($	104.4	)

The ~~Company conducts its annual test of impairment for goodwill~~2004 amounts 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.~~ Little Tikes Commercial Playground Systems business). No amounts related to interest expense have been allocated to discontinued operations.

The Company also tests for impairment if events or circumstances occur subsequent 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.

~~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.

June 30, December 31,
2005 2004
Accounts receivable, net $ — $ 45.6
Inventories, net 11.1 34.2
Prepaid expenses and other — 1.8

Total Current Assets 11.1 81.6

Property, plant and equipment, net 10.9 85.8
Goodwill 3.6 3.6
Other assets — 5.6

Total Assets $ 25.6 $ 176.6

Accounts payable $ — $ 21.4
Other accrued liabilities 0.1 10.0

Total Current Liabilities 0.1 31.4

Other noncurrent liabilities — 0.7

Total Liabilities $ 0.1 $ 32.1

Footnote 3 — Impairment Charges

For the three months ended June 30, 2004, the Company recorded a noncash pretax impairment charge as follows~~Other~~ (in millions):

Description Amount
Intangible assets $ 11.7
Long-lived assets 13.4

Total impairment charge $ 25.1

Intangible Assets

In the first quarter of 2004, the Company began exploring various options for certain 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 charge to write-down the net assets of these businesses and product lines to estimated fair value.

Long-Lived Assets ~~primarily Fixed Assets~~Held and ~~Patents~~Used

In ~~accordance with SFAS No. 144,~~2004, the Company ~~evaluated if there were~~made the decision to exit certain product lines, which resulted in the impairment ~~indicators present related to its~~of fixed assets, ~~and other long-term assets. If impairment indicators were present, future cash flows related to~~primarily in the ~~asset group was estimated.~~Cleaning & Organization segment. The ~~sum~~Company determined the fair value of the ~~undiscounted~~fixed assets by estimating the future cash flows attributable to ~~the asset group was then compared to the carrying amount~~these fixed assets, including an estimate 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,~~ultimate sale proceeds. Accordingly, the Company recorded a ~~noncash $348.9 million ($332.8 million, net of tax) impairment~~ charge into write-down 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 recordedassets 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.
8

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 totheir estimated 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 3~~

Footnote 4 — 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.~~2001 (the “Plan”). 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~~$87.6 million onrelating to discontinued operations. ~~The following analysis excludes the restructuring amounts related to discontinued operations.~~
9

~~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).

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

2005 2004
Beginning balance at January 1 $ 27.9 $ 145.1
Restructuring costs (provision) 6.5 47.3
Costs incurred (18.3 ) (92.7 )

Ending balance at June 30 $ 16.1 $ 99.7

The restructuring reserve at June 30, 2005 relates to employee severance and lease commitment costs for facilities exited, primarily in the Office Products and Cleaning & Organization segments of $7.8 million and $3.9 million, respectively.

Restructuring costs in 2004 consisted of the following(in millions):

Three Months Ended Six Months Ended
June 30, 2004 June 30, 2004
Facility and other exit costs $ 17.7 $ 31.6
Employee severance and termination benefits 5.0 10.4
Exited contractual commitments and other 3.0 5.3

$ 25.7 $ 47.3

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~~six months ended ~~September~~June 30, 2004 aggregated by reportable business segment(in millions):

12/31/03 Costs 06/30/04
Segment Balance Provision Incurred Balance
Cleaning & Organization $ 55.5 $ 22.3 ($ 58.0 ) $ 19.8
Office Products 29.9 8.6 (11.8 ) 26.7
Tools & Hardware 17.9 4.5 (11.4 ) 11.0
Home Fashions 17.7 8.7 (6.5 ) 19.9
Other 9.6 7.0 (2.0 ) 14.6
Corporate 14.5 (3.8 ) (3.0 ) 7.7

$ 145.1 $ 47.3 ($ 92.7 ) $ 99.7

The Company recorded $0.3 million and $6.5 million in restructuring costs for the three and six months ended June 30, 2005, respectively. The costs primarily related to the closure of manufacturing facilities in Wilmington, OH ($5.0 million) and Elverson, PA ($1.4 million). The Wilmington facility is included in the Tools & Hardware segment and the Elverson facility is included in the Other segment.

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 $5.8 million and $27.8 million for the second quarters of 2005 and 2004, respectively. Cash paid for restructuring activities was $16.4 million and $43.5 million in the first six months of 2005 and 2004, respectively.

Footnote 5 — Inventories

Inventories are stated at the lower of cost or market value. The components of inventories, net of LIFO reserve, were as follows(in millions):

June 30, December 31,
2005 2004
Materials and supplies $ 209.0 $ 216.0
Work in process 190.4 168.8
Finished products 624.3 553.3

$ 1,023.7 $ 938.1

Footnote 6 — Long-term Debt

The following is a summary of long-term debt(in millions):

June 30, December 31,
2005 2004
Medium-term notes $ 1,487.0 $ 1,647.0
Preferred debt securities 450.0 450.0
Junior convertible subordinated debentures 436.7 474.3
Terminated interest rate swaps 31.5 38.3
Other long-term debt 0.8 0.3

Total debt 2,406.0 2,609.9
Current portion of long-term debt (25.4 ) (185.6 )

Long-term Debt $ 2,380.6 $ 2,424.3

In February and April 2005, the Company purchased 550,000 shares and 200,000 shares, respectively, of 5.25% convertible preferred securities (“Preferred Securities”) that were issued by a 100%-owned finance subsidiary of the Company and are fully and unconditionally guaranteed by the Company, from holders for $47.375 per share and $46.25 per share, respectively. In connection with the purchases of these securities, the Company negotiated the early retirement of the corresponding junior convertible subordinated debentures with the financing subsidiary. The Company accounted for these transactions as extinguishments of debt resulting in net gains of $1.1 million and $0.6 million in the first and second quarter, respectively, which were included in Other expense (income), net.

Footnote 7 — Employee Benefit and Retirement Plans

The following table presents the components of the Company’s pension (income) expense for the three months ended June 30, (in millions):

United States International
2005 2004 2005 2004
Service cost-benefits earned during the year $ 0.5 $ 10.0 $ 2.1 $ 1.8
Interest cost on projected benefit obligation 12.9 10.9 6.0 4.9
Expected return on plan assets (16.2 ) (13.3 ) (5.5 ) (4.5 )
Amortization of:
Prior service cost 0.3 — — —
Actuarial loss 1.2 0.8 1.0 0.4
Curtailment & special termination benefit costs 0.2 (1.8 ) — —

Net pension (income) expense ($ 1.1 ) $ 6.6 $ 3.6 $ 2.6

The following table presents the components of the Company’s pension (income) expense for the six months ended June 30, (in millions):

United States International
2005 2004 2005 2004
Service cost-benefits earned during the year $ 0.9 $ 21.0 $ 4.2 $ 3.6
Interest cost on projected benefit obligation 25.8 24.4 12.2 9.9
Expected return on plan assets (32.3 ) (29.6 ) (11.1 ) (9.1 )

12/31/02 Costs 09/30/03
Segment
Balance
Provision
Incurred
Balance
Cleaning & Organization $ 3.8 $ 29.4 ($ 19.2 ) $ 14.0
Office Products 27.2 24.9 (28.3 ) 23.8
Home Fashions 12.4 35.2 (22.7 ) 24.9
Tools & Hardware 0.5 8.9 (2.2 ) 7.2
Other 3.6 8.2 (0.5 ) 11.3
Corporate 20.3 2.9 (9.6 ) 13.6

$ 67.8 $ 109.5 ($ 82.5 ) $ 94.8

United States International
2005 2004 2005 2004
Amortization of:
Prior service cost 0.5 (0.2 ) — —
Actuarial loss 2.5 2.2 2.0 0.8
Curtailment & special termination benefit costs (16.2 ) (1.8 ) — 0.2

Net pension (income) expense ($ 18.8 ) $ 16.0 $ 7.3 $ 5.4

12/31/03 Costs 09/30/04
Segment
Balance
Provision
Incurred
Balance
Cleaning & Organization $ 56.2 $ 21.5 ($ 69.8 ) $ 7.9
Office Products 29.9 7.4 (20.9 ) 16.4
Home Fashions 17.7 7.3 (23.3 ) 1.7
Tools & Hardware 17.9 4.5 (19.1 ) 3.3
Other 9.6 7.0 (12.9 ) 3.7
Corporate 14.5 0.2 (8.7 ) 6.0

$ 145.8 $ 47.9 ($ 154.7 ) $ 39.0

~~Note 4 – Discontinued Operations~~

~~On January~~Effective December 31, 2004, the Company ~~completed the sale of~~froze its ~~Panex Brazilian low-end cookware division (previously reported in the Other operating segment) and European picture frames businesses (previously reported in the Home Fashions operating segment).~~

~~On April 13, 2004, the Company sold substantially all of~~defined benefit pension plan for its entire non-union 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, asworkforce. As a result of this curtailment, the ~~transaction were $304 million. The Burnes picture frame business was previously reported~~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 ~~Home Fashions operating segment, while~~first quarter of 2005. In conjunction with this action, the ~~Anchor Hocking and Mirro businesses were previously reported in~~Company offered special termination benefits to certain employees that accepted early retirement. The Company replaced the ~~Other operating segment. In September 2004, as part~~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 ~~final adjustments relating to~~defined contribution plan.

The following table presents the ~~transaction, the Company recorded an additional loss of approximately $1.0 million on this sale.~~
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 was previously reported in the Other operating segment, as a unitcomponents 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.
~~The following table summarizes the results of the discontinued operations~~other postretirement benefits expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2004~~((in ~~millions)~~millions):
11

Three Months Ended June 30, Six Months Ended June 30,
2005 2004 2005 2004
Service cost-benefits earned during the year $ 0.9 $ 1.2 $ 1.9 $ 2.5
Interest cost on projected benefit obligation 3.7 3.6 7.5 7.7
Amortization of prior service cost (0.1 ) (0.1 ) (0.3 ) (0.3 )
Actuarial loss 0.3 — 0.5 0.5

Net other postretirement benefits expense $ 4.8 $ 4.7 $ 9.6 $ 10.4

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 ) —
Footnote 8 — Income Taxes

~~No amounts~~

In January 2005, the Company reached agreement with the Internal Revenue Service (IRS) relating to the appropriate treatment of a specific transaction reflected on the Company’s 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 ~~interest expense have been allocated to discontinued operations.~~
this issue. The ~~following table presents summarized balance sheet information of the discontinued operations~~amount was fully reserved as of December 31, ~~2003 (~~~~in millions~~):2004.

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~~three months ended ~~September~~June 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~~three months ended ~~September~~June 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~~these 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.~~

~~In the~~ three months ended ~~September~~June 30, 2004, the Company received notification from the Internal Revenue Service that it would receive a refund of $2.9 million relating to amounts previously paid. Accordingly, this amount has been recorded in income taxes for the three and nine months ended September 30, 2004.

~~Note 6 – Inventories~~

~~Inventories are stated at the lower of cost or market value. The components of inventories, net of LIFO reserve, were as follows~~~~(in millions)~~:

September 30, December 31,
2004
2003
Materials and supplies $ 251.1 $ 240.4
Work in process 170.1 115.4
Finished products 638.8 529.0

$ 1,060.0 $ 884.8

~~Note 7 – Long-term Debt~~

~~The following is a summary of long-term debt~~~~(in millions)~~:

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

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

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

Effective March 9, 2004, the Company terminated an interest rate swap agreement prior to the scheduled maturity date and received cash of $9.2 million. Of this amount $5.5 million represents the fair value of the swap that was terminated and the remainder represents net interest receivable on the swap. The cash received relating to the fair value of the swap has been 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.

~~Note 8 – Employee Benefit and Retirement Plans~~

~~The following table presents the components of the Company’s pension expense for the three months ended September 30, (~~~~in millions~~):

United States
International
2004
2003
2004
2003
Service cost-benefits earned during the year $ 10.2 $ 8.8 $ 1.8 $ 2.2
Interest cost on projected benefit obligation 16.0 12.1 4.9 4.5
Expected return on plan assets (19.5 ) (17.1 ) (4.5 ) (4.3 )
Actuarial loss 1.3 0.1 0.4 0.4

Net pension expense $ 8.0 $ 3.9 $ 2.6 $ 2.8

~~The following table presents the components 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

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

Three Months Ended Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
Service cost-benefits earned during the year $ 1.0 $ 1.2 $ 3.5 $ 3.7
Interest cost on projected benefit obligation 3.4 4.0 11.1 12.1
Amortization of prior service cost (0.2 ) 0.1 (0.5 ) 0.2
Actuarial loss — — 0.5 —

Net pension expense $ 4.2 $ 5.3 $ 14.6 $ 16.0

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

~~Note~~Footnote 9 — Earnings per Share

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

“In the Convertible
Basic Money” Preferred Diluted
Method
Options(1)
Securities(2)
Method
Three Months Ended September 30, 2004

Loss from continuing operations ($ 235.0 ) — — ($ 235.0 )
Loss per share ($ 0.86 ) — — ($ 0.86 )

Income from discontinued operations $ 8.6 — — $ 8.6
Income per share $ 0.03 — — $ 0.03

Net loss ($ 226.4 ) — — ($ 226.4 )
Loss per share ($ 0.83 ) — — ($ 0.83 )

Weighted average shares outstanding 274.4 — — 274.4

Three Months Ended September 30, 2003

Income from continuing operations $ 85.5 — — $ 85.5
Earnings per share $ 0.31 — — $ 0.31

Loss from discontinued operations ($ 10.3 ) — — ($ 10.3 )
Loss per share ($ 0.04 ) — — ($ 0.04 )
1411


				“In the		Convertible										Convertible
	Basic			Money”		Preferred		Diluted			Basic			Dilutive		Preferred		Diluted
											Method			Securities(1)		Securities(2)		Method
Three Months Ended June 30, 2005
Income from continuing operations											$	103.5			—		—	$	103.5
Earnings per share											$	0.38			—		—	$	0.38
Loss from discontinued operations											($	37.3	)		—		—	($	37.3	)
Loss per share											($	0.14	)		—		—	($	0.14	)
	Method			Options(1)		Securities(2)		Method
Net income	$	75.2			—		—	$	75.2		$	66.2			—		—	$	66.2
Earnings per share	$	0.27			—		—	$	0.27		$	0.24			—		—	$	0.24

Weighted average shares outstanding		274.4			—		—		274.4			274.4			0.3		—		274.7

Nine Months Ended September 30, 2004
Loss from continuing operations	($	143.3	)		—		—	($	143.3	)
Loss per share	($	0.52	)		—		—	($	0.52	)
Three Months Ended June 30, 2004
Income from continuing operations											$	58.5			—		—	$	58.5
Earnings per share											$	0.21			—		—	$	0.21

Loss from discontinued operations	($	97.0	)		—		—	($	97.0	)
Loss per share	($	0.35	)		—		—	($	0.35	)
Income from discontinued operations											$	2.5			—		—	$	2.5
Earnings per share											$	0.01			—		—	$	0.01

Net loss	($	240.3	)		—		—	($	240.3	)
Loss per share	($	0.88	)		—		—	($	0.88	)
Net income											$	61.0			—		—	$	61.0
Earnings per share											$	0.22			—		—	$	0.22

Weighted average shares outstanding		274.4			—		—		274.4			274.4			0.1		—		274.5

Nine Months Ended September 30, 2003
Six Months Ended June 30, 2005
Income from continuing operations	$	208.9			—		—	$	208.9		$	188.3			—		—	$	188.3
Earnings per share	$	0.76			—		—	$	0.76		$	0.69			—		—	$	0.69

Loss from discontinued operations	($	43.9	)		—		—	($	43.9	)	($	85.5	)		—		—	($	85.5	)
Loss per share	($	0.16	)		—		—	($	0.16	)	($	0.31	)		—		—	($	0.31	)

Net income	$	165.0			—		—	$	165.0		$	102.8			—		—	$	102.8
Earnings per share	$	0.60			—		—	$	0.60		$	0.37			—		—	$	0.37

Weighted average shares outstanding		274.0			0.3		—		274.3			274.4			0.3		—		274.7

Six Months Ended June 30, 2004
Income from continuing operations											$	90.6			—		—	$	90.6
Earnings per share											$	0.33			—		—	$	0.33

Loss from discontinued operations											($	104.4	)		—		—	($	104.4	)
Loss per share											($	0.38	)		—		—	($	0.38	)

Net loss											($	13.8	)		—		—	($	13.8	)
Loss per share											($	0.05	)		—		—	($	0.05	)

Weighted average shares outstanding												274.4			0.1		—		274.5


(1)		Dilutive securities include “in the money options” and restricted stock awards. The weighted average shares outstanding for the three months ended ~~September~~June 30, 2005 and 2004 ~~and 2003~~ exclude the dilutive effect of approximately ~~11.2~~10.4 million and ~~10.0~~9.2 million stock options, respectively, and approximately ~~8.8~~10.6 million and ~~8.0~~9.0 million stock options for the ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 and ~~2003,~~2004, 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~~six months ended ~~September~~June 30, ~~2004~~2005 and ~~2003,~~2004, 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 $3.6 million and $4.2 million for the three months ended ~~September~~June 30, ~~2004~~2005 and ~~2003,~~2004, respectively, and by ~~$12.6~~$7.3 million and $8.4 million for the ~~nine~~six months ended ~~September~~June 30, 2005 and 2004, ~~and 2003, respectively, and weighted~~respectively. Weighted average shares outstanding would have increased by 8.3 million shares and 9.9 million shares ~~in all periods.~~for the three months ended June 30, 2005 and 2004, respectively, and 8.4 million shares and 9.9 million shares for the six months ended June 30, 2005 and 2004, respectively.

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 June 30, 2005, the Company had outstanding

~~Note~~

restricted stock awards of 0.9 million shares, none of which are vested. Total compensation expense of $1.6 million and $0.8 million was recorded for the three months ended June 30, 2005 and 2004, respectively, related to the restricted shares. Total compensation expense of $2.9 million and $1.5 million was recorded for the six months ended June 30, 2005 and 2004, respectively, related to the restricted shares.

Footnote 10 –— Accumulated Other Comprehensive Loss

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

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

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 )

Foreign After-tax After-tax Accumulated
Currency Derivatives Minimum Other
Translation Hedging Pension Comprehensive
Gain/(Loss) (Loss)/Gain Liability Loss
Balance at December 31, 2004 $ 120.4 ($ 4.3 ) ($ 186.5 ) ($ 70.4 )
Current year change (69.6 ) 12.5 — (57.1 )

Balance at June 30, 2005 $ 50.8 $ 8.2 ($ 186.5 ) ($ 127.5 )

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

Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Net income (loss) $ 66.2 $ 61.0 $ 102.8 ($ 13.8 )
Foreign currency translation (loss) gain (46.3 ) (21.0 ) (69.6 ) 25.6
After-tax derivatives hedging gain (loss) 8.0 1.3 12.5 (8.6 )

Comprehensive income $ 27.9 $ 41.3 $ 45.7 $ 3.2

~~Note~~

Footnote 11 — 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
September 30,
September 30,
2004
2003
2004
2003
Net Sales (1)

Cleaning & Organization $ 455.9 $ 514.4 $ 1,372.0 $ 1,504.3
Office Products 424.3 428.7 1,246.3 1,258.8
Tools & Hardware 300.6 299.3 875.2 859.5
Home Fashions 228.1 223.5 679.1 670.9
Other 262.9 263.2 767.3 778.5

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

Operating (Loss) Income (2)

Cleaning & Organization $ 29.2 $ 31.9 $ 49.9 $ 93.0
Office Products 61.5 69.9 188.7 231.8
Tools & Hardware 45.1 53.4 131.6 136.6
Home Fashions 15.9 17.5 25.0 30.1
Other 24.7 31.2 55.6 74.5
Corporate (3) (10.2 ) (10.9 ) (27.4 ) (24.5 )
Impairment Charges (4) (348.9 ) — (374.0 ) —
Restructuring Costs (5) — (32.3 ) (47.9 ) (109.5 )

($ 182.7 ) $ 160.7 $ 1.5 $ 432.0

1613


	September 30,		December 31,		Three Months Ended						Six Months Ended
Identifiable Assets	2004		2003
					June 30,						June 30,
					2005			2004			2005			2004
Net Sales (1)
Cleaning & Organization	$	1,088.4	$	1,256.5	$	376.5		$	400.1		$	701.0		$	785.9
Office Products		1,063.0		997.5		495.5			489.2			828.3			822.0
Tools & Hardware		818.5		812.1		315.5			300.3			591.9			574.6
Home Fashions		575.6		630.2		212.0			224.2			410.3			451.0
Other		528.1		577.8		241.6			253.4			486.6			504.4
Corporate (6)		2,531.6		2,814.5
Discontinued Operations		—		392.1

	$	6,605.2	$	7,480.7	$	1,641.1		$	1,667.2		$	3,018.1		$	3,137.9


Operating Income (2)
Cleaning & Organization					$	23.1		$	9.2		$	35.6		$	25.4
Office Products						98.9			95.5			132.4			127.3
Tools & Hardware						49.3			43.5			76.0			86.5
Home Fashions						3.6			5.2			(0.9	)		9.1
Other						18.7			15.0			32.0			30.9
Corporate (3)						(9.7	)		(9.7	)		(19.2	)		(17.1	)
Impairment Charges (4)						—			(25.1	)		—			(25.1	)
Restructuring Costs (5)						(0.3	)		(25.7	)		(6.5	)		(47.3	)

					$	183.6		$	107.9		$	249.4		$	189.7

June 30, December 31,
2005 2004
Identifiable Assets

Cleaning & Organization $ 827.6 $ 825.7
Office Products 1,074.5 997.8
Tools & Hardware 863.2 836.2
Home Fashions 539.3 599.0
Other 454.0 523.1
Corporate (6) 2,299.3 2,708.1
Discontinued Operations 25.6 176.6

$ 6,083.5 $ 6,666.5

Geographic Area Information

Three Months Ended Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
Net Sales

United States $ 1,169.6 $ 1,199.9 $ 3,379.2 $ 3,511.3
Canada 87.0 91.5 250.6 253.5

North America 1,256.6 1,291.4 3,629.8 3,764.8
Europe 331.2 344.2 1,050.2 1,045.3
Central and South America 48.2 54.4 149.0 156.5
All other 35.8 39.1 110.9 105.4

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

Operating (Loss) Income (7)

United States $ 119.8 $ 145.5 $ 308.1 $ 401.1
Canada 19.7 17.7 52.3 48.9

North America 139.5 163.2 360.4 450.0
Europe (290.8 ) (8.1 ) (330.8 ) (41.0 )
Central and South America (38.9 ) (3.9 ) (36.4 ) 9.4
All other 7.5 9.5 8.3 13.6

($ 182.7 ) $ 160.7 $ 1.5 $ 432.0

September 30, December 31, Three Months Ended Six Months Ended
Identifiable Assets (8)
2004
2003
June 30, June 30,
2005 2004 2005 2004
Net Sales

United States $ 4,646.0 $ 5,012.1 $ 1,140.2 $ 1,145.5 $ 2,079.4 $ 2,157.7
Canada 101.0 136.2 94.7 88.9 165.9 161.9

North America 4,747.0 5,148.3 1,234.9 1,234.4 2,245.3 2,319.6
Europe 1,545.0 1,628.3 308.9 336.0 596.8 642.7
Central and South America 192.7 195.4 59.6 58.5 101.2 100.5
All other 120.5 116.6 37.7 38.3 74.8 75.1
Discontinued Operations — 392.1

$ 6,605.2 $ 7,480.7 $ 1,641.1 $ 1,667.2 $ 3,018.1 $ 3,137.9

Operating Income (7)

United States $ 143.1 $ 108.7 $ 204.7 $ 176.5
Canada 18.5 19.5 29.1 32.4

North America 161.6 128.2 233.8 208.9
Europe 5.4 (25.1 ) (5.5 ) (30.0 )
Central and South America 8.6 0.4 8.1 2.5
All other 8.0 4.4 13.0 8.3

$ 183.6 $ 107.9 $ 249.4 $ 189.7

.

June 30, December 31,
2005 2004
Identifiable Assets (8)

United States $ 4,421.0 $ 4,797.2
Canada 107.9 114.1

North America 4,528.9 4,911.3
Europe 1,208.4 1,257.4
Central and South America 192.1 185.1
All other 128.5 136.1
Discontinued Operations 25.6 176.6

$ 6,083.5 $ 6,666.5


1)		All intercompany transactions have been eliminated. Sales to ~~one customer~~Wal*Mart Stores, Inc. and subsidiaries amounted to approximately ~~14.3%~~14% and 15% of consolidated net sales, excluding discontinued operations, in the first ~~nine~~six 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~~are not allocated to a particular segment.

4)		Impairment charges 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.~~additional information.

5)		Restructuring costs have been presented separately in this table; refer to ~~Note 3~~Footnote 4 to the Consolidated Financial Statements (Unaudited) for a breakout of the ~~charge~~costs 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~~charges (see ~~Note 2~~Footnote 3 to the Consolidated Financial Statements (Unaudited)) have been reflected as reductions in Corporate assets.

7)		The restructuring costs and impairment charges ~~recorded in the nine months ended September 30, 2004~~ have been reflected in the appropriate geographic ~~regions.~~regions for all periods presented.

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

~~Note~~

Footnote 12 –— Contingencies

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~~

Footnote 13 –— Subsequent ~~Event~~
Events

On ~~October 12, 2004,~~July 20, 2005, the Company ~~purchased 825,000 shares of its Preferred Securities from~~approved a ~~holder for $43.6875 per share.~~restructuring plan to shut down a manufacturing facility in the Cleaning & Organization segment. The manufacturing facility currently produces indoor storage products. This production will be integrated into existing facilities. The plan is expected to result in a total pre-tax charge between $12 million and $16 million, primarily related to facility and other exit costs. The Company ~~paid a total of $36 million.~~
plans to exit the facility during the third quarter.

On ~~November 4, 2004,~~July 28, 2005, the Company ~~declared~~entered into a ~~quarterly~~definitive agreement with a subsidiary of Esselte Group Holdings AB to acquire DYMO, a global leader in designing, manufacturing and marketing on-demand labeling solutions, for approximately $730 million in cash, ~~dividend of $0.21 per share on~~subject to adjustment for working capital and other items. This acquisition will strengthen the Company’s ~~common stock.~~global leadership position in the Office Products segment by expanding and enhancing the Company’s product lines and customer base. The ~~dividend~~Company expects to close the transaction prior to December 30, 2005. The transaction is ~~payable December 3,~~not expected to materially impact 2005 earnings. Total 2004 ~~to common stockholders of record on November 16, 2004.~~
annual sales by DYMO were approximately $226 million.

1715

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


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

Overview

The Company made significant progress in the first ~~nine~~six months 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~~six months of ~~2004~~2005 toward achieving such priorities, are highlighted below:

	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 June 2005, the Company completed the sale of its Curver business, the Company’s European indoor organization and home storage division. Additionally, during the quarter, the Company recognized an impairment loss in discontinued operations associated with the anticipated disposal of a business in the Cleaning & Organization segment. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for additional information on this transaction. In the first six months of 2005, the Company exited approximately $120 million in low margin product lines in the Rubbermaid Home Products, Graco, Swish UK, and Office Products businesses.

			On July 28, 2005, the Company reached a definitive agreement to acquire DYMO, a global leader in designing, manufacturing and marketing on-demand labeling solutions for approximately $730 million in cash, subject to adjustment for working capital and other items. The Company expects to close the transaction prior to December 30, 2005. The transaction is not expected to materially impact 2005 earnings. Total 2004 annual sales by DYMO were approximately $226 million.

	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 six months 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 7 to the Consolidated Financial Statements (Unaudited)). The net impact was an increase in SG&A of $10.1 million over the first six months of 2004. These SG&A increases in Office Products and Tools & Hardware segments are expected to continue in the second half of 2005.

	3.		Address Raw Material Inflation:The Company has several businesses that have been significantly impacted by commodity inflation. The Company has historically combated these cost increases through organic productivity initiatives. However, due to the continued inflationary pressure in raw materials, the Company has implemented price increases to offset a portion of the increased costs. In the first six months of 2005, the Company experienced raw material inflation of approximately $88 million (primarily in resin and steel), partially offset by pricing increases of approximately $65 million. For the full year raw material inflation is expected to be $150 million, which will be partially offset by forecasted price increases of $125 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 $45 million of gross productivity savings, excluding raw material inflation, during the first six months of 2005. Gross productivity savings are forecasted to be $105 million for the full year 2005.

			On July 20, 2005, the Company approved a restructuring plan to shut down a manufacturing facility in the Cleaning & Organization segment. The manufacturing facility currently produces indoor storage products. This production will be integrated into existing facilities. The plan is expected to result in a total pre-tax charge between $12 million and $16 million, primarily related to facility and other exit costs. The Company plans to exit the facility during the third quarter.

			The Company is in the process of undergoing a worldwide strategic review to evaluate opportunities to further reduce manufacturing overhead, increase operational efficiencies and to accelerate existing or implement additional cost savings programs, which could result in incremental restructuring costs to streamline operations.

~~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.

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.

1816

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 September 30,										Nine Months Ended September 30,										Three Months Ended June 30,									Six Months Ended June 30,
	2004					2003					2004					2003					2005					2004				2005					2004
Net sales	$	1,671.8		100.0	%	$	1,729.1		100.0	%	$	4,939.9		100.0	%	$	5,072.0		100.0	%	$	1,641.1		100.0	%	$	1,667.2	100.0	%	$	3,018.1		100.0	%	$	3,137.9		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			1,132.8		69.0			1,189.7	71.4			2,134.9		70.7			2,258.6		72.0

Gross margin		473.3		28.3			491.8		28.4			1,368.9		27.7			1,447.0		28.5			508.3		31.0			477.5	28.6			883.2		29.3			879.3		28.0
Selling, general and administrative expenses		307.1		18.4			298.8		17.3			945.5		19.1			905.5		17.9			324.4		19.8			318.8	19.1			627.3		20.8			617.2		19.7
Impairment charges		348.9		20.9			—		—			374.0		7.6			—		—			—		—			25.1	1.5			—		—			25.1		0.8
Restructuring costs		—		—			32.3		1.9			47.9		1.0			109.5		2.2			0.3		—			25.7	1.5			6.5		0.2			47.3		1.5

Operating (loss) income		(182.7	)	(10.9	)		160.7		9.3			1.5		—			432.0		8.5
Operating income																						183.6		11.2			107.9	6.5			249.4		8.3			189.7		6.0
Nonoperating expenses:
Interest expense, net		29.5		1.8			33.1		1.9			90.0		1.8			104.5		2.1			31.0		1.9			29.5	1.8			61.9		2.1			60.4		1.9
Other (income) expense, net		(0.8	)	—			1.4		0.1			(3.9	)	(0.1	)		18.6		0.4
Other expense (income), net																						1.9		0.1			1.7	0.1			(0.4	)	—			4.0		0.1

Net nonoperating expenses		28.7		1.7			34.5		2.0			86.1		1.7			123.1		2.4			32.9		2.0			31.2	1.9			61.5		2.0			64.4		2.0

(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																						150.7		9.2			76.7	4.6			187.9		6.2			125.3		4.0
Income taxes		23.6		1.4			40.7		2.4			58.7		1.2			100.0		2.0			47.2		2.9			18.2	1.1			(0.4	)	—			34.7		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																						103.5		6.3			58.5	3.5			188.3		6.2			90.6		2.9

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) gain from discontinued operations, net of tax																						(37.3	)	(2.3	)		2.5	0.2			(85.5	)	(2.8	)		(104.4	)	(3.3	)

Net (loss) income	($	226.4	)	(13.5	)%	$	75.2		4.3	%	($	240.3	)	(4.9	)%	$	165.0		3.3	%
Net income (loss)																					$	66.2		4.0	%	$	61.0	3.7	%	$	102.8		3.4	%	($	13.8	)	(0.4	)%

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

Consolidated Operating Results:

Net sales for the three months ended ~~September~~June 30, ~~2004 (third~~2005 (second quarter) were ~~$1,671.8~~$1,641.1 million, representing a decrease of ~~$57.3~~$26.1 million, or ~~3.3%~~1.6%, from ~~$1,729.1~~$1,667.2 million in the comparable quarter of ~~2003. The decrease resulted from product line rationalization~~2004, consisting of ~~$75 million, or 4.3%, and a decline~~ the following(in millions, except percentages):

$ %

Favorable currency translation $ 25 1.5 %
Favorable pricing 35 2.1
Product line rationalization (60 ) (3.6 )
Core sales (26 ) (1.6 )

($ 26 ) (1.6 )%

The core sales ~~of $15 million, or 0.9%. These were partially~~decline was primarily in the Cleaning & Organization segment, resulting from the aggressive pricing required to offset resin inflation. In addition, the European Home Fashion business continues to experience core sales declines 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. Partially offsetting these sales declines was growth in the Tools & Hardware and Office Products segments, driven by favorable ~~foreign currency translation of $30 million, or 1.7%,~~mix, positive pricing and ~~favorable pricing of $3 million, or 0.2%, for~~new

product successes. Sales in the Tools & Hardware business were up 5.1% and sales in the Office Products business were up 1.3% in the quarter.

Gross margin, as a percentage of net sales, in the ~~third~~second quarter of ~~2004~~2005 was ~~28.3%~~31.0%, or ~~$473.3~~$508.3 million, versus ~~28.4%~~28.6%, or ~~$491.8~~$477.5 million, in the comparable quarter of ~~2003.~~2004. The ~~decline~~increase in gross margin is primarily related to ~~raw material inflation of $31 million. This was partially offset by~~ favorable pricing of $3$35 million, or ~~0.2%,~~2.1% of net sales, gross productivity of $27 million, and a favorable mix, driven by new products and the continued rationalization of unprofitable product lines, ~~primarily in the Rubbermaid Home Products and Eldon Office Products businesses. Gross productivity in the quarter of $29 million was~~ partially offset by ~~restructuring related costs~~raw material inflation of ~~$15 million.~~
$37 million (primarily resin and steel).

Selling, general and administrative expenses (SG&A) in the ~~third~~second quarter of ~~2004~~2005 were ~~18.4%~~19.8% of net sales, or ~~$307.1~~$324.4 million, versus ~~17.3%~~19.1%, or ~~$298.8~~$318.8 million, in the comparable quarter of ~~2003.~~2004. The primary drivers of the increase ~~in SG&A reflects a~~were foreign
19

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

Office Products and Tools & Hardware segments, partially offset by streamlining activities.

The Company recorded a non-cash pretax impairment charge of ~~$348.9~~$25.1 million ~~(332.8 million, net of tax)~~ in the ~~third~~second quarter of 2004. ~~These charges were~~The charge was required to write-down certain assets to fair value. See ~~Note 2~~Footnote 3 to the Consolidated Financial Statements (Unaudited) for additional information.

The Company recorded pre-tax ~~strategic~~ restructuring ~~charges~~costs of ~~$32.3~~$0.3 million in the ~~third~~second quarter of ~~2003.~~2005, compared to $25.7 million in the prior year. The 2004 pre-tax ~~charge~~costs included ~~$28.6~~$17.7 million of facility and other exit costs, ~~and $3.7~~$5.0 million of employee severance and termination ~~benefits.~~benefits and $3.0 million of exited contractual commitments and other restructuring costs. See ~~Note 3~~Footnote 4 to the Consolidated Financial Statements (Unaudited) for further information on the ~~strategic~~ restructuring plan.

Operating ~~(loss)~~ income in the ~~third~~second quarter of ~~2004~~2005 was ~~($182.7)~~$183.6 million, or ~~(10.9%)~~11.2% of net sales, versus ~~operating income of $160.7~~$107.9 million, or ~~9.3%~~6.5%, in the comparable quarter of ~~2003.~~2004. The ~~decrease~~increase in operating margins is the result of the factors described above.

Net nonoperating expenses in the ~~third~~second quarter of ~~2004~~2005 were ~~1.7%~~2.0% of net sales, or ~~$28.7~~$32.9 million, versus ~~2.0%,~~1.9% of net sales, or ~~$34.5~~$31.2 million, in the comparable quarter of ~~2003. Net~~2004. The increase in net nonoperating expenses is mainly attributable to an increase in net interest expense ~~decreased $3.6~~of $1.5 million for the ~~third~~second quarter of 2005 compared to the second quarter of 2004, ~~compared~~mostly due to ~~the third quarter of 2003 as a result of lower average debt outstanding, partially offset by increased~~higher interest rates.

The effective tax rate was ~~(11.2)%~~31.3% in the ~~third~~second quarter of ~~2004~~2005 versus ~~32.3%~~23.7% in the ~~third~~second quarter of ~~2003.~~2004. The change in the effective tax rate is primarily related to the ~~non-deductibility associated with a portion~~resolution of certain income tax provisions in the ~~Company’s $348.9 million impairment charge.~~second quarter of 2004. See ~~Notes 2 and 5~~Footnote 8 to the Consolidated Financial Statements (Unaudited) for further information.
~~Net (loss) income~~

Income from continuing operations for the ~~third~~second quarter of ~~2004~~2005 was ~~($235.0)~~$103.5 million, compared to ~~$85.5~~$58.5 million in the ~~third~~second quarter of ~~2003.~~2004. Diluted ~~(loss)~~ earnings per share from continuing operations were ~~($0.86)~~$0.38 in the ~~third~~second quarter of ~~2004~~2005 compared to ~~$0.31~~$0.21 in the ~~third~~second quarter of ~~2003.~~
2004.

The ~~net gain~~income (loss) recognized from operations of discontinued operations for the ~~third~~second quarter of ~~2004~~2005 was ~~$8.6~~$1.4 million, net of tax, compared to ~~a net loss of $10.3~~($3.1) million, net of tax, in the ~~third~~second quarter of ~~2003.~~2004. The (loss) gain on disposal of discontinued operations for the second quarter of 2005 was ($38.7) million, net of tax, compared to $5.6 million, net of tax, in the second quarter of 2004. Diluted ~~earnings~~ (loss) income per share from discontinued operations was ~~$0.03~~($0.14) in the ~~third~~second quarter of ~~2004~~2005 compared to ~~($0.04)~~$0.01 in the ~~third~~second quarter of ~~2003.~~2004. See ~~Note 4~~Footnote 2 to the Consolidated Financial Statements (Unaudited) for further information.

Net ~~(loss)~~ income for the ~~third~~second quarter of ~~2004~~2005 was ~~($226.4)~~$66.2 million, compared to ~~$75.2~~$61.0 million in the ~~third~~second quarter of ~~2003.~~2004. Diluted ~~(loss)~~ earnings per share ~~was ($0.83)~~were $0.24 in the ~~third~~second quarter of ~~2004~~2005 compared to ~~$0.27~~$0.22 in the ~~third~~second quarter of ~~2003.~~
2004.

Business Group Operating Results:

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


	2004		2003		% Change			2005		2004		% Change
Cleaning & Organization	$	455.9	$	514.4		(11.4	)%	$	376.5	$	400.1		(5.9	)%
Office Products		424.3		428.7		(1.0	)		495.5		489.2		1.3
Tools & Hardware		300.6		299.3		0.4			315.5		300.3		5.1
Home Fashions		228.1		223.5		2.1			212.0		224.2		(5.4	)
Other		262.9		263.2		(0.1	)		241.6		253.4		(4.7	)

Total Net Sales (1)	$	1,671.8	$	1,729.1		(3.3	)%	$	1,641.1	$	1,667.2		(1.6	)%

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


	2004			2003			% Change			2005			2004			% Change
Cleaning & Organization	$	29.2		$	31.9			(8.5	)%	$	23.1		$	9.2			151.1	%
Office Products		61.5			69.9			(12.0	)		98.9			95.5			3.6
Tools & Hardware		45.1			53.4			(15.5	)		49.3			43.5			13.3
Home Fashions		15.9			17.5			(9.1	)		3.6			5.2			(30.8	)
Other		24.7			31.2			(20.8	)		18.7			15.0			24.7
Corporate Costs (2)		(10.2	)		(10.9	)					(9.7	)		(9.7	)
Impairment Charges (3)		(348.9	)		—						—			(25.1	)
Restructuring Costs (4)		—			(32.3	)					(0.3	)		(25.7	)

Total Operating Income (5)	($	182.7	)	$	160.7			(213.7	)%	$	183.6		$	107.9			70.2	%


(1)		All intercompany transactions have been eliminated. Sales to ~~one customer~~Wal*Mart Stores, Inc. and subsidiaries amounted to approximately ~~14.8%~~14% and ~~14.6%~~16% of consolidated net sales, excluding discontinued operations, in the three months ended ~~September~~June 30, ~~2004~~2005 and ~~2003,~~2004, respectively. 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~~are not allocated to a particular segment.

(3)		Impairment charges 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.~~additional information.

(4)		Restructuring costs have been presented separately in this table; refer to ~~Note 3~~Footnote 4 to the Consolidated Financial Statements (Unaudited) for a breakout of the costs by reportable segment for 2004.

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

Cleaning & Organization

Net sales for the second quarter of 2005 were $376.5 million, a decrease of $23.6 million, or 5.9%, from $400.1 million in the second quarter of 2004, driven primarily by the planned product line exits and core sales decline in the Rubbermaid Home Products business, partially offset by mid single digit growth in both the Rubbermaid Commercial Products and Rubbermaid Foodservice businesses, favorable pricing and foreign currency translation.

Operating income for the second quarter of 2005 was $23.1 million, an increase of $13.9 million, or 151.1%, from $9.2 million in the second quarter of 2004. The improvement in operating income is the result of improved manufacturing and distribution productivity, favorable sales mix and favorable pricing which offset raw material inflation.

Office Products

Net sales for the second quarter of 2005 were $495.5 million, an increase of $6.3 million, or 1.3%, from $489.2 million in the second quarter of 2004. The increase was primarily due to new product successes in writing instruments (Sharpie® Retractables, Sharpie® Mini permanent markers, Papermate® Flexgrip Elite pens) and favorable currency translation, partially offset by sales declines in the Eldon office products business.

Operating income for the second quarter of 2005 was $98.9 million, an increase of $3.4 million, or 3.6%, from $95.5 million in the second quarter of 2004, as a result of increased sales, improved gross margins driven by new product introductions and productivity, partially offset by increased investment in SG&A, primarily related to the Sharpie advertising campaign.

Tools & Hardware

Net sales for the second quarter of 2005 were $315.5 million, an increase of $15.2 million, or 5.1%, from $300.3 million in the second quarter of 2004, driven by strong sales in the LENOX, IRWIN and BernzOmatic businesses, partially offset by a sales decline in the Amerock business.

Operating income for the second quarter of 2005 was $49.3 million, an increase of $5.8 million, or 13.3%, from $43.5 million in the second quarter of 2004, driven by the increased sales and strong productivity, partially offset by raw material inflation and increased investments in SG&A.

Home Fashions

Net sales for the second quarter of 2005 were $212.0 million, a decrease of $12.2 million, or 5.4%, from $224.2 million in the second quarter of 2004, driven by product line exits and core sales declines in the European Home Fashions business, partially offset by mid single digit growth in the North American business.

Operating income for the second quarter of 2005 was $3.6 million, a decrease of $1.6 million, or 30.8%, from $5.2 million in the second quarter of 2004. The decrease in operating income was due primarily to lower sales and raw material inflation, partially offset by productivity.

Other

Net sales for the second quarter of 2005 were $241.6 million, a decrease of $11.8 million, or 4.7%, from $253.4 million in the second quarter of 2004. The decline is primarily the result of product line exits in the Graco business and core sales declines in the Little Tikes battery operated products business, partially offset by core sales growth in the rest of the segment and favorable foreign currency translation.

Operating income for the second quarter of 2005 was $18.7 million, an increase of $3.7 million, or 24.7%, from $15.0 million in the second quarter of 2004, driven primarily by productivity and reduced SG&A in the juvenile products businesses.

Six Months Ended June 30, 2005 vs. Six Months Ended June 30, 2004

Consolidated Operating Results:

Net sales for the six months ended June 30, 2005 were $3,018.1 million, representing a decrease of $119.8 million, or 3.8%, from $3,137.9 million in the comparable period of 2004, consisting of the following(in millions, except percentages):

$ %

Favorable currency translation $ 49 1.6 %
Favorable pricing 65 2.0
Product line rationalization (120 ) (3.8 )
Core sales (114 ) (3.6 )

($ 120 ) (3.8 )%

The core sales decline was primarily in the Cleaning & Organization segment, resulting from the aggressive pricing required to offset resin inflation. In addition, the European Home Fashion business continues to experience core sales declines 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, for the six months ended June 30, 2005 was 29.3%, or $883.2 million, versus 28.0%, or $879.3 million, in the comparable period of 2004. The increase in gross margin is primarily related to favorable pricing of $65 million, or 2.0% of net sales, gross productivity of $45 million, favorable mix driven by new products and the continued rationalization of unprofitable product lines and the positive impact of the US pension curtailment, partially offset by raw material inflation of $88 million (primarily resin and steel) and the impact of the core sales decline.

Selling, general and administrative expenses (SG&A) for the six months ended June 30, 2005 were 20.8% of net sales, or $627.3 million, versus 19.7%, or $617.2 million, in the comparable period of 2004. The increase in SG&A reflects a currency impact of $13.5 million. All other SG&A was down $3.4 million with strategic investments more than offset by the effect of streamlining initiatives.

The Company recorded a non-cash pretax impairment charge of $25.1 million for the six months ended June 30, 2004. These charges were required to write-down certain assets to estimated fair value. See Footnote 3 to the Consolidated Financial Statements (Unaudited) for additional information.

The Company recorded pre-tax restructuring costs of $6.5 million and $47.3 million for the six months ended June 30, 2005 and 2004, respectively. The 2004 pre-tax costs included $31.6 million of facility and other exit costs, $10.4 million of employee severance and termination benefits and $5.3 million of exited contractual commitments and other restructuring costs. See Footnote 4 to the Consolidated Financial Statements (Unaudited) for further information on the restructuring plan.

Operating income for the six months ended June 30, 2005 was $249.4 million, or 8.3% of net sales, versus $189.7 million, or 6.0% of net sales, in the comparable period of 2004. The increase in operating margins is the result of the factors described above.

Net nonoperating expenses for the six months ended June 30, 2005 were 2.0% of net sales, or $61.5 million, versus 2.0% of net sales, or $64.4 million, in the comparable period of 2004. The reduction in net nonoperating expenses is mainly attributable to gains recognized in 2005 on the sale of property, plant and equipment. Partially offsetting this reduction was an increase in net interest expense, $1.5 million for the six months ended June 30, 2005 compared to the same period for 2004. The increase was primarily due to higher interest rates, partially offset by lower debt balances.

The effective tax rate was (0.2%) for the six months ended June 30, 2005 versus 27.7% for the six months ended June 30, 2004. The change in the effective tax rate is primarily related to the $58.6 million income tax benefit recorded in 2005 compared to the net income tax benefit of $6.4 million recorded in 2004, as a result of favorable tax contingency settlements. See Footnote 8 to the Consolidated Financial Statements (Unaudited) for further information.

Income from continuing operations for the six months ended June 30, 2005 was $188.3 million, compared to $90.6 million for the six months ended June 30, 2004. Diluted earnings per share from continuing operations was $0.69 for the six months ended June 30, 2005 compared to $0.33 for the six months ended June 30, 2004.

The income (loss) recognized from operations of discontinued operations for the six months ended June 30, 2005 was $2.3 million, net of tax, compared to ($5.3) million, net of tax, for the six months ended June 30, 2004. The loss on disposal of discontinued operations for the six months ended June 30, 2005 was $87.8 million, net of tax, compared to $99.1 million, net of tax, for the six months ended June 30, 2004. Diluted loss per share from discontinued operations was $0.31 for the six months ended June 30, 2005 compared to $0.38 for the six months ended June 30, 2004. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for further information.

Net income (loss) for the six months ended June 30, 2005 was $102.8 million, compared to ($13.8) million for the six months ended June 30, 2004. Diluted earnings (loss) per share was $0.37 for the six months ended June 30, 2005 compared to ($0.05) for the six months ended June 30, 2004.

Business Segment Operating Results:

Net sales by reportable segment were as follows for the six months ended June 30, (in millions, except percentages):

2005 2004 % Change
Cleaning & Organization $ 701.0 $ 785.9 (10.8 )%
Office Products 828.3 822.0 0.8
Tools & Hardware 591.9 574.6 3.0
Home Fashions 410.3 451.0 (9.0 )
Other 486.6 504.4 (3.5 )

Total Net Sales (1) $ 3,018.1 $ 3,137.9 (3.8 )%

Operating income by segment was as follows for the six months ended June 30, (in millions, except percentages):

2005 2004 % Change
Cleaning & Organization $ 35.6 $ 25.4 40.2 %
Office Products 132.4 127.3 4.0
Tools & Hardware 76.0 86.5 (12.1 )
Home Fashions (0.9 ) 9.1 (109.9 )
Other 32.0 30.9 3.6
Corporate Costs (2) (19.2 ) (17.1 )
Impairment Charges (3) — (25.1 )
Restructuring Costs (4) (6.5 ) (47.3 )

Total Operating Income (5) $ 249.4 $ 189.7 31.5 %


(1)		All intercompany transactions have been eliminated. Sales to Wal*Mart Stores, Inc. and subsidiaries amounted to approximately 14% and 15% of consolidated net sales, excluding discontinued operations, in the first six months of 2005 and 2004. Sales to no other customer exceeded 10% of consolidated net sales for either period.

(2)		Corporate operating expenses consist primarily of administrative costs that are not allocated to a particular segment.

(3)		Impairment charges have been presented separately in this table; refer to Footnote 3 to the Consolidated Financial Statements (Unaudited) for additional information.

(4)		Restructuring costs have been presented separately in this table; refer to Footnote 4 to the Consolidated Financial Statements (Unaudited) for a breakout of the costs 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~~headquarter’s 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 quarter of 2004~~six months ended June 30, 2005 were ~~$455.9~~$701.0 million, a decrease of ~~$58.5~~$84.9 million, or ~~11.4%~~10.8%, from ~~$514.4~~$785.9 million in the ~~third quarter~~comparable period of ~~2003,~~2004, driven primarily by ~~a decline~~the planned product line exits and core sales declines in the Rubbermaid Home Products ~~business due to planned product line rationalization~~business. These factors were partially offset by mid single digit growth in ~~certain low margin product lines.~~
the Rubbermaid Commercial Products and Rubbermaid Foodservice businesses, favorable pricing and foreign currency translation.

Operating income for the ~~third quarter~~six months ended June 30, 2005 was $35.6 million, an increase of ~~2004 was $29.2 million, a decrease of $2.7~~$10.2 million, or ~~8.5%~~40.2%, from ~~$31.9~~$25.4 million in the ~~third quarter~~comparable period of ~~2003.~~2004. The ~~decrease~~improvement in operating income is the result of ~~higher~~improved manufacturing and distribution productivity, favorable sales mix and favorable pricing which significantly offset raw material ~~costs and lost absorption in manufacturing facilities, partially offset by favorable pricing, productivity and mix.~~
inflation.

Office Products

Net sales for the ~~third quarter~~six months ended June 30, 2005 were $828.3 million, an increase of ~~2004 were $424.3 million, a decrease of $4.4~~$6.3 million, or ~~1.0%,~~0.8% from ~~$428.7~~$822.0 million in the ~~third quarter~~comparable period of ~~2003, driven~~2004. The increase was primarily due to successful implementation of new products in the writing instruments business (Sharpie® Retractables, Sharpie® Mini permanent markers, Papermate® Flexgrip Elite pens) and favorable foreign currency translation, partially offset by ~~the exit of certain low margin resin based products~~sales declines in the Eldon office products ~~business, partially offset by a mid single digit sales increase in the writing instruments~~ business.

Operating income for the ~~third quarter~~six months ended June 30, 2005 was $132.4 million, an increase of $5.1 million, or 4.0%, from $127.3 million in the comparable period of 2004, as a result of increased sales and improved margins associated with the new product introductions and productivity, partially offset by raw material inflation and increased investment in SG&A, primarily related to the Sharpie® advertising campaign.

Tools & Hardware

Net sales for the six months ended June 30, 2005 were $591.9 million, an increase of $17.3 million, or 3.0%, from $574.6 million in the comparable period of 2004, driven by increases in the LENOX and BernzOmatic businesses, partially offset by sales declines in the Amerock business.

Operating income for the six months ended June 30, 2005 was ~~$61.5~~$76.0 million, a decrease of ~~$8.4~~$10.5 million, or ~~12.0%~~12.1%, from ~~$69.9~~$86.5 million in the ~~third quarter~~comparable period of ~~2003,~~2004, driven by raw material inflation, restructuring related costs at the ~~sales decrease at Eldon~~Amerock and ~~an increase~~IRWIN businesses and continued investments in SG&A ~~spending. These were~~in the tools business, partially offset by ~~a mid single digit~~the sales increase ~~in the writing instruments business.~~
~~Tools & Hardware~~
noted above and strong productivity.

Home Fashions

Net sales for the ~~third quarter of 2004~~six months ended June 30, 2005 were $300.6 million, an increase of $1.3 million, or 0.4%, from $299.3 million in the third quarter of 2003, driven by the impact of positive currency translation and a sales increase in the Lenox business.
~~Operating income for the third quarter of 2004 was $45.1~~$410.3 million, a decrease of ~~$8.3~~$40.7 million, or ~~15.5%~~9.0%, from ~~$53.4~~$451.0 million in the ~~third quarter~~comparable period of ~~2003,~~2004, driven by ~~increases in raw material costs, particularly steel,~~product line exits and ~~restructuring related costs.~~
~~Home Fashions~~
~~Net~~core sales ~~for the third quarter of 2004 were $228.1 million, an increase of $4.6 million, or 2.1%, from $223.5 million~~declines in the ~~third quarter of 2003, driven~~European Home Fashions business, partially offset by favorable foreign currency translation.

Operating (loss) income for the ~~third quarter of 2004~~six months ended June 30, 2005 was ~~$15.9~~($0.9) million, a decrease of ~~$1.6~~$10.0 million, ~~or 9.1%,~~ from ~~$17.5~~$9.1 million in the ~~third quarter~~comparable period of ~~2003.~~2004. The decrease in operating income was due primarily to ~~an increase in~~lower sales, raw ~~materials costs,~~material inflation and the liquidation of Douglas Kane, partially offset by productivity.
21

Other

Net sales for the ~~third quarter of 2004~~six months ended June 30, 2005 were ~~$262.9~~$486.6 million, a decrease of ~~$0.3~~$17.8 million, or ~~0.1%~~3.5%, from ~~$263.2 million in the third 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~~$504.4 million in the comparable period of ~~2003.~~2004. The ~~decrease resulted from~~decline is primarily the result of product line ~~rationalization of approximately $200 million, or 3.9%,~~exits in the Graco business and ~~unfavorable pricing of $24 million, or 0.5%,~~core sales declines in the Little Tikes battery operated products business, partially offset by favorable pricing and foreign currency ~~translation~~translation.

Operating income for the six months ended June 30, 2005 was $32.0 million, an increase of ~~$115~~$1.1 million, or ~~2.3%~~3.6%, ~~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~~from $30.9 million in the comparable period of ~~2003. The decline~~2004, driven primarily by improved productivity, favorable pricing and reduced SG&A in ~~gross margin is primarily related to unfavorable pricing of $24 million, or 0.4 points, and raw material inflation of $70 million,~~the juvenile products businesses, 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.
22

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.~~

inflation.

~~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 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 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~~$293.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2004.~~2005. The change in cash and cash equivalents is as follows for the ~~nine~~six months ended ~~September~~June 30, (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 operating activities $ 91.9 $ 137.0
Cash (used in) provided by investing activities (58.9 ) 177.0
Cash used in financing activities (319.8 ) (346.2 )
Exchange effect on cash and cash equivalents (6.6 ) (1.2 )

Decrease in cash and cash equivalents ($ 293.4 ) ($ 33.4 )

Sources:

~~Sources:~~

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

Cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 was ~~$421.8~~$91.9 million compared to ~~$420.5~~$137.0 million for the comparable period of ~~2003.~~2004. The ~~increase~~decrease in cash provided from operating activities was primarily due to an increase of working capital in ~~earnings before non-cash charges~~2005, specifically related to the timing of ~~$58.9 million (as shown~~sales in the following table), mostly offset by a reduction in the year over year improvement in working capital and other assets in 2004 compared to 2003, which used an additional $22.1 million, and a reduction in 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~~):second quarter.

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

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~~June 30, ~~2004,~~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~~June 30, ~~2004,~~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~~June 30, ~~2004,~~2005, the Company was in compliance with this agreement.

In the first ~~nine~~six months of ~~2004,~~2005, the Company received proceeds from the issuance of debt of ~~$21.3~~$131.7 million compared to ~~$1,040.5~~$16.9 million in the year ago period.

In the first ~~nine~~six months of ~~2004,~~2005, the Company received cash proceeds of ~~$289.2~~$22.1 million related to the sale of businesses and other non-current assets, compared to ~~$10.2~~$247.1 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~~disposal of ~~these businesses to reduce its commercial paper borrowings.~~
Curver.

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~~six months of ~~2004,~~2005, the Company ~~made payments for~~spent $35.0 million on strategic acquisitions. The Company did not make any significant acquisitions ~~of $3.0 million, compared to $460.0 million used in the first nine months of 2003 relating to the acquisition of Lenox.~~
during 2004.

In the first ~~nine~~six months of ~~2004,~~2005, the Company made payments on notes payable and long-term debt of ~~$251.9~~$335.7 million compared to ~~$776.7~~$248.8 million in the year ago ~~period.~~
25
period, including the purchases of 550,000 shares and 200,000 shares of its Preferred Securities from holders for $47.375 per share and $46.25 per share, respectively. The Company paid $26.1 million and $9.3 million, respectively, for the purchases of these securities. See Footnote 6 to the Consolidated Financial Statements (Unaudited) for additional information on these transactions.

Cash used for restructuring activities was ~~$68.6~~$16.4 million and ~~$63.4~~$43.5 million in the first ~~nine~~six 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~~$46.0 million and ~~$247.1~~$70.1 million in the first ~~nine~~six months of ~~2004~~2005 and ~~2003,~~2004, respectively. The ~~reduction~~Company is focused on capital spending discipline and expects to spend between $125 million and $150 million in ~~capital expenditures is largely due to the Company’s decision to reduce capital investment in the Rubbermaid Home Products business, where capital expenditures decreased from $69.6~~2005 on property, plant and equipment.

Aggregate dividends paid were $115.8 million and $115.7 million in the first ~~nine~~six months of ~~2003 to $7.8 million in the first nine months of 2004.~~
~~Aggregate dividends paid were $173.2 million~~2005 and ~~$173.1 million in the first nine months of~~ 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~~six months of ~~2004~~2005 by ~~$413.5~~$12.9 million. The reduction in retained earnings is due to cash dividends paid on common stock, ~~and~~partially offset by the current year net ~~loss.~~
income.

Working capital at ~~September~~June 30, ~~2004~~2005 was ~~$923.4~~$1,184.0 million compared to ~~$978.2~~$1,141.1 million at December 31, ~~2003.~~2004. The current ratio at ~~September~~June 30, ~~2004~~2005 was ~~1.47:~~1.81:1 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~~June 30, ~~2004~~2005 and ~~.58:~~.55:1 at December 31, ~~2003.~~
~~On October 12, 2004,~~2004.

In August 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 third 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~~

On July 28, 2005, the Company reached a definitive agreement to acquire DYMO, a global leader in designing, manufacturing and marketing on-demand labeling solutions for ~~Pensions, the~~approximately $730 million in cash, subject to adjustment for working capital and other items. The Company expects to ~~record an additional minimum pension liability adjustment at~~close on the transaction prior to December ~~31, 2004. Based~~30, 2005 and to fund the purchase price payment through a combination of cash 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 strategyhand and ~~the Company’s liquidity position is expected to remain strong.~~
existing credit facilities.

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.
26

The Company’s foreign exchange risk management policy emphasizes hedging anticipated intercompany and third party commercial transaction exposures of one-year duration or less. The Company focuses on natural hedging techniques of the following form: 1) offsetting or netting of like foreign currency flows, 2) structuring foreign subsidiary balance sheets with appropriate levels of debt to reduce subsidiary net investments and subsidiary cash flows subject to conversion risk, 3) converting excess foreign currency deposits into U.S. dollars or the relevant functional currency and 4) avoidance of risk by denominating contracts in the appropriate functional currency. In addition, the Company utilizes forward contracts and purchased options to hedge commercial and intercompany transactions. Gains and losses related to qualifying hedges of commercial and intercompany transactions are deferred and included in the basis of the underlying transactions. Derivatives used to hedge intercompany loans are marked to market with the corresponding gains or losses included in the Company’s Consolidated Statements of Operations.

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.
In the first six months of 2005, the Company experienced raw material inflation of approximately $88 million (primarily in resin and steel), partially offset by pricing increases of approximately $65 million. For the full year raw material inflation is expected to be $150 million, which will be partially offset by forecasted price increases of $125 million.

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~~six months ended ~~September~~June 30, (in millions, except percentages):


	2004				2003							2005				2004
	Nine				Nine							Six				Six
	Month		September 30,		Month		September 30,		Confidence			Month		June 30,		Month		June 30,		Confidence
	Average		2004		Average		2003		Level			Average		2005		Average		2004		Level
Interest rates	$	12.3	$	11.3	$	22.4	$	21.1		95	%	$	10.4	$	10.8	$	12.8	$	13.2		95	%
Foreign exchange	$	2.3	$	1.6	$	1.2	$	1.1		95	%	$	2.1	$	2.7	$	2.6	$	1.7		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

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.
~~Item~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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 Results of Operations and Financial Condition (Part I, Item 2).
27

Item 4. Controls and Procedures

As of ~~September~~June 30, ~~2004,~~2005, an evaluation was performed by the Company’s management, under the supervision and with the participation of the Company’s chief executive officer and chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2004~~2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2826

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 4. Submission of Matters to a Vote of Security Holders

On May 11, 2005, the 2005 Annual Meeting of Stockholders of the Company was held. The following is a brief description of the matters voted upon at the meeting and tabulation of the voting therefor:

Proposal 1. Election of four directors of the Company to serve for a term of three years.

Number of Shares
Nominee For Withheld
Michael T. Cowhig 239,363,243 6,550,081
Mark D. Ketchum 239,354,876 6,558,448
William D. Marohn 239,153,120 6,760,204
Raymond G. Viault 239,160,521 6,752,803

Proposal 2. Appointment of Independent Registered Public Accounting Firm. A proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent accountants for the year 2005 was adopted, with 242,692,254 votes cast for, 1,583,246 votes cast against, and 1,637,824 votes abstained.

Proposal 3. A stockholder proposal requesting that the Board of Directors take the necessary steps to declassify the Company’s Board of Directors and establish annual elections of all Directors, was adopted, with 157,287,018 votes cast for, 44,911,264 votes cast against, and 3,971,512 votes abstained.

Item 5. Other Information

In connection with the preparation of the Company’s consolidated financial statements for the quarter ended June 30, 2005, the Company recorded an impairment charge to write down certain long-lived assets currently being held for sale in the Cleaning & Organization segment to their fair value based upon net sales proceeds estimated as of June 30, 2005. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for a discussion of this impairment charge, which discussion is incorporated herein by this reference.

On July 20, 2005, the Company approved a restructuring plan to shut down a manufacturing facility in the Cleaning & Organization segment. See Footnote 13 to the Consolidated Financial Statements (Unaudited) for a discussion of this plan and the related expected charges, which discussion is incorporated herein by this reference.

Item 6. Exhibits


1110.1		~~Statement~~Form of ~~Computation~~Employment Security Agreement between the Company and Shaun P. Holliday (incorporated by reference to Exhibit 10 of ~~Earnings per Share of Common Stock.~~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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		NEWELL RUBBERMAID INC.
		Registrant

Date: ~~November 9, 2004~~August 5, 2005		/s/ ~~J. Patrick Robinson~~Ronald L. Hardnock

	~~J. Patrick Robinson~~	Ronald L. Hardnock
		Vice President – ~~Chief Financial Officer~~
Corporate Controller


	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


Description	Amount
Intangible assets	$	11.7
Long-lived assets		13.4

Total impairment charge	$	25.1


			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		$	145.1
Restructuring costs (provision)		6.5			47.3
Costs incurred		(18.3	)		(92.7	)

Ending balance at June 30	$	16.1		$	99.7


	Three Months Ended		Six Months Ended
	June 30, 2004		June 30, 2004
Facility and other exit costs	$	17.7	$	31.6
Employee severance and termination benefits		5.0		10.4
Exited contractual commitments and other		3.0		5.3

	$	25.7	$	47.3


	12/31/03					Costs			06/30/04
Segment	Balance		Provision			Incurred			Balance
Cleaning & Organization	$	55.5	$	22.3		($	58.0	)	$	19.8
Office Products		29.9		8.6			(11.8	)		26.7
Tools & Hardware		17.9		4.5			(11.4	)		11.0
Home Fashions		17.7		8.7			(6.5	)		19.9
Other		9.6		7.0			(2.0	)		14.6
Corporate		14.5		(3.8	)		(3.0	)		7.7

	$	145.1	$	47.3		($	92.7	)	$	99.7


	United States						International
	2005			2004			2005			2004
Service cost-benefits earned during the year	$	0.5		$	10.0		$	2.1		$	1.8
Interest cost on projected benefit obligation		12.9			10.9			6.0			4.9
Expected return on plan assets		(16.2	)		(13.3	)		(5.5	)		(4.5	)
Amortization of:
Prior service cost		0.3			—			—			—
Actuarial loss		1.2			0.8			1.0			0.4
Curtailment & special termination benefit costs		0.2			(1.8	)		—			—

Net pension (income) expense	($	1.1	)	$	6.6		$	3.6		$	2.6


	United States						International
	2004			2003			2004			2003
Service cost-benefits earned during the year	$	10.2		$	8.8		$	1.8		$	2.2
Interest cost on projected benefit obligation		16.0			12.1			4.9			4.5
Expected return on plan assets		(19.5	)		(17.1	)		(4.5	)		(4.3	)
Actuarial loss		1.3			0.1			0.4			0.4

Net pension expense	$	8.0		$	3.9		$	2.6		$	2.8


	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	)


	$			%

Favorable currency translation	$	25			1.5	%
Favorable pricing		35			2.1
Product line rationalization		(60	)		(3.6	)
Core sales		(26	)		(1.6	)

	($	26	)		(1.6	)%


	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


	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


	Number of Shares
Nominee	For		Withheld
Michael T. Cowhig		239,363,243		6,550,081
Mark D. Ketchum		239,354,876		6,558,448
William D. Marohn		239,153,120		6,760,204
Raymond G. Viault		239,160,521		6,752,803