UNITED STATES 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 June 30, ~~2005~~2006

Commission File Number 1-9608

NEWELL RUBBERMAID INC.

(Exact name of registrant as specified in its charter)


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

~~10B~~10 B Glenlake Parkway, Suite ~~600~~300
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


~~Yes~~þ		YesþNoo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filerþ Accelerated Filero Non-Accelerated Filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yeso Noþ		Noo

Number of shares of common stock outstanding (net of treasury shares) as of ~~July 29, 2005: 275.3~~June 30, 2006: 276.9 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					Six Months Ended						Three Months Ended						Six Months Ended
	June 30,					June 30,						June 30,						June 30,
	2005			2004		2005			2004			2006			2005			2006			2005
Net sales	$	1,641.1		$	1,667.2	$	3,018.1		$	3,137.9		$	1,696.8		$	1,548.6		$	3,102.1		$	2,811.1
Cost of products sold		1,132.8			1,189.7		2,134.9			2,258.6			1,122.4			1,063.2			2,087.2			1,974.1

GROSS MARGIN		508.3			477.5		883.2			879.3			574.4			485.4			1,014.9			837.0
Selling, general and administrative expenses		324.4			318.8		627.3			617.2			353.6			292.9			678.0			560.7
Impairment charges		—			25.1		—			25.1			—			31.4			—			31.4
Restructuring costs		0.3			25.7		6.5			47.3			19.8			0.3			43.3			6.8

OPERATING INCOME		183.6			107.9		249.4			189.7			201.0			160.8			293.6			238.1

Nonoperating expenses:
Interest expense, net		31.0			29.5		61.9			60.4			35.6			31.1			69.3			61.9
Other expense (income), net		1.9			1.7		(0.4	)		4.0
Other expense, net													1.0			2.2			3.7			0.4

Net nonoperating expenses		32.9			31.2		61.5			64.4			36.6			33.3			73.0			62.3

INCOME BEFORE INCOME TAXES		150.7			76.7		187.9			125.3			164.4			127.5			220.6			175.8
Income taxes		47.2			18.2		(0.4	)		34.7			28.7			40.1			(33.9	)		(7.9	)

INCOME FROM CONTINUING OPERATIONS		103.5			58.5		188.3			90.6			135.7			87.4			254.5			183.7
(Loss) gain from discontinued operations, net of tax		(37.3	)		2.5		(85.5	)		(104.4	)
Loss from discontinued operations, net of tax													(16.2	)		(21.2	)		(80.2	)		(80.9	)

NET INCOME (LOSS)	$	66.2		$	61.0	$	102.8		($	13.8	)
NET INCOME												$	119.5		$	66.2		$	174.3		$	102.8

Weighted average shares outstanding:
Basic		274.4			274.4		274.4			274.4			274.6			274.4			274.5			274.4
Diluted		274.7			274.5		274.7			274.5			283.6			274.7			283.5			274.7

Earnings (Loss) per share:
Basic -
Earnings (loss) per share:
Basic —
Income from continuing operations	$	0.38		$	0.21	$	0.69		$	0.33		$	0.49		$	0.32		$	0.93		$	0.67
(Loss) income from discontinued operations		(0.14	)		0.01		(0.31	)		(0.38	)
Loss from discontinued operations													(0.06	)		(0.08	)		(0.29	)		(0.29	)

Net income (loss) per common share	$	0.24		$	0.22	$	0.37		($	0.05	)
Earnings per common share												$	0.44		$	0.24		$	0.63		$	0.37

Diluted -
Diluted —
Income from continuing operations	$	0.38		$	0.21	$	0.69		$	0.33		$	0.49		$	0.32		$	0.92		$	0.67
(Loss) income from discontinued operations		(0.14	)		0.01		(0.31	)		(0.38	)
Loss from discontinued operations													(0.06	)		(0.08	)		(0.28	)		(0.29	)

Net income (loss) per common share	$	0.24		$	0.22	$	0.37		($	0.05	)
Earnings per common share												$	0.43		$	0.24		$	0.64		$	0.37


Dividends per share	$	0.21		$	0.21	$	0.42		$	0.42		$	0.21		$	0.21		$	0.42		$	0.42

See Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Amounts in millions)


	June 30,		December 31,		June 30,		December 31,
	2005		2004		2006		2005
	(Unaudited)				(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	212.2	$	505.6	$	116.3	$	115.5
Accounts receivable, net		1,204.5		1,233.0		1,157.5		1,107.7
Inventories, net		1,023.7		938.1		967.8		825.1
Deferred income taxes		74.0		73.8		131.8		109.8
Prepaid expenses and other		113.6		180.3		96.6		105.7
Current assets of discontinued operations		11.1		81.6		209.4		209.0

TOTAL CURRENT ASSETS		2,639.1		3,012.4		2,679.4		2,472.8

PROPERTY, PLANT AND EQUIPMENT, NET						832.4		911.8
DEFERRED INCOME TAXES						—		38.0
GOODWILL						2,420.0		2,304.4
OTHER INTANGIBLE ASSETS, NET						415.7		401.7
OTHER ASSETS		202.1		186.4		188.2		185.3

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

DEFERRED INCOME TAXES		5.2		30.2

GOODWILL		1,796.0		1,821.0

OTHER INTANGIBLE ASSETS, NET		313.3		299.1

NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS		14.5		95.0		—		132.5


TOTAL ASSETS	$	6,083.5	$	6,666.5	$	6,535.7	$	6,446.5

See Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in millions, except par value)


	June 30,			December 31,			June 30,			December 31,
	2005			2004			2006			2005
	(Unaudited)						(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	590.2		$	661.5		$	634.8		$	617.9
Accrued compensation		106.2			113.3			130.2			144.0
Other accrued liabilities		699.5			789.4			667.1			685.9
Income taxes payable		20.7			68.8			11.3			82.6
Notes payable		13.0			21.3			20.9			4.0
Current portion of long-term debt		25.4			185.6			408.6			162.8
Current liabilities of discontinued operations		0.1			31.4			77.3			100.3

TOTAL CURRENT LIABILITIES		1,455.1			1,871.3			1,950.2			1,797.5

LONG-TERM DEBT		2,380.6			2,424.3			2,245.6			2,429.7

DEFERRED INCOME TAXES								32.1			—
OTHER NONCURRENT LIABILITIES		542.8			606.0			579.9			570.1

LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS		—			0.7			—			6.0

STOCKHOLDERS’ EQUITY:
Common stock, authorized shares, 800.0 at $1.00 par value		290.1			290.1			290.4			290.2
Outstanding shares:
2005 - 290.1
2004 - 290.1
2006 — 290.4
2005 — 290.2
Treasury stock, at cost;		(411.6	)		(411.6	)		(411.6	)		(411.6	)
Shares held:
2005 - 15.7
2004 - 15.7
2006 — 15.7
2005 — 15.7
Additional paid-in capital		448.3			437.5			472.7			453.0
Retained earnings		1,505.7			1,518.6			1,596.2			1,538.3
Accumulated other comprehensive loss		(127.5	)		(70.4	)		(219.8	)		(226.7	)

TOTAL STOCKHOLDERS’ EQUITY		1,705.0			1,764.2			1,727.9			1,643.2


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,083.5		$	6,666.5		$	6,535.7		$	6,446.5

See Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES

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


	Six Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2006			2005
OPERATING ACTIVITIES:
Net income (loss)	$	102.8		($	13.8	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income							$	174.3		$	102.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		109.9			117.6			105.1			105.8
Deferred income taxes		12.0			58.6			10.7			12.2
Impairment charges		—			25.1
Impairment charges — Continuing operations								—			31.4
Impairment charges — Discontinued operations								50.9			—
Noncash restructuring costs		0.8			25.3			26.3			1.1
Gain on sale of assets/debt extinguishment		(4.3	)		(5.5	)
Loss (gain) on sale of assets/debt extinguishment								2.5			(4.3	)
Stock-based compensation expense								15.4			2.9
Loss on disposal of discontinued operations		87.7			99.1			2.9			63.2
Other		(6.8	)		(1.3	)		(6.7	)		(6.8	)
Changes in current accounts excluding the effects of acquisitions:
Accounts receivable		(2.2	)		69.7			(28.5	)		(24.3	)
Inventories		(105.5	)		(151.2	)		(127.0	)		(104.4	)
Accounts payable		(63.4	)		(28.9	)		8.7			(52.5	)
Accrued liabilities and other		(44.0	)		(55.0	)		(151.7	)		(69.6	)
Discontinued operations		4.9			(2.7	)		9.2			34.4

NET CASH PROVIDED BY OPERATING ACTIVITIES		91.9			137.0			92.1			91.9


INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(35.0	)		—			(46.3	)		(35.0	)
Expenditures for property, plant and equipment		(46.0	)		(70.1	)
Capital expenditures								(57.2	)		(46.0	)
Disposals of noncurrent assets and sale of businesses		22.1			247.1			40.2			22.1

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(58.9	)		177.0
NET CASH USED IN INVESTING ACTIVITIES								(63.3	)		(58.9	)


FINANCING ACTIVITIES:
Proceeds from issuance of debt		131.7			16.9			167.2			131.7
Payments on notes payable and long-term debt		(335.7	)		(248.8	)		(82.0	)		(335.7	)
Cash dividends		(115.8	)		(115.7	)		(116.4	)		(115.8	)
Proceeds from exercised stock options and other		—			1.4			2.3			—

NET CASH USED IN FINANCING ACTIVITIES		(319.8	)		(346.2	)		(28.9	)		(319.8	)


Exchange rate effect on cash and cash equivalents		(6.6	)		(1.2	)		0.9			(6.6	)



DECREASE IN CASH AND CASH EQUIVALENTS		(293.4	)		(33.4	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS								0.8			(293.4	)

Cash and cash equivalents at beginning of year		505.6			144.4			115.5			505.6


CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	212.2		$	111.0		$	116.3		$	212.2

See Footnotes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 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 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~~sales and ~~Other business segments typically have higher sales~~operating income in the ~~second half of~~first quarter are generally lower than any other quarter during the year, ~~due to retail stocking related to~~driven principally by reduced volume and the ~~holiday season; the Tools & Hardware and Home Fashions business segments typically have higher sales~~mix of products sold 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.quarter.

~~Fair Value~~Stock-Based Compensation:Effective January 1, 2006, the Company adopted the provisions of ~~Stock Options:In December 2004,~~ the Financial Accounting Standards Board ~~(“FASB”) issued~~(FASB) Statement of Financial Accounting Standards (“SFAS”) No. 123 ~~(revised)~~(revised 2004), “Share-Based Payment” (“SFAS 123(R)”), ~~“Share-Based Payment.~~using the modified prospective method and therefore has not restated results for prior periods. Under this transition method, stock-based compensation expense for 2006 includes compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provision of SFAS No. 123, “Accounting for Stock-Based Compensation.” Stock-based compensation expense for all awards granted after December 31, 2005 is based on the grant-date fair value estimated in accordance with the provision of SFAS 123(R) ~~requires all share-based payments to employees, including grants~~. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of ~~employee~~the award, which is generally five years for stock options and three years for restricted stock. Prior to bethe adoption of SFAS 123(R), the Company recognized stock-based compensation expense by applying the intrinsic value method in ~~the financial statements based on their fair values (i.e., pro forma disclosure is no longer an alternative to financial statement recognition). The Statement supersedes~~accordance with Accounting Principles Board Opinion ~~(“APB”)~~ No. 25, “Accounting for Stock Issued to ~~Employees,”~~Employees” (“APB 25”). See Footnote 12 to the Consolidated Financial Statements (Unaudited) for further discussion on stock-based compensation.

Recent Accounting Pronouncement:In July 2006, the FASB issued Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The interpretation would require a review of all tax positions accounted for in accordance with FASB Statement No. 109 and ~~will require adoption no later~~apply a more-likely-than-not recognition threshold. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Subsequent recognition, derecognition, and measurement is based on management’s best judgment given the facts, circumstances and information available at the reporting date. The guidance is effective for fiscal years beginning after December 15, 2006, which we intend to adopt on January 1, ~~2006. The Company expects~~2007. We do not expect the adoption of this statement to ~~adopt the provisions~~have a material effect on our financial position or results of ~~the new standard effective January 1, 2006.~~operation.

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. The Company provides pro forma disclosure of stock-based compensation expense as measured under the fair value requirements of SFAS No. 123, “Accounting for Stock Based Compensation.” The following table is a reconciliation of the Company’s net income/(loss) and earnings/(loss) per share to proforma net income/(loss) and proforma earnings/(loss) per share for the three and six months ended June 30,~~(in millions, except per share data):~~

Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Net income (loss):
As reported $ 66.2 $ 61.0 $ 102.8 ($ 13.8 )
Fair value option expense (2.8 ) (4.5 ) (5.6 ) (9.0 )

Pro forma $ 63.4 $ 56.5 $ 97.2 ($ 22.8 )

Basic earnings (loss) per share:
As reported $ 0.24 $ 0.22 $ 0.37 ($ 0.05 )
Pro forma $ 0.23 $ 0.21 $ 0.35 ($ 0.08 )

Diluted earnings (loss) per share:
As reported $ 0.24 $ 0.22 $ 0.37 ($ 0.05 )
Pro forma $ 0.23 $ 0.21 $ 0.35 ($ 0.08 )

Reclassifications:Certain amounts in prior years have been reclassified to conform to the current year ~~presentation.~~presentation and to reflect the results of discontinued operations. See Footnote 23 for a discussion of discontinued operations.

Footnote 2 — Acquisition of Business

On November 23, 2005, the Company acquired DYMO, a global leader in designing, manufacturing and marketing on-demand labeling solutions, from Esselte AB (“Esselte”). The Company preliminarily allocated the purchase price of $706 million to the identifiable assets and liabilities. As of June 30, 2006, the Company had not yet settled

contractually the final purchase price adjustments with Esselte. The purchase price allocation was based on management’s estimate using the assistance of appraisals at the date of acquisition as follows(in millions):


Current assets	$	30.2
Property, plant & equipment		21.8
Goodwill		623.4
Other intangible assets		109.1
Other assets		2.3

Total assets	$	786.8


Current liabilities	$	35.9
Deferred income taxes		41.7
Other noncurrent liabilities		3.2

Total liabilities	$	80.8

The preliminary allocation of the purchase price resulted in the recognition of $623.4 million of goodwill primarily related to the anticipated future earnings and cash flows of the DYMO business including the estimated effects of the integration of this business into the Office Products segment. The transaction resulted in the recognition of $109.1 million in intangible assets consisting primarily of customer lists, patents, and trademarks. Approximately $76.1 million were indefinite-lived intangible assets related to trademarks and $33.0 million related to finite-lived intangible assets that will be amortized over periods of 3 to 10 years.

The transaction summarized above was accounted for as a purchase and the results of operations are included in the Company’s Consolidated Financial Statements since the acquisition date. The acquisition costs were allocated to the fair value of the assets acquired and liabilities assumed.

The unaudited consolidated results of operations on a pro forma basis, as though the 2005 acquisition of DYMO had been completed on January 1, 2005, are as follows:(in millions, except per share amounts):


	Three Months		Six Months
	Ended		Ended
	June 30, 2005		June 30, 2005
Net sales	$	1,603.9	$	2,925.3
Income from continuing operations	$	91.0	$	193.5
Net income	$	69.8	$	112.6

Basic earnings per share
Income from continuing operations	$	0.33	$	0.71
Net income	$	0.25	$	0.41

Diluted earnings per share
Income from continuing operations	$	0.33	$	0.70
Net income	$	0.25	$	0.41

These pro forma financial results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on acquisition debt. They do not reflect the effect of synergies that are expected to result from integration.

Footnote 3 — Discontinued Operations

OnThe following table summarizes the results of the discontinued operations for the three and six months ended June 30,(in millions):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Net sales	$	78.9		$	140.8		$	158.4		$	308.9

Loss from operations of discontinued operations, net of income tax expense of $2.1 for each of the three months ended June 30, 2006 and 2005, and $2.7 and $3.6 for the six months ended June 30, 2006 and 2005, respectively	$	(14.9	)	$	(6.9	)	$	(77.3	)	$	(17.7	)
Loss on disposal of discontinued operations, net of income tax benefit of $0.4 for the three and six months ended June 30, 2006 and zero for the three and six months ended June 30, 2005		(1.3	)		(14.3	)		(2.9	)		(63.2	)

Loss from discontinued operations, net of tax	$	(16.2	)	$	(21.2	)	$	(80.2	)	$	(80.9	)

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

2006

In June 2006, the Company’s Board of Directors committed to a plan to sell the Home Décor Europe business. The business designs, manufactures and sells drapery hardware and window treatments in Europe under Gardinia^® and other local brands. The Company is currently in negotiations with prospective buyers. The Company has not entered into any definitive agreement, and any intended sale would be subject to receipt of all applicable regulatory approvals, including consultation proceedings with works councils, trade unions and employee representatives in the affected countries. In the first quarter of 2006, the Company began exploring various options for certain businesses in the Home Fashions segment and obtained a better indication of the businesses’ fair value and determined that these businesses had a net book value in excess of their estimated fair value. Due to the apparent decline in value, the Company conducted an impairment test in the first quarter and recorded a $50.9 million impairment charge to write-off the goodwill of the businesses. The impairment charge is recorded in the loss from operations of discontinued operations for the six months ended June 30, 2006. The intended sale of Home Décor Europe would not affect the Company’s North American window furnishings business.

In October 2005, the Company entered into an agreement for the intended sale of its European Cookware business. The Company completed this divestiture on January 1, 2006. This business included the brands Pyrex^® (used under exclusive license from Corning Incorporated and its subsidiaries in Europe, the Middle East and Africa only) and Vitri^® and was previously included in the Company’s Other segment.

2005

In January 2005, the Company entered into an agreement for the intended sale of the Company’s Curver business. In June 2005, the Company completed the sale of its Curver business. The Curver business ~~manufactured~~included the Company’s European indoor organization and ~~marketed plastic products for~~ home storage division 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.segment.

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. The non-cash loss is reported in the table above as the loss on disposal of discontinued operations.

Footnote 4 — Impairment Charges

In ~~connection with~~ the ~~preparation of the Company’s~~ second quarter of 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~~committed to the ~~anticipated~~ disposal of a business in the Cleaning & Organization ~~segment. This is part~~segment and recognized an impairment charge of ~~the Company’s continued efforts to divest non-strategic businesses. The loss, included in the loss on disposal of discontinued operations, was recorded~~$31.4 million in order to state the assets of this business at their estimated fair ~~values, based upon net sales proceeds estimated as~~values. In the third and fourth quarters of ~~June 30, 2005. Goodwill of $3.6 million was allocated to~~2005, 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 results of the discontinued operations for the three and six months ended June 30,~~~~(in millions)~~:

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 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 the Little Tikes Commercial Playground Systems business). No amountsCompany revised its estimate related to ~~interest expense have been allocated to discontinued operations.~~

~~The following table presents summarized balance sheet information of the discontinued operations (~~~~in millions~~):

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~~~~(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 Held and Used~~

~~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 this business after winning several line reviews with a key retailer and reversed the ~~fixed assets by estimating the future cash flows attributable to these fixed assets, including an estimate~~full amount of the ~~ultimate sale proceeds. Accordingly, the Company recorded a charge to write-down the assets to their estimated fair value.~~

~~Footnote 4 — Restructuring Costs~~

In the second quarter of 2004, the Company completed its accounting charges associated with its strategic restructuring plan announced on May 3, 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 $461.7 million in restructuring charges under the Plan, including $87.6 million relating to discontinued operations. 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).

impairment charge. In the fourth quarter of 2005, the Company changed its decision to dispose of this business as a result of the aforementioned line review wins and the identification of significant productivity opportunities.

Footnote 5 — Restructuring Costs

In the third quarter of 2005, the Company announced a global initiative referred to as Project Acceleration aimed at strengthening and transforming the Company’s portfolio. In connection with Project Acceleration, the Board of Directors of the Company approved a three-year restructuring plan (“the Plan”) that commenced in the fourth quarter of 2005. The Plan is designed to reduce manufacturing overhead to achieve best cost positions, and to allow the Company to increase investment in new product development, brand building and marketing. The Plan includes the closure of approximately one-third of the Company’s 80 manufacturing facilities (as of September 2005), optimizing the Company’s geographic manufacturing footprint. During the first six months of 2006, the Company announced the closure of 15 manufacturing facilities. Through June 30, 2006, the Company has approved approximately $125 million in restructuring actions related to Project Acceleration and recorded $94.6 million of costs. The Company expects the remaining costs, primarily severance, associated with plans approved as of June 30, 2006, to be recorded during the third quarter.

The Plan is expected to result in cumulative restructuring costs totaling between $350 million and $400 million ($295 million — $340 million after tax), with between $150 million and $180 million ($130 million — $155 million after tax) to be incurred in 2006. Approximately 60% of the costs are expected to be cash. Annualized savings are projected to exceed $120 million upon conclusion of the program in 2008 with expected savings of approximately $50 million in 2007.

The table below shows the restructuring costs recognized for restructuring activities for the following periods(in millions):


	Three		Six
	Months Ended		Months Ended
	June 30, 2006		June 30, 2006

Facility and other exit costs	$	11.9	$	25.7
Employee severance and termination benefits		6.7		15.4
Exited contractual commitments and other		1.2		2.2

Restructuring costs	$	19.8	$	43.3

The facility and other exit costs are primarily related to the impairment of assets associated with vacated facilities and future minimum lease payments.

A summary of the Company’s restructuring reserves related to the Plan for the six months ended June 30, 2006, is as follows(in millions):


	2005			2004
Beginning balance at January 1	$	27.9		$	145.1
Balance as of January 1,							$	—
Restructuring costs (provision)		6.5			47.3			43.3
Costs incurred		(18.3	)		(92.7	)		(34.7	)

Ending balance at June 30	$	16.1		$	99.7
Balance as of June 30,							$	8.6

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~~A summary 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~~Company’s restructuring 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~~for the ~~changes in accrued~~pre-Acceleration restructuring ~~reserves~~activities (see the Company’s Form 10-K for the fiscal year ended December 31, 2005 for further information) for the six months ended June 30, ~~2004 aggregated by reportable business segment~~2005 is as follows(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


Balance as of January 1,	$	24.7
Restructuring costs (provision)		6.8
Costs incurred		(16.8	)

Balance as of June 30,	$	14.7

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 are periodically updated for changes, and also include amounts recognized as incurred. Cash paid for restructuring activities was ~~$5.8~~$8.1 million and ~~$27.8~~$5.8 million for the ~~second quarters of~~three months ended June 30, 2006 and 2005, ~~and 2004,~~ respectively. Cash paid for restructuring activities was $11.9 million and $16.4 million ~~and $43.5 million in~~for the ~~first~~ six months ofended June 30, 2006 and 2005, ~~and 2004,~~ respectively.

The following table depicts the changes in accrued restructuring reserves for the Plan for the six months ended June 30, aggregated by reportable business segment(in millions):


	12/31/05				Costs			6/30/06
Segment	Balance		Provision		Incurred			Balance

Cleaning & Organization	$	—	$	16.1	$	(13.9	)	$	2.2
Office Products		—		3.8		(1.6	)		2.2
Tools & Hardware		—		4.0		(2.3	)		1.7
Home Fashions		—		3.0		(2.8	)		0.2
Other		—		15.9		(13.7	)		2.2
Corporate		—		0.5		(0.4	)		0.1

	$	—	$	43.3	$	(34.7	)	$	8.6

Footnote 56 — Inventories

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


	June 30,		December 31,		June 30,		December 31,
	2005		2004		2006		2005
Materials and supplies	$	209.0	$	216.0	$	202.7	$	171.0
Work in process		190.4		168.8
Work in-process						176.7		171.5
Finished products		624.3		553.3		588.4		482.6

	$	1,023.7	$	938.1	$	967.8	$	825.1

Footnote 67 — ~~Long-term~~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.


	June 30,			December 31,
	2006			2005
Medium-term notes	$	1,475.0		$	1,475.0
Commercial paper		270.0			202.0
Preferred debt securities		450.0			450.0
Junior convertible subordinated debentures		436.7			436.7
Terminated interest rate swaps		18.1			24.8
Other long-term debt		4.4			4.0

Total Debt		2,654.2			2,592.5
Current portion of long-term debt		(408.6	)		(162.8	)

Long-Term Debt	$	2,245.6		$	2,429.7

Footnote 78 — Employee Benefit and Retirement Plans

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


	United States						International						United States						International
	2005			2004			2005			2004			2006			2005			2006			2005
Service cost-benefits earned during the year	$	0.5		$	10.0		$	2.1		$	1.8
Service cost-benefits earned during the period													$	0.8		$	0.5		$	1.9		$	2.1
Interest cost on projected benefit obligation		12.9			10.9			6.0			4.9			12.8			12.9			6.1			6.0
Expected return on plan assets		(16.2	)		(13.3	)		(5.5	)		(4.5	)		(14.9	)		(16.2	)		(6.1	)		(5.5	)
Amortization of:
Prior service cost		0.3			—			—			—			0.3			0.3			—			—
Actuarial loss		1.2			0.8			1.0			0.4			1.9			1.2			1.2			1.0
Curtailment & special termination benefit costs		0.2			(1.8	)		—			—
Curtailment & special termination benefit gains														—			0.2			—			—

Net pension (income) expense	($	1.1	)	$	6.6		$	3.6		$	2.6
Net pension cost (benefit)													$	0.9		$	(1.1	)	$	3.1		$	3.6

The following table presents the components of the Company’s pension ~~(income) expense~~cost (benefit) 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 )


	United States						International				United States						International
	2005			2004			2005		2004		2006			2005			2006			2005
Service cost-benefits earned during the period											$	1.5		$	0.9		$	3.7		$	4.2
Interest cost on projected benefit obligation												25.6			25.8			12.0			12.2
Expected return on plan assets												(29.8	)		(32.3	)		(12.0	)		(11.1	)
Amortization of:
Prior service cost		0.5			(0.2	)		—		—		0.6			0.5			—			—
Actuarial loss		2.5			2.2			2.0		0.8		3.9			2.5			2.4			2.0
Curtailment & special termination benefit costs		(16.2	)		(1.8	)		—		0.2
Curtailment & special termination benefit gains												—			(16.2	)		—			—

Net pension (income) expense	($	18.8	)	$	16.0		$	7.3	$	5.4
Net pension cost (benefit)											$	1.8		$	(18.8	)	$	6.1		$	7.3

Effective December 31, 2004, the Company froze its defined benefit pension plan for its entire non-union U.S. workforce. As a result of this curtailment, the Company reduced its pension obligation by $50.3 million and recorded a curtailment gain related to negative prior service cost of $15.8 million in the first quarter of 2005. ~~In conjunction with this action, the Company offered special termination benefits to certain employees that accepted early retirement.~~ The Company replaced the defined benefit pension plan with an additional defined contribution plan, whereby the Company will make additional contributions to the Company sponsored ~~employee’s~~employees’ profit sharing plan. The ~~new~~Company recorded $5.2 million and $4.4 million in expense for the defined contribution plan ~~has a five-year cliff-vesting schedule, but allows credit~~ for ~~service rendered~~the three months ended June 30, 2006 and 2005, respectively. The Company recorded $10.5 million and $9.9 million in expense for the defined contribution plan for the six months ended June 30, 2006 and 2005, respectively. During the first quarter of 2006, the Company paid $20.9 million to fund the prior ~~to the inception of~~year liability associated with the defined contribution plan.

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004			2006			2005			2006			2005
Service cost-benefits earned during the year	$	0.9		$	1.2		$	1.9		$	2.5		$	0.6		$	0.9		$	1.2		$	1.9
Interest cost on projected benefit obligation		3.7			3.6			7.5			7.7			2.5			3.7			5.0			7.5
Amortization of prior service cost		(0.1	)		(0.1	)		(0.3	)		(0.3	)		(0.6	)		(0.1	)		(1.2	)		(0.3	)
Actuarial loss		0.3			—			0.5			0.5			—			0.3			—			0.5

Net other postretirement benefits expense	$	4.8		$	4.7		$	9.6		$	10.4		$	2.5		$	4.8		$	5.0		$	9.6

Footnote 89 — Income Taxes

In the second quarter of 2006, the Company determined that it would be able to utilize certain capital loss carryforwards that it previously believed would expire unused. Accordingly, the Company reversed an income tax valuation reserve of $22.7 million.

During the first quarter of 2006, the Company completed the reorganization of certain legal entities in Europe which resulted in the recognition of an income tax benefit of $78.0 million.

In January 2005, the Company reached agreement with the Internal Revenue Service (IRS) relating to the appropriate treatment of a specific ~~transaction reflected on~~deduction included in the Company’s 2003 USU.S. federal income tax return. The Company requested accelerated review of the transaction under the IRS’ Pre-Filing Agreement Program that resulted in an affirmative resolution in late January 2005. AAs a result, the Company recorded a $58.6 million benefit ~~was recorded~~ in income taxes ~~for the three months ended March 31, 2005 related to this issue. The amount was fully reserved as of December 31, 2004.~~

~~During the three months ended 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~~first quarter of the provisions and interest accrued thereon in the amount of $37.4 million. Accordingly, the impact was recorded in income taxes for the three months ended 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 these net operating losses previously tax-benefited has been increased by $31.0 million. This amount was recorded in income taxes for the three months ended June 30, 2004.2005.

Footnote 910 — Earnings per Share

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

Convertible
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 )

Net income $ 66.2 — — $ 66.2
Earnings per share $ 0.24 — — $ 0.24

Weighted average shares outstanding 274.4 0.3 — 274.7

Three Months Ended June 30, 2004

Income from continuing operations $ 58.5 — — $ 58.5
Earnings per share $ 0.21 — — $ 0.21

Income from discontinued operations $ 2.5 — — $ 2.5
Earnings per share $ 0.01 — — $ 0.01

Net income $ 61.0 — — $ 61.0
Earnings per share $ 0.22 — — $ 0.22

Weighted average shares outstanding 274.4 0.1 — 274.5

Six Months Ended June 30, 2005

Income from continuing operations $ 188.3 — — $ 188.3
Earnings per share $ 0.69 — — $ 0.69

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

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

Weighted average shares outstanding 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


	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005

Numerator for basic earnings per share:
Income from continuing operations	$	135.7		$	87.4		$	254.5		$	183.7
Loss from discontinued operations		(16.2	)		(21.2	)		(80.2	)		(80.9	)

Net income for basic earnings per share	$	119.5		$	66.2		$	174.3		$	102.8

Numerator for diluted earnings per share:
Income from continuing operations	$	135.7		$	87.4		$	254.5		$	183.7
Effect of convertible preferred securities (2)		3.6			—			7.1			—

Income from continuing operations for diluted earnings per share		139.3			87.4			261.6			183.7
Loss from discontinued operations		(16.2	)		(21.2	)		(80.2	)		(80.9	)

Net income for diluted earnings per share	$	123.1		$	66.2		$	181.4		$	102.8

Denominator:
Denominator for basic earnings per share — weighted-average shares		274.6			274.4			274.5			274.4
Dilutive securities (1)		0.7			0.3			0.7			0.3
Convertible preferred securities (2)		8.3			—			8.3			—

Denominator for diluted earnings per share		283.6			274.7			283.5			274.7


Basic earnings (loss) per share:
Earnings from continuing operations	$	0.49		$	0.32		$	0.93		$	0.67
Loss from discontinued operations		(0.06	)		(0.08	)		(0.29	)		(0.29	)

Earnings per share	$	0.44		$	0.24		$	0.63		$	0.37

Diluted earnings (loss) per share:
Earnings from continuing operations	$	0.49		$	0.32		$	0.92		$	0.67
Loss from discontinued operations		(0.06	)		(0.08	)		(0.28	)		(0.29	)

Earnings per share	$	0.43		$	0.24		$	0.64		$	0.37


(1)		Dilutive securities include “in the money options” and restricted stock awards. The ~~weighted average~~weighted-average shares outstanding for the three months ended June 30, ~~2005~~2006 and ~~2004~~2005 exclude the dilutive effect of approximately ~~10.4~~12.7 million and ~~9.2~~10.4 million stock options, respectively, ~~and approximately 10.6 million and 9.0 million stock~~because such options were anti-dilutive. The weighted-average shares outstanding for the six months ended June 30, 2006 and 2005 exclude the dilutive effect of approximately 13.1 million and ~~2004,~~10.6 million stock options, 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 or the inclusion would have been~~were anti-dilutive.

(2)		The convertible preferred securities are anti-dilutive for the three and six months ended June 30, 2005, ~~and 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~~$7.3 million for the three ~~months ended June 30, 2005~~ and ~~2004, respectively, and by $7.3 million and $8.4 million for the~~ six months ended June 30, 2005, ~~and 2004,~~ respectively. Weighted average shares outstanding would have increased by 8.3 million shares and ~~9.9~~8.4 million shares 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

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 1011 — Accumulated Other Comprehensive Loss

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


		Foreign		After-tax			After-tax			Accumulated
		Currency		Derivatives			Minimum			Other
		Translation		Hedging			Pension			Comprehensive
	��	Gain		Gain (Loss)			Liability			Loss
Balance at December 31, 2005		$	12.8	$	6.8		$	(246.3	)	$	(226.7	)
Current year change			16.8		(9.9	)		—			6.9

Balance at June 30, 2006		$	29.6	$	(3.1	)	$	(246.3	)	$	(219.8	)

~~Total comprehensive~~Comprehensive income amounted to the following for the three and six months ended June 30,(in millions):

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Net income	$	119.5		$	66.2		$	174.3		$	102.8
Foreign currency translation gain (loss)		7.8			(46.3	)		16.8			(69.6	)
After-tax derivatives hedging (loss) gain		(10.9	)		8.0			(9.9	)		12.5

Comprehensive income	$	116.4		$	27.9		$	181.2		$	45.7

Footnote 1112 — Stock-Based Compensation

The Company offers stock-based compensation to its employees that include stock options and restricted share awards as follows:

Stock Options

The Company’s stock plans include plans adopted in 1993 and 2003. The Company issues both non-qualified and incentive stock options at exercise prices equal to the Company’s common stock price on the date of grant with contractual terms of ten years that generally vest over five years.

Restricted Stock

Restricted stock awards are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. The awards generally cliff-vest three years from the date of grant. Prior to vesting, ownership of the shares cannot be transferred. The restricted stock has the same dividend and voting rights as the common stock. The Company expenses the cost of these awards ratably over the vesting period.

Prior to January 1, 2006, the Company accounted for stock-based compensation under the recognition and measurement provisions of APB 25. Under APB 25, the Company generally recognized compensation expense only for restricted stock. The Company recognized the compensation expense associated with the restricted stock ratably over the associated service period.

Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R), using the modified prospective method, and therefore has not restated the results of prior periods. Under this transition method, stock-based compensation expense for 2006 includes (i) compensation expense for all stock-based compensation awards granted

prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (ii) compensation expense for all share-based payment awards granted after January 1, 2006 based on estimated grant-date fair values. Compensation expense is adjusted for estimated forfeitures and is recognized on a straight-line basis over the requisite service period of the award, which is generally five years for stock options and three years for restricted stock. The Company estimated future forfeiture rates based on its historical experience during the preceding fiscal years.

The table below highlights the expense related to share-based payments for the following periods:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2005		2006		2005
Stock options	$	4.4	$	—	$	8.4	$	—
Restricted shares		4.1		1.6		7.0		2.9

Stock-based compensation	$	8.5	$	1.6	$	15.4	$	2.9

Stock-based compensation, net of income tax benefit	$	5.8	$	1.1	$	10.6	$	2.0

In 2006, the Company modified its stock-based compensation by expanding the number of employees receiving restricted shares. The net impact was to reduce the amount of annual options granted and increase the annual restricted stock awards. For the year ending December 31, 2006, the Company expects to recognize approximately $20 million to $25 million, pre-tax, in additional stock-based compensation expense over 2005 as a result of the adoption of SFAS 123(R) and the modification of its stock-based compensation plan described above.

The following table is a reconciliation of the Company’s net income and earnings per share to pro forma net income and pro forma earnings per share as if the Company had adopted the provisions of SFAS No. 123 with respect to options granted under the Company’s stock option plans during the following periods(in millions, except per share data):


	Three Months			Six Months
	Ended			Ended
	June 30, 2005			June 30, 2005

Net income:
As reported	$	66.2		$	102.8
Fair value option expense, net of income taxes		(2.8	)		(5.6	)

Pro forma	$	63.4		$	97.2


Basic earnings per share:
As reported	$	0.24		$	0.37
Pro forma	$	0.23		$	0.35

Diluted earnings per share:
As reported	$	0.24		$	0.37
Pro forma	$	0.23		$	0.35

The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model with the following assumptions and weighted-average fair values for the periods below:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Weighted-average fair value of grants	$	8		$	6		$	7		$	6
Risk-free interest rate		5.1	%		3.9	%		4.7	%		3.9	%
Dividend yield		3.0	%		3.0	%		3.0	%		3.0	%
Expected volatility		33	%		33	%		33	%		33	%
Expected life (in years)		6.5			6.5			6.5			6.5

The Company utilized its historic experience to estimate the expected life of the options and volatility.

The following summarizes the changes in the number of shares of common stock under option for the six months ended June 30, 2006 (shares in millions):


										Weighted
										Average
				Weighted				Weighted		Remaining		Aggregate
				Average				Average		Contractual		Intrinsic
				Exercise				Exercise		Term		Value
	Shares			Price		Exercisable		Price		(in years)		(in millions)

Outstanding at December 31, 2005		13.2		$	27		5.8	$	29		6.9
Granted		2.8			24
Exercised		(0.2	)		23
Canceled / expired		(0.9	)		27

Outstanding at June 30, 2006		14.9		$	26		7.1	$	28		7.0	$	19


Vested and expected to vest at June 30, 2006		13.6		$	26						7.0	$	17

Exercisable at June 30, 2006											5.3	$	6

The following table summarizes the changes in the number of shares of restricted stock for the period ended June 30, 2006 (shares in millions):


				Weighted-
				average grant
	Shares			date fair value

Outstanding at December 31, 2005		1.0		$	23
Granted		1.4			24
Vested		—			—
Canceled		(0.1	)		(24	)

Outstanding at June 30, 2006		2.3		$	24

Vested and expected to vest at June 30, 2006		1.9		$	24

The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of June 30, 2006 (in millions):


	Unrecognized		Weighted Average
	Compensation		Period Expense
	Cost		Recognition (in months)

Stock options	$	48.8		27
Restricted stock		38.4		17

Total	$	87.2

Footnote 13 — Industry Segments

The Company’s reporting segments reflect the Company’s focus on building large consumer brands, promoting organizational integration, achieving operating efficiencies in sourcing and ~~aligning the businesses with the Company’s strategic account management strategy.~~distribution, and leveraging our understanding of similar consumer segments and distribution channels. The Company ~~reports~~aggregates certain of its ~~results in~~operating segments into five reportable segments. The reportable segments are as follows:


Segment		Description of Products
Cleaning & Organization		~~Indoor/~~Material handling, cleaning, refuse, indoor/outdoor organization, home storage, food storage ~~cleaning, refuse~~

Office Products		Ballpoint/roller ball pens, markers, highlighters, pencils, correction fluids, office products, art supplies,
		on-demand labeling products
Tools & Hardware		Hand tools, power tool accessories, ~~industrial tool accessories,~~ manual paint applicators, cabinet, window and convenience hardware, propane torches,
		solder
Home Fashions		Drapery hardware, window treatments

Other		Operating segments that do not meet aggregation criteria with other operating segments, including ~~aluminum~~premium cookware and ~~stainless steel cookware,~~related kitchenware, hair care accessory products, infant and juvenile products, including toys, high chairs, car seats, strollers and ~~strollers~~play yards

In the first quarter of 2006, the Company updated its segment reporting to reflect the realignment of certain European businesses, previously reported in the Cleaning & Organization segment, now reported in the Other segment for all periods presented. The decision to realign these businesses, which include the European Little Tikes and Graco businesses, is consistent with the Company’s move from a regional management structure to a global business unit structure. Management measures segment profit as operating income of the business. The Company’s segment results are as follows(in millions):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Net Sales (1)
Cleaning & Organization	$	403.3		$	365.1		$	736.4		$	665.4
Office Products		579.1			495.5			969.9			828.3
Tools & Hardware		328.8			315.5			605.6			591.9
Home Fashions		106.6			115.0			223.2			212.7
Other		279.0			257.5			567.0			512.8

	$	1,696.8		$	1,548.6		$	3,102.1		$	2,811.1


Operating Income (2)
Cleaning & Organization	$	42.9		$	23.1		$	64.2		$	35.6
Office Products		99.9			98.9			132.2			132.4
Tools & Hardware		53.8			49.3			86.9			76.0
Home Fashions		14.4			8.0			31.5			10.3
Other		29.8			22.9			59.7			41.2
Corporate (3)		(20.0	)		(9.7	)		(37.6	)		(19.2	)
Impairment Charges (4)		—			(31.4	)		—			(31.4	)
Restructuring Costs (5)		(19.8	)		(0.3	)		(43.3	)		(6.8	)

	$	201.0		$	160.8		$	293.6		$	238.1

1316

Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Net Sales (1)

Cleaning & Organization $ 376.5 $ 400.1 $ 701.0 $ 785.9
Office Products 495.5 489.2 828.3 822.0
Tools & Hardware 315.5 300.3 591.9 574.6
Home Fashions 212.0 224.2 410.3 451.0
Other 241.6 253.4 486.6 504.4

$ 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		June 30,		December 31,
Identifiable Assets					2006		2005
Cleaning & Organization	$	827.6	$	825.7	$	717.9	$	737.4
Office Products		1,074.5		997.8		1,325.0		1,020.0
Tools & Hardware		863.2		836.2		750.4		735.1
Home Fashions		539.3		599.0		145.1		179.6
Other		454.0		523.1		410.0		446.9
Corporate (6)		2,299.3		2,708.1		2,977.9		2,986.0
Discontinued Operations		25.6		176.6		209.4		341.5

	$	6,083.5	$	6,666.5	$	6,535.7	$	6,446.5

Geographic Area Information


	Three Months Ended					Six Months Ended						Three Months Ended				Six Months Ended
	June 30,					June 30,						June 30,				June 30,
	2005		2004			2005			2004			2006		2005		2006		2005
Net Sales
United States	$	1,140.2	$	1,145.5		$	2,079.4		$	2,157.7		$	1,262.0	$	1,167.0	$	2,326.7	$	2,121.7
Canada		94.7		88.9			165.9			161.9			110.4		95.8		193.8		168.0

North America		1,234.9		1,234.4			2,245.3			2,319.6			1,372.4		1,262.8		2,520.5		2,289.7
Europe		308.9		336.0			596.8			642.7			219.7		188.9		389.0		346.1
Central and South America		59.6		58.5			101.2			100.5			59.8		59.7		107.1		101.2
All other		37.7		38.3			74.8			75.1			44.9		37.2		85.5		74.1

	$	1,641.1	$	1,667.2		$	3,018.1		$	3,137.9		$	1,696.8	$	1,548.6	$	3,102.1	$	2,811.1


Operating Income (7)
United States	$	143.1	$	108.7		$	204.7		$	176.5		$	134.4	$	115.0	$	204.7	$	179.0
Canada		18.5		19.5			29.1			32.4			25.7		18.6		38.3		29.3

North America		161.6		128.2			233.8			208.9			160.1		133.6		243.0		208.3
Europe		5.4		(25.1	)		(5.5	)		(30.0	)		24.4		10.7		30.5		8.6
Central and South America		8.6		0.4			8.1			2.5			6.4		8.5		2.6		8.1
All other		8.0		4.4			13.0			8.3			10.1		8.0		17.5		13.1

	$	183.6	$	107.9		$	249.4		$	189.7		$	201.0	$	160.8	$	293.6	$	238.1

				.

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 WalMart Stores, Inc. and subsidiaries amounted to approximately ~~14%~~16% and 15% of consolidated net sales ~~excluding discontinued operations,~~ in the ~~first~~three months ended June 30, 2006 and 2005, respectively. Sales to WalMart Stores, Inc. and subsidiaries amounted to approximately 15% of consolidated net sales in the six months ~~of 2005~~ended June 30, 2006 and ~~2004, respectively.~~2005. 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, including stock-based compensation, that are not allocated to a particular segment.

4)		Impairment charges have been presented separately in this table; refer to Footnote 34 to the Consolidated Financial Statements (Unaudited) for additional information.

5)		Restructuring costs have been presented separately in this table; refer to Footnote 45 to the Consolidated Financial Statements (Unaudited) for a breakout of the costs by reportable ~~segment~~segment.

6)		Corporate assets primarily include goodwill, trade names ~~goodwill~~ and deferred tax assets. Accordingly, the write-down of goodwill and other intangible assets associated with the impairment charges (see Footnote 3 to the Consolidated Financial Statements (Unaudited)) have been reflected as reductions in Corporate assets.

7)		The restructuring costs and impairment charges have been reflected in the appropriate geographic 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.~~

Footnote 1214 — 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.

Footnote 1315 — Subsequent ~~Events~~Event

OnIn July ~~20, 2005,~~2006, the Company approved a restructuring plan as part of Project Acceleration to shut down a manufacturing facility in the ~~Cleaning & Organization segment.~~Office Products segment subject to receipt of all applicable regulatory approvals, including consultation proceedings with works council. The ~~manufacturing facility currently produces indoor storage products. This~~ production will be ~~integrated into existing facilities.~~outsourced to third party suppliers. The plan is expected to result in a ~~total~~ pre-tax charge of between ~~$12 million~~$25 and ~~$16~~$30 million, primarily related to ~~facility and other exit costs.~~severance. The Company plans to exit the facility ~~during~~by the ~~third quarter.~~

~~On July 28, 2005,~~end of the ~~Company entered into a definitive agreement with a subsidiary~~fourth quarter 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, subject to adjustment for working capital and other items. This acquisition will strengthen the Company’s global leadership position in the Office Products segment by expanding and enhancing the Company’s product lines and customer base. 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.2006.

1518


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

Overview

The Company remains committed to investing in strategic brands and new product development, strengthening its portfolio of businesses, reducing its supply chain costs and streamlining non-strategic selling, general and administrative expenses (SG&A). The Company will continue to make investments in advertising, promotion, new product development and brand building activities in its “Invest” businesses, which encompass the Company’s high-potential, high margin brands, while taking action to improve profitability in “Fix” businesses, which encompass many of the Company’s low margin product lines.

The Company defines Invest businesses as those having high margin opportunity and the ability to generate growth through innovative new products and investments in brand building and marketing. Invest businesses are generally meeting or exceeding the Company’s minimum financial targets and collectively generate above average operating income margins. Fix businesses are characterized by the Company as having various challenges and unacceptable profitability. Management’s primary focus for Fix businesses is to take actions to improve profitability significantly. Currently, the Company classifies Rubbermaid Home Products, Home Fashions and Little Tikes as Fix businesses.

In late February 2006, a revised strategy and key imperatives were communicated to the Company’s management team. The tenets of the strategy include building large brands that are important to consumers (“Brands That Matter^TM”), creating scale advantages through horizontal integration, commercializing innovation across the enterprise and creating a structure for business globalization.

Consumer-Meaningful Brands:The Company is moving from its historical focus on creating competitive advantage in manufacturing and distributing products, to excellence in innovating and marketing brands. Consumer meaningful brands create more value than products alone, and big brands provide the Company with the economies of scale that can be leveraged in today’s marketplace. In the current year, the Company has made ~~significant progress~~incremental strategic investments in advertising, promotion and research and development, particularly on brands like Calphalon^®, Graco^®, Goody^®, LENOX^®, IRWIN^®, Sharpie^® and DYMO^®, increasing the investment in strategic SG&A from approximately 4.0% of sales in 2005 to 5.5% of sales in 2006. The integration of DYMO into the office products business remains on schedule and the Company is pleased with its performance. The Company also initiated a consulting and training partnership with one of the largest worldwide creative and media agencies. The objective is to create best–in-class branding capabilities across the Company. The first step is to understand the brand vitality of the Company’s 16 largest brands using a common set of metrics. The Company will then integrate this understanding into its ongoing processes for product innovation, competitive analysis, strategic planning and brand marketing.

Horizontal Integration:The Company is exploring ways to best leverage its common functional capabilities such as Human Resources, Information Technology, Supply Chain and Finance to improve efficiency and reduce costs. This broad reaching initiative already includes projects such as the corporate consolidation of the distribution and transportation function, and aggregating Company-wide purchasing efforts including both direct and indirect materials and services. During the current year, the Company also streamlined the structure of its Tools & Hardware segment to create a more effective organization and leverage scale efficiencies. The Company also accelerated the process of creating shared services for the European businesses and is evaluating expanding the scope of shared services in the ~~first six months~~United States. The most important benefit of ~~2005 toward achieving~~horizontal integration is that the cost savings from these initiatives will free up money for investment in innovation and brand building.

Invest in Innovation: The Company has broadened its ~~previously announced 2005 key objectives.~~definition of innovation beyond product invention. The Company will define innovation as the successful commercialization of invention. Innovation must be more than product development. It is a rigorous process that permeates the entire development cycle. It begins with a deep understanding of how consumers interact with the Company’s ~~key objectives for 2005,~~brands and categories, and all the ~~progress made in~~factors that drive their purchase decisions and in-use experience. That understanding must then be translated into products that deliver unique features and benefits, at a best-cost position, providing the ~~first six months~~consumer with great value. Lastly, understanding how and where to create awareness and trial, and measuring the effectiveness of ~~2005 toward achieving such priorities, are highlighted below:~~

	1.		~~Strengthen/Broaden Portfolio:~~~~The Company continues to evaluate its current portfolio~~advertising 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.

1619

promotion spending, completes the process. The Company has pockets of excellence using this expanded definition of innovation, and it will continue to build on this competency.

Globalization:The Company is expanding from a U.S.-centric business model to one that includes international growth as an increasing focus. The Company is working hard to get the structure right for the future. For example, the Office Products businesses have been reorganized to operate across product lines that can target global consumer acceptance. In the current year, the Company also aligned the Graco and Little Tikes businesses under a global business unit structure, reporting under the Home & Family Products group (included in the “Other” segment), rather than by geographic location. This realignment positions the businesses to leverage research and development, branding, marketing and innovation on a global basis.

2006 will be a transformational year for the Company, on the multi-year journey to becoming an integrated, innovative branding and marketing company. The Company is making the necessary investments now for the long-term success of its business.

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 June 30,									Six Months Ended June 30,										Three Months Ended June 30,										Six Months Ended June 30,
	2005					2004				2005					2004					2006					2005					2006					2005
Net sales	$	1,641.1		100.0	%	$	1,667.2	100.0	%	$	3,018.1		100.0	%	$	3,137.9		100.0	%	$	1,696.8		100.0	%	$	1,548.6		100.0	%	$	3,102.1		100.0	%	$	2,811.1		100.0	%
Cost of products sold		1,132.8		69.0			1,189.7	71.4			2,134.9		70.7			2,258.6		72.0			1,122.4		66.1			1,063.2		68.7			2,087.2		67.3			1,974.1		70.2

Gross margin		508.3		31.0			477.5	28.6			883.2		29.3			879.3		28.0			574.4		33.9			485.4		31.3			1,014.9		32.7			837.0		29.8
Selling, general and administrative expenses		324.4		19.8			318.8	19.1			627.3		20.8			617.2		19.7			353.6		20.8			292.9		18.9			678.0		21.9			560.7		19.9
Impairment charges		—		—			25.1	1.5			—		—			25.1		0.8			—		—			31.4		2.0			—		—			31.4		1.1
Restructuring costs		0.3		—			25.7	1.5			6.5		0.2			47.3		1.5			19.8		1.2			0.3		—			43.3		1.4			6.8		0.2

Operating income		183.6		11.2			107.9	6.5			249.4		8.3			189.7		6.0			201.0		11.8			160.8		10.4			293.6		9.5			238.1		8.5
Nonoperating expenses:
Interest expense, net		31.0		1.9			29.5	1.8			61.9		2.1			60.4		1.9			35.6		2.1			31.1		2.0			69.3		2.2			61.9		2.2
Other expense (income), net		1.9		0.1			1.7	0.1			(0.4	)	—			4.0		0.1
Other expense, net																					1.0		0.1			2.2		0.1			3.7		0.1			0.4		—

Net nonoperating expenses		32.9		2.0			31.2	1.9			61.5		2.0			64.4		2.0			36.6		2.2			33.3		2.2			73.0		2.4			62.3		2.2

Income before income taxes		150.7		9.2			76.7	4.6			187.9		6.2			125.3		4.0
Income from continuing operations before income taxes																					164.4		9.7			127.5		8.2			220.6		7.1			175.8		6.3
Income taxes		47.2		2.9			18.2	1.1			(0.4	)	—			34.7		1.1			28.7		1.7			40.1		2.6			(33.9	)	(1.1	)		(7.9	)	(0.3	)

Income from continuing operations		103.5		6.3			58.5	3.5			188.3		6.2			90.6		2.9			135.7		8.0			87.4		5.6			254.5		8.2			183.7		6.5

(Loss) gain from discontinued operations, net of tax		(37.3	)	(2.3	)		2.5	0.2			(85.5	)	(2.8	)		(104.4	)	(3.3	)
Loss from discontinued operations, net of tax																					(16.2	)	(1.0	)		(21.2	)	(1.4	)		(80.2	)	(2.6	)		(80.9	)	(2.9	)

Net income (loss)	$	66.2		4.0	%	$	61.0	3.7	%	$	102.8		3.4	%	($	13.8	)	(0.4	)%
Net income																				$	119.5		7.0	%	$	66.2		4.3	%	$	174.3		5.6	%	$	102.8		3.7	%

Three Months Ended June 30, ~~2005~~2006 vs. Three Months Ended June 30, ~~2004~~2005

Consolidated Operating Results:

Net sales for the three months ended June 30, ~~2005 (second quarter)~~2006 were ~~$1,641.1~~$1,696.8 million, representing ~~a decrease~~an increase of ~~$26.1~~$148.2 million, or ~~1.6%~~9.6%, from ~~$1,667.2~~$1,548.6 million in the comparable quarter of ~~2004, consisting of~~2005. Excluding sales related to 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~~DYMO acquisition, sales were up $88 million, or 5.7%, driven by core sales ~~decline was primarily~~increases and favorable pricing. Positive currency translation improved sales by 0.6% in the ~~Cleaning & Organization segment, resulting~~quarter.

Excluding the sales from the ~~aggressive pricing required to offset resin inflation. In addition,~~DYMO acquisition, the ~~European Home Fashion business continues to experience core~~Company’s Invest businesses generated a 4.9% improvement in sales ~~declines primarily due to~~for the ~~soft economic environment in Germany and market share losses to private label suppliers in~~second quarter of 2006 versus the ~~opening price point drapery hardware product lines. Partially offsetting these sales declines was~~comparable quarter of 2005, led by double-digit growth in the ~~Tools & Hardware~~Calphalon, Goody, and IRWIN and LENOX branded tools businesses, as well as mid single-digit growth in Office Products ~~segments, driven by favorable mix, positive pricing~~ and ~~new~~Rubbermaid Commercial.

~~product successes. Sales~~Net sales of the businesses the Company classifies as Fix realized an 8.7% increase as double-digit growth in the ~~Tools & Hardware business were up 5.1%~~Rubbermaid Home Products and Little Tikes businesses was partially offset by lower sales in the ~~Office Products business were up 1.3% in the quarter.~~North American Window Fashions business.

Gross margin, as a percentage of net sales, in the second quarter of ~~2005~~2006 was ~~31.0%~~33.9%, or ~~$508.3~~$574.4 million, versus ~~28.6%~~31.3%, or ~~$477.5~~$485.4 million, in the comparable quarter of ~~2004.~~2005. The increase in gross margin ~~is primarily related to~~was the result of strong productivity, favorable pricing, ~~of $35 million, or 2.1% of net sales, gross productivity of $27 million,~~ and a favorable mix, ~~driven by new products and~~more than offsetting the ~~continued rationalization~~impact of ~~unprofitable product lines, partially offset by~~ raw material ~~inflation of $37 million (primarily resin and steel).~~inflation.

~~Selling, general and administrative~~SG&A expenses ~~(SG&A)~~ in the second quarter of ~~2005~~2006 were ~~19.8%~~20.8% of net sales, or ~~$324.4~~$353.6 million, versus ~~19.1%~~18.9%, or ~~$318.8~~$292.9 million, in the comparable quarter of ~~2004.~~2005. Approximately one-half of the increase is related to the impact of acquisitions and expensing stock options. The primary drivers of the remaining increase were ~~foreign currency~~the additional strategic advertising and ~~additional~~promotion investment in the Calphalon, Graco, Rubbermaid Food Service, and Office Products businesses and ~~Tools & Hardware segments, partially offset by streamlining activities.~~other variable expenses associated with the increased sales and operating performance of the Company.

The Company recorded ~~a non-cash pretax impairment charge of $25.1~~$19.8 million in restructuring charges related to Project Acceleration in the ~~second quarter~~quarter. The Company has announced the closure of ~~2004.~~15 manufacturing facilities since the plan’s inception. The ~~charge was required~~Company continues to ~~write-down certain assets~~expect cumulative pre-tax charges of $350 to ~~fair value.~~$400 million, approximately 60% of which are expected to be cash charges, over the life of the initiative. Annualized savings are projected to exceed $120 million upon completion of the project with an approximate $50 million benefit expected in 2007 and the remainder in 2008. See Footnote ~~3 to the Consolidated Financial Statements (Unaudited) for additional information.~~

The Company recorded pre-tax restructuring costs of $0.3 million in the second quarter of 2005, compared to $25.7 million in the prior year. The 2004 pre-tax costs included $17.7 million of facility and other exit costs, $5.0 million of employee severance and termination benefits and $3.0 million of exited contractual commitments and other restructuring costs. See Footnote 45 to the Consolidated Financial Statements (Unaudited) for further information on ~~the~~these restructuring ~~plan.~~costs.

Operating income in the second quarter of ~~2005~~2006 was ~~$183.6~~$201.0 million, or ~~11.2%~~11.8% of net sales, versus ~~$107.9~~$160.8 million, or ~~6.5%~~10.4%, in the comparable quarter of ~~2004.~~2005. The ~~increase~~change in operating ~~margins~~income is the result of the factors described above.

Net nonoperating expenses in the second quarter of ~~2005~~2006 were ~~2.0%~~2.2% of net sales, or ~~$32.9~~$36.6 million, versus ~~1.9%~~2.2% of net sales, or ~~$31.2~~$33.3 million, in the comparable quarter of ~~2004.~~2005. The increase in net nonoperating expenses is ~~mainly~~primarily attributable to an increase in net interest expense as a result of ~~$1.5 million for~~borrowings to fund the ~~second quarter of 2005 compared to the second quarter of 2004, mostly due to higher~~DYMO acquisition and rising interest rates.

The effective tax rate was ~~31.3%~~17.5% in the second quarter of ~~2005~~2006 versus ~~23.7%~~31.5% in the second quarter of ~~2004. The change in the effective tax rate is primarily related to the resolution of certain income tax provisions in~~2005. In the second quarter of ~~2004. See Footnote 8~~2006, the Company determined that it would be able to utilize certain capital loss carryforwards that it previously believed would expire unused. Accordingly, the ~~Consolidated Financial Statements (Unaudited) for further information.~~Company reversed a $22.7 million income tax valuation reserve.

Income from continuing operations for the second quarter of ~~2005~~2006 was ~~$103.5~~$135.7 million, compared to ~~$58.5~~$87.4 million in the second quarter of ~~2004.~~2005. Diluted earnings per share from continuing operations were ~~$0.38~~$0.49 in the second quarter of ~~2005~~2006 compared to ~~$0.21~~$0.32 in the second quarter of ~~2004.~~2005.

The ~~income (loss) recognized~~loss from discontinued operations, net of tax, was $16.2 million and $21.2 million for the three months ended June 30, 2006 and 2005, respectively. The loss on disposal of discontinued operations for the second quarter of 2006 was $1.3 million, net of tax, compared to $14.3 million, net of tax, in the second quarter of 2005. The loss from operations of discontinued operations for the second quarter of ~~2005~~2006 was ~~$1.4~~$14.9 million, net of tax, compared to ~~($3.1)~~$6.9 million, net of tax, in the second quarter of ~~2004.~~2005. In the second quarter, the Company’s Board of Directors committed to a plan to sell its Home Décor Europe business. As a result, the business is reported in discontinued

operations for all periods presented. The ~~(loss) gain on disposal~~business, which was previously reported in the Home Fashions segment, contributed approximately $375 million of ~~discontinued~~revenue in 2005. Discontinued operations for the ~~second quarter~~three months ended June 30, 2005 also include the results of ~~2005~~the European Cookware business, which was ~~($38.7) million, net of tax, compared to $5.6 million, net of tax, in the second quarter of 2004.~~divested January 1, 2006. Diluted ~~(loss) income~~loss per share from discontinued operations was ~~($0.14)~~$0.06 in the second quarter of ~~2005~~2006 compared to ~~$0.01~~$0.08 in the second quarter of ~~2004.~~2005. See Footnote 23 to the Consolidated Financial Statements (Unaudited) for further information.

Net income for the second quarter of ~~2005~~2006 was ~~$66.2~~$119.5 million, compared to ~~$61.0~~$66.2 million in the second quarter of ~~2004.~~2005. Diluted earnings per share were $0.43 in the second quarter of 2006 compared to $0.24 in the second quarter of ~~2005 compared to $0.22 in the second quarter of 2004.~~2005.

Business Group Operating Results:

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


	2005		2004		% Change			2006		2005		% Change
Cleaning & Organization	$	376.5	$	400.1		(5.9	)%	$	403.3	$	365.1		10.5	%
Office Products		495.5		489.2		1.3			579.1		495.5		16.9
Tools & Hardware		315.5		300.3		5.1			328.8		315.5		4.2
Home Fashions		212.0		224.2		(5.4	)		106.6		115.0		(7.3	)
Other		241.6		253.4		(4.7	)		279.0		257.5		8.3

Total Net Sales (1)	$	1,641.1	$	1,667.2		(1.6	)%	$	1,696.8	$	1,548.6		9.6	%

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


	2005			2004			% Change			2006			2005			% Change
Cleaning & Organization	$	23.1		$	9.2			151.1	%	$	42.9		$	23.1			85.7	%
Office Products		98.9			95.5			3.6			99.9			98.9			1.0
Tools & Hardware		49.3			43.5			13.3			53.8			49.3			9.1
Home Fashions		3.6			5.2			(30.8	)		14.4			8.0			80.0
Other		18.7			15.0			24.7			29.8			22.9			30.1
Corporate Costs (2)		(9.7	)		(9.7	)					(20.0	)		(9.7	)		(106.2	)
Impairment Charges (3)		—			(25.1	)					—			(31.4	)
Restructuring Costs (4)		(0.3	)		(25.7	)					(19.8	)		(0.3	)		(6,500.0	)

Total Operating Income (5)	$	183.6		$	107.9			70.2	%	$	201.0		$	160.8			25.0	%


(1)		All intercompany transactions have been eliminated. Sales to Wal*Mart Stores, Inc. and subsidiaries amounted to approximately ~~14%~~16% and ~~16%~~15% of consolidated net sales ~~excluding discontinued operations,~~ in the three months ended June 30, ~~2005~~2006 and ~~2004,~~2005, respectively. Sales to no other customer exceeded 10% of consolidated net sales for either period.

(2)		Corporate operating expenses consist primarily of administrative costs, including stock-based compensation, that are not allocated to a particular segment.

(3)		Impairment charges have been presented separately in this table; refer to Footnote 34 to the Consolidated Financial Statements (Unaudited) for additional information.

(4)		Restructuring costs have been presented separately in this ~~table;~~table. For additional information refer to Footnote 45 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~~headquarters 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~~2006 were ~~$376.5~~$403.3 million, ~~a decrease~~an increase of ~~$23.6~~$38.2 million, or ~~5.9%~~10.5%, from ~~$400.1~~$365.1 million in the second quarter of ~~2004,~~2005, driven ~~primarily~~ by ~~the planned product line exits~~double-digit growth in Rubbermaid Home Products and ~~core~~mid single-digit growth in Rubbermaid Commercial Products. The second quarter sales ~~decline~~growth in the Rubbermaid Home Products business ~~partially~~benefited from relatively easy comparisons as sales in the second quarter of 2005 were suppressed by product line exits and pricing actions required to offset raw material inflation. During the second half and fourth

quarter of 2005, Rubbermaid Home Products sales were favorably impacted by ~~mid single digit~~holiday promotions, which will affect second half and full year over year sales growth ~~in both the Rubbermaid Commercial Products and Rubbermaid Foodservice businesses, favorable pricing and foreign currency translation.~~for this business.

Operating income for the second quarter of ~~2005~~2006 was ~~$23.1~~$42.9 million, or 10.6% of sales, an increase of ~~$13.9~~$19.8 million, or ~~151.1%~~85.7%, from ~~$9.2~~$23.1 million in the second quarter of ~~2004.~~2005. The ~~improvement~~increase in operating income is ~~the~~a result of ~~improved manufacturing~~the sales increase and ~~distribution~~ productivity, ~~favorable sales mix and favorable pricing which~~partially offset by raw material ~~inflation.~~inflation and higher SG&A.

Office Products

Net sales for the second quarter of ~~2005~~2006 were ~~$495.5~~$579.1 million, an increase of ~~$6.3~~$83.6 million, or ~~1.3%~~16.9%, from ~~$489.2~~$495.5 million in the second quarter of ~~2004. The increase was~~2005, benefiting primarily ~~due to new~~from the effect of the DYMO acquisition. From a product ~~successes~~line perspective, double-digit growth in markers and growth in everyday writing ~~instruments (Sharpie® Retractables, Sharpie® Mini permanent markers, Papermate® Flexgrip Elite pens) and favorable currency translation,~~were partially offset by ~~sales~~ declines in ~~the Eldon~~coloring and office ~~products business.~~organization.

Operating income for the second quarter of ~~2005~~2006 was ~~$98.9~~$99.9 million or 17.3% of sales, an increase of ~~$3.4~~$1.0 million, or ~~3.6%~~1.0%, from ~~$95.5~~$98.9 million in the second quarter of ~~2004, as a result of increased sales, improved gross margins driven by new product introductions and productivity, partially~~2005. The additional income from the DYMO acquisition was offset by increased ~~investment in~~ SG&A ~~primarily~~investment, restructuring related ~~to the Sharpie advertising campaign.~~inefficiencies and acquisition integration costs.

Tools & Hardware

Net sales for the second quarter of ~~2005~~2006 were ~~$315.5~~$328.8 million, an increase of ~~$15.2~~$13.3 million, or ~~5.1%~~4.2%, from ~~$300.3~~$315.5 million in the second quarter of ~~2004,~~2005, driven by ~~strong sales~~double-digit growth in the ~~LENOX,~~ IRWIN and ~~BernzOmatic businesses, partially offset by a sales decline in the Amerock business.~~LENOX branded tools businesses.

Operating income for the second quarter of ~~2005~~2006 was ~~$49.3~~$53.8 million, or 16.4% of sales, an increase of ~~$5.8~~$4.5 million, or ~~13.3%~~9.1%, from ~~$43.5~~$49.3 million in the second quarter of ~~2004, driven by~~2005. Operating income increased as a result of the increased sales volume and ~~strong~~ productivity initiatives, partially offset by additional SG&A investment and raw material ~~inflation and increased investments in SG&A.~~inflation.

Home Fashions

Net sales for the second quarter of ~~2005~~2006 were ~~$212.0~~$106.6 million, a decrease of ~~$12.2~~$8.4 million, or ~~5.4%~~7.3%, from ~~$224.2~~$115.0 million in the second quarter of ~~2004, driven by product line exits and core sales declines in~~2005. The decrease was due to the ~~European Home Fashions business, partially offset by mid single digit~~timing of first half shipments. This segment posted double-digit growth in the ~~North American business.~~first quarter.

Operating income for the second quarter of ~~2005~~2006 was ~~$3.6 million, a decrease of $1.6~~$14.4 million, or ~~30.8%~~13.5% of sales, an increase of $6.4 million, or 80.0%, from ~~$5.2~~$8.0 million in the second quarter of ~~2004.~~2005. The ~~decrease~~increase in operating income was ~~due primarily to lower sales and raw material inflation,~~the result of strong productivity partially offset by ~~productivity.~~the sales decline.

Other

Net sales for the second quarter of ~~2005~~2006 were ~~$241.6~~$279.0 million, ~~a decrease~~an increase of ~~$11.8~~$21.5 million, or ~~4.7%~~8.3%, from ~~$253.4~~$257.5 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~~2005, driven by ~~core sales~~double-digit growth in the ~~rest of the segment~~Calphalon and ~~favorable foreign currency translation.~~Goody businesses.

Operating income for the second quarter of ~~2005~~2006 was ~~$18.7~~$29.8 million or 10.7% of sales, an increase of ~~$3.7~~$6.9 million, or ~~24.7%~~30.1%, from ~~$15.0~~$22.9 million in the second quarter of ~~2004, driven primarily~~2005. Driving the favorability was the increase in sales and productivity, partially offset by ~~productivity and reduced~~increased SG&A ~~in the juvenile products businesses.~~investment.

Six Months Ended June 30, ~~2005~~2006 vs. Six Months Ended June 30, ~~2004~~2005

Consolidated Operating Results:

Net sales for the six months ended June 30, ~~2005~~2006 were ~~$3,018.1~~$3,102.1 million, representing ~~a decrease~~an increase of ~~$119.8~~$291.0 million, or ~~3.8%~~10.4%, from ~~$3,137.9~~$2,811.1 million in the comparable period of ~~2004, consisting of~~2005. Excluding sales related to the ~~following~~(DYMO acquisition, sales were up $175 million, or 6.2%, with the Company’s Invest businesses generating a 4.9% improvement 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,~~excluding sales resulting from the ~~aggressive pricing required to offset resin inflation. In addition,~~DYMO acquisition, for 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.first six months of 2006 versus

2023

the comparable period of 2005, and the Company’s Fix businesses increasing net sales by 10.8% in the first six months of 2006 versus the comparable period of 2005.

Gross margin, as a percentage of net sales, ~~for~~in the six months ended June 30, ~~2005~~2006 was ~~29.3%~~32.7%, or ~~$883.2~~$1,014.9 million, versus ~~28.0%~~29.8%, or ~~$879.3~~$837.0 million, in the comparable period of ~~2004.~~2005. The increase in gross margin is ~~primarily related to~~a result of productivity, favorable pricing, ~~of $65 million, or 2.0% of net sales, gross productivity of $45 million,~~and 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 raw material inflation.

SG&A expenses in the ~~core sales decline.~~

~~Selling, general and administrative expenses (SG&A) for the~~first six months ~~ended June 30, 2005~~of 2006 were ~~20.8%~~21.9% of net sales, or ~~$627.3~~$678.0 million, versus ~~19.7%~~19.9%, or ~~$617.2~~$560.7 million, in the comparable period of ~~2004.~~2005. The primary drivers of the increase were the additional strategic advertising and promotional investments in ~~SG&A reflects a currency~~the Rubbermaid Commercial and Food Products, Tools & Hardware, Calphalon, Graco and Office Products businesses, the impact of ~~$13.5 million. All other SG&A was down $3.4~~the DYMO acquisition, the expense related to stock option accounting, and the non-recurring pension curtailment benefit recognized in 2005.

In the first six months of 2006, the Company recorded $43.3 million ~~with strategic investments more than offset by the effect of streamlining initiatives.~~

in restructuring costs related to Project Acceleration. The Company ~~recorded a non-cash pretax impairment charge~~announced the closure of ~~$25.1~~15 manufacturing facilities since the inception of the Plan. The Company continues to expect cumulative charges of $350 to $400 million, ~~for~~approximately 60% of which are expected to be cash charges, over the life of the initiative. Annualized savings are projected to exceed $120 million upon completion of the project with an approximate $50 million benefit expected in 2007 and the remainder in 2008. In the first six months ~~ended June 30, 2004. These charges were required to write-down certain assets to estimated fair value. See Footnote 3 to~~of 2005, 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.$6.8 million. See Footnote 45 to the Consolidated Financial Statements (Unaudited) for further information on ~~the~~these restructuring ~~plan.~~costs.

Operating income ~~for~~in the first six months ~~ended June 30, 2005~~of 2006 was ~~$249.4~~$293.6 million, or ~~8.3%~~9.5% of net sales, versus ~~$189.7~~$238.1 million, or ~~6.0% of net sales,~~8.5%, in the comparable period of ~~2004.~~2005. The ~~increase~~change in operating ~~margins~~income is the result of the factors described above.

Net nonoperating expenses ~~for~~in the first six months ~~ended June 30, 2005~~of 2006 were ~~2.0%~~2.4% of net sales, or ~~$61.5~~$73.0 million, versus ~~2.0%~~2.2% of net sales, or ~~$64.4~~$62.3 million, in the comparable period of ~~2004.~~2005. The ~~reduction~~increase in net nonoperating expenses is ~~mainly~~primarily 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~~as a result of borrowings to fund the ~~six months ended June 30, 2005 compared to the same period for 2004. The increase was primarily due to higher~~DYMO acquisition and rising interest ~~rates, partially offset by lower debt balances.~~rates.

The effective tax rate was ~~(0.2%) for~~(15.4)% in the first six months ~~ended June 30, 2005~~of 2006 versus ~~27.7% for~~(4.5)% in the ~~six months ended June 30, 2004.~~comparable period of 2005. The change in the effective tax rate is primarily related to the ~~$58.6~~$78.0 million net income tax benefit recorded in the first quarter of 2006 as a result of the reorganization of certain of the Company’s non-U.S. subsidiaries and the $22.7 million income tax benefit recorded in the second quarter of 2006 as a result of the determination that the Company would be able to utilize certain capital loss carryforwards that it previously believed would expire unused. In the first six months of 2005, ~~compared to the~~a net income tax benefit of ~~$6.4~~$58.6 million was recorded ~~in 2004,~~ as a result of the favorable resolution of a tax ~~contingency settlements. See Footnote 8 to the Consolidated Financial Statements (Unaudited) for further information.~~contingency.

Income from continuing operations for the first six months ~~ended June 30, 2005~~of 2006 was ~~$188.3~~$254.5 million, compared to ~~$90.6~~$183.7 million in the first six months of 2005. Diluted earnings per share from continuing operations were $0.92 in the first six months of 2006 compared to $0.67 in the first six months of 2005.

The loss from discontinued operations, net of tax, was $80.2 million and $80.9 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,~~2006 and 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.respectively. The loss on disposal of discontinued operations for the six months ended June 30, ~~2005~~2006 was ~~$87.8~~$2.9 million, net of tax, compared to ~~$99.1~~$63.2 million, net of tax, in the first six months of 2005. The 2006 loss was primarily related to the disposal of the European Cookware business, while the 2005 loss related primarily to the disposal of the Curver business. The loss from operations of discontinued operations for the six months ended June 30, ~~2004.~~2006 was $77.3 million, net of tax, compared to $17.7 million, net of tax, in the first six months of 2005. The 2006 net loss from operations included a $50.9 million impairment charge recorded in the first quarter to write off the goodwill of the Home Décor Europe business. Diluted loss per share from discontinued operations was ~~$0.31 for~~$0.28 in the first six months ~~ended June 30, 2005~~of 2006 compared to ~~$0.38 for~~$0.29 in the first six months ~~ended June 30, 2004.~~of 2005. See Footnote 23 to the Consolidated Financial Statements (Unaudited) for further information.

Net income ~~(loss)~~ for the six months ended June 30, ~~2005~~2006 was ~~$102.8~~$174.3 million, compared to ~~($13.8)~~$102.8 million in the comparable period of 2005. Diluted earnings per share were $0.64 for the six months ended June 30, ~~2004. Diluted earnings (loss) per share was $0.37 for the six months ended June 30, 2005~~2006 compared to ~~($0.05) for~~$0.37 in the ~~six months ended June 30, 2004.~~comparable period of 2005.

Business ~~Segment~~Group Operating Results:

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


	2005		2004		% Change			2006		2005		% Change
Cleaning & Organization	$	701.0	$	785.9		(10.8	)%	$	736.4	$	665.4		10.7	%
Office Products		828.3		822.0		0.8			969.9		828.3		17.1
Tools & Hardware		591.9		574.6		3.0			605.6		591.9		2.3
Home Fashions		410.3		451.0		(9.0	)		223.2		212.7		4.9
Other		486.6		504.4		(3.5	)		567.0		512.8		10.6

Total Net Sales (1)	$	3,018.1	$	3,137.9		(3.8	)%	$	3,102.1	$	2,811.1		10.4	%

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


	2005			2004			% Change			2006			2005			% Change
Cleaning & Organization	$	35.6		$	25.4			40.2	%	$	64.2		$	35.6			80.3	%
Office Products		132.4			127.3			4.0			132.2			132.4			(0.2	)
Tools & Hardware		76.0			86.5			(12.1	)		86.9			76.0			14.3
Home Fashions		(0.9	)		9.1			(109.9	)		31.5			10.3			205.8
Other		32.0			30.9			3.6			59.7			41.2			44.9
Corporate Costs (2)		(19.2	)		(17.1	)					(37.6	)		(19.2	)		(95.8	)
Impairment Charges (3)		—			(25.1	)					—			(31.4	)
Restructuring Costs (4)		(6.5	)		(47.3	)					(43.3	)		(6.8	)		(536.8	)

Total Operating Income (5)	$	249.4		$	189.7			31.5	%	$	293.6		$	238.1			23.3	%


(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~~ended June 30, 2006 and ~~2004.~~2005. Sales to no other customer exceeded 10% of consolidated net sales for either period.

(2)		Corporate operating expenses consist primarily of administrative costs, including stock-based compensation, that are not allocated to a particular segment.

(3)		Impairment charges have been presented separately in this table; refer to Footnote 34 to the Consolidated Financial Statements (Unaudited) for additional information.

(4)		Restructuring costs have been presented separately in this ~~table;~~table. For additional information refer to Footnote 45 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 ~~headquarter’s~~headquarters expenses of an operational nature are allocated to business segments primarily on a net sales basis.

Cleaning & Organization

Net sales for the six months ended June 30, ~~2005~~2006 were ~~$701.0~~$736.4 million, ~~a decrease~~an increase of ~~$84.9~~$71.0 million, or ~~10.8%~~10.7%, from ~~$785.9~~$665.4 million in the ~~comparable period of 2004,~~six months ended June 30, 2005, driven ~~primarily~~ by ~~the planned product line exits and core sales declines~~double-digit growth in the Rubbermaid Home Products ~~business. These factors were partially offset by mid single digit~~business, high single-digit growth in the Rubbermaid Commercial Products business and low single-digit growth in the Rubbermaid ~~Foodservice businesses, favorable~~Food Service business. The sales growth in the Rubbermaid Home Products business for the first six months of 2006 resulted largely from the fact that sales in the six months ended June 30, 2005 were suppressed by product line exits and pricing actions required to offset raw material inflation. During the second half and ~~foreign currency translation.~~fourth quarter of 2005, Rubbermaid Home Products sales were favorably impacted by holiday promotions, which will affect second half and full year over year sales growth for this business.

Operating income for the six months ended June 30, ~~2005~~2006 was ~~$35.6~~$64.2 million or 8.7% of sales, an increase of ~~$10.2~~$28.6 million, or ~~40.2%~~80.3%, from ~~$25.4~~$35.6 million in the ~~comparable period of 2004.~~six months ended June 30, 2005. The ~~improvement~~increase in operating income is ~~the~~ a

result of ~~improved manufacturing and distribution~~the sales increase, productivity ~~favorable sales mix~~ and favorable ~~pricing which significantly~~mix, partially offset by raw material ~~inflation.~~inflation and higher SG&A.

Office Products

Net sales for the six months ended June 30, ~~2005~~2006 were ~~$828.3~~$969.9 million, an increase of ~~$6.3~~$141.6 million, or ~~0.8%~~17.1%, from ~~$822.0~~$828.3 million in the ~~comparable period~~six months ended June 30, 2005, benefiting primarily from the impact of ~~2004. The increase was primarily due to successful implementation~~the DYMO acquisition. Excluding the impact of ~~new products~~DYMO, sales increased approximately 3.1%. From a product line perspective, double-digit growth in ~~the~~markers and growth in everyday writing ~~instruments business (Sharpie® Retractables, Sharpie® Mini permanent markers, Papermate® Flexgrip Elite pens) and favorable foreign currency translation,~~were partially offset by ~~sales~~ declines in ~~the Eldon~~coloring, fine writing and office ~~products business.~~organization.

Operating income for the six months ended June 30, ~~2005 was $132.4 million, an increase of $5.1~~2006 remained relatively flat at $132.2 million, or ~~4.0%, from $127.3~~13.6% of sales, compared to $132.4 million in the ~~comparable period of 2004, as a result of increased sales and improved margins associated with~~six months ended June 30, 2005. The additional income generated from the ~~new product introductions and productivity, partially~~DYMO acquisition was more than offset by ~~raw material inflation~~increased SG&A investment, restructuring related expenses and ~~increased investment in SG&A, primarily related to the Sharpie® advertising campaign.~~acquisition integration costs.

Tools & Hardware

Net sales for the six months ended June 30, ~~2005~~2006 were ~~$591.9~~$605.6 million, an increase of ~~$17.3~~$13.7 million, or ~~3.0%~~2.3%, from ~~$574.6~~$591.9 million in the ~~comparable period of 2004,~~six months ended June 30, 2005, driven by ~~increases~~double-digit growth in the IRWIN and LENOX ~~and BernzOmatic businesses,~~branded tools business, partially offset by ~~sales declines~~a double-digit decline in the ~~Amerock business.~~consumer electronic tools business which is near the end of its product life cycle.

Operating income for the six months ended June 30, ~~2005~~2006 was ~~$76.0 million, a decrease of $10.5~~$86.9 million or ~~12.1%~~14.3% of sales, an increase of $10.9 million, or 14.3%, from ~~$86.5~~$76.0 million in the ~~comparable period~~six months ended June 30, 2005. Operating income increased primarily as the result of ~~2004, driven by raw material inflation, restructuring related costs at the Amerock~~productivity initiatives, sales volume and ~~IRWIN businesses and continued investments in SG&A in the tools business,~~favorable mix, partially offset by ~~the sales increase noted above~~increased SG&A investment and ~~strong productivity.~~raw material inflation.

Home Fashions

Net sales for the six months ended June 30, ~~2005~~2006 were ~~$410.3~~$223.2 million, ~~a decrease~~an increase of ~~$40.7~~$10.5 million, or ~~9.0%~~4.9%, from ~~$451.0~~$212.7 million in the ~~comparable period~~six months ended June 30, 2005. Sales benefited from the addition of ~~2004, driven by product line exits~~a new warehouse at a key retailer and ~~core sales declines in~~generally low customer inventories coming into the ~~European Home Fashions business, partially offset by favorable foreign currency translation.~~year.

Operating ~~(loss)~~ income for the six months ended June 30, ~~2005~~2006 was ~~($0.9)~~$31.5 million ~~a decrease~~or 14.1% of ~~$10.0~~sales, an increase of $21.2 million, or 205.8%, from ~~$9.1~~$10.3 million in the ~~comparable period of 2004.~~six months ended June 30, 2005. The ~~decrease~~increase in operating income was ~~due primarily to lower~~the result of sales ~~raw material inflation~~growth and ~~the liquidation of Douglas Kane, partially offset by~~strong productivity.

Other

Net sales for the six months ended June 30, ~~2005~~2006 were ~~$486.6~~$567.0 million, ~~a decrease~~an increase of ~~$17.8~~$54.2 million, or ~~3.5%~~10.6%, from ~~$504.4~~$512.8 million in the ~~comparable period of 2004. The decline is primarily the result of product line exits~~six months ended June 30, 2005, driven by double-digit increases in the ~~Graco business~~Calphalon, Goody and ~~core sales declines in the~~ Little Tikes ~~battery operated products business, partially offset by favorable pricing~~businesses and ~~foreign currency translation.~~mid single-digit growth in Graco. A portion of the sales increase relates to the timing of promotions and plan-o-gram changes at retailers.

Operating income for the six months ended June 30, ~~2005~~2006 was ~~$32.0~~$59.7 million or 10.5% of sales, an increase of ~~$1.1~~$18.5 million, or ~~3.6%~~44.9%, from ~~$30.9~~$41.2 million in the ~~comparable period~~six months ended June 30, 2005. The primary drivers of ~~2004, driven primarily by improved~~the increase in operating income were the impact of the sales increase, productivity and favorable ~~pricing and reduced SG&A in the juvenile products businesses,~~mix, partially offset by ~~raw material inflation.~~increased SG&A investment.

Liquidity and Capital Resources

Cash and cash equivalents ~~decreased~~increased by ~~$293.4~~$0.8 million for the six months ended June 30, ~~2005.~~2006. The change in cash and cash equivalents is as follows for the six months ended June 30, (in millions):


	2005			2004			2006			2005

Cash provided by operating activities	$	91.9		$	137.0		$	92.1		$	91.9
Cash (used in) provided by investing activities		(58.9	)		177.0
Cash used in investing activities								(63.3	)		(58.9	)
Cash used in financing activities		(319.8	)		(346.2	)		(28.9	)		(319.8	)
Exchange effect on cash and cash equivalents		(6.6	)		(1.2	)		0.9			(6.6	)


Decrease in cash and cash equivalents	($	293.4	)	($	33.4	)
Increase (decrease) in cash and cash equivalents							$	0.8		$	(293.4	)

Sources:

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

Cash provided by operating activities for the six months ended June 30, ~~2005~~2006 was ~~$91.9~~$92.1 million compared to ~~$137.0~~$91.9 million for the comparable period of ~~2004. The decrease in cash provided from operating activities was primarily due to an increase of working capital in 2005, specifically related to the timing of sales in the second quarter.~~2005.

The Company has a ~~$650.0~~$750.0 million ~~five-year Syndicated Revolving Credit Agreement~~syndicated revolving credit facility (the “Revolver”) ~~that is scheduled~~pursuant to ~~expire~~a five-year credit agreement, which expires in ~~June 2007.~~November 2010. At June 30, ~~2005,~~2006, there were no borrowings under the Revolver.

In lieu of borrowings under the Revolver, the Company may issue up to ~~$650.0~~$750.0 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. The Revolver also provides for the issuance of up to $100.0 million of standby letters of credit so long as there is a sufficient amount available for borrowing under the Revolver. At June 30, ~~2005, no~~2006, $270.0 million of commercial paper was ~~outstanding.~~outstanding and there were no standby letters of credit issued under the Revolver.

The Revolver permits the Company to borrow funds on a variety of interest rate ~~terms. The Revolver~~terms and 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~~Revolver also limits Subsidiary Indebtedness. As of June 30, ~~2005,~~2006, the Company was in compliance with ~~this agreement.~~the agreement governing the Revolver. On an annual basis, the Company may request extension of the Revolver (subject to lender approval) for additional one-year periods.

In the first six months of ~~2005,~~2006, the Company received proceeds from the issuance of debt of ~~$131.7~~$167.2 million compared to ~~$16.9~~$131.7 million in the ~~year ago period.~~first six months of 2005.

In the first six months of ~~2005,~~2006, the Company received cash proceeds of ~~$22.1~~$40.2 million related to the sale of businesses and other non-current assets, compared to ~~$247.1~~$22.1 million in the ~~year ago period. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for a discussion~~first six months of ~~the disposal~~2005. The Company’s European Cookware business was sold in 2006, generating cash proceeds of ~~Curver.~~$29.3 million.

Uses:

The Company’s primary uses of liquidity and capital resources include acquisitions, dividend payments, capital expenditures and payments on ~~notes payable and long-term debt, dividend payments and expenditures for property, plant and equipment.~~debt.

In the first six months of ~~2005,~~2006, the Company spent ~~$35.0~~$46.3 million on strategic ~~acquisitions. The Company did not make any significant~~ acquisitions, ~~during 2004.~~compared to $35.0 million in the comparable period of 2005.

In the first six months of ~~2005,~~2006, the Company made payments on notes payable and long-term debt of ~~$335.7~~$82.0 million compared to ~~$248.8~~$335.7 million in the ~~year ago period,~~first six months of 2005, including the purchases in 2005 of 550,000 ~~shares~~ and 200,000

shares of its Preferred Securities from ~~holders~~a holder 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.

Cash used for restructuring activities was $11.9 million and $16.4 million in the first six months of 2006 and 2005, respectively. These payments relate primarily to employee termination benefits. The Company expects to spend approximately $75 million in 2006 related to restructuring activities. See Footnote 65 to the Consolidated Financial Statements (Unaudited) for additional ~~information on these transactions.~~information.

~~Cash used for restructuring activities was $16.4~~Capital expenditures were $57.2 million and ~~$43.5~~$46.0 million in the first six months of 2006 and 2005, ~~and 2004,~~ respectively. ~~These payments relate primarily~~Capital expenditures for 2006 are expected to ~~employee termination benefits.~~be in the range of $125 to $150 million.

~~Expenditures~~In the first six months of 2006, the Company paid $20.9 million to fund the U.S. defined contribution plan implemented in 2005. See Footnote 8 to the Consolidated Financial Statements (Unaudited) for ~~property, plant and equipment~~additional information.

Dividends paid were ~~$46.0~~$116.4 million and ~~$70.1~~$115.8 million in the first six months of 2006 and 2005, ~~and 2004,~~ respectively. ~~The~~In the second half of 2006, the Company ~~is focused on capital spending discipline and~~ expects to ~~spend between $125 million and $150 million in 2005 on property, plant and equipment.~~make similar dividend payments.

~~Aggregate dividends paid were $115.8 million and $115.7 million~~Stockholders’ equity increased in the first six months of ~~2005 and 2004, respectively.~~

~~Retained earnings decreased in the first six months of 2005~~2006 by ~~$12.9~~$84.7 million. The ~~reduction~~increase in ~~retained earnings~~stockholders’ equity is primarily due to ~~cash~~the current year net income and foreign currency translation adjustments, partially offset by dividends paid on common ~~stock, partially offset by the current year net income.~~stock.

Working capital at June 30, ~~2005~~2006 was ~~$1,184.0~~$729.2 million compared to ~~$1,141.1~~$675.3 million at December 31, ~~2004.~~2005. The current ratio was 1.37:1 at June 30, ~~2005 was 1.81:1 compared to 1.61:~~2006 and 1.38:1 at December 31, ~~2004. The increase in working capital is due to the reduction of income taxes payable and other accrued liabilities, primarily as a result of spending on previously announced restructuring plans.~~2005.

Total debt to total capitalization (total debt is net of cash and cash equivalents, and total capitalization includes total debt and stockholders’ equity) was ~~.56:~~.60:1 at June 30, ~~2005~~2006 and ~~.55:~~.60:1 at December 31, ~~2004.~~

~~In August 2005, the Company expects to declare a quarterly cash dividend of $0.21 per share on the Company’s common stock, payable in the third quarter.~~2005.

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.

~~On July 28,~~Critical Accounting Policies

The Company’s accounting policies are more fully described in the consolidated financial statements included in the 2005 Annual Report on Form 10-K. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the consolidated financial statements. The Company describes its most critical accounting policies in its 2005 Annual Report on Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations. During the first quarter of 2006, the Company ~~reached a definitive agreement~~adopted SFAS No. 123(R), Share-Based Payment. The following discussion provides additional information about the effects on the consolidated financial statements of judgments and estimates related to ~~acquire DYMO, a global leader~~the Company’s policies on the recording of stock–based compensation expense.

Stock Options

Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R), using the modified prospective method and therefore has not restated results for prior periods. Under this transition method, stock-based compensation expense for 2006 includes compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in ~~designing, manufacturing and marketing on-demand labeling solutions~~accordance with the original provisions of SFAS No. 123, “Accounting for ~~approximately $730 million~~Stock-Based Compensation.” Stock-based compensation expense for all awards granted after December 31, 2005 is based on the grant-date fair value estimated in ~~cash, subject to adjustment for working capital and other items.~~accordance with the provisions of SFAS 123(R). The Company ~~expects~~recognizes stock-based compensation expense on a straight-line

basis over the requisite service period of the award, which is generally five years for stock options and three years for restricted stock. Prior to ~~close~~the adoption of SFAS 123(R), the Company recognized stock-based compensation expense by applying the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected pre-vesting forfeiture rate and only recognize expense for those shares expected to vest. If our actual pre-vesting forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from our estimates. See Footnote 12 to the Consolidated Financial Statements (Unaudited) for a further discussion of stock-based compensation.

Recent Accounting Pronouncement

In July 2006, the FASB issued Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The interpretation would require a review of all tax positions accounted for in accordance with FASB Statement No. 109 and apply a more-likely-than-not recognition threshold. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Subsequent recognition, derecognition, and measurement is based on management’s best judgment given the ~~transaction prior~~facts, circumstances and information available at the reporting date. The guidance is effective for fiscal years beginning after December 15, 2006, which we intend to ~~December 30, 2005 and~~adopt on January 1, 2007. We do not expect the adoption of this statement to ~~fund the purchase price payment through~~have a ~~combination~~material effect on our financial position or results of ~~cash on hand and existing credit facilities.~~operation.

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

The Company’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, including resin, corrugate, 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,~~Where practical, the Company ~~does not use~~uses derivatives ~~to manage the volatility related to this risk.~~as part of its risk management process. In the first six months of ~~2005,~~2006, the Company experienced raw material inflation ~~of approximately $88 million~~ (primarily in ~~resin and steel)~~resin), ~~partially~~which was more than 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.~~favorable mix and productivity.

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. 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, but are shown as an illustration of the impact of potential adverse changes in interest and foreign currency exchange rates.

The following table indicates the calculated amounts for the six months ended June 30,(dollars in millions ~~except percentages~~):


	2005				2004							2006				2005
	Six				Six							Six				Six
	Month		June 30,		Month		June 30,		Confidence			Month		June 30,		Month		June 30,		Confidence
	Average		2005		Average		2004		Level			Average		2006		Average		2005		Level
Interest rates	$	10.4	$	10.8	$	12.8	$	13.2		95	%	$	8.4	$	8.8	$	10.4	$	10.8		95	%
Foreign exchange	$	2.1	$	2.7	$	2.6	$	1.7		95	%	$	5.5	$	5.8	$	2.1	$	2.7		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, information or assumptions about the effects of Project Acceleration, sales, ~~(including pricing),~~ income/(loss), earnings per share, operating income or gross margin improvements, 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, 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, performance and growth or the assumptions relating to any of the forward-looking statements. These statements generally are accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “project,” “target,” “plan,” “expect,” “will,” “should” or similar 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 generally and Exhibit 99.1 to this Report.

I~~tem~~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).

Item 4. Controls and Procedures

As of June 30, ~~2005,~~2006, 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 June 30, ~~2005~~2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2631

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,~~9, 2006, the ~~2005~~2006 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:~~therefore:

Proposal 1. Election of ~~four directors~~Directors. The following nominees were elected to serve as 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

Number of Shares
Nominee For Withheld
Thomas E. Clarke 160,388,781 85,260,996
Elizabeth Cuthbert Millett 177,956,327 67,693,450
Steven J. Strobel 241,003,924 4,645,853

In addition, the terms of office of the following Directors continued after the meeting: Scott S. Cowen, Michael T. Cowhig, Mark D. Ketchum, William D. Marohn, Cynthia A. Montgomery, Allan P. Newell, Gordon R. Sullivan and Raymond G. Viault.

Proposal 2. Approval of Amended and Restated Newell Rubbermaid Inc. 2003 Stock Plan. A proposal to approve the amended and restated Newell Rubbermaid Inc. 2003 Stock Plan was adopted, with 165,851,219 votes cast for, 38,501,114 votes cast against, 1,863,668 votes abstained, and 39,433,776 broker non-votes.

Proposal 3. Approval of Newell Rubbermaid Inc. Employee Stock Purchase Plan. A proposal to approve the Newell Rubbermaid Employee Stock Purchase Plan was adopted with 200,561,240 votes cast for, 3,929,513 votes cast against, 1,725,248 votes abstained, and 39,433,776 broker non-votes.

Proposal 4. Ratification of Appointment of Independent Registered Public Accounting Firm. A proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent ~~accountants~~registered public accounting firm for the year ~~2005~~2006 was adopted, with ~~242,692,254~~243,224,072 votes cast for, ~~1,583,246~~858,015 votes cast against, and ~~1,637,824~~1,567,690 votes abstained.

Proposal 3.5. A stockholder proposal requesting that the Company’s Board of Directors adopt a rule that the Board of Directors will redeem any current or future poison pill unless such poison pill is submitted to a stockholder vote, as a separate ballot item, as soon as practicable, was adopted, with 172,487,168 votes cast for, 31,380,739 votes cast against, 2,348,094 votes abstained, and 39,433,776 broker non-votes.

Proposal 6. 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~~169,963,091 votes cast for, ~~44,911,264~~33,946,487 votes cast against, 2,306,423 votes abstained, and ~~3,971,512 votes abstained.~~39,433,776 broker non-votes.

~~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~~Exhibits.


3.1		By-Laws of Newell Rubbermaid Inc., as amended as of April 26, 2006 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2006).

3.2		Amendment to By-Laws of Newell Rubbermaid Inc., effective April 26, 2006 (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2006).


4.1		By-Laws of Newell Rubbermaid Inc., as amended as of April 26, 2006, are included in Item 3.1.

10.1		~~Form of Employment Security Agreement between the Company~~Newell Rubbermaid Inc. 2003 Stock Plan, as amended and ~~Shaun P. Holliday~~restated effective February 8, 2006 (incorporated by reference to ~~Exhibit 10 of~~Appendix B to the Company’s ~~Current Report on Form 8-K~~Proxy Statement, dated ~~November 10, 2004)~~April 3, 2006).

10.2		Forms of Stock Option Agreement under the Newell Rubbermaid Inc. 2003 Stock Plan, as amended and restated effective February 8, 2006.

10.3		Forms of Restricted Stock Award Agreement under the Newell Rubbermaid Inc. 2003 Stock Plan, as amended and restated effective February 8, 2006.

10.4		Performance Share Award Agreement granted to Mark D. Ketchum under the Newell Rubbermaid Inc. 2003 Stock Plan, as amended and restated effective February 8, 2006.

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.

2833

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: August ~~5, 2005~~7, 2006		/s/ Ronald L. Hardnock
Ronald L. Hardnock
		~~Ronald L. Hardnock~~
		Vice President – Corporate Controller


Description	Amount
Intangible assets	$	11.7
Long-lived assets		13.4

Total impairment charge	$	25.1


	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


						Convertible
	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	)

Net income	$	66.2			—		—	$	66.2
Earnings per share	$	0.24			—		—	$	0.24

Weighted average shares outstanding		274.4			0.3		—		274.7

Three Months Ended June 30, 2004
Income from continuing operations	$	58.5			—		—	$	58.5
Earnings per share	$	0.21			—		—	$	0.21

Income from discontinued operations	$	2.5			—		—	$	2.5
Earnings per share	$	0.01			—		—	$	0.01

Net income	$	61.0			—		—	$	61.0
Earnings per share	$	0.22			—		—	$	0.22

Weighted average shares outstanding		274.4			0.1		—		274.5

Six Months Ended June 30, 2005
Income from continuing operations	$	188.3			—		—	$	188.3
Earnings per share	$	0.69			—		—	$	0.69

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

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

Weighted average shares outstanding		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


	$			%

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	)%


	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