Diversey 10-Q 2006 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10–Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM            TO            

COMMISSION FILE NUMBER 333-97427

JOHNSONDIVERSEY, INC.

(Exact name of registrant as specified in its charter)

Delaware	39-1877511
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

8310 16^th Street Sturtevant, Wisconsin 53177-0902

(Address of Principal Executive Offices, Including Zip Code)

(262) 631-4001

(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  x    No  ¨

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 filer  ¨            Accelerated filer  ¨            Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

There is no public trading market for the registrant’s common stock. As of November 3, 2006, there were 24,422 outstanding shares of the registrant’s common stock, $1.00 par value.

INDEX

Section	Topic	Page
	Forward-Looking Statements	i
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)
	Consolidated Balance Sheets as of September 29, 2006 and December 30, 2005	1
	Consolidated Statements of Operations for the three and nine months ended September 29, 2006 and September 30, 2005	2
	Consolidated Statements of Cash Flows for the nine months ended September 29, 2006 and September 30, 2005	3
	Notes to Consolidated Financial Statements – September 29, 2006	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3	Quantitative and Qualitative Disclosure about Market Risk	42
Item 4	Controls and Procedures	43
Item 5	Other Information	45
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	47
Item 6	Exhibits	47
Signatures		48

Unless otherwise indicated, references to “JohnsonDiversey,” “the Company,” “we,” “our” and “us” in this quarterly report refer to JohnsonDiversey, Inc. and its consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

We make statements in this Form 10–Q that are not historical facts. These “forward-looking statements” can be identified by the use of terms such as “may,” “intend,” “might,” will,” “should,” “could,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “project,” “potential,” or the negative of these terms, and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following:

• our ability to execute our business strategies;

• our ability to successfully complete our restructuring program, including the achievement of cost savings and potential disposition of assets;

• changes in general economic and political conditions, interest rates and currency movements, including, in particular, exposure to foreign currency risks;

• the vitality of the institutional and industrial cleaning and sanitation market;

• restraints on pricing flexibility due to competitive conditions in the professional market;

• the loss or insolvency of a significant supplier or customer;

• effectiveness in managing our manufacturing processes, including our inventory, fixed assets and system of internal control;

• changes in energy costs, the costs of raw materials and other operating expenses;

• our ability and the ability of our competitors to introduce new products and technical innovations;

• the costs and effects of complying with laws and regulations relating to the environment and to the manufacture, storage, distribution and labeling of our products;

• the occurrence of litigation or claims;

• changes in tax, fiscal, governmental and other regulatory policies;

• the effect of future acquisitions or divestitures or other corporate transactions;

• adverse or unfavorable publicity regarding us or our services;

• the loss of, or changes in, executive management or other key personnel;

• natural and man made disasters, including acts of terrorism, hostilities or war that impact our markets;

• conditions affecting the food and lodging industry, including health-related, political and weather-related; and

• other factors listed from time to time in reports that we file with the Securities and Exchange Commission.

i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JOHNSONDIVERSEY, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

	September 29, 2006		December 30, 2005
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	163,196	$	158,204
Accounts receivable, less allowance of $32,379 and $26,963, respectively		516,416		479,420
Accounts receivable – related parties		29,494		28,370
Inventories		276,060		254,425
Deferred income taxes		14,315		14,393
Other current assets		147,769		115,588
Current assets of discontinued operations		3,996		64,763
Total current assets		1,151,246		1,115,163
Property, plant and equipment, net		412,313		440,754
Capitalized software, net		68,432		90,996
Goodwill, net		1,175,926		1,126,347
Other intangibles, net		314,071		342,564
Long-term receivables – related parties		69,451		65,194
Other assets		72,141		81,537
Noncurrent assets of discontinued operations		14,307		46,338
Total assets	$	3,277,887	$	3,308,893
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	40,284	$	43,419
Current portion of long-term debt		10,372		11,998
Accounts payable		326,288		321,111
Accounts payable – related parties		59,009		52,976
Accrued expenses		533,255		365,439
Current liabilities of discontinued operations		1,633		34,006
Total current liabilities		970,841		828,949
Pension and other post-retirement benefits		238,794		266,351
Long-term borrowings		1,045,711		1,350,845
Long-term payables – related parties		28,803		28,242
Deferred income taxes		43,762		43,123
Other liabilities		51,938		57,382
Noncurrent liabilities of discontinued operations		1,862		5,823
Total liabilities		2,381,711		2,580,715
Commitments and contingencies (Note 18)		—		—
Stockholders’ equity:
Common stock – $1.00 par value; 200,000 shares authorized; 24,422 shares issued and outstanding		24		24
Class A 8% cumulative preferred stock – $100.00 par value; 1,000 shares authorized; no shares issued and outstanding		—		—
Class B 8% cumulative preferred stock – $100.00 par value; 1,000 shares authorized; no shares issued and outstanding		—		—
Capital in excess of par value		743,026		742,790
Retained earnings (deficit)		11,079		(91,551	)
Accumulated other comprehensive income		142,047		77,775
Notes receivable from officers		—		(860	)
Total stockholders’ equity		896,176		728,178
Total liabilities and stockholders’ equity	$	3,277,887	$	3,308,893

The accompanying notes are an integral part of the consolidated financial statements.

1

JOHNSONDIVERSEY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands)

	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
	(unaudited)						(unaudited)
Net sales:
Net product and service sales	$	717,408		$	720,743		$	2,122,546		$	2,161,551
Sales agency fee income		22,063			22,107			65,677			73,920
		739,471			742,850			2,188,223			2,235,471
Cost of sales		426,514			421,215			1,263,442			1,269,949
Gross profit		312,957			321,635			924,781			965,522
Selling, general and administrative expenses		279,521			264,250			873,735			819,460
Research and development expenses		15,402			13,870			44,744			42,305
Restructuring expenses		30,792			4,299			108,476			12,406
Operating profit (loss)		(12,758	)		39,216			(102,174	)		91,351
Other (income) expense:
Interest expense		26,735			29,655			93,926			103,754
Interest income		(3,064	)		(2,185	)		(9,622	)		(6,257	)
Other expense, net		1,300			453			3,169			443
Income (loss) from continuing operations before income taxes and minority interests		(37,729	)		11,293			(189,647	)		(6,589	)
Income tax (benefit) provision		(14,221	)		9,710			(43,105	)		11,339
Income (loss) from continuing operations before minority interests		(23,508	)		1,583			(146,542	)		(17,928	)
Minority interests in net income (loss) of subsidiaries		20			13			25			(57	)
Income (loss) from continuing operations		(23,528	)		1,570			(146,567	)		(17,871	)
Income from discontinued operations, net of income taxes of $2,164, $3,784, $133,067 and $10,486 (Note 7 and 21)		7,413			6,855			249,248			23,595
Net income (loss)	$	(16,115	)	$	8,425		$	102,681		$	5,724

The accompanying notes are an integral part of the consolidated financial statements.

2

JOHNSONDIVERSEY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

	Nine Months Ended
	September 29, 2006			September 30, 2005
	(unaudited)
Cash flows from operating activities:
Net income	$	102,681		$	5,724
Adjustments to reconcile net income to net cash provided by (used in) operating activities–
Depreciation and amortization		117,094			112,986
Amortization of intangibles		43,021			24,627
Amortization and write-off of debt issuance costs		4,695			17,493
Interest accrued on long-term receivables- related parties		(1,837	)		(2,719	)
Deferred income taxes		316			4,524
Gain on disposal of discontinued operations		(231,870	)		(4,000	)
(Gain) loss from divestitures		(1,342	)		1,198
Loss on property disposals		819			2,724
Other		14,660			7,413
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses–
Accounts receivable securitization		(52,900	)		10,100
Accounts receivable		(18,631	)		(27,914	)
Inventories		(23,021	)		(30,294	)
Other current assets		(9,859	)		(18,106	)
Other assets		3,311			7,624
Accounts payable and accrued expenses		12,874			37,692
Other liabilities		(22,651	)		13,338
Net cash provided by (used in) operating activities		(62,640	)		162,410
Cash flows from investing activities:
Capital expenditures		(57,119	)		(50,713	)
Expenditures for capitalized computer software		(5,875	)		(13,853	)
Proceeds from property disposals		13,530			2,879
Acquisitions of businesses		(10,551	)		(4,222	)
Proceeds from divestitures, net of transaction costs		461,645			23,200
Net cash provided by (used in) investing activities		401,630			(42,709	)
Cash flows from financing activities:
Repayments of short-term borrowings		(4,439	)		(62,730	)
Repayments of long-term borrowings		(327,560	)		(48,854	)
Payment of debt issuance costs		—			(1,703	)
Dividends paid		(49	)		(5,235	)
Net cash used in financing activities		(332,048	)		(118,522	)
Effect of exchange rate changes on cash and cash equivalents		(5,760	)		(5,434	)
Change in cash and cash equivalents		1,182			(4,255	)
Beginning balance		162,014			28,044
Ending balance	$	163,196		$	23,789
Supplemental cash flows information
Cash paid during the year:
Interest	$	73,107		$	64,047
Income taxes		31,911			18,948

The accompanying notes are an integral part of the consolidated financial statements.

3

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

1.Description of the Company

JohnsonDiversey, Inc. (the “Company”) is a global marketer and manufacturer of commercial, industrial and institutional building maintenance and sanitation products.

The Company’s financial results include the discontinued operations of the Polymer Business segment, a global marketer and manufacturer of polymer intermediates, which was divested on June 30, 2006 (see Note 7).

2.Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary to present fairly the financial position of the Company as of September 29, 2006 and its results of operations for the three and nine month periods ended September 29, 2006 and cash flows for the nine month period ended September 29, 2006 have been included. The results of operations for the three and nine month periods ended September 29, 2006 are not necessarily indicative of the results to be expected for the full fiscal year. It is recommended that the accompanying consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 30, 2005.

The Company has accounted for the divestiture of the Polymer Business (see Note 7) as a discontinued operation, resulting in the reclassification of prior period amounts in the Company’s consolidated statements of operations and consolidated balance sheets.

Certain prior period amounts have been reclassified to conform with current period presentation. None of these reclassifications are considered material to the Company’s consolidated balance sheets, results of operations or cash flows.

Unless otherwise indicated, all monetary amounts, excluding share data, are stated in thousands.

3.New Accounting Standards

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payments” (“SFAS No. 123R”). SFAS No. 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS No. 123R, which is effective for the Company beginning in fiscal year 2006, is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statements of operations based on their fair values. Pro forma disclosure is no longer an alternative. The Company adopted the provisions of SFAS No. 123R using the modified prospective transition method and recorded additional compensation expense of $157 and $471 during the three month period and nine month period ended September 29, 2006, respectively.

In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is required to adopt FIN No. 48 beginning in fiscal year 2007 and is currently evaluating the impact that the adoption will have on its consolidated balance sheets, results of operations and cash flows.

4

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for the fiscal year beginning December 29, 2007. The Company is currently evaluating the impact of the provisions of FAS 157.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106, and 132 (R). SFAS No. 158 requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 also requires the measurement of defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions). Under SFAS No. 158, the Company will recognize the funded status of its defined benefit postretirement plans and provide required disclosures as of December 28, 2007. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position will be effective in fiscal year 2008. If the Company had adopted SFAS No. 158 at December 30, 2005, it would have recorded an increase in pension and post-retirement benefit liabilities and a decrease in accumulated other comprehensive income of approximately $112,000. However, this impact could change materially as of December 28, 2007, due to changes in the discount rates used to measure plan obligations, the actual returns on plan assets, and other factors.

4.Master Sales Agency Terminations

In connection with the May 2002 acquisition of the DiverseyLever business, the Company entered into a master sales agency agreement (the “Sales Agency Agreement”) with Unilever, whereby the Company acts as an exclusive sales agent in the sale of Unilever’s consumer brand products to various institutional and industrial end-users. At acquisition, the Company assigned an intangible value to the Sales Agency Agreement of $13,000.

An agency fee is paid by Unilever to the Company in exchange for its sales agency services. An additional fee is payable by Unilever to the Company in the event that conditions for full or partial termination of the Sales Agency Agreement are met. The Company elected, and Unilever agreed, to partially terminate the Sales Agency Agreement in several territories resulting in payment by Unilever to the Company of additional fees. In association with the partial terminations, the Company recognized sales agency fee income of $915 and $270 during the three months ended September 29, 2006 and September 30, 2005, respectively; and $990 and $7,439 during the nine months ended September 29, 2006 and September 30, 2005, respectively.

5.Lease Accounting Adjustment

In the first quarter of 2005, the Company identified inconsistencies in its accounting treatment for equipment leased to a European-based customer. Further analysis concluded that such leases should primarily be accounted for as sales-type capital leases rather than as operating leases. The cumulative impact of the correction was recorded by the Company in the three months ended April 1, 2005. The Company concluded that the impact of the accounting error was not significant to its current year, prior year and prior quarter consolidated financial position, results of operations or cash flows and, as such, does not require restatement of prior year amounts. Below is a summary of the adjustment with increases to key measures in the consolidated statements of operations for the nine months ended September 30, 2005:

Net sales	$	15,333
Gross profit		5,764
Operating profit		5,764
Net income		3,770

5

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

6.Acquisitions

In February 2006, the Company purchased the remaining 15% of the outstanding shares of Shanghai JohnsonDiversey, Ltd., the Company’s Chinese operating entity, for $3,516. The Company previously held 85% of the outstanding shares and included the holding in its consolidated financial results. Goodwill recorded with respect to the transaction was $2,572. The acquisition was accounted for under the purchase method of accounting in accordance with step acquisition rules. Operations from the acquisition are included in the Company’s financial statements from the date of acquisition.

In July 2006, the Company purchased an exclusive distribution license for certain cleaning technology used in a variety of business sectors for $4,150. The license is included as a component of other intangibles in the consolidated balance sheet and is being amortized over the expected useful life of the underlying technology.

7.Discontinued Operations-Polymer Business

On June 30, 2006, Johnson Polymer, LLC (“JP”) and JohnsonDiversey Holdings II B.V. (“Holdings II”), an indirectly owned subsidiary of the Company, completed the sale of substantially all of the assets of JP, certain of the equity interests in, or assets of certain JP subsidiaries and all of the equity interests owned by Holdings II in Johnson Polymer B.V. (collectively, the “Polymer Business”) to BASF Aktiengesellschaft (“BASF”) for approximately $470,000 plus an additional $8,119 in connection with the parties’ estimate of purchase price adjustments that will be based upon the closing net asset value of the Polymer Business. Further, BASF paid the Company $1,500 for the option to extend the tolling agreement (described below) by up to six months. In August 2006, the Company recorded an additional gain of $7,878 based on its preliminary assessment of closing net asset value. The Company and BASF are expected to finalize purchase price adjustments during the fourth quarter of 2006.

The Polymer Business develops, manufactures, and sells specialty polymers for use in the industrial print and packaging industry, industrial paint and coatings industry, and industrial plastics industry. The Polymer Business was a non-core asset of the Company and had been reported as a separate business segment. The sale resulted in a gain of approximately $356,034 ($231,746 after tax), net of related costs.

6

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

The following summarizes the carrying amount of assets and liabilities of the Polymer Business immediately preceding divestiture:

	June 30, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	3,837
Accounts receivable, less allowance of $616		63,317
Accounts receivable – related parties		738
Inventories		31,010
Deferred income taxes		71
Other current assets		5,084
Current assets of discontinued operations	$	104,057
Non current assets:
Property, plant and equipment, net	$	40,174
Goodwill, net		2,913
Other intangibles, net		245
Deferred income taxes		223
Other assets		3,712
Non current assets of discontinued operations	$	47,267
LIABILITIES
Current liabilities:
Accounts payable	$	25,217
Accounts payable – related parties		1,115
Accrued expenses		9,441
Current liabilities of discontinued operations	$	35,773
Non current liabilities:
Pension and other post-retirement benefits	$	435
Other liabilities		1,662
Non current liabilities of discontinued operations	$	2,097

Net sales from discontinued operations for the three and nine months ended September 29, 2006 and September 30, 2005 were as follows:

	Three Months Ended					Nine Months Ended
	September 29, 2006			September 30, 2005		September 29, 2006		September 30, 2005
Net sales	$	653	1	$	91,543	$	201,006	$	275,016

¹ Represents net sales related to the tolling agreement with BASF.

7

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

Income from discontinued operations for the three and nine months ended September 29, 2006 and September 30, 2005 were comprised of the following:

	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
Income from discontinued operations before taxes and gain from sale	$	—		$	9,942		$	22,679		$	27,900
Taxes on discontinued operations		—			(3,539	)		(7,510	)		(9,723	)
Gain on sale of discontinued operations before taxes		7,878			—			356,034			—
Taxes on gain from sale of discontinued operations		(1,579	)		—			(124,288	)		—
Income from tolling operations		653			—			653			—
Taxes on income from tolling operations		(257	)		—			(257	)		—
Income from discontinued operations	$	6,695		$	6,403		$	247,311		$	18,177

The Asset and Equity Purchase Agreement between JP, Holdings II and BASF refers to ancillary agreements governing certain relationships between the parties, including a Supply Agreement and Tolling Agreement, each of which is not considered material to the Company’s consolidated financial results.

Supply Agreement

A ten-year global agreement providing for the supply of polymer products to the Company by BASF. Unless either party provides notice of its intent not to renew at least three years prior to the expiration of the ten-year term, the term of the agreement will extend for an additional five years. The agreement requires that the Company purchase a specified percentage of related product from BASF during the term of agreement. Subject to certain adjustments, the Company has a minimum volume commitment during each of the first five years of the agreement.

The Polymer Business sold polymer product to the Company for $7,003 and $22,665 during the six months ended June 30, 2006 and twelve months ended December 30, 2005, respectively.

Tolling Agreement

A three-year agreement providing for the toll manufacture of polymer products by the Company, at its manufacturing facility in Sturtevant, Wisconsin, for BASF. The agreement may be extended six months by either party. The agreement specifies product pricing and provides BASF the right to purchase certain equipment retained by the Company.

In association with the Tolling Agreement, the Company agreed to pay $11,400 in compensation to S.C. Johnson and Son, Inc. (“SCJ”), a related party, primarily related to pre-payments and the right to extend terms on the lease agreement at the Sturtevant, Wisconsin manufacturing location. The Company is amortizing $9,200 of the payment into the results of the tolling operation over the term of the Tolling Agreement.

The Company considered its continuing involvement with the Polymer Business, including the Supply Agreement and Tolling Agreement, concluding that neither the related cash inflows nor cash outflows were direct, due to the relative insignificance of the continuing operations to the disposed business.

On May 1, 2006, in association with the divestiture of the Polymer Business, Commercial Markets Holdco, Inc. (“Holdco”), which is the parent of the Company’s direct parent, JohnsonDiversey Holdings, Inc. (“Holdings”), Marga B.V., a subsidiary of Unilever, and Holdings amended and restated the Stockholders’ Agreement dated as of May 3, 2002 among the parties (as amended and restated, the “Stockholders’ Agreement”). Holdco and Marga B.V. own 66 2/3% and 33 1/3%, respectively, of the outstanding shares of Holdings. Holdings owns 100% of the outstanding shares of the Company except for one share owned by SCJ. The amendment and restatement of the Stockholders’ Agreement included restatement of provisions relating to, among other things, share transfer restrictions, corporate governance, put and call options and rights of first offer and refusal and various other rights and obligations of the parties. In addition, the amendment and restatement adjusted the buyout formula relating to Marga B.V.’s shares in Holdings to require an incremental payment of $30,000, plus interest (payable from put execution date) at the time of Marga B.V.’s exit. The Stockholders’ Agreement also provides for the issuance of options to Marga B.V. for the purchase of Holdings shares at exit, which, following exercise, will result in the incremental payment to Marga B.V., by Holdco, of up to $40,000, plus interest.

8

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

8.Divestiture of the Whitmire Micro-Gen Business

In June 2004, the Company completed the sale of Whitmire Micro-Gen Research Laboratories, Inc. (“Whitmire”) to Sorex Holdings, Ltd., a European pest-control manufacturer headquartered in the United Kingdom, for $46,000 cash and the assumption of certain liabilities.

The purchase agreement provided for additional earn-out provisions based on future Whitmire net sales, for which the Company recorded $124 and $4,000 during the three month periods ended March 31, 2006 and April 1, 2005, respectively. The income is included as a component of income from discontinued operations in the consolidated statements of operations.

9.Accounts Receivable Securitization

The Company and certain of its subsidiaries entered into an agreement (the “Receivables Facility”) whereby they sell, on a continuous basis, certain trade receivables to JWPR Corporation (“JWPRC”), a wholly owned, consolidated, special purpose, bankruptcy-remote subsidiary of the Company. JWPRC was formed for the sole purpose of buying and selling receivables generated by the Company and certain of its subsidiaries party to the Receivables Facility. JWPRC, in turn, sells an undivided interest in the accounts receivable to nonconsolidated financial institutions (the “Conduits”) for an amount equal to the value of all eligible receivables (as defined under the receivables sale agreement between JWPRC and the Conduits) less the applicable reserve.

In March 2006, the Receivables Facility was amended and restated to add a second conduit purchaser to the program and to allow the repurchase of the receivables of JP.

In July 2006, the Receivables Facility was amended to allow one of the conduit purchasers to exit the program, to allow the repurchase of the receivables of JohnsonDiversey SpA (Italy), and to reduce the total potential for securitization of trade receivables from $150,000 to $75,000.

As of September 29, 2006 and December 30, 2005, the Conduits held $58,400 and $111,300, respectively, of accounts receivable that are not included in the accounts receivable balance reflected in the Company’s consolidated balance sheets.

As of September 29, 2006 and December 30, 2005, the Company had a retained interest of $81,467 and $149,197, respectively, in the receivables of JWPRC. The retained interest is included in the accounts receivable balance and is reflected in the consolidated balance sheets at estimated fair value.

10.Indebtedness and Credit Arrangements

In June 2006 the Company repaid $420,000 of its obligations under its term loan B facility with a majority of the $470,000 proceeds received from the divestiture of the Polymer Business (see Note 7). The aggregate principal amount of the facility at September 29, 2006 was $351,125.

11.Income Taxes

The Company reported an effective income tax rate of 22.7% on pre-tax loss from continuing operations for the nine month period ended September 29, 2006. The relatively low effective income tax rate on the pre-tax loss means that the Company was not able to claim full income tax benefit for the loss recognized in the nine month period, due largely to increased valuation allowances against tax loss carryforwards from international operations and increased valuation allowance against U.S. net deferred tax assets. The increase in the valuation allowance associated with the U.S. net deferred tax assets results from temporary differences.

9

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

The Company reported an effective income tax rate of 37.7% on pre-tax loss from continuing operations for the three month period ended September 29, 2006. The high effective income tax rate on pre-tax loss is favorable, and is primarily the result of the Company claiming income tax benefit for a portion of year-to-date pre-tax losses to offset the gain on the sale of the Polymer business. The income tax benefit for the three month period ended September 29, 2006 was partially offset by increased valuation allowances against tax loss carryforwards from international operations and increased valuation allowance against U.S. net deferred tax assets.

The existence of current period U.S. pre-tax losses from continuing operations, U.S. tax loss and tax credit carryforwards, and income from discontinued operations that is largely attributable to the U.S. will result in unique income tax results during the fiscal year ending December 29, 2006. A U.S. tax loss from continuing operations is projected for each quarter throughout 2006, while the U.S. income from discontinued operations will be reported in the nine months ended September 29, 2006. Under applicable tax accounting guidance, income tax benefit is claimed in continuing operations to the extent that current year U.S. tax losses and U.S. tax credits are used to offset the U.S. income from discontinued operations. However, the income tax benefit from continuing operations for the period ended September 29, 2006 is limited to the U.S. tax loss actually incurred, and the U.S. tax credits actually generated, through September 29, 2006.

The Company reported an effective income tax rate of 34.8% on pre-tax income from discontinued operations for the nine months ended September 29, 2006. The effective income tax rate was increased by local income taxes and a large permanent difference attributable to an excess of tax gain over book gain on sale of the Polymer business and decreased by a reduction in valuation allowance against U.S. tax losses and U.S. tax credits.

In accordance with the tax sharing agreement executed by the Company, the income tax provision for the Company has been calculated as if the entities included in the Company’s consolidated financial statements file an income tax return separately from their parent holding company, Holdings. The Company has recorded accrued income taxes at September 29, 2006, of which $26,599 represents a payable to Holdings under the tax sharing agreement.

12.Inventories

The components of inventories are summarized as follows:

	September 29, 2006		December 30, 2005
Raw materials and containers	$	61,621	$	57,295
Finished goods		214,439		197,130
Total inventories	$	276,060	$	254,425

Inventories are stated in the consolidated balance sheets net of allowance for excess and obsolete inventory of $31,901 and $25,216 on September 29, 2006 and December 30, 2005, respectively.

13.Restructuring Liabilities

November 2005 Restructuring Program

On November 7, 2005, the Company’s Board of Directors approved a restructuring program (“November 2005 Plan”), which is expected to take two to three years to implement, and includes a redesign of the Company’s organization structure, the closure of a number of manufacturing and other facilities and a workforce reduction of approximately 10%, in addition to previously planned divestitures. In addition to the divestiture of the Polymer Business, the Company is considering the potential divestiture of, or exit from, certain other non-core or underperforming businesses.

10

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

In connection with the November 2005 Plan, the Company recognized liabilities of $30,451 and $107,608 for the involuntary termination of 342 and 1,611 employees, and an additional $341 and $868 for other restructuring costs, during the three and nine months ended September 29, 2006, respectively.

The activities associated with the November 2005 Plan for nine months ended September 29, 2006 were as follows:

	Employee- Related
				Other			Total
Liability balances as of December 30, 2005	$	2,300		$	47		$	2,347
Liability recorded as restructuring expense		42,337			493			42,830
Cash paid1		(2,816	)		(134	)		(2,950	)
Liability balances as of March 31, 2006	$	41,821		$	406		$	42,227
Liability recorded as restructuring expense		34,820			34			34,854
Cash paid1		(15,643	)		(233	)		(15,876	)
Liability balances as of June 30, 2006	$	60,998		$	207		$	61,205
Liability recorded as restructuring expense		30,451			341			30,792
Cash paid1		(17,827	)		(138	)		(17,965	)
Liability balances as of September 29, 2006	$	73,622		$	410		$	74,032

¹ Cash paid includes the effects of foreign exchange.

In addition, and in connection with the November 2005 Plan, the Company recorded additional selling, general, and administrative costs of approximately $29,232 and $106,379, of which $1,028 and $26,926 related to tangible asset impairment, $5,139 and $25,702 related to intangible asset impairment, and $23,065 and $53,751 related to period costs associated with restructuring activities during the three and nine months ended September 29, 2006, respectively.

Exit and Acquisition-Related Restructuring Programs

In connection with the acquisition of the DiverseyLever business, the Company recorded liabilities for the involuntary termination of former DiverseyLever employees and other exit costs associated with former DiverseyLever facilities. The Company paid cash of $421 and $2,510 representing contractual obligations associated with involuntary terminations and lease payments on closed facilities during the three and nine months ended September 29, 2006. In addition, the Company reversed $209 of reserves in association with the revised assumptions, resulting in remaining restructuring reserves of $2,970 as of September 29, 2006.

14.Other (Income) Expense, Net

The components of other (income) expense, net in the consolidated statements of operations are as follows:

	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
Foreign currency translation (gain) loss	$	(1,824	)	$	(2,991	)	$	(10,454	)	$	20,464
Forward contracts (gain) loss		3,236			3,647			13,613			(19,736	)
Other, net		(112	)		(203	)		10			(285	)
	$	1,300		$	453		$	3,169		$	443

11

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

15.Defined Benefit Plans and Other Post-Employment Benefit Plans

The components of net periodic benefit costs for the Company’s defined benefit pension plans and other post-employment benefit plans for the three and nine months ended September 29, 2006 and September 30, 2005 are as follows:

	Defined Pension Benefits
	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
Service cost	$	7,667		$	8,091		$	24,555		$	24,359
Interest cost		8,707			8,459			26,802			25,378
Expected return on plan assets		(8,736	)		(7,858	)		(27,070	)		(23,573	)
Amortization of net loss		1,763			2,157			5,911			6,472
Amortization of transition obligation		60			63			180			188
Amortization of prior service credit		(167	)		(71	)		(489	)		(212	)
Curtailments and settlements		—			(2,054	)		(2,628	)		(2,440	)
Special termination benefits		—			183			—			183
Net periodic pension cost	$	9,294		$	8,970		$	27,261		$	30,355
	Other Post-Employment Benefits
	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
Service cost	$	538		$	839		$	1,958		$	2,516
Interest cost		1,309			1,224			3,945			3,673
Amortization of net loss		205			188			848			563
Amortization of transition obligation		—			72			—			215
Amortization of prior service cost		(47	)		12			(140	)		37
Curtailments and settlements		—			—			(492	)		—
Net periodic benefit cost	$	2,005		$	2,335		$	6,119		$	7,004

The Company made contributions to its defined benefit pension plans of $18,013 and $13,478 during the three months ended September 29, 2006 and September 30, 2005, respectively; and $40,848 and $28,634 during the nine months ended September 29, 2006 and September 30, 2005, respectively.

Effective January 1, 2006, a new healthcare system was introduced in the Netherlands. The new system requires that all residents and non-residents working in the Netherlands subscribe to private health insurance with an insurer of their choice, regardless of income level. In association with the new system, the Company and affected employees have negotiated a new collective bargaining agreement that discontinues the Company sponsored postretirement medical subsidy, resulting in a curtailment gain of $4,361 during the three month period ended March 31, 2006.

In April 2006, the Company’s Turkish and Danish subsidiaries curtailed and settled certain defined benefit plans resulting in a settlement gain of $2,332 and settlement loss of $1,473, respectively, during the three months ended June 30, 2006. The Company recorded associated net gains of $1,089 in selling, general and administrative expenses and net losses of $230 in cost of sales in the consolidated statement of operations.

In April 2006, the Company curtailed its participation in a defined benefit plan in the Netherlands sponsored by SCJ. The active participant plan obligations were settled in June 2006, resulting in a settlement gain of $2,814 during the three months ended June 30, 2006. The Company recorded a gain of $1,939 in selling, general and administrative expenses and a gain of $875 in discontinued operations in the consolidated statement of operations.

12

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

In April 2006, the Company curtailed or settled defined benefits and retiree welfare benefits to former North American Professional employees, resulting in related losses of $267 and gains of $199, respectively, during the three months ended June 30, 2006. The Company recorded the gains and losses, which are substantially associated with the Company’s exit from the laundry and ware washing business in the United States, in selling, general and administrative expenses in the consolidated statement of operations.

In June 2006, in association with the divestiture of the Polymer Business, the Company curtailed defined benefits and retiree welfare benefits to former North American Polymer employees, resulting in curtailment losses of $778 and $4,068, respectively, during the three months ended June 30, 2006. The losses are included as a component of discontinued operations in the consolidated statement of operations. Further, and in conjunction with divestiture of the Polymer Business, the Company remeasured its defined benefit plan obligations in North America and the Netherlands resulting in a $25,118 reduction of additional minimum pension liabilities, primarily as a result of an increase in discount rate assumptions.

16.Stock-Based Compensation

The Company has a long-term incentive plan (the “Plan”) that provides for the right to purchase stock of Commercial Markets Holdco, Inc. (“Holdco”), the parent of the Company’s direct parent, JohnsonDiversey Holdings, Inc. (“Holdings”), for certain members of senior management of the Company.

In December 2005, the Company and Holdco approved the cancellation of the Plan. In connection with this decision, Holdco commenced an offer to purchase all of its outstanding unrestricted class C common stock and options to purchase its class C common stock and class B common stock. Pursuant to the offer, holders of Holdco’s class C common stock who tendered shares in the offer received $139.25 in cash, without interest, for each share of class C common stock tendered. Holders of options received a cash payment as follows: (a) for options with an exercise price less than $139.25 per share, an amount equal to the difference between $139.25 and the exercise price for each share of class C common stock issuable upon exercise of the options and (b) for options with an exercise price equal to or greater than $139.25 per share, $8.00 for each share of class C common stock issuable upon exercise of the options. Holders of class B common stock received $83.30 for each share of class B common stock tendered. Those participants who chose not to accept the tender offer will continue to participate under existing Plan terms; however, the Company will not grant further awards under the Plan.

The Company recorded compensation expense of $137 and $240 related to restricted stock during the three months ended September 29, 2006 and September 30, 2005; and $225 and $761 related to restricted stock during the nine months ended September 29, 2006 and September 30, 2005, respectively.

Prior to January 1, 2006, the Company accounted for stock compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees,” and related Interpretations, as permitted by Financial Accounting Standards Board (FASB) Statement No. 123 (SFAS 123), “Accounting for Stock-Based Compensation.” No stock-based employee compensation cost was recognized for stock option awards in the Consolidated Statements of Operations for the periods prior to January 1, 2006 as all options granted under those plans had an exercise price equal to the market value of the underlying Common Stock on the date of grant. The pro forma impact of compensation expense if the Company had used the fair-value method of accounting to measure compensation expense would have decreased net income by approximately $4,403 for the three months ended September 30, 2005 and $13,562 for the nine months ended September 30, 2005.

13

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

17.Comprehensive Income (Loss)

Comprehensive income (loss) for the three and nine month periods ended September 29, 2006 and September 30, 2005 was as follows:

	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006		September 30, 2005
Net income (loss)	$	(16,115	)	$	8,425		$	102,681	$	5,724
Foreign currency translation adjustments		6,660			6,669			40,459		(78,732	)
Adjustments to minimum pension liability, net of tax		—			(158	)		22,939		(3,167	)
Unrealized gains (losses) on derivatives, net of tax		(548	)		1,294			874		10,279
Total comprehensive income (loss)	$	(10,003	)	$	16,230		$	166,953	$	(65,896	)

18.Commitments and Contingencies

The Company is subject to various legal actions and proceedings in the normal course of business. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, the Company does not believe the final outcome of any current litigation will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

The Company has purchase commitments for materials, supplies, and property, plant and equipment entered into in the ordinary course of business. In the aggregate, such commitments are not in excess of current market prices. Additionally, the Company normally commits to some level of marketing related expenditures that extend beyond the fiscal period. These marketing expenses are necessary in order to maintain a normal course of business and the risk associated with them is limited. It is not expected that these commitments will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

The Company maintains environmental reserves for remediation, monitoring and related expenses at one of its domestic facilities. While the ultimate exposure to further remediation expense at this site continues to be evaluated, the Company does not anticipate a material effect on its consolidated financial position or results of operations.

In connection with the acquisition of the DiverseyLever business, the Company conducted environmental assessments and investigations at DiverseyLever facilities in various countries. These investigations disclosed the likelihood of soil and/or groundwater contamination, or potential environmental regulatory matters. An estimate of costs has been made and maintained based on the expected extent of contamination and the expected likelihood of recovery for some of these costs from Unilever under the purchase agreement for the acquisition.

In connection with the acquisition of the DiverseyLever business, Holdings entered into a Stockholders’ Agreement with its stockholders, Holdco and Marga B.V., as amended and restated in May 2006. The Stockholders’ Agreement relates to, among other things:

• restrictions on the transfer of Holdings’ shares held by the stockholders;

• Holdings’ corporate governance, including board and committee representation and stockholder approval provisions;

• the put and call options and rights of first offer and refusal with respect to shares held by Marga B.V.;

• certain payments to Marga B.V. as described below; and

• various other rights and obligations of Holdings and its stockholders, such as provisions relating to delivery of and access to financial and other information, payment of dividends and indemnification of directors, officers and stockholders.

Marga B.V.’s obligations under the Stockholders’ Agreement are guaranteed by Unilever N.V.

Put and Call Options. Under the Stockholders’ Agreement, at any time after May 3, 2008, Unilever has the right to require Holdings to purchase the shares then beneficially owned by Unilever. Holdings has the option to

14

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

purchase the shares beneficially owned by Unilever at any time after May 3, 2010. Any exercise by Holdings of its call option must be for at least 50% of the shares beneficially owned by Unilever. Any exercise by Unilever of its put option must be for all of its shares.

Before May 3, 2010, Holdings’ obligations in connection with a put by Unilever are conditioned on a refinancing of the Company’s and Holdings’ indebtedness, including indebtedness under the Company’s senior subordinated notes and the Company’s senior secured credit facilities. In connection with the put, Holdings must use its reasonable best efforts prior to May 3, 2009, and its best efforts after that date, to consummate a refinancing and may be required to purchase less than all of the shares subject to the put under some circumstances. If Holdings purchases less than all of the shares subject to a put, Unilever may again put its remaining shares after a specified suspension period.

Following the exercise by Unilever of its put rights, if Holdings fails to purchase all of Unilever’s shares for cash by May 3, 2010, it must issue a promissory note to Unilever in exchange for the remaining shares. The maturity date of the promissory note will be either 90 days or one year after its issuance, depending on the level of Unilever’s ownership interest in Holdings at that time. The terms of the promissory note will provide Unilever with rights similar to its rights as a stockholder under the Stockholders’ Agreement, including board representation, veto and access and informational rights. The promissory note will contain various subordination provisions in relation to the Company’s and Holdings’ indebtedness.

If, after May 3, 2010, Unilever has not been paid cash with respect to its put option, Unilever may also:

• require Holdings to privately sell Unilever’s shares or other shares of Holdings’ capital stock to a third party; and

• require Holdings to sell its Japan businesses or any other business or businesses that may be identified for sale by a special committee of Holdings’ board of directors. The special committee is required to identify such other business or businesses after May 3, 2009 and prior to May 3, 2010 and to engage an investment banking firm to assist it with such identification and evaluation.

The exercise of these remedies, other than sales of Unilever’s shares, is subject to compliance with the agreements relating to the Company’s and Holdings’ indebtedness.

The price for Holdings’ shares subject to a put or call option will be based on Holdings’ enterprise value at the time the relevant option is exercised, plus its cash and minus its indebtedness. Holdings’ enterprise value cannot be less than eight times the EBITDA of Holdings and its subsidiaries, on a consolidated basis, for the preceding four fiscal quarters, as calculated in accordance with the terms of the Stockholders’ Agreement. If Holdings, Unilever and their respective financial advisors cannot agree on an enterprise value, the issue will be submitted to an independent third-party for determination.

If Holdings purchases less than all of the shares beneficially owned by Unilever in connection with the exercise of the put or call option, Unilever may elect to fix the price for its remaining shares not purchased. If Unilever does not elect to fix the price, the price will float and a new price will be determined based on the enterprise value the next time a put or call option is exercised.

Contingent Payments. Under the Stockholders’ Agreement, Holdings may be required to make payments to Unilever in each year from 2007 through 2010 so long as Unilever continues to beneficially own 5% or more of Holdings’ outstanding shares. The amount of each payment will be equal to 25% of the amount by which the cumulative cash flows of Holdings and its subsidiaries, on a consolidated basis, for the period from May 3, 2002, through the end of the fiscal year preceding the payment (not including any cash flow with respect to which Unilever received a payment in a prior year), exceeds:

• $727,000 in 2006;

15

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

• $975,000 in 2007;

• $1,200,000 in 2008; and

• $1,425,000 in 2009.

The aggregate amount of all these payments cannot exceed $100,000. Payment of these amounts is subject to compliance with the agreements relating to Holdings and the Company’s senior indebtedness including, without limitation, the senior discount notes of Holdings, the Company’s senior subordinated notes and the Company’s senior secured credit facilities.

Transfer of Shares. Under the Stockholders’ Agreement, a stockholder controlled by Unilever may transfer its shares of Holdings to another entity of which Unilever owns at least an 80% interest, and a stockholder controlled by Holdco may transfer its shares of Holdings to another entity of which Holdco owns at least an 80% interest.

In addition, at any time after May 3, 2007, Unilever may sell all, but not less than all, of its shares of Holdings to no more than one person (an “Early Sale”), subject to certain restrictions, including, but not limited to, the requirement that all consents and approvals are obtained, the sale not violating or resulting in the termination of the Company’s license agreement with SCJ and the sale not constituting a change of control under the Company’s senior secured credit facilities. Further, the purchaser of Holdings’ shares from Unilever cannot be a competitor of SCJ and must be approved by Holdco, which approval cannot be unreasonably withheld or delayed. If Unilever sells its shares of Holdings to a third party, that third party would be entitled to the same rights and be subject to the same obligations applicable to Unilever under the Stockholders’ Agreement.

From May 3, 2007 through May 3, 2008, prior to commencing an Early Sale, Unilever must notify Holdings of its intention to sell its shares and Holdings has the right of first offer to purchase the shares beneficially owned by Unilever at the price and on the terms specified by Unilever. If Holdings does not elect to purchase the shares, Unilever may commence an Early Sale. Prior to completing that sale, however, Unilever must again offer the shares to Holdings, and Holdings has a right of first refusal to purchase the shares. The price for the shares under Holdings’ right of first refusal would be the price at which the shares are offered to the third-party purchaser plus a premium equal to 3% of that third-party price, with a maximum aggregate premium of $15 million and a minimum aggregate premium of $10 million. The maximum and minimum limitations applicable to the premium are prorated to the extent that Holdings had previously purchased shares held by Unilever. The premium would be paid by Holdco. Notwithstanding the foregoing, if Unilever has not notified Holdings of its intention to sell its shares pursuant to an Early Sale prior to May 3, 2008, Unilever would be required to first exercise its put option prior to selling its shares to a third party as described in this paragraph.

Purchase of Additional Shares from Holdco. Under the Stockholders’ Agreement, on the earlier of May 3, 2010 and the date on which Unilever sells all of its shares of Holdings to Holdings or a third party in accordance with the terms of the Stockholders’ Agreement, Unilever will have the right to buy from Holdco that number of class A common shares of Holdings (the “Additional Shares”) equal to the lesser of (i) 1.5% of the total outstanding shares of Holdings and (ii) the largest whole number of class A common shares, the aggregate value (as determined pursuant to the Stockholders’ Agreement) of which does not exceed $40 million. The purchase price to be paid by Unilever to Holdco for such Additional Shares would be $.01 per share. Unilever may then require the immediate repurchase by Holdco of the Additional Shares at a price determined in accordance with the Stockholders’ Agreement. The obligations to transfer the Additional Shares and repurchase those shares are obligations solely of Holdco.

16

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

19.Segment Information

Business segment information is summarized as follows:

	Three Months Ended September 29, 2006
	Professional			Polymer Discontinued		Eliminations/ Other			Total Company
Net sales	$	739,471		$	653	$	—		$	740,124
Operating profit (loss)		(12,758	)		653		—			(12,105	)
Depreciation and amortization		37,887			441		—			38,328
Interest expense		26,735			—		—			26,735
Interest income		3,064			—		—			3,064
Total assets		3,259,584			18,303		—			3,277,887
Goodwill, net		1,175,926			—		—			1,175,926
Capital expenditures, including capitalized computer software		22,719			296		—			23,015
	Three Months Ended September 30, 2005
	Professional			Polymer Discontinued		Eliminations/ Other			Total Company
Net sales	$	742,850		$	91,543	$	(5,386	)	$	829,007
Operating profit		39,216			10,053		—			49,269
Depreciation and amortization		39,835			2,420		—			42,255
Interest expense		30,551			106		(896	)		29,761
Interest income		2,185			914		(896	)		2,203
Total assets		3,300,897			226,657		(169,968	)		3,357,586
Goodwill, net		1,154,799			2,054		—			1,156,853
Capital expenditures, including capitalized computer software		21,242			1,643		—			22,885
	Nine Months Ended September 29, 2006
	Professional			Polymer Discontinued		Eliminations/ Other			Total Company
Net sales	$	2,188,223		$	201,006	$	(11,968	)	$	2,377,261
Operating profit (loss)		(102,174	)		370,524		—			268,350
Depreciation and amortization		156,959			3,156		—			160,115
Interest expense		93,926			398		(2,978	)		91,346
Interest income		9,622			3,049		(2,978	)		9,693
Total assets		3,259,584			18,303		—			3,277,887
Goodwill, net		1,175,926			—		—			1,175,926
Capital expenditures, including capitalized computer software		61,287			1,707		—			62,994
	Nine Months Ended September 30, 2005
	Professional			Polymer Discontinued		Eliminations/ Other			Total Company
Net sales	$	2,235,471		$	275,016	$	(17,307	)	$	2,493,180
Operating profit		91,351			28,443		—			119,794
Depreciation and amortization		130,178			7,435		—			137,613
Interest expense		105,981			438		(2,227	)		104,192
Interest income		6,256			2,286		(2,227	)		6,315
Total assets		3,300,897			226,657		(169,698	)		3,357,856
Goodwill, net		1,154,799			2,054		—			1,156,853
Capital expenditures, including capitalized computer software		61,064			3,502		—			64,566

17

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

20.Subsidiary Guarantors of Senior Subordinated Notes

The Company’s senior subordinated notes are guaranteed by certain of its wholly-owned subsidiaries. Such guarantees are full and unconditional, to the extent allowed by law, and joint and several. The following supplemental information sets forth, on an unconsolidated basis, statement of income, balance sheet and statement of cash flows information for the Company, for the guarantor subsidiaries and for the Company’s non-guarantor subsidiaries, each of which were determined on a combined basis with the exception of eliminating investments in combined subsidiaries and certain reclassifications, which are eliminated at the consolidated level.

Consolidating condensed statements of operations for the three months ended September 29, 2006:

	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net product and service sales	$	165,436		$	20,776		$	556,256		$	(25,060	)	$	717,408
Sales agency fee income		1,057			1			21,005			—			22,063
		166,493			20,777			577,261			(25,060	)		739,471
Cost of sales		101,491			11,444			338,703			(25,124	)		426,514
Gross profit		65,002			9,333			238,558			64			312,957
Selling, general and administrative expenses		85,642			8,762			185,117			—			279,521
Research and development expenses		8,342			—			7,060			—			15,402
Restructuring expense		172			—			30,620			—			30,792
Operating profit (loss)		(29,154	)		571			15,761			64			(12,758	)
Other expense (income):
Interest expense		32,254			71			18,650			(24,240	)		26,735
Interest income		(10,881	)		(14,649	)		(1,774	)		24,240			(3,064	)
Other (income) expense, net		(15,569	)		(7,983	)		(27,328	)		52,180			1,300
Income (loss) before taxes		(34,958	)		23,132			26,213			(52,116	)		(37,729	)
Income tax (benefit) provision		(18,447	)		4,665			(439	)		—			(14,221	)
Income (loss) before minority interests		(16,511	)		18,467			26,652			(52,116	)		(23,508	)
Minority interests in net income of subsidiaries		—			—			20			—			20
Income (loss) from continuing operations		(16,511	)		18,467			26,632			(52,116	)		(23,528	)
Income from discontinued operations, net of income taxes		396			4,454			2,563			—			7,413
Net income (loss)	$	(16,115	)	$	22,921		$	29,195		$	(52,116	)	$	(16,115	)

Consolidating condensed statements of operations for the three months ended September 30, 2005:

	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net product and service sales	$	210,046		$	3,404		$	537,683		$	(30,390	)	$	720,743
Sales agency fee income		1,004			6			21,097			—			22,107
		211,050			3,410			558,780			(30,390	)		742,850
Cost of sales		129,068			557			322,018			(30,428	)		421,215
Gross profit		81,982			2,853			236,762			38			321,635
Selling, general and administrative expenses		100,031			49			164,171			(1	)		264,250
Research and development expenses		8,739			—			5,131			—			13,870
Restructuring expense		1,267			—			3,032			—			4,299
Operating profit (loss)		(28,055	)		2,804			64,428			39			39,216
Other expense (income):
Interest expense		34,223			203			21,389			(26,160	)		29,655
Interest income		(10,109	)		(16,807	)		(1,429	)		26,160			(2,185	)
Other (income) expense, net		(48,317	)		3,969			918			43,883			453
Income (loss) before taxes		(3,852	)		15,439			43,550			(43,844	)		11,293
Income tax (benefit) provision		(12,277	)		2,899			19,088			—			9,710
Income (loss) before minority interests		8,425			12,540			24,462			(43,844	)		1,583
Minority interests in net income of subsidiaries		—			—			13			—			13
Income (loss) from continuing operations		8,425			12,540			24,449			(43,844	)		1,570
Income from discontinued operations, net of income taxes		—			3,279			3,576			—			6,855
Net income (loss)	$	8,425		$	15,819		$	28,025		$	(43,844	)	$	8,425

18

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

Consolidating condensed statements of operations for the Nine months ended September 29, 2006:

	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net product and service sales	$	515,717		$	68,347		$	1,625,693		$	(87,211	)	$	2,122,546
Sales agency fee income		3,187			8			62,482			—			65,677
		518,904			68,355			1,688,175			(87,211	)		2,188,223
Cost of sales		321,190			42,283			987,801			(87,832	)		1,263,442
Gross profit		197,714			26,072			700,374			621			924,781
Selling, general and administrative expenses		307,786			11,019			554,930			—			873,735
Research and development expenses		23,765			—			20,979			—			44,744
Restructuring expense		38,813			—			69,663			—			108,476
Operating profit (loss)		(172,650	)		15,053			54,802			621			(102,174	)
Other expense (income):
Interest expense		112,960			204			56,404			(75,642	)		93,926
Interest income		(31,862	)		(47,320	)		(6,082	)		75,642			(9,622	)
Other (income) expense, net		(289,071	)		(8,017	)		(41,935	)		342,192			3,169
Income (loss) before taxes		35,323			70,186			46,415			(341,571	)		(189,647	)
Income tax (benefit) provision		(66,962	)		14,866			8,991			—			(43,105	)
Income (loss) before minority interests		102,285			55,320			37,424			(341,571	)		(146,542	)
Minority interests in net income (loss) of subsidiaries		—			—			25			—			25
Income (loss) from continuing operations		102,285			55,320			37,399			(341,571	)		(146,567	)
Income from discontinued operations, net of income taxes		396			169,418			79,434			—			249,248
Net income (loss)	$	102,681		$	224,738		$	116,833		$	(341,571	)	$	102,681

Consolidating condensed statements of operations for the Nine months ended September 30, 2005:

	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net product and service sales	$	533,425		$	70,755		$	1,650,912		$	(93,541	)	$	2,161,551
Sales agency fee income		3,268			32			70,620			—			73,920
		536,693			70,787			1,721,532			(93,541	)		2,235,471
Cost of sales		318,724			47,137			997,150			(93,062	)		1,269,949
Gross profit		217,969			23,650			724,382			(479	)		965,522
Selling, general and administrative expenses		267,109			10,635			541,716			—			819,460
Research and development expenses		25,985			—			16,320			—			42,305
Restructuring expense		5,822			—			6,584			—			12,406
Operating profit (loss)		(80,947	)		13,015			159,762			(479	)		91,351
Other expense (income):
Interest expense		94,485			387			83,542			(74,660	)		103,754
Interest income		(28,780	)		(47,435	)		(4,702	)		74,660			(6,257	)
Other (income) expense, net		(113,591	)		414			(4,049	)		117,669			443
Income (loss) before taxes		(33,061	)		59,649			84,971			(118,148	)		(6,589	)
Income tax (benefit) provision		(38,785	)		10,064			40,060			—			11,339
Income (loss) before minority interests		5,724			49,585			44,911			(118,148	)		(17,928	)
Minority interests in net income (loss) of subsidiaries		—			—			(57	)		—			(57	)
Income (loss) from continuing operations		5,724			49,585			44,968			(118,148	)		(17,871	)
Income from discontinued operations, net of income taxes		—			14,615			8,980			—			23,595
Net income (loss)	$	5,724		$	64,200		$	53,948		$	(118,148	)	$	5,724

19

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

Condensed consolidating balance sheet at September 29, 2006:

	Parent Company		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	91,071	$	860	$	71,265	$	—		$	163,196
Accounts receivable		7,426		3,554		534,930		—			545,910
Intercompany receivables		—		705,455		—		(705,455	)		—
Inventories		52,711		8,559		214,893		(103	)		276,060
Other current assets		11,361		12,208		138,691		(176	)		162,084
Current assets of discontinued operations		3,996		—		—		—			3,996
Total current assets		166,565		730,636		959,779		(705,734	)		1,151,246
Property, plant and equipment, net		97,395		1,935		319,146		(6,163	)		412,313
Capitalized software, net		60,842		673		6,917		—			68,432
Goodwill and other intangibles, net		154,077		148,002		1,177,631		10,287			1,489,997
Deferred income taxes		—		—		—		—			—
Intercompany advances		468,614		391,762		26,014		(886,390	)		—
Other assets		103,836		829		37,289		(362	)		141,592
Investments in subsidiaries		1,741,378		32,536		—		(1,773,914	)		—
Noncurrent assets of discontinued operations		14,307		—		—		—			14,307
Total assets	$	2,807,014	$	1,306,373	$	2,526,776	$	(3,362,276	)	$	3,277,887
Liabilities and stockholders’ equity
Current liabilities:
Short-term borrowings	$	—	$	—	$	40,284	$	—		$	40,284
Current portion of long-term debt		8,250		—		2,122		—			10,372
Accounts payable		74,968		2,260		308,069		—			385,297
Intercompany payables		567,004		—		139,071		(706,075	)		—
Accrued expenses		91,185		152,904		283,152		6,014			533,255
Current liabilities of discontinued operations		1,633		—		—		—			1,633
Total current liabilities		743,040		155,164		772,698		(700,061	)		970,841
Intercompany note payable		37,213		171,487		677,690		(886,390	)		—
Long-term borrowings		1,028,738		—		16,973		—			1,045,711
Other liabilities		99,985		43,388		219,962		(38	)		363,297
Noncurrent liabilities of discontinued operations		1,862		—		—		—			1,862
Total liabilities		1,910,838		370,039		1,687,323		(1,586,489	)		2,381,711
Stockholders’ equity		896,176		936,334		839,453		(1,775,787	)		896,176
Total liabilities and equity	$	2,807,014	$	1,306,373	$	2,526,776	$	(3,362,276	)	$	3,277,887

20

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

Condensed consolidating balance sheet at December 30, 2005:

	Parent Company		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	105,614	$	325	$	52,265	$	—		$	158,204
Accounts receivable		12,524		2,916		492,350		—			507,790
Intercompany receivables		261,634		433,866		—		(695,500	)		—
Inventories		61,318		8,236		185,015		(144	)		254,425
Other current assets		13,224		4,649		112,108		—			129,981
Current assets of discontinued operations		—		15,026		49,737		—			64,763
Total current assets		454,314		465,018		891,475		(695,644	)		1,115,163
Property, plant and equipment, net		119,920		10,590		316,987		(6,743	)		440,754
Capitalized software, net		81,570		1,115		8,311		—			90,996
Goodwill and other intangibles, net		182,264		148,014		1,130,919		7,714			1,468,911
Intercompany advances		414,956		390,669		—		(805,625	)		—
Other assets		107,543		1,148		38,336		(296	)		146,731
Investments in subsidiaries		1,542,879		64,079		—		(1,606,958	)		—
Noncurrent assets of discontinued operations		—		17,486		28,852		—			46,338
Total assets	$	2,903,446	$	1,098,119	$	2,414,880	$	(3,107,552	)	$	3,308,893
Liabilities and stockholders’ equity
Current liabilities:
Short-term borrowings	$	—	$	39	$	43,380	$	—		$	43,419
Current portion of long-term debt		7,750		—		4,248		—			11,998
Accounts payable		77,138		2,394		294,555		—			374,087
Intercompany payables		510,304		7,423		177,769		(695,496	)		—
Accrued expenses		122,319		20,377		223,760		(1,017	)		365,439
Current liabilities of discontinued operations		—		11,020		22,986		—			34,006
Total current liabilities		717,511		41,253		766,698		(696,513	)		828,949
Intercompany note payable		—		171,487		634,138		(805,625	)		—
Long-term borrowings		1,333,853		—		16,992		—			1,350,845
Other liabilities		123,904		41,253		228,660		1,281			395,098
Noncurrent liabilities of discontinued operations		—		254		5,569		—			5,823
Total liabilities		2,175,268		254,247		1,652,057		(1,500,857	)		2,580,715
Stockholders’ equity		728,178		843,872		762,823		(1,606,695	)		728,178
Total liabilities and equity	$	2,903,446	$	1,098,119	$	2,414,880	$	(3,107,552	)	$	3,308,893

21

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

Condensed consolidating statement of cash flows for the nine months ended September 29, 2006:

	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net cash provided by (used in) operating activities	$	293,928		$	(230,453	)	$	34,317		$	(160,432	)	$	(62,640	)
Cash flows from investing activities:
Capital expenditures, net		(21,086	)		9,053			(37,431	)		—			(49,464	)
Acquisitions of businesses		21,902			32,921			(3,810	)		(61,564	)		(10,551	)
Proceeds from divestitures		769			360,670			100,206			—			461,645
Net cash provided by (used in) investing activities		1,585			402,644			58,965			(61,564	)		401,630
Cash flows from financing activities:
Proceeds from (repayments of) short-term borrowings		(19,862	)		(39	)		(46,786	)		62,248			(4,439	)
Proceeds from (repayments of) long-term borrowings		(129,374	)		—			39,864			(238,050	)		(327,560	)
Proceeds from (repayments of) additional paid in capital		(178,764	)		(44,734	)		(14,744	)		238,242			—
Payment of debt issuance costs		—			—			—			—			—
Dividends paid		—			(112,106	)		(47,499	)		159,556			(49	)
Net cash provided by (used in) financing activities		(328,000	)		(156,879	)		(69,165	)		221,996			(332,048	)
Effect of exchange rate changes on cash and cash equivalents		17,943			(15,689	)		(8,014	)		—			(5,760	)
Change in cash and cash equivalents		(14,544	)		(377	)		16,103			—			1,182
Beginning balance		105,614			1,238			55,162			—			162,014
Ending balance	$	91,070		$	861		$	71,265		$	—		$	163,196

Condensed consolidating statement of cash flows for the nine months ended September 30, 2005:

	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net cash provided by (used in) operating activities	$	(103,024	)	$	100,439		$	159,852		$	5,143		$	162,410
Cash flows from investing activities:
Capital expenditures, net		(24,723	)		(2,093	)		(34,871	)		—			(61,687	)
Acquisitions of businesses		23,553			19,582			(16,704	)		(30,653	)		(4,222	)
Proceeds from divestitures		985			4,000			18,215			—			23,200
Net cash provided by (used in) investing activities		(185	)		21,489			(33,360	)		(30,653	)		(42,709	)
Cash flows from financing activities:
Proceeds from (repayments of) short-term borrowings		(7,166	)		(3,000	)		136,216			(188,780	)		(62,730	)
Proceeds from (repayments of) long-term borrowings		196,322			3,000			(325,013	)		76,837			(48,854	)
Proceeds from (repayments of) additional paid in capital		(48,820	)		(35,932	)		11,223			73,529			—
Payment of debt issuance costs		(1,466	)		—			(237	)		—			(1,703	)
Dividends paid		(5,238	)		(40,563	)		(23,358	)		63,924			(5,235	)
Net cash provided by (used in) financing activities		133,632			(76,495	)		(201,169	)		25,510			(118,522	)
Effect of exchange rate changes on cash and cash equivalents		(28,978	)		(45,043	)		68,587						(5,434	)
Change in cash and cash equivalents		1,445			390			(6,090	)		—			(4,255	)
Beginning balance		991			465			26,588						28,044
Ending balance	$	2,436		$	855		$	20,498		$	—		$	23,789

21.Subsequent Events

Discontinued Operations – Chemical Methods Associates

On September 30, 2006, in connection with its November 2005 Restructuring Program, the Company sold its equity interest in Chemical Methods Associates (“CMA”) to Ali SpA, an Italian based manufacturer of equipment for the food service industry, for $17,000. The purchase price is subject to various post-closing adjustments, principally with regard to changes in working capital. As of the divestiture date, CMA net assets totaled approximately $5,900.

Effective with the third quarter of 2006, CMA, which was included in the Company’s Professional Business segment, has been classified as a discontinued operation and, as such, the Company has made the required changes to the consolidated statement of operations for the three and nine month periods ended September 29, 2006 and restated the prior periods. Due to the immaterial impact of the divestiture on the consolidated balance sheet and consolidated statement of cash flows, no adjustments or restatements for discontinued operations have been made for the periods presented.

22

JOHNSONDIVERSEY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2006

(unaudited)

Net sales from discontinued operations for three and nine month periods ended September 29, 2006 and September 30, 2005 are as follows:

	Three Months Ended				Nine Months Ended
	September 29, 2006		September 30, 2005		September 29, 2006		September 30, 2005
Net sales	$	5,683	$	4,525	$	16,905	$	14,266

Income from discontinued operations for the three and nine month periods ended September 29, 2006 and September 30, 2005 is comprised of the following:

	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
Income from discontinued operations before taxes and gain from sale	$	1,046		$	697		$	2,825		$	2,181
Taxes on discontinued operations		(328	)		(245	)		(1,012	)		(763	)
Income from discontinued operations	$	718		$	452		$	1,813		$	1,418

Divestiture – Auto-Chlor Branch Operation

On October 11, 2006, in conjunction with its November 2005 Restructuring Program, the Company signed an agreement to divest of its Auto-Chlor branch operation in the southern United States, a business that markets and sells low-energy dishwashing systems, kitchen chemicals, laundry and housekeeping products and services to foodservice, lodging, healthcare, and institutional customers, for $9,000. The purchase price is subject to various post-closing adjustments. The Company expects to close the transaction during the quarter ending December 29, 2006.

On September 28, 2006, the Company determined that its investment in the divested business met held for sale criteria under SFAS No. 144. In conjunction with its assessment, the Company recorded an impairment charge of $5,139 on certain amortizable intangible assets. The charge is included within restructuring expenses in the consolidated statement of operations (see Note 13). The divested assets and liabilities of the business are not considered material to the Company, and are included in the Company’s Professional Business segment.

Japanese Merger

On November 1, 2006, three wholly-owned Japanese subsidiaries of the Company, JohnsonDiversey Co., Ltd., Johnson Professional Co., Ltd. and TeepolDiversey Co., Ltd., were merged to form one legal entity. As a result of the legal entity merger, and based on projections of future income of the merged Japanese entity, the Company has determined that existing tax loss carryforwards of TeepolDiversey Co., Ltd. are expected to be fully utilized within the statutory tax loss carryforward period. The Company expects to reverse a valuation allowance against deferred tax assets of $10,200 related to the TeepolDiversey Co., Ltd. tax loss carryforwards during the fourth quarter ending December 29, 2006.

23

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

Executive Overview

Except where noted, the management discussion and analysis below reflect the results of continuing operations excluding the divestiture of the Polymer Business (as defined below) and the CMA business, as discussed in Notes 7 and 21, respectively, to the Consolidated Financial Statements.

We are a leading global marketer and manufacturer of cleaning, hygiene and appearance products, equipment and related services for the institutional and industrial cleaning and sanitation market. We sell our products in more than 140 countries through our direct sales force, wholesalers and third-party distributors. Our sales are balanced geographically, with our principal markets being Europe, North America and Japan.

In the three and nine months ended September 29, 2006, net sales decreased by $3.4 million and $47.2 million respectively, from the same periods in the prior year. As indicated in the following table, excluding the impact of foreign currency exchange rates and acquisitions and divestitures, our net sales were relatively flat for the three months and nine months ended September 29, 2006, compared to the same periods in the prior year.

	Three Months Ended					Change		Nine Months Ended					Change
(dollars in thousands)	September 29, 2006		September 30, 2005					September 29, 2006		September 30, 2005
Net sales	$	739,471	$	742,850		-0.5	%	$	2,188,223	$	2,235,471		-2.1	%
Variance due to:
Foreign currency exchange		—		10,129					—		(25,317	)
Acquisitions and divestitures		—		(11,473	)				—		(34,047	)
		—		(1,344	)				—		(59,364	)
	$	739,471	$	741,506		-0.3	%	$	2,188,223	$	2,176,107		0.6	%

Net sales in the three months ended September 29, 2006 was impacted by our decision to withdraw from a majority of the service-oriented laundry and ware washing business in the United States, which we announced in March 2006. Excluding the laundry and ware washing business in the United States; partial termination fees related to our Master Sales Agency Agreement with Unilever, which increased sales in the nine months ended September 30, 2005 by $6.7 million; and the impact of a correction in the accounting treatment for certain equipment leases, which increased net sales by $15.3 million in the nine months ended September 30, 2005, the equivalent growth rates were 2.8% and 3.6% for the third quarter and first nine months of 2006, respectively. Our core business in North America continues to perform well and outside the United States we continue to show net sales growth, primarily due to price increases taking hold in all business sectors and global geographic areas and the expansion of developing markets in Asia Pacific, Latin America, Central and Eastern Europe, Africa and the Middle East.

Our gross profit percentage declined 80 basis points for the third quarter of 2006 compared to the second quarter of 2006, primarily due to mix effect, but has improved over the fourth quarter of fiscal year 2005 and the first semester of fiscal year 2006 primarily due to the aforementioned price increases taking hold. Our gross profit percentage declined 100 basis points compared to the third quarter of 2005, as pricing actions taken in 2005 and in the first half of 2006 have not yet fully recovered the unprecedented increases in key raw material costs and transportation costs. Our gross profit percentages for the five most recent fiscal quarters are set forth below:

Three Months Ended
September 29, 2006		June 30, 2006		March 31, 2006		December 30, 2005		September 30, 2005
42.3	%	43.1	%	41.1	%	40.8	%	43.3	%

In November 2005, in response to the structural changes in the raw material markets that have given rise to the significant increases in our input costs, we announced a program (“November 2005 Plan”) to implement an operational restructuring of our Company. The program also considers the potential divestiture of, or exit from, certain non-core or underperforming businesses.

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In March 2006, as part of our November 2005 Plan, we announced our intention to withdraw from a majority of the underperforming, service-oriented laundry and ware washing business in the United States. As a result of this decision, the Company severed approximately 500 employees in the nine months of 2006. In connection with this decision, we also announced the closure of our manufacturing facilities in East Stroudsburg, Pennsylvania and Cambridge, Maryland.

On June 30, 2006, as part of our November 2005 Plan, we completed the sale of our non-core business that was engaged in developing, manufacturing, and selling specialty polymers for use in the industrial print and packaging industry, industrial paint and coatings industry, and industrial plastics industry (the Polymer Business), to BASF Aktiengesellschaft (“BASF”) for approximately $470.0 million plus approximately $8.1 million in connection with the parties’ estimate of the expected purchase price adjustments. Further, BASF paid the Company $1.5 million for the option to extend the tolling agreement (described below) by up to six months. In August 2006, the Company recorded an additional $7.9 million of purchase price based on its preliminary assessment of the closing net asset value. Proceeds of $420.0 million were used to pay down debt in the quarter ended June 30, 2006.

On September 30, 2006, and as a part of our November 2005 Plan, we completed the sale of our Chemical Methods Associates subsidiary (“CMA”), a manufacturer of dish machines for use in the food service industry, to Ali SpA, an Italian based manufacturer of equipment for the food service industry for $17.0 million.

Furthermore, during the third quarter of 2006 we continued the operational restructuring of our Company in accordance with the November 2005 Plan. A number of key elements of this restructuring program were announced in the quarter, among them and of significance were:

• the announcement of our intention to proceed with the outsourcing of our IT support work in Europe, which followed our earlier announcement related to IT support work outside Europe;

• the announcement of our intention to proceed with the outsourcing of financial services in Western Europe;

• the announcement of our intention to close the JohnsonDiversey powder factory located in Bobigny, near Paris, France; and

• the announcement of our intention to close the Polinya factory in Barcelona and the reorganization of the Valdemoro factory in Madrid to improve capacity utilization of our manufacturing assets in Spain.

In connection with the aforementioned and other activities under the November 2005 Plan, we recorded charges of approximately $30.5 million and $107.6 million for severance costs in the quarter and nine months ended September 29, 2006, respectively, and approximately $0.3 million and $0.9 million for non-employee related costs in the quarter and nine months ended September 29, 2006, respectively. In addition, the Company recorded additional selling, general and administrative costs of approximately $29.2 million and $106.4 million in the quarter and nine months ended September 29, 2006, respectively, of which $1.0 million and $26.9 million were related to tangible asset impairment and $5.1 million and $25.7 million were related to intangible asset impairment.

Critical Accounting Policies

The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results may differ from these estimates under different assumptions or conditions. We believe the accounting policies that are most critical to our financial condition and results of operations and that involve management’s judgment and/or evaluation of inherent uncertain factors are as follows:

Revenue Recognition. We recognize revenue on product sales when risk of loss and title to the product is transferred to the customer. We record an estimated reduction to revenue for customer discount programs and incentive offerings, including allowances and other volume-based incentives. If market conditions were to decline, we may take actions to increase customer incentive offerings, possibly resulting in a reduction of gross profit margins in the period during which the incentive is offered.

In arriving at net sales, we estimate the amounts of sales deductions likely to be earned by customers in conjunction with incentive programs such as volume rebates and other discounts. Such estimates are based on written agreements and historical trends and are reviewed periodically for possible revision based on changes in facts and circumstances.

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Estimating Reserves and Allowances. We estimate inventory reserves based on periodic reviews of our inventory balances to identify slow-moving or obsolete items. This determination is based on a number of factors, including new product introductions, changes in customer demand patterns and historic usage trends.

We estimate the allowance for doubtful accounts by analyzing accounts receivable balances by age, applying historical trend rates, analyzing market conditions and specifically reserving for identified customer balances, based on known facts, which are deemed probable as uncollectible. For larger accounts greater than 90 days past due, an allowance for doubtful accounts is recorded based on the customer’s ability and likelihood to pay and based on management’s review of the facts and circumstances. For other customers, we recognize an allowance based on the length of time the receivable is past due based on historical experience.

We accrue for losses associated with litigation and environmental claims based on management’s best estimate of future costs when such losses are probable and reasonably able to be estimated. We record those costs based on what management believes is the most probable amount of the liability within the ranges or, where no amount within the range is a better estimate of the potential liability, at the minimum amount within the range. The accruals are adjusted as further information becomes available or circumstances change.

Pension and Post-Retirement Benefits. We sponsor pension and post-retirement plans in various countries, including the United States, which are separately funded. Several statistical and judgmental factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases and healthcare cost trends, as determined by us and our actuaries. In addition, our actuarial consultants also use subjective factors, such as withdrawal and mortality rates, to estimate these factors. The actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and changes in actual costs of healthcare. Actual results may significantly affect the amount of pension and other post-retirement benefit expenses recorded by us.

Goodwill and Long-Lived Assets. We periodically review long-lived assets, including non-amortizing intangible assets and goodwill, for impairment and assess whether significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated by the excess of the asset’s carrying value over its estimated fair value. We also periodically reassess the estimated remaining useful lives of our amortizing intangible assets and our other long-lived assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in our consolidated financial statements. We annually complete an impairment analysis of goodwill and non-amortizing intangible assets. Moreover, where indicators of impairment are identified for long-lived assets, we would prepare a future undiscounted cash flows analysis, determine any impairment impact and record, if necessary, a reduction in the affected asset(s). In association with the November 2005 Plan, the Company recorded impairment charges on certain intangible assets and long-lived assets of $25.7 million and $21.4 million, respectively, during the nine-month period ended September 29, 2006. There were no impairments recognized in the nine-month period ended September 30, 2005.

New Accounting Standards.In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payments” (“SFAS No. 123R”). SFAS No. 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS No. 123R, which is effective for the Company beginning in fiscal year 2006, is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statements of operations based on their fair values. Pro forma disclosure is no longer an alternative. The Company adopted the provisions of SFAS No. 123R using the modified prospective transition method and recorded additional compensation expense of $0.2 million and $0.5 million during the three month period and nine month period ended September 29, 2006, respectively.

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In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is required to adopt FIN No. 48 beginning in fiscal year 2007 and is currently evaluating the impact that the adoption will have on its consolidated balance sheet, results of operations and cash flows.

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for the fiscal year beginning December 29, 2007. The Company is currently evaluating the impact of the provisions of FAS 157.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (SFAS No. 158), an amendment of FASB Statements No. 87, 88, 106, and 132 (R). SFAS No. 158 requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 also requires the measurement of defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions). Under SFAS No. 158, the Company will recognize the funded status of its defined benefit postretirement plans and provide required disclosures as of December 28, 2007. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position will be effective in fiscal year 2008. If the Company had adopted SFAS No. 158 at December 30, 2005, it would have recorded an increase in pension and post-retirement benefit liabilities and decrease in accumulated other comprehensive income of approximately $112.0 million. However, this impact could change materially as of December 28, 2007, due to changes in the discount rates used to measure plan obligations, the actual returns on plan assets, and other factors.

Three Months Ended September 29, 2006 Compared to Three Months Ended September 30, 2005

Net Sales:

	Three Months Ended				Change
(dollars in thousands)	September 29, 2006		September 30, 2005		Amount			Percentage
Net product and service sales	$	717,408	$	720,743	$	(3,335	)	-0.5	%
Sales agency fee income		22,063		22,107		(44	)	-0.2	%
		739,471		742,850		(3,379	)	-0.5	%

• Excluding the impact of foreign currency exchange rates, which increased sales by $9.2 million, acquisitions and divestitures, and sales agency fee income, net sales were relatively flat for the three months ended September 29, 2006 compared to the same period in the prior year, primarily due to the affect of price increases taking hold globally and the expansion of developing markets in Asia Pacific, Latin America, Central and Eastern Europe, Africa and the Middle East which offset the net sales decline associated with the decision to exit a majority of the service-oriented laundry and ware washing business in the United States, which we announced in March 2006.

• In North America, one of our largest markets, net sales decreased 7.3% in the third quarter of 2006, compared to the same period in the prior year. This sales decline reflects the impact of our withdrawal from a majority of the service-oriented laundry and ware washing business in the United States. We continue to have strong growth in our core North American business units, primarily due to the impact of price increases in 2005 and the first quarter of 2006.

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• In our Europe, Africa and Middle East markets, net sales in the third quarter increased 3.8% compared to the same period in the prior year. This growth was primarily due to increased sales in developing countries in Eastern Europe, Africa and the Middle East and the affect of price increases in Western Europe.

• In Asia Pacific, net sales increased 10.0% in the third quarter of 2006 compared to the same period in the prior year, primarily due to strong growth in the food and beverage business and the lodging, retail and quick-service restaurant sectors.

• In Latin America, net sales increased 4.6% in the third quarter of 2006 compared to the same period in the prior year, driven by increased sales in most geographic areas, with growth from the food and beverage business, retail and lodging sectors and distribution, partially offset by lower health and hospitality sales in Mexico, where tourism remains adversely affected by hurricane damage, and our decision to exit direct sales to the cruise business in the Caribbean.

• In Japan, net sales decreased by 6.3% in the third quarter of 2006 compared to the same period in the prior year, primarily as a result of a change from direct selling to a joint venture for sales and distribution to select food service customers in the Tokyo metropolitan market, the planned withdrawal from low margin filter sales in the food and beverage business and the restructuring of the service relationship at a core Japanese retail customer.

• Excluding the impact of foreign currency exchange rates, net sales under our Master Sales Agency Agreement with Unilever decreased by $1.6 million, or 7.2%, for the three month period ended September 29, 2006 compared to the same period in the prior year which was partially offset by an increase in partial termination fees of $0.6 million.

Gross Profit:

	Three Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount			Percentage
	$	312,957		$	321,635		$	(8,678	)	-2.7	%
Gross profit as a percentage of net sales:
		42.3	%		43.3	%

• The reduction in gross profit in the third quarter of fiscal year 2006 compared to the third quarter of fiscal year 2005 was primarily due to the impact of raw material cost increases, which had a particularly strong impact on our floorcare business, where acrylic-based polymers are common in product formulations. Gross profit was also adversely impacted by higher freight and transportation costs, primarily attributable to the rise in crude oil prices and changes in U.S. transportation legislation that has affected driver hours and carrier availability.

• We continue to pursue further cost reduction initiatives under our November 2005 Plan.

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Operating Expenses:

	Three Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount		Percentage
Selling, general and administrative expenses	$	279,521		$	264,250		$	15,271	5.8	%
Research and development expenses		15,402			13,870			1,532	11.0	%
Restructuring expenses		30,792			4,299			26,493	616.3	%
	$	325,715		$	282,419		$	43,296	15.3	%
As a percentage of net sales:
Selling, general and administrative expenses		37.8	%		35.6	%
Research and development expenses		2.1	%		1.9	%
Restructuring expenses		4.2	%		0.6	%
		44.1	%		38.1	%

• The weakening of the U.S. dollar against the euro and certain other foreign currencies increased operating expenses by $3.8 million in the three months ended September 29, 2006 compared to the same period in the prior year.

• Excluding the impact of foreign currency and costs associated with our restructuring programs, selling, general and administrative costs decreased $7.5 million during the third quarter of 2006 compared to the prior year period. This reflects the impact of cost savings associated with the November 2005 Plan, which have more than offset inflationary impacts on our cost base.

• Excluding the impact of foreign currency, research and development expenses increased $1.4 million during the third quarter of 2006 compared to the prior year period.

• Excluding the impact of foreign currency, restructuring expenses increased $26.4 million during the third quarter of 2006 compared to the prior year period, primarily due to employee severance and other expenses related to the November 2005 Plan.

Restructuring and Integration:

A summary of all costs associated with the November 2005 Plan for the three months ended September 29, 2006, and since the consummation of the program in November 2005, is outlined below:

(dollars in thousands)	Three Months Ended September 29, 2006			Total Project to Date September 29, 2006
Reserve balance at beginning of period	$	61,205		$	—
Restructuring costs charged to income		30,792			112,986
Liability adjustments		—			383
Payments of accrued costs		(17,965	)		(39,337	)
Reserve balance at end of period	$	74,032		$	74,032
Period costs classified as selling, general and administrative expenses	$	29,232		$	122,026
Capital expenditures		2,332			8,870

• During the third quarter of 2006, we recorded $30.8 million of restructuring costs related to our November 2005 Plan in our consolidated statements of operations. These costs consisted primarily of involuntary termination and other costs incurred throughout North America and Europe. In addition, the Company recorded $29.2 million of selling, general and administrative expenses, in the third quarter of 2006, of which $1.0 million related to tangible asset impairment, $5.1 million related to intangible asset impairment and $23.1 million related to other period costs associated with restructuring activities, including consulting services of $9.2 million, information technology project costs of $6.0 million and employee retention, benefit and outplacement program costs of $5.2 million.

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• In connection with the acquisition of the DiverseyLever business, the Company recorded liabilities for the involuntary termination of former DiverseyLever employees and other exit costs associated with former DiverseyLever facilities. During the third quarter of 2006, the Company paid cash of $0.4 million representing contractual obligations associated with involuntary terminations and lease payments on closed facilities. The restructuring reserve balance associated with the exit plans and the Company’s acquisition-related restructuring plans was $3.0 million as of September 29, 2006.

Non-Operating Results:

	Three Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount			Percentage
Interest expense	$	26,735		$	29,655		$	(2,920	)	-9.8	%
Interest income		(3,064	)		(2,185	)		(879	)	40.2	%
Net interest expense		23,671			27,470			(3,799	)	-13.8	%
Other expense, net		1,300			453			847

• Net interest expense decreased in the third quarter of 2006 compared to the prior year period primarily due to lower average debt balances during the quarter. The lower debt balances resulted from the June 2006 repayment of $420.0 million of term debt using the proceeds from the sale of the Polymer Business, partially offset by the drawing of the $100.0 million delayed draw term loan in July of 2006.

Income Taxes:

	Three Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount			Percentage
Income (loss) from continuing operations, including minority interests, before income taxes and discontinued operations	$	(37,749	)	$	11,280		$	(49,029	)	-434.7	%
Provision for (benefit from) income taxes		(14,221	)		9,710			(23,931	)	-246.5	%
Effective income tax rate		37.7	%		86.1	%

• The Company reported an effective income tax rate of 37.7% on pre-tax loss from continuing operations for the three month period ended September 29, 2006. The high effective income tax rate on pre-tax loss is favorable, and is primarily the result of the Company claiming income tax benefit for a portion of year-to-date pre-tax losses to offset the gain on the sale of the Polymer business. The income tax benefit for the three month period ended September 29, 2006 was partially offset by increased valuation allowances against tax loss carryforwards from international operations and increased valuation allowance against U.S. net deferred tax assets.

• The Company reported an effective income tax rate of 86.1% on pre-tax income from continuing operations for the three month period ended September 30, 2005. The high effective income tax rate for this period is primarily due to incremental income tax expense related to repatriation of earnings from international operations and an increased valuation allowance against tax loss carryforwards from international operations. These increases to income tax expense were partially offset by a tax benefit from the realization of previously un-benefited foreign tax credits.

Net Income:

Our net income decreased by $24.5 million, to a net loss of $16.1 million for the third quarter of 2006 compared to net income of $8.4 million for the third quarter of 2005, primarily due to an increase of $45.9 million in restructuring costs and other period costs associated with the November 2005 Plan, partially offset by an income tax benefit for a portion of year-to-date pre-tax losses to offset the gain on the sale of the Polymer business.

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EBITDA:

EBITDA is a non-U.S. GAAP financial measure, and you should not consider EBITDA as an alternative to U.S. GAAP financial measures such as (a) operating profit or net profit as a measure of our operating performance or (b) cash flows provided by operating, investing and financing activities (as determined in accordance with U.S. GAAP) as a measure of our ability to meet cash needs.

We believe that, in addition to cash flows from operating activities, EBITDA is a useful financial measurement for assessing liquidity as it provides management, investors, lenders and financial analysts with an additional basis to evaluate our ability to incur and service debt and to fund capital expenditures. In addition, various covenants under our senior secured credit facilities are based on EBITDA, as adjusted pursuant to the provisions of those facilities.

In evaluating EBITDA, management considers, among other things, the amount by which EBITDA exceeds interest costs for the period, how EBITDA compares to principal repayments on outstanding debt for the period and how EBITDA compares to capital expenditures for the period. Management believes many investors, lenders and financial analysts evaluate EBITDA for similar purposes. To evaluate EBITDA, the components of EBITDA, such as net sales and operating expenses and the variability of such components over time, should also be considered.

Accordingly, we believe that the inclusion of EBITDA in this report permits a more comprehensive analysis of our liquidity relative to other companies and our ability to service debt requirements. Because all companies do not calculate EBITDA identically, the presentation of EBITDA in this report may not be comparable to similarly titled measures of other companies.

EBITDA should not be construed as a substitute for, and should be considered together with, net cash flows provided by operating activities as determined in accordance with U.S. GAAP. The following table reconciles EBITDA to net cash flows provided by operating activities, which is the U.S. GAAP measure most comparable to EBITDA for the three months ended September 29, 2006 and September 30, 2005.

	Three Months Ended
(dollars in thousands)	September 29, 2006			September 30, 2005
Net cash flows provided by (used in) operating activities	$	(38,334	)	$	154,102
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses		66,256			(94,300	)
Changes in deferred income taxes		278			(5,057	)
Gain (loss) from divestitures		6,454			(1,189	)
Gain (loss) on property disposals		(917	)		817
Depreciation and amortization expense		(38,328	)		(42,255	)
Amortization of debt issuance costs		(1,383	)		(1,111	)
Interest accrued on long-term receivables-related parties		620			854
Other		(10,761	)		(3,436	)
Net income (loss)		(16,115	)		8,425
Minority interests in net income of subsidiaries		20			13
Provision for (benefit from) income taxes		(12,057	)		13,494
Interest expense, net		23,671			27,558
Depreciation and amortization expense		38,328			42,255
EBITDA	$	33,847		$	91,745

EBITDA decreased by $57.9 million for the quarter ended September 29, 2006 as compared to the prior year third quarter, primarily due to a $40.5 increase in restructuring costs and period costs included in selling, general and administrative costs related to our November 2005 Plan.

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Nine Months Ended September 29, 2006 Compared to Nine Months Ended September 30, 2005

Net Sales:

	Nine Months Ended				Change
(dollars in thousands)	September 29, 2006		September 30, 2005		Amount			Percentage
Net product and service sales	$	2,122,546	$	2,161,551	$	(39,005	)	-1.8	%
Sales agency fee income		65,677		73,920		(8,243	)	-11.2	%
		2,188,223		2,235,471		(47,248	)	-2.1	%

• The strengthening of the U.S. dollar against the euro and certain other foreign currencies contributed $25.1 million to the decrease in net product and service sales.

• Excluding the impact of foreign currency exchange rates, acquisitions and divestitures, and sales agency fee income, net sales increased 1.0% for the nine months ended September 29, 2006 compared to the same period in the prior year, primarily due to price increases taking hold globally, a strong performance from North America’s core businesses and the expansion of developing markets in Asia Pacific, Latin America, Central and Eastern Europe, Africa and the Middle East, which more than offset the impact of our withdrawal from a majority of the service-oriented laundry and ware washing business in the United States.

• In North America, one of our largest markets, net sales decreased 1.5% in the first nine months of 2006 compared to the same period in the prior year. This sales decline reflects the impact of our withdrawal from a majority of the service-oriented laundry and ware washing business in the United States. We continue to have strong growth in our core North American business units, primarily due to the impact of price increases in 2005 and the first quarter of 2006.

• In our Europe, Africa and Middle East markets, net sales for the first nine months of 2006 increased 2.2% compared to the same period in the prior year. This growth rate was impacted by a correction in the accounting treatment for certain equipment leases that increased net sales by $15.3 million in the first quarter of 2005. Excluding the impact of this adjustment, net sales in the region grew by 3.7% during the first nine months of 2006 compared to the first nine months of 2005. This growth was primarily due to price increases taking hold and increased sales volume in our Central European area and in developing countries in Eastern Europe, Africa and the Middle East.

• In Asia Pacific, net sales increased 8.2% for the first nine months of 2006 compared to the same period in the prior year, primarily due to growth in the food and beverage business and the lodging, retail and quick-service restaurant sectors.

• In Latin America, net sales increased 6.8% for the first nine months of 2006 compared to the same period in the prior year, driven by increased sales in most geographic areas, with growth from the food and beverage business, retail and lodging sectors and distribution, partially offset by lower health and hospitality sales in Mexico, where tourism is still adversely affected by hurricane damage.

• In Japan, net sales decreased by 5.5% for the first nine months of 2006 compared to the same period in the prior year, primarily as a result of the restructuring of the service relationship at a core Japanese retail customer, the planned withdrawal from low margin filter sales in the food and beverage business and a change from direct selling to a joint venture for sales and distribution to select food service customers in the Tokyo metropolitan market.

• Excluding the impact of foreign currency exchange rates, agency fee income under our Master Sales Agency Agreement with Unilever decreased by $8.1 million, or 10.9%, during the first nine months of 2006, primarily as a result of additional $6.7 million in partial termination recorded in same period last year.

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Gross Profit:

	Nine Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount			Percentage
	$	924,781		$	965,522		$	(40,741	)	-4.2	%
Gross profit as a percentage of net sales:
		42.3	%		43.2	%

• The strengthening of the U.S. dollar against the euro and certain other foreign currencies decreased gross profit by $15.6 million for the nine months ended September 29, 2006 compared to the same period in the prior year.

• The reduction in gross profit was primarily due to the impact of raw material cost increases, which had a particularly strong impact on our floorcare business, where acrylic-based polymers are common in product formulations. Gross profit was also adversely impacted by higher freight and transportation costs, primarily attributable to the rise in crude oil prices and changes in U.S. transportation legislation that has affected driver hours and carrier availability. In addition, gross profit in the first quarter of 2005 included a correction in accounting treatment for certain equipment leases which increased our European gross profit by $5.8 million compared to the current period.

• We continue to pursue further cost reduction initiatives under our November 2005 Plan.

Operating Expenses:

	Nine Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount		Percentage
Selling, general and administrative expenses	$	873,735		$	819,460		$	54,275	6.6	%
Research and development expenses		44,744			42,305			2,439	5.8	%
Restructuring expenses		108,476			12,406			96,070	774.4	%
	$	1,026,955		$	874,171		$	152,784	17.5	%
As a percentage of net sales:
Selling, general and administrative expenses		39.9	%		36.7	%
Research and development expenses		2.0	%		1.9	%
Restructuring expenses		5.0	%		0.6	%
		46.9	%		39.2	%

• The strengthening of the U.S. dollar against the euro and certain other foreign currencies decreased operating expenses by $8.4 million during the first nine months of 2006 compared to the same period in the prior year.

• Excluding the impact of foreign currency and costs associated with our restructuring programs, selling, general and administrative costs declined $21.4 million during the nine months ended September 29, 2006, compared to the prior year period. Included within selling, general and administrative expenses in the nine-month period ended September 29, 2006 was a gain of $1.2 million on the sale of our U.S. commercial laundry business and a net gain of $7.3 million related to pension and post-retirement benefits curtailments and settlements.

• Excluding the impact of foreign currency, research and development expenses increased $2.8 million during the first nine months of 2006 compared to the prior year period.

• Excluding the impact of foreign currency, restructuring expenses increased $96.0 million during the first nine months of 2006 compared to the prior year period, primarily due to employee severance and other expenses related to the November 2005 Plan.

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Restructuring and Integration:

A summary of all costs associated with the November 2005 Plan for the nine months ended September 29, 2006 and since the consummation of the program in November 2005, is outlined below:

(dollars in thousands)	Nine Months Ended September 29, 2006			Total Project to Date September 29, 2006
Reserve balance at beginning of period	$	2,347		$	—
Restructuring costs charged to income		108,476			112,986
Liability adjustments		—			383
Payments of accrued costs		(36,791	)		(39,337	)
Reserve balance at end of period	$	74,032		$	74,032
Period costs classified as selling, general and administrative expenses	$	106,379		$	122,026
Capital expenditures		6,739			8,870

• During the nine months of 2006, we recorded $108.5 million of restructuring costs related to our November 2005 Plan in our consolidated statements of operations. These costs consisted primarily of involuntary termination and other costs incurred throughout North America and Europe. In addition, the Company recorded $106.4 million of selling, general and administrative expenses during the first nine months of 2006, of which $26.9 million related to tangible asset impairments, $25.7 million related to intangible asset impairment and $53.8 million related to other period costs associated with restructuring activities, including consulting services of $24.0 million, information technology project costs of $12.9 million and employee retention, benefit and outplacement program costs of $6.7 million.

• In connection with the acquisition of the DiverseyLever business, the Company recorded liabilities for the involuntary termination of former DiverseyLever employees and other exit costs associated with former DiverseyLever facilities. During the nine months ended September 29, 2006, the Company paid cash of $2.5 million representing contractual obligations associated with involuntary terminations and lease payments on closed facilities. The restructuring reserve balance associated with the exit plans and the Company’s acquisition-related restructuring plans was $3.0 million as of September 29, 2006.

Non-Operating Results:

	Nine Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount			Percentage
Interest expense	$	93,926		$	103,754		$	(9,828	)	-9.5	%
Interest income		(9,622	)		(6,257	)		(3,365	)	53.8	%
Net interest expense		84,304			97,497			(13,193	)	-13.5	%
Other expense, net		3,169			443			2,726

• Net interest expense decreased in the first nine months of 2006 compared to the prior year period. In the nine months ended September 30, 2005, the company recorded $8.7 million of interest expense due to the ineffectiveness of our EURIBOR-based interest rate swap agreements and wrote off $3.6 million of unamortized debt issuance costs arising from the repayment of the euro portion of the our term loan B in connection with the April 2005 amendment to our senior secured credit facilities. In addition, interest expense during the first nine months of 2006 was lower than the prior year period due to lower average net debt levels during the period.

• Other expense, net, increased during the first nine months of 2006 compared to the prior year period, primarily due to higher net losses from foreign currency translation and transactions.

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Income Taxes:

	Nine Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount			Percentage
Loss from continuing operations, including minority interests, before income taxes and discontinued operations	$	(189,672	)	$	(6,532	)	$	(183,140	)	2803.7	%
Provision for (benefit from) income taxes		(43,105	)		11,339			(54,444	)	-480.1	%
Effective income tax rate		22.7	%		-173.6	%

• The Company reported an effective income tax rate of 22.7% on pre-tax loss from continuing operations for the nine month period ended September 29, 2006. The relatively low effective income tax rate on the pre-tax loss means that the Company was not able to claim full income tax benefit for the loss recognized in the nine month period, due largely to increased valuation allowances against tax loss carryforwards from international operations and increased valuation allowance against U.S. net deferred tax assets. The increase in the valuation allowance associated with the U.S. net deferred tax assets results from temporary differences.

• The Company reported an effective income tax rate of (173.6)% on pre-tax loss from continuing operations for the nine month period ended September 30, 2005. The relatively high effective income tax rate for this period was primarily due to incremental income tax expense related to repatriation of earnings from international operations and an increased valuation allowance against tax loss carryforwards from international operations. These increases to income tax expense were partially offset by a tax benefit from the realization of previously un-benefited foreign tax credits.

Net Income:

Our net income increased by $96.9 million, to $102.7 million for the first nine months of 2006 compared to $5.7 million for the first nine months of 2005, primarily due to the gain of $231.7 million (net of tax) on the sale of our Polymer business offset by an increase of $179.6 million in restructuring costs and other period costs associated with the November 2005 Plan.

EBITDA:

The following table reconciles EBITDA to net cash flows provided by operating activities, which is the U.S. GAAP measure most comparable to EBITDA for the nine months ended September 29, 2006 and September 30, 2005.

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	Nine Months Ended
(dollars in thousands)	September 29, 2006			September 30, 2005
Net cash flows provided by (used in) operating activities	$	(62,640	)	$	162,410
Changes in operating assets and liabilities, net of effects		110,877			7,560
from acquisitions and divestitures of businesses
Changes in deferred income taxes		(316	)		(4,524	)
Gain from divestitures		233,212			2,802
Loss on property disposals		(819	)		(2,724	)
Depreciation and amortization expense		(160,115	)		(137,613	)
Amortization of debt issuance costs		(4,695	)		(17,493	)
Interest accrued on long-term receivables-related parties		1,837			2,719
Other		(14,660	)		(7,413	)
Net income		102,681			5,724
Minority interests in net income (loss) of subsidiaries		25			(57	)
Provision for income taxes		89,962			21,825
Interest expense, net		81,653			97,877
Depreciation and amortization expense		160,115			137,613
EBITDA	$	434,436		$	262,982

EBITDA increased by $171.5 million for the nine months ended September 29, 2006 as compared to the same period in the prior year, primarily due to the divestiture of the Polymer Business which increased EBITDA by $356.0 million and was partially offset by a $132.6 million increase in restructuring costs and period costs included in selling, general and administrative costs related to our November 2005 Plan and raw material cost increases not fully offset by pricing actions. In addition, EBITDA in the nine months ended September 30, 2005 included a correction in accounting treatment for certain equipment leases which increased our EBITDA by $5.8 million compared to the current period.

Liquidity and Capital Resources

	Nine Months Ended						Change
(dollars in thousands)	September 29, 2006			September 30, 2005			Amount			Percentage
Net cash provided by (used in) operating activities	$	(62,640	)	$	162,410		$	(225,050	)	-138.6	%
Net cash provided by (used in) investing activities		401,630			(42,709	)		444,339		-1040.4	%
Net cash used in financing activities		(332,048	)		(118,522	)		(213,526	)	180.2	%
Capital expenditures		62,994			64,566			(1,572	)	-2.4	%
	September 29, 2006			December 30, 2005			Change
							Amount			Percentage
Cash and cash equivalents	$	163,196		$	158,204		$	4,992		3.2	%
Working capital (1)		436,673			388,128			48,545		12.5	%
Total debt		1,096,367			1,406,262			(309,895	)	-22.0	%

(1) Working capital is defined as net accounts receivable, plus inventories less accounts payable.

• The increase in cash and cash equivalents at September 29, 2006 compared to December 30, 2005 resulted primarily from cash proceeds from the $100.0 million delayed draw term loan facility offset by cash used during the first nine months of 2006 to fund activities related to the November 2005 Plan, capital expenditures, and a reduction in the utilization of the Asset Securitization program.

• The decrease in net cash provided by operating activities during the nine months ended September 29, 2006 compared to the prior year period was primarily due to cash payments related to our November 2005 Plan and a reduction in the utilization of the Asset Securitization program.

• The increase in net cash used in investing activities during the nine months ended September 29, 2006 compared to the prior year period was primarily due to the net proceeds received from the divestiture of the Polymer Business during the second quarter of 2006. Other than our investment in dosing and feeder equipment with new and existing customer accounts, the characteristics of our business do not generally require us to make significant ongoing capital expenditures.

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• The decrease in cash flow from financing activities during the nine months ended September 29, 2006 compared to the prior year period was primarily due to the repayment of $420.0 million of obligations under our term loan B facility using the majority of the proceeds from the divestiture of the Polymer Business.

• The increase in working capital during the nine months ended September 29, 2006 was due to a $21.6 million increase in inventories resulting from an inventory build in advance of factory closures and increased raw materials costs and a $38.1 million increase in accounts receivable driven by the exit of our Italian subsidiary from our Asset Securitization program, partially offset by a $11.2 million increase in accounts payable.

Debt and Contractual Obligations. As a result of the DiverseyLever acquisition, we have a significant amount of indebtedness. On May 3, 2002, in connection with the acquisition, we issued senior subordinated notes and entered into a $1.2 billion senior secured credit facility. We used the proceeds of the sale of the senior subordinated notes and initial borrowings under the senior secured credit facilities, together with other available funds, to finance the cash portion of the purchase price for the DiverseyLever business and the related fees and expenses and to refinance then-existing indebtedness.

The senior secured credit facilities were amended and restated in December 2005.

The amended facilities, among other things, permit the global restructuring under the November 2005 Plan and modify the financial covenants contained in our previous credit facilities. The amended facilities consist of a revolving loan facility in an aggregate principal amount not to exceed $175 million, including a letter of credit sub-limit of $50 million and a swingline loan sub-limit of $30 million, that matures on December 16, 2010, as well as a term loan facility that matures on December 10, 2011. In addition, the amended facilities include a committed delayed draw term facility of up to $100 million, which was fully drawn on July 14, 2006. The amended facilities also provide for an increase in the revolving credit facility of up to $25 million under specified circumstances. As of September 29, 2006, we had $8 million in letters of credit outstanding under the revolving portion of the senior secured credit facilities and therefore had the ability to borrow $167 million under those revolving facilities.

As of September 29, 2006, we had total indebtedness of $1.1 billion, consisting of $585.9 million of senior subordinated notes, $451.1 million of borrowings under the senior secured credit facilities, $19.1 million of other long-term borrowings and $40.3 million in short-term credit lines. In addition, we had $185.4 million in operating lease commitments, $2.1 million in capital lease commitments and $8.3 million committed under letters of credit.

We believe that the cash flows from operations, together with available cash, borrowings under our amended and restated senior secured credit facilities and the proceeds from our receivables securitization facility will generate sufficient cash flow to meet our liquidity needs for the foreseeable future, including our restructuring programs. Please refer to our forward-looking statements for potential risks associated with our restructuring programs.

We have obligations related to our pension and post-retirement plans that are discussed in detail in Note 15 of the Notes to Consolidated Financial Statements. As of the most recent actuarial estimation, we anticipate making $55.8 million of contributions to pension plans in fiscal year 2006. We made contributions of $40.8 million during the nine months ended September 29, 2006. Post-retirement medical claims are paid as they are submitted. We made contributions of $4.3 million during the nine months ended September 29, 2006.

Off-Balance Sheet Arrangements. We and certain of our subsidiaries entered into an agreement (the “Receivables Facility”) in March 2001, as amended, whereby we and each participating subsidiary sell, on a continuous basis, certain trade receivables to JWPR Corporation (“JWPRC”), our wholly owned, consolidated, special purpose, bankruptcy-remote subsidiary. JWPRC was formed for the sole purpose of buying and selling receivables generated by us and certain of our subsidiaries party to the Receivables Facility. JWPRC, in turn, sells an undivided interest in the accounts receivable to nonconsolidated financial institutions (the “Conduits”) for an amount equal to the value of all eligible receivables (as defined under the receivables sale agreement between JWPRC and the Conduits) less the applicable reserve. The accounts receivable securitization arrangement is

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accounted for under the provisions of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities–A replacement of FASB Statement No. 125.”As September 29, 2006 and December 30, 2005, our total potential for securitization of trade receivables was $75.0 million and $150.0 million, respectively.

In July 2006, the Receivables Facility was amended to allow one of the conduit purchasers to exit the program, to allow the repurchase of the receivables of JohnsonDiversey SpA (Italy), and to reduce the total potential for securitization of trade receivables from $150.0 million to $75.0 million.

As of September 29, 2006 and December 30, 2005, the Conduits held $58.4 million and $111.3 million, respectively, of accounts receivable that are not included in the accounts receivable balance reflected in our consolidated balance sheets.

As of September 29, 2006 and December 30, 2005, we had a retained interest of $81.5 million and $149.2 million, respectively, in the receivables of JWPRC. The retained interest is included in the accounts receivable balance and is reflected in the consolidated balance sheets at estimated fair value.

For the nine months ended September 29, 2006, JWPRC’s cost of borrowing under the Receivables Facility was at a weighted average rate of 6.41% per annum.

Under the terms of our senior secured credit facilities, we must use any net proceeds from the Receivables Facility first to prepay loans outstanding under the senior secured credit facilities. In addition, the net amount of trade receivables at any time outstanding under this and any other securitization facility that we may enter into may not exceed $200 million in the aggregate.

Financial Covenants under Our Senior Secured Credit Facilities

Under the amended terms of our senior secured credit facilities, we are subject to certain financial covenants. The financial covenants under our senior secured credit facilities require us to meet the following targets and ratios.

Maximum Leverage Ratio. We are required to maintain a leverage ratio for each financial covenant period of no more than the maximum ratio specified in the senior secured credit facilities for that financial covenant period. The maximum leverage ratio is the ratio of (1) our consolidated indebtedness (excluding up to $55 million of indebtedness incurred under our Receivables Facility and indebtedness relating to specified interest rate hedge agreements) as of the last day of a financial covenant period using a weighted-average exchange rate for the relevant fiscal nine-month period to (2) our consolidated EBITDA, as defined in the senior secured credit facilities, for that same financial covenant period.

The senior secured credit facilities require that we maintain a leverage ratio of no more than the ratio set forth below for each of the financial covenant periods ending nearest the corresponding date set forth below:

	Maximum Leverage Ratio
September 30, 2006	5.00 to 1
December 31, 2006	5.00 to 1
March 31, 2007	5.00 to 1
June 30, 2007	5.00 to 1
September 30, 2007	4.75 to 1
December 31, 2007	4.75 to 1
March 31, 2008	4.75 to 1
June 30, 2008	4.75 to 1
September 30, 2008	4.25 to 1
December 31, 2008	4.25 to 1
March 31, 2009	4.25 to 1
June 30, 2009	3.25 to 1
September 30, 2009	3.25 to 1
December 31, 2009	3.25 to 1
March 31, 2010	3.25 to 1
June 30, 2010	3.25 to 1
September 30, 2010 and thereafter	3.50 to 1

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Minimum Interest Coverage Ratio. We are required to maintain an interest coverage ratio for each financial covenant period of no less than the minimum ratio specified in the senior secured credit facilities for that financial covenant period. The minimum interest coverage ratio is the ratio of (1) our consolidated EBITDA, as defined in the senior secured credit facilities, for a financial covenant period to (2) our cash interest expense for the same financial covenant period.

The senior secured credit facilities require that we maintain an interest coverage ratio of no less than the ratio set forth below for each of the financial covenant periods ending nearest the corresponding date set for the below:

	Minimum Interest Coverage Ratio
September 30, 2006	2.00 to 1
December 31, 2006	2.00 to 1
March 31, 2007	2.00 to 1
June 30, 2007	2.00 to 1
September 30, 2007	2.25 to 1
December 31, 2007	2.25 to 1
March 31, 2008	2.25 to 1
June 30, 2008	2.25 to 1
September 30, 2008	2.50 to 1
December 31, 2008	2.50 to 1
March 31, 2009	2.50 to 1
June 30, 2009	2.75 to 1
September 30, 2009	2.75 to 1
December 31, 2009	2.75 to 1
March 31, 2010	2.75 to 1
June 30, 2010	2.75 to 1
September 30, 2010 and thereafter	3.00 to 1

Compliance with Maximum Leverage Ratio and Minimum Interest Coverage Ratio. For our financial covenant period ended on September 29, 2006, we were in compliance with the maximum leverage ratio and minimum interest coverage ratio covenants contained in the senior secured credit facilities.

Capital Expenditures. Capital expenditures are limited under the senior secured credit facilities to $150 million in fiscal year 2006 and to $130 million for subsequent fiscal years. To the extent that we make capital expenditures of less than the limit in any fiscal year, however, we may carry forward into the subsequent year the difference between the limit and the actual amount we expended, provided that the amounts we carry forward from the previous year will be allocated to capital expenditures in the current fiscal year only after the amount allocated to the current fiscal year is exhausted. As of September 29, 2006, we were in compliance with the limitation on capital expenditures for fiscal year 2006.

Restructuring Charges. The senior secured credit facilities limit the amount of cash payments (i) arising in connection with the November 2005 Plan at any time from fiscal year 2006 through the end of fiscal year 2009 to $355 million in the aggregate and (ii) arising in connection with permitted divestitures at any time from fiscal year 2006 through the end of fiscal year 2008 to $45 million. As of September 29, 2006, we were in compliance with the limitation on spending for restructuring and permitted divestiture-related activities.

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In addition, the senior secured credit facilities contain covenants that restrict our ability to declare dividends and to redeem and repurchase capital stock. The senior secured credit facilities also limit our ability to incur additional liens, engage in sale-leaseback transactions and incur additional indebtedness and make investments.

Discontinued Operations

On June 30, 2006, Johnson Polymer, LLC (“JP”) and JohnsonDiversey Holdings II B.V. (“Holdings II”), an indirectly owned subsidiary of the Company, completed the sale of substantially all of the assets of JP, certain of the equity interests in, or assets of certain of JP subsidiaries and all of the equity interests owned by Holdings II in Johnson Polymer B.V. (collectively, the “Polymer Business”) to BASF Aktiengesellschaft (“BASF”) for approximately $470.0 million plus an additional $8.1 million in connection with the parties’ estimate of purchase price adjustments that will be based upon the closing net asset value of the Polymer Business. Further, BASF paid the Company $1.5 million for the option to extend the tolling agreement (described below) by up to six months. In August 2006, the Company recorded an additional $7.9 million of purchase price based on its preliminary assessment of closing net asset value. The Company and BASF are expected to finalize purchase price adjustments during the fourth quarter of 2006.

The Polymer Business develops, manufactures, and sells specialty polymers for use in the industrial print and packaging industry, industrial paint and coatings industry, and industrial plastics industry. The Polymer Business was a non-core asset of the Company and had been reported as a separate business segment. The sale resulted in a gain of approximately $356.0 million ($231.7 million after tax), net of related costs.

Net sales from discontinued operations for the three and nine months ended September 29, 2006 and September 30, 2005 were as follows:

	Three Months Ended					Nine Months Ended
	September 29, 2006			September 30, 2005		September 29, 2006		September 30, 2005
Net sales	$	653	1	$	91,543	$	201,006	$	275,016

¹ Represents net sales related to the tolling agreement with BASF.

Income from discontinued operations for the three and nine months ended September 29, 2006 and September 30, 2005 were comprised of the following:

	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
Income from discontinued operations before taxes and gain from sale	$	—		$	9,942		$	22,679		$	27,900
Taxes on discontinued operations		—			(3,539	)		(7,510	)		(9,723	)
Gain on sale of discontinued operations before taxes		7,878			—			356,034			—
Taxes on gain from sale of discontinued operations		(1,579	)		—			(124,288	)		—
Income from tolling operations		653			—			653			—
Taxes on income from tolling operations		(257	)		—			(257	)		—
Income from discontinued operations	$	6,695		$	6,403		$	247,311		$	18,177

The Asset and Equity Purchase Agreement between JP, Holdings II and BASF refers to ancillary agreements governing certain relationships between the parties, including a Supply Agreement and Tolling Agreement, each of which is not considered material to the Company’s consolidated financial results.

Supply Agreement

A ten-year global agreement providing for the supply of polymer products to the Company by BASF. Unless either party provides notice of its intent not to renew at least three years prior to the expiration of the ten-year term, the term of the agreement will extend for an additional five years. The agreement requires that

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the Company purchase a specified percentage of related product from BASF during the term of agreement. Subject to certain adjustments, the Company has a minimum volume commitment during each of the first five years of the agreement.

The Polymer Business sold polymer product to the Company for $7,003 and $22,665 during the six months ended June 30, 2006 and twelve months ended December 30, 2005, respectively.

Tolling Agreement

A three-year agreement providing for the toll manufacture of polymer products by the Company, at its manufacturing facility in Sturtevant, Wisconsin, for BASF. The agreement may be extended six months by either party. The agreement specifies product pricing and provides BASF the right to purchase certain equipment retained by the Company.

In association with the Tolling Agreement, the Company agreed to pay $11.4 million in compensation to S.C. Johnson and Son, Inc. (“SCJ”), a related party, primarily related to pre-payments and the right to extend terms on the lease agreement at the Sturtevant, Wisconsin manufacturing location. The Company is amortizing $9.2 million of the payment into the results of the tolling operation over the term of the Tolling Agreement.

The Company considered its continuing involvement with the Polymer Business, including the Supply Agreement and Tolling Agreement, concluding that neither the related cash inflows nor cash outflows were direct, due to the relative insignificance of the continuing operations to the disposed business.

On May 1, 2006, in association with the divestiture of the Polymer Business, Commercial Markets Holdco, Inc. (“Holdco”), which is the parent of the Company’s direct parent, JohnsonDiversey Holdings, Inc. (“Holdings”), Marga B.V., a subsidiary of Unilever, and Holdings amended and restated the Stockholders’ Agreement dated as of May 3, 2002 among the parties (as amended and restated, the “Stockholders’ Agreement”). Holdco and Marga B.V. own 66 2/3% and 33 1/3%, respectively, of the outstanding shares of Holdings. Holdings owns 100% of the outstanding shares of the Company except for one share owned by SCJ. The amendment and restatement of the Stockholders’ Agreement included restatement of provisions relating to, among other things, share transfer restrictions, corporate governance, put and call options and rights of first offer and refusal and various other rights and obligations of the parties. In addition, the amendment and restatement adjusted the buyout formula relating to Marga B.V.’s shares in Holdings to require an incremental payment of $30.0 million, plus interest (payable from put execution date) at the time of Marga B.V.’s exit. The Stockholders’ Agreement also provides for the issuance of options to Marga B.V. for the purchase of Holdings shares at exit, which, following exercise, will result in the incremental payment to Marga B.V., by Holdco, of up to $40.0 million, plus interest.

Subsequent Events

Divestiture – Auto-Chlor Branch Operation

On October 11, 2006, in conjunction with its November 2005 Restructuring Program, the Company signed an agreement to divest of its Auto-Chlor branch operation in the southern United States, a business that markets and sells low-energy dishwashing systems, kitchen chemicals, laundry and housekeeping products and services to foodservice, lodging, healthcare, and institutional customers, for $9.0 million. The purchase price is subject to various post-closing adjustments. The Company expects to close the transaction during the quarter ending December 29, 2006.

On September 28, 2006, the Company determined that its investment in the divested business met held for sale criteria under SFAS No. 144. In conjunction with its assessment, the Company recorded an impairment charge of $5.1 million on certain amortizable intangible assets. The charge is included within restructuring expenses in the consolidated statement of operations (see Note 13). The divested assets and liabilities of the business are not considered material to the Company, and are included in the Company’s Professional Business segment.

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Discontinued Operations – Chemical Methods Associates

On September 30, 2006, in connection with its November 2005 Restructuring Program, the Company sold its equity interest in Chemical Methods Associates (“CMA”) to Ali SpA, an Italian based manufacturer of equipment for the food service industry, for $17.0 million. The purchase price is subject to various post-closing adjustments, principally with regard to changes in working capital. As of the divestiture date, CMA net assets totaled approximately $5.9 million.

Effective with the third quarter of 2006, CMA, which was included in the Company’s Professional Business segment, has been classified as a discontinued operation and, as such, the Company has made the required changes to the consolidated statement of operations for the three and nine month periods ended September 29, 2006 and restated the prior periods. Due to the immaterial impact of the divestiture on the consolidated balance sheet and consolidated statement of cash flows, no adjustments or restatements for discontinued operations have been made for the periods presented.

Net sales from discontinued operations for three and nine month periods ended September 29, 2006 and September 30, 2005 are as follows:

	Three Months Ended				Nine Months Ended
	September 29, 2006		September 30, 2005		September 29, 2006		September 30, 2005
Net sales	$	5,683	$	4,525	$	16,905	$	14,266

Income from discontinued operations for the three and nine month periods ended September 29, 2006 and September 30, 2005 is comprised of the following:

	Three Months Ended						Nine Months Ended
	September 29, 2006			September 30, 2005			September 29, 2006			September 30, 2005
Income from discontinued operations before taxes and gain from sale	$	1,046		$	697		$	2,825		$	2,181
Taxes on discontinued operations		(328	)		(245	)		(1,012	)		(763	)
Income from discontinued operations	$	718		$	452		$	1,813		$	1,418

Japanese Merger

On November 1, 2006, three wholly-owned Japanese subsidiaries of the Company, JohnsonDiversey Co., Ltd., Johnson Professional Co., Ltd. and TeepolDiversey Co., Ltd., were merged to form one legal entity. As a result of the legal entity merger, and based on projections of future income of the merged Japanese entity, the Company has determined that existing tax loss carryforwards of TeepolDiversey Co., Ltd. are expected to be fully utilized within the statutory tax loss carryforward period. The Company expects to reverse a valuation allowance against deferred tax assets of $10.2 million related to the TeepolDiversey Co., Ltd. tax loss carryforwards during the fourth quarter ending December 29, 2006

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

As of September 29, 2006, we had $451.1 million of debt outstanding under our senior secured credit facilities. After giving effect to the interest rate swap transactions that we have entered into with respect to some of the borrowings under our credit facilities, $259.7 million of the debt outstanding remained subject to variable rates. We also have entered into interest rate swap agreements with a notional value of €127.4 million that were related to the euro portion of the term loan B that was fully repaid in April 2005. As a result of the debt repayment, these interest rate swaps have been deemed ineffective and, therefore, must be marked-to-market at the end of each accounting period through the statements of operations. Because of certain intercompany funding arrangements, we believe that these swaps provide an economic hedge to the incremental debt used to finance the repayment. In addition, as of

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September 29, 2006, we had $59.4 million of debt outstanding under foreign lines of credit, all of which were subject to variable rates. Accordingly, our earnings and cash flows are affected by changes in interest rates. At the above level of variable rate borrowings, we do not anticipate a significant impact on earnings in the event of a reasonable change in interest rates. In the event of an adverse change in interest rates, management would likely take actions that would mitigate our exposure to interest rate risk; however, due to the uncertainty of the actions and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effects of the change in the level of the overall economic activity that could exist in such an environment.

Foreign Currency Risk

We conduct our business in various regions of the world and export and import products to and from many countries. Our operations may, therefore, be subject to volatility because of currency fluctuations, inflation changes and changes in political and economic conditions in these countries. Sales and expenses are frequently denominated in local currencies, and results of operations may be affected adversely as currency fluctuations affect product prices and operating costs. We engage in hedging operations, including forward foreign exchange contracts, to reduce the exposure of our cash flows to fluctuations in foreign currency rates. All hedging instruments are designated and effective as hedges, in accordance with U.S. GAAP. Other instruments that do not qualify for hedge accounting are marked to market with changes recognized in current earnings. We do not engage in hedging for speculative investment reasons. There can be no assurance that our hedging operations will eliminate or substantially reduce risks associated with fluctuating currencies.

Based on our overall foreign exchange exposure, we estimate that a 10% change in the exchange rates would not materially affect our financial position and liquidity. The effect on our results of operations would be substantially offset by the impact of the hedged items.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of JohnsonDiversey’s Disclosure Controls and Internal Controls. As of the end of the period covered by this quarterly report, we evaluated the effectiveness of the design and operation of our “disclosure controls and procedures” (“Disclosure Controls”). The controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

CEO & CFO Certifications. Attached as exhibits 31.1 and 31.2 to this quarterly report are certifications of the CEO and the CFO required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This portion of our quarterly report includes the information concerning the controls evaluation referred to in the certifications and should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Disclosure Controls. Disclosure Controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controls include those components of our internal control over financial reporting that are designed to provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. GAAP. To the extent that components of our internal control over financial reporting are included in our Disclosure Controls, they are included in the scope of our quarterly evaluation of Disclosure Controls.

Limitations on the Effectiveness of Controls. Our Disclosure Controls were designed to provide reasonable assurance that the controls and procedures would meet their objectives. Our management, including the CEO and CFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the designed control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can

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provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation. The evaluation of our Disclosure Controls included a review of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in this quarterly report. In the course of the controls evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were undertaken. This evaluation is done on a quarterly basis so that the conclusions of management, including the CEO and the CFO, concerning the effectiveness of the controls can be reported in our quarterly reports on Form 10-Q and our annual report on Form 10-K. Many of the components of our Disclosure Controls are also evaluated on an ongoing basis by our internal audit department and by other personnel in our finance organization, as well as our independent registered public accounting firm in connection with their audit and review activities. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and to make modifications as necessary; our intent in this regard is that the Disclosure Controls will be maintained as dynamic systems that change (including with improvements and corrections) as conditions warrant.

Among other matters, we sought in our evaluation to determine whether there were any “significant deficiencies” or “material weaknesses” in our internal control over financial reporting, or whether we had identified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting. This information was important both for our controls evaluation and for Rule 13a-14 of the Exchange Act, which requires that the CEO and CFO disclose that information to our Audit Committee and to our independent registered public accounting firm, and report on that information and related matters in this section of the quarterly report. In the professional accounting literature, “significant deficiencies” are referred to as “reportable conditions,” which are control issues that could have a significant adverse effect on our ability to record, process, summarize and report financial data in the consolidated financial statements. A “material weakness” is defined in professional accounting literature as a particularly serious reportable condition whereby the internal control does not reduce to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and not be detected within a timely period by employees in the normal course of performing their assigned functions. We also sought to deal with other control matters in the controls evaluation, and in each case, if an issue was identified, we considered what revision, improvement and/or correction to make in accordance with our on-going procedures.

During the third quarter of 2006, we determined that certain information relating to board-approved incentive plans and agreements that provided for compensation to named executive officers was not identified and reported to management in sufficient time to allow timely decisions regarding required disclosure. To address these issues, we took action to improve our Disclosure Controls, including educating Company employees regarding disclosure obligations and streamlining the procedures for communicating information regarding events that may require disclosure to senior management. We will continue to evaluate and implement corrective action, including instituting additional training programs, to improve the effectiveness of our Disclosure Controls. For additional information relating to the compensation agreements, see “Item 5. Other Information.”

Conclusions. Based upon the controls evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this quarterly report, our Disclosure Controls, including the additional controls instituted by us to address the issues discovered by us in the third quarter of 2006 and discussed above, are effective to ensure that material information relating to JohnsonDiversey, Inc. and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our internal controls are effective in providing reasonable assurance that our financial statements are fairly presented in conformity with U.S. GAAP. In addition, no change in our internal control over financial reporting has occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 5. OTHER INFORMATION

As discussed in Item 4 above, during the third quarter of 2006, we determined that certain information relating to board-approved incentive plans and agreements that provided for compensation to named executive officers was not identified and reported to management in sufficient time to allow timely decisions regarding required disclosure. Set forth below is a summary of incentive plans and compensation agreements that were not previously disclosed. All such plans and agreements were approved by the Compensation Committee of the Board of Directors (the “Compensation Committee”).

Long Term Incentive Plan

In December 2005, the Compensation Committee approved a new Cash Long Term Incentive Plan (the “LTIP”). The terms of the LTIP are attached to this quarterly report as Exhibit 10.2. As approved by the Compensation Committee, amounts to be earned under the LTIP would be based on the achievement of specified performance criteria including targets with respect to global EBITDA and global cash flows. On May 10, 2006, the Compensation Committee approved target award amounts and maximum award amounts for the LTIP’s three-year performance period beginning January 1, 2006. The Compensation Committee approved target award amounts and maximum award amounts of $780,000 and $1,560,000 for JoAnne Brandes, our Executive Vice President, Chief Administrative Officer, General Counsel and Secretary, $600,000 and $1,200,000 for Thomas M. Gartland, our Regional President–North America, $2,000,000 and $4,000,000 for S. Curtis Johnson III, our Chairman of the Board, and $780,000 and $1,560,000 for Joseph F. Smorada, our Executive Vice President and Chief Financial Officer. Payments of amounts earned with respect to the three-year performance period beginning January 1, 2006 would be made in the first quarter of 2009.

The Compensation Committee also approved a floor for Mr. Smorada’s awards under the LTIP. Earned awards under the LTIP will be based on the LTIP’s performance targets, but in any event Mr. Smorada’s award will not be less than $350,000 for each of the three-year performance periods beginning in 2006, 2007, 2008, 2009 and 2010. If Mr. Smorada’s employment is terminated for reasons other than for “cause,” as defined in his Employment Agreement, or voluntary resignation, each LTIP award will be paid on a prorated basis based on service during the award’s three-year performance period.

In October 2006, the Compensation Committee removed the global cash flow performance criteria from the LTIP for all future fiscal years. For the performance period beginning January 1, 2006, 88.9% of the LTIP award payout will be based on global EBITDA during the three-year performance period and 11.1% of the LTIP award payout will be based on 2006 global cash flow. For all subsequent performance periods, the LTIP award payout will be based solely on global EBITDA during the three-year performance period.

Restructuring Incentive Plan

In December 2005, the Compensation Committee approved a new incentive plan associated with the Company’s November 2005 restructuring program (the “Restructuring Incentive Plan”). The Restructuring Incentive Plan is intended to reward senior executives and other key employees with specific responsibilities for certain restructuring initiatives for contributions to the Restructuring Incentive Plan’s performance objectives: EBITDA improvement, containment of one-time costs and capital expenditures associated with the restructuring and divestiture of specified business units.

Under the Restructuring Incentive Plan, participants have the opportunity to receive a cash award for each of fiscal year 2006 and fiscal year 2007. In December 2005, the Compensation Committee approved target award amounts and maximum award amounts for each participant. The Compensation Committee approved target award amounts and maximum award amounts of $200,000 and $400,000 for Ms. Brandes, $200,000 and $400,000 for Mr. Gartland, $200,000 and $400,000 for Mr. Johnson and $300,000 and $600,000 for Mr. Smorada.

At the end of each fiscal year, the Compensation Committee will determine the amount of a participant’s award based on that individual’s contributions to the Restructuring Incentive Plan’s performance objectives. Awards for fiscal year 2006 will be paid in 2007 and awards for fiscal year 2007 will be paid in 2008.

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On May 10, 2006, the Compensation Committee granted Mr. Smorada the opportunity to earn an additional cash award of between $200,000 (target amount) and $400,000 (maximum amount) in 2006 for achievement of the divestiture component of the Restructuring Incentive Plan, provided the Company meets the specified earnings threshold in 2006.

Supplemental Executive Retirement Plan

In the first quarter of 2006, Commercial Markets Holdco, Inc. (“Holdco”), the parent of the Company, offered to purchase all outstanding shares of its class C common stock, options to purchase its class C common stock and shares of its class B common stock. Holders of Holdco’s class C common stock who tendered shares in the offer received $139.25 in cash, without interest, for each tendered share of class C common stock. Holders of restricted stock were not eligible to tender their shares of restricted stock pursuant to this offer.

In October 2006, the Compensation Committee approved additional provisions to our Supplemental Executive Retirement Plan (the “SERP”) to provide holders of restricted stock with a payout value of no less than $139.25 per share upon the vesting of those shares. Under the terms of the new SERP provisions, if the payout value of a participant’s restricted stock would have been less than $139.25 per share at the time the shares vested, the participant will receive a cash benefit equal to the difference between the actual payout value of the restricted stock at the time the shares vested and the payout value of the restricted stock if the shares were valued at $139.25 per share. This benefit will be calculated and paid at the time the shares of restricted stock vest.

Ms. Brandes and Mr. Smorada participate in the SERP. Ms. Brandes has 7,850 shares of restricted stock that were granted on November 2, 2001 and are scheduled to vest on October 31, 2011. As discussed below, Mr. Smorada has 2,334 shares of restricted stock that were granted in August 2005 and are scheduled to vest on November 1, 2009. Mr. Smorada has an additional 2,500 shares of restricted stock that were granted pursuant to his Employment Agreement and are scheduled to vest in equal amounts on October 31, 2008 and October 31, 2009.

Additional Compensation Arrangements with Joseph F. Smorada

In August 2005, the Compensation Committee granted 4,668 shares of restricted stock of Holdco to Mr. Smorada. One half of these shares vested and were paid out in December 2005 upon completion of the bank financing portion of the Company’s November 2005 restructuring program. The remaining shares will vest on November 1, 2009 if Mr. Smorada remains employed by the Company, or earlier, if Mr. Smorada’s employment is terminated for reasons other than for “cause,” as defined in his Employment Agreement, or voluntary resignation.

During fiscal year 2005, the Compensation Committee approved a change to the vesting requirements applicable to Mr. Smorada under the Company’s retirement plan for employees and excess benefit plan. As amended, if Mr. Smorada’s employment is terminated for reasons other than for “cause,” as defined in his Employment Agreement, or voluntary resignation, prior to attaining five years of service, Mr. Smorada will be credited with the additional years of service required to vest benefits under such plans.

Compensation Arrangements with J. Gary Raley

In the fourth quarter of 2005, the Compensation Committee approved a retention and severance package for J. Gary Raley, the President and Chief Operating Officer of Johnson Polymer, which was sold to BASF Aktiengesellschaft in a transaction that closed on June 30, 2006. Under the retention and severance package, Mr. Raley received a transaction bonus of $400,000 in connection with the divestiture of Johnson Polymer, a retention bonus of $166,000 for his continued service throughout the divestiture process and a severance package of $498,000 (one year base salary plus Mr. Raley’s performance bonus target amount). Mr. Raley received the entire retention and severance package of $1,064,000 as a lump-sum payment on July 15, 2006. In connection with the Johnson Polymer transaction, BASF Aktiengesellschaft reimbursed the Company for one-half, or $83,000, of Mr. Raley’s retention bonus and all $498,000 of the severance package.

During fiscal year 2006, Mr. Raley also received a performance bonus of $142,500, $274,700 pursuant to the Company’s Long-Term Equity Incentive Plan and $21,200 pursuant to the Company’s discretionary profit sharing plan.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are party to various legal proceedings in the ordinary course of our business which may, from time to time, include product liability, intellectual property, contract, environmental and tax claims as well as government or regulatory agency inquiries or investigations. We believe that, taking into account our insurance and reserves and the valid defenses with respect to legal matters currently pending against us, the ultimate resolution of these proceedings will not, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations or cash flows.

ITEM 6. EXHIBITS

10.1	First Amendment to Asset and Equity Interest Purchase Agreement, dated as of June 30, 2006, by and among Johnson Polymer, LLC, JohnsonDiversey Holdings II B.V. and BASF Aktiengesellschaft (incorporated by reference to Exhibit 99.1 to JohnsonDiversey, Inc.’s Form 8-K dated June 30, 2006, File No. 333-97427).
10.2	2006-08 Cash Long-Term Incentive Plan
31.1	Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

	JOHNSONDIVERSEY, INC.
Date: November 9, 2006	/s/ Joseph F. Smorada
	Joseph F. Smorada, Executive Vice President and Chief Financial Officer

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JOHNSONDIVERSEY, INC.

EXHIBIT INDEX

10.1	First Amendment to Asset and Equity Interest Purchase Agreement, dated as of June 30, 2006, by and among Johnson Polymer, LLC, JohnsonDiversey Holdings II B.V. and BASF Aktiengesellschaft (incorporated by reference to Exhibit 99.1 to JohnsonDiversey, Inc.’s Form 8-K dated June 30, 2006, File No. 333-97427)
10.2	2006-08 Cash Long-Term Incentive Plan
31.1	Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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