Diversey 10-Q 2007 Q3 Quarterly report

UNITED STATES

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 28, 2007

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 333-108853

JOHNSONDIVERSEY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	80-0010497
(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 October 2, 2007, there were 3,920 outstanding shares of the registrant’s class A common stock, $0.01 par value, and there were 1,960 outstanding shares of the registrant’s class B common stock, $0.01 par value, which is subject to put and call options.

INDEX

Section	Topic	Page
	Forward-Looking Statements	i
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)
	Consolidated Balance Sheets as of September 28, 2007 and December 29, 2006	1
	Consolidated Statements of Operations for the three and nine months ended September 28, 2007 and September 29, 2006	2
	Consolidated Statements of Cash Flows for the nine months ended September 28, 2007 and September 29, 2006	3
	Notes to Consolidated Financial Statements – September 28, 2007	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosure about Market Risk	35
Item 4	Controls and Procedures	36
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	38
Item 6	Exhibits	38
Signatures		39

Unless otherwise indicated, references to “Holdings,” “the Company,” “we,” “our” and “us” in this quarterly report refer to JohnsonDiversey Holdings, Inc. and its consolidated subsidiaries, and references to “JDI” refer to JohnsonDiversey, Inc., a wholly owned subsidiary of Holdings.

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 execute and complete our restructuring program (“November 2005 Plan”), including outsourcing the majority of IT support worldwide, outsourcing of financial services in Western Europe, workforce reduction, achievement of cost savings, as well as plant closures and 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 manmade disasters, including acts of terrorism, hostilities, war, and other such events that cause business interruptions or 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 (“SEC”).

i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JOHNSONDIVERSEY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

	September 28, 2007			December 29, 2006
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	138,497		$	208,418
Accounts receivable, less allowance of $28,346 and $30,711, respectively		590,399			523,512
Accounts receivable – related parties		35,982			27,478
Inventories		294,128			261,015
Deferred income taxes		22,859			35,256
Other current assets		145,571			121,189
Current assets of discontinued operations		3,834			4,100
Total current assets		1,231,270			1,180,968
Property, plant and equipment, net		433,460			421,712
Capitalized software, net		38,806			61,040
Goodwill, net		1,265,706			1,196,104
Other intangibles, net		302,874			310,413
Long-term receivables – related parties		76,603			71,392
Other assets		65,374			65,312
Non current assets of discontinued operations		9,338			14,369
Total assets	$	3,423,431		$	3,321,310
LIABILITIES, CLASS B COMMON STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	31,118		$	35,649
Current portion of long-term borrowings		10,919			12,954
Accounts payable		339,638			350,170
Accounts payable – related parties		53,354			55,454
Accrued expenses		483,950			465,452
Non current liabilities of discontinued operations		3,897			2,943
Total current liabilities		922,876			922,622
Pension and other post-retirement benefits		238,795			234,659
Long-term borrowings		1,450,290			1,407,470
Long-term payables – related parties		30,649			29,480
Deferred income taxes		75,121			56,132
Other liabilities		97,536			47,167
Non current liabilities of discontinued operations		4,070			4,423
Total liabilities		2,819,337			2,701,953
Commitments and contingencies
Class B common stock subject to put and call options– $0.01 par value; 3,000 shares authorized; 1,960 shares issued and outstanding		570,964			570,475
Stockholders’ equity:
Class A common stock – $0.01 par value; 7,000 shares authorized; 3,920 shares issued and outstanding		—			—
Capital in excess of par value		—			—
Retained deficit		(234,604	)		(129,443	)
Accumulated other comprehensive income		267,734			178,325
Total stockholders’ equity		33,130			48,882
Total liabilities, class B common stock and stockholders’ equity	$	3,423,431		$	3,321,310

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

1

JOHNSONDIVERSEY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands)

	Three Months Ended						Nine Months Ended
	September 28, 2007			September 29, 2006			September 28, 2007			September 29, 2006
	(unaudited)						(unaudited)
Net sales:
Net product and service sales	$	767,289		$	717,408		$	2,227,192		$	2,122,546
Sales agency fee income		24,149			22,063			68,824			65,677
		791,438			739,471			2,296,016			2,188,223
Cost of sales		450,769			426,685			1,324,287			1,263,961
Gross profit		340,669			312,786			971,729			924,262
Selling, general and administrative expenses		284,853			279,350			845,449			873,243
Research and development expenses		16,431			15,402			48,936			44,744
Restructuring expenses		9,133			30,792			15,452			108,476
Operating profit (loss)		30,252			(12,758	)		61,892			(102,201	)
Other (income) expense:
Interest expense		38,517			37,333			114,365			125,267
Interest income		(2,260	)		(3,064	)		(7,708	)		(9,622	)
Other (income) expense, net		(430	)		1,301			(32	)		3,169
Loss from continuing operations before income taxes and minority interests		(5,575	)		(48,328	)		(44,733	)		(221,015	)
Income tax (benefit) provision		20,915			1,057			60,719			(47,884	)
Loss from continuing operations before minority interests		(26,490	)		(49,385	)		(105,452	)		(173,131	)
Minority interests in net income of subsidiaries		—			20			—			25
Loss from continuing operations		(26,490	)		(49,405	)		(105,452	)		(173,156	)
Income from discontinued operations, net of income taxes of $8, $(18,036), $159 and $113,102		10			27,612			236			269,213
Net income (loss)	$	(26,480	)	$	(21,793	)	$	(105,216	)	$	96,057

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

2

JOHNSONDIVERSEY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

	Nine Months Ended
	September 28, 2007			September 29, 2006
	(unaudited)
Cash flows from operating activities:
Net income (loss)	$	(105,216	)	$	96,057
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities–
Depreciation and amortization		95,831			117,094
Amortization of intangibles		21,339			43,021
Amortization and write-off of debt issuance costs		3,821			4,865
Interest accrued on long-term receivables- related parties		(1,926	)		(1,837	)
Interest accreted on notes payable		34,454			31,171
Deferred income taxes		26,106			316
(Gain) loss on disposal of discontinued operations		880			(251,835	)
Gain from divestitures		(268	)		(1,342	)
(Gain) loss on property, plant and equipment disposals		(4,323	)		819
Other		10,853			14,660
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses–
Accounts receivable securitization		(12,600	)		(52,900	)
Accounts receivable		(32,965	)		(18,668	)
Inventories		(23,005	)		(23,054	)
Other current assets		(16,960	)		(8,759	)
Other assets		5,462			3,411
Accounts payable and accrued expenses		(20,435	)		8,128
Other liabilities		17,334			(22,651	)
Net cash used in operating activities		(1,618	)		(61,504	)
Cash flows from investing activities:
Capital expenditures		(63,979	)		(57,305	)
Expenditures for capitalized computer software		(4,871	)		(5,875	)
Proceeds from property, plant and equipment disposals		10,258			12,580
Acquisitions of businesses		(3,861	)		(10,551	)
Proceeds from divestitures, net of transaction costs		2,351			461,645
Net cash provided by (used in) investing activities		(60,102	)		400,494
Cash flows from financing activities:
Repayments of short-term borrowings		(7,308	)		(4,439	)
Repayments of long-term borrowings		(6,413	)		(327,560	)
Payment of debt issuance costs		(500	)		—
Dividends paid		—			(49	)
Net cash used in financing activities		(14,221	)		(332,048	)
Effect of exchange rate changes on cash and cash equivalents		6,020			(5,760	)
Change in cash and cash equivalents		(69,921	)		1,182
Beginning balance1		208,418			162,119
Ending balance2	$	138,497		$	163,301
Supplemental cash flows information
Cash paid during the year:
Interest	$	56,917		$	73,107
Income taxes		19,644			31,911

¹ Includes cash and cash equivalents for discontinued operations of $3,828 at the beginning of the nine-month period ended September 29, 2006.

² Includes cash and cash equivalents for discontinued operations of $783 at September 29, 2006.

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

3

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

1.Description of the Company

JohnsonDiversey Holdings, Inc. (“Holdings” or the “Company”) directly owns all of the shares of JohnsonDiversey, Inc. (“JDI”), except for one share which is owned by S.C. Johnson & Son, Inc. (“SCJ”). The Company is a holding company and its sole business interest is the ownership and control of JDI and its subsidiaries. JDI is a global marketer and manufacturer of commercial, industrial and institutional building maintenance and sanitation products.

Except where noted, the consolidated financial statements and related notes, excluding the consolidated statements of cash flows, reflect the results of continuing operations excluding the divestiture of Chemical Methods Associates (“CMA”), the Polymer Business segment (“Polymer Business”), and Whitmire Micro-Gen Research Laboratories, Inc. (“Whitmire”) (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 SEC. 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 28, 2007 and its results of operations for the three and nine month periods ended September 28, 2007 and cash flows for the nine month period ended September 28, 2007 have been included. The results of operations for the three and nine month periods ended September 28, 2007 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 29, 2006.

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

Certain other 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 sheet, results of operations or cash flows.

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

3.New Accounting Standards

In January 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 is intended to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. It also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value, and it does not establish requirements for recognizing dividend income, interest income or interest expense. It also does not eliminate disclosure requirements included in other accounting standards. The provisions of SFAS 159 are effective for the fiscal year beginning after November 15, 2007, which for the Company is its fiscal year 2008. The Company is currently evaluating the impact of the provisions of SFAS No. 159.

4

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

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 consolidated balance sheets 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 consolidated balance sheets (with limited exceptions). Under SFAS No. 158, the Company will also 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 consolidated balance sheets will be effective in fiscal year 2008. If the Company had adopted SFAS No. 158 at December 29, 2006, it would have recorded an increase in pension and post-retirement benefit liabilities of approximately $67,280, substantially all of which would be offset to accumulated other comprehensive income. 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.

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” (“SFAS No. 157”). SFAS No. 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 SFAS No. 157 are effective for the fiscal year beginning after November 15, 2007, which for the Company is its fiscal year 2008. The Company is currently evaluating the impact of the provisions of SFAS No. 157.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109”(“FIN No. 48”), 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 adopted FIN No. 48 beginning in fiscal year 2007 (see Note 10).

4.Master Sales Agency and Umbrella Agreements

Master Sales Agency Agreement—May 2002

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, which was fully amortized at May 2007.

An agency fee is paid by Unilever to JDI in exchange for its sales agency services. An additional fee is payable by Unilever to JDI in the event that conditions for full or partial termination of the Sales Agency Agreement are met. JDI elected, and Unilever agreed, to partially terminate the Sales Agency Agreement in several territories resulting in payment by Unilever to JDI of additional fees. In association with the partial terminations, JDI recognized sales agency fee income of $2,229 and $915 during the three months ended September 28, 2007 and September 29, 2006, respectively; and $2,947 and $990 during the nine months ended September 28, 2007 and September 29, 2006, respectively.

Umbrella Agreement—October 2007

In October 2007, the Company and Unilever agreed on an Umbrella Agreement (the “Umbrella”), to replace the previous Sales Agency Agreement, which includes; i) a new agency agreement with terms similar to the previous Sales Agency Agreement, covering Ireland, the United Kingdom, Portugal and Brazil, and ii) a Master Sub-License Agreement (the “License Agreement”) under which Unilever has agreed to grant 31 of the Company’s subsidiaries a license to produce and sell professional size packs of Unilever’s consumer brand cleaning products. The entities covered by the License Agreement will also enter agreements with Unilever to distribute Unilever’s consumer branded products. The Umbrella becomes effective January 1, 2008, and, unless otherwise terminated or extended, will expire on December 31, 2017.

5

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

5.Acquisitions

In March 2007, JDI purchased an additional 6% interest in a North American business that provides purchasing and category management tools to certain of the Company’s end-users for $2,550. JDI previously held 9% of the outstanding shares. The transaction is not considered material to the Company’s consolidated financial position, results of operations or cash flows.

In February 2006, JDI purchased the remaining 15% of the outstanding shares of Shanghai JohnsonDiversey, Ltd., JDI’s Chinese operating entity, for $3,516. JDI 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.

6.Divestitures

On August 3, 2007, in conjunction with its November 2005 Plan, the Company divested of certain of its Auto-Chlor branch operations in the eastern United States for $2,450, resulting in a gain of $1,064, net of taxes and related costs. The gain is included within selling, general and administrative expenses in the consolidated statements of operations. These branch operations marketed and sold low-energy dishwashing systems, kitchen chemicals, laundry and housekeeping products and services to food service, lodging, healthcare and institutional customers. The purchase price is subject to various post-closing adjustments.

In September 2006, the Company determined that its Auto-Chlor branch operation in the southern United States 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 selling, general and administrative expenses in the consolidated statements of operations. The assets and liabilities of the business were not considered material to the Company, and are included in the Company’s North American segment.

7.Discontinued Operations

Chemical Methods Associates

On September 30, 2006, in connection with its November 2005 Plan (see Note 12), the Company sold its equity interest in CMA to Ali SpA, an Italian-based manufacturer of equipment for the food service industry, for $17,000. The purchase price was subject to various post-closing adjustments, principally with regard to changes in working capital. In December 2006, the Company recorded additional purchase price of approximately $300 based on its preliminary assessment of closing working capital. The sale resulted in a gain of $2,322 ($497 after tax), net of related costs. CMA was a non-core asset of the Company.

During the nine months ended September 28, 2007, the Company finalized and collected the closing working capital adjustment and recorded additional closing costs, resulting in a reduction to the gain of $125 ($75 after tax). Further adjustments are not expected to be significant.

Income, net of tax, and net sales from discontinued operations relating to CMA were $962 and $5,683, respectively, for the three months ended September 29, 2006 and $1,813 and $16,905, respectively, for the nine months ended September 29, 2006.

6

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

Polymer Business

On June 30, 2006, Johnson Polymer, LLC (“JP”) and JohnsonDiversey Holdings II B.V. (“Holdings II”), an indirectly owned subsidiary of JDI, 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 are 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 by up to six months. In December 2006, the Company and BASF finalized purchase price adjustments related to the net asset value and the Company received an additional $4,062.

The Polymer Business developed, manufactured and sold 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 $352,907 ($256,693 after tax), net of related costs.

The Company finalized and paid certain pension related adjustments, adjusted net assets disposed and recorded additional closing costs, reducing the gain by $243 ($145 after tax) and $1,342 ($805 after tax), during the three and nine months ended September 28, 2007, respectively. Further adjustments are not expected to be significant.

In association with the tolling agreement with BASF, the Company recorded income from discontinued operations, net of tax, of $238 and $1,116, respectively, during the three and nine months ended September 28, 2007.

Excluding the net gain on divestiture, income, net of tax, and net sales, excluding sales to the Company, from discontinued operations relating to the Polymer Business were $0 and $195, respectively, for the three months ended September 29, 2006, and $15,169 and $188,580, respectively, for the nine months ended September 29, 2006.

Whitmire Micro-Gen Business

In June 2004, the Company completed the sale of Whitmire to Sorex Holdings, Ltd., a European pest-control manufacturer headquartered in the United Kingdom, for $46,000 in 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 in the three months ended March 31, 2006. The income is included as a component of income from discontinued operations in the consolidated statements of operations.

8.Accounts Receivable Securitization

JDI 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 JDI. JWPRC was formed for the sole purpose of buying and selling receivables generated by JDI and certain of its subsidiaries party to the Receivables Facility. JWPRC, in turn, sells an undivided interest in the accounts receivable to a nonconsolidated financial institution (the “Conduit”) for an amount equal to the value of all eligible receivables (as defined under the receivables sale agreement between JWPRC and the Conduit) less the applicable reserve. The total potential for securitization of trade receivables under this program at September 28, 2007 and December 29, 2006 was $75,000.

As of September 28, 2007 and December 29, 2006, the Conduit held $51,700 and $64,300, respectively, of accounts receivable that are not included in the accounts receivable balance reflected in the Company’s consolidated balance sheet.

7

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

As of September 28, 2007 and December 29, 2006, JDI had a retained interest of $102,825 and $78,055, respectively, in the receivables of JWPRC. The retained interest is included in the accounts receivable balance and is reflected in the consolidated balance sheet at estimated fair value.

9.Indebtedness and Credit Arrangements

In June 2007, JDI’s senior secured credit facilities were amended to reduce the interest rate payable on the term B loan facility and the delayed draw term loan facility from LIBOR plus 250 basis points to LIBOR plus 200 basis points, thereby reducing borrowing costs over the remaining life of the credit facilities. The Company incurred costs of $500 in relation to this amendment which have been capitalized and are being amortized over the remaining term of the facilities.

10.Income Taxes

The Company adopted the provisions of FIN No. 48 at the beginning of the 2007 fiscal year. FIN No. 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. As a result of adoption of FIN No. 48, an adjustment of approximately $800 was recognized as an increase to beginning retained earnings. As of the adoption date, the Company had gross unrecognized tax benefits for uncertain tax positions of $80,100, including positions impacting only the timing of tax benefits, of which $32,700, if recognized, would favorably affect the effective income tax rate in future periods (after considering the impact of valuation allowances). Additionally, $4,800 of unrecognized tax benefits would, if recognized, reduce goodwill. The Company recognizes interest and penalties related to the underpayment of income taxes as a component of income tax expense. As of the beginning of the 2007 fiscal year, the Company had accrued interest and penalties of $7,100 related to unrecognized tax benefits. The Company anticipates a charge to income tax expense of approximately $14,000 for the 2007 fiscal year related to uncertain income tax positions, primarily related to certain intercompany transactions and a preliminary income tax assessment received in the quarter ended September 28, 2007.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and international jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company has substantially completed tax audits for all U.S. federal income tax matters for years through 2003 and generally concluded all other income tax matters globally for years through 2001.

The Company is currently under audit by various state and international tax authorities and it is reasonably possible all or a portion of these audits may conclude during 2007, and it is reasonably possible a reduction in the unrecognized tax benefits may occur; however, quantification of an estimated range cannot be made at this time.

The Company reported an effective income tax rate of -135.7% on the pre-tax loss from continuing operations for the nine month period ended September 28, 2007. The high effective income tax rate is primarily the result of increased valuation allowances against deferred tax assets for U.S. and international tax loss and credit carryforwards, increased valuation allowances against other net deferred tax assets, and increases in tax contingency reserves.

11.Inventories

The components of inventories are summarized as follows:

	September 28, 2007		December 29, 2006
Raw materials and containers	$	64,302	$	59,530
Finished goods		229,826		201,485
Total inventories	$	294,128	$	261,015

8

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

Inventories are stated in the consolidated balance sheets net of allowance for excess and obsolete inventory of $33,997 and $29,865 on September 28, 2007 and December 29, 2006, respectively.

12.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 and CMA, the Company is considering the potential divestiture of, or exit from, certain other non-core or underperforming businesses.

In connection with the November 2005 Plan, the Company recognized liabilities of $8,986 and $14,764 for the involuntary termination of 73 and 195 employees, most of which is associated with the European business segment, and an additional $147 and $762 for other restructuring costs during the three and nine months ended September 28, 2007, respectively.

In addition, and 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 28, 2007 were as follows:

	Employee- Related			Other			Total
Liability balances as of December 29, 2006	$	68,973		$	1,252		$	70,225
Liability recorded as restructuring expense		1,562			615			2,177
Liability adjustments1		—			(52	)		(52	)
Cash paid2		(13,643	)		—			(13,643	)
Liability balances as of March 30, 2007	$	56,892		$	1,815		$	58,707
Liability recorded as restructuring expense		4,216			—			4,216
Liability adjustments3		—			(18	)		(18	)
Cash paid4		(14,510	)		(127	)		(14,637	)
Liability balances as of June 29, 2007	$	46,598		$	1,670		$	48,268
Liability recorded as restructuring expense		8,986			147			9,133
Cash paid5		(10,498	)		(195	)		(10,693	)
Liability balances as of September 28, 2007	$	45,086		$	1,622		$	46,708

¹ Liability adjustments include reductions based on clarification of original assumptions, of which $56 resulted in reduction of restructuring expense and $4 was reclassified to other liabilities.

² Cash paid is reduced by $4 due to the effects of foreign exchange.

³ Liability adjustments include reductions based on clarification of original assumptions, of which $18 resulted in reduction of restructuring expense.

⁴ Cash paid is increased by $3 due to the effects of foreign exchange.

⁵ Cash paid is decreased by $350 due to the effects of foreign exchange.

9

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

In connection with the November 2005 Plan, the Company recorded asset impairment charges of $4,918 and $10,770 for the three and nine months ended September 28, 2007, respectively. In addition, and in connection with the November 2005 Plan, the Company recorded asset impairment charges of $6,167 and $52,628 for the three and nine months ended September 29, 2006, respectively. The impairment charges are included in selling, general and administrative costs.

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 $315 and $803 representing contractual obligations associated with involuntary terminations and lease payments on closed facilities during the three and nine months ended September 28, 2007, respectively. As of September 28, 2007, the Company had remaining exit and acquisition-related restructuring reserves of $1,847. 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, respectively. 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.

13.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 28, 2007			September 29, 2006			September 28, 2007			September 29, 2006
Foreign currency translation gain	$	(4,809	)	$	(1,824	)	$	(8,754	)	$	(10,454	)
Forward contracts loss		3,979			3,236			7,610			13,613
Other, net		400			(111	)		1,112			10
	$	(430	)	$	1,301		$	(32	)	$	3,169

10

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

14.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 28, 2007 and September 29, 2006 are as follows:

	Defined Pension Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2007			September 29, 2006			September 28, 2007			September 29, 2006
Service cost	$	8,016		$	7,667		$	23,480		$	24,555
Interest cost		9,517			8,707			28,105			26,802
Expected return on plan assets		(10,375	)		(8,736	)		(30,680	)		(27,070	)
Amortization of net loss		2,042			1,763			5,457			5,911
Amortization of transition obligation		102			60			302			180
Amortization of prior service credit		(177	)		(167	)		(520	)		(489	)
Curtailments and settlements		2,950			—			7,301			(2,628	)
Net periodic pension cost	$	12,075		$	9,294		$	33,445		$	27,261
	Other Post-Employment Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2007			September 29, 2006			September 28, 2007			September 29, 2006
Service cost	$	601		$	538		$	1,792		$	1,958
Interest cost		1,418			1,309			4,241			3,945
Amortization of net loss		350			205			1,051			848
Amortization of prior service credit		(47	)		(47	)		(140	)		(140	)
Curtailments and settlements		—			—			(129	)		(492	)
Net periodic benefit cost	$	2,322		$	2,005		$	6,815		$	6,119

The Company made contributions to its defined benefit pension plans of $26,158 and $18,013 during the three months ended September 28, 2007 and September 29, 2006, respectively; and $43,469 and $40,848 during the nine months ended September 28, 2007 and September 29, 2006, respectively.

In July 2007, the Company recognized a settlement of defined benefits to former North American Professional and Polymer employees, resulting in related losses of $1,900 and $500, respectively, in the three months ended September 28, 2007. The Company recorded the Professional losses, which are related to the November 2005 Plan, in selling, general and administrative expenses in the consolidated statement of operations. The Polymer related losses were recorded as a component of discontinued operations in the consolidated statement of operations.

In July 2007, the Company’s Italian subsidiary recognized curtailment losses of $550 in the three months ended September 28, 2007 relating to legislative changes to the mandatory termination indemnity program. The Company recorded the losses in selling, general and administrative expenses in the consolidated statement of operations.

In June 2007, the Company recognized a settlement of defined benefits to former North American Professional and Polymer employees, resulting in related losses of $3,500 and $600, respectively, in the three months ended June 29, 2007. The Company recorded the Professional losses, which are related to the November 2005 Plan, in selling, general and administrative expenses in the consolidated statement of operations. The Polymer related losses were recorded as a component of discontinued operations in the consolidated statement of operations.

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 nine months ended September 29, 2006.

11

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

15.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. 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.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R),“Share-Based Payment” (“SFAS 123(R)”) using the modified-prospective-transition method. Under this transition method, compensation cost recognized includes compensation costs for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123(R). The Company recorded compensation expense of $129 and $157 during the three months ended September 28, 2007 and September 29, 2006, respectively; and $386 and $471 during the nine months ended September 28, 2007 and September 29, 2006, respectively.

The Company also recorded compensation expense of $39 and $137 related to restricted stock during the three months ended September 28, 2007 and September 29, 2006, respectively; and $117 and $225 for the nine months ended September 28, 2007 and September 29, 2006, respectively.

16.Comprehensive Income (Loss)

Comprehensive income (loss) for the three and nine month periods ended September 28, 2007 and September 29, 2006 was as follows:

	Three Months Ended						Nine Months Ended
	September 28, 2007			September 29, 2006			September 28, 2007			September 29, 2006
Net income (loss)	$	(26,480	)	$	(21,793	)	$	(105,216	)	$	96,057
Foreign currency translation adjustments		58,088			6,660			89,725			40,459
Adjustments to minimum pension liability, net of tax		—		��	—			—			22,939
Unrealized gains (losses) on derivatives, net of tax		(1,618	)		(548	)		(316	)		874
Total comprehensive income (loss)	$	29,990		$	(15,681	)	$	(15,807	)	$	160,329

17.Stockholders’ Agreement and Class B Common Stock Subject to Put and Call Options

In connection with the acquisition of the DiverseyLever business, the Company 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 the Company’s shares held by the stockholders;

• the Company’s 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 the Company 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.

12

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

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 the Company to purchase the shares then beneficially owned by Unilever. The Company has the option to purchase the shares beneficially owned by Unilever at any time after May 3, 2010. Any exercise by the Company 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, the Company’s obligations in connection with a put by Unilever are conditioned on a refinancing of JDI’s and the Company’s indebtedness, including indebtedness under JDI’s senior subordinated notes and JDI’s senior secured credit facilities. In connection with the put, the Company 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 the Company 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 the Company 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 the Company 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 JDI’s and the Company’s indebtedness.

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

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

• require the Company to sell its Japan businesses or any other business or businesses that may be identified for sale by a special committee of the Company’s 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 JDI’s and the Company’s indebtedness.

The price for the Company’s shares subject to a put or call option will be based on the Company’s enterprise value at the time the relevant option is exercised, plus its cash and minus its indebtedness. The Company enterprise value cannot be less than eight times the EBITDA of the Company 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 the Company, 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 the Company 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, the Company 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 the Company’s outstanding shares. The amount of each payment will be equal to 25% of the amount by which the cumulative cash flows of the Company 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:

• $975,000 in 2007;

13

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

• $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 the Company and JDI’s senior indebtedness including, without limitation, the senior discount notes of the Company, JDI’s senior subordinated notes and JDI’s senior secured credit facilities.

Transfer of Shares. Under the Stockholders’ Agreement, a stockholder controlled by Unilever may transfer its shares of the Company to another entity of which Unilever owns at least an 80% interest, and a stockholder controlled by Holdco may transfer its shares of the Company 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 the Company 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 JDI’s license agreement with SCJ and the sale not constituting a change of control under the JDI’s senior secured credit facilities. Further, the purchaser of the Company’s 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 the Company 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 the Company of its intention to sell its shares and the Company 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 the Company 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 the Company, and the Company has a right of first refusal to purchase the shares. The price for the shares under the Company’s 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 the Company had previously purchased shares held by Unilever. The premium would be paid by Holdco. Notwithstanding the foregoing, if Unilever has not notified the Company 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 the Company to the Company 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 the Company (the “Additional Shares”) equal to the lesser of (i) 1.5% of the total outstanding shares of the Company 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.

14

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

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.

The Company is a licensee of certain chemical production technology used globally. The license agreement provides for guaranteed minimum royalty payments during a term ending on December 31, 2014. Under the terms of agreement and based on current financial projections, the Company does not expect to meet the minimum guaranteed payments. In accordance with the requirements of SFAS No. 5, the Company has estimated its possible range of loss as $1,656 to $3,446 and, in accordance with FASB Interpretation No. 14, has recorded a contingent loss of $1,656 in selling, general and administrative expenses during the three months ended June 29, 2007, and was unchanged during the three months ended September 28, 2007.

15

JOHNSONDIVERSEY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2007

(unaudited)

19.Segment Information

Business segment information is summarized as follows:

	Three Months Ended September 28, 2007
	North America			Europe			Japan		Latin America			Asia Pacific			Eliminations / Corporate			Total Company
Net sales	$	204,552		$	408,095		$	68,251	$	56,658		$	57,534		$	(3,652	)	$	791,438
Operating profit (loss)		21,643			22,183			318		5,308			1,753			(20,953	)		30,252
Depreciation and amortization		8,271			15,856			3,661		2,030			2,117			9,635			41,570
Interest expense		2,801			17,419			175		768			833			16,521			38,517
Interest income		1,215			2,728			1		4			166			(1,854	)		2,260
Total assets		897,546			2,051,602			265,897		200,665			199,224			(191,503	)		3,423,431
Goodwill, net		173,639			800,638			101,876		82,586			65,222			41,745			1,265,706
Capital expenditures, including capitalized computer software		6,201			8,397			654		1,460			2,643			4,187			23,542
Long Lived Assets		286,981			1,112,008			150,732		117,365			94,935			295,593			2,057,614
	Three Months Ended September 29, 2006
	North America			Europe			Japan		Latin America			Asia Pacific			Eliminations / Corporate			Total Company
Net sales	$	206,415		$	368,443		$	72,584	$	47,861		$	49,159		$	(4,991	)	$	739,471
Operating profit (loss)		1,054			(3,075	)		2,866		2,845			(690	)		(15,758	)		(12,758	)
Depreciation and amortization		8,359			13,183			1,912		2,209			2,007			10,658			38,328
Interest expense		2,706			17,568			210		1,067			907			14,875			37,333
Interest income		3,268			2,733			—		(23	)		128			(3,042	)		3,064
Total assets		1,149,939			1,872,787			272,860		177,604			168,597			(349,021	)		3,292,766
Goodwill, net		175,103			729,264			113,058		75,156			55,025			41,932			1,189,538
Capital expenditures, including capitalized computer software		5,571			6,721			1,584		2,405			1,344			4,688			22,313
Long Lived Assets		303,140			1,032,157			155,196		106,983			81,278			312,736			1,991,490
	Nine Months Ended September 28, 2007
	North America			Europe			Japan		Latin America			Asia Pacific			Eliminations / Corporate			Total Company
Net sales	$	595,371		$	1,184,761		$	202,817	$	160,700		$	166,174		$	(13,807	)	$	2,296,016
Operating profit (loss)		25,624			67,705			6,063		13,387			8,015			(58,902	)		61,892
Depreciation and amortization		23,955			42,454			6,628		6,239			6,060			31,834			117,170
Interest expense		8,562			52,237			551		2,185			2,599			48,231			114,365
Interest income		5,137			8,190			77		21			445			(6,162	)		7,708
Total assets		897,546			2,051,602			265,897		200,665			199,224			(191,503	)		3,423,431
Goodwill, net		173,639			800,638			101,876		82,586			65,222			41,745			1,265,706
Capital expenditures, including capitalized computer software		14,185			29,250			2,423		6,580			6,594			9,818			68,850
Long Lived Assets		286,981			1,112,008			150,732		117,365			94,935			295,593			2,057,614
	Nine Months Ended September 29, 2006
	North America			Europe			Japan		Latin America			Asia Pacific			Eliminations / Corporate			Total Company
Net sales	$	634,169		$	1,068,669		$	214,801	$	142,766		$	144,377		$	(16,559	)	$	2,188,223
Operating profit (loss)		(48,515	)		(6,704	)		7,659		11,996			2,948			(69,585	)		(102,201	)
Depreciation and amortization		65,243			44,350			5,679		6,057			5,731			33,055			160,115
Interest expense		7,904			51,918			651		3,625			2,742			58,427			125,267
Interest income		10,736			8,749			8		208			327			(10,406	)		9,622
Total assets		1,149,939			1,872,787			272,860		177,604			168,597			(349,021	)		3,292,766
Goodwill, net		175,103			729,264			113,058		75,156			55,025			41,932			1,189,538
Capital expenditures, including capitalized computer software		12,555			22,880			3,058		5,609			5,009			14,069			63,180
Long Lived Assets		303,140			1,032,157			155,196		106,983			81,278			312,736			1,991,490

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

Executive Overview

The following discussion and analysis describes material changes in the financial condition and results of operations of JohnsonDiversey Holdings, Inc. and its consolidated subsidiaries since December 29, 2006. This discussion should be read in conjunction with our unaudited consolidated financial statements as of, and for the quarterly period ended, September 28, 2007, our annual report on Form 10-K for the year ended December 29, 2006, and the section entitled “Forward-Looking Statements” located before Part I of this report.

We operate our business through Holdings’ sole subsidiary, JDI, and its subsidiaries. We are a leading global marketer and manufacturer of cleaning, hygiene and appearance enhancing products, equipment and related services for the institutional and industrial cleaning and sanitation market. We have net product and service sales (“net sales”) in more than 160 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.

Except where noted, and except for discussion on the consolidated statements of cash flows, the management discussion and analysis below reflects the results of continuing operations, specifically excluding the results from operations and the divestitures of the Chemical Methods Associates subsidiary (“CMA”), the former Polymer Business segment (“Polymer Business”), and Whitmire Micro-Gen Research Laboratories, Inc. (“Whitmire”) as discussed in Note 7 to the consolidated financial statements.

In the three and nine months ended September 28, 2007, net sales increased by $52.0 million and $107.8 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 increased 3.9% for the three months ended September 28, 2007 compared to the third quarter of 2006, and our 2007 year-to-date net sales increased 2.6%.

	Three Months Ended							Nine Months Ended
(dollars in thousands)	September 28, 2007		September 29, 2006			Change		September 28, 2007		September 29, 2006			Change
Net sales	$	791,438	$	739,471		7.0	%	$	2,296,016	$	2,188,223		4.9	%
Variance due to:
Foreign currency exchange				37,140							90,169
Acquisitions and divestitures				(14,610	)						(39,984	)
				22,530							50,185
	$	791,438	$	762,001		3.9	%	$	2,296,016	$	2,238,408		2.6	%

Net sales for the three months ended September 28, 2007 and 2007 year-to-date net sales were 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 this impact as well as the impact of foreign currency exchange rates, and acquisitions and divestitures, the growth rate was 4.0% and 4.1% for the third quarter and the first nine months of 2006, respectively. Outside of North America and Japan, we continue to show net sales growth in Europe, Latin America, and Asia Pacific driven primarily by increased sales volume, selective price increases in certain business sectors and global geographic areas, and the continued expansion of developing markets in Asia Pacific, Latin America, Central and Eastern Europe, Africa and the Middle East.

Our gross profit percentage has shown continuous improvement in 2007, improving by 240 basis points compared to the fourth quarter of 2006, 130 basis points compared to the first quarter of 2007, and 80 basis points compared to the second quarter of 2007. This was due to selective price increases and stabilization of raw materials prices, in part reflecting early success from our Global Strategic Sourcing Initiative, and the favorable impact of our cost reduction programs. Our gross profit percentages for the five most recent fiscal quarters are set forth below:

Three Months Ended
September 28, 2007		June 29, 2007		March 30, 2007		December 29, 2006		September 29, 2006
43.0	%	42.2	%	41.7	%	40.6	%	42.3	%

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In November 2005, in response to structural changes in raw material markets that gave rise to 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.

During the third fiscal quarter of 2007, we continued to make significant progress with the operational restructuring of our Company in accordance with the November 2005 Plan. In particular, activity of significance during the quarter was:

• commenced the closure of our factory and other related assets in Tsukuba (near Tokyo), Japan;

• continued the transition of certain finance activities in Western Europe to a third party provider, and globally, continued the transition of payroll and human resource information systems to new providers;

• substantially completed the first phase of optimizing our North American warehouse operations with the opening a of new warehouse and distribution center in Sturtevant, Wisconsin, and continued further redesign of supply chain throughout the rest of North America;

• continued progress on various supply chain optimization projects to improve capacity utilization and efficiency; and

• continued a redesign of our European operations to strengthen the focus of our local organizations on sales and marketing execution.

In connection with the aforementioned and other activities under the November 2005 Plan, we recorded restructuring charges of approximately $9.1 million and $15.5 million, which consisted primarily of severance costs in the third quarter and nine months ended September 28, 2007, respectively. In addition, we recorded additional selling, general and administrative costs of approximately $24.7 million and $69.0 million in the third quarter and nine months ended September 28, 2007, respectively. For the third quarter, these costs consist primarily of $6.0 million related to asset write-downs, $5.6 million related to consulting services and $5.0 million related to human resource costs. For the nine months ended September 28, 2007, these costs consist primarily of $16.2 million related to human resource costs, $12.4 million related to consulting services, and $12.0 million related to IT costs.

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. The following are the accounting policies that we believe are most critical to our financial condition and results of operations and that involve management’s judgment and/or evaluation of inherent uncertain factors:

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. Revenues are reflected in the consolidated statement of operations net of taxes collected from customers and remitted to governmental authorities.

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, product life cycle, 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 separately funded pension and post-retirement plans in various countries, including the United States. 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. We use actuarial assumptions that 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 conduct an impairment review on long-lived assets, including non-amortizing intangible assets and goodwill, 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 prepare a future undiscounted cash flow analysis, determine any impairment impact and record, if necessary, a reduction in the affected asset(s). In connection with the November 2005 Plan, we recorded impairment charges on certain intangible assets and long-lived assets of $6.4 million and $9.8 million, during the three and nine months ended September 28, 2007, respectively.

New Accounting Pronouncements

In January 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 is intended to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. It also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value, and it does not establish requirements for recognizing dividend income, interest income or interest expense. It also does not eliminate disclosure requirements included in other accounting standards. The provisions of SFAS 159 are effective for the fiscal year beginning after November 15, 2007, which for us is our fiscal year 2008. We are currently evaluating the impact of the provisions of SFAS No. 159.

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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 consolidated balance sheets 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 consolidated balance sheets (with limited exceptions). Under SFAS No. 158, we will also 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 consolidated balance sheets will be effective in fiscal year 2008. If we had adopted SFAS No. 158 at December 29, 2006, we would have recorded an increase in pension and post-retirement benefit liabilities of approximately $67.3 million, substantially all of which would be offset to accumulated other comprehensive income. 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.

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” (“SFAS No. 157”). SFAS No. 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 SFAS No. 157 are effective for the fiscal year beginning after November 15, 2007, which for us is our fiscal year 2008. We are currently evaluating the impact of the provisions of SFAS No. 157.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN No. 48”), 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. We adopted FIN No. 48 beginning in fiscal year 2007. See Note 10 (Income Taxes) to our consolidated financial statements, included elsewhere in this report, for further discussion.

Three Months Ended September 28, 2007 Compared to Three Months Ended September 29, 2006

Net Sales:

	Three Months Ended				Change
(dollars in thousands)	September 28, 2007		September 29, 2006		Amount		Percentage
Net product and service sales	$	767,289	$	717,408	$	49,881	7.0	%
Sales agency fee income		24,149		22,063		2,086	9.5	%
	$	791,438	$	739,471		51,967	7.0	%

• The weakening of the U.S. dollar against the euro and certain other foreign currencies contributed $35.4 million to the increase in net sales.

• Excluding the impact of foreign currency exchange rates, acquisitions and divestitures, and sales agency fee income, net sales increased by 3.9% for the three months ended September 28, 2007 compared to the same period in the prior year, primarily due to strong growth in our European, Latin America, and Asia Pacific regions where growth rates were 5.0% or higher. These gains were partially offset by declining sales in Japan.

• In Europe, which includes our African and Middle Eastern markets, net sales increased 5.0% in the third quarter of 2007 compared to the same period in the prior year. This growth was primarily due to continued higher sales volumes throughout most of the countries in our European region.

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• In Latin America, net sales increased 11.4% in the third quarter of 2007 compared to the same period in the prior year, primarily due to higher sales volumes throughout most of the region, particularly in Brazil and Argentina, with growth from the food and beverage business, food service, and indirect channels.

• In Asia Pacific, net sales increased 11.9% in the third quarter of 2007 compared to the same period in the prior year, led by continued strong sales volume growth in China and India in the food and beverage, lodging, and quick-service restaurant sectors.

• In Japan, net sales decreased 4.8% in the third quarter of 2007 compared to the same period in the prior year, primarily due to a decline in the facilities solution sector.

• In North America net sales increased 1.1% in the third quarter of 2007 compared to the same period in the prior year, excluding the impact of divestitures. Excluding the impact of the withdrawal from the service-oriented laundry and ware washing business, and the divestitures of other non-core businesses, our North American net sales increased 2.4%.

• Excluding a $1.7 million increase from the weakening of the U.S. dollar against the euro and certain other foreign currencies, net sales under our Sales Agency Agreement increased by $0.3 million, or 1.5%, for the three month period ended September 28, 2007 compared to the same period in the prior year, primarily due to an increase in partial termination fees of $1.2 million in our European segment.

In October 2007, the Sales Agency Agreement with Unilever, which is set to expire in December 2007, was replaced by an Umbrella Agreement, which includes: i) a new agency agreement with terms similar to the previous Sales Agency Agreement, covering Ireland, the United Kingdom, Portugal and Brazil, and ii) a Master Sub-License Agreement (the “License Agreement”) under which Unilever has agreed to grant 31 of our subsidiaries a license to produce and sell professional size packs of Unilever’s consumer brand cleaning products. The entities covered by the License Agreement will also enter agreements with Unilever to distribute Unilever’s consumer branded products. The Umbrella Agreement becomes effective January 1, 2008, and, unless otherwise terminated or extended, will expire on December 31, 2017.

Gross Profit:

	Three Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount		Percentage
Gross Profit	$	340,669		$	312,786		$	27,883	8.9	%
Gross profit as a percentage of net sales:		43.0	%		42.3	%

• The weakening of the U.S. dollar against the euro and certain other foreign currencies increased gross profit by $16.2 million for the three months ended September 28, 2007 compared to the same period in the prior year.

• Excluding the impact of foreign currency exchange rates, gross profit in the third quarter of fiscal year 2007 compared to the third quarter of fiscal year 2006 increased by $11.7 million, primarily due to higher sales volumes in our European, Latin America, and Asia Pacific regions as mentioned above.

• Our gross profit percentage increased by 70 basis points for the third quarter of 2007 compared to the third quarter of 2006, mainly due to improved margins in Europe, North America, and Asia Pacific. The improved margins primarily resulted from selective price increases and stabilization of raw materials prices, in part reflecting early success from our Global Strategic Sourcing Initiative, and the favorable impact of our cost reduction programs.

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Operating Expenses:

	Three Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount			Percentage
Selling, general and administrative expenses	$	284,853		$	279,350		$	5,503		2.0	%
Research and development expenses		16,431			15,402			1,029		6.7	%
Restructuring expenses		9,133			30,792			(21,659	)	-70.3	%
	$	310,417		$	325,544		$	(15,127	)	-4.6	%
As a percentage of net sales:
Selling, general and administrative expenses		36.0	%		37.8	%
Research and development expenses		2.1	%		2.1	%
Restructuring expenses		1.2	%		4.2	%
		39.3	%		44.1	%

• The weakening of the U.S. dollar against the euro and certain other foreign currencies increased operating expenses by $14.3 million in the three months ended September 28, 2007 compared to the same period in the prior year.

• Excluding costs associated with the November 2005 Plan, selling, general, and administrative costs, as a percentage of net sales were 32.9% in the three months ended September 28, 2007 compared to 33.8% for the prior year period. Excluding the impact of foreign currency and costs associated with our restructuring programs under the November 2005 Plan, selling, general and administrative costs declined $1.3 million during the third quarter of 2007 compared to the prior year period. This reflects progress from our November 2005 Plan, which primarily affects our North American and European business segments. The decline was partially offset by a $2.3 million change in estimate for environmental reserves associated with updated exposure studies at a former DiverseyLever site in Europe.

• Excluding the impact of foreign currency exchange rates, research and development expenses increased $0.7 million during the third quarter of 2007 compared to the prior year period.

• Excluding the impact of foreign currency exchange rates, restructuring expenses declined $24.3 million during the third quarter of 2007 compared to the prior year period, primarily due to decreased 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 28, 2007 and September 29, 2006, and since inception of the program in November 2005, is outlined below:

(dollars in thousands)	Three Months Ended September 28, 2007			Three Months Ended September 29, 2006			Total Project to Date September 28, 2007
Reserve balance at beginning of period	$	48,268		$	61,205		$	—
Restructuring costs charged to income		9,133			30,792			134,822
Liability adjustments		—			—			313
Payments of accrued costs		(10,693	)		(17,965	)		(88,427	)
Reserve balance at end of period	$	46,708		$	74,032		$	46,708
Period costs classified as selling, general and administrative expenses	$	24,693		$	29,232		$	206,573
Period costs classified as cost of sales		(1,498	)		—			4,053
Capital expenditures		4,908			2,332			33,604

• During the third quarter of 2007, we recorded $9.1 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, we recorded $24.7 million of selling, general and administrative expenses and a $1.5 million reduction to cost of sales (represents an adjustment of previous inventory reserves) for the third quarter of 2007. Collectively, these costs were mainly recorded at our Corporate Center and consist of $6.4 million related to long-lived asset impairment, a $1.5 million credit related to other tangible related non-cash items and $18.3 million related to other period costs associated with restructuring activities, including $5.6 million related to consulting services, $5.0 million related to human resource project costs, and $2.5 related to supply chain costs for the third quarter of 2007.

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• In connection with the acquisition of the DiverseyLever business, we also recorded liabilities for the involuntary termination of former DiverseyLever employees and other exit costs associated with former DiverseyLever facilities. During the third quarter of 2007, we paid cash of $0.3 million representing contractual obligations associated with involuntary terminations and lease payments on closed facilities. The restructuring reserve balance associated with the exit plans and acquisition-related restructuring plans was $1.8 million as of September 28, 2007.

Non-Operating Results:

	Three Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount			Percentage
Interest expense	$	38,517		$	37,333		$	1,184		3.2	%
Interest income		(2,260	)		(3,064	)		804		-26.2	%
Net interest expense	$	36,257		$	34,269		$	1,988		5.8	%
Other (income) expense, net		(430	)		1,301			(1,731	)

• Net interest expense increased in the third quarter of 2007 compared to the prior year period primarily due to a decrease in interest income resulting from lower average cash balances during the quarter. The decrease in average cash balances resulted from cash used to fund activities related to the November 2005 Plan and capital expenditures during the year.

Income Taxes:

	Three Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount		Percentage
Loss from continuing operations, including minority interests, before income taxes and discontinued operations	$	(5,575	)	$	(48,348	)	$	42,773	-88.5	%
Provision for income taxes		20,915			1,057			19,858	1878.7	%
Effective income tax rate		-375.2	%		-2.2	%

• We reported an effective income tax rate of -375.2% on the pre-tax loss from continuing operations for the three month period ended September 28, 2007. The high effective income tax rate is primarily the result of increased valuation allowances against deferred tax assets for U.S. and international tax loss and credit carryforwards, increased valuation allowances against other net deferred tax assets, and increases in tax contingency reserves.

• We reported an effective income tax rate of -2.2% on pre-tax loss from continuing operations for the three month period ended September 29, 2006. Income tax expense for the three month period includes a reclassification of income tax benefit from continuing operations in the amount of $16.8 million to income tax benefit from discontinued operations related to the utilization of prior year un-benefited net operating losses. This income tax benefit was inappropriately classified in continuing operations in the financial statements for the six month period ended June 30, 2006. Absent this reclassification, the income tax benefit recorded for the three month period was substantially similar to the expected tax benefit.

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Net Income:

Our net income decreased by $4.7 million, to a net loss of $26.5 million for the third quarter of 2007 compared to a net loss of $21.8 million for the third quarter of 2006, primarily due to an increase in the income tax provision of $19.9 million and a $27.6 million decrease in income from discontinued operations. This was offset by an increased operating profit of $43.0 million, which mainly resulted from a $27.7 million decrease in restructuring costs and other period cost associated with the November 2005 Plan and controlled selling, general and administrative spending (excluding restructuring costs).

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 28, 2007 and September 29, 2006.

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	Three Months Ended
(dollars in thousands)	September 28, 2007			September 29, 2006
Net cash flows provided by (used in) operating activities	$	68,160		$	(38,398	)
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses		(35,792	)		51,275
Changes in deferred income taxes		(7,801	)		278
Gain (loss) from divestitures		(439	)		26,419
Gain (loss) on property disposals		2,331			(917	)
Depreciation and amortization expense		(41,570	)		(38,328	)
Amortization of debt issuance costs		(1,310	)		(1,440	)
Interest accreted on notes payable		(11,697	)		(10,542	)
Interest accrued on long-term receivables-related parties		650			620
Other		988			(10,760	)
Net loss		(26,480	)		(21,793	)
Minority interests in net income of subsidiaries		—			20
Provision for (benefit from) income taxes		20,923			(16,979	)
Interest expense, net		36,257			34,269
Depreciation and amortization expense		41,570			38,328
EBITDA	$	72,270		$	33,845

EBITDA increased by $38.4 million for the quarter ended September 28, 2007 as compared to the prior year third quarter, primarily due to a $28.7 million decrease in restructuring costs and period costs included in selling, general and administrative expenses and cost of sales related to the November 2005 Plan.

Nine Months Ended September 28, 2007 Compared to Nine Months Ended September 29, 2006

Net Sales:

	Nine Months Ended				Change
(dollars in thousands)	September 28, 2007		September 29, 2006		Amount		Percentage
Net product and service sales	$	2,227,192	$	2,122,546	$	104,646	4.9	%
Sales agency fee income		68,824		65,677		3,147	4.8	%
	$	2,296,016	$	2,188,223	$	107,793	4.9	%

• The weakening of the U.S. dollar against the euro and certain other foreign currencies contributed $85.5 million to the increase in net sales.

• Excluding the impact of foreign currency exchange rates, acquisitions and divestitures, and sales agency fee income, net sales increased by 2.7% compared to the same period in the prior year, primarily due to strong growth in our European, Latin America, and Asia Pacific regions where growth rates were 5.7% or higher. These gains were partially offset by declining sales in Japan and North America.

• In Europe, which includes our African and Middle Eastern markets, net sales increased 5.7% in the first nine months of 2007 compared to the same period in the prior year. This growth was primarily due to higher sales volumes throughout most of the countries in our European region.

• In Latin America, net sales increased 8.4% in the first nine months of 2007 compared to the same period in the prior year, primarily driven by higher sales volumes throughout most of the region, particularly in Brazil and Argentina, with growth from the food service sector, the food and beverage business, indirect channels, and the retail sector.

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• In Asia Pacific, net sales increased 10.4% in the first nine months of 2007 compared to the same period in the prior year, led by strong sales volume growth in China and India in the food and beverage, lodging, quick-service restaurant, retail, and building service contractor sectors.

• In Japan, net sales decreased 2.6% in the first nine months of 2007 compared to the same period in the prior year, primarily due to a decline in the facilities solution sector.

• In North America, net sales decreased 3.9 % in the first nine months of 2007 compared to the same period in the prior year, excluding the impact of divestitures. 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. Excluding the impact of the withdrawal from the service-oriented laundry and ware washing business, and the divestitures of other non-core businesses, our North American sales increased 1.8%, reversing the declining sales trend experienced earlier in the year from the high volume sales to distributors in December 2006.

• Excluding a $4.7 million increase from the weakening of the U.S. dollar against the euro and certain other foreign currencies, net sales under our Sales Agency Agreement decreased by $1.6 million, or 2.2%, during the first nine months of 2007 compared to the same period in the prior year. This decline was partially offset by an increase in partial termination fees of $1.9 million in our European segment.

In October 2007, the Sales Agency Agreement with Unilever, which is set to expire in December 2007, was replaced by an Umbrella Agreement, which includes: i) a new agency agreement with terms similar to the previous Sales Agency Agreement, covering Ireland, the United Kingdom, Portugal and Brazil, and ii) a Master Sub-License Agreement (the “License Agreement”) under which Unilever has agreed to grant 31 of our subsidiaries a license to produce and sell professional size packs of Unilever’s consumer brand cleaning products. The entities covered by the License Agreement will also enter agreements with Unilever to distribute Unilever’s consumer branded products. The Umbrella Agreement becomes effective January 1, 2008, and, unless otherwise terminated or extended, will expire on December 31, 2017.

Gross Profit:

	Nine Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount		Percentage
Gross Profit	$	971,729		$	924,262		$	47,467	5.1	%
Gross profit as a percentage of net sales:		42.3	%		42.2	%

• The weakening of the U.S. dollar against the euro and certain other foreign currencies increased gross profit by $39.7 million for the nine months ended September 28, 2007 compared to the same period in the prior year.

• Excluding the impact of foreign currency exchange rates, gross profit for the first nine months of 2007 compared to the same period in 2006 increased $7.8 million primarily due to higher sales volumes in our European, Latin America, and Asia Pacific regions as mentioned above.

• Our gross profit percentage for the first nine months of 2007 has improved slightly over 2006 mainly due to improved margins in Europe and North America. The improved margins primarily resulted from selective price increases and stabilization of raw materials prices, in part reflecting early success from our Global Strategic Sourcing Initiative, and the favorable impact of our cost reduction programs.

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Operating Expenses:

	Nine Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount			Percentage
Selling, general and administrative expenses	$	845,449		$	873,243		$	(27,794	)	-3.2	%
Research and development expenses		48,936			44,744			4,192		9.4	%
Restructuring expenses		15,452			108,476			(93,024	)	-85.8	%
	$	909,837		$	1,026,463		$	(116,626	)	-11.4	%
As a percentage of net sales:
Selling, general and administrative expenses		36.8	%		39.9	%
Research and development expenses		2.1	%		2.0	%
Restructuring expenses		0.7	%		5.0	%
		39.6	%		46.9	%

• The weakening of the U.S. dollar against the euro and certain other foreign currencies increased operating expenses by $31.9 million in the nine months ended September 28, 2007 compared to the same period in the prior year.

• Excluding costs associated with the November 2005 Plan, selling, general, and administrative costs, as a percentage of net sales were 33.8% in the nine months ended September 28, 2007 compared to 35.0% for the prior year period. Excluding the impact of foreign currency and costs associated with our restructuring programs under the November 2005 Plan, selling, general and administrative costs declined $16.2 million during the third quarter of 2007 compared to the prior year period. This reflects progress from our November 2005 Plan, which primarily affects our North American and European business segments.

• Excluding the impact of foreign currency exchange rates, research and development expenses increased $3.2 million during the third quarter of 2007 compared to the prior year period.

• Excluding the impact of foreign currency exchange rates, restructuring expenses declined $98.2 million during the third quarter of 2007 compared to the prior year period, primarily due to decreased 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 nine months ended September 28, 2007 and September 29, 2006, and since inception of the program in November 2005, is outlined below:

(dollars in thousands)	Nine Months Ended September 28, 2007			Nine Months Ended September 29, 2006			Total Project to Date September 28, 2007
Reserve balance at beginning of period	$	70,225		$	2,347		$	—
Restructuring costs charged to income		15,526			108,476			134,822
Liability adjustments		(70	)		—			313
Payments of accrued costs		(38,973	)		(36,791	)		(88,427	)
Reserve balance at end of period	$	46,708		$	74,032		$	46,708
Period costs classified as selling, general and administrative expenses	$	69,045		$	106,379		$	206,573
Period costs classified as cost of sales		(261	)		—			4,053
Capital expenditures		14,690			6,739			33,604

• During the first nine months of 2007, we recorded $15.5 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, we recorded $69.0 million of selling, general and administrative expenses and a $0.3 million reduction to cost of sales (represents an adjustment of previous inventory reserves) for the first nine months of 2007.

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Collectively, these costs were mainly recorded at our Corporate Center and consist of $9.8 million related to long-lived asset impairment, $0.9 million related to other tangible related non-cash items and $58.0 million related to other period costs associated with restructuring activities, including $16.2 million related to human resource project costs, $12.4 million related to consulting services, and $12.0 million related to IT charges for the nine months ended September 28, 2007.

• In connection with the acquisition of the DiverseyLever business, we also recorded liabilities for the involuntary termination of former DiverseyLever employees and other exit costs associated with former DiverseyLever facilities. During the first nine months of 2007, we paid cash of $0.8 million representing contractual obligations associated with involuntary terminations and lease payments on closed facilities. The restructuring reserve balance associated with the exit plans and acquisition-related restructuring plans was $1.8 million as of September 28, 2007.

Non-Operating Results:

	Nine Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount			Percentage
Interest expense	$	114,365		$	125,267		$	(10,902	)	-8.7	%
Interest income		(7,708	)		(9,622	)		1,914		-19.9	%
Net interest expense	$	106,657		$	115,645		$	(8,988	)	-7.8	%
Other (income) expense, net		(32	)		3,169			(3,201	)

• Net interest expense decreased in the first nine months of 2007 compared to the prior year period primarily due to lower average debt balances during the period. The lower average 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. This was partially offset by a decrease in interest income resulting from lower average cash balances during the period as compared to the same period last year. The decrease in cash balances resulted from cash used to fund activities related to the November 2005 Plan and capital expenditures during the year.

Income Taxes:

	Nine Months Ended						Change
(dollars in thousands)	September 28, 2007			September 29, 2006			Amount		Percentage
Loss from continuing operations, including minority interests, before income taxes and discontinued operations	$	(44,733	)	$	(221,040	)	$	176,307	-79.8	%
Provision (benefit) for income taxes		60,719			(47,884	)		108,603	-226.8	%
Effective income tax rate		-135.7	%		21.7	%

• We reported an effective income tax rate of -135.7% on the pre-tax loss from continuing operations for the nine month period ended September 28, 2007. The high effective income tax rate is primarily the result of increased valuation allowances against deferred tax assets for U.S. and international tax loss and credit carryforwards, increased valuation allowances against other net deferred tax assets, and increases in tax contingency reserves.

• We reported an effective income tax rate of 21.7% on the 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 we were 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 that are currently deductible for book purposes, but will be deductible for tax purposes in the future.

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Net Income:

Our net income decreased by $201.3 million, to a net loss of $105.2 million for the first nine months of 2007 compared to income of $96.1 million for the first nine months of 2006, primarily due to the divestiture of the Polymer Business in June 2006, which increased income by $256.7 million (net of tax) in 2006, and an increase in the income tax provision of $108.6 million for the first nine months of 2007 compared to the same period in the prior year. This was offset by an increased operating profit of $164.1, which mainly resulted from a $130.6 million decrease in restructuring costs and other period costs associated with the November 2005 Plan, a $47.5 increase in gross profit, and controlled selling, general and administrative spending (excluding restructuring costs).

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 28, 2007 and September 29, 2006.

	Nine Months Ended
(dollars in thousands)	September 28, 2007				September 29, 2006
Net cash flows used in operating activities	$	(1,618	)		$	(61,504	)
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses		83,169				114,493
Changes in deferred income taxes		(26,106	)	��		(316	)
Gain (loss) from divestitures		(612	)			253,177
Gain (loss) on property disposals		4,323				(819	)
Depreciation and amortization expense		(117,170	)			(160,115	)
Amortization of debt issuance costs		(3,821	)			(4,865	)
Interest accreted on notes payable		(34,454	)			(31,171	)
Interest accrued on long-term receivables-related parties		1,926				1,837
Other		(10,853	)			(14,660	)
Net income (loss)		(105,216	)			96,057
Minority interests in net income of subsidiaries		—				25
Provision for income taxes		60,878				65,218
Interest expense, net		106,657				112,994
Depreciation and amortization expense		117,170				160,115
EBITDA	$	179,489			$	434,409

EBITDA decreased by $254.9 million for the nine months ended September 28, 2007 as compared to the same period in the prior year, primarily due to the divestiture of the Polymer Business in June 2006, which increased EBITDA by $352.9 million for the nine months ended September 29, 2006. This was partially offset by a $93.4 million decrease in restructuring costs and period costs included in selling, general and administrative expenses and cost of sales related to the November 2005 Plan.

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Liquidity and Capital Resources

	Nine Months Ended						Change
(dollars in thousands)	September 28, 2007			September 26, 2006			Amount			Percentage
Net cash used in operating activities	$	(1,618	)	$	(61,504	)	$	59,886		-97.4	%
Net cash provided by (used in) investing activities		(60,102	)		400,494			(460,596	)	-115.0	%
Net cash used in financing activities		(14,221	)		(332,048	)		317,827		-95.7	%
Capital expenditures		68,850			63,180			5,670		9.0	%
							Change
	September 28, 2007			December 29, 2006			Amount			Percentage
Cash and cash equivalents	$	138,497		$	208,418		$	(69,921	)	-33.5	%
Working capital (1)		527,517			406,381			121,136		29.8	%
Total debt		1,492,327			1,456,073			36,254		2.5	%

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

• The decrease in cash and cash equivalents at September 28, 2007 compared to December 30, 2006 resulted primarily from cash used during the first nine months of 2007 to fund activities related to the November 2005 Plan and capital expenditures, and a reduction of $12.6 million in the utilization of the Asset Securitization program.

• The decrease in net cash used in operating activities during the nine months ended September 28, 2007 compared to the prior year period was primarily due to greater operating profits and a lower reduction in the utilization of the Asset Securitization program, partially offset by a greater increase in working capital (increase in accounts receivable and inventories and a decrease in accounts payable) compared to the prior year period.

• The decrease in net cash used in investing activities during the nine months ended September 28, 2007 compared to the prior year period was primarily due to lower proceeds from divestitures, resulting from the divestiture of the Polymer Business in 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.

• The decrease in cash flow used in financing activities during the nine months ended September 28, 2007 compared to the prior year period was due to lower repayments on long-term debt in the current year. In the second quarter of 2006, we repaid $420.0 million of obligations under our term loan B facility using a majority of the proceeds from the divestiture of the Polymer Business.

• The increase in net sales and the weakening U.S. dollar contributed to the increase in working capital during the nine months ended September 28, 2007.

• The $33.1 million increase in inventories also resulted from a seasonal build in inventory levels and safety stock inventory builds associated with factory closure initiatives.

• The $75.4 million increase in accounts receivable also resulted from a 1.9 day increase in days sales outstanding.

• Accounts payable decreased $12.6 million.

Debt and Contractual Obligations. As a result of the DiverseyLever acquisition, we and JDI have a significant amount of indebtedness. On May 3, 2002, in connection with the acquisition, we issued senior discount notes with a principal amount at maturity of $406.3 million to Unilever. Under the indenture for the senior discount notes, the principal amount of the senior discount notes accretes at a rate of 10.67% per annum through May 15, 2007. After May 15, 2007, interest will accrue on the accreted value of the senior discount notes at this rate, but will be payable in cash semiannually in arrears to the extent that JDI can distribute to Holdings the cash necessary to make the payments in accordance with the restrictions contained in the indentures for the JDI senior subordinated notes and the JDI senior secured credit facilities. The failure by Holdings to make all or any portion of a semiannual interest payment on the senior discount notes will not constitute an event of default under the indenture for the senior discount notes if that failure results from JDI’s inability to distribute the cash necessary to make that payment in accordance with these restrictions. Instead, interest will continue to accrue on any unpaid interest at a rate of 10.67% per annum, and the unpaid interest will be payable on the next interest payment date on which JDI is able to distribute to Holdings the cash necessary to make the payment in accordance with the provisions contained in the indentures for the JDI senior subordinated notes and the JDI senior secured credit facilities.

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Holdings has no income from operations and no meaningful assets. Holdings receives all of its income from JDI and substantially all of its assets consist of its investment in JDI. The senior discount notes mature on May 15, 2013.

The JDI 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 28, 2007, we had $8.3 million in letters of credit outstanding under the revolving portion of the senior secured credit facilities and therefore had the ability to borrow $166.7 million under those revolving facilities.

The JDI senior secured credit facilities were amended in June 2007. The amendment reduced the interest rate payable on the term B loan facility and the delayed draw term loan facility from LIBOR plus 250 basis points to LIBOR plus 200 basis points, thereby reducing borrowing costs over the remaining life of the credit facilities.

As of September 28, 2007, excluding indebtedness held by JDI, our only indebtedness consisted of the senior discount notes with an accreted value of $384.0 million. As of September 28, 2007, our subsidiaries had total indebtedness of approximately $1.1 billion, consisting of $619.2 million of senior subordinated notes, $442.9 million of borrowings under the senior secured credit facilities, $15.1 million of other long-term borrowings and $31.1 million in short-term credit lines. In addition, we had $162.5 million in operating lease commitments, $1.9 million in capital lease commitments and $8.3 million committed under letters of credit.

We believe that the cash flows from continuing operations, including the effects of divestitures made as part of the November 2005 Plan, together with available cash, borrowings available under our JDI senior secured credit facilities, and the proceeds from the JDI receivables securitization facility will generate sufficient cash flow to meet our liquidity needs for the foreseeable future, including those related to the November 2005 Plan. We do not expect the divestitures of the Polymer Business and other businesses, made as part of the November 2005 Plan and included as part of continuing and discontinuing operations, to significantly impact our future liquidity or our ability to meet our debt service obligations. With regards to the divestiture of the Polymer Business, we anticipate that the interest savings from the repayment of the JDI term B loan with $420.0 million of proceeds from the sale will largely offset the operating cash flows that would have been generated by this business.

We have obligations related to our pension and post-retirement plans that are discussed in detail in Note 14 of the Notes to Consolidated Financial Statements. As of the most recent actuarial estimation, we anticipate making $50.7 million of contributions to pension plans in fiscal year 2007. Post-retirement medical claims are paid as they are submitted and are anticipated to be $4.3 million in fiscal year 2007.

Off-Balance Sheet Arrangements. JDI and certain of its subsidiaries entered into an agreement (the “Receivables Facility”) in March 2001, as amended, whereby JDI and each participating subsidiary sell, on a continuous basis, certain trade receivables to JWPR Corporation (“JWPRC”), JDI’s wholly owned, consolidated, special purpose, bankruptcy-remote subsidiary. JWPRC was formed for the sole purpose of buying and selling receivables generated by JDI 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. The accounts receivable securitization arrangement is accounted for as a sale 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 28, 2007 and December 29, 2006, our total potential for securitization of trade receivables was $75.0 million.

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As of September 28, 2007 and December 29, 2006, the Conduits held $51.7 million and $64.3 million, respectively, of accounts receivable that are not included in the accounts receivable balance reflected in our consolidated balance sheets.

As of September 28, 2007 and December 29, 2006, JDI had a retained interest of $102.8 million and $78.1 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 28, 2007, JWPRC’s cost of borrowing under the Receivables Facility was at a weighted average rate of 6.44% per annum.

Under the terms of the JDI senior secured credit facilities, JDI 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 JDI may enter into may not exceed $200 million in the aggregate.

Contractual Obligations

As a result of the adoption of FIN No. 48 and changes during the nine month period ended September 28, 2007, we increased FIN No. 48 liabilities by $2.0 million, resulting in FIN No. 48 liabilities of $28.9 million at September 28, 2007. Total FIN No. 48 liabilities for which payments are expected in less than one year are $5.3 million. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to non-current FIN No. 48 liabilities.

Financial Covenants under the JDI 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. JDI is 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) JDI’s consolidated indebtedness (excluding up to $55 million of indebtedness incurred under the 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 three-month period to (2) JDI’ consolidated EBITDA, as defined in the JDI senior secured credit facilities, for that same financial covenant period.

The JDI senior secured credit facilities require that JDI 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, 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. JDI is required to maintain an interest coverage ratio for each financial covenant period of no less than the minimum ratio specified in the JDI senior secured credit facilities for that financial covenant period. The minimum interest coverage ratio is the ratio of (1) JDI’s consolidated EBITDA, as defined in the JDI senior secured credit facilities, for a financial covenant period to (2) JDI’s cash interest expense for the same financial covenant period.

The JDI 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, 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 JDI’s financial covenant period ended on September 28, 2007, JDI was in compliance with the maximum leverage ratio and minimum interest coverage ratio covenants contained in the JDI senior secured credit facilities.

Capital Expenditures. Capital expenditures are limited under the JDI senior secured credit facilities to $150 million in fiscal year 2006 and to $130 million for subsequent fiscal years. To the extent that JDI makes capital expenditures of less than the limit in any fiscal year, however, JDI carries 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 28, 2007, JDI was in compliance with the limitation on capital expenditures for fiscal year 2007.

Restructuring Charges. The JDI 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 28, 2007, JDI was in compliance with the limitation on spending for restructuring and permitted divestiture-related activities.

In addition, the JDI senior secured credit facilities contain covenants that restrict JDI’s 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.

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Discontinued Operations

Chemical Methods Associates

On September 30, 2006, in connection with its November 2005 Plan, we sold our equity interest in CMA to Ali SpA, an Italian-based manufacturer of equipment for the food service industry, for $17.0 million. The purchase price was subject to various post-closing adjustments, principally with regard to changes in working capital. In December 2006, we recorded additional purchase price of approximately $0.3 million based on its preliminary assessment of closing working capital. The sale resulted in a gain of $2.3 million ($0.5 million after tax), net of related costs. CMA was a non-core asset of the Company.

During the nine months ended September 28, 2007, the Company finalized and collected the closing working capital adjustment and recorded additional closing costs, resulting in a reduction to the gain of $0.1 million ($0.1 million after tax). Further adjustments are not expected to be significant.

Income, net of tax, and net sales from discontinued operations relating to CMA were $1.0 million and $5.7 million, respectively, for the three months ended September 29, 2006 and $1.8 million and $16.9 million, respectively, for the nine months ended September 29, 2006.

Polymer Business

On June 30, 2006, Johnson Polymer, LLC (“JP”) and JohnsonDiversey Holdings II B.V. (“Holdings II”), our indirectly owned subsidiary, 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 $470.0 million plus an additional $8.1 million in connection with the parties’ estimate of purchase price adjustments that are based upon the closing net asset value of the Polymer Business. Further, BASF paid us $1.5 million for the option to extend the tolling agreement by up to six months. In December 2006, we and BASF finalized purchase price adjustments related to the net asset value and the Company received an additional $4.1 million.

The Polymer Business developed, manufactured and sold 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 and had been reported as a separate business segment. The sale resulted in a gain of approximately $352.9 million ($256.7 million after tax), net of related costs.

We finalized and paid certain pension related adjustments, adjusted net assets disposed and recorded additional closing costs, reducing the gain by $0.2 million ($0.1 million after tax) and $1.3 million ($0.8 million after tax), during the three and nine months ended September 28, 2007, respectively. Further adjustments are not expected to be significant.

In association with the tolling agreement with BASF, we recorded income from discontinued operations, net of tax, of $0.2 million and $1.1 million, respectively, during the three and nine months ended September 28, 2007.

Excluding the net gain on divestiture, income, net of tax, and net sales, excluding sales to us, from discontinued operations relating to the Polymer Business were $0 and $0.2 million, respectively, for the three months ended September 29, 2006, and $15.2 million and $188.6 million, respectively, for the nine months ended September 29, 2006.

Whitmire Micro-Gen Business

In June 2004, we completed the sale of Whitmire to Sorex Holdings, Ltd., a European pest-control manufacturer headquartered in the United Kingdom, for $46.0 million in cash and the assumption of certain liabilities.

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The purchase agreement provided for additional earn-out provisions based on future Whitmire net sales, for which the Company recorded $0.1 million in the three month period ended March 31, 2006. The income is included as a component of income from discontinued operations in the consolidated statements of operations.

Acquisitions

In March 2007, we purchased an additional 6% interest in a North American business that provides purchasing and category management tools to certain of the Company’s end-users for $2.6 million. We previously held 9% of the outstanding shares. The transaction is not considered material to our consolidated financial position, results of operations or cash flows.

In February 2006, we purchased the remaining 15% of the outstanding shares of Shanghai JohnsonDiversey, Ltd., our Chinese operating entity, for $3.5 million. We previously held 85% of the outstanding shares and included the holding in our consolidated financial results. Goodwill recorded with respect to the transaction was $2.6 million. The acquisition was accounted for under the purchase method of accounting in accordance with step acquisition rules.

Divestitures

On August 3, 2007, in conjunction with its November 2005 Plan, we divested of certain Auto-Chlor branch operations in the eastern United States for $2.5 million, resulting in a gain of $1.1 million, net of taxes and related costs. The gain is included within selling, general and administrative expenses in the consolidated statements of operations. These branch operations marketed and sold low-energy dishwashing systems, kitchen chemicals, laundry and housekeeping products and services to food service, lodging, healthcare and institutional customers. The purchase price is subject to various post-closing adjustments.

In September 2006, we determined that our Auto-Chlor branch operation in the southern United States met held for sale criteria under SFAS No. 144. In conjunction with its assessment, we recorded an impairment charge of $5.1 million on certain amortizable intangible assets. The charge is included within selling, general and administrative expenses in the consolidated statements of operations. The assets and liabilities of the business were not considered material and are included in our North American segment.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

As of September 28, 2007, JDI had $442.9 million of debt outstanding under the JDI senior secured credit facilities. After giving effect to the interest rate swap transactions that JDI has entered into with respect to some of the borrowings under our credit facilities, $242.9 million of the debt outstanding remained subject to variable rates. In addition, as of September 28, 2007, JDI had $46.3 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

Through JDI and its subsidiaries, 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.

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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 Holding’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 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.

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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. A “significant deficiency” is defined in professional accounting literature as a control issue 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.

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 are effective to ensure that material information relating to JohnsonDiversey Holdings, 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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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We and JDI 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 and JDI, 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	Umbrella Agreement in Respect of Professional Products among Unilever N.V., Unilever PLC and JohnsonDiversey, Inc. dated as of October 11, 2007.^ *
10.2	Form of Amended and Restated Master Sales Agency Agreement among Unilever N.V., Unilever PLC and JohnsonDiversey, Inc.^ *
10.3	Form of Master Sub-License Agreement in Respect of Professional Products among Unilever N.V., Unilever PLC and JohnsonDiversey, Inc.*
10.4	Form of Amended and Restated Stockholders’ Agreement among JohnsonDiversey Holding’s Inc., Commercial Markets Holdco, Inc. and Marga B.V.*
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.

^ Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

* Certain information, including schedules and other attachments to this exhibit, were intentionally omitted. We agree to furnish supplementally a copy of any omitted schedules or attachments to the Securities and Exchange Commission upon request.

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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 HOLDINGS, INC.
Date: November 8, 2007	/s/ Joseph F. Smorada
	Joseph F. Smorada, Vice President and Chief Financial Officer

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JOHNSONDIVERSEY HOLDINGS, INC.

EXHIBIT INDEX

10.1	Umbrella Agreement in Respect of Professional Products among Unilever N.V., Unilever PLC and JohnsonDiversey, Inc. dated as of October 11, 2007.^ *
10.2	Form of Amended and Restated Master Sales Agency Agreement among Unilever N.V., Unilever PLC and JohnsonDiversey, Inc.^ *
10.3	Form of Master Sub-License Agreement in Respect of Professional Products among Unilever N.V., Unilever PLC and JohnsonDiversey, Inc.*
10.4	Form of Amended and Restated Stockholders’ Agreement among JohnsonDiversey Holding’s Inc., Commercial Markets Holdco, Inc. and Marga B.V.*
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.

^ Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

* Certain information, including schedules and other attachments to this exhibit, were intentionally omitted. We agree to furnish supplementally a copy of any omitted schedules or attachments to the Securities and Exchange Commission upon request.

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