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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 JULY 1, 2005



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 jurisdictionof incorporation or organization) |  | (IRS Employer Identification No.)



8310 16thStreet

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 an accelerated filer (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 August 5, 2005, 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.



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INDEX



|                               |  |                                                                                                        |  |     
|------------------------------ |  | ------------------------------------------------------------------------------------------------------ |  | ----
|Section                        |  | Topic                                                                                                  |  | Page
|                               |  | Forward-Looking Statements                                                                             |  | i   
|                               | 
|PART I  FINANCIAL INFORMATION |  |                                                                                                       
|                               |  |                                                                                                       
|Item 1                         |  | Financial Statements (unaudited)                                                                       |  |     
|                               |  |                                                                                                       
|                               |  | Consolidated Balance Sheets as of July 1, 2005 and December 31, 2004                                   |  | 1   
|                               |  |                                                                                                       
|                               |  | Consolidated Statements of Operations for the three and six months ended July 1, 2005 and July 2, 2004 |  | 2   
|                               |  |                                                                                                       
|                               |  | Consolidated Statements of Cash Flows for the three and six months ended July 1, 2005 and July 2, 2004 |  | 3   
|                               |  |                                                                                                       
|                               |  | Notes to Consolidated Financial Statements  July 1, 2005                                              |  | 4   
|                               |  |                                                                                                       
|Item 2                         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 13  
|                               |  |                                                                                                       
|Item 3                         |  | Quantitative and Qualitative Disclosure about Market Risk                                              |  | 30  
|                               |  |                                                                                                       
|Item 4                         |  | Controls and Procedures                                                                                |  | 30  
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                       
|                               |  |                                                                                                       
|Item 1                         |  | Legal Proceedings                                                                                      |  | 33  
|                               |  |                                                                                                       
|Item 6                         |  | Exhibits                                                                                               |  | 33  
|                               |  |                                                                                                       
|Signatures                     |  |                                                                                                        |  | 34  



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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 complete integration and synergy plans, including the achievement of cost and tax savings;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | 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, and the printing and packaging, coatings and plastics markets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | restraints on pricing flexibility due to competitive conditions in the professional and polymer markets;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | 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 or war that impact our markets;
| | - |  | -------------------------------------------------------------------------------------------------------



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



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



i



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PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



JOHNSONDIVERSEY HOLDINGS, INC.



CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)



|                                                                                                                                    |  |              |           |   |                   |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ----------------- | - | --------- | -
|                                                                                                                                    |  | July 1, 2005 |           |   | December 31, 2004 |  
|                                                                                                                                    |  | (unaudited)  |           |   |                   |  
|ASSETS                                                                                                                              |  |              |           |   |                   |   |           |  
|Current assets:                                                                                                                     |  |              |           |   |                   |   |           |  
|Cash and cash equivalents                                                                                                           |  | $            | 25,639    |   |                   | $ | 28,413    |  
|Accounts receivable, less allowance of $26,568 and $29,881, respectively                                                            |  |              | 507,158   |   |                   |   | 524,669   |  
|Accounts receivable  related parties                                                                                               |  |              | 37,302    |   |                   |   | 31,148    |  
|Inventories                                                                                                                         |  |              | 288,311   |   |                   |   | 281,752   |  
|Deferred income taxes                                                                                                               |  |              | 23,772    |   |                   |   | 24,458    |  
|Other current assets                                                                                                                |  |              | 120,373   |   |                   |   | 112,390   |  
|                                                                                                                                    |  |              |           |   |                   |   |           |  
|Total current assets                                                                                                                |  |              | 1,002,555 |   |                   |   | 1,002,830 |  
|Property, plant and equipment, net                                                                                                  |  |              | 507,345   |   |                   |   | 566,961   |  
|Capitalized software, net                                                                                                           |  |              | 101,459   |   |                   |   | 112,229   |  
|Goodwill, net                                                                                                                       |  |              | 1,177,068 |   |                   |   | 1,267,350 |  
|Other intangibles, net                                                                                                              |  |              | 367,357   |   |                   |   | 408,433   |  
|Deferred income taxes                                                                                                               |  |              | 123,498   |   |                   |   | 116,070   |  
|Long-term receivables  related parties                                                                                             |  |              | 92,902    |   |                   |   | 96,269    |  
|Other assets                                                                                                                        |  |              | 89,046    |   |                   |   | 72,540    |  
|                                                                                                                                    |  |              |           |   |                   |   |           |  
|Total assets                                                                                                                        |  | $            | 3,461,230 |   |                   | $ | 3,642,682 |  
|                                                                                                                                    |  |              |           |   |                   |   |           |  
|LIABILITIES, CLASS B COMMON STOCK AND STOCKHOLDERS EQUITY                                                                          |  |              |           |   |                   |   |           |  
|Current liabilities:                                                                                                                |  |              |           |   |                   |   |           |  
|Short-term borrowings                                                                                                               |  | $            | 132,567   |   |                   | $ | 92,704    |  
|Current portion of long-term debt                                                                                                   |  |              | 6,925     |   |                   |   | 8,286     |  
|Accounts payable                                                                                                                    |  |              | 330,687   |   |                   |   | 364,559   |  
|Accounts payable  related parties                                                                                                  |  |              | 64,270    |   |                   |   | 65,309    |  
|Accrued expenses                                                                                                                    |  |              | 374,557   |   |                   |   | 413,664   |  
|                                                                                                                                    |  |              |           |   |                   |   |           |  
|Total current liabilities                                                                                                           |  |              | 909,006   |   |                   |   | 944,522   |  
|                                                                                                                                    |  |             
|Pension and other post-retirement benefits                                                                                          |  |              | 277,018   |   |                   |   | 278,890   |  
|Long-term borrowings                                                                                                                |  |              | 1,490,086 |   |                   |   | 1,525,603 |  
|Long-term payables  related parties                                                                                                |  |              | 28,610    |   |                   |   | 28,695    |  
|Other liabilities                                                                                                                   |  |              | 64,665    |   |                   |   | 73,637    |  
|                                                                                                                                    |  |              |           |   |                   |   |           |  
|Total liabilities                                                                                                                   |  |              | 2,769,385 |   |                   |   | 2,851,347 |  
|                                                                                                                                    |  |             
|Commitments and contingencies (Note 17)                                                                                             |  |              |          |   |                   |   |          |  
|Class B common stock subject to put and call options $0.01 par value; 3,000 shares authorized; 1,960 shares issued and
outstanding |  |              | 596,667   |   |                   |   | 596,667   |  
|                                                                                                                                    |  |             
|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 earnings (accumulated deficit)                                                                                             |  |              | (18,081   | ) |                   |   | 2,028     |  
|Accumulated other comprehensive income                                                                                              |  |              | 113,556   |   |                   |   | 192,981   |  
|Notes receivable from officers                                                                                                      |  |              | (297      | ) |                   |   | (341      | )
|                                                                                                                                    |  |              |           |   |                   |   |           |  
|Total stockholders equity                                                                                                          |  |              | 95,178    |   |                   |   | 194,668   |  
|                                                                                                                                    |  |              |           |   |                   |   |           |  
|Total liabilities, class B common stock and stockholders equity                                                                    |  | $            | 3,461,230 |   |                   | $ | 3,642,682 |  
|                                                                                                                                    |  |              |           |   |                   |   |           |  



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



1



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JOHNSONDIVERSEY HOLDINGS, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands)



|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ---------------- | - | ------- | ------------ |  | - | ------------ | - |  | - | --------- | -
|                                                                                           |  | Three Months Ended |         |   | Six Months Ended |  
|                                                                                           |  | July 1, 2005       |         |   | July 2, 2004     |   |         | July 1, 2005 |  |   | July 2, 2004 |  
|                                                                                           |  | (unaudited)        |         |   | (unaudited)      |  
|Net sales:                                                                                 |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|Net product and service sales                                                              |  | $                  | 839,423 |   |                  | $ | 784,177 |              |  | $ | 1,622,100    |   |  | $ | 1,534,462 |  
|Sales agency fee income                                                                    |  |                    | 30,130  |   |                  |   | 25,549  |              |  |   | 51,813       |   |  |   | 48,443    |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|                                                                                           |  |                    | 869,553 |   |                  |   | 809,726 |              |  |   | 1,673,913    |   |  |   | 1,582,905 |  
|Cost of sales                                                                              |  |                    | 505,772 |   |                  |   | 448,847 |              |  |   | 981,929      |   |  |   | 881,924   |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|Gross profit                                                                               |  |                    | 363,781 |   |                  |   | 360,879 |              |  |   | 691,984      |   |  |   | 700,981   |  
|Selling, general and administrative expenses                                               |  |                    | 290,563 |   |                  |   | 275,032 |              |  |   | 576,350      |   |  |   | 552,969   |  
|Research and development expenses                                                          |  |                    | 17,962  |   |                  |   | 18,576  |              |  |   | 35,593       |   |  |   | 37,019    |  
|Restructuring expenses                                                                     |  |                    | 4,712   |   |                  |   | 2,498   |              |  |   | 8,108        |   |  |   | 7,550     |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|Operating profit                                                                           |  |                    | 50,544  |   |                  |   | 64,773  |              |  |   | 71,933       |   |  |   | 103,443   |  
|Other (income) expense:                                                                    |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |          |  
|Interest expense                                                                           |  |                    | 52,599  |   |                  |   | 40,190  |              |  |   | 93,145       |   |  |   | 80,052    |  
|Interest income                                                                            |  |                    | (2,538  | ) |                  |   | (830    | )            |  |   | (4,112       | ) |  |   | (1,954    | )
|Other expense, net                                                                         |  |                    | 13      |   |                  |   | 4,668   |              |  |   | 174          |   |  |   | 6,783     |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|Income (loss) from continuing operations before income taxes and minority interests        |  |                    | 470     |   |                  |   | 20,745  |              |  |   | (17,274      | ) |  |   | 18,562    |  
|Provision for income taxes                                                                 |  |                    | 1,722   |   |                  |   | 8,999   |              |  |   | 1,755        |   |  |   | 8,445     |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|Income (loss) from continuing operations before minority interests                         |  |                    | (1,252  | ) |                  |   | 11,746  |              |  |   | (19,029      | ) |  |   | 10,117    |  
|Minority interests in net income (loss) of subsidiaries                                    |  |                    | (214    | ) |                  |   | 82      |              |  |   | (114         | ) |  |   | 161       |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|Income (loss) from continuing operations                                                   |  |                    | (1,038  | ) |                  |   | 11,664  |              |  |   | (18,915      | ) |  |   | 9,956     |  
|Income from discontinued operations, net of income taxes of $0, $634, $0 and $947 (Note 6) |  |                    |        |   |                  |   | 1,839   |              |  |   | 4,000        |   |  |   | 2,258     |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  
|Net income (loss)                                                                          |  | $                  | (1,038  | ) |                  | $ | 13,503  |              |  | $ | (14,915      | ) |  | $ | 12,214    |  
|                                                                                           |  |                    |         |   |                  |   |         |              |  |   |              |   |  |   |           |  



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



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JOHNSONDIVERSEY HOLDINGS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)



|                                                                                                              |  |                  |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                              |  | Six Months Ended |        
|                                                                                                              |  | July 1, 2005     |         |   | July 2, 2004 |  
|                                                                                                              |  | (unaudited)      |        
|Cash flows from operating activities:                                                                         |  |                  |         |   |              |   |         |  
|Net income (loss)                                                                                             |  | $                | (14,915 | ) |              | $ | 12,214  |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities                      |  |                  |         |   |              |   |         |  
|Depreciation and amortization                                                                                 |  |                  | 78,751  |   |              |   | 75,009  |  
|Amortization of intangibles                                                                                   |  |                  | 16,607  |   |              |   | 17,628  |  
|Amortization and write-off of debt issuance costs                                                             |  |                  | 16,498  |   |              |   | 6,644   |  
|Interest accreted on notes payable                                                                            |  |                  | (1,865  | ) |              |   | 16,380  |  
|Interest accrued on long-term receivables - related parties                                                   |  |                  | 18,598  |   |              |   | (1,823  | )
|Deferred income taxes                                                                                         |  |                  | (7,153  | ) |              |   | (3,113  | )
|Gain on disposal of discontinued operations                                                                   |  |                  | (4,000  | ) |              |   | (989    | )
|(Gain) loss from divestitures                                                                                 |  |                  | 9       |   |              |   | (2,044  | )
|Loss on property disposals                                                                                    |  |                  | 3,541   |   |              |   | 762     |  
|Other                                                                                                         |  |                  | 3,977   |   |              |   | 165     |  
|Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses |  |                  |         |   |              |   |         |  
|Accounts receivable securitization                                                                            |  |                  | 6,000   |   |              |   | 47,700  |  
|Accounts receivable                                                                                           |  |                  | (27,982 | ) |              |   | (44,397 | )
|Inventories                                                                                                   |  |                  | (24,299 | ) |              |   | (16,051 | )
|Other current assets                                                                                          |  |                  | (5,687  | ) |              |   | (16,512 | )
|Other assets                                                                                                  |  |                  | (31,103 | ) |              |   | 2,396   |  
|Accounts payable and accrued expenses                                                                         |  |                  | (35,235 | ) |              |   | 3,201   |  
|Other liabilities                                                                                             |  |                  | 16,522  |   |              |   | (11,525 | )
|                                                                                                              |  |                  |         |   |              |   |         |  
|Net cash provided by operating activities                                                                     |  |                  | 8,264   |   |              |   | 85,645  |  
|Cash flows from investing activities:                                                                         |  |                  |         |   |              |   |         |  
|Capital expenditures                                                                                          |  |                  | (31,119 | ) |              |   | (39,012 | )
|Expenditures for capitalized computer software                                                                |  |                  | (10,562 | ) |              |   | (12,828 | )
|Cash from property disposals                                                                                  |  |                  | 2,279   |   |              |   | 2,621   |  
|Acquisitions of businesses                                                                                    |  |                  | (1,680  | ) |              |   | (3,801  | )
|Proceeds from divestitures                                                                                    |  |                  | 5,571   |   |              |   | 48,757  |  
|                                                                                                              |  |                  |         |   |              |   |         |  
|Net cash used in investing activities                                                                         |  |                  | (35,511 | ) |              |   | (4,263  | )
|Cash flows from financing activities:                                                                         |  |                  |         |   |              |   |         |  
|Proceeds from short-term borrowings                                                                           |  |                  | 45,532  |   |              |   | 41,145  |  
|Repayments of long-term borrowings                                                                            |  |                  | (9,215  | ) |              |   | (96,575 | )
|Payment of debt issuance costs                                                                                |  |                  | (1,703  | ) |              |   | (1,337  | )
|Dividends paid                                                                                                |  |                  | (5,115  | ) |              |   | (7,897  | )
|                                                                                                              |  |                  |         |   |              |   |         |  
|Net cash provided by (used in) financing activities                                                           |  |                  | 29,499  |   |              |   | (64,664 | )
|                                                                                                              |  |                  |         |   |              |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                                                  |  |                  | (5,026  | ) |              |   | (15,031 | )
|                                                                                                              |  |                  |         |   |              |   |         |  
|Change in cash and cash equivalents                                                                           |  |                  | (2,774  | ) |              |   | 1,687   |  
|Beginning balance                                                                                             |  |                  | 28,413  |   |              |   | 24,543  |  
|                                                                                                              |  |                  |         |   |              |   |         |  
|Ending balance                                                                                                |  | $                | 25,639  |   |              | $ | 26,230  |  
|                                                                                                              |  |                  |         |   |              |   |         |  
|Supplemental cash flows information                                                                           |  |                  |         |   |              |   |         |  
|Cash paid during the period:                                                                                  |  |                  |         |   |              |   |         |  
|Interest                                                                                                      |  | $                | 54,296  |   |              | $ | 53,731  |  
|Income taxes                                                                                                  |  |                  | 13,420  |   |              |   | 7,517   |  



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



3



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##### Table of Contents

JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(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 comprised of a
Professional Business and a Polymer Business. The Professional Business is a global marketer and manufacturer of commercial, industrial and institutional building maintenance and sanitation products. The Polymer Business is a global marketer and
manufacturer of polymer intermediates marketed to the printing and packaging, coatings, adhesives and related industries.



|2. | Basis of Presentation
|-- | ---------------------



The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the
opinion of management, all normal recurring adjustments considered necessary to present fairly the financial position of the Company as of July 1, 2005 and its results of operations and cash flows for the three and six month periods ended July 1,
2005 have been included. The results of operations for the three and six month periods ended July 1, 2005 are not necessarily indicative of the results to be expected for the full fiscal year. It is suggested 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 31, 2004.



Effective with the second quarter of 2005, the Company reclassified
additional fees related to partial terminations under the Master Sales Agency Agreement from selling, general and administrative expenses to sales agency fee income to properly classify operating profit. Prior year amounts have been reclassified
from other (income) expense to sales agency fee income for consistency. In addition, associated intangible impairment from prior years has been reclassified from other (income) expense to selling, general and administrative expenses. See Note 4
below.



Certain other prior period amounts have been
reclassified to conform with current period presentation.



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



|3. | New Accounting Standards
|-- | ------------------------



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payments
(SFAS No. 123R). SFAS No. 123R replaces SFAS No. 123, Accounting for Stock-Based Compensation, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No.
95, Statement of Cash Flows. Generally, the approach in SFAS No. 123R is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The accounting provisions of SFAS No. 123R will be effective for the Company in the first quarter of fiscal year 2006. As
permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB Opinion No. 25s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. The Company
will adopt the provisions of SFAS No. 123R using a modified prospective application. Under the modified prospective application, SFAS No. 123R, which provides certain changes to the method for valuing stock-based compensation, among other changes,
will apply to new awards and to awards that are outstanding on the effective date and are subsequently modified or cancelled. Compensation expense for outstanding awards for which the requisite service had not been rendered as of the effective date
will be recognized over the remaining service period. The Company is in the



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##### Table of Contents

JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



process of determining how the new method of valuing stock-based compensation as prescribed in SFAS No. 123R will be applied to valuing stock-based awards
granted after the effective date and the impact the recognition of compensation expense related to such awards will have on its consolidated financial condition, results of operations or cash flows.



In November 2004, the FASB issued SFAS No. 151, Inventory Costs
 an amendment of ARB No. 43 (SFAS No. 151). SFAS No. 151 requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current-period charges. It also requires that
allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal 2006. The Company is evaluating the impact
this standard will have on its consolidated financial condition, results of operations or cash flows.



|4. | Master Sales Agency Terminations
|-- | --------------------------------



In connection with the May 2002 acquisition of the DiverseyLever business, JDI entered into a Master Sales Agency Agreement (the Agreement)
with Unilever, whereby the Company acts as 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 Agreement of
$13,000.



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 Agreement are met. JDI elected, and Unilever agreed, to partially terminate the Agreement in several
territories resulting in payment by Unilever to the Company of additional fees of $6,359 and $2,872 during the three months ended July 1, 2005 and July 2, 2004, respectively; and $7,169 and $2,872 during the six months ended July 1, 2005 and July 2,
2004, respectively, which are included in sales agency fee income in each period presented.



In association with a partial termination in the three months ended July 2, 2004, the Company recorded intangible impairment of $387, which is included in selling, general and administrative expenses.



|5. | Lease Accounting Adjustment
|-- | ---------------------------



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



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



|6. | Divestiture of the Whitmire Micro-Gen Business
|-- | ----------------------------------------------



In June 2004, the Company completed the sale of Whitmire Micro-Gen Research Laboratories, Inc. (Whitmire) to Sorex Holdings, Ltd.
(Sorex), a European pest-control manufacturer headquartered in the United Kingdom, for $46,000 cash and the assumption of certain liabilities. The purchase price was subject to a working capital adjustment, which was agreed and settled
in September 2004, resulting in Sorex paying $751 to the Company. As of the divestiture date, Whitmire net assets were approximately $45,000.



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##### Table of Contents

JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



Effective with the second quarter of 2004, Whitmire, which was included in the Companys
professional segment, has been classified as a discontinued operation in the consolidated statements of operations with the prior periods restated. No adjustments or restatements for discontinued operations have been made to the consolidated balance
sheets and consolidated statements of cash flows due to the immaterial impact of the divestiture for the periods presented.



The purchase agreement also provided for additional earnout provisions based on future Whitmire net sales, for which the Company recorded $4,000 during
the three month period ended April 1, 2005. The income is included as a component of income from discontinued operations in the consolidated statements of operations.



Income, net of tax, and net sales from discontinued operations were $1,839 and $9,295, respectively, for the three month
period ended July 2, 2004, and $2,258 and $18,688, respectively, for the six month period ended July 2, 2004.



|7. | Accounts Receivable Securitization
|-- | ----------------------------------



JDI and certain of its subsidiaries entered into an agreement (the Receivables Facility) in March 2001 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. As of July 1, 2005 and December 31, 2004, JDIs total potential for securitization of trade receivables was
$150,000.



As of July 1, 2005 and December 31, 2004, the
Conduit held $136,300 and $130,300, respectively, of accounts receivable that are not included in the accounts receivable balance reflected in the Companys consolidated balance sheets.



As of July 1, 2005 and December 31, 2004, JDI had a retained interest of
$136,714 and $135,404, 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.



|8. | Income Taxes
|-- | ------------



During the six months ended July 1, 2005, the Company reported a negative effective income tax rate of 10.2% on taxable losses. The negative effective
income tax rate resulted from certain tax reporting entities with low income tax benefit reporting losses, while other profitable tax reporting entities reported income tax expense generally at or near their statutory tax rate. The tax benefit on
U.S. losses for the six months ended July 1, 2005, was offset by incremental income tax expense due to repatriation of earnings from international operations. An increased valuation allowance has been provided at July 1, 2005 against tax loss
carryforwards of international operations which resulted in additional income tax expense. These increases to income tax expense have been partially offset by a tax expense benefit from the realization of previously un-benefited foreign tax credits.
Accordingly, the Company had a negative effective tax rate for the period.



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##### Table of Contents

JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



|9. | Inventories
|-- | -----------



The components of inventories are summarized as follows:



|                             |  |              |         |                   |   |        
|---------------------------- |  | ------------ | ------- | ----------------- | - | -------
|                             |  | July 1, 2005 |         | December 31, 2004
|Raw materials and containers |  | $            | 68,427  |                   | $ | 71,835 
|Finished goods               |  |              | 219,884 |                   |   | 209,917
|                             |  |              |         |                   |   |        
|Total inventories            |  | $            | 288,311 |                   | $ | 281,752
|                             |  |              |         |                   |   |        



Inventories are stated
in the consolidated balance sheets net of allowance for excess and obsolete inventory of $26,548 and $25,573 on July 1, 2005 and December 31, 2004, respectively.



|10. | Indebtedness and Credit Arrangements
|--- | ------------------------------------



On April 8, 2005, JDI amended its senior secured credit facilities. This amendment allowed JDI to borrow additional funds under the U.S. dollar portion of
the term loan B and to repay the entire euro portion. In addition, the interest rate spread applicable to the U.S. dollar-based debt was reduced from LIBOR plus 225 basis points to LIBOR plus 175 basis points, thereby reducing JDIs borrowing
cost over the credit facilities remaining term. The amendment also changed certain financial covenants and administrative requirements to provide JDI with greater operating flexibility.



As a result of fully repaying the euro-based portion of the term loan B, the
Company recorded additional interest expense of $9,447 due to ineffectiveness of EURIBOR-based interest swap agreements and $3,563 for the write-off of capitalized debt issuance costs.



|11. | Restructuring Liabilities
|--- | -------------------------



During fiscal years 2002 and 2003, 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 (exit plans). During the six months ended July 1, 2005, the Company paid cash of $697 representing contractual obligations
associated with involuntary terminations and lease payments on closed facilities. The restructuring reserve balances associated with the exit plans were $793 and $1,490 as of July 1, 2005 and December 31, 2004, respectively.



Additionally, the Company developed plans to restructure certain facilities
that it owned prior to the acquisition of the DiverseyLever business, primarily for the purpose of eliminating redundancies resulting from the acquisition of the DiverseyLever business. During fiscal years 2002 and 2003, in connection with these
acquisition related restructuring plans, the Company recorded liabilities for the involuntary termination of pre-acquisition employees and other restructuring costs associated with pre-acquisition facilities. The Company recognized net liabilities
of $3,229 and $2,686, for the involuntary termination of 81 and 74 additional pre-acquisition employees and $52 and $97 for additional other restructuring costs during the three months ended July 1, 2005 and July 2, 2004, respectively; and $6,133
and $7,405, for the involuntary termination of 117 and 153 additional pre-acquisition employees and $544 and $145 for additional other restructuring costs during the six months ended July 1, 2005 and July 2, 2004, respectively. The Companys
acquisition-related restructuring plans provide for the planned termination of 794 pre-acquisition employees, of which 494 and 464 were actually terminated as of July 1, 2005 and December 31, 2004, respectively. Net liabilities recognized by the
Company in connection with such planned terminations were recorded as restructuring expenses in accordance with SFAS No. 146.



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JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



During the second quarter of 2005, the Company eliminated certain management positions and recognized
net liabilities of $1,431 in accordance with SFAS No. 146. These do not pertain to the acquisition related restructuring plans and are therefore disclosed as Other Restructuring Plans in the table below.



|                                            |  |                                         |        |   |                           |   |      |       |  |   |                  |   |  |       |       |       |  |   |   |  |   |       |  
|------------------------------------------- |  | --------------------------------------- | ------ | - | ------------------------- | - | ---- | ----- |  | - | ---------------- | - |  | ----- | ----- | ----- |  | - | - |  | - | ----- | -
|                                            |  | Acquisition-Related Restructuring Plans |        |   | Other Restructuring Plans |  
|                                            |  | Employee-Related                        |        |   | Other                     |   |      | Total |  |   | Employee-Related |   |  | Other |       | Total | 
|Liability balances as of December 31, 2004  |  | $                                       | 7,197  |   |                           | $ | 321  |       |  | $ | 7,518            |   |  | $     |      |       |  | $ |  |  | $ |      |  
|Liability recorded as restructuring expense |  |                                         | 2,904  |   |                           |   | 492  |       |  |   | 3,396            |   |  |       |      |       |  |   |  |  |   |      |  
|Cash paid1                                  |  |                                         | (2,771 | ) |                           |   | (262 | )     |  |   | (3,033           | ) |  |       |      |       |  |   |  |  |   |      |  
|                                            |  |                                         |        |   |                           |   |      |       |  |   |                  |   |  |       |       |       |  |   |   |  |   |       |  
|Liability balances as of April 1, 2005      |  | $                                       | 7,330  |   |                           | $ | 551  |       |  | $ | 7,881            |   |  | $     |      |       |  | $ |  |  | $ |      |  
|Liability recorded as restructuring expense |  |                                         | 3,229  |   |                           |   | 52   |       |  |   | 3,281            |   |  |       | 1,431 |       |  |   |  |  |   | 1,431 |  
|Cash paid1                                  |  |                                         | (4,021 | ) |                           |   | (85  | )     |  |   | (4,106           | ) |  |       | (135  | )     |  |   |  |  |   | (135  | )
|                                            |  |                                         |        |   |                           |   |      |       |  |   |                  |   |  |       |       |       |  |   |   |  |   |       |  
|Liability balances as of July 1, 2005       |  | $                                       | 6,538  |   |                           | $ | 518  |       |  | $ | 7,056            |   |  | $     | 1,296 |       |  | $ |  |  | $ | 1,296 |  
|                                            |  |                                         |        |   |                           |   |      |       |  |   |                  |   |  |       |       |       |  |   |   |  |   |       |  



|1 | Cash paid includes the effects of foreign exchange rates.
|- | ---------------------------------------------------------



|12. | Other (Income) Expense, Net
|--- | ---------------------------



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



|                                                                    |  |                    |         |   |                  |   |       |              |  |   |              |   |  |   |      
|------------------------------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ----- | ------------ |  | - | ------------ | - |  | - | -----
|                                                                    |  | Three Months Ended |         |   | Six Months Ended
|                                                                    |  | July 1, 2005       |         |   | July 2, 2004     |   |       | July 1, 2005 |  |   | July 2, 2004
|Foreign currency translation loss                                   |  | $                  | 18,997  |   |                  | $ | 567   |              |  | $ | 23,628       |   |  | $ | 2,841
|Forward contracts (gain) loss                                       |  |                    | (18,821 | ) |                  |   | (129  | )            |  |   | (23,367      | ) |  |   | 594  
|Loss on hyperinflationary country foreign currency translations     |  |                    |        |   |                  |   | 3,106 |              |  |   |             |   |  |   | 2,221
|Loss on non-recoverable sales tax assessment related to prior years |  |                    |        |   |                  |   | 972   |              |  |   |             |   |  |   | 972  
|Other, net                                                          |  |                    | (163    | ) |                  |   | 152   |              |  |   | (87          | ) |  |   | 155  
|                                                                    |  |                    |         |   |                  |   |       |              |  |   |              |   |  |   |      
|                                                                    |  | $                  | 13      |   |                  | $ | 4,668 |              |  | $ | 174          |   |  | $ | 6,783
|                                                                    |  |                    |         |   |                  |   |       |              |  |   |              |   |  |   |      



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JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



|13. | 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 six month periods ended July 1, 2005 and July 2, 2004 are as follows:



|                                      |  |                                |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|------------------------------------- |  | ------------------------------ | ------ | - | ---------------- | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | -
|                                      |  | Defined Pension Benefits       |       
|                                      |  | Three Months Ended             |        |   | Six Months Ended |  
|                                      |  | July 1, 2005                   |        |   | July 2, 2004     |   |        | July 1, 2005 |  |   | July 2, 2004 |  
|Service cost                          |  | $                              | 7,719  |   |                  | $ | 7,793  |              |  | $ | 16,177       |   |  | $ | 15,169 |  
|Interest cost                         |  |                                | 8,237  |   |                  |   | 6,793  |              |  |   | 16,744       |   |  |   | 13,301 |  
|Expected return on plan assets        |  |                                | (7,737 | ) |                  |   | (5,057 | )            |  |   | (15,634      | ) |  |   | (9,964 | )
|Amortization of net loss              |  |                                | 2,227  |   |                  |   | 1,706  |              |  |   | 4,329        |   |  |   | 3,328  |  
|Amortization of transition obligation |  |                                | 62     |   |                  |   | 65     |              |  |   | 128          |   |  |   | 125    |  
|Amortization of prior service credit  |  |                                | (68    | ) |                  |   | (21    | )            |  |   | (144         | ) |  |   | (41    | )
|                                      |  |                                |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Net periodic pension cost             |  | $                              | 10,440 |   |                  | $ | 11,279 |              |  | $ | 21,600       |   |  | $ | 21,918 |  
|                                      |  |                                |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|                                      | 
|                                      |  | Other Post-Employment Benefits |       
|                                      |  | Three Months Ended             |        |   | Six Months Ended |  
|                                      |  | July 1, 2005                   |        |   | July 2, 2004     |   |        | July 1, 2005 |  |   | July 2, 2004 |  
|Service cost                          |  | $                              | 827    |   |                  | $ | 882    |              |  | $ | 1,671        |   |  | $ | 1,764  |  
|Interest cost                         |  |                                | 1,213  |   |                  |   | 1,220  |              |  |   | 2,442        |   |  |   | 2,441  |  
|Amortization of net loss              |  |                                | 186    |   |                  |   | 139    |              |  |   | 375          |   |  |   | 278    |  
|Amortization of transition obligation |  |                                | 72     |   |                  |   | 72     |              |  |   | 144          |   |  |   | 144    |  
|Amortization of prior service cost    |  |                                | 12     |   |                  |   | 9      |              |  |   | 25           |   |  |   | 18     |  
|                                      |  |                                |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Net periodic benefit cost             |  | $                              | 2,310  |   |                  | $ | 2,322  |              |  | $ | 4,657        |   |  | $ | 4,645  |  
|                                      |  |                                |        |   |                  |   |        |              |  |   |              |   |  |   |        |  



The Company made
contributions to its material defined pension benefit plans of $8,075 and $22,543, during the three months ended July 1, 2005 and July 2, 2004, respectively; and $15,156 and $34,965 during the six months ended July 1, 2005 and July 2, 2004,
respectively. During the three and six months ended July 2, 2004, contributions relating to the acquisition of the DiverseyLever business were $6,189 and $7,259, respectively.



Certain of the Companys United Kingdom based employees participate in a pension plan sponsored by SCJ, a related
party. In March 2005, the Company and SCJ agreed to segregate the assets and liabilities of the plan resulting in the Company recording an additional minimum pension liability of approximately $4,300. At segregation, the projected benefit
obligation, accumulated benefit obligation and market value of assets associated with the plan were $21,492, $19,251 and $14,951, respectively.



|14. | 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, for certain senior management of the Company. Prior to July 1, 2001, the Plan provided for the award of one share of restricted stock and one stock option for every four shares purchased. Shares are
acquired at a formula value, which is an estimation of fair value by the Company based on overall Holdco performance. Most restricted shares vest over a two-to-four year period from the grant date. Stock options have an exercise term of ten years
from the date of grant.



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##### Table of Contents

JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



Subsequent to June 29, 2001, the Plan was modified so that all awards granted under the Plan were
stock option grants. Newly issued stock options subsequently vest over four years and have an exercise period of seven years from the date of grant.



The Company recorded compensation expense of $213 and $574 related to restricted stock and debt forgiveness during the three
months ended July 1, 2005 and July 2, 2004, respectively; and $522 and $1,147 related to restricted stock and debt forgiveness during the six months ended July 1, 2005 and July 2, 2004, respectively.



The pro forma impact of compensation expense if the Company had used the
fair-value method of accounting to measure compensation expense would have reduced net income, as applicable, by approximately $4,962 and $4,420 for the three months ended July 1, 2005 and July 2, 2004, respectively; and $9,159 and $7,526 for the
six months ended July 1, 2005 and July 2, 2004, respectively.



|15. | Comprehensive Income (Loss)
|--- | ---------------------------



Comprehensive income (loss) for the three and six month periods ended July 1, 2005 and July 2, 2004 was as follows:



|                                                     |  |                    |         |   |                  |   |        |              |  |   |              |   |  |   |         |  
|---------------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------ | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                                     |  | Three Months Ended |         |   | Six Months Ended |  
|                                                     |  | July 1, 2005       |         |   | July 2, 2004     |   |        | July 1, 2005 |  |   | July 2, 2004 |  
|Net income (loss)                                    |  | $                  | (1,038  | ) |                  | $ | 13,503 |              |  | $ | (14,915      | ) |  | $ | 12,214  |  
|Foreign currency translation adjustments             |  |                    | (44,225 | ) |                  |   | (4,744 | )            |  |   | (85,401      | ) |  |   | (31,174 | )
|Adjustments to minimum pension liability, net of tax |  |                    |        |   |                  |   |       |              |  |   | (3,009       | ) |  |   |        |  
|Unrealized gains on derivatives, net of tax          |  |                    | 5,628   |   |                  |   | 4,213  |              |  |   | 8,985        |   |  |   | 2,726   |  
|                                                     |  |                    |         |   |                  |   |        |              |  |   |              |   |  |   |         |  
|Total comprehensive income (loss)                    |  | $                  | (39,635 | ) |                  | $ | 12,972 |              |  | $ | (94,340      | ) |  | $ | (16,234 | )
|                                                     |  |                    |         |   |                  |   |        |              |  |   |              |   |  |   |         |  



|16. | 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., a subsidiary of Unilever. Under the stockholders agreement, at any time after May 3, 2007, the Company has the option to purchase, and Unilever has the right, under certain conditions, to require
the Company to purchase the shares of the Company then beneficially owned by Unilever. If, after May 3, 2010, the Company is unable to fulfill its obligations in connection with the put option, Unilever may require the Company to take certain
actions, including selling certain assets of the Company.



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 payment in a prior year), exceeds $727,500 in 2006, $975,000 in 2007, $1,200,000 in 2008 or $1,425,000 in 2009. The aggregate amount of these payments cannot exceed $100,000. Payment of
these amounts, which may be funded with cash flows generated by the Company, is subject to compliance with the agreements relating to the Companys and JDIs senior indebtedness including, without limitation, the JDI senior secured credit
facilities, the JDI senior subordinated notes and the Companys senior discount notes.



10



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##### Table of Contents

JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



|17. | 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 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 conduct 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. The
Company continues to evaluate the nature and extent of the identified contamination and is preparing plans to address the contamination. An estimate of costs has been made based on the expected extent of contamination and the expected likelihood of
recovery for some of these costs from Unilever under the purchase agreement. To the extent that contamination is determined to be in violation of local environmental laws, the Company intends to seek recovery under indemnification clauses contained
in the purchase agreement.



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##### Table of Contents

JOHNSONDIVERSEY HOLDINGS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 1, 2005

(unaudited)



|18. | Segment Information
|--- | -------------------



Business segment information is summarized as follows. Income statement measures include results from continuing operations only.



|                                                              |  |                                       |           |         |   |                    |  |   |               |   |  |   |          
|------------------------------------------------------------- |  | ------------------------------------- | --------- | ------- | - | ------------------ |  | - | ------------- | - |  | - | ---------
|                                                              |  | Three Months Ended as of July 1, 2005
|                                                              |  | Professional                          |           | Polymer |   | Eliminations/Other |  |   | Total Company
|Net sales                                                     |  | $                                     | 781,917   |         | $ | 93,887             |  | $ | (6,251        | ) |  | $ | 869,553  
|Operating profit                                              |  |                                       | 41,558    |         |   | 9,062              |  |   | (76           | ) |  |   | 50,544   
|Depreciation and amortization                                 |  |                                       | 45,793    |         |   | 2,470              |  |   |              |   |  |   | 48,263   
|Interest expense                                              |  |                                       | 43,642    |         |   | 255                |  |   | 8,702         |   |  |   | 52,599   
|Interest income                                               |  |                                       | 2,517     |         |   | 751                |  |   | (730          | ) |  |   | 2,538    
|Total assets                                                  |  |                                       | 3,349,615 |         |   | 236,310            |  |   | (124,695      | ) |  |   | 3,461,230
|Goodwill, net                                                 |  |                                       | 1,161,407 |         |   | 2,049              |  |   | 13,612        |   |  |   | 1,177,068
|Capital expenditures, including capitalized computer software |  |                                       | 20,902    |         |   | 982                |  |   |              |   |  |   | 21,884   
|                                                              | 
|                                                              |  | Three Months Ended as of July 2, 2004
|                                                              |  | Professional                          |           | Polymer |   | Eliminations/Other |  |   | Total Company
|Net sales                                                     |  | $                                     | 733,327   |         | $ | 81,705             |  | $ | (5,306        | ) |  | $ | 809,726  
|Operating profit                                              |  |                                       | 55,003    |         |   | 9,770              |  |   |              |   |  |   | 64,773   
|Depreciation and amortization                                 |  |                                       | 42,359    |         |   | 2,361              |  |   |              |   |  |   | 44,720   
|Interest expense                                              |  |                                       | 32,210    |         |   | 116                |  |   | 7,864         |   |  |   | 40,190   
|Interest income                                               |  |                                       | 834       |         |   | 234                |  |   | (238          | ) |  |   | 830      
|Total assets                                                  |  |                                       | 3,361,631 |         |   | 219,580            |  |   | (117,100      | ) |  |   | 3,464,111
|Goodwill, net                                                 |  |                                       | 1,163,769 |         |   | 2,096              |  |   | 13,612        |   |  |   | 1,179,477
|Capital expenditures, including capitalized computer software |  |                                       | 26,703    |         |   | 1,163              |  |   |              |   |  |   | 27,866   
|                                                              | 
|                                                              |  | Six Months Ended as of July 1, 2005  
|                                                              |  | Professional                          |           | Polymer |   | Eliminations/Other |  |   | Total Company
|Net sales                                                     |  | $                                     | 1,502,360 |         | $ | 183,474            |  | $ | (11,921       | ) |  | $ | 1,673,913
|Operating profit                                              |  |                                       | 53,620    |         |   | 18,389             |  |   | (76           | ) |  |   | 71,933   
|Depreciation and amortization                                 |  |                                       | 90,342    |         |   | 5,016              |  |   |              |   |  |   | 95,358   
|Interest expense                                              |  |                                       | 75,430    |         |   | 332                |  |   | 17,383        |   |  |   | 93,145   
|Interest income                                               |  |                                       | 4,072     |         |   | 1,371              |  |   | (1,331        | ) |  |   | 4,112    
|Total assets                                                  |  |                                       | 3,349,615 |         |   | 236,310            |  |   | (124,695      | ) |  |   | 3,461,230
|Goodwill, net                                                 |  |                                       | 1,161,407 |         |   | 2,049              |  |   | 13,612        |   |  |   | 1,177,068
|Capital expenditures, including capitalized computer software |  |                                       | 39,821    |         |   | 1,860              |  |   |              |   |  |   | 41,681   
|                                                              | 
|                                                              |  | Six Months Ended as of July 2, 2004  
|                                                              |  | Professional                          |           | Polymer |   | Eliminations/Other |  |   | Total Company
|Net sales                                                     |  | $                                     | 1,429,311 |         | $ | 164,543            |  | $ | (10,949       | ) |  | $ | 1,582,905
|Operating profit                                              |  |                                       | 79,890    |         |   | 23,553             |  |   |              |   |  |   | 103,443  
|Depreciation and amortization                                 |  |                                       | 87,902    |         |   | 4,735              |  |   |              |   |  |   | 92,637   
|Interest expense                                              |  |                                       | 63,704    |         |   | 249                |  |   | 16,099        |   |  |   | 80,052   
|Interest income                                               |  |                                       | 1,919     |         |   | 440                |  |   | (405          | ) |  |   | 1,954    
|Total assets                                                  |  |                                       | 3,361,631 |         |   | 219,580            |  |   | (117,100      | ) |  |   | 3,464,111
|Goodwill, net                                                 |  |                                       | 1,163,769 |         |   | 2,096              |  |   | 13,612        |   |  |   | 1,179,477
|Capital expenditures, including capitalized computer software |  |                                       | 49,359    |         |   | 2,481              |  |   |              |   |  |   | 51,840   



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Executive Overview



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 products, equipment and related services for the institutional and industrial cleaning and sanitation market. We are also a leading global supplier of environmentally compliant, water-based acrylic polymer resins for the
industrial printing and packaging, coatings and plastics markets. We sell our products in more than 140 countries through our direct sales force, wholesalers and third-party distributors. Our sales are balanced geographically, with our principal
markets being Europe, North America and Japan. For financial statement reporting purposes, our business is comprised of two operating segments: professional and polymer.



In the three and six months ended July 1, 2005, net sales increased by $59.8 million and $91.0 million, respectively, from
the same period in the prior year. As indicated in the following table, excluding the impact of foreign currency exchange rates and acquisitions and divestitures, our second quarter net sales increased by 3.8% compared to the second quarter of 2004.
As a result, our 2005 year-to-date net sales were up 2.2% from the same period in the prior year.



|                              |  |                    |         |   |              |   |         |                  |  |     |              |  |   |              |   |  |        |           |   |  |     |  
|----------------------------- |  | ------------------ | ------- | - | ------------ | - | ------- | ---------------- |  | --- | ------------ |  | - | ------------ | - |  | ------ | --------- | - |  | --- | -
|                              |  | Three Months Ended |         |   |              |   |         | Six Months Ended |  |     |              | 
|(dollars in thousands)        |  | July 1, 2005       |         |   | July 2, 2004 |   |         | Change           |  |     | July 1, 2005 |  |   | July 2, 2004 |   |  | Change |          
|Net sales                     |  | $                  | 869,553 |   |              | $ | 809,726 |                  |  | 7.4 | %            |  | $ | 1,673,913    |   |  | $      | 1,582,905 |   |  | 5.7 | %
|Variance due to:              |  |                    |         |   |              |   |         |                  |  |     |              |  |   |              |   |  |        |           |   |  |     |  
|Foreign currency exchange     |  |                    |        |   |              |   | 29,998  |                  |  |     |              |  |   |              |   |  |        | 57,973    |   |  |     |  
|Acquisitions and divestitures |  |                    | (1,309  | ) |              |   | (3,131  | )                |  |     |              |  |   | (2,188       | ) |  |        | (4,865    | ) |  |     |  
|                              |  |                    |         |   |              |   |         |                  |  |     |              |  |   |              |   |  |        |           |   |  |     |  
|                              |  |                    | (1,309  | ) |              |   | 26,867  |                  |  |     |              |  |   | (2,188       | ) |  |        | 53,108    |   |  |     |  
|                              |  |                    |         |   |              |   |         |                  |  |     |              |  |   |              |   |  |        |           |   |  |     |  
|                              |  | $                  | 868,244 |   |              | $ | 836,593 |                  |  | 3.8 | %            |  | $ | 1,671,725    |   |  | $      | 1,636,013 |   |  | 2.2 | %
|                              |  |                    |         |   |              |   |         |                  |  |     |              |  |   |              |   |  |        |           |   |  |     |  



We have continued to
show net sales growth, primarily due to price increases taking hold in all business sectors and global geographic areas, and expansion of developing markets in the Asia Pacific and Latin America regions. In North America, one of our largest markets,
net sales showed a strong improvement of 6.3% for the second quarter (1.9% for the year-to-date) compared to the prior year period, reversing the recent trend of flat to declining revenues. The North America sales growth was primarily attributable
to pricing actions and more than offset regional challenges of industry consolidation and changes in customer purchase practices. The price increases were introduced globally late in 2004 and in the first half of 2005 in direct response to rising
raw material costs. For the most part, these increases have been accepted in the marketplace and are expected to be sustainable. In Asia Pacific, net sales increased by 4.4% and 5.7% for the quarter and year-to-date, respectively, primarily due to
growth in China and India. In Latin America, net sales increased by 8.6% and 8.8% for the quarter and year-to-date, respectively, primarily due to improved economic conditions and growth in distributor markets, the food and beverage business and the
lodging sector, as well as through key customer wins in Mexico and Brazil. Sales in our polymer segment increased 12.7% for the second quarter (9.7% for the year-to-date), primarily due to the aforementioned price increases.



In our European region, which also includes the Middle East and Africa,
excluding sales agency fee income, net sales were flat for the quarter and year-to-date compared to the prior year period, primarily due to softening economies in key countries and continuing consolidation in key market sectors, including
distribution, building service contractors and food and beverage. In addition, competitive conditions have weakened our ability to implement across-the-board price increases. These factors were partially offset by sales growth in Central Europe,
Eastern Europe, Africa and the Middle East and a correction in accounting treatment for certain equipment leases which increased Europes first quarter 2005 net sales by $15.3 million compared to the same period in the prior year.



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Consistent with our experience over the past 12 months, our gross profit percentages have declined in
both business segments compared to the same period in the prior year. As a result of the pricing actions described above, however, the professional segment gross profit percentage for the second quarter of fiscal year 2005 improved 120 basis points
compared to the first quarter of fiscal year 2005 and 230 basis points compared to the fourth quarter of fiscal year 2004. The polymer segment quarter gross profit percentage for the second quarter of fiscal year 2005 decreased 140 basis points
compared to the first quarter of fiscal year 2005, but increased 250 basis points compared to the fourth quarter of fiscal year 2004. While our pricing actions have assisted in improving our gross profit percentage, they have not been able to offset
the unprecedented increases in key raw material costs and sales mix shift to lower margin products. Our gross profit percentages for selected fiscal quarters are set forth below:



|             |  |                    |   |  |               |   |  |                   |   |  |              |  
|------------ |  | ------------------ | - |  | ------------- | - |  | ----------------- | - |  | ------------ | -
|             |  | Three Months Ended |  
|             |  | July 1, 2005       |   |  | April 1, 2005 |   |  | December 31, 2004 |   |  | July 2, 2004 |  
|Consolidated |  | 41.8               | % |  | 40.8          | % |  | 39.6              | % |  | 44.6         | %
|             |  |                    |   |  |               |   |  |                   |   |  |              |  
|Professional |  | 43.7               | % |  | 42.5          | % |  | 41.4              | % |  | 46.1         | %
|Polymer      |  | 24.9               | % |  | 26.3          | % |  | 22.4              | % |  | 30.2         | %



The reductions in
gross profit for the second quarter of fiscal year 2005 compared to the second quarter of fiscal year 2004 were most evident in our polymer segment where raw material costs continued to escalate, driven by the impact of higher crude oil and natural
gas costs on key fuel feedstocks, as well as industry cyclical factors that caused demand to outstrip supply for certain raw materials. In addition, increased crude oil and natural gas costs negatively affected our floorcare business where acrylic
based polymers are common in product formulations. We also experienced escalating freight and transportation costs in North America, which are attributable to the rise in crude oil prices and changes in U.S. transportation legislation that have
reduced carrier availability.



We are continuing to implement a
mix of general and selective price increases to recover, to the fullest extent possible, increases in raw material costs. These price increases require time to take hold and consequently will lag, to some degree, the impact from rising raw material
costs. Raw material costs, however, continue to rise and, in addition to further pricing actions, will be addressed through cost reduction initiatives.



In April 2005, JDI amended its senior secured credit facilities. This amendment allowed JDI to borrow additional funds under the U.S. dollar portion of
the term loan B and to repay the entire euro portion of the term loan B. In addition, the interest rate applicable to the U.S. dollar-based debt was reduced; thereby reducing JDIs borrowing cost over the credit facilities remaining term.
The amendment also changed certain financial covenants and administrative requirements to provide us with greater operating flexibility.



Critical Accounting Policies



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



Revenue Recognition. We recognize revenue on product sales when risk of loss and title to the product is transferred to the customer, substantially
all of which occurs at the time shipment is made. 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.



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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.



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



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



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



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



Goodwill and Long-Lived Assets. We periodically review long-lived assets, including non-amortizing intangible assets and goodwill, for impairment
and assess whether significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the anticipated future
undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated by the excess of the assets carrying value over its estimated fair
value. We also periodically reassess the estimated remaining useful lives of our amortizing intangible assets and our other long-lived assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense
recorded in our consolidated financial statements. We annually complete a fair value impairment analysis of goodwill and non-amortizing intangible assets. Moreover, where indicators of impairment are identified for long-lived assets, we would
prepare a future undiscounted cash flows analysis, determine any impairment impact and record, if necessary, a reduction in the affected asset(s). There were no known impairments or indicators of impairment identified during the three and six-month
periods ended July 1, 2005 or July 2, 2004 that had a material impact on our financial position, results of operations or cash flows.



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##### Table of Contents

Three Months Ended July 1, 2005 Compared to Three Months Ended July 2, 2004



Net Sales:



|                               |  |                    |         |              |   |         |  |            |        |  |      |  
|------------------------------ |  | ------------------ | ------- | ------------ | - | ------- |  | ---------- | ------ |  | ---- | -
|                               |  | Three Months Ended |         | Change       |  
|(dollars in thousands)         |  | July 1, 2005       |         | July 2, 2004 |   | Amount  |  | Percentage |       
|Net product and service sales: |  |                    |         |              |   |         |  |            |        |  |      |  
|Professional                   |  | $                  | 751,787 |              | $ | 707,778 |  | $          | 44,009 |  | 6.2  | %
|Polymer (1)                    |  |                    | 87,636  |              |   | 76,399  |  |            | 11,237 |  | 14.7 | %
|                               |  |                    |         |              |   |         |  |            |        |  |      |  
|                               |  |                    | 839,423 |              |   | 784,177 |  |            | 55,246 |  | 7.0  | %
|Sales agency fee income        |  |                    | 30,130  |              |   | 25,549  |  |            | 4,581  |  | 17.9 | %
|                               |  |                    |         |              |   |         |  |            |        |  |      |  
|                               |  | $                  | 869,553 |              | $ | 809,726 |  | $          | 59,827 |  | 7.4  | %
|                               |  |                    |         |              |   |         |  |            |        |  |      |  



|(1) | Excludes inter-segment sales to the professional segment
|--- | --------------------------------------------------------



| |  |  | The strengthening of the euro and certain other foreign currencies against the U.S. dollar contributed $28.7 million ($27.4 million for the professional segment and $1.3 million for
the polymer segment) to the increase in net product and service sales.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of foreign currency exchange rates and acquisitions and divestitures, consolidated net sales increased 3.8% compared to the same period in the prior year.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the foreign currency impact and sales agency fee income, professional segment net sales increased 2.3% compared to the same period in the prior year. The net sales growth
was primarily due to price increases taking hold in all business sectors and global geographic areas and expansion of key developing markets in the Asia Pacific and Latin America regions.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In North America, net sales showed strong improvement of 6.3% compared to the prior year period, reversing the recent trend of flat to declining revenues. The North America sales
growth was primarily attributable to pricing actions and more than offset regional challenges of industry consolidation and changes in customer purchase practices.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Europe, net sales were flat compared to the prior year period, primarily due to softening economies in key countries and continuing consolidation in key market sectors, including
distribution, building service contractors and food and beverage. In addition, competitive conditions have weakened our ability to implement across-the-board price increases. These factors were partially offset by sales growth in Central Europe,
Eastern Europe, Africa and the Middle East.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Asia Pacific, net sales have increased 4.4% compared to the prior year period, primarily due to growth in China and India.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | In Latin America, net sales increased 8.6% compared to the prior year period, primarily due to improved economic conditions and growth in distributor markets, the food and beverage
business and the lodging sector, as well as through key customer wins in Mexico and Brazil.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the foreign currency impact, polymer segment net sales increased by $9.9 million, or 12.7%, compared to the prior year period, primarily due to price increases in response
to the significant rise in raw material costs experienced over the past year.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding a $1.3 million increase from the strengthening of the euro and certain other foreign currencies against the U.S. dollar, net sales under our sales agency agreement with
Unilever increased $3.3 million, or 12.4%, compared to the prior year period, primarily due to partial termination fees for certain European territory sales agency agreements ($6.4 million), which offset the impact of certain brand disposals by
Unilever that affected the European and Asia Pacific markets in the prior year.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Gross Profit:



|                                           |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|------------------------------------------ |  | ------------------ | ------- | - | ------------ | - | ------- | ------ |  | - | ---------- | - |  | ---- | -
|                                           |  | Three Months Ended |         |   | Change       |  
|                                           |  | July 1, 2005       |         |   | July 2, 2004 |   |         | Amount |  |   | Percentage |  
|Professional                               |  | $                  | 341,993 |   |              | $ | 337,784 |        |  | $ | 4,209      |   |  | 1.2  | %
|Polymer                                    |  |                    | 21,788  |   |              |   | 23,095  |        |  |   | (1,307     | ) |  | -5.7 | %
|                                           |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|                                           |  |                    | 363,781 |   |              |   | 360,879 |        |  |   | 2,902      |   |  | 0.8  | %
|                                           |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|Gross profit as a percentage of net sales: |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|Professional                               |  |                    | 43.7    | % |              |   | 46.1    | %      |  |   |            |   |  |      |  
|Polymer                                    |  |                    | 24.9    | % |              |   | 30.2    | %      |  |   |            |   |  |      |  
|                                           |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|                                           |  |                    | 41.8    | % |              |   | 44.6    | %      |  |   |            |   |  |      |  
|                                           |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  



| |  |  | The strengthening of the euro and certain other foreign currencies against the U.S. dollar increased gross profit by $16.3 million ($15.9 million for the professional segment and
$0.4 million for the polymer segment) compared to the prior year period.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The reductions in gross profit continued to be most evident in our polymer segment, where our products are formulated from solvents, acrylates and resins that include propylene,
ethylene and benzene, costs for all of which are partially dependent on the price of crude oil and natural gas. Costs for styrene, a key raw material in our polymer business, are currently at or near their peak levels and are expected to remain in
this cost range into the near future. Another contributor to the rise in raw material costs is a cyclical mismatch in demand and supply for certain key materials in the marketplace. In addition, as costs have increased, the polymer segment has also
trended toward a change in product mix, with customers substituting lower margin products for specialty polymers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In our professional segment, the primary driver of the gross profit decline was the effect of increased crude oil and natural gas prices on raw material costs in our floorcare
business, where acrylic based polymers are common in product formulations, and increased prices on certain other key raw materials. The segment was also adversely impacted by higher freight and transportation costs, primarily attributable to the
rise in crude oil prices and changes in U.S. transportation legislation that has affected driver hours and carrier availability. To a lesser extent, gross profit has been impacted by a change in product and services mix, reflecting a relative
increase in lower margin sales to our food and beverage sector, which is not expected to continue, and a strategic shift towards increased solutions selling, which has a different business model than most of our operations. These negative influences
were partially offset by the effect of partial termination fees under JDIs sales agency agreement with Unilever in certain European territories, which increased gross profit by $6.4 million compared to the prior year period.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are continuing to implement a mix of general and selective price increases to recover, to the fullest extent possible, increases in raw material costs. These price increases
require time to take hold and consequently will lag, to some degree, the impact from rising raw material costs. Raw material costs, however, continue to rise and, in addition to further pricing actions, will be addressed through cost reduction
initiatives.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17



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##### Table of Contents

Operating Expenses:



|                                             |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|-------------------------------------------- |  | ------------------ | ------- | - | ------------ | - | ------- | ------ |  | - | ---------- | - |  | ---- | -
|                                             |  | Three Months Ended |         |   | Change       |  
|(dollars in thousands)                       |  | July 1, 2005       |         |   | July 2, 2004 |   |         | Amount |  |   | Percentage |  
|Selling, general and administrative expenses |  | $                  | 290,563 |   |              | $ | 275,032 |        |  | $ | 15,531     |   |  | 5.6  | %
|Research and development expenses            |  |                    | 17,962  |   |              |   | 18,576  |        |  |   | (614       | ) |  | -3.3 | %
|Restructuring expenses                       |  |                    | 4,712   |   |              |   | 2,498   |        |  |   | 2,214      |   |  | 88.6 | %
|                                             |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|                                             |  | $                  | 313,237 |   |              | $ | 296,106 |        |  | $ | 17,131     |   |  | 5.8  | %
|                                             |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|As a percentage of net sales:                |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|Selling, general and administrative expenses |  |                    | 33.4    | % |              |   | 34.0    | %      |  |   |            |   |  |      |  
|Research and development expenses            |  |                    | 2.1     | % |              |   | 2.3     | %      |  |   |            |   |  |      |  
|Restructuring expenses                       |  |                    | 0.5     | % |              |   | 0.3     | %      |  |   |            |   |  |      |  
|                                             |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  
|                                             |  |                    | 36.0    | % |              |   | 36.6    | %      |  |   |            |   |  |      |  
|                                             |  |                    |         |   |              |   |         |        |  |   |            |   |  |      |  



| |  |  | The strengthening of the euro and certain other foreign currencies against the U.S. dollar increased operating expenses by $9.4 million ($9.0 million in selling, general and
administrative expenses, $0.3 million in research and development expenses and $0.1 million in restructuring expenses) compared to the prior year period.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Selling, general and administrative expenses as a percentage of net sales improved 60 basis points compared to the same period in the prior year. Excluding the impact of foreign
currency, selling, general and administrative expenses increased $6.5 million compared to the prior year period with inflationary pressures partially offset by a reduction in risk insurance accruals ($2.1 million) and cost savings resulting from our
synergy, integration and cost containment programs.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of foreign currency, restructuring expenses increased $2.1 million compared to the prior year period, primarily due to $1.4 million of severance costs related
to the elimination of certain management positions during the three months ended July 1, 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Restructuring and Integration:



A summary of all costs associated with the restructuring and integration program for the three months ended July 1, 2005 and the three months ended July 2, 2004 is outlined below. The reserve balance shown below reflects the aggregate
reserves for all restructuring and integration projects.



|                                                                        |  |                    |        |   |              |   |         |  
|----------------------------------------------------------------------- |  | ------------------ | ------ | - | ------------ | - | ------- | -
|                                                                        |  | Three Months Ended |       
|(dollars in thousands)                                                  |  | July 1, 2005       |        |   | July 2, 2004 |  
|Reserve balance at beginning of period                                  |  | $                  | 9,027  |   |              | $ | 25,457  |  
|Exit costs recorded as purchase accounting adjustments                  |  |                    |       |   |              |   |        |  
|Restructuring costs charged to income                                   |  |                    | 4,712  |   |              |   | 2,498   |  
|Liability adjustments                                                   |  |                    |       |   |              |   | (3,891  | )
|Payments of accrued costs                                               |  |                    | (4,594 | ) |              |   | (15,044 | )
|                                                                        |  |                    |        |   |              |   |         |  
|Reserve balance at end of period                                        |  | $                  | 9,145  |   |              | $ | 9,020   |  
|                                                                        |  |                    |        |   |              |   |         |  
|Period costs classified as selling, general and administrative expenses |  | $                  | 6,208  |   |              | $ | 5,805   |  
|Capital expenditures                                                    |  |                    | 6,777  |   |              |   | 11,927  |  



| |  |  | During the three months ended July 1, 2005, we recorded $4.7 million of restructuring costs and $6.2 million of selling, general and administrative expenses related to our
restructuring and integration programs in our consolidated statement of income. These costs consisted primarily of involuntary termination and other costs incurred throughout North America and Europe as we continued to consolidate our operations and
IT ERP system platforms.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Non-Operating Results:



|                       |  |                    |        |   |              |   |        |        |  |   |            |   |  |       |  
|---------------------- |  | ------------------ | ------ | - | ------------ | - | ------ | ------ |  | - | ---------- | - |  | ----- | -
|                       |  | Three Months Ended |        |   | Change       |  
|(dollars in thousands) |  | July 1, 2005       |        |   | July 2, 2004 |   |        | Amount |  |   | Percentage |  
|Interest expense       |  | $                  | 52,599 |   |              | $ | 40,190 |        |  | $ | 12,409     |   |  | 30.9  | %
|Interest income        |  |                    | (2,538 | ) |              |   | (830   | )      |  |   | (1,708     | ) |  | 205.8 | %
|                       |  |                    |        |   |              |   |        |        |  |   |            |   |  |       |  
|Net interest expense   |  |                    | 50,061 |   |              |   | 39,360 |        |  |   | 10,701     |   |  | 27.2  | %
|Other expense, net     |  |                    | 13     |   |              |   | 4,668  |        |  |   | (4,655     | ) |  | -99.7 | %



| |  |  | Net interest expense increased compared to the prior year period, primarily due to the ineffectiveness of the JDI EURIBOR-based interest swap agreements ($9.4 million) and the
write-off of unamortized debt issuance costs ($3.6 million) arising from fully repaying the euro portion of the JDI term loan B in connection with the April 2005 amendment to the JDI senior secured credit facilities, partially offset by a reduction
in the interest rate spread on the JDI term loan B resulting from the amendment and higher interest income from short-term investments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other expense, net, decreased compared to the prior year period, primarily due to lower net losses from foreign currency translation and transactions and a prior year gain on a
non-recoverable sales tax assessment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Income Taxes:



|                                                                                                                 |  |                    |       |   |              |   |        |        |  |   |            |   |  |       |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | - | ------------ | - | ------ | ------ |  | - | ---------- | - |  | ----- | -
|                                                                                                                 |  | Three Months Ended |       |   | Change       |  
|(dollars in thousands)                                                                                           |  | July 1, 2005       |       |   | July 2, 2004 |   |        | Amount |  |   | Percentage |  
|Income from continuing operations, including minority interests, before income taxes and discontinued operations |  | $                  | 684   |   |              | $ | 20,663 |        |  | $ | (19,979    | ) |  | -96.7 | %
|Provision for income taxes                                                                                       |  |                    | 1,722 |   |              |   | 8,999  |        |  |   | (7,277     | ) |  | -80.9 | %
|Effective income tax rate                                                                                        |  |                    | 251.8 | % |              |   | 43.6   | %      |  |   |            |   |  |       |  



| |  |  | During the three months ended July 1, 2005, we reported an effective income tax rate of 251.8%. The high effective income tax rate resulted from a number of reasons. Certain tax
reporting entities with low income tax benefit reported losses during the second quarter of 2005 while other profitable tax reporting entities reported income tax expense generally at or near their statutory tax rate. The tax benefit on U.S. losses
for the three months ended July 1, 2005 was offset by incremental income tax expense due to repatriation of earnings from international operations. An increased valuation allowance has been provided at July 1, 2005 against tax loss carryforwards of
international operations which resulted in additional income tax expense. These increases to income tax expense have been partially offset by a tax expense benefit from the realization of previously un-benefited foreign tax credits.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For the three months ended July 2, 2004, foreign tax reporting entities that reported income recorded income tax expense at a rate higher than the U.S. statutory income tax rate.
Certain tax reporting entities that reported losses were not able to claim the full tax benefit for their losses; however, most loss reporting entities were able to claim income tax benefit at or near the U.S. statutory income tax rates.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



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##### Table of Contents

Net Income:



Net income decreased by $14.5 million, or 107.7%, to a net loss of $1.0 million for the three months ended July 1, 2005 compared to net income of $13.5
million for the three months ended July 2, 2004, primarily due to an increase in interest expense resulting from ineffective interest rate swap agreements ($9.4 million), the write-off of unamortized debt issuance costs ($3.6 million) associated
with the April 2005 amendment to JDIs senior secured credit facilities, as well as raw material cost increases in both our professional and polymer segments. Price increases introduced late in 2004 and the first half of 2005 have not been able
to fully offset these rising raw material costs. These factors were partially offset by the impact of our cost savings initiatives and the net effect of the strengthening of the euro and certain other foreign currencies against the U.S. dollar.



Our net loss for the three months ended July 1, 2005 was $6.1
million less than the $5.1 million net income for JDI, primarily due to additional interest expense on our senior discount notes ($9.4 million), partially offset by a lower provision for income taxes ($3.3 million).



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 quarterly 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 quarterly report may not be comparable to similarly titled measures of
other companies.



EBITDA should not be construed as a
substitute for, and should be read 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 each of the periods for which EBITDA is presented.



20



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##### Table of Contents

|                                                                                                             |  |                    |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ------------ | - | ------- | -
|                                                                                                             |  | Three Months Ended |        
|(dollars in thousands)                                                                                       |  | July 1, 2005       |         |   | July 2, 2004 |  
|Net cash flows provided by operating activities                                                              |  | $                  | 10,295  |   |              | $ | 59,932  |  
|Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses |  |                    | 57,201  |   |              |   | 7,045   |  
|Changes in deferred income taxes                                                                             |  |                    | 2,552   |   |              |   | 1,808   |  
|Gain from divestitures                                                                                       |  |                    | (613    | ) |              |   | 1,050   |  
|Loss on property disposals                                                                                   |  |                    | (893    | ) |              |   | (355    | )
|Depreciation and amortization expense                                                                        |  |                    | (48,263 | ) |              |   | (44,588 | )
|Amortization of debt issuance costs                                                                          |  |                    | (14,241 | ) |              |   | (3,293  | )
|Interest accreted on notes payable                                                                           |  |                    | 11,087  |   |              |   | (8,033  | )
|Interest accrued on long-term receivables-related parties                                                    |  |                    | (19,506 | ) |              |   | 1,071   |  
|Other                                                                                                        |  |                    | 1,343   |   |              |   | (1,134  | )
|                                                                                                             |  |                    |         |   |              |   |         |  
|Net income (loss)                                                                                            |  |                    | (1,038  | ) |              |   | 13,503  |  
|Minority interests in net income (loss) of subsidiaries                                                      |  |                    | (214    | ) |              |   | 82      |  
|Provision for income taxes                                                                                   |  |                    | 1,722   |   |              |   | 9,633   |  
|Interest expense, net                                                                                        |  |                    | 50,061  |   |              |   | 39,360  |  
|Depreciation and amortization expense                                                                        |  |                    | 48,263  |   |              |   | 44,588  |  
|                                                                                                             |  |                    |         |   |              |   |         |  
|EBITDA                                                                                                       |  | $                  | 98,794  |   |              | $ | 107,166 |  
|                                                                                                             |  |                    |         |   |              |   |         |  



EBITDA decreased by
$8.4 million, or 7.8%, compared to the same period in the prior year, primarily due to raw material cost increases in both our professional and polymer segments. Price increases introduced late in 2004 and the first half of 2005 have not been able
to fully offset rising raw material costs, but the increases have been partially offset by the impact of cost savings initiatives and the net effect of the strengthening of the euro and certain other foreign currencies against the U.S. dollar.



Six Months Ended July 1, 2005 Compared to Six Months Ended July 2, 2004



Net Sales:



|                               |  |                  |           |              |   |           |  |            |        |  |      |  
|------------------------------ |  | ---------------- | --------- | ------------ | - | --------- |  | ---------- | ------ |  | ---- | -
|                               |  | Six Months Ended |           | Change       |  
|(dollars in thousands)         |  | July 1, 2005     |           | July 2, 2004 |   | Amount    |  | Percentage |       
|Net product and service sales: |  |                  |           |              |   |           |  |            |        |  |      |  
|Professional                   |  | $                | 1,450,547 |              | $ | 1,380,868 |  | $          | 69,679 |  | 5.0  | %
|Polymer (1)                    |  |                  | 171,553   |              |   | 153,594   |  |            | 17,959 |  | 11.7 | %
|                               |  |                  |           |              |   |           |  |            |        |  |      |  
|                               |  |                  | 1,622,100 |              |   | 1,534,462 |  |            | 87,638 |  | 5.7  | %
|Sales agency fee income        |  |                  | 51,813    |              |   | 48,443    |  |            | 3,370  |  | 7.0  | %
|                               |  |                  |           |              |   |           |  |            |        |  |      |  
|                               |  | $                | 1,673,913 |              | $ | 1,582,905 |  | $          | 91,008 |  | 5.7  | %
|                               |  |                  |           |              |   |           |  |            |        |  |      |  



|(1) | Excludes inter-segment sales to the professional segment
|--- | --------------------------------------------------------



| |  |  | The strengthening of the euro and certain other foreign currencies against the U.S. dollar contributed $55.6 million ($52.7 million for the professional segment and $2.9 million for
the polymer segment) to the increase in net product and service sales compared to the prior year period.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of foreign currency exchange rates and acquisitions and divestitures, consolidated net sales increased 2.2% compared to the prior year period.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the foreign currency impact and sales agency fee income, professional segment net sales increased 1.2% compared to the prior year period. The net sales growth was
primarily due to price increases taking hold in all business sectors and global geographic areas and expansion of key developing markets in Asia Pacific and Latin America.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21



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##### Table of Contents

| |  |  | In North America, net sales showed strong improvement of 1.9% for the year-to-date compared to the prior year, reversing a recent trend of flat to declining revenues. The North
America sales growth was primarily attributable to pricing actions and has more than offset regional challenges of industry consolidation and changes in customer purchase practices.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Europe, net sales were flat for the year-to-date compared to the prior year period, primarily due to softening economies in key countries and continuing consolidation in key
market sectors, including distribution, building service contractors, and food and beverage. In addition, competitive conditions have weakened our ability to implement across the board price increases. These factors were partially offset by growth
in Central Europe, Eastern Europe, Africa and the Middle East and a correction in accounting treatment for certain equipment leases which increased Europes first quarter 2005 net sales by $15.3 million compared to the same period in the prior
year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Asia Pacific, net sales have increased 5.7% for the year-to-date compared to the prior year period, primarily due to growth in China and India.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Latin America, net sales grew by 8.8% for the year-to-date compared to the prior year period, as a result of improved economic conditions and growth in distributor markets, the
food and beverage business and the lodging sector, as well as through key customer wins in Mexico and Brazil.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the foreign currency impact, polymer segment net sales increased by $15.1 million, or 9.7%, compared to the prior year period, primarily due to price increases in response
to the significant rise in raw material costs experienced over the past year.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding a $2.4 million increase from the strengthening of the euro and certain other foreign currencies against the U.S. dollar, net sales under our sales agency agreement with
Unilever increased $1.0 million, or 1.9%, compared to the prior year, primarily due to partial termination fees for certain European territory sales agency agreements ($7.2 million), which offset the impact of certain brand disposals by Unilever
that affected the European and Asia Pacific markets in the prior year.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Gross Profit:



|                                           |  |                  |         |   |              |   |         |        |  |   |            |   |  |       |  
|------------------------------------------ |  | ---------------- | ------- | - | ------------ | - | ------- | ------ |  | - | ---------- | - |  | ----- | -
|                                           |  | Six Months Ended |         |   | Change       |  
|                                           |  | July 1, 2005     |         |   | July 2, 2004 |   |         | Amount |  |   | Percentage |  
|Professional                               |  | $                | 648,107 |   |              | $ | 650,271 |        |  | $ | (2,164     | ) |  | -0.3  | %
|Polymer                                    |  |                  | 43,877  |   |              |   | 50,710  |        |  |   | (6,833     | ) |  | -13.5 | %
|                                           |  |                  |         |   |              |   |         |        |  |   |            |   |  |       |  
|                                           |  |                  | 691,984 |   |              |   | 700,981 |        |  |   | (8,997     | ) |  | -1.3  | %
|                                           |  |                  |         |   |              |   |         |        |  |   |            |   |  |       |  
|Gross profit as a percentage of net sales: |  |                  |         |   |              |   |         |        |  |   |            |   |  |       |  
|Professional                               |  |                  | 43.1    | % |              |   | 45.5    | %      |  |   |            |   |  |       |  
|Polymer                                    |  |                  | 25.6    | % |              |   | 33.0    | %      |  |   |            |   |  |       |  
|                                           |  |                  |         |   |              |   |         |        |  |   |            |   |  |       |  
|                                           |  |                  | 41.3    | % |              |   | 44.3    | %      |  |   |            |   |  |       |  
|                                           |  |                  |         |   |              |   |         |        |  |   |            |   |  |       |  



| |  |  | The strengthening of the euro and certain other foreign currencies against the U.S. dollar increased gross profit by $28.5 million ($27.6 million for the professional segment and
$0.9 million for the polymer segment) compared to the prior year period.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The reductions in gross profit continued to be most evident in our polymer segment, where our products are formulated from solvents, acrylates and resins that include propylene,
ethylene and benzene, costs for all of which are partially dependent on the price of crude oil and natural gas. Costs for styrene, a key raw material in our polymer business, are currently at or near peak levels and are expected to remain in this
cost range into the near future. Another contributor to the rise in raw material costs is a cyclical mismatch in demand and supply for certain key materials in the marketplace. In addition, as costs have increased, the polymer segment has also
trended toward a change in product mix, with customers substituting lower margin products for specialty polymers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | In our professional segment, the primary driver of the gross profit decline was the effect of increased crude oil and natural gas prices on raw material costs in our floorcare
business, where acrylic based polymers are common in product formulations, and increased prices on certain other key raw materials. The segment was also adversely impacted by higher freight and transportation costs, primarily attributable to the
rise in crude oil prices and changes in U.S. transportation legislation that has affected driver hours and carrier availability. To a lesser extent, gross profit has been impacted by a change in product and services mix, reflecting a relative
increase in lower margin sales to our food and beverage sector, which is not expected to continue, and a strategic shift towards increased solutions selling, which has a different business model than most of our business. These negative influences
were partially offset by the effect of a correction in accounting treatment in the first quarter of 2005 for certain equipment leased to customers in Europe, which increased gross profit by $5.8 million compared to the prior year period, and partial
termination fees in certain European territories, which increased gross profit by $7.2 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are continuing to implement a mix of general and selective price increases to recover, to the fullest extent possible, increases in raw material costs. These price increases
require time to take hold and consequently will lag, to some degree, the impact from rising raw material costs. Raw material costs, however, continue to rise and, in addition to further pricing actions, will be addressed through cost reduction
initiatives.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Operating Expenses:



|                                             |  |                  |         |   |              |   |         |        |  |   |            |   |  |      |  
|-------------------------------------------- |  | ---------------- | ------- | - | ------------ | - | ------- | ------ |  | - | ---------- | - |  | ---- | -
|                                             |  | Six Months Ended |         |   | Change       |  
|(dollars in thousands)                       |  | July 1, 2005     |         |   | July 2, 2004 |   |         | Amount |  |   | Percentage |  
|Selling, general and administrative expenses |  | $                | 576,350 |   |              | $ | 552,969 |        |  | $ | 23,381     |   |  | 4.2  | %
|Research and development expenses            |  |                  | 35,593  |   |              |   | 37,019  |        |  |   | (1,426     | ) |  | -3.9 | %
|Restructuring expenses                       |  |                  | 8,108   |   |              |   | 7,550   |        |  |   | 558        |   |  | 7.4  | %
|                                             |  |                  |         |   |              |   |         |        |  |   |            |   |  |      |  
|                                             |  | $                | 620,051 |   |              | $ | 597,538 |        |  | $ | 22,513     |   |  | 3.8  | %
|                                             |  |                  |         |   |              |   |         |        |  |   |            |   |  |      |  
|As a percentage of net sales:                |  |                  |         |   |              |   |         |        |  |   |            |   |  |      |  
|Selling, general and administrative expenses |  |                  | 34.4    | % |              |   | 34.9    | %      |  |   |            |   |  |      |  
|Research and development expenses            |  |                  | 2.1     | % |              |   | 2.3     | %      |  |   |            |   |  |      |  
|Restructuring expenses                       |  |                  | 0.5     | % |              |   | 0.5     | %      |  |   |            |   |  |      |  
|                                             |  |                  |         |   |              |   |         |        |  |   |            |   |  |      |  
|                                             |  |                  | 37.0    | % |              |   | 37.7    | %      |  |   |            |   |  |      |  
|                                             |  |                  |         |   |              |   |         |        |  |   |            |   |  |      |  



| |  |  | The strengthening of the euro and certain other foreign currencies against the U.S. dollar increased operating expenses by $18.5 million ($17.5 million in selling, general and
administrative expenses, $0.7 million in research and development expenses and $0.3 million in restructuring expenses) compared to the prior year period.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Selling, general and administrative expenses as a percentage of net sales have improved 50 basis points compared to the same period in the prior year. Excluding the impact of
foreign currency, selling, general and administrative expenses increased $5.8 million compared to the prior year period, with inflationary pressures partially offset by a reduction in risk insurance accruals of $2.1 million and cost savings
resulting from our synergy, integration and cost containment programs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of foreign currency, restructuring expenses increased $0.3 million compared to the prior year period, primarily due to $1.4 million in severance costs related
to the elimination of certain management positions during the three months ended July 1, 2005, partially offset by a reduction in the remaining restructuring expenses related to the DiverseyLever acquisition.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Restructuring and Integration:



A summary of all costs associated with the restructuring and integration
program for the six months ended July 1, 2005, the six months ended July 2, 2004 and since the DiverseyLever acquisition, which occurred in May 2002, is outlined below. The reserve balance shown below reflects the aggregate reserves for all
restructuring and integration projects.



23



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|                                                                        |  |                  |        |   |                                                |   |         |   |  |   |          |  
|----------------------------------------------------------------------- |  | ---------------- | ------ | - | ---------------------------------------------- | - | ------- | - |  | - | -------- | -
|                                                                        |  | Six Months Ended |        |   | Total Projectto DateMay 4, 2002 - July 1, 2005 |  
|(dollars in thousands)                                                  |  | July 1, 2005     |        |   | July 2, 2004                                   |   |        
|Reserve balance at beginning of period                                  |  | $                | 9,008  |   |                                                | $ | 34,798  |   |  | $ |         |  
|Exit costs recorded as purchase accounting adjustments                  |  |                  |       |   |                                                |   |        |   |  |   | 80,574   |  
|Restructuring costs charged to income                                   |  |                  | 8,108  |   |                                                |   | 7,550   |   |  |   | 61,198   |  
|Liability adjustments                                                   |  |                  |       |   |                                                |   | (4,040  | ) |  |   | (4,337   | )
|Payments of accrued costs                                               |  |                  | (7,971 | ) |                                                |   | (29,288 | ) |  |   | (128,290 | )
|                                                                        |  |                  |        |   |                                                |   |         |   |  |   |          |  
|Reserve balance at end of period                                        |  | $                | 9,145  |   |                                                | $ | 9,020   |   |  | $ | 9,145    |  
|                                                                        |  |                  |        |   |                                                |   |         |   |  |   |          |  
|Period costs classified as cost of sales                                |  | $                |       |   |                                                | $ |        |   |  | $ | 4,878    |  
|Period costs classified as selling, general and administrative expenses |  |                  | 12,994 |   |                                                |   | 9,676   |   |  |   | 112,994  |  
|Capital expenditures                                                    |  |                  | 12,512 |   |                                                |   | 12,724  |   |  |   | 122,930  |  



| |  |  | During fiscal years 2002, 2003 and 2004, in connection with the May 2002 acquisition of the DiverseyLever business, we recorded liabilities for the involuntary termination of former
DiverseyLever employees and other exit costs associated with former DiverseyLever facilities. We also developed plans to restructure certain facilities that we owned prior to the acquisition of the DiverseyLever business, primarily for the purpose
of eliminating redundancies resulting from the acquisition of the DiverseyLever business.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the six months ended July 1, 2005, we recorded $8.1 million of restructuring costs and $13.0 million of selling, general and administrative expenses related to our
restructuring and integration programs in our consolidated statement of income. These costs consisted primarily of involuntary termination and other costs incurred throughout North America and Europe as we continued to consolidate our operations and
IT ERP system platforms.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Non-Operating Results:



|                       |  |                  |        |   |              |   |        |        |  |   |            |   |  |       |  
|---------------------- |  | ---------------- | ------ | - | ------------ | - | ------ | ------ |  | - | ---------- | - |  | ----- | -
|                       |  | Six Months Ended |        |   | Change       |  
|(dollars in thousands) |  | July 1, 2005     |        |   | July 2, 2004 |   |        | Amount |  |   | Percentage |  
|Interest expense       |  | $                | 93,145 |   |              | $ | 80,052 |        |  | $ | 13,093     |   |  | 16.4  | %
|Interest income        |  |                  | (4,112 | ) |              |   | (1,954 | )      |  |   | (2,158     | ) |  | 110.4 | %
|                       |  |                  |        |   |              |   |        |        |  |   |            |   |  |       |  
|Net interest expense   |  |                  | 89,033 |   |              |   | 78,098 |        |  |   | 10,935     |   |  | 14.0  | %
|Other expense, net     |  |                  | 174    |   |              |   | 6,783  |        |  |   | (6,609     | ) |  | -97.4 | %



| |  |  | Net interest expense increased compared to the prior year period, primarily due to the ineffectiveness JDIs EURIBOR-based interest swap agreements ($9.4 million) and the
write-off of unamortized debt issuance costs ($3.6 million) arising from fully repaying the euro portion of the JDI term loan B in connection with the April 2005 amendment to the JDI senior secured credit facilities, partially offset by a reduction
in the interest rate spread on the JDI term loan B resulting from the February 2004 and April 2005 amendments to JDIs senior secured credit facilities and higher interest income from short-term investments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other expense, net, decreased compared to the prior year period, primarily due to lower net losses from foreign currency translation and transactions and a prior year gain on a
non-recoverable sales tax assessment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Income Taxes:



|                                                                                                                        |  |                  |         |   |              |   |        |        |  |   |            |   |  |        |  
|----------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------ | - | ------ | ------ |  | - | ---------- | - |  | ------ | -
|                                                                                                                        |  | Six Months Ended |         |   | Change       |  
|(dollars in thousands)                                                                                                  |  | July 1, 2005     |         |   | July 2, 2004 |   |        | Amount |  |   | Percentage |  
|(Loss) Income from continuing operations, including minority interests, before income taxes and discontinued operations |  | $                | (17,160 | ) |              | $ | 18,401 |        |  | $ | (35,561    | ) |  | -193.3 | %
|Provision for income taxes                                                                                              |  |                  | 1,755   |   |              |   | 8,445  |        |  |   | (6,690     | ) |  | -79.2  | %
|Effective income tax rate                                                                                               |  |                  | -10.2   | % |              |   | 45.9   | %      |  |   |            |   |  |        |  



| |  |  | During the six months ended July 1, 2005, we reported a negative effective income tax rate of 10.2% on losses of $17,160, the result of certain tax reporting entities with low
income tax benefit reporting losses during the first half of 2005 while other profitable tax reporting entities reported income tax expense generally at or near their statutory tax rate. The tax benefit on U.S. losses for the six months ended July
1, 2005 was offset by incremental income tax expense due to repatriation of earnings from international operations. An increased valuation allowance has been provided at July 1, 2005 against tax loss carryforwards of international operations which
resulted in additional income tax expense. These increases to income tax expense have been partially offset by a tax expense benefit from the realization of previously un-benefited foreign tax credits. Accordingly, we had a negative effective tax
rate for the period.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For the six months ended July 2, 2004, foreign tax reporting entities that reported income recorded income tax expense at a rate higher than the U.S. statutory income tax rate.
Certain tax reporting entities that reported losses were not able to claim the full tax benefit for their losses; however, most loss reporting entities were able to claim income tax benefit at or near the U.S. statutory income tax rates.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net Income:



Net income decreased by $27.1 million, or 222.1%, to a net loss of $14.9
million for the six months ended July 1, 2005 compared to net income of $12.2 million for the six months ended July 2, 2004, primarily due to an increase in interest expense resulting from ineffective interest rate swap agreements ($9.4 million) and
the write-off of unamortized debt issuance costs ($3.6 million) associated with the April 2005 amendment to JDIs senior secured credit facilities, as well as raw material cost increases in both our professional and polymer segments. Price
increases introduced late in 2004 and the first half of 2005 have not been able to fully offset these rising raw material costs. These factors were partially offset by a $3.8 million increase from the correction in the accounting treatment for
equipment leased to customers, a $4.0 million gain on discontinued operations, the impact of our cost savings initiatives and net effect of the strengthening of the euro and certain other foreign currencies against the U.S. dollar.



Our net loss for the six months ended July 1, 2005 was $12.2 million greater
than the $2.7 million net loss for JDI, primarily due to additional interest expense on our senior discount notes ($18.7 million), partially offset by a lower provision for income taxes ($6.6 million).



25



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##### Table of Contents

EBITDA:



As discussed above, EBITDA should not be construed as a substitute for, and should be read 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 each of the periods for which EBITDA is presented.



|                                                                                                             |  |                  |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ---------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                             |  | Six Months Ended |        
|(dollars in thousands)                                                                                       |  | July 1, 2005     |         |   | July 2, 2004 |  
|Net cash flows provided by operating activities                                                              |  | $                | 8,264   |   |              | $ | 85,645  |  
|Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses |  |                  | 101,784 |   |              |   | 35,188  |  
|Changes in deferred income taxes                                                                             |  |                  | 7,153   |   |              |   | 3,113   |  
|Gain from divestitures                                                                                       |  |                  | 3,991   |   |              |   | 3,033   |  
|Loss on property disposals                                                                                   |  |                  | (3,541  | ) |              |   | (762    | )
|Depreciation and amortization expense                                                                        |  |                  | (95,358 | ) |              |   | (92,637 | )
|Amortization of debt issuance costs                                                                          |  |                  | (16,498 | ) |              |   | (6,644  | )
|Interest accreted on notes payable                                                                           |  |                  | 1,865   |   |              |   | (16,380 | )
|Interest accrued on long-term receivables-related parties                                                    |  |                  | (18,598 | ) |              |   | 1,823   |  
|Other                                                                                                        |  |                  | (3,977  | ) |              |   | (165    | )
|                                                                                                             |  |                  |         |   |              |   |         |  
|Net income (loss)                                                                                            |  |                  | (14,915 | ) |              |   | 12,214  |  
|Minority interests in net income (loss) of subsidiaries                                                      |  |                  | (114    | ) |              |   | 161     |  
|Provision for income taxes                                                                                   |  |                  | 1,755   |   |              |   | 9,392   |  
|Interest expense, net                                                                                        |  |                  | 89,033  |   |              |   | 78,098  |  
|Depreciation and amortization expense                                                                        |  |                  | 95,358  |   |              |   | 92,637  |  
|                                                                                                             |  |                  |         |   |              |   |         |  
|EBITDA                                                                                                       |  | $                | 171,117 |   |              | $ | 192,502 |  
|                                                                                                             |  |                  |         |   |              |   |         |  



EBITDA decreased by
$21.4 million, or 11.1%, compared to the prior year period, primarily due to raw material cost increases in both our professional and polymer segments. Price increases introduced late in 2004 and the first half of 2005 have not been able to fully
offset these rising raw material costs. These factors were partially offset by a $5.8 million increase from the correction in the accounting treatment for equipment leased to customers, a $4.0 million gain on discontinued operations, the impact of
our cost savings initiatives and net effect of the strengthening of the euro and certain other foreign currencies against the U.S. dollar.



Liquidity and Capital Resources



|                                                    |  |                  |           |   |                   |   |           |        |  |   |            |   |  |        |  
|--------------------------------------------------- |  | ---------------- | --------- | - | ----------------- | - | --------- | ------ |  | - | ---------- | - |  | ------ | -
|                                                    |  | Six Months Ended |           |   | Change            |  
|(dollars in thousands)                              |  | July 1, 2005     |           |   | July 2, 2004      |   |           | Amount |  |   | Percentage |  
|Net cash provided by operating activities           |  | $                | 8,264     |   |                   | $ | 85,645    |        |  | $ | (77,381    | ) |  | -90.4  | %
|Net cash used in investing activities               |  |                  | (35,511   | ) |                   |   | (4,263    | )      |  |   | (31,248    | ) |  | 733.0  | %
|Net cash provided by (used in) financing activities |  |                  | 29,499    |   |                   |   | (64,664   | )      |  |   | 94,163     |   |  | -145.6 | %
|Capital expenditures                                |  |                  | 41,681    |   |                   |   | 51,840    |        |  |   | (10,159    | ) |  | -19.6  | %
|                                                    |  |                  |          
|                                                    |  |                  |           |   |                   |   |           | Change | 
|                                                    |  | July 1, 2005     |           |   | December 31, 2004 |   |           | Amount |  |   | Percentage |  
|Cash and cash equivalents                           |  | $                | 25,639    |   |                   | $ | 28,413    |        |  | $ | (2,774     | ) |  | -9.8   | %
|Working capital (1)                                 |  |                  | 437,815   |   |                   |   | 407,701   |        |  |   | 30,114     |   |  | 7.4    | %
|Total debt                                          |  |                  | 1,629,578 |   |                   |   | 1,626,593 |        |  |   | 2,985      |   |  | 0.2    | %



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



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##### Table of Contents

| |  |  | The decrease in net cash provided by operating activities during the six months ended July 1, 2005 compared to the prior year period was primarily due to the expansion of the
accounts receivable securitization facility in the first quarter of 2004, changes in operating assets and liabilities, lower net income, and a gain on disposal of discontinued operations recognized in the first quarter of fiscal year 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The increase in net cash used in investing activities during the six months ended July 1, 2005 compared to the prior year period was primarily due to the $46.0 million in proceeds
received from the divestiture of Whitmire Microgen in June 2004 and a $10.2 million reduction in expenditures for property, plant and equipment and computer software. 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. We may make significant cash expenditures in the next few years in an effort to capitalize on cost savings
opportunities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net cash provided by financing activities during the six months ended July 1, 2005 compared to net cash used in financing activities during the prior year period was primarily due
to lower repayments of long-term debt, resulting from a reduction in cash provided by operating activities. In the first six months of fiscal year 2004, cash proceeds received from the expansion of the accounts receivable securitization program and
the Whitmire divestiture were used to repay long-term debt.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The increase in net working capital during the six months ended July 1, 2005 compared to the prior year period was due to a $34.9 million decrease in accounts payable, resulting
from an six-day reduction in average days in trade accounts payable, and a $6.6 million increase in inventories, resulting from our seasonal build in inventory levels, partially offset by a $11.4 million reduction in accounts receivable resulting
from a three day decrease in days sales outstanding as collection activities improved.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 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. 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.



In addition, on May 3, 2002, in connection with the acquisition, JDI issued
its senior subordinated notes and entered into a $1.2 billion senior secured credit facility. JDI used the proceeds of the sale of the JDI senior subordinated notes and initial borrowings under the JDI senior secured credit facilities, together with
other available funds, to finance the cash portion of the purchase price for the DiverseyLever business and the related fees and expenses and to refinance then-existing indebtedness.



The JDI senior secured credit facilities were amended in August 2003, February 2004 and April 2005. The amendments, among
other things, reduced the interest rate spread on specified tranches of debt under the credit facilities, thereby reducing borrowing costs over the remaining life of the credit facilities. In addition, the amendments increased specified credit
limits and changed various financial covenants and administrative requirements to provide us with greater operating flexibility. In addition, the April 2005 amendment allowed us to borrow additional funds under the U.S. dollar portion of the term
loan B and to repay the entire euro portion.



27



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##### Table of Contents

As of July 1, 2005, excluding indebtedness held by JDI, Holdings only indebtedness consisted of $300
million in senior discount notes. As of July 1, 2005, Holdings subsidiaries had total indebtedness of about $1.3 billion, consisting of $571 million of JDI senior subordinated notes, $656 million of borrowings under the JDI senior secured
credit facilities, $1.7 million of other long-term borrowings and $101 million in short-term credit lines. In addition, we had $205 million in operating lease commitments, $3.6 million in capital lease commitments and $7.3 million committed under
letters of credit that expire in 2005 and 2006.



JDI and some
of its subsidiaries have the capacity to borrow additional funds under the JDI senior secured credit facilities, subject to compliance with the financial covenants set forth in the facilities. As of July 1, 2005, JDI had $31.2 million in borrowings
under the revolving portion of the JDI senior secured credit facilities and had the ability to borrow $285 million under those revolving facilities. Of this amount, we believe JDI would have been able to borrow $105 million and still be in
compliance with the financial covenants set forth in the JDI senior secured credit facilities and the indentures for the JDI senior subordinated notes.



We believe that the cash flows from operations, together with available cash, available borrowings under the JDI senior secured credit facilities and the
proceeds from JDIs receivables securitization facility will generate sufficient cash flow to meet our liquidity needs for the foreseeable future. There can be no assurance, however, that we will be able to achieve the anticipated cost savings
or that our substantial indebtedness will not adversely affect our financial condition.



Off-Balance Sheet Arrangements. JDI and certain of its subsidiaries entered into an agreement (the Receivables Facility) in March 2001 whereby they 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 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 accounts receivable securitization arrangement is accounted for under the provisions of SFAS No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of LiabilitiesA replacement of FASB Statement No. 125.As of July 1, 2005 and December 31, 2004, JDIs total potential for securitization of trade receivables was $150,000.



As of July 1, 2005 and December 31, 2004, the Conduit held
$136,300 and $130,300, respectively, of accounts receivable that are not included in the accounts receivable balance reflected in our consolidated balance sheets.



As of July 1, 2005 and December 31, 2004, JDI had a retained interest of $136,714 and $135,304, 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 six months ended July 1, 2005, JWPRCs cost of borrowing under the Receivables Facility was at a weighted
average rate of 3.99% per annum, which is significantly lower than our incremental borrowing rate.



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 JDI 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.



Financial Covenants under Our Senior Secured Credit Facilities



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



28



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##### Table of Contents

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 six-month
period to (2) JDIs 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
|June 30, 2005                     |  | 4.00 to 1             
|September 30, 2005                |  | 3.50 to 1             
|December 31, 2005                 |  | 3.25 to 1             
|March 31, 2006                    |  | 3.25 to 1             
|June 30, 2006                     |  | 3.25 to 1             
|September 30, 2006                |  | 3.00 to 1             
|December 31, 2006                 |  | 3.00 to 1             
|March 31, 2007                    |  | 3.25 to 1             
|June 30, 2007                     |  | 3.25 to 1             
|September 30, 2007                |  | 3.00 to 1             
|December 31, 2007                 |  | 3.00 to 1             
|March 31, 2008                    |  | 3.25 to 1             
|June 30, 2008                     |  | 3.25 to 1             
|September 30, 2008                |  | 3.00 to 1             
|December 31, 2008                 |  | 3.00 to 1             
|March 31, 2009                    |  | 3.25 to 1             
|June 30, 2009                     |  | 3.25 to 1             
|September 30, 2009 and thereafter |  | 3.00 to 1             



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 JDI
maintain an interest coverage ratio of no less than 3.50 to 1 for all fiscal periods ended on or after June 30, 2005.



Compliance with Maximum Leverage Ratio and Minimum Interest Coverage Ratio. For JDIs financial covenant period ended on July 1, 2005, 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. The JDI senior secured credit facilities prohibit JDI from making capital expenditures during any calendar year in an amount
exceeding $150,000. As of July 1, 2005, JDI was in compliance with the limitation on capital expenditures for fiscal year 2005.



Restructuring Charges. The JDI senior secured credit facilities limit the amount of spending on restructuring and integration-related activities in
2004 and 2005 to $145 million in the aggregate. As of July 1, 2005, JDI was in compliance with the limitation on spending on restructuring and integration-related activities for fiscal years 2004 and 2005.



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##### Table of Contents

|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|------- | ---------------------------------------------------------



Interest Rate Risk



As of July 1, 2005, JDI had $656 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 its credit facilities, $437 million of the debt outstanding remained subject to variable rates. JDI also has entered into interest rate swap agreements with a
notional value of 146 million that were related to the euro portion of the term loan B that was fully repaid in April 2005. As a result of the debt repayment, these interest rate swaps have been deemed ineffective and, therefore, must be
marked-to-market at the end of each accounting period through the income statement. Because of certain intercompany funding arrangements, we believe that these swaps provide an economic hedge to the incremental debt use to finance the repayment. In
addition, as of July 1, 2005, JDI had $101 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.



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 Holdings 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.



30



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##### Table of Contents

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. The overall goals of these various
evaluation activities are to monitor our Disclosure Controls and to make modifications as necessary; our intent in this regard is that the Disclosure Controls will be maintained as dynamic systems that change (including with improvements and
corrections) as conditions warrant.



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



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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
|------- | --------



|     |  |                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|31.1 |  | Principal Executive Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|     | 
|31.2 |  | Principal Financial Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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SIGNATURES



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



|                      |  |  |  |                                                              
|--------------------- |  |  |  | -------------------------------------------------------------
|                      |  |  |  | JOHNSONDIVERSEY HOLDINGS, INC.                               
|                      |  | 
|Date: August 11, 2005 |  |  |  | /S/    JOSEPH F.
SMORADA                                     
|                      |  |  |  | Joseph F. Smorada, Vice President and Chief Financial Officer



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JOHNSONDIVERSEY HOLDINGS,
INC.



EXHIBIT INDEX



|              |  |                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                                 
|31.1          |  | Principal Executive Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|              | 
|31.2          |  | Principal Financial Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|              | 
|32.1          |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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