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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended January 3, 2003

OR

For the transition period from                               to                              .

COMMISSION FILE NUMBER 333-97427

JOHNSONDIVERSEY, INC.

(Exact name of registrant as specified in its charter)

8310 16^th Street

Sturtevant, Wisconsin 53177-0902

(Address of Principal Executive Offices, Including Zip Code)

(262) 631-4001

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act:  None.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

There is no public trading market for the registrant’s common stock. As of March 31, 2003, there were 24,422 outstanding shares of the registrant’s common stock, $1.00 par value.

DOCUMENTS INCORPORATED BY REFERENCE:  None.

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FORWARD-LOOKING STATEMENTS

We make statements in this annual report on Form 10-K 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:

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PART I

ITEM 1.     BUSINESS

Unless otherwise indicated, references to “JohnsonDiversey,” “we,” “our” and “us” refer to JohnsonDiversey, Inc. and its consolidated subsidiaries. Our principal executive offices are located at 8310 16^th Street, Sturtevant, Wisconsin 53177, and our telephone number is (262) 631-4001.

In June 2002, we changed our fiscal year end to the Friday closest to December 31. Prior to that, our fiscal year ended on the Friday closest to June 30. Accordingly, references in this annual report to fiscal year 2000 are to our fiscal year ended June 30, 2000 and references to fiscal year 2001 are to our fiscal year ended June 29, 2001. Our fiscal year 2002 commenced on December 29, 2001 and ended on January 3, 2003. We also refer in this report to the six-month transition period which commenced on June 30, 2001 and ended on December 28, 2001 as the fiscal six months ended December 28, 2001.

We are required to file annual reports on Form 10–K, quarterly reports on Form 10-Q, current reports on Form 8-K and other information with the Securities and Exchange Commission, or SEC. The public can obtain copies of these materials by visiting the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330, or by accessing the SEC’s website at http://www.sec.gov. In addition, as soon as reasonably practicable after these materials are filed with or furnished to the SEC, we make copies available to the public free of charge on or through our website at http://www.johnsondiversey.com. The information on our website is not incorporated into, and is not part of, this annual report.

General

We are a leading global marketer and manufacturer of cleaning, hygiene and appearance products 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 printing, packaging, coatings and plastics markets. We operate our cleaning, hygiene and appearance products and related services business, which we refer to as our professional business, under the names “JohnsonDiversey,” “Johnson Wax Professional” and “DiverseyLever,” and our polymer business under the name “Johnson Polymer.”

We sell our products in more than 120 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 the Asia Pacific region.

We are a privately held business incorporated in the State of Delaware on February 10, 1997 under the name S.C. Johnson Commercial Markets, Inc. Until 1999, we were a wholly owned subsidiary of S.C. Johnson & Son, Inc., a leading provider of innovative consumer home cleaning, maintenance and storage products that Samuel Curtis Johnson founded in 1886. In November 1999, we were separated from S.C. Johnson & Son in a tax-free spin-off. In connection with the spin-off, Commercial Markets Holdco, Inc., a Delaware corporation that is majority-owned by descendants of Samuel Curtis Johnson, obtained substantially all of our shares from S.C. Johnson & Son. Prior to May 3, 2002, Commercial Markets Holdco contributed its shares of JohnsonDiversey to Johnson Professional Holdings, Inc., a wholly owned subsidiary of Commercial Markets Holdco.

On May 3, 2002, we acquired DiverseyLever, an institutional and industrial cleaning and sanitation business, from Conopco, Inc. a subsidiary of Unilever PLC and Unilever N.V. (together “Unilever”). Following the acquisition, we changed our name to “JohnsonDiversey, Inc.” and Johnson Professional Holdings changed its name to “JohnsonDiversey Holdings, Inc.” In connection with the acquisition, Unilever acquired a one-third interest in JohnsonDiversey Holdings and Commercial Markets Holdco retained the remaining two-thirds interest.

At the closing of the acquisition, we were appointed Unilever’s exclusive agent to sell its consumer branded products to institutional and industrial customers, a business we did not acquire.

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Professional Business

General

Our professional business supplies cleaning, hygiene and appearance products, including food service, food processing, floor care, restroom/other housekeeping, laundry and industrial products, to institutional and industrial end-users such as food and lodging establishments, food processing facilities, building service contractors (BSCs), educational institutions, retail outlets, healthcare facilities and industrial plants. In addition, we provide a wide range of value-added services, including safety and application training, safety and hygiene consulting and hygiene auditing. We sell our professional products and related services on a global basis to a broad range of customers in diverse industries. Our professional business had net sales of $1,952 million in fiscal year 2002. See note 26 to our consolidated financial statements, included elsewhere in this report.

Products

We are a worldwide supplier of cleaning, hygiene and appearance products and related services to the institutional and industrial cleaning and sanitation market. We offer a broad, diversified line of products and related services to customers in more than 120 countries. We currently offer a wide range of products in each of six different categories—food service, food processing, floor care, restroom/other housekeeping, laundry and industrial.

Food Service. Food service products remove soil and eliminate microbiological contamination from food contact surfaces. Our food service products include chemicals for washing dishes, glassware, flatware, utensils and kitchen equipment; dish machines; pre-rinse units; dish tables and racks; hood, duct and exhaust cleaning products; food handling and storage products; and safe floor systems and tools. We also manufacture and supply kitchen cleaning products, such as general purpose cleaners, lime scale removers, bactericides/disinfectants, detergents, oven and grill cleaners, general surface degreasers, floor cleaners and food surface disinfectants. In addition, we support all cleaning tasks with documented cleaning methods and hygiene plans.

Food Processing. We offer detergents, cleaners, sanitizers and lubricants, as well as cleaning systems, electronic dispensers and chemical injectors for the application of chemical products. We also offer gel and foam products for manual open plant cleaning, acid and alkaline cleaners and membrane cleaning products. In addition, we provide consulting services in the areas of food safety and quality management.

Floor Care. We manufacture a broad range of floor care products and systems, including finishes, buffable waxes, cleaners, polishes, sealers and strippers for all types of flooring surfaces, including vinyl, terrazzo, granite, concrete, marble, linoleum and wood. We also provide a full range of carpet cleaners, such as extraction cleaners and shampoos; carpet powders; treatments, such as pre-sprays and deodorizers; and a full line of carpet spotters. Our range of products also includes carpet cleaning and floor polishing machines.

Restroom/Other Housekeeping. We offer a fully integrated line of products and dispensing systems for hard surface cleaning, disinfecting and sanitizing, hand washing and air deodorizing and freshening. Our restroom care and other housekeeping products include bowl and hard surface cleaners, hand soaps, sanitizers, air care products, general purpose cleaners, disinfectants and specialty cleaning products.

Laundry. We offer detergents, stain removers, fabric conditioners, softeners and bleaches in liquid, powder and concentrated forms to clean items such as bed linen, clothing and table linen. Our range of products covers all of the requirements of fabric washing from domestic-sized machines in small hotels to continuous batch washers in commercial laundries. We also offer customized washing programs for different levels and types of soils, a comprehensive range of dispensing equipment and a selection of process control and management information systems.

Industrial. We offer industrial cleaners and degreasers and a line of specialty vehicle cleaners that remove traffic film, road soil, dirt and grime from the surfaces of vehicles, including automobiles, buses and trucks.

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End-Users and Customers

We offer our professional products directly or through third-party distributors to end-users in eight sectors: food and lodging, food processing, building service contractors, education, retail, healthcare, industrial and other.

Food and Lodging. Food and lodging end-users include fast food and full service restaurants, first class, luxury and economy hotel chains, independent hotels and nursing/care homes.

Food Processing. Food processing end-users include dairy plants, dairy farms, breweries, soft-drink bottling plants and meat, poultry and other food processors.

Building Service Contractors. Building service contractors and contract caterers clean, maintain and manage facility and food service operations in office buildings, retail stores, healthcare facilities, educational institutions and factories.

Education. Educational end-users include primary and secondary schools, technical schools, colleges and universities.

Retail. Retail end-users include supermarkets, drug stores, discounters, hypermarkets and wholesale clubs.

Healthcare. Healthcare end-users include both private and public hospitals, long-term care facilities and other facilities where medical services are performed.

Industrial. Industrial end-users include factories; industrial plants, including paper and pulp plants and water treatment facilities; and offices.

Other. End-users in this sector include cash and carry establishments, government institutions and commercial laundries. Cash and carry customers are stores in which professional end-users purchase products for their own use. Commercial laundry customers include professional laundries operated for profit, as well as large hospital on-site laundries.

Sales and Distribution

We sell our products and systems in domestic and international markets through company-trained sales and service personnel, who also advise and assist customers in the proper and efficient use of products and systems in order to meet a full range of cleaning and sanitation needs. We sell our products in more than 120 countries either directly to end-users or through a network of distributors, wholesalers and third-party intermediaries. In 54 of those countries, we employ a direct sales force of over 6,000 employees to market and sell our products. We contract with local third-party distributors on an exclusive and non-exclusive basis. We estimate that direct sales to end-users by our sales force typically account for about half of our professional net sales, with indirect sales through third-party channels accounting for the other half.

In our larger customer sectors, such as food processing, the supply of cleaning, hygiene and appearance products involves more than the physical distribution of detergents. In these sectors, customers may contract for the provision of a complete hygiene system, which includes products as well as safety and application training, safety and hygiene consulting, hygiene auditing and after-sales services. We employ specialized sales people who are trained to provide these specific services and, through our tailored cleaning solutions approach, we are able to address the specific needs of these customers.

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The following table shows net sales of our professional business for fiscal years 2000, 2001, the fiscal six months ended December 28, 2001and fiscal year 2002 in the United States and other countries:

For additional financial information regarding our professional business, see note 26 to our consolidated financial statements, included elsewhere in this report.

Raw Materials

Suppliers for our cleaning, hygiene and appearance products provide raw materials, packaging components, equipment, accessories and contract manufactured goods. The key raw materials we use in our professional business are surfactants, polymers and resins, fragrances, solvents, caustic soda, waxes, chelates and phosphates. Packaging components include bag-in-the-box containers, bottles, corrugated boxes, drums, pails, totes, aerosol cans, caps, triggers and valves. Equipment and accessories include dilution control, warewashing and laundry equipment, floor machines, air care dispensers, mops, buckets, carts and other items used in the maintenance of a facility.

We believe that all raw materials required for the manufacture of our products and all components related to our equipment and accessories are available from multiple sources. Although we purchase some raw materials under long-term supply arrangements with third parties, these arrangements are not material to our business.

Competition

The worldwide market for our professional products is highly competitive. Our principal professional competitor on a worldwide basis is Ecolab Inc., which is the largest supplier of cleaning and sanitizing products in the institutional and industrial cleaning and sanitation industry. Ecolab has significant capacity, technology, expertise and financial resources, which enables it to compete effectively with us. We also face significant competition from numerous national, regional and local companies within some or all of our product lines in each sector that we serve. Many of these companies have increased in strength as a result of recent consolidations in the industry. Barriers to entry and expansion in the institutional and industrial cleaning and sanitation industry are low, and significant new entrants in the market include The Procter & Gamble Company and The Clorox Company, which have expanded into the institutional sector from their bases in consumer products, and Kimberly-Clark Corporation, which has expanded from paper accessories into personal care and washroom products.

We seek to differentiate our products from those of our competitors by (1) building upon our reputation in food service, food processing, floor care and laundry, (2) providing cost control mechanisms to our customers from our advanced dispensing and dilution products, (3) proactively responding to customer needs, and (4) providing product related value-added services. We believe the quality and ease of use of our products are competitive strengths. In addition, we have long-standing relationships with many of our top customers. Price considerations and sales and marketing effectiveness are also important competitive factors. To achieve expected profitability levels, we must, among other things, maintain the service levels and competitive pricing necessary to retain existing customers and attract new customers.

Polymer Business

General

We supply environmentally compliant, water-based acrylic polymer resins to the industrial printing and packaging, coatings and plastics markets. Polymer resins work within inks, paints and floor coatings to disperse

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or carry colorants, provide adhesion to the material being coated, protect the surface of the material and provide a glossy finish. We sell these resins to our customers primarily in North America, Europe and Asia. In fiscal year 2002, our polymer business had net sales of about $264 million, including intercompany sales to our professional business of about $19 million.

Products

We manufacture styrene acrylic resins and styrene acrylic emulsion polymers for inks, over-print varnishes, powder coatings, pigment dispersions, high solids thermoset coatings, urethane coatings, water-based industrial and architectural coatings, and plastic additives. We sell these products to industrial customers in the printing and packaging, coatings and plastics industries in North America, Europe and Asia.

Printing and Packaging (Ink and Overprint Varnish). We are a leading global supplier of polymer products to the printing and packaging industry and are committed to working with our graphic arts customers to customize their product offerings. Our emulsions and styrene acrylic resins are used in the manufacturing of liquid inks, overprint varnishes, pigment dispersions and wax emulsions for a wide range of applications in the printing and packaging industry.

Coatings. In the industrial markets, our polymer products are used in wood, metal and plastic coatings and include one component water-based emulsions, two component emulsions, polyurethane high solid coatings and baking enamels. In the architectural market, our emulsions are used in interior and exterior paint sold through retail outlets.

Plastics. In the plastics industry our resins are used as additives to improve the processing of the plastics or their physical or functional properties.

End-Users and Customers

We principally supply acrylic polymers to industrial customers in the printing and packaging, coatings and plastics markets. The printing and packaging market, consisting of liquid ink, pigment dispersion and over print varnish manufacturers, represents our polymer business’ largest customer sector. During fiscal year 2002, Sun Chemical Corporation, our largest polymer customer, accounted for about 10% of our net sales of polymer products. We also had net sales of polymers to our professional business of about $19 million, or about 7% of net sales of our polymer business, for fiscal year 2002.

Sales and Distribution

We sell our polymer products to customers primarily through our own sales force located in North America, Europe and the Asia Pacific region. As of February 28, 2003, our polymer sales force consisted of about 40 employees.

The following table shows net sales of our polymer business for fiscal years 2000 and 2001, the fiscal six months ended December 28, 2001 and fiscal year 2002 in the United States and other countries:

For additional financial information regarding our polymer business, see note 26 to our consolidated financial statements, included elsewhere in this report.

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Raw Materials

We believe that all materials required for production of our polymer products are available from multiple sources, and we operate under contracts with all of our major raw material suppliers. The top five raw materials we purchase for our polymer business are styrene, acrylic acid, alpha methyl styrene, 2-ethyl hexyl acrylate and methyl methacrylate.

Competition

The polymer industry is highly competitive. Our principal competitor in the market for water-based acrylic polymers for printing and packaging applications is Rohm and Haas Company, and in the architectural and industrial coatings markets, our principal competitors are Avecia Limited, BASF AG, The Dow Chemical Corporation and Rohm and Haas Company. Other competitors in the specialty chemical industry include Air Products and Chemicals, Inc., Eastman Chemical Company and Noveon Corporation. These competitors are larger and have greater financial resources than we do. As a result, they may be better able to respond to price increases in raw materials and to compete on pricing than we are. By capitalizing upon our unique research and development expertise and providing customers with new products and technologies, we believe that we are able to compete successfully in the polymer industry.

Proprietary Rights; Research and Development

We believe that the Johnson housemark and the Diversey trademark are important to our business. S.C. Johnson & Son has granted us a license to use specified trade names, housemarks and trademarks that incorporate “Johnson,” including “Johnson Wax Professional”, and to use the “Johnson” name, with our owned trade name “Diversey,” in the commercial and industrial channels of trade. See “Item 13. Certain Relationships and Related Transactions.” We own the Diversey trademark and have filed registrations of that trademark in various jurisdictions. These registrations are renewable, potentially indefinitely, as long as we continue to use the Diversey trademark. Other than the Johnson and Diversey marks, we do not believe that our overall business is materially dependent on any individual trademark or patent.

In connection with our acquisition of the DiverseyLever business, we entered into several license agreements with Unilever under which Unilever granted us a license of specified trademarks, patents, design rights, copyrights and know-how used in the DiverseyLever business, including the “Lever” name, that were retained by Unilever. In addition, under a transferred technology license agreement, we have granted a license to Unilever to use specified intellectual property rights and patents and registered designs that were transferred to us in the acquisition. The licenses granted under these agreements generally terminate with the expiration of the particular patent, design right, copyright or know-how, unless terminated earlier. With respect to the Lever mark, the license terminates on November 2, 2004.

Manufacturing expertise and innovative technologies are also important to our business. In particular, our ability to compete effectively is materially dependant upon the technology used in the manufacturing process. We conduct most of our research and development activities at our research facilities located in Sturtevant, Wisconsin, Sharonville, Ohio, Santa Cruz, California, Utrecht, the Netherlands and Muenchwilen, Switzerland. We also have local development and application support in the Asia Pacific region, including Japan, in Brazil and in other locations in Europe. Through our research, we aim to improve the production processes in our manufacturing facilities, as well as to develop new, more innovative and competitive products, applications and processes and to provide technical assistance to customers to help them improve their operations. In addition, we have entered into a technology disclosure and license agreement with S.C. Johnson & Son under which each party has agreed to disclose to the other new technologies that it develops internally, acquires or licenses from third parties.

Substantially all of our principal products have been developed by the research and development and engineering personnel. The following table shows the research and development expenses for our professional

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and polymer businesses for fiscal years 2000 and 2001, the fiscal six months ended December 28, 2001 and fiscal year 2002 in the United States and other countries:

Employees

As of February 28, 2003, we employed about 13,530 employees, of which about 3,200 were employed in the United States and the remainder were employed outside of the United States.

Environmental Regulation

Our operations are regulated under a number of federal, state and foreign environmental and safety laws and regulations that govern, among other things, the discharge of hazardous materials into the air, soil and water as well as the handling, storage and disposal of these materials. These laws and regulations include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, as well as analogous state and foreign laws. Compliance with these environmental laws is a major consideration for us because we use hazardous materials in some of our manufacturing processes. In addition, because we are a generator of hazardous wastes, we, along with any other person who arranges for the disposal of our wastes, may be subject to financial exposure for costs associated with an investigation and any remediation of sites at which we have arranged for the disposal of hazardous wastes if those sites become contaminated, even if we fully comply with applicable environmental laws. Furthermore, process wastewater from our manufacturing operations is discharged to various types of wastewater management systems. We may incur significant costs relating to contamination that may have been, or is currently being, caused by this practice. We are also subject to numerous federal, state and foreign laws that regulate the manufacture, storage, distribution and labeling of many of our products, including disinfecting, sanitizing and antimicrobial products. Some of these laws require us to have operating permits for our production facilities, warehouse facilities and operations, and we may not have some of these permits or some of the permits we have may not be current. In the event of a violation of these laws, we may be liable for damages and for the costs of remedial actions and may also be subject to revocation, non-renewal or modification of our operating and discharge permits. Any revocation, non-renewal or modification may require us to cease or limit the manufacture and sale of products at one or more of our facilities and may have a material adverse effect on our business, financial condition, results of operations and cash flows. Environmental laws may also become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with any violation, which also may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Environmental regulations most significant to us are summarized below:

Toxic Substances. We are subject to various federal, state, local and foreign laws governing the production, transport and import of industrial chemicals. Notably, the Toxic Substances Control Act gives the U.S. Environmental Protection Agency, or EPA, the authority to track, test and/or ban chemicals that may pose an environmental or human-health hazard. We are required to comply with certification, testing, labeling and transportation requirements associated with regulated chemicals. To date, compliance with this legislation has not had a material adverse effect on our business, financial condition, results of operations or cash flows.

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Pesticide Legislation. Some of our facilities are subject to various federal, state, local or foreign laws governing the manufacture and/or use of pesticides. We manufacture and sell certain disinfecting and sanitizing products that kill microorganisms, such as bacteria, viruses and fungi. These products are considered “pesticides” or “antimicrobial pesticides” and, in the United States, are governed primarily by the Federal Insecticide Fungicide and Rodenticide Act, as amended by the Food Quality Protection Act of 1996. To register these products, we must meet various efficacy, toxicity and labeling requirements and must pay initial and on going registration fees. In addition, some states or foreign jurisdictions may impose taxes on sales of pesticides. Although the cost of maintaining and delays associated with pesticide registration have increased in recent years, compliance with the various laws governing the manufacture and sale of pesticides has not had a material adverse effect on our business, financial condition, results of operations or cash flows.

Ingredient Legislation. Numerous state, local and foreign jurisdictions have enacted laws and regulations relating to the sale of products containing phosphorous or other ingredients that may impact human health and the environment. Specifically, the State of California has enacted Proposition 65, which requires us to disclose specified listed ingredient chemicals on the labels of our products. To date, compliance with this legislation has not had a material adverse effect on our business, financial condition, results of operations or cash flows.

FDA Antimicrobial Product Requirement. We are subject to various federal, state, local and foreign laws and regulations that regulate products manufactured and sold by us for controlling microbial growth on humans, animals and processed foods. In the United States, these requirements are generally administered by the U.S. Food and Drug Administration, or FDA. The FDA regulates the manufacture and sale of food, drugs and cosmetics, which includes antibacterial soaps and products used in food preparation establishments. The FDA requires companies to register antibacterial hand care products with the FDA and imposes specific criteria that the products must meet in order to be marketed for these regulated uses. In addition, the FDA regulates the labeling of these products. If the FDA determines that any of our products do not meet their standards for an antibacterial product, we will not be able to market the product as an antibacterial product. Some of our business operations are subject to similar restrictions and obligations under an order of the U.S. Federal Trade Commission which was issued in 1999 and will remain in effect until at least 2019. To date, the cost of complying with product registration has not had a material adverse effect on our business, financial condition, results of operations or cash flows.

Other Environmental Legislation. Many of our facilities are subject to various federal, state, local or foreign laws governing the discharge, transportation, handling, storage and disposal of hazardous substances. In the United States, the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act are the primary statutes governing these activities. We are also subject to the Superfund Amendments and Reauthorization Act of 1986, including the Emergency Planning and Community Right-to-Know Act, which imposes reporting requirements when toxic substances are released into the environment. Each year we make various capital investments and expenditures necessary to comply with applicable laws and satisfy our environmental stewardship principles. To date, these investments and expenditures have not had a material adverse effect on our business, financial condition, results of operations or cash flows. For fiscal year 2003, we have budgeted approximately $1.8 million for capital expenditures for environmental control projects.

Environmental Remediation and Proceedings. We may be jointly and severally liable under CERCLA or its state, local or foreign equivalent for the costs of environmental contamination on or from our properties and at off-site locations where we disposed of or arranged for the disposal or treatment of hazardous wastes. Along with several other potentially responsible parties, or PRPs, we are currently involved in waste disposal site clean-up activities at eight sites in the United States. Generally, CERCLA imposes joint and several liability on each PRP that actually contributed hazardous waste to a site. Customarily, PRPs will work with the EPA to agree on and implement a plan for site investigation and

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remediation. Based on our experience with these environmental proceedings, our estimate of the contribution to be made by other PRPs with the financial ability to pay their shares, and our third party indemnification rights at certain sites (including indemnities provided by S.C. Johnson & Son), we believe that our share of the costs at these eight sites will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

In addition to the liabilities imposed by CERCLA or its state, local or foreign equivalent, we may be liable for costs of investigation and remediation of environmental contamination on or from our properties or at off-site locations under numerous other federal, state, local and foreign laws. Our operations involve the handling, transportation and use of numerous hazardous substances. We are aware that there is or may be soil or groundwater contamination at some of our facilities resulting from past operations and practices. We are currently in the process of cleaning up soil and/or groundwater contamination at four of our facilities in the United States, one facility in Japan and one facility in the Netherlands. In addition, we have identified the likelihood of soil and/or groundwater contamination at seven other sites. Based on available information and our indemnification rights, explained below, we believe that the costs to investigate and remediate known contamination will not have a material adverse effect on our business, financial condition, results of operations or cash flows. In many of the foreign jurisdictions in which we operate, however, the laws that govern our operations are still undeveloped or evolving.

Many of the environmental regulations discussed above apply to properties and operations of the DiverseyLever business that we acquired from Unilever in May 2002. Under the acquisition agreement, Unilever has made warranties to us with respect to the DiverseyLever business and has agreed to indemnify us for damages in respect of breaches of its warranties and for specified types of environmental liabilities if the aggregate amounts of damages meet various dollar thresholds. Unilever will not be liable for any damages resulting from environmental matters (1) in the case of known environmental matters or breaches, that are less than $250,000 in the aggregate, and (2) in the case of unknown environmental matters or breaches, that are less than $50,000 individually and $2 million in the aggregate.

In the case of clause (1) above, we will bear the first $250,000 in damages. In the case of clause (2) above, once the $2 million threshold is reached, Unilever will not be liable for any occurrence where the damages are less than $50,000 or for the first $1 million of damages that exceed the $50,000 per occurrence threshold. In no event will Unilever be liable for any damages arising out of or resulting from environmental claims that exceed $250 million in the aggregate.

Given the nature of our business, we believe that it is possible that, in the future, we will be subject to more stringent environmental laws that may result in restrictions imposed on our manufacturing, processing and distribution activities, which may result in possible violations, substantial fines, penalties, damages or other significant costs. The potential cost to us relating to environmental matters, including the cost of complying with the foregoing legislation and remediation of contamination, is uncertain due to such factors as the unknown magnitude and type of possible pollution and clean-up costs, the complexity and evolving nature of laws and regulations, including outside of the United States, and the timing, variable costs and effectiveness of alternative clean-up methods. We have accrued our best estimate of probable future costs relating to such known sites, but we cannot estimate at this time the costs associated with any contamination that may be discovered as a result of future investigations, and we cannot provide assurance that those costs or the costs of any required remediation will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

Environmental Permits and Licensing. In the ordinary course of our business, we are continually subject to environmental inspections and monitoring by governmental enforcement authorities. In addition, our production facilities, warehouse facilities and operations require operating permits that are subject to renewal, modification, and, in specified circumstances, revocation. We are aware that there may be noncompliance with permit or licensing requirements at some of our facilities. Based on available information and our indemnification rights, we believe that costs associated with our permit and licensing obligations will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

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ITEM 2.     PROPERTIES

We have manufacturing facilities in all regions in which we operate, including Canada, Brazil, France, Germany, Italy, Switzerland, the Netherlands, Spain, the United Kingdom, Japan, China and North America. We have a total of 51 manufacturing facilities in 29 countries. Our principal manufacturing facilities for our professional and polymer businesses are located at Waxdale in Sturtevant, Wisconsin. We lease these facilities from S.C. Johnson & Son under leases expiring in 2009, with renewal options. See “Item 13. Certain Relationships and Related Transactions—Relationships with S.C. Johnson & Son—Leases”. Our corporate headquarters are also located in Sturtevant, Wisconsin.

We believe our facilities are in good condition and are adequate to meet the existing production needs of our businesses.

The following table summarizes our principal plants and other physical properties that are important to our professional and polymer businesses. Unless indicated otherwise, all properties listed below, other than those properties leased from S.C. Johnson & Son, are subject to mortgages.

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ITEM 3.     LEGAL PROCEEDINGS

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

As previously disclosed, Auto-C, LLC, our wholly owned subsidiary, supplies, in the United States, commercial warewashing, laundry and other products that bear the Auto-Chlor^® System trademark and distributes these products through us or through dealers with rights in defined territories. Pursuant to a complaint filed on March 2, 2002, as amended on June 20, 2002, a group of Auto-Chlor System dealers are suing DiverseyLever, Inc., a subsidiary of Unilever, Auto-C, LLC and us in the United States District Court for the District of Minnesota. In the complaint, the plaintiffs claim statutory violations under state dealership, franchise and consumer practices laws and breach of contract, breach of covenant of good faith and fair dealing, unfair competition and tortuous interference with contractual relations and prospective business relations. The plaintiffs are seeking a declaration regarding various terms of their dealer agreements, unspecified damages, including lost profits, such treble damages as may be available under applicable statutes, and attorneys’ fees. Unilever has acknowledged that we are entitled to indemnification in respect of this suit under the terms and subject to the limitations and exclusions set forth in the acquisition agreement under which we acquired the DiverseyLever business. DiverseyLever, Inc. is seeking indemnification from us insofar as any claims may be deemed assumed liabilities, subject to indemnification under the same agreement. We believe that we have valid defenses to the dealers’ claims and, together with Unilever, intend to defend the matter vigorously.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders, through the solicitation of proxies or otherwise, during the fourth quarter of fiscal year 2002.

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PART II

ITEM 5.     MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of March 31, 2003, there were 24,422 shares of our common stock outstanding. JohnsonDiversey Holdings owns all of the outstanding shares of our common stock, except for one share owned by S.C. Johnson & Son. There is no established public trading market for our common stock.

The following table sets forth the amount of cash dividends we paid to our stockholders in calendar years 2001 and 2002 on a per share basis:

We intend to pay comparable cash dividends to our stockholders in the future. However, our ability to pay dividends is restricted by covenants in the indentures governing our senior subordinated notes and the senior secured credit facilities.

On May 3, 2002, in connection with our acquisition of the DiverseyLever business, we issued an aggregate of US$300,000,000 and Euro 225,000,000 of 9.625% senior subordinated notes due 2012, series A to qualified institutional investors. The offer and sale of the notes was made in reliance upon an exemption from registration under the Securities Act of 1933 pursuant to Rule 144A promulgated there under. The underwriters in this transaction were Goldman, Sachs & Co., Salomon Smith Barney Inc., Banc One Capital Markets, Inc., ABN AMRO Incorporated, The Royal Bank of Scotland and certain of their respective affiliates.

We received net proceeds from the sale of these series A senior subordinated notes of about $493.0 million. We used these proceeds, together with other borrowings and available funds, to pay the cash portion of the purchase price for the DiverseyLever business, refinance existing indebtedness and pay related fees and expenses.

In connection with the issuance of our series A senior subordinated notes in May 2002, we entered into registration rights agreements with the initial purchasers pursuant to which we agreed to exchange the outstanding series A senior subordinated notes for an equal principal amount of notes registered under the Securities Act. In July 2002, we filed a registration statement on Form S-4 (Reg. No. 333-97427) with the SEC to register an aggregate of US$300,000,000 and Euro 225,000,000 of 9.625% senior subordinated notes due 2012, series B. The registration statement was declared effective by the SEC on November 27, 2002. On December 9, 2002, we commenced an exchange offer to exchange the registered series B senior subordinated notes for the outstanding series A senior subordinated notes. The exchange offer expired on January 21, 2003. At the close of business on January 21, 2003, an aggregate of US$300,000,000 and Euro 224,970,000 series A senior subordinated notes were exchanged for an equivalent amount of 9.625% senior subordinated notes due 2012, series B. Consequently, an aggregate of Euro 30,000 series A senior subordinated notes remain outstanding. We did not receive any proceeds from the exchange offer.

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ITEM 6.     SELECTED HISTORICAL FINANCIAL DATA

We derived the following selected historical consolidated financial data (1) from our audited consolidated financial statements as of and for the fiscal years ended July 2, 1999, June 30, 2000, June 29, 2001 and January 3, 2003, (2) from our audited consolidated financial statements as of and for the fiscal six months ended December 28, 2001, and (3) from our unaudited consolidated financial statements for the six months ended December 29, 2000 and the twelve months ended December 28, 2001. Those audited and unaudited consolidated financial statements have been prepared under accounting principles generally accepted in the United States, or US GAAP. You should read the following selected historical consolidated financial data in conjunction with the financial statements and related notes included elsewhere in this report, and with the information included in this annual report under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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

Our management considers EBITDA to be a useful tool for managing the operations of our business. In addition, various financial covenants contained in our senior secured credit facilities are based on EBITDA, as adjusted pursuant to the provisions of the facilities, and various financial covenants contained in the indentures for our senior subordinated notes are based on consolidated cash flows, which is a non-GAAP financial measure calculated similarly to EBITDA. Our management also considers EBITDA to be useful in assessing our debt servicing ability.

We also believe that EBITDA is a measure commonly reported and widely used by investors and other interested parties as a measure of a company’s operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon accounting methods or non-operating factors (such as historical cost). Accordingly, we believe that the inclusion of EBITDA in our annual report permits a more comprehensive analysis of our operating performance relative to other companies and of our debt servicing ability. Because all companies do not calculate EBITDA identically, the presentation of EBITDA in this annual report may not be comparable to similarly titled measures of other companies.

We believe that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA. The following table reconciles EBITDA to net income for each of the periods for which EBITDA is presented in this annual report.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis includes a review of our results for the fiscal year ended January 3, 2003. As a result of our acquisition of the DiverseyLever business on May 3, 2002, our results for fiscal year 2002 include eight months of DiverseyLever results. Due to the timing of the acquisition, the transition of the institutional and industrial Unilever consumer brands business to a sales agency relationship with us after closing and the manner in which the DiverseyLever business was operated as a division of Unilever and not as a stand-alone business, comparative information for the acquired DiverseyLever business does not exist. Because of these factors, and the extent to which integration of the businesses has already occurred, historical comparisons are of limited relevance.

The acquisition significantly increased the size and scope of our operations and thus affected 2002 full year results and is the primary driver of the 2002 versus 2001 twelve-month period changes in each financial category discussed below. Except as noted, changes detailed below describe significant events that are unrelated to the acquisition.

Critical Accounting Policies

The preparation of our financial statements in conformity with GAAP in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 involve management’s judgment and/or evaluation of inherent uncertain factors are as follows:

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

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

Estimating Reserves and Allowances. Management estimates inventory reserves based on periodical 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. Further, management estimates 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, that are deemed probable as uncollectible.

Management’s current estimated ranges of liabilities relating to litigation and environmental claims are based on management’s best estimate of future costs. We record those costs based on what management believes

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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.

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. Effective July 1, 2001, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangibles.” SFAS No. 142 addresses financial accounting and reporting for goodwill and other intangible assets subsequent to their acquisition. Upon adoption of SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life. Rather, goodwill is subject to at least an annual assessment for impairment by applying a fair-value-based test. Other intangible assets are required to be separately recognized if the benefit of the intangible asset can be sold, transferred, licensed, rented or exchanged. Amortization of these intangibles over their useful lives is required. Effective July 1, 2001, we also adopted SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.”

In accordance with SFAS Nos. 142 and 144, management periodically reviews its long-lived assets, including intangible assets and goodwill, for impairment and assesses 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. Management also periodically reassesses the estimated remaining useful lives of its long-lived assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in our financial statements. As of January 3, 2003, we completed a fair value impairment analysis as required by SFAS 142 and anticipated future undiscounted cash flows analysis as required by SFAS 144. Based on these assessments no impairments were identified.

For an additional discussion of our critical accounting policies and a discussion of new accounting pronouncements, see note 2 to our audited consolidated financial statements included elsewhere in this report.

Fiscal Year Ended January 3, 2003 Compared to Twelve Months Ended December 28, 2001

Net Sales. Net sales increased by $1,061.6 million, or 93.6%, to $2,196.4 million for the fiscal year ended January 3, 2003 from $1,134.8 million for the twelve months ended December 28, 2001. The primary reason for the increase was net sales attributable to the DiverseyLever business, which we acquired on May 3, 2002. Included in the net sales attributable to the acquisition is $54.3 million of sales agency fee income for the fiscal year ended January 3, 2003, which we earned under a sales agency agreement we entered into with Unilever on May 3, 2002 in connection with the acquisition. See “Item 13. Certain Relationships and Related Transactions—Relationships with Unilever—Sales Agency Agreement.”

Net sales for the professional segment increased by $1,037.9 million, or 113.6%, to $1,951.5 million for the fiscal year ended January 3, 2003 from $913.6 million for the twelve months ended December 28, 2001. The strengthening of the dollar against the yen, real, Argentine peso and other foreign currencies negatively impacted

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net sales by $18.1 million. Excluding this negative currency impact, net sales of the professional segment for the fiscal year ended January 3, 2003 grew by $1,056.0 million, or 115.6%, from net sales for the twelve months ended December 28, 2001.

Net sales for the polymer segment of $263.5 million for the fiscal year ended January 3, 2003, including intercompany sales to the professional segment of $18.6 million, increased by $22.1 million, or 9.1%, from $241.4 million for the twelve months ended December 28, 2001. The increase in the segment’s net sales was attributable primarily to volume growth of 10.1%, partially offset by a decline in average selling prices. Sales volume increased in Europe by 16.1%, Asia Pacific by 20.8% and North America by 4.8%, due primarily to new business in the printing and packaging industry and the global coatings markets. Average selling prices declined primarily due to an unfavorable product and geographical mix reflecting faster growth in Europe and the Asia Pacific region, which have lower average selling prices than North America.

Gross Profit. Gross profit increased by $616.4 million, or 107.7%, to $1,189.0 million for the fiscal year ended January 3, 2003 from $572.5 million for the twelve months ended December 28, 2001, while gross profit margin increased to 54.1% for the fiscal year ended January 3, 2003 from 50.5% for the twelve months ended December 28, 2001. The primary reason for the increase in gross profit and gross profit margin was the acquisition of the DiverseyLever business. The gross profit margin on the acquired DiverseyLever business was higher due to a greater mix of higher-margin direct sales than the pre-acquisition business, which was focused more on lower-margin distributor sales.

The polymer segment’s gross profit increased by $15.1 million, or 16.8%, to $105.1 million for the fiscal year ended January 3, 2003 from $90.0 million for the twelve months ended December 28, 2001. The increase in the segment’s gross profit resulted primarily from the sales volume increase discussed above, lower raw material costs, and lower manufacturing costs. The increase in volume was offset partially by a decline in global average selling prices, as discussed above. In relation to gross profit margin, the reduced raw material costs and lower manufacturing costs more than offset the negative impact of the decline in global average selling prices, resulting in an increase to 39.9% for the fiscal year ended January 3, 2003, from 37.3% for the twelve months ended December 28, 2001.

Marketing, Distribution, Administrative and General Expenses. Marketing, distribution, administrative and general expenses increased by $535.8 million, or 114.5%, to $1,003.6 million for the fiscal year ended January 3, 2003 from $467.8 million for the twelve months ended December 28, 2001. The primary reason for this increase was incremental expenses attributable to the DiverseyLever business. Also contributing to this increase in expenses were incremental non-cash pension charges of $3.3 million reflecting updated actuarial valuations of the acquired DiverseyLever pension plans. Additionally, incremental insurance expenses of $1.3 million were incurred primarily in North America, largely reflecting increased industry rates. Incremental spending on strategic initiatives related primarily to new computer systems contributed an additional $8.5 million to the increase in marketing, distribution, administrative and general expenses for the fiscal year ended January 3, 2003.

Total synergy savings achieved through the integration of the DiverseyLever business, a key internal objective during this period, exceeded the planned targets in all regions. This was largely driven by a reduction in headcount, which also exceeded expectations. In order to achieve these synergy savings, one-time integration related costs of $31.5 million were incurred during the period, including a non-cash charge of $10.1 million related to the write-down of JD Edwards ERP software following the decision to integrate both our historic business and the DiverseyLever business onto the SAP platform in Europe.

Research and Development Expenses. Research and development expenses increased by $26.6 million, or 70.3%, to $64.4 million for the fiscal year ended January 3, 2003 from $37.8 million for the twelve months ended December 28, 2001. The primary reason for the increase was the additional expenses attributable to the DiverseyLever business.

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Restructuring Expense. Restructuring expenses of $19.6 million were incurred in the fiscal year ended January 3, 2003 in connection with a restructuring plan developed primarily for the purpose of eliminating redundancies resulting from the acquisition. In connection with this plan, we incurred $11.0 million of expenses pertaining primarily to planned employee terminations and we also incurred $8.6 million of expenses for the elimination of redundant facilities as part of the overall restructuring plan.

Interest Expense, Net. Net interest expense increased by $67.7 million to $84.5 million for the fiscal year ended January 3, 2003 from $16.8 million for the twelve months ended December 28, 2001. An increase in the average debt balance of $854.2 million for the fiscal year ended January 3, 2003, compared to the twelve months ended December 28, 2001 resulted in an increase in net interest expense of about $41.6 million. The increased average debt balance resulted from our borrowings under the senior secured credit facilities and the issuance of the senior subordinated notes to fund the acquisition of the DiverseyLever business. The increase in interest expense attributable to the higher average debt balance was further impacted by an increase in the weighted average interest rate of 6.3% during the fiscal year ended January 3, 2003 compared to 4.9% during the twelve months ended December 28, 2001.

Other Income/Expense. Other income/expense increased by $31.9 million to $29.0 million of income for the fiscal year ended January 3, 2003 from $2.9 million of expense for the twelve months ended December 28, 2001. Other income for the fiscal year ended January 3, 2003 consists primarily of a $15.7 million gain on a forward purchase contract for euros entered into in connection with the acquisition, a $9.6 million gain on the sale of a non-strategic dishwash detergent product line in May 2002, a $2.4 million gain on the sale of a non-strategic adhesives product line within the polymer business, and a $3.2 million gain on other foreign currency exchange related items. Partially offsetting these gains was a $3.1 million loss in the fiscal year ended January 3, 2003 related to the devaluation of the Argentine peso.

Provision for Income Taxes. Our effective tax rate was 36.3% for the fiscal year ended January 3, 2003 compared to 31.6% for the twelve months ended December 28, 2001. The higher effective tax rate was primarily due to increased foreign tax liability as a result of the acquisition of the DiverseyLever business, for which an offsetting U.S. foreign tax credit is not recognizable.

Net Income. Net income decreased by $2.6 million, or 8.2%, to $29.6 million for the fiscal year ended January 3, 2003 from $32.2 million for the twelve months ended December 28, 2001. This decrease in net income was due primarily to a $535.8 million increase in marketing, distribution, administrative and general expenses, a $26.6 million increase in research and development costs, a $19.6 million restructuring expense, a $67.7 million increase in net interest expense, and a $1.7 million increase in the provision for income taxes, offset partially by a $616.4 million increase in gross profit driven by the incremental DiverseyLever net sales, and a $31.9 million increase in other income, all as previously discussed. In addition to the $19.6 million restructuring expense, expenses of $31.5 million of integration-related costs are included in the Marketing, Distribution, Administrative and General Expenses discussed above and $2.5 million are included in cost of goods sold.

EBITDA. EBITDA increased by $130.5 million, or 119.5%, to $239.8 million for the fiscal year ended January 3, 2003 from $109.3 million for the twelve months ended December 28, 2001. The increase in EBITDA resulted primarily from a $616.4 million increase in gross profit resulting from the increased net sales and a $31.9 million increase in other income, offset partially by a $535.8 million increase in marketing, distribution, administrative and general expenses, a $26.6 million increase in research and development expense, and the $19.6 million restructuring expense, all as previously discussed. $64.2 million of these cost increases are related to depreciation and amortization expense and do not impact EBITDA. For a discussion of EBITDA and a reconciliation of EBITDA to net income, see “Item 6. Selected Historical Financial Data.”

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Six Months Ended December 28, 2001 Compared to Six Months Ended December 29, 2000

Net Sales. Net sales increased by $2.0 million, or 0.4%, to $549.0 million for the six months ended December 28, 2001 from $547.0 million for the six months ended December 29, 2000. Net sales for the professional segment increased by $1.0 million, or 0.2%, to $437.4 million for the six months ended December 28, 2001 from $436.4 million for the six months ended December 29, 2000. Professional net sales increased (1) by $2.9 million in the Asia Pacific region due to strong growth in all sectors, most notably retail and food and lodging, (2) by $5.3 million in Europe due primarily to incremental sales attributable to The Butcher Company, a U.S. manufacturer of floor care, dilution control and commercial cleaning hygiene and appearance products, which we acquired in September 2000, and core business growth, (3) by $12.1 million in North America due primarily to incremental sales attributable to Butcher, (4) by $2.2 million in Japan due mainly to incremental sales attributable to Butcher and (5) by $0.4 million in Latin America due primarily to strong growth in Mexico, offsetting economic weaknesses elsewhere in that region. These increases in net sales were offset partially by a $19.7 million reduction in net sales due to the strengthening of the dollar against the yen, the real and other foreign currencies. Excluding the impact of foreign currency translations and all net sales from businesses acquired or divested during the six months ended December 29, 2000 or December 28, 2001, the professional segment’s net sales increased by $8.5 million, or 2.1%, to $406.1 million for the six months ended December 28, 2001 from $397.6 million for the six months ended December 29, 2000.

Net sales for the polymer segment, including intercompany sales to the professional segment of $9.4 million, increased by $0.9 million, or 0.8%, to $120.9 million for the six months ended December 28, 2001 from $120.0 million for the six months ended December 29, 2000. The growth resulted primarily from a 2.3% increase in sales volume, largely in the printing and packaging industry.

Cost of Sales. Cost of sales increased by $4.8 million, or 1.8%, to $276.8 million for the six months ended December 28, 2001 from $272.0 million for the six months ended December 29, 2000. The professional segment’s cost of sales increased by $9.4 million, or 4.6%, to $212.4 million for the six months ended December 28, 2001 from $203.0 million for the six months ended December 29, 2000. The increase in the segment’s cost of sales resulted primarily from a $9.8 million increase in customer rebates and allowances to generate sales growth and respond to actions by competitors.

The polymer segment’s cost of sales declined by $4.6 million, or 6.7%, to $64.4 million for the six months ended December 28, 2001 from $69.0 million for the six months ended December 29, 2000. $4.1 million of this decline was attributable to a significant reduction in the average price of styrene and other key raw materials and the remaining $0.5 million resulted from increased manufacturing efficiencies.

Gross Profit. Gross profit declined by $2.9 million, or 1.0%, to $272.2 million for the six months ended December 28, 2001 from $275.1 million for the six months ended December 29, 2000, while gross profit margin declined to 49.6% from 50.3% between the two periods. The professional segment’s gross profit declined by $8.4 million, or 3.6%, to $225.0 million for the six months ended December 28, 2001 from $233.4 million for the six months ended December 29, 2000, while gross profit margin declined to 51.4% from 53.5%. The decline resulted primarily from the $9.8 million increase in cost of sales as a result of increased customer rebates and allowances.

The polymer segment’s gross profit increased by $5.5 million, or 13.3%, to $47.2 million for the six months ended December 28, 2001 from $41.7 million for the six months ended December 29, 2000, while gross profit margin increased to 39.0% from 34.7% for those same periods. This increase in gross profit resulted primarily from the reduced raw material costs and increased manufacturing efficiencies discussed above.

Marketing, Distribution, Administrative and General Expenses. Marketing, distribution, administrative and general expenses declined by $4.1 million, or 1.7%, to $228.4 million for the six months ended December 28, 2001 from $232.5 million for the six months ended December 29, 2000. The decline was attributable primarily to the cessation of goodwill amortization upon our adoption of SFAS No. 142 at the beginning of fiscal year 2002.

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Excluding the impact of SFAS No. 142, marketing, distribution, administrative and general expenses increased by $4.7 million for the six months ended December 28, 2001 compared to the six months ended December 29, 2000 due largely to a $1.2 million increase in sales freight expense, a $1.5 million increase in non-capitalizable costs incurred in the six months ended December 28, 2001 in connection with the acquisition and a $1.8 million increase in expenses due to incremental amortization of capitalized software costs.

Research and Development Expenses. Research and development expenses declined by $0.8 million, or 4.4%, to $18.6 million for the six months ended December 28, 2001 from $19.4 million for the six months ended December 29, 2000. The decline in research and development expenses was attributable primarily to a continued focus on cost management.

Interest Expense, Net. Net interest expense declined by $1.5 million, or 17.1%, to $6.9 million for the six months ended December 28, 2001 from $8.4 million for the six months ended December 29, 2000. The decline resulted primarily from the reduced cost of borrowing as a result of a receivables securitization program that we implemented in March 2001.

Other Income/Expense. Other income/expense declined by $5.5 million to $2.1 million of expense for the six months ended December 28, 2001 from $3.4 million of income for the six months ended December 29, 2000. The shift to net expense from income was due primarily to a $2.0 million foreign currency translation loss due to the devaluation of the Argentine peso in December 2001. Other income for the six months ended December 29, 2000 included a one-time, pre-tax gain of $3.0 million related to the sale on July 1, 2000 of our interest in Acurid, a non-strategic pest control joint venture.

Provision for Income Taxes. Our effective tax rate was 30.5% for the six months ended December 28, 2001 compared to 35.7% for the six months ended December 29, 2000. The lower effective tax rate was primarily due to lower sustainable foreign tax rates.

Net Income. Net income declined by $0.5 million, or 3.6%, to $11.1 million for the six months ended December 28, 2001 from $11.6 million for the six months ended December 29, 2000. The decline in net income was due primarily to the decline in gross profit and increase in expenses due to incremental acquisition-related expenses and amortization of capitalized software costs, as discussed above, and a $2.0 million foreign currency translation loss due to the devaluation of the Argentine peso in the six months ended December 28, 2001, partially offset by the impact of the adoption of SFAS No. 142, reduced net interest expense and the lower effective tax rate for the six months ended December 28, 2001, each as discussed above. Positively impacting net income for the six months ended December 29, 2000 was the one-time divestiture gain of $3.0 million from the sale of our interest in the Acurid joint venture.

EBITDA. EBITDA declined by $8.1 million, or 16.5%, to $41.2 million for the six months ended December 28, 2001 from $49.3 million for the six months ended December 29, 2000. The decline in EBITDA resulted primarily from the devaluation of the Argentine peso, lower gross profit margins in the professional business and non-capitalizable costs incurred in connection with the acquisition of the DiverseyLever business in the six months ended December 28, 2001, each as discussed above. EBITDA for the six months ended December 29, 2000 reflects the positive effect of the one-time divestiture gain from the sale of our interest in the Acurid joint venture, as discussed above. For a discussion of EBITDA and a reconciliation of EBITDA to net income, see “Item 6. Selected Historical Financial Data.”

Year Ended June 29, 2001 Compared to Year Ended June 30, 2000

Net Sales. Net sales increased by $104.6 million, or 10.2%, to $1,132.8 million for the fiscal year ended June 29, 2001 from $1,028.2 million for the fiscal year ended June 30, 2000. Net sales for the professional segment increased $109.9 million, or 13.7%, to $912.6 million for fiscal year 2001 from $802.7 million for the prior fiscal year. The growth was due primarily to $53.6 million in incremental net sales attributable to Butcher,

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which was acquired in September 2000, and $71.2 million of incremental net sales attributable to Teepol, Ltd., a Japanese provider of dishwashing, sanitation and restroom supplies, which we acquired in April 2000, partially offset by a $9.2 million decline in net sales attributable to our October 1999 divestiture of PCO Canada, a pest control business, and the strengthening of the dollar against certain foreign currencies in fiscal year 2001, which reduced net sales by $32.2 million. Excluding the impact of currency translation and net sales from businesses acquired or divested during fiscal year 2000 or 2001, the professional segment’s net sales grew by 3.2% in fiscal year 2001.

Net sales of the polymer segment, including intercompany sales to the professional segment of $20.3 million, declined by $2.9 million, or 1.2%, to $240.5 million for fiscal year 2001 from $243.4 million for fiscal year 2000, despite a 3% increase in unit volume sales. The decline in net sales resulted from a greater percentage of the segment’s global sales occurring in Europe, where average prices were lower than in other regions.

Cost of Sales. Cost of sales increased by $67.1 million, or 13.7%, to $557.4 million for fiscal year 2001 from $490.4 million for fiscal year 2000. The professional segment’s cost of sales increased by $54.0 million, or 14.7%, to $421.6 million for fiscal year 2001 from $367.6 million for fiscal year 2000. The increase in the segment’s cost of sales resulted primarily from the increase in professional net sales discussed above.

The polymer segment’s cost of sales increased by $13.0 million, or 10.6%, to $135.8 million for fiscal year 2001 from $122.8 million for fiscal year 2000. The increase in the segment’s cost of sales resulted primarily from an increase in the price of styrene, a key raw material.

Gross Profit. Gross profit increased by $37.6 million, or 7.0%, to $575.4 million for fiscal year 2001 from $537.8 million for fiscal year 2000, while gross profit margin declined to 50.8% from 52.3% between the two periods. The professional segment’s gross profit increased by $55.9 million, or 12.8%, to $491.0 million for fiscal year 2001 from $435.1 million for fiscal year 2000, while gross profit margin declined to 53.8% from 54.2%. This decline in the segment’s gross profit margin was entirely attributable to the 46.6% gross profit margin associated with sales by Butcher, which we acquired in September 2000.

The polymer segment’s gross profit declined by $18.3 million, or 17.8%, to $84.4 million for fiscal year 2001 from $102.7 million for fiscal year 2000, while gross profit margin declined to 35.1% from 42.2% between the two periods, primarily because of the increased cost of styrene discussed above.

Marketing, Distribution, Administrative and General Expenses. Marketing, distribution, administrative and general expenses increased by $44.0 million, or 10.3%, to $471.8 million for fiscal year 2001 from $427.8 million for the prior fiscal year. This increase resulted primarily from $21.5 million of additional sales force expenses attributable largely to the Butcher and Teepol acquisitions, and $11.7 million of additional spending on strategic initiatives relating to the supply chain and new computer systems. The remaining $10.8 million of the increase was attributable primarily to higher direct variable costs resulting from the incremental sales growth. Marketing, distribution, administrative and general expenses remained constant at 41.6% of net sales for fiscal years 2000 and 2001.

Research and Development Expense. Research and development expenses increased by $1.4 million, or 3.8%, to $38.6 million for fiscal year 2001 from $37.2 million for fiscal year 2000. The increase in research and development expenses was attributable primarily to $2.4 million of incremental spending resulting from the Butcher and Teepol acquisitions, partially offset by $1.0 million of reduced spending due to a continued focus on cost management. Research and development expenses dropped from 3.6% of net sales for fiscal year 2000 to 3.4% of net sales for fiscal year 2001.

Interest Expense, Net. Net interest expense increased by $7.0 million, or 61.9%, to $18.3 million for fiscal year 2001 from $11.3 million for the prior fiscal year. The increase resulted primarily from additional debt incurred in connection with the Butcher and Teepol acquisitions.

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Other Income/Expense. Other income/expense declined by $14.6 million, or 84.6%, to $2.6 million of income for fiscal year 2001 from $17.2 million of income for fiscal year 2000. This decline was due primarily to lower one-time gains on divestitures in fiscal year 2001. In fiscal year 2000, we realized a $15.2 million one-time, pre-tax gain on the divestiture of PCO Canada and a $6.0 million one-time, pre-tax gain on the sale of unutilized property in Japan. These gains were partially offset by other net expenses of $4.0 million incurred in fiscal year 2000 largely in connection with our separation from S.C. Johnson & Son in November 1999. In addition, in fiscal year 2001, we realized a one-time, pre-tax gain of $3.0 million related to the sale of our interest in the Acurid joint venture.

Provision for Income Taxes. Our effective tax rate was 33.5% for fiscal year 2001 compared to 36.7% for fiscal year 2000. The lower effective tax rate is attributable primarily to lower sustainable foreign tax rates.

Net Income. Net income declined by $17.1 million, or 34.4%, to $32.6 million for fiscal year 2001 from $49.7 million for fiscal year 2000. The decline in net income resulted primarily from one-time gains in fiscal year 2000 of $15.2 million from the divestiture of PCO Canada and of $6.0 million from the sale of unutilized property in Japan discussed above. Excluding the after-tax impact of one-time divestitures and property sales from both fiscal years, net income declined $5.7 million, or 15.7%, to $30.6 million for fiscal year 2001 from $36.3 million for fiscal year 2000. That decline was attributable to a $7.0 million increase in net interest expense for fiscal year 2001 as a result of the additional debt incurred in connection with the Butcher and Teepol acquisitions.

EBITDA. EBITDA declined by $6.5 million, or 5.2%, to $117.4 million for fiscal year 2001 from $123.9 million for fiscal year 2000. The decline in EBITDA for fiscal year 2001 resulted primarily from a $14.6 million decline in other income, a $21.5 million increase in sales force expenses and an $11.7 million increase in spending on strategic initiatives. The decline in EBITDA was offset partially by the increase in net income discussed above. For a discussion of EBITDA and a reconciliation of EBITDA to net income, see “Item 6. Selected Historical Financial Data.”

Liquidity and Capital Resources

Comparison of Fiscal Year Ended January 3, 2003 and Twelve Months Ended December 28, 2001. Cash flows provided by operating activities were $231.0 million for the fiscal year ended January 3, 2003, compared to $126.1 million for the twelve months ended December 28, 2001. The increase in cash from operations of $104.9 million during the fiscal year ended January 3, 2003 was due primarily to the impact of the acquisition of the DiverseyLever business.

Cash flows used in investing activities increased to $1,468.5 million for the fiscal year ended January 3, 2003, compared to $54.0 million for the twelve months ended December 28, 2001. This increase is attributable to the acquisition of the DiverseyLever business.

Cash flows provided by financing activities were $1,360.9 million for the fiscal year ended January 3, 2003, compared to net cash used of $74.4 million for the twelve months ended December 28, 2001. The increase in cash flows provided by financing activities resulted from the borrowings under our senior secured credit facilities and issuance of senior subordinated notes on May 3, 2002 to finance the acquisition of the DiverseyLever business.

Overview. As a result of the acquisition, we have a significant amount of indebtedness. On May 3, 2002, in connection with the acquisition, we issued senior subordinated notes and entered into a $1.2 billion senior secured credit facility. We used the proceeds of the sale of the senior subordinated notes and initial borrowings under the senior secured credit facilities, together with other available funds, to finance the cash portion of the purchase price for the DiverseyLever business and the related fees and expenses and to refinance existing indebtedness. As of January 3, 2003, we had total indebtedness of about $1.596 billion, consisting of $533

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million of notes, $873 million of borrowings under the senior secured credit facilities, $122 million in operating lease commitments and $68 million in short-term debt.

We have capacity to borrow additional funds under the senior secured credit facilities, subject to compliance with the financial covenants set forth in the facilities. As of January 3, 2003, we had $32.7 million of indebtedness outstanding under the revolving portion of the senior secured credit facilities and the ability to incur an additional $273.3 million of indebtedness under those revolving facilities, all of which we believe we would have been able to borrow at that time in compliance with the financial covenants set forth in the senior secured credit facilities, the indentures for the senior subordinated notes and the indenture for the senior discount notes of JonhsonDiversey Holdings.

Since March 2001, we have funded a portion of our short-term liquidity needs through the securitization of some of our trade accounts receivable. We and some of our U.S. subsidiaries are parties to an agreement whereby we and each participating subsidiary sell, on a continuous basis, all trade receivables to JWPR Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary formed for the sole purpose of buying and selling receivables. Under the receivables facility, we and some of our subsidiaries, irrevocably and without recourse, transfer all trade receivables to JWPR. JWPR, in turn, sells an undivided interest in these receivables to Falcon Asset Management Corporation for an amount equal to the value of all eligible receivables (as defined under the receivables sale agreement) less the applicable reserve. As of January 3, 2003, about $34 million of eligible receivables have been sold under our securitization facility. JWPR’s funding costs under the receivables facility have accrued interest at a weighted average rate of about 1.5% per annum.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” effective June 15, 2003, which requires a company to consolidate a variable interest entity if the company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns. We do not believe that the adoption of this interpretation will have a significant impact on our consolidated financial position or results of operations.

Under the terms of the senior secured credit facilities, we must use any future net proceeds from the securitization facility first to pay any outstanding portion of the $39 million aggregate installment of principal due on the term loan portion of the senior secured credit facilities on May 3, 2003, the first anniversary of the closing date, and thereafter to prepay loans outstanding under the senior secured credit facilities. In addition, the net amount of trade receivables at any time outstanding under this and any other securitization facility that we may enter into may not exceed $150 million in the aggregate.

During fiscal year 2002, we repaid $57 million of the principal amount outstanding under the term loan portion of the senior secured credit facilities. As of January 3, 2003, we had the following long-term debt agreements and operating leases with non-cancelable terms in excess of one year, excluding the indebtedness associated with the receivables securitization.

The characteristics of our business do not generally require us to make significant ongoing capital expenditures. We made capital expenditures of about $54 million in the twelve months ended December 28, 2001, and capital expenditures for the fiscal year ended January 3, 2003 were about $112 million.

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We may make significant cash expenditures in the next few years in an effort to capitalize on anticipated revenue growth and cost savings opportunities associated with the acquisition of the DiverseyLever business, and to continue and, in some cases, expand on certain DiverseyLever pre-acquisition restructuring initiatives.

In connection with the re-measurement of pension obligations and related plan assets, we have increased our additional minimum pension liability, which reduced our stockholders’ equity by $ 16 million. The adjustment is reflective of current depressed market conditions in the equity markets and the related impact on the fair value of plan assets. We are currently taking actions to mitigate our exposure to further increases in our minimum pension liability, including additional planned pension contributions over the next four years.

We believe that the cash flows from operations that we anticipate as a result of cost savings and operating improvements associated with the acquisition and restructuring initiatives, together with available cash, our available borrowings under the senior secured credit facilities and the proceeds from our securitization facility will be sufficient 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.

We do not have any off-balance sheet financing arrangements or contractual obligations other than those disclosed above. All contingent liabilities are disclosed in note 25 to our audited consolidated financial statements.

Financial Covenants under Senior Secured Credit Facilities

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

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

The first two financial covenant periods under our senior secured credit facilities began on May 3, 2002, the closing date of the DiverseyLever acquisition, and ended on September 27, 2002 and January 3, 2003. For these financial covenant periods, we were required to maintain a leverage ratio of no more than 5.25 to 1. For the subsequent financial covenant period, which began on May 3, 2002 and ended on March 28, 2003, we were required to maintain a leverage ratio of no more than 5.25 to 1.

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Thereafter, the four fiscal quarters preceding the end of each of our fiscal quarters will constitute a financial covenant period. Commencing with the financial covenant period ending June 27, 2003, the senior secured credit facilities require that we maintain a leverage ratio of no more than the ratio set forth below for each of the financial covenant periods ending nearest the corresponding date set forth below:

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

Commencing with the financial covenant period ended September 27, 2002, the senior secured credit facilities require that we maintain an interest coverage ratio of no less than the ratio set forth below for each of the financial covenant periods ending nearest the corresponding date set forth below:

Compliance with Maximum Leverage Ratio and Minimum Interest Coverage Ratio. For our financial covenant period that began on May 3, 2002 and ended on January 3, 2003, we were in compliance with the maximum leverage ratio and minimum interest coverage ratio covenants contained in the senior secured credit facilities.

Capital Expenditures. The senior secured credit facilities prohibit us from making capital expenditures during any calendar year nearest the corresponding date set forth below in an amount exceeding the following:

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Beginning in calendar year 2003, however, we can exceed in a year the maximum capital expenditures limitation set forth above for that year by the amount, if any, by which the limitation set forth above for the previous year exceeded actual capital expenditures made in that previous year.

For calendar year 2002, we made capital expenditures of $112 million. Our maximum capital expenditure limitation for calendar year 2002 was $148 million. Accordingly, we were in compliance with the limitation on capital expenditures for calendar year 2002.

Senior Discount Notes of JohnsonDiversey Holdings

In connection with the acquisition of the DiverseyLever business, our parent, JohnsonDiversey Holdings, issued senior discount notes with a principal amount at issuance of about $241 million to Unilever. In addition, Unilever received a one-third equity interest in JohnsonDiversey Holdings. Under the indenture for the JohnsonDiversey Holdings senior discount notes, the principal amount of the senior discount notes will accrete at a rate of 10.670017063% per annum and 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 we can distribute to JohnsonDiversey Holdings the cash necessary to make the payments in accordance with the restrictions contained in the indentures for our senior subordinated notes and senior secured credit facilities. The failure by JohnsonDiversey 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 our 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 10.670017063% per annum, and the unpaid interest will be payable on the next interest payment date on which we are able to distribute to JohnsonDiversey Holdings the cash necessary to make the payment in accordance with the provisions contained in the indentures for the senior subordinated notes and the senior secured credit facilities. JohnsonDiversey Holdings has no income from operations and no meaningful assets. JohnsonDiversey Holdings receives all of its income from us and substantially all of its assets consist of its investment in us. The senior discount notes mature on May 15, 2013.

Post-Closing Adjustments to Acquisition Consideration

The consideration for the DiverseyLever business paid by us to Unilever at the closing of the acquisition is subject to several adjustments based upon the net debt and working capital of the parties and pension matters. Some of the adjustments to the purchase price for the DiverseyLever business and the subscription price Unilever paid for its one-third equity interest in JohnsonDiversey Holdings are paid upon finalization of the adjustments while other adjustments will be paid at the time Unilever ceases to own its equity interest in JohnsonDiversey Holdings. In fiscal year 2002, specified adjustments were finalized with Unilever and were paid to Unilever as adjustments to the purchase price. See note 4 to our audited consolidated financial statements and “Item 13. Certain Relationships and Related Transactions—Relationships with Unilever—Stockholders’ Agreement” included elsewhere in this annual report.

Under the acquisition agreement, because our pre-acquisition debt balance exceeded our cash balance at the closing date of the acquisition, we are required to pay to Unilever about $11.7 million, representing a reduction to Unilever’s subscription price for its JohnsonDiversey Holdings equity interest. This amount will be paid by us at the time Unilever ceases to own its equity interest in JohnsonDiversey Holdings. The amount was recorded in our audited consolidated financial statements for fiscal year 2002 as an increase to purchase price. Also, based on a preliminary determination of a working capital adjustment to the subscription price, we anticipate that Unilever will be required to pay to us about $36.5 million, representing an adjustment to the subscription price for Unilever’s equity interest in JohnsonDiversey Holdings. Unilever would be required to pay this adjustment to the subscription price, together with interest from and including the closing date, to us at the time Unilever ceases to hold its equity interest in JohnsonDiversey Holdings.

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In addition, based on a preliminary determination of the transferred pension assets and liabilities relating to specified plans we assumed in the acquisition, we anticipate that Unilever will be required to pay to us an aggregate of about $108.0 million, representing an adjustment to the purchase price for the DiverseyLever business. This adjustment is preliminary and is expected to be finalized and agreed to with Unilever by December 2003. The majority of this adjustment is to be paid by Unilever over a two-year period following the acquisition, with the remainder to be paid, together with interest from and including the closing date, at the time Unilever ceases to hold its equity interest in JohnsonDiversey Holdings. In fiscal year 2002, we received about $43.6 million, including interest of $485,000, representing a portion of Unilever’s payment of the transferred pension adjustment. The purchase price of the DiverseyLever business is also subject to adjustment relating to pension expenses of DiverseyLever’s employee benefit plans for the fiscal year ended June 29, 2001. This adjustment has not been finalized and agreed to with Unilever, however, based on a preliminary calculation, we have determined that we will be required to make a payment to Unilever of about $2.6 million.

For further discussion of the post-closing adjustments to the acquisition consideration, see note 4 to our audited consolidated financial statements included elsewhere in this annual report.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

As a result of our acquisition of the DiverseyLever business, we have a significant amount of indebtedness. On May 3, 2002, in connection with the acquisition, we issued senior subordinated notes and entered into $1.2 billion senior secured credit facilities. Market risk exposure as it relates to interest and currency rates, as discussed below, has changed materially when compared to the previous year.

Interest Rate Risk

As of January 3, 2003, we had about $1,596 million of debt outstanding under all our credit facilities. After giving effect to the interest rate swap transactions that we have entered into with respect to some of the borrowings under our credit facilities, $519 million of the $1,528 million of long-term debt remained subject to variable rates. Accordingly, our earnings and cash flows are affected by changes in interest rates. At the above level of borrowings at variable rates and assuming a  ¹/8% per annum increase or decrease in the weighted average interest rate under these borrowings, we estimate that our interest expense for fiscal year 2002 would have changed by $648,000. In the event of an adverse change in interest rates, management would likely take actions that would mitigate our exposure to interest rate risk; however, due to the uncertainty of the actions and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effects of the change in the level of the overall economic activity that could exist in such an environment.

Foreign Currency Risk

We conduct our business in various regions of the world and export and import products to and from many countries. Our operations may, therefore, be subject to volatility because of currency fluctuations, inflation changes and changes in political and economic conditions in these countries. Sales and expenses are frequently denominated in local currencies, and results of operations may be affected adversely as currency fluctuations affect product prices and operating costs. We engage in hedging operations, including forward foreign exchange contracts, to reduce the exposure of our cash flows to fluctuations in foreign currency rates. 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.

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Related Party Transactions

Until 1999, we were part of S.C. Johnson & Son. In connection with our spin-off from S.C. Johnson & Son in 1999, we entered into a number of agreements relating to the separation and our ongoing relationship with S.C. Johnson & Son after the spin-off. A number of these agreements relate to our ordinary course of business, while others pertain to our historical relationship with S.C. Johnson & Son and our former status as a wholly owned subsidiary of S.C. Johnson & Son.

We are also party to various agreements with Unilever entered into in connection with the acquisition of the DiverseyLever business. All of the agreements with Unilever were negotiated before Unilever acquired its equity interest in our parent, JohnsonDiversey Holdings, and the senior discount notes of JohnsonDiversey Holdings. These agreements with Unilever are on arms-length terms.

For further discussion of the related party transactions, see note 22 to our audited consolidated financial statements and “Item 13. Certain Relationships and Related Transactions”, included elsewhere in this annual report.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Index to Consolidated Financial Statements beginning on page F-1.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On June 24, 2002, we dismissed Arthur Andersen LLP and appointed Ernst & Young LLP as our independent public accountants. The decision to change our independent public accountants was recommended by our senior management and approved by our board of directors. As a result of this action, Ernst & Young audited our financial statements for our fiscal year ended January 3, 2003.

During our two most recent fiscal years, which ended June 30, 2000 and June 29, 2001, the fiscal six months ended December 28, 2001 and the subsequent interim period through June 24, 2002, there were no disagreements between us and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen’s satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its reports. None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred within our two most recent fiscal years, the fiscal six months ended December 28, 2001 and the subsequent interim period through June 24, 2002. The audit report of Arthur Andersen on our consolidated financial statements as of and for the fiscal years ended June 30, 2000 and June 29, 2001 and as of and for the fiscal six months ended December 28, 2001, a copy of which is included elsewhere in this report, did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. Subsequent to the issuance of that audit report by Arthur Anderson, we modified some of the notes to the consolidated financial statements covered by that report. Arthur Anderson has ceased operations and did not reissue its audit report for these subsequent changes. Ernst & Young performed audit procedures with respect to the revised disclosures of the related party transactions in note 22 to the consolidated financial statements for the periods covered by Arthur Anderson’s report.

During our two fiscal years ended June 29, 2001 and the subsequent interim period through June 24, 2002, we did not consult with Ernst & Young regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

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PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following is a list of our directors and executive officers, their ages as of February 28, 2003, and their positions and offices:

S. Curtis Johnson III has been Chairman since February 1996. He also has been Chairman of Commercial Markets Holdco since December 8, 1999. Mr. Johnson joined S.C. Johnson & Son in 1983 and became a general partner of Wind Point Partners, L.C., a $126 million venture capital partnership which he co-founded and in which S.C. Johnson & Son was a major limited partner. He also served as Vice President—Global Business Development of S.C. Johnson & Son from October 1994 to February 1996. Since joining S.C. Johnson & Son in August 1983, Mr. Johnson has served in several other offices, including Vice President and Managing Director of Mexican Johnson, a subsidiary of S.C. Johnson & Son, and Director—Worldwide Business Development. Mr. Johnson earned a Bachelor of Arts degree in Economics from Cornell University in 1977 and a Master of Business Administration in Marketing/Finance from Northwestern University in 1983. Mr. Johnson also serves as a director of Cargill, Incorporated. He is a descendant of Samuel Curtis Johnson and the brother of Helen Johnson-Leipold, another director of our company.

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Gregory E. Lawton has been a director and President and Chief Executive Officer since September 2000. Mr. Lawton has also served as a director of Commercial Markets Holdco since April 12, 2000. He joined us as President and Chief Operating Officer in December 1998 and was Chief Operating Officer until August 2000. Prior to joining us, Mr. Lawton was President of NuTone, Inc., a supplier of residential ventilation products and electronics located in Cincinnati, Ohio, from August 1994 to December 1998. From 1972 to August 1994, Mr. Lawton served in various offices at The Procter & Gamble Company, most recently as Vice President and General Manager of its consumer business within its paper division from 1989 until 1994. Mr. Lawton earned a Bachelor of Arts degree in Government from St. Lawrence University. Mr. Lawton also serves as a director of Johnson Outdoors, Inc., our affiliate and a marketer of outdoor recreational products, and General Cable Corporation, a manufacturer and distributor of wire and cable products for the communications, energy and specialty markets.

Michael J. Bailey has served as Executive Vice President since March 21, 2003 and as Chief Financial Officer since October 1999. He has also been the Senior Vice President and Chief Financial Officer of Commercial Markets Holdco since December 8, 1999. From October 1999 until March 20, 2003, Mr. Bailey also served as Senior Vice President. Before joining us, Mr. Bailey served as Senior Vice President, Finance and Administration and Chief Financial Officer for Standard Motor Products, Inc., a large manufacturer and distributor of a wide range of automotive replacement parts from June 1993 to September 1999. Mr. Bailey has held numerous financial leadership and business development positions for domestic and international companies, including Instituto Finanziazio Industriale S.P.A. and Ford Motor Company. Mr. Bailey earned a Bachelor of Business Administration from Western Michigan University in 1974 and a Master of Business Administration from the University of Michigan—Ann Arbor in 1976.

JoAnne Brandes has served as Executive Vice President since March 21, 2003, as General Counsel and Secretary since October 1997 and as Chief Administrative Officer since January 2002. Ms. Brandes also served as Senior Vice President from October 1997 until March 20, 2003. From October 1996 until October 1997, she was Vice President and General Counsel. She has also been the Senior Vice President and General Counsel of Commercial Markets Holdco since December 8, 1999. Ms. Brandes joined S.C. Johnson & Son in 1981. Prior to joining S.C. Johnson & Son, Ms. Brandes was in the private practice of law in Milwaukee, Wisconsin. Ms. Brandes earned a Bachelor degree from the University of Wisconsin—Eau Claire and a juris doctor degree from Willamette University College of Law, Salem, Oregon. Ms. Brandes also serves as a member of the boards of directors of Alternative Resources Corporation, Bright Horizons Family Solutions, Inc., Capital H, Inc. and Johnson Family Funds, Inc. She also is a Regent of the University of Wisconsin System.

Sue Leboza has been Vice President and Chief Information Officer since August 2000. Prior to that, Ms. Leboza was a Vice President of Baxter International, Inc., a supplier of medical products. She held that position from October 1996 until February 2000.

Timothy Ransome has been loaned to us from Unilever as Senior Vice President—Human Resources since the closing of the acquisition of the DiverseyLever business in May 2002. From July 1996 until May 2002, he served as Senior Vice President—Human Resources for DiverseyLever. Mr. Ransome joined Unilever in 1973 after previous experience in the British civil service and the construction industry. Within Unilever his early experience was in industrial relations in the chemical, packaging and food industries, all based in the United Kingdom. In 1983, he became head of human resources for Unilever’s food business in the United Kingdom before moving to Unilever’s headquarters in London in 1985 to take responsibility for Unilever’s management compensation and development functions in the United Kingdom. In 1991, he became Vice President of Human Resources for the worldwide business of Elizabeth Arden based in New York.

Clive A. Newman joined us as Vice President and Corporate Controller upon the closing of the acquisition of the DiverseyLever business in May 2002. From May 2001 until May 2002, he was Controller and Vice President—Finance Europe of DiverseyLever. Prior to that, Mr. Newman was Finance Manager—Beverages of Unilever from 2000 until April 2001, Regional Finance Director of DiverseyLever from 1996 until 2000 and Chief Accountant and Corporate Secretary, UK of Lever Industrial from 1994 until 1996.

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Sanjib Choudhuri has been loaned to us from Unilever as Senior Vice President—Global Strategy Development since the closing of the acquisition of the DiverseyLever business in May 2002 and is expected to continue with us in his capacity on a permanent basis. Prior to the acquisition of the DiverseyLever business, Mr. Choudhuri served as Vice President—Knowledge Management and Regional Vice President, Asia Pacific of DiverseyLever from April 1996 until May 2002. Mr. Choudhuri’s involvement with the industry started in April 1984 when he joined The Molson Companies Ltd., the predecessor to DiverseyLever, and was responsible for corporate and business unit development. He transferred to DiverseyLever in 1991 with responsibility for global business and technology development. Prior to his experience at The Molson Companies, Mr. Choudhuri served as a consultant with McKinsey and in brand management with Procter & Gamble, both in Canada.

David S. Andersen has been our Vice President—Global Enterprise Development since May 2002. He was our Vice President—eSolutions from October 2000 until May 2002. He served as Vice President—Global Enterprise Development Group from July 1999 until October 2000, as Vice President Business-Development from March 1998 to July 1999, as Managing Director of Total Solutions Inc. of our North American operations from March 1996 until March 1998, and as Director of Global Mergers and Acquisitions from December 1994 until March 1996. Mr. Andersen also served as Corporate Acquisition’s Director of S.C. Johnson & Son from October 1992 until December 1994. Mr. Andersen joined S.C. Johnson & Son in March 1991 as Business Development Manager. Mr. Andersen earned a Bachelor degree from Brown University and a Master of Business Administration from Harvard University.

Gregory F. Clark has been our Senior Vice President—Global Product Portfolio and Innovation since May 2002. He was our Vice President—Global Manufacturing and Sourcing from May 1999 until May 2002. Mr. Clark joined S.C. Johnson & Son in 1978 and has served in a variety of manufacturing, operations and financial positions domestically and internationally with both us and S.C. Johnson & Son. Mr. Clark earned a Bachelor degree in Chemical Engineering from Purdue University and a Master of Business Administration from the University of Chicago.

Roberto G. A. Sidoli joined us as Senior Vice President—Global Supply Chain upon the closing of the acquisition of the DiverseyLever business in May 2002. Prior to that, he was Senior Vice President—Supply Chain of DiverseyLever since August 1999. Dr. Sidoli joined Unilever Research in 1977, working as a research scientist in the gum health program. He then held a number of development roles in the Philippines, United Kingdom and Indonesia before returning to the United Kingdom as Factory Manager in Unilever’s Personal Care business. He also held supply chain positions in France and Italy before joining DiverseyLever, including Supply Chain Director of Unilever Home Personal Care Europe from August 1996 until August 1999. Dr. Sidoli earned a Bachelor of Science degree and Ph.D. in Chemistry from Liverpool University.

Candan Karabagli joined us as Senior Vice President—Global Strategic Sectors upon the closing of the acquisition of the DiverseyLever business in May 2002. Prior to that, she was Senior Vice President—Strategic Sectors of DiverseyLever since September 2000. Ms. Karabagli was also Vice President—Customer Management Excellence from January 2000 until September 2000, Vice President—Global Business Development, Institutional and Laundry from April 1999 until January 2000 and Managing Director of DiverseyLever Turkey from June 1995 until April 1999. Ms. Karabagli joined Lever Brothers, Turkey in 1987 and led the customer management automation project for Lever, Elida and Lever Industrial International. Ms. Karabagli received a Bachelor of Science degree in Industrial Engineering from The Middle East Technical University and also a Master degree in Management Information Systems from the University of Arizona.

J. Gary Raley has been President and Chief Operating Officer of Johnson Polymer since May 2002. Prior to joining Johnson Polymer, he was President of Johnson Wax Professional, North America from April 2000 until May 2002, and Senior Vice President, Global Sales and Marketing from June 1998 until April 2000.

Jean-Max Teissier joined us as Regional President—Latin America upon the closing of the acquisition of the DiverseyLever business in May 2002. Prior to that, he was Regional Vice President of Latin America of

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DiverseyLever since January 1999. He joined Unilever (United Africa Company) in 1969 in the Ivory Coast. Thereafter, he was transferred to Senegal to serve in his first general management role. After a six year tenure in Cameroon, he assumed a regional role for the Unilever business in the Middle East and was based in London. Mr. Teissier was appointed Chairman of the United Africa Company in Ivory Coast in 1987. Thereafter, he took a management position in France and was responsible for running businesses in Francophone, Africa. In 1993, he joined Lever Industrial as Manager Director (France) and served in that position until December 1998.

Morio Nishikawa has been Regional President—Japan since September 1997. He has also been President and Chief Executive Officer of JohnsonDiversey Co., Ltd. (Japan) (formerly Johnson Professional Co. Ltd. (Japan)) since January 1998. Mr. Nishikawa joined S.C. Johnson & Son in 1968 and has held numerous positions, including Chief Executive Officer of Johnson Professional Co., Ltd., Marketing Manager of the Consumer Business and Household Products, our Director of Consumer Products Marketing and Sales Development and Senior Managing Director. Mr. Nishikawa earned a Bachelor of Arts degree in Economics from Kokugakuin University and has completed advanced management programs at Nomura Management School and Harvard University.

Venkatesh Kasturirangan joined us as Regional President—North America upon the closing of the acquisition of the DiverseyLever business in May 2002. Prior to that, he was President—North America of DiverseyLever since July 2000. From July 1998 until June 2000, Mr. Kasturirangan served as Executive Vice President and Chief Operating Officer (Personal Wash, Skin and Oral Care) for Unilever Home and Personal Care. Prior to that, he was the Chairman and Chief Executive Officer of Unilever Philippines from July 1995 until June 1998. Mr. Kasturirangan joined Unilever over 30 years ago after having worked for Warner Lambert in India and held various other sales, marketing and management positions with Unilever, including Director, Unilever India (HLL) where he was in charge of Personal Products and Director Ponds (India).

Graeme D. Armstrong joined us as Regional President—Europe upon the closing of the acquisition of the DiverseyLever business in May 2002. Prior to that, he was Senior Vice President of Portfolio and Innovation of DiverseyLever since 2000 and was responsible for the global DiverseyLever product range and product development and marketing functions. Mr. Armstrong joined Unilever in 1986, working in the Consumer Detergents Division on research on detergent enzymes. Thereafter, he ran detergents development projects in Brazil, South Africa and Indonesia. Mr. Armstrong returned to England in 1992 and served as Section Manager for the cleaning technologies of DiverseyLever and then as Deputy Division Manager for exploratory research. In 1994, he joined Lever Industrial International as Vice President of Technology and became a member of the Lever Industrial International Board. From 1995 until 1996, Mr. Armstrong served as Vice President of Research and Development of Lever Industrial International. He became Senior Vice President of Research and Development for DiverseyLever after Unilever acquired DiverseyLever from The Molson Companies Ltd. in 1996 and held that position until 2000.

Paul A. Mathias has been Regional President—Asia Pacific since April 2000. Prior to that, Mr. Mathias was Group Managing Director—Indochina of S.C. Johnson & Son from July 1992 until April 2000. Mr. Mathias joined S.C. Johnson & Son in 1972.

Todd C. Brown has been a director since April 2001. Mr. Brown has also been a director of Commercial Markets Holdco since April 3, 2000 and of JohnsonDiversey Holdings since May 3, 2002. Mr. Brown is Executive Vice President of Kraft Foods, Inc. and President of its e-Commerce Division. He has held these positions since January 2001. Mr. Brown has held various positions at Kraft Foods, Inc. since 1985, most recently President of Kraft Foodservices Division from April 1998 until December 2000, General Manager of Beverages and Desserts Division from October 1997 until March 1998 and General Manager of Desserts Division from August 1996 until October 1997. Mr. Brown is also a director of ADVO Inc., a targeted direct mail marketing services company.

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Irene M. Esteves has been a director since June 1998. Ms. Esteves has also been a director of Commercial Markets Holdco since April 3, 2000 and of JohnsonDiversey Holdings since May 3, 2002. She is currently the Chief Financial Officer of Putnam Investment Trust, an asset management firm and the fifth largest mutual fund manager in the United States. Before joining Putnam in 1997, Ms. Esteves was with Miller Brewing Company for two years, first as the Corporate Controller & Director of International Finance, then Vice President— International Finance and Corporate Strategy. Prior to this, she spent thirteen years with S.C. Johnson & Son in various finance and business development roles, last serving as Controller—North America Home Care.

Robert M. Howe has been a director since April 1996. He has also been a director of Commercial Markets Holdco since April 12, 2000 and of JohnsonDiversey Holdings since May 3, 2002. Since February 2003, Mr. Howe has been the Chairman of Montgomery Goodwin Investments, LLC. Prior to that, Mr. Howe was the Chairman of Scient, Inc., a provider of integrated e-Business strategy and technology services, from April 2000 to September 2002 and previously served as its Chief Executive Officer. Mr. Howe also was General Manager of Global Financial Services at International Business Machines Corporation from 1997 until February 1998. He is a member of the board of directors of the Development Bank of Singapore. Mr. Howe earned a Bachelor in Business Administration degree from Southern Methodist University and a Master of Business Administration from Harvard University.

Helen Johnson-Leipold has been a director since December 1999. Ms. Johnson-Leipold has also been a director of Commercial Markets Holdco since April 12, 2000 and of JohnsonDiversey Holdings since May 3, 2002. Ms. Leipold is the Chairman and Chief Executive Officer of Johnson Outdoors, Inc., a manufacturer and marketer of outdoor recreational equipment, since 1999. From 1998 until 1999, she served as Vice President— Worldwide Consumer Products and from 1997 until 1998, she served as the Vice President—North America Personal Care and Home Care of S.C. Johnson & Son. Prior to that, Ms. Johnson-Leipold was the Executive Vice President—North America Businesses of Johnson Outdoors, Inc. from 1995 until 1997 and the Vice President—Consumer Marketing Services Worldwide of S.C. Johnson & Son from 1992 until 1995. Ms. Johnson-Leipold is a descendant of Samuel Curtis Johnson and the sister of S. Curtis Johnson III, the Chairman of our company.

Clifton D. Louis has been a director since December 1999. Mr. Louis has also been a director of Commercial Markets Holdco since March 1, 1999 and of JohnsonDiversey Holdings since May 3, 2002. Mr. Louis is the owner of The Vineyard, Inc., a retail wine store, and has been its President and Chief Executive Officer since 1985. Mr. Louis is a descendant of Samuel Curtis Johnson.

Neal R. Nottleson has been a director since September 1999. Mr. Nottleson has also been a director of Commercial Markets Holdco since March 1, 1999 and of JohnsonDiversey Holdings since May 3, 2002. Mr. Nottleson retired in 1999. Prior to his retirement, he was the Vice Chairman of S.C. Johnson & Son from October 1996 until June 30, 1999. As Vice Chairman, Mr. Nottleson directed the finance, legal, environmental, public affairs, information technology and strategic planning departments at S.C. Johnson & Son.

Reto Wittwer has been a Director since July 2002. Mr. Wittwer has also been a director of JohnsonDiversey Holdings since July 2002. Mr. Wittwer is the President and Chief Executive Officer of Kempinski Hotel Group. Mr. Wittwer joined Kempinski Hotel Group in 1995 following three years as President and Chief Executive Officer of CIGA Hotels. Prior to that, he served in various positions with Swisshotel Group, including General Manager/Vice President Far East Asia, Senior Vice President for Operations and most recently as President and Chief Executive Officer.

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ITEM 11.     EXECUTIVE COMPENSATION

The following table sets forth information with respect to compensation earned during our last three fiscal years by our Chief Executive Officer and our four other most highly compensated executive officers. The officers listed in the following table are referred to as the named executive officers.

Summary Compensation Table Data