SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended March 31, 2004

Commission File Number 1-9608

NEWELL RUBBERMAID INC.

10B Glenlake Parkway, Suite 600
Atlanta, Georgia 30328
(Address of principal executive offices)
(Zip Code)
(770) 407-3800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

     Number of shares of common stock outstanding (net of treasury shares) as of April 30, 2004: 274.8 million

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share data)

See Notes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)

See Notes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(In millions, except per share data)

See Notes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)

See Notes to Consolidated Financial Statements (Unaudited).

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements of Newell Rubbermaid Inc. (collectively with its subsidiaries, the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of only normal recurring accruals, considered necessary for a fair presentation of the financial position and the results of operations. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

Seasonal Variations: The Company’s product groups are only moderately affected by seasonal trends. The Cleaning & Organization business segment typically has higher sales in the second half of the year due to retail stocking related to the holiday season; the Tools & Hardware and Home Fashions business segments typically have higher sales in the second and third quarters due to an increased level of do-it-yourself projects completed in the summer months; and the Office Products business segment typically has higher sales in the second and third quarters due to the back-to-school season. Because these seasonal trends are moderate, the Company’s consolidated quarterly sales generally do not fluctuate significantly, unless a significant acquisition is made.

Fair Value of Stock Options: The Company’s stock option plans are accounted for under Accounting Principles Board Opinion No. 25. As a result, the Company grants fixed stock options under which no compensation cost is recognized. Had compensation cost for the plans been determined consistent with Statement of Financial Accounting Standard No. 123 (FAS 123), “Accounting for Stock Based Compensation,” the Company’s net income and earnings per share would have been reduced to the following pro forma amounts for the quarter ended March 31, (in millions, except per share data):

Reclassifications: Certain amounts in prior years have been reclassified to conform to the current year presentation. See Note 2 for a discussion of discontinued operations.

Note 2 — Discontinued Operations

On January 31, 2004, the Company completed the sale of its Panex Brazilian low-end cookware division (previously reported in the Other operating segment) and European picture frames businesses (previously reported in the Home Fashions operating segment) in France, Spain and the United Kingdom.

On March 14, 2004, the Company entered into a definitive agreement to sell substantially all of its U.S. picture frame business (Burnes), its Anchor Hocking glassware business and its Mirro cookware business. Under the terms of the agreement, the Company will retain the accounts receivable of the businesses and expects total proceeds, including the retained receivables, as a result of the transaction to be approximately $310 million, subject to final negotiation. The effective date of sale is April 13, 2004. The Burnes picture frames business was previously reported in the Home Fashions operating segment, while the Anchor Hocking and Mirro businesses were previously reported in the in the Other operating segment.

The following table summarizes the results of the discontinued operations for the three months ended March 31,:

No tax benefit was recorded on the loss on disposal of discontinued operations. In addition, no amounts related to interest expense have been allocated to discontinued operations.

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

Note 3 — Restructuring Costs

The Company continues to incur restructuring charges associated with the Company’s strategic restructuring plan (the “plan”) announced on May 3, 2001. The specific objectives of the plan are to streamline the Company’s supply chain to become the best-cost global provider throughout the Company’s portfolio by reducing worldwide headcount and consolidating duplicative manufacturing facilities. The Company expects to incur between $470 and $480 million in restructuring charges under the plan, including previously recognized charges on discontinued operations of $83.6 million. The following analysis excludes restructuring amounts related to discontinued operations.

Pre-tax restructuring costs consisted of the following for the quarter ended March 31, (in millions):

Restructuring provisions were determined based on estimates prepared at the time the restructuring actions were approved by management, and also include amounts recognized as incurred. Cash paid for restructuring activities was $13.7 million and $17.4 million in the first three months of 2004 and 2003, respectively. A summary of the Company’s restructuring plan reserves is as follows (in millions):

The facility and other exit cost reserves are primarily related to future minimum lease payments on vacated facilities and other closure costs.

Under the plan, the Company expects to exit 76 facilities and reduce headcount by approximately 10,300 people. At the plan’s completion, the Company expects total annual savings of between $125 and $150 million ($105 to $115 million related to the reduced headcount, $10 to $20 million related to reduced depreciation, and $10 to $15 million related to other cash savings). As of March 31, 2004, restructuring reserves consisted of approximately 100 individual restructuring plans. The following table depicts the material changes in these plans for the three months ended March 31, aggregated by reportable business segment:

In the first three months of 2004, the Company incurred facility exit costs and employee severance and termination benefit costs for approximately 600 employees. Under the restructuring plan, 73 facilities have been exited and headcount has been reduced by approximately 9,300 employees.

Note 4 — Inventories

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

Note 5 – Long-term Debt

The following is a summary of long-term debt (in millions):

Effective March 9, 2004, the Company terminated an interest rate swap agreement prior to the scheduled maturity date and received cash of $9.2 million. Of this amount $5.5 million represents the fair value of the swap that was terminated and the remainder represents net interest receivable on the swap. The cash received relating to the fair value of the swap has been included in Other as an operating activity in the Consolidated Statement of Cash Flows. The unamortized gain on the terminated interest rate swap is accounted for as long-term debt (of which $0.7 million is classified as current). On March 9, 2004, the Company entered into a fixed to floating rate swap that effectively replaced the terminated swap.

Note 6 – Employee Benefit and Retirement Plans

The following table presents the components of the Company’s pension expense for the three months ended March 31 (in millions):

The following table presents the components of the Company’s other postretirement benefits expense for the three months ended March 31 (in millions):

On December 8, 2003, Congress enacted the Medicare Prescription Drug, Improvement and Modernization Act (the “Drug Act”) into law. The Drug Act introduces a prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The Company is currently reviewing the impact of the Drug Act and has elected to defer recognition of the benefit to its postretirement healthcare plans; as a result, the reported benefit obligation and net periodic postretirement cost as of and for the quarter ended March 31, 2004 do not reflect the effects of the Drug Act. Once final guidance is issued, previously reported information is subject to change.

Note 7 — Earnings per Share

The calculation of basic and diluted earnings per share for the quarter ended March 31, 2004 and 2003, respectively, is shown below (in millions, except per share data):

Note 8 – Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) encompasses net after-tax unrealized gains or losses on securities available for sale, foreign currency translation adjustments, net losses on derivative instruments and net minimum pension liability adjustments and is recorded within stockholders’ equity. The following table displays the components of accumulated other comprehensive income or loss (in millions):

Total comprehensive (loss) income amounted to the following (in millions):

Note 9 — Industry Segment Information

In 2003, the Company made several organizational changes, divided the company into two major groups, and named two chief operating officers. As of December 31, 2003, the Company realigned its reporting segments to reflect the changes in the Company’s structure and to more appropriately reflect the Company’s focus on building large consumer brands, promoting organizational integration, achieving operating efficiencies and aligning the businesses with the Company’s strategic account management strategy. The realignment streamlines what had previously been four operating segments (prior years’ segment data has been reclassified to conform to the current segment structure). The Company reports its results in five reportable segments as follows:

The Company’s segment results are as follows (in millions):

Geographic Area Information

Note 10 – Contingencies

The Company is involved in legal proceedings in the ordinary course of its business. These proceedings include claims for damages arising out of use of the Company’s products, allegations of infringement of intellectual property, commercial disputes and employment related matters, as well as environmental matters. Some of the legal proceedings include claims for punitive as well as compensatory damages, and a few proceedings purport to be class actions.

Although management of the Company cannot predict the ultimate outcome of these legal proceedings with certainty, it believes that the ultimate resolution of the Company’s legal proceedings, including any amounts it may be required to pay in excess of amounts reserved, will not have a material effect on the Company’s financial statements.

In the normal course of business and as part of its acquisition and divestiture strategy, the Company may provide certain representation and indemnifications related to legal, environmental, product liability, tax or other types of issues. Based on the nature of these representations and indemnifications, it is not possible to predict the maximum potential payments under all of these agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements did not have a material effect on the Company’s business, financial condition or results of operation.

PART I. FINANCIAL INFORMATION

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview

The Company has made significant progress in the first quarter of 2004 toward achieving its previously announced 2004 key objectives. The Company’s 2004 priorities remain unchanged as it continues to work to reconfigure its portfolio through divestitures, rationalization of low-margin product lines and restructuring. The Company’s key objectives, and the progress made in the first quarter of 2004 toward achieving such priorities, are highlighted below:

1. Continue to divest non-strategic businesses: The Company has substantially completed its previously announced plan to divest certain under-performing, non-strategic businesses in order to concentrate on leveraging brand strength and product innovation in its core portfolio of businesses. In January 2004, the Company completed the sale of its Panex Brazilian low-end cookware division and European picture frames businesses. In March 2004, the Company entered into a definitive agreement to sell substantially all of its U.S. picture frames business (Burnes), its Anchor Hocking glassware business and its Mirro cookware business. Under the terms of the agreement, the Company will retain the accounts receivable of the businesses and expects total proceeds, including the retained receivables, as a result of the transaction to be approximately $310 million. The effective date of sale is April 13, 2004. In connection with these divestitures, the Company recorded a loss on the sale of these businesses of approximately $105 million in the first quarter of 2004. The divestitures of these businesses and others currently being evaluated for potential divestiture are expected to reduce 2004 earnings per share by approximately $0.11 to $0.13, exclusive of the loss to be recognized in 2004. In addition, operating cash flow is expected to be reduced by $40 to $45 million, annually.

2. Complete the 2001 restructuring plan: In the first quarter of 2004, the Company recorded a restructuring charge of $22.8 million, bringing plan-to-date charges to approximately $437 million. In total, the Company has exited or has begun exiting 73 facilities and has reduced headcount by approximately 9,300 employees. In the second quarter of 2004, the Company expects to incur between $33 and $43 million in restructuring charges. The 2001 restructuring plan will result in total charges of $470 to $480 million, including previously recognized charges on discontinued operations of $83.6 million. The Company will complete the accounting charges associated with this plan in the second quarter of 2004.

3. Continue to rationalize low-margin product lines: In the first quarter of 2004, the Company exited approximately $60 million in sales of low-margin product lines. The Company will continue to rationalize low-margin product lines throughout 2004. The completion of this program is expected to reduce annual sales by $225 to $250 million.

4. Deploy Newell Operational Excellence (NWL OPEX): The Company is committed to reducing costs by at least 5% annually. In connection with this goal, the Company is committed to deploying and implementing NWL OPEX, which is a methodical process focused on lean manufacturing. It includes installing the right manufacturing and distribution metrics and driving improvement quarter after quarter. In addition to cost reduction, other key components of NWL OPEX are improved quality and service levels and the reduction of inventory and lead times. The Company’s program for driving productivity throughout its manufacturing network gained traction in the first quarter of 2004. The Company delivered approximately $25 million of gross productivity savings during the quarter.

Consolidated Results of Operations

The following table sets forth for the periods indicated items from the Consolidated Statements of Operations as reported and as a percentage of net sales for the three months ended March 31, ($ in millions):

Three Months Ended March 31, 2004 Vs. Three Months Ended March 31, 2003

Net sales for the three months ended March 31, 2004 (first quarter) were $1,541.0 million, representing a decrease of $16.9 million, or 1.1%, from $1,557.9 million in the comparable quarter of 2003. The decrease resulted from product line rationalization of $60 million, or 3.8%, and unfavorable pricing of $13 million, or 0.8%, partially offset by favorable foreign currency translation of $57 million, or 3.6%, for the quarter.

Gross margin as a percentage of net sales in the first quarter of 2004 was 26.7%, or $411.5 million, versus 27.8%, or $432.7 million, in the comparable quarter of 2003. The decline in gross margin is primarily related to unfavorable pricing of $13 million, or 0.8%, and raw material inflation of $21 million, partially offset by favorable mix driven by the rationalization of unprofitable product lines, primarily in the Rubbermaid Home Products business. Gross productivity in the quarter of $25 million, or 2.5%, was offset by restructuring related costs of $26 million, primarily in the Sanford Europe and Rubbermaid Home Products business.

Selling, general and administrative expenses (SG&A) in the first quarter of 2004 were 20.4% of net sales, or $313.8 million, versus 18.7%, or $292.0 million, in the comparable quarter of 2003. The increase in SG&A reflects a foreign currency impact of $16 million and pension cost increases of $4 million. All other SG&A was flat due to streamlining initiatives offsetting continued investments in the business.

The Company recorded pre-tax strategic restructuring charges of $22.8 million and $24.4 million in the first quarter of 2004 and 2003, respectively. The 2004 first quarter pre-tax charge included $15.1 million of facility and other exit costs, $5.4 million of employee severance and termination benefits, and $2.3 million in other restructuring costs. The 2003 first quarter pre-tax charge included $3.1 million of facility and other exit costs and $21.3 million of employee severance and termination benefits. See Note 3 to the Consolidated Financial Statements (Unaudited) for further information on the strategic restructuring plan.

Operating income in the first quarter of 2004 was 4.9% of net sales, or $74.9 million, versus operating income of 7.5% or $116.3 million, in the comparable quarter of 2003. The decrease in operating margins is primarily the result of the factors described above.

Net nonoperating expenses in the first quarter of 2004 were 1.7% of net sales, or $26.6 million, versus 3.7%, or $57.3 million, in the comparable quarter of 2003. In March 2003, the Company recognized a $21.2 million non-cash pre-tax loss on the sale of the Cosmolab business. Net interest expense decreased $6.1 million for the first quarter of 2004 compared to the first quarter of 2003 as a result of a reduction in average borrowings of $218.5 million, the maturation of $415.0 million of medium term notes with higher interest rates, the maturation of $50.0 million of fixed rate interest rate swaps in 2003 and the conversion of $650.0 million of interest rate swaps from fixed to floating rates.

The effective tax rate was 31.5% in the first quarter of 2004 versus 32.4% in the first quarter of 2003. This lower rate reflects, among other things, the increase in earnings in low-tax jurisdictions and, in certain jurisdictions, the year over year reduction in current year losses and the use of net operating loss carryforwards.

Net income from continuing operations for the first quarter of 2004 was $33.1 million, compared to $39.9 million in the first quarter of 2003. Diluted earnings per share from continuing operations were $0.12 in the first quarter of 2004 compared to $0.15 in the first quarter of 2003.

The net loss recognized from discontinued operations for the first quarter of 2004 was $108.0 million, net of tax, compared to $23.9 million, net of tax, in the first quarter of 2003. Diluted loss per share from discontinued operations were ($0.39) in the first quarter of 2004 compared to ($0.09) in the first quarter of 2003.

Net loss for the first quarter of 2004 was $74.9 million, compared to $16.0 million of net income in the first quarter of 2003. Diluted loss per share was ($0.27) in the first quarter of 2004 compared to diluted earnings per share of $0.06 in the first quarter of 2003.

Business Segment Operating Results:

Net sales in the five segments in which the Company operates were as follows for the quarter ended March 31, (in millions):

Operating income by segment were as follows for the quarter ended March 31, (in millions):

Cleaning & Organization

Net sales for the first quarter of 2004 were $447.4 million, a decrease of $30.1 million, or 6.3%, from $477.5 million in the first quarter of 2003. A double-digit decline in the Rubbermaid Home Products business due to planned product line rationalization was partially offset by a 4% increase in the remainder of the segment.

Operating income for the first quarter of 2004 was $12.2 million, a decrease of $27.8 million, or 69.5%, from $40.0 million in the first quarter of 2003. The decrease in operating income is the result of higher raw material costs and restructuring related charges, including lost absorption in manufacturing facilities.

Office Products

Net sales for the first quarter of 2004 were $332.8 million, an increase of $10.5 million, or 3.3%, from $322.3 million in the first quarter of 2003. The increase in net sales was driven by improvement in the commercial sector of the business.

Operating income for the first quarter of 2004 was $31.8 million, a decrease of $15.3 million, or 32.5%, from $47.1 million in the first quarter of 2003. Approximately half of the decrease relates to restructuring related costs in the European writing instruments business. These costs include duplicate facilities as the business consolidates manufacturing and distribution and expediting costs to maintain service levels. The remaining decrease in operating income relates to the Eldon business resulting from increased raw material costs and additional investment in new product development.

Tools & Hardware

Net sales for the first quarter of 2004 were $274.3 million, an increase of $8.7 million, or 3.3%, from $265.6 million in the first quarter of 2003. The increase in net sales was driven by high single digit increases in the Irwin and BernzOmatic businesses.

Operating income for the first quarter of 2004 was $43.0 million, an increase of $7.6 million, or 21.5%, from $35.4 million in the first quarter of 2003. The increase in operating income was related to the sales increases described above and strong productivity at Lenox and Irwin North America, partially offset by increases in raw material costs.

Home Fashions

Net sales for the first quarter of 2004 were $226.8 million, an increase of $7.2 million, or 3.3%, from $219.6 million in the first quarter of 2003. The increase in net sales was driven by favorable foreign currency in the current year.

Operating income for the first quarter of 2004 was $3.9 million, a decrease of $0.8 million, or 17.0%, from $4.7 million in the first quarter of 2003. The decrease in operating income was due primarily to unfavorable sales mix in the quarter.

Other

Net sales for the first quarter of 2004 were $259.7 million, a decrease of $13.2 million, or 4.8%, from $272.9 million in the first quarter of 2003. The decrease in net sales was primarily attributable to the sale of Cosmolab in March 2003, which contributed $10 million in sales in the first quarter of 2003.

Operating income for the first quarter of 2004 was $14.2 million, a decrease of $6.5 million, or 31.4%, from $20.7 million in the first quarter of 2003. The decrease in operating income was due primarily to higher raw material costs and unfavorable product mix.

Liquidity and Capital Resources

Cash and cash equivalents decreased by $92.5 million for the three months ended March 31, 2004. The change in cash and cash equivalents is as follows as of the three months ended March 31 (in millions):

Sources:

The Company’s primary sources of liquidity and capital resources include cash provided from operations and use of available borrowing facilities.

Cash used in operating activities in the first three months ended March 31, 2004 was $6.7 million compared to cash provided by operating activities of $40.5 million for the comparable period of 2003. The decrease in cash provided from operating activities was due to a decrease in earnings before non cash charges of $24.4 million (as shown in the following table) and a reduction in the year over year improvement in working capital and other assets in 2004 compared to 2003, which used an additional $8.0 million, and a reduction in deferred gains relating to the termination of certain interest rate swap arrangements. The deferred gain from these swap agreements was $2.2 million in 2004 compared to $17.0 million in 2003 and were included in Other in the Consolidated Statement of Cash Flows.

The following table reconciles earnings before non-cash charges to net (loss) income as of March 31, (in millions):

In the first three months of 2004, the Company received proceeds from the issuance of debt of $9.7 million compared to $619.3 million in the year ago period.

Uses:

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

In the first three months of 2004, the Company made payments on notes payable and long-term debt of $17.7 million compared to $312.0 million in the year ago period.

Cash used for restructuring activities was $13.7 million and $17.4 million in the first three months of 2004 and 2003, respectively. Such cash payments represent primarily employee termination benefits.

Capital expenditures were $36.6 million and $93.2 million in the first three months of 2004 and 2003, respectively. The reduction in capital expenditures is primarily due to the Company’s decision to decapitalize the Rubbermaid Home Products portion of the business, where capital expenditures decreased from $48 million in the first quarter of 2003 to $2 million in the first quarter of 2004.

Aggregate dividends paid were $57.7 million during the first three months of 2004 and 2003.

Retained earnings decreased in the first three months of 2004 by $132.5 million. The reduction in retained earnings is due to cash dividends paid on common stock and the current year net loss, offset by a favorable cumulative translation adjustment.

Working capital at March 31, 2004 was $967.6 million compared to $978.2 million at December 31, 2003. The current ratio at March 31, 2004 was 1.52:1 compared to 1.48:1 at December 31, 2003. The reduction in working capital is due to the use of cash to pay down commercial paper and the collection of accounts receivable, partially offset by seasonal inventory build.

Total debt to total capitalization (total debt is net of cash and cash equivalents, and total capitalization includes total debt and stockholders’ equity) was .60:1 at March 31, 2004 and .58:1 at December 31, 2003.

The Company believes that cash provided from operations and available borrowing facilities will continue to provide adequate support for the cash needs of existing businesses on a short-term basis; however, certain events, such as significant acquisitions, could require additional external financing on a long-term basis.

Market Risk

The Company’s market risk is impacted by changes in interest rates, foreign currency exchange rates, and certain commodity prices. Pursuant to the Company’s policies, natural hedging techniques and derivative financial instruments may be utilized to reduce the impact of adverse changes in market prices. The Company does not hold or issue derivative instruments for trading purposes.

The Company’s primary market risks are foreign exchange and interest rate exposure.

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

The Company’s foreign exchange risk management policy emphasizes hedging anticipated intercompany and third party commercial transaction exposures of one-year duration or less. The Company focuses on natural hedging techniques of the following form:

	•		offsetting or netting of like foreign currency flows,
	•		structuring foreign subsidiary balance sheets with appropriate levels of debt to reduce subsidiary net investments and subsidiary cash flows subject to conversion risk,
	•		converting excess foreign currency deposits into U.S. dollars or the relevant functional currency and
	•		avoidance of risk by denominating contracts in the appropriate functional currency.

In addition, the Company utilizes forward contracts and purchased options to hedge commercial and intercompany transactions. Gains and losses related to qualifying hedges of commercial and intercompany transactions are deferred and included in the basis of the underlying transactions. Derivatives used to hedge intercompany loans are marked to market with the corresponding gains or losses included in the consolidated statements of operations.

The Company purchases certain raw materials that are subject to price volatility caused by unpredictable factors. While future movements of raw material costs are uncertain, a variety of programs, including periodic raw material purchases, purchases of raw materials for future delivery and customer price adjustments help the Company address this risk. Generally, the Company does not use derivatives to manage the volatility related to this risk.

The amounts shown below represent the estimated potential economic loss that the Company could incur from adverse changes in either interest rates or foreign exchange rates using the value-at-risk estimation model. The value-at-risk model uses historical foreign exchange rates and interest rates to estimate the volatility and correlation of these rates in future periods. It estimates a loss in fair market value using statistical modeling techniques and including substantially all market risk exposures (specifically excluding equity-method investments). The fair value losses shown in the table below have no impact on results of operations or financial condition at March 31, 2004 as they represent hypothetical not realized losses. The following table indicates the calculated amounts for each of the quarters ended March 31, (in millions):

The 95% confidence interval signifies the Company’s degree of confidence that actual losses would not exceed the estimated losses shown above. The amounts shown here disregard the possibility that interest rates and foreign currency exchange rates could move in the Company’s favor. The value-at-risk model assumes that all movements in these rates will be adverse. Actual experience has shown that gains and losses tend to offset each other over time, and it is highly unlikely that the Company could experience losses such as these over an extended period of time. These amounts should not be considered projections of future losses, because actual results may differ significantly depending upon activity in the global financial markets.

Forward Looking Statements

Forward-looking statements in this Report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to, but are not limited to, such matters as sales, income, earnings per share, return on equity, return on invested capital, capital expenditures, working capital, dividends, capital structure, debt to capitalization ratios, interest rates, internal growth rates, impact of changes in accounting standards, pending legal proceedings and claims (including environmental matters), future economic performance, operating income improvements, synergies, management’s plans, goals and objectives for future operations and growth or the assumptions relating to any of the forward-looking statements. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results could differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, those matters set forth in this Report and Exhibit 99.1 of this Report.

PART I. FINANCIAL INFORMATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is incorporated herein by reference to the section entitled “Market Risk” in the Company’s Management’s Discussion and Analysis of Results of Operations and Financial Condition (Part I, Item 2).

PART I. FINANCIAL INFORMATION

Item 4. Controls and Procedures

As of March 31, 2004, an evaluation was performed by the Company’s management, under the supervision and with the participation of the Company’s chief executive officer and chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective.

There have been no significant changes in the Company’s internal controls or in other facts that could significantly affect internal controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information required under this Item is contained above in the Part I. Financial Information, Item 1 and is incorporated herein by reference.

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES

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