SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Commission File Number 1-9608

NEWELL RUBBERMAID INC.

(Exact name of registrant as specified in its charter)

10B Glenlake Parkway, Suite 600
Atlanta, Georgia 30328
(Address of principal executive offices)

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.

Yes þ                                                                                  No o

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

Yes þ                                                                                  No o

Number of shares of common stock outstanding (net of treasury shares) as of April 30, 2005: 275.3 million.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

See Footnotes to Consolidated Financial Statements (Unaudited).

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

See Footnotes to Consolidated Financial Statements (Unaudited).

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NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in millions, except par value)

See Footnotes to Consolidated Financial Statements (Unaudited).

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

See Footnotes to Consolidated Financial Statements (Unaudited).

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

Footnote 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 footnotes 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 footnotes 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 and Other business segments typically have 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: In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised) (“SFAS 123(R)”), “Share-Based Payment.” SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro forma disclosure is no longer an alternative to financial statement recognition). The Statement supersedes Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and will require adoption no later than January 1, 2006. The Company expects to adopt the provisions of the new standard effective January 1, 2006.

As of March 31, 2005, the Company’s stock option plans are accounted for under APB No. 25. As a result, the Company grants fixed stock options under which no compensation cost is recognized. Had compensation cost for the options granted been determined consistent with SFAS 123(R), the Company’s net income and earnings per share would have been reduced to the following pro forma amounts under the Black Scholes method for the three months ended March 31, (in millions, except per share data):

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

Footnote 2 – Discontinued Operations

On January 12, 2005, the Company entered into an agreement for the intended sale of the Company’s Curver business. The Curver business manufactures and markets plastic products for home storage and garage organization, food storage, laundry, bath, cleaning, closet organization and refuse removal in various countries in Europe. The Company’s European commercial products and other European businesses would not be affected by the sale. The Curver business had 2004 sales of $151.8 million.

The contemplated sale price is $5 million, payable at closing, and a contingent note for $5 million, payable within 12 years. The sales price is subject to reduction for working capital adjustments. There could also be contingent payments received by the Company, up to an aggregate maximum of $25 million, based on the adjusted earnings before interest and taxes of the Curver business for the five years ended December 31, 2009.

The agreement contains customary representations, warranties, covenants and conditions. The agreement also contains indemnification provisions subject to specified limitations as to time and amount. The agreement is subject to termination if the transaction is not completed within four months or, in certain cases, six months.

In connection with this intended transaction, the Company expects to record a total non-cash loss related to the sale of approximately $60 to $80 million, including the $49.1 million loss recorded in the first quarter of 2005. In the first quarter, the Company wrote-off the remaining long-lived assets of the business (primarily property, plant and equipment) and recorded the charge in discontinued operations as a loss on the disposal. The remaining charge is expected to be recorded in the second quarter of 2005 when the deal is expected to close.

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

The 2005 amounts reflect only the operations of the Curver business, while the 2004 amounts also include businesses sold in 2004 (Panex Brazilian low-end cookware division, European picture frames businesses, U.S. picture frames business (Burnes), Anchor Hocking glassware business, Mirro cookware business and the Little Tikes Commercial Playground Systems business). 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):

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Footnote 3 – Restructuring Costs

In the second quarter of 2004, the Company completed its accounting charges associated with its strategic restructuring plan (the “Plan”) announced on May 3, 2001. The specific objectives of the Plan were 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 recorded $461.7 million in restructuring charges under the Plan, including $87.4 million in discontinued operations. Under the Plan, the Company exited 84 facilities and reduced headcount by approximately 12,000. 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).

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

A summary of the Company’s restructuring plan reserves is as follows (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 $10.6 million and $15.7 million in the first three months of 2005 and 2004, respectively.

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

The following table depicts the changes in accrued restructuring reserves for the three months ended March 31, aggregated by reportable business segment (in millions):

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During the first quarters of 2005 and 2004, the Company reduced its restructuring reserves by approximately $1.0 million and $0.6 million, respectively, primarily as a result of a change in estimate on the amount of proceeds to be received from the sale of fixed assets scheduled for disposal.

Footnote 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):

Footnote 5 – Long-term Debt

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

In February 2005, the Company purchased 550,000 shares of 5.25% convertible preferred securities (“Preferred Securities”) that were issued by a 100%-owned finance subsidiary of the Company and are fully and unconditionally guaranteed by the Company, from a holder for $47.375 per share. In connection with the purchase of these securities, the Company negotiated the early retirement of the corresponding junior convertible subordinated debentures with the financing subsidiary. The Company accounted for this transaction as an extinguishment of debt resulting in a net gain of $1.1 million, which was included in Other (income) expense, net.

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Footnote 6 – Employee Benefit and Retirement Plans

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

Effective December 31, 2004, the Company froze its defined benefit pension plan for its entire non-union U.S. workforce. As a result of this curtailment, the Company reduced its pension obligation by $50.3 million and recorded a curtailment gain related to negative prior service cost of $15.8 million in the first quarter of 2005. In conjunction with this action, the Company offered special termination benefits to certain employees that accepted early retirement. The Company replaced the defined benefit pension plan with an additional defined contribution plan, whereby the Company will make additional contributions to the Company sponsored employee’s profit sharing plan. The new defined contribution plan has a five-year cliff-vesting schedule, but allows credit for service rendered prior to the inception of the defined contribution plan.

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

Footnote 7 – Income Taxes

In January 2005, the Company reached agreement with the Internal Revenue Service (IRS) relating to the appropriate treatment of a specific transaction reflected on the Company’s 2003 US federal income tax return. The Company requested accelerated review of the transaction under the IRS’ Pre-Filing Agreement Program that resulted in affirmative resolution in late January 2005. A $58.6 million benefit was recorded in income taxes for the three months ended March 31, 2005 related to this issue. The amount was fully reserved as of December 31, 2004.

Footnote 8 – Earnings per Share

The calculation of basic and diluted earnings (loss) per share for the three months ended March 31, is shown below (in millions, except per share data):

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The Company also grants restricted stock awards to directors and certain employees. Generally, these awards are subject to three-year cliff vesting and pay dividends quarterly. As of March 31, 2005, the Company had outstanding restricted stock awards of 0.8 million shares, none of which are vested. Total compensation expense of $1.3 million and $0.7 million was recorded for the three months ended March 31, 2005 and 2004, respectively, related to the restricted shares.

Footnote 9 – Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss encompasses foreign currency translation adjustments, net gains/(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 loss (in millions):

Total comprehensive income (loss) amounted to the following for the three months ended March 31, (in millions):

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Footnote 10 — Industry Segments

The Company’s reporting segments 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 Company reports its results in five reportable segments as follows:

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

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Geographic Area Information

Footnote 11 – 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.

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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 representations 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.

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

Overview

The Company made progress in the first quarter of 2005 toward achieving its previously announced 2005 key objectives. The Company’s key objectives for 2005, and the progress made in the first three months of 2005 toward achieving such priorities, are highlighted below:

	1.	Strengthen/Broaden Portfolio: The Company continues to evaluate its current portfolio and intends to pursue acquisition opportunities to complement internal growth. In addition to adding businesses or product lines to the Company’s current portfolio, the Company continues to rationalize low margin product lines that do not fit within the Company’s strategic plan. In January 2005, the Company entered into an agreement for the intended sale of the Company’s Curver business. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for additional information on this transaction. In the first quarter of 2005, the Company exited approximately $60 million in low margin product lines in the Rubbermaid Home Products, Graco, Swish UK, and Office Products businesses.
	2.	Invest in High Margin Businesses: The Company continues to focus significant resources on enhancing its new product development pipeline, as well as strengthening the Company’s numerous brands through targeted advertising. In the first quarter of 2005, the Company made additional investments in SG&A (primarily in the Office Products and Tools & Hardware segments), which was partially offset by the positive impact of the U.S. pension curtailment (discussed in Footnote 6 to the Consolidated Financial Statements (Unaudited)). The net impact was an increase in SG&A of $4.2 million over the first quarter of 2004.
	3.	Address Raw Material Inflation: The Company has several businesses that are significantly impacted by commodity inflation. The Company has historically combated these cost increases through organic productivity initiatives. However, due to the continued inflation pressure within several of its core commodity purchases, the Company has implemented price increases to offset a portion of the increased costs. In the first quarter of 2005, the Company experienced raw material inflation of approximately $51 million (primarily in resin and steel), partially offset by pricing increases of approximately $30 million.
	4.	Reduce Manufacturing Overhead: The Company is committed to reducing its manufacturing costs by at least five percent annually. As a result of the recent divestiture and product line rationalization programs, the Company is focusing on reengineering its manufacturing overhead structure to accommodate its current manufacturing base. In connection with this goal, the Company is committed to deploying and implementing Newell Operational Excellence. The Company delivered approximately $18 million of gross productivity savings, excluding raw material inflation, during the first quarter of 2005.

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Results of Operations

The following table sets forth for the periods indicated items from the Consolidated Statements of Operations as a percentage of net sales (in millions, except percentages):

Three Months Ended March 31, 2005 vs. Three Months Ended March 31, 2004

Consolidated Operating Results:

Net sales for the three months ended March 31, 2005 (first quarter) were $1,393.6 million, representing a decrease of $97.2 million, or 6.5%, from $1,490.8 million in the comparable quarter of 2004. The decrease resulted from a decline in core sales of $91 million, or 6.1%, and product line rationalization of $60 million, or 4.0%. These were partially offset by favorable foreign currency translation of $24 million, or 1.6% of net sales, and favorable pricing of $30 million, or 2.0% of net sales, for the quarter. Approximately two thirds of the core sales decline occurred in the Cleaning & Organization segment, primarily in the Rubbermaid Home Products business, resulting from the aggressive pricing required to offset resin inflation. The remaining one third of the core sales decline occurred in the European Home Fashion business, primarily due to the soft economic environment in Germany and market share losses to private label suppliers in the opening price point drapery hardware product lines.

Gross margin, as a percentage of net sales, in the first quarter of 2005 was 27.2%, or $378.9 million, versus 27.1%, or $404.4 million, in the comparable quarter of 2004. The increase in gross margin percentage is primarily related to favorable pricing of $30 million, or 2.0% of net sales, and a favorable mix driven by new products and the rationalization of unprofitable product lines. The decrease in the gross margin amount was caused primarily by the decrease in net sales noted above. Raw material inflation of $51 million (primarily in resin and steel) was mostly offset by favorable pricing of $30 million and gross productivity of $18 million in the quarter.

Selling, general and administrative expenses (SG&A) in the first quarter of 2005 were 21.8% of net sales, or $304.0 million, versus 20.1%, or $299.8 million, in the comparable quarter of 2004. The positive impact of the U.S. pension plan curtailment (see Footnote 6 to the Consolidated Financial Statements (Unaudited) for further information) was more than offset by foreign currency and additional investment in the Office Products and Tools & Hardware segments.

The Company recorded pre-tax strategic restructuring charges of $6.2 million in the first quarter of 2005, compared to $21.6 million in the prior year. The 2005 pre-tax charge included $3.4 million of facility and other exit costs, $1.5 million of employee severance and termination benefits and $1.3 million of exited contractual commitments and other restructuring costs. The 2004 pre-tax charge included $13.9 million of facility and other exit costs, $5.4 million of employee severance and termination benefits and $2.3 million of exited contractual commitments and other restructuring costs. See Footnote 3 to the Consolidated Financial Statements (Unaudited) for further information on the restructuring plan.

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Operating income in the first quarter of 2005 was $68.7 million, or 4.9% of net sales, versus $83.0 million, or 5.6%, in the comparable quarter of 2004. The decrease in operating margins was the result of the factors described above.

Net nonoperating expenses in the first quarter of 2005 were 2.0% of net sales, or $28.5 million, versus 2.2% of net sales, or $33.2 million, in the comparable quarter of 2004. The reduction in net nonoperating expenses is mainly attributable to gains recognized in 2005 on the sale of property, plant and equipment. Additionally, net interest expense decreased $0.1 million for the first quarter of 2005 compared to the first quarter of 2004 primarily as a result of cash generated from operations and divestitures which lowered debt and increased cash balances, mostly offset by higher interest rates.

The effective tax rate was (116.2%) in the first quarter of 2005 versus 32.5% in the first quarter of 2004. The change in the effective tax rate is primarily related to the $58.6 million income tax benefit recorded in the first quarter of 2005 resulting from the resolution of a tax contingency with the Internal Revenue Service. See Footnote 7 to the Consolidated Financial Statements (Unaudited) for further information.

Income from continuing operations for the first quarter of 2005 was $86.9 million, compared to $33.6 million in the first quarter of 2004. Diluted earnings per share from continuing operations were $0.32 in the first quarter of 2005 compared to $0.12 in the first quarter of 2004.

The loss recognized from discontinued operations for the first quarter of 2005 was $50.3 million, net of tax, compared to $108.5 million, net of tax, in the first quarter of 2004. Diluted loss per share from discontinued operations was $0.18 in the first quarter of 2005 compared to $0.40 in the first quarter of 2004. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for further information.

Net income (loss) for the first quarter of 2005 was $36.6 million, compared to ($74.9) million in the first quarter of 2004. Diluted earnings (loss) per share was $0.13 in the first quarter of 2005 compared to ($0.27) in the first quarter of 2004.

Business Group Operating Results:

Net sales by reportable segment were as follows for the three months ended March 31, (in millions, except percentages):

Operating income by segment was as follows for the three months ended March 31, (in millions, except percentages):

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Cleaning & Organization

Net sales for the first quarter of 2005 were $341.1 million, a decrease of $64.8 million, or 16.0%, from $405.9 million in the first quarter of 2004, driven primarily by the planned low margin product line exits in the Rubbermaid Home Products business and reduced volumes caused by the recent price increase action taken to offset raw material inflation. These factors were partially offset by favorable pricing and foreign currency translation.

Operating income for the first quarter of 2005 was $15.4 million, a decrease of $2.0 million, or 11.5%, from $17.4 million in the first quarter of 2004. The decrease in operating income is the result of higher raw material costs and lost absorption in manufacturing facilities as a result of lower production volumes, partially offset by gross productivity and favorable pricing.

Office Products

Net sales for the first quarter of 2005 and 2004 were $332.8 million. Successful implementation of new products in the writing instruments business (Sharpie® Retractables, Sharpie® Mini permanent markers, Accent® highlighters, Papermate® Flexgrip Elite pens) were offset by sales declines in the European fine writing business and everyday writing business in the United States.

Operating income for the first quarter of 2005 was $33.5 million, an increase of $1.7 million, or 5.3%, from $31.8 million in the first quarter of 2004, as a result of productivity and favorable pricing, partially offset by raw material inflation and increased investment in SG&A.

Tools & Hardware

Net sales for the first quarter of 2005 were $276.4 million, an increase of $2.1 million, or 0.8%, from $274.3 million in the first quarter of 2004, driven by increases in the LENOX and BernzOmatic businesses, partially offset by declines in the Amerock and IRWIN Power Tools Accessories businesses.

Operating income for the first quarter of 2005 was $26.7 million, a decrease of $16.3 million, or 37.9%, from $43.0 million in the first quarter of 2004, driven by restructuring related costs at the Amerock and IRWIN businesses and continued investments in SG&A in the tools business.

Home Fashions

Net sales for the first quarter of 2005 were $198.3 million, a decrease of $28.5 million, or 12.6%, from $226.8 million in the first quarter of 2004, driven by planned product line exits primarily in the Douglas Kane UK business, and core sales declines in the European Home Fashions business, partially offset by favorable foreign currency translation.

Operating (loss) income for the first quarter of 2005 was ($4.5) million, a decrease of $8.4 million, from $3.9 million in the first quarter of 2004. The decrease in operating income was due primarily to lower sales, raw materials inflation and the liquidation of Douglas Kane, partially offset by productivity gains.

Other

Net sales for the first quarter of 2005 were $245.0 million, a decrease of $6.0 million, or 2.4%, from $251.0 million in the first quarter of 2004. The decline is primarily the result of product line exits in the Graco business, partially offset by favorable pricing and foreign currency translation.

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Operating income for the first quarter of 2005 was $13.3 million, a decrease of $2.6 million, or 16.4%, from $15.9 million in the first quarter of 2004, driven primarily by raw material inflation and restructuring related costs in the Graco business, partially offset by favorable pricing and productivity.

Liquidity and Capital Resources

Cash and cash equivalents decreased by $75.8 million and $92.5 million for the three months ended March 31, 2005 and 2004, respectively. The change in cash and cash equivalents is as follows for 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 provided by operating activities for the three months ended March 31, 2005 was $55.5 million compared to a use of $6.7 million for the comparable period of 2004. The increase in cash provided from operating activities was primarily due to improved working capital and lower cash spent for restructuring.

The Company has a $650.0 million five-year Syndicated Revolving Credit Agreement (the “Revolver”) that is scheduled to expire in June 2007. At March 31, 2005, there were no borrowings under the Revolver.

In lieu of borrowings under the Revolver, the Company may issue up to $650.0 million of commercial paper. The Revolver provides the committed backup liquidity required to issue commercial paper. Accordingly, commercial paper may only be issued up to the amount available for borrowing under the Revolver. At March 31, 2005, no commercial paper was outstanding.

The Revolver permits the Company to borrow funds on a variety of interest rate terms. The Revolver requires, among other things, that the Company maintain certain Interest Coverage and Total Indebtedness to Total Capital Ratio, as defined in the agreement. The agreement also limits Subsidiary Indebtedness. As of March 31, 2005, the Company was in compliance with this agreement.

In the first three months of 2005, the Company received proceeds from the issuance of debt of $1.9 million compared to $9.7 million in the year ago period.

In the first three months of 2005, the Company received cash proceeds of $12.9 million related to the sale of businesses and other non-current assets, compared to $16.5 million in the year ago period. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for a discussion of the intended disposal of Curver, expected to be completed in the second quarter.

Uses:

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

In the first quarter of 2005, the Company spent $30.3 million associated with an acquisition. The Company did not make any significant acquisitions during 2004, as the priority was the reduction of debt.

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In the first three months of 2005, the Company made payments on notes payable and long-term debt of $31.1 million compared to $17.7 million in the year ago period, including the purchase of 550,000 shares of its Preferred Securities from a holder for $47.375 per share. The Company paid a total of $26.1 million for the purchase of these securities. See Footnote 5 to the Consolidated Financial Statements (Unaudited) for additional information on this transaction.

Cash used for restructuring activities was $10.6 million and $15.7 million in the first three months of 2005 and 2004, respectively. These payments relate primarily to employee termination benefits.

Expenditures for property, plant and equipment were $23.1 million and $36.6 million in the first three months of 2005 and 2004, respectively. The Company is focused on capital spending discipline and expects to spend between $125 and $150 million in 2005.

Aggregate dividends paid were $58.0 million and $57.7 million in the first three months of 2005 and 2004, respectively.

Retained earnings decreased in the first three months of 2005 by $21.4 million. The reduction in retained earnings is due to cash dividends paid on common stock, offset by the current year net income.

Working capital at March 31, 2005 was $1,155.4 million compared to $1,141.1 million at December 31, 2004. The current ratio at March 31, 2005 was 1.71:1 compared to 1.61:1 at December 31, 2004. The increase in working capital is due to the reduction of income taxes payable and other accrued liabilities, primarily as a result of spending on previously announced restructuring plans.

Total debt to total capitalization (total debt is net of cash and cash equivalents, and total capitalization includes total debt and stockholders’ equity) was .56:1 at March 31, 2005 and .55:1 at December 31, 2004.

In May 2005, the Company expects to declare a quarterly cash dividend of $0.21 per share on the Company’s common stock, payable in the second quarter.

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 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: 1) offsetting or netting of like foreign currency flows, 2) structuring foreign subsidiary balance sheets with appropriate levels of debt to reduce subsidiary net investments and subsidiary cash flows subject to conversion risk, 3) converting excess foreign currency deposits into U.S. dollars or the relevant functional currency and 4) 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 Company’s Consolidated Statements of Operations.

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The Company purchases certain raw materials, including resin, steel and aluminum, which 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 that are based on a variance/covariance approach and includes 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, but are shown as an illustration of the impact of potential adverse changes in interest rates. The following table indicates the calculated amounts for the three months ended March 31, (in millions, except percentages):

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, information or assumptions about sales (including pricing), income/(loss), earnings per share, return on equity, return on invested capital, capital expenditures, working capital, cash flow, dividends, capital structure, debt to capitalization ratios, interest rates, internal growth rates, restructuring, impairment and other charges, potential losses on divestitures, impact of changes in accounting standards, pending legal proceedings and claims (including environmental matters), future economic performance, operating income improvements, costs and cost savings (including raw material inflation, productivity and streamlining), 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 to this Report.

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 Financial Condition and Results of Operations (Part I, Item 2).

Item 4. Controls and Procedures

As of March 31, 2005, 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

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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 were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 6. Exhibits

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SIGNATURES

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