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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10–K

FOR THE ANNUAL PERIOD ENDED JANUARY 2, 2004

OR

FOR THE TRANSITION PERIOD FROM              TO             

COMMISSION FILE NUMBER 333-108853

JOHNSONDIVERSEY HOLDINGS, 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 5, 2004, there were 3,920 outstanding shares of the registrant’s class A common stock, $0.01 par value. There were 1,960 outstanding shares of the registrant’s class B common stock, $0.01 par value, which is subject to put and call options.

DOCUMENTS INCORPORATED BY REFERENCE: None.

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FORWARD-LOOKING STATEMENTS

We make statements in this 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 “Holdings,” “we,” “our” and “us” refer to JohnsonDiversey Holdings, Inc. and its consolidated subsidiaries, and references to “JDI” refer to JohnsonDiversey, Inc., a wholly owned subsidiary of Holdings. Our principal executive offices are located at 8310 16th Street, Sturtevant, Wisconsin 53177, and our telephone number is (262) 631-4001.

Holdings was incorporated in the State of Delaware in November 2001 under the name Johnson Professional Holdings, Inc. in anticipation of the acquisition of the DiverseyLever business. Following the acquisition, we changed our name from Johnson Professional Holdings to “JohnsonDiversey Holdings, Inc.” Holdings owns all of the outstanding stock of JDI, except for one share which is owned by S.C. Johnson & Son, Inc.

Prior to fiscal year 2002, Holding’s only activity was to enter into the acquisition agreement with respect to the DiverseyLever business. Accordingly, consolidated financial statements of Holdings and its subsidiaries are included in this Form 10-K only for fiscal year 2002 and subsequent periods. For the periods prior to fiscal year 2002, we have included in this Form 10-K the historical consolidated financial statements of JDI and its subsidiaries.

Our fiscal year ends on the Friday closest to December 31. Accordingly, references in this annual report to our fiscal year 2003 relate to the period from January 4, 2003 to January 2, 2004, and references to our fiscal year 2002 relate to the period from December 29, 2001, to January 3, 2003. Previously, JDI’s fiscal year ended on the Friday closest to June 30. References in this annual report to fiscal year 2000 are to JDI’s fiscal year ended June 30, 2000, and references to fiscal year 2001 are to JDI’s fiscal year ended June 29, 2001. In June 2002, JDI changed its fiscal year to the Friday closest to December 31. In connection with the change in fiscal year end, JDI prepared audited financial statements for the six-month transition period that began on June 30, 2001 and ended on December 28, 2001, a period referenced in this annual report 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 operate our business through Holdings’ sole subsidiary, JDI, and its subsidiaries. We are a leading global marketer and manufacturer of cleaning, hygiene and appearance products and related services for the institutional and industrial cleaning and sanitation market. We are also a leading global supplier of environmentally compliant, water-based acrylic polymer resins for the industrial printing and packaging, coatings and plastics markets. We 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.”

JDI is 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, JDI was 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, JDI 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 JDI’s shares from S.C. Johnson & Son. Prior to May 3, 2002, Commercial Markets Holdco contributed its shares of JDI to Holdings, its wholly owned subsidiary.

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

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

Through JDI and its subsidiaries, we operate two businesses, the professional business and the polymer business. 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. For the year ended January 2, 2004, we had net sales of $2.9 billion, of which 47% were from Europe, 34% were from North America and 15% were from the Asia Pacific region.

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. Excluding sales agency fee income of $86.8 million, our professional business had net sales of $2.6 billion in fiscal year 2003. For a summary of key financial measures related to our professional business, see note 27 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.

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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.

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. 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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For additional financial information regarding key financial measures of our professional business, including net sales and long-lived assets by geographical locations, see note 27 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, Inc. 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. Other competitors 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 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 2003, our polymer business had net sales of $285 million, including intercompany sales to our professional business of $18.6 million.

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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, plastics and institutional and industrial cleaning and sanitation 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. Our largest end-user sector is consumer packaging where applications include corrugated boxes, beverage cartons, cereal and packaged food boxes, packaging for health and beauty aids, toys and other non-durable consumer goods.

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.

Institutional and Industrial Cleaning and Sanitation. We manufacture polymers used in the production of floor care products, which are primarily sold to our professional business.

End-Users and Customers

We principally supply acrylic polymers to industrial customers in the printing and packaging, coatings and plastics industries. 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 2003, 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 $18.6 million, or about 7% of net sales of our polymer business, for fiscal year 2003.

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 March 5, 2004, our polymer sales force consisted of about 40 employees. For additional information regarding key financial measures for our polymer business, including net sales and long-lived assets by geographical locations, see note 27 to our consolidated financial statements, included elsewhere in this report.

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

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Rohm and Haas Company. Other competitors in the specialty chemical industry include Air Products and Chemicals, Inc., Eastman Chemical Company and Noveon, Inc. 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, Inc. 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 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, Inc. 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 and polymer businesses for the fiscal years ended January 2, 2004, and January 3, 2003, the fiscal six months ended December 28, 2001, and the fiscal year ended June 29, 2001:

Employees

As of March 5, 2004, we employed over 13,000 employees, of which about 3,400 were employed in the United States. About 3% of our employees in the United States are covered by a collective bargaining agreement, which expires in April 2007. We believe that we have a satisfactory working relationship with organized labor in the United States and have not had any major work stoppages in the past eight years.

In Europe, the majority of our employees are represented by labor unions and covered by collective bargaining agreements. Collective bargaining agreements are generally renewable on an annual basis. In several European countries, local co-determination legislation or practice requires employees of companies that are over a specified size or that operate in more than one European country to be represented by a works council. Works councils typically meet between two and four times a year to discuss management plans or decisions that impact

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employment levels or conditions within the company, including closures of facilities. We have works councils in a number of European countries, as well as one that covers all of Europe. The majority of our European employees are covered by a works council. We believe that our labor relations in Europe have been stable during the last several years.

A number of employees in Australia, Japan, Latin America, New Zealand and South Africa belong to labor unions and are covered by collective bargaining agreements. Local employment legislation may impose significant requirements in these and other jurisdictions, including consultation requirements.

We anticipate a further reduction in our total workforce as a result of the ongoing integration of the DiverseyLever business.

Environmental Regulation

Our operations are regulated under a number of federal, state, local 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 use, 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, local 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 disposes or 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 disposed or arranged for the disposal of hazardous wastes if those sites become contaminated, even if we fully complied with applicable environmental laws at the time of disposal. 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, local and foreign laws that regulate the manufacture, storage, distribution and labeling of many of our products, including some of our 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 such 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 and regulations 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 these laws and regulations has not had a material adverse effect on our business, financial condition, results of operations or cash flows.

Pesticide Regulation. Some of our facilities are subject to various federal, state, local and foreign laws and regulations 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 and regulations 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.

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Ingredient Regulation. Numerous federal, state, local and foreign laws and regulations relate 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 these laws and regulations has not had a material adverse effect on our business, financial condition, results of operations or cash flows.

Other Environmental Regulation. Many of our facilities are subject to various federal, state, local or foreign laws and regulations governing the discharge, transportation, use, handling, storage and disposal of hazardous substances. In the United States, these statutes include the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act. 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 regulations 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. Planned capital expenditures for environmental equipment are expected to be approximately $7.0 million for fiscal year 2004.

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 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 current or former 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 two of our facilities in the United States and one facility in the Netherlands. In addition, we have identified the likelihood of soil and/or groundwater contamination at eight other sites. Based on available information and our indemnification rights, explained below, we believe that the costs to investigate and remediate known contamination at these sites 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 laws and 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 representations and 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

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million in the aggregate. We have submitted indemnification claims to Unilever regarding ten DiverseyLever locations and may file additional claims in the future. Although Unilever has acknowledged receipt of the indemnification claims, it has not notified us as to whether it will indemnify us for those claims. There can be no assurance that we will be able to recover any amounts relating to these indemnification claims, or any future indemnification claims, from Unilever.

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 or regulations 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 those outside 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.

Product Registration and Compliance

Various federal, state, local and foreign laws and regulations regulate some of our products and require us to register our products and to comply with specified requirements. In the United States, we must register our sanitizing and disinfecting products with the EPA. In addition, each state where these products are sold requires registration and payment of a fee. When we register these products, we must also submit to the EPA information regarding the chemistry, toxicology and antimicrobial efficacy for the agency’s review. Data must be consistent with the desired claims stated on the product label.

In addition, 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 the 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. Before we are able to advertise our product as an antibacterial soap or food-related product, we must generate, and maintain in our possession, information about the product that is consistent with the appropriate FDA monograph. FDA monographs dictate the necessary requirements for various product types such as antimicrobial handsoaps. 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 and compliance has not had a material adverse effect on our business, financial condition, results of operations or cash flow.

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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 the United States. We have a total of 47 manufacturing facilities in 27 countries. Our principal manufacturing facilities for our professional and polymer businesses are located at Waxdale in Sturtevant, Wisconsin. JDI leases these facilities from S.C. Johnson & Son, Inc. 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. Certain of the facilities presented in the table below have been designated for closure in 2004 and 2005 as a result of previously announced restructuring and integration programs.

The following table summarizes our principal plants and other physical properties that are important to our professional and polymer businesses. Unless indicated otherwise, all owned properties listed below are subject to mortgages:

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ITEM 3. LEGAL PROCEEDINGS

Auto-C, LLC, a wholly owned subsidiary of JDI, supplies commercial warewashing, laundry and other products in the United States that bear the Auto-Chlor^® System trademark and distributes these products through JDI or through dealers with rights in defined territories. Pursuant to a complaint filed on March 2, 2002, as amended, a group of Auto-Chlor System dealers are suing DiverseyLever, Inc., a subsidiary of Unilever, Auto-C, LLC and JDI in the United States District Court for the District of Minnesota. In the complaint, 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 allege that the defendants failed to develop new products and failed to sell the machines, parts and concentrates at cost. The plaintiffs also allege that the defendants have encroached into each plaintiff’s respective territory, and that, under the terms of their agreements, they have exclusive rights within each plaintiff’s respective territory to the names, trademarks and the brands of the defendants. The plaintiffs recently amended their complaint to include claims for promissory estoppel – claims that promises were made to the plaintiffs by the defendants on which the plaintiffs relied to their detriment. 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. Under the acquisition agreement, Unilever generally will not be liable for any damages in respect of breaches of its warranties, unless (1) the amount of damages in respect of any individual breach of its warranties exceeds $250,000 per occurrence and (2) the aggregate amount of damages in respect of breaches of its warranties, excluding environmental warranties, exceeds $30 million. Once the $30 million threshold is reached, Unilever will not be liable for any occurrence where the damages are less than $250,000 or for the first $15 million of damages that exceed the $250,000 per occurrence threshold. In any event, Unilever will not be liable for any damages, excluding environmental claims, which exceed $500 million in the aggregate. Unilever is seeking indemnification from JDI insofar as any claims may be deemed assumed liabilities that are not covered by Unilever’s indemnity obligations under the acquisition agreement.

We believe that we have valid defenses to the dealers’ claims and, together with Unilever, intend to defend the matter vigorously. We cannot, however, assure you that we will be successful in our defense of the matter, or that an adverse determination with respect to the matter would not adversely affect our business, financial condition, results of operations or cash flows.

We are also 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.

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 2003.

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PART II

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

As of March 5, 2004, there were 3,920 shares of our class A common stock outstanding, all of which are owned by Commercial Markets Holdco. There were also 1,960 shares of our class B common stock outstanding, all of which are owned by Marga B.V., which is 100% owned by Unilever. 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 class A common and class B common stockholders in calendar years 2003 and 2002 on a per share basis:

Cash dividends for the fourth quarter of fiscal year 2003 were paid in January 2004. 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 discount notes, JDI’s senior subordinated notes and JDI’s senior secured credit facilities.

On May 3, 2002, in connection with our acquisition of the DiverseyLever business, Holdings issued an aggregate of $406 million principal amount at maturity of 10.67% series A senior discount notes due 2013 to Unilever. The senior discount notes were issued under an indenture, dated May 3, 2002, between Holdings and BNY Midwest Trust Company, as trustee, in a private transaction that was not subject to the registration requirements of the Securities and Exchange Act of 1933.

In connection with the issuance of Holdings’ senior discount notes in May 2002, Holdings entered into a resale agreement with Unilever pursuant to which it agreed to exchange the outstanding senior discount notes for an equal principal amount of notes registered under the Securities and Exchange Act of 1933. In September 2003, Holdings filed a registration statement on Form S–4 (Reg. No. 333-108853) with the SEC to register an aggregate of $406 million principal amount at maturity of 10.67% senior discount notes due 2013, series B. The registration statement was declared effective by the SEC on January 8, 2004. On January 12, 2004, Holdings commenced an exchange offer for the senior discount notes. The exchange offer expired on February 20, 2004. At the close of business on February 20, 2004, the $406 million principal amount at maturity of senior discount notes, series A were exchanged for an equivalent amount of 10.67% senior subordinated notes due 2013, series B. Holdings did not receive any proceeds from the exchange offer.

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 January 2, 2004 and January 3, 2003, (2) from JDI’s audited consolidated financial statements as of and for the fiscal years ended June 29, 2001, and June 30, 2000, (3) from JDI’s audited consolidated financial statements as of and for the fiscal six months ended December 28, 2001, and (4) from JDI’s 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 U.S. 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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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

We operate our business through Holdings’ sole subsidiary, JDI, and its subsidiaries. We are a leading global marketer and manufacturer of cleaning, hygiene and appearance products and related services for the institutional and industrial cleaning and sanitation market. We are also a leading global supplier of environmentally compliant, water-based acrylic polymer resins for the industrial printing and packaging, coatings and plastics markets. We sell our products in more than 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.

Fiscal year 2003 continued our successful integration of the DiverseyLever acquisition as we realized higher than expected synergies from restructuring and integration programs, treasury initiatives and systems improvements. Our global consolidation of facilities, people and processes are examples of these synergy programs. By the end of fiscal year 2003, we had effectively met our acquisition cost synergy target one full year earlier than planned. These savings were realized despite spending 30% less than planned on restructuring costs, some of which was deferred until fiscal year 2004. We expect to realize additional future synergies in excess of $200 million over the two year period ending with fiscal year 2005, with the completion of our remaining restructuring and integration projects, well in excess of the original cost synergy target of $150 million.

Also in fiscal year 2003, our management team renewed its focus on maximizing the cash flows of the business and improved its management of global cash balances. As a result, we generated $274 million in cash flows from operating activities, allowing us to pay down $141 million in term debt, which was $82 million greater than the scheduled payment amounts, and meet all of our financial debt covenants during the year. Cash flows were improved as a result of the implementation of programs to increase the amount of securitized accounts receivables ($59.3 million), decrease net working capital and control capital expenditures.

On February 24, 2004, JDI amended the JDI credit facility agreement, including certain financial covenants, to provide for greater flexibility to complete our planned restructuring and integration programs over the next two years and, concurrently with the covenant amendment, JDI achieved a 50 basis point pricing reduction on our U.S. dollar denominated tranche B term debt of $416 million. We view this amendment as an important step in our continued efforts to invest in and strengthen our business.

As a result of our May 2, 2002 acquisition of DiverseyLever, an institutional and industrial cleaning and sanitation business, from Conopco, Inc., a subsidiary of Unilever PLC and Unilever N.V., our results for the year ended January 2, 2004, include a full year of results of the DiverseyLever business, while the results of the year ended January 3, 2003 include only eight months of post-acquisition 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 JDI 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 occurred, historical comparisons for the annual periods are of limited relevance.

The acquisition significantly increased the size and scope of our operations and is the primary driver of the changes in each financial category discussed below for the year ended January 2, 2004, as compared to the year ended January 3, 2003, and for the year ended January 3, 2003, as compared to the year ended December 28, 2001. 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 accounting principles generally accepted 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

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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 periodic reviews of our inventory balances to identify slow-moving or obsolete items. This determination is based on a number of factors, including new product introductions, changes in customer demand patterns, and historic usage trends. 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, which 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 is the most probable amount of the liability within the ranges or, where no amount within the range is a better estimate of the potential liability, at the minimum amount within the range.

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. 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. We completed a fair value impairment analysis for the year ended January 2, 2004, as required by SFAS No. 142 and anticipated future undiscounted cash flows analysis as required by SFAS No. 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.

Holdings’ Fiscal Year Ended January 2, 2004, Compared to Holdings’ Fiscal Year Ended January 3, 2003

Net Sales. Net sales increased by $751 million, or 34%, to $2.9 billion for the year ended January 2, 2004, from $2.2 billion for the year ended January 3, 2003, primarily due to the acquisition of the DiverseyLever business on May 3, 2002, and the strengthening of the euro and certain other foreign currencies against the U.S. dollar ($175 million). Included in net sales is sales agency fee income of $86.8 million and $54.3 million for the years ended January 2, 2004, and January 3, 2003, respectively, which was earned under a sales agency agreement entered into with Unilever on May 3, 2002, in connection with the acquisition.

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Excluding sales agency fee income of $86.8 million and $54.3 million for the years ended January 2, 2004, and January 3, 2003, respectively, net sales for the professional segment increased by $697 million, or 37%, to $2.6 billion for the year ended January 2, 2004, from $1.9 billion for the year ended January 3, 2003, primarily due to net sales attributable to the acquisition of the DiverseyLever business and the strengthening of the euro and certain other foreign currencies against the dollar ($152 million). The professional business continued to be negatively impacted by slow recoveries from the terrorist attacks of September 11, 2001, and the SARS epidemic, both of which have reduced international travel and tourism, and poor economic conditions that have depressed demand in key business sectors in North America and certain western European countries.

Net sales for the polymer segment of $285 million for the year ended January 2, 2004, including intercompany sales to the professional segment of $18.6 million, increased by $21.6 million, or 8%, from $263 million for the year ended January 3, 2003, primarily due to the strengthening of the euro and certain other foreign currencies against the U.S. dollar ($16 million) and volume growth of 2%, mainly in Asia Pacific and North America. This growth was partially offset by a decline in average selling prices resulting from an unfavorable product and geographical mix reflecting reduced demand for higher priced specialty polymers and faster growth in the Asia Pacific region, which has lower average selling prices than in our other polymer markets.

Gross Profit. Gross profit increased by $345 million, or 35%, to $1.3 billion for the year ended January 2, 2004, from $987 million for the year ended January 3, 2003, and gross profit margin increased slightly to 45.2% for the year ended January 2, 2004, from 44.9% for the year ended January 3, 2003. The increase in gross profit was primarily due to the acquisition of the DiverseyLever business, the strengthening of the euro and certain other foreign currencies against the U.S. dollar ($71 million) and supply chain synergy savings, such as additional material volume purchase discounts and more efficient production and distribution processes, partially offset by unfavorable product mix and pricing under-recovery.

The professional segment’s gross profit increased by $346 million, or 39%, to $1.2 billion for the year ended January 2, 2004, from $898 million for the year ended January 3, 2003, primarily due to the sales growth as noted above. Gross profit margin increased to 46.4% for the year ended January 2, 2004, from 46.0% for the year ended January 3, 2003.

The polymer segment’s gross profit was $87.1 million for the year ended January 2, 2004, and $88.4 million for the year ended January 3, 2003, and gross profit margin decreased to 32.7% for the year ended January 2, 2004, from 36.1% for the year ended January 3, 2003, primarily due to higher raw material costs and the decline in global average selling prices, partially offset by the sales volume increase discussed above.

Marketing, Administrative and General Expenses. Marketing, administrative and general expenses increased by $284 million, or 35%, to $1.1 billion for the year ended January 2, 2004, from $801 million for the year ended January 3, 2003, primarily due to the acquisition of the DiverseyLever business and the strengthening of the euro and certain other foreign currencies against the U.S. dollar ($51 million), partially offset by synergies realized from the DiverseyLever acquisition and cost reduction programs. Integration-related costs of $43.1 million were incurred in marketing, administrative and general expenses during the year ended January 2, 2004, consisting primarily of employee severance, information technology and facility-related costs, an increase of $11.6 million compared to the year ended January 3, 2003.

Research and Development Expenses. Research and development expenses increased by $10.7 million, or 17%, to $75.1 million for the year ended January 2, 2004, from $64.4 million for the year ended January 3, 2003, primarily due to incremental expenses attributable to the acquisition of the DiverseyLever business and the strengthening of the euro and certain other foreign currencies against the U.S. dollar ($4 million).

Restructuring and Integration. We have initiated an extensive restructuring and integration program in connection with the acquisition of the DiverseyLever business. Under this program, specified costs associated with the closure of former DiverseyLever operations and the involuntary termination of former DiverseyLever employees are recorded as purchase accounting adjustments. Costs under the program associated with the closure of specified pre-acquisition operations and the involuntary terminations of pre-acquisition employees are recorded as

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restructuring expenses in the consolidated statement of income. Also incurred under the program are costs related to the acquisition which do not meet the definition of exit costs or restructuring costs. Those costs are included in marketing, administrative and general expenses in the consolidated statement of income.

During the year ended January 2, 2004, we recorded $10.5 million of exit costs as purchase accounting adjustments, $12.9 million of restructuring costs and $43.1 million of period costs in our consolidated statement of income. Non-purchase accounting related costs primarily consisted of $20.0 million in IT implementation projects in Western Europe, Latin America, Japan and our corporate headquarters, $16.8 million in involuntary termination and outplacement costs associated with the consolidation of global operations, $6.2 million in facility closure and asset write-down costs and $4.6 million related to the consolidation of the North American supply chain operations.

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 realizing headcount reductions and rationalizing facilities 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.

A summary of all costs associated with the restructuring and integration program for the years ended January 2, 2004, and January 3, 2003, and since May 4, 2002, the day following the DiverseyLever acquisition date, is outlined below. The reserve balance shown below reflects the aggregate reserves for restructuring costs.

Interest Expense, Net. Net interest expense increased by $52.1 million, or 50%, to $155.5 million for the year ended January 2, 2004, from $103.4 million for the year ended January 3, 2003. To fund the acquisition of the DiverseyLever business in May 2002, Holdings issued $202 million of senior discount notes, and JDI incurred $1.4 billion of debt under the JDI senior secured credit facilities and the JDI senior subordinated notes. Due to the timing of the borrowings, the increased debt level was in place for only eight of the twelve months in the year ended January 3, 2003, versus for the entire year ended January 2, 2004. In addition, JDI wrote-off $5.1 million of debt issuance costs in the fourth quarter of fiscal year 2003.

Other Income/Expense. Other income decreased by $19.3 million to $9.7 million for the year ended January 2, 2004, from $29.0 million for the year ended January 3, 2003. Net other income for the year ended January 2, 2004, consisted primarily of a $2.8 million net gain on foreign currency and derivative financial instruments and a $3.4 million net gain on the sale of certain product lines, partially offset by a $1.4 million loss on the dissolution of a partnership. Net other income for the year ended January 3, 2003, consisted primarily of a $15.7 million hedging transaction gain on a forward-purchase contract of euros related to the acquisition of DiverseyLever, a $9.6 million gain on the sale of a non-strategic dishwashing detergent product line, and a $2.3 million gain on the sale of a non-strategic adhesives product line, partially offset by a $3.1 million loss on the devaluation of the Argentine peso.

Provision for Income Taxes. Provision for income taxes decreased by $1.1 million to $8.9 million for the year ended January 2, 2004, from $10.0 million of income taxes for the year ended January 3, 2003, primarily due to lower income before taxes, partially offset by a higher effective tax rate, which was 70.1% for the year ended January 2, 2004, compared to 36.9% for the year ended January 3, 2003. The higher effective tax rate for the year ended January 2, 2004, was primarily due to not providing a current tax benefit for certain U.S. foreign tax credits that are not expected to be utilized prior to expiration.

Net Income. Net income decreased by $13.5 million, or 78.1%, to $3.8 million for the year ended January 2, 2004, from $17.3 million for the year ended January 3, 2003. This decrease in net income was due primarily to a $284 million increase in marketing, administrative and general expenses, a $10.7 million increase in research and development costs, a $52.1 million increase in net interest expense, and a $19.3 million decrease in other income, partially offset by a $345 million increase in gross profit driven by the incremental DiverseyLever net sales, a $6.7 million decrease in restructuring expenses, and a $1.0 million reduction in the provision

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for income taxes, all as previously discussed. In addition to the $12.9 million restructuring expense, expenses of $43.1 million of integration-related costs are included in the cost of sales or marketing, administrative and general expenses discussed above, an increase of $11.6 million compared to the year ended January 3, 2003.

EBITDA. EBITDA increased by $88.1 million to $328 million for the year ended January 2, 2004, from $240 million for the year ended January 3, 2003. The increase in EBITDA resulted primarily from a $345 million increase in gross profit resulting from the increased net sales, partially offset by a $284 million increase in marketing, administrative and general expenses, a $10.7 million increase in research and development expense and a $19.3 million decrease in other income, all as previously discussed. Of these cost increases, $50.1 million are related to higher depreciation and amortization expense which do not impact EBITDA. For a discussion of EBITDA and a reconciliation of EBITDA to net cash flows provided by operating activities, see “Item 6. Selected Historical Financial Data.”

Holdings’ Fiscal Year Ended January 3, 2003, Compared to JDI’s Twelve Months Ended December 28, 2001

The twelve months ended December 28, 2001 preceded the acquisition of the DiverseyLever business. Accordingly, JDI’s results for the period do not include any results of the DiverseyLever business. Our results for the fiscal year ended January 3, 2003 include eight months of results of the acquired business.

Net Sales. Net sales increased by $1.1 billion, or 94%, to $2.2 billion for the fiscal year ended January 3, 2003, from $1.1 billion 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 $1.0 billion, or 114%, to $2.0 billion for the fiscal year ended January 3, 2003, from $914 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 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 $1.1 billion, or 115.6%, from net sales for the twelve months ended December 28, 2001.

Net sales for the polymer segment of $264 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%, from $241 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%, partially offset by a decline in average selling prices. Sales volume increased in Europe by 16%, Asia Pacific by 21% and North America by 5%, 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, whose product mix includes lower average selling prices than North America.

Gross Profit. Gross profit increased by $616 million, or 108%, to $1.1 billion for the fiscal year ended January 3, 2003, from $572 million for the twelve months ended December 28, 2001, while gross profit margin increased to 54% for the fiscal year ended January 3, 2003, from 50% 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 17%, to $105 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 40% for the fiscal year ended January 3, 2003, from 37% for the twelve months ended December 28, 2001.

Marketing, Administrative and General Expenses. Marketing, administrative and general expenses increased by $536 million, or 114%, to $1.0 billion for the fiscal year ended January 3, 2003, from $468 million for the twelve

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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, 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%, 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.

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 $86.6 million to $103.4 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 (including asset securitization) to $1,361.7 million for the fiscal year ended January 3, 2003, compared to $216.0 million for the twelve months ended December 28, 2001, resulted in an increase in net interest expense of about $56.0 million. The increased average debt balance resulted from Holdings’ issuance of the senior discount notes, JDI’s borrowings under the JDI senior secured credit facilities and the issuance of the JDI senior subordinated notes in connection with 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 7.67% during the fiscal year ended January 3, 2003, compared to 4.89% during the twelve months ended December 28, 2001, resulting primarily from the issuance of Holdings’ 10.67% senior discount notes and the 9.625% JDI senior subordinated notes.

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, consisted 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. While the provision for income taxes declined by $4.9 million, the effective tax rate was 36.9% 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 $14.9 million, or 46.3%, to $17.3 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 $536 million increase in marketing, administrative and general expenses, a $26.6 million increase in research and development costs, a $19.6 million restructuring expense, and a $86.6 million increase in net interest expense, offset partially by a $616 million increase in gross profit driven by the incremental

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DiverseyLever net sales, a $31.9 million increase in other income and a $4.9 million reduction in the provision for income taxes, 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, administrative and general expenses discussed above and $2.5 million are included in cost of goods sold.

EBITDA. EBITDA increased by $130 million, or 119%, to $240 million for the fiscal year ended January 3, 2003, from $109 million for the twelve months ended December 28, 2001. The increase in EBITDA resulted primarily from a $616 million increase in gross profit resulting from the increased net sales and a $31.9 million increase in other income, offset partially by a $536 million increase in marketing, 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 cash flows from operating activities, see “Item 6. Selected Historical Financial Data.”

Liquidity and Capital Resources

Comparison of Holdings’ Fiscal Year Ended January 2, 2004, to Holdings’ Fiscal Year Ended January 3, 2003. Cash flows provided by operating activities were $274 million for the year ended January 2, 2004, compared to $231 million for the year ended January 3, 2003. The increase in net cash provided from operating activities of $35.2 million during the year ended January 2, 2004, was primarily due to increased proceeds from accounts receivable securitization programs ($64.9 million), partially offset by a net increase in operating assets and liabilities.

Cash flows used in investing activities were $135 million for the year ended January 2, 2004, compared to $1.5 billion for the year ended January 3, 2003. The reduction in net cash used in investing activities was primarily due to the impact of the acquisition of the DiverseyLever business, partially offset by a $23.3 million increase in capital expenditures for property, plant and equipment and computer software.

The characteristics of our business do not generally require us to make significant ongoing capital expenditures. We made capital expenditures of about $135 million in the year ended January 2, 2004, of which approximately $55.5 million were in support of the integration/synergy efforts.

Cash flows used in financing activities were $202 million for the year ended January 2, 2004, compared to cash flows provided by financing activities of $1.4 billion for the year ended January 3, 2003. This change in net cash flows from financing activities was primarily due to the proceeds from long-term borrowings and capital contributions related to the acquisition of the DiverseyLever business.

Overview. As a result of the acquisition, we have a significant amount of indebtedness. In connection with the acquisition of the DiverseyLever business, Holdings issued senior discount notes with a principal amount at maturity of $406 million to Unilever. Under the indenture for the senior discount notes, the principal amount of the senior discount notes accretes at a rate of 10.67% per annum through May 15, 2007. After May 15, 2007, interest will accrue on the accreted value of the senior discount notes at this rate, but will be payable in cash semiannually in arrears to the extent that JDI can distribute to Holdings the cash necessary to make the payments in accordance with the restrictions contained in the indentures for the JDI senior subordinated notes and the JDI senior secured credit facilities. The failure by Holdings to make all or any portion of a semiannual interest payment on the senior discount notes will not constitute an event of default under the indenture for the senior discount notes if that failure results from JDI’s inability to distribute the cash necessary to make that payment in accordance with these restrictions. Instead, interest will continue to accrue on any unpaid interest at a rate of 10.67% per annum, and the unpaid interest will be payable on the next interest payment date on which JDI is able to distribute to Holdings the cash necessary to make the payment in accordance with the provisions contained in the indentures for the JDI senior subordinated notes and the JDI senior secured credit facilities. Holdings has no income from operations and no meaningful assets. Holdings receives all of its income from JDI and substantially all of its assets consist of its investment in JDI. The senior discount notes mature on May 15, 2013.

On February 26, 2004, Holdings successfully completed an offer to exchange $406 million in aggregate principal amount at maturity of the outstanding 10.67% senior discount notes due 2013, Series A, for 10.67% senior discount notes due 2013, Series B, which were registered with the SEC under the Securities Act of 1933 pursuant to a registration statement declared effective by the SEC on January 8, 2004.

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

The JDI senior secured credit facilities were amended in August 2003. This amendment reduced the interest rate payable with respect to specified tranches of debt under the JDI senior secured credit facilities, thereby reducing borrowing costs over the remaining life of the JDI senior secured credit facilities. In addition, the amendment increased specified credit limits and changed various administrative requirements to provide us greater operating flexibility.

The JDI senior secured credit facilities were amended for a second time on February 24, 2004. This amendment reduced the interest rate payable for the U.S. dollar portion of the term B tranche of debt under the credit facilities, thereby reducing the borrowing cost over the remaining life of the tranche. In addition, the amendment changed various financial covenants, as described in the “Financial Covenants Under Credit Facilities” section below, and administrative requirements to provide us with greater flexibility to operate our business and to complete the integration of the DiverseyLever acquisition.

As of January 2, 2004, excluding indebtedness held by JDI, Holdings only indebtedness consisted of the senior discount notes with an accreted value of $286 million. As of January 2, 2004, Holding’s subsidiaries had total indebtedness of $1.7 billion, consisting of $583 million of JDI senior subordinated notes, $797 million of borrowings under the JDI senior secured credit facilities, $95.2 million in borrowings under the receivables securitization facility and $15.0 million in short-term credit lines, as well as $201 million in operating lease commitments.

JDI and some of its subsidiaries have the capacity to borrow additional funds under the JDI senior secured credit facilities, subject to compliance with the financial covenants set forth in the facilities. As of January 2, 2004, we had $14.0 million of indebtedness outstanding under the revolving portion of the JDI senior secured credit facilities and the ability to incur an additional $304 million of indebtedness under those revolving facilities, of which we believe we would have been able to borrow $43.3 million and still be in compliance with the financial covenants set forth in the JDI senior secured credit facilities, the indentures for the JDI senior subordinated notes and the indenture for the senior discount notes of Holdings.

As of January 2, 2004, we had the following payments due with respect to contractual obligations, excluding $6.2 million committed under letters of credit that expire at various times in 2004:

We believe that the cash flows from operations, the anticipated cost savings and operating improvements associated with the acquisition of the DiverseyLever business and our restructuring initiatives, together with available cash, available borrowings under the JDI senior secured credit facilities and the proceeds from JDI’s receivables 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.

Off-Balance Sheet Arrangements

Since March 2001, JDI and some of its subsidiaries have funded a portion of their short-term liquidity needs through the securitization of some of their trade accounts receivable. JDI and some of its U.S. and foreign subsidiaries are parties to agreements whereby they sell, on a continuous basis, all trade receivables to JWPR Corporation, or JWPRC, a wholly owned, special purpose, bankruptcy-remote subsidiary formed for the sole purpose of buying and selling receivables. Under the receivables securitization facility, JDI and some of its

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subsidiaries, irrevocably and without recourse, transfer all trade receivables to JWPRC. JWPRC, 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.

On August 29, 2003, the receivables securitization facility was amended to include certain additional U.S. subsidiaries, expand the total potential for securitization of trade receivables to $75 million from the previous limit of $55 million, and change the facility term to 354 days from the date of closing, renewable without fee. On October 24, 2003, the receivables securitization facility was again amended to include certain United Kingdom subsidiaries and further expand the total potential for securitization of trade receivables to $100 million (the “October 2003 amendment”). Subsequent to our 2003 fiscal year-end, on January 5, 2004, the receivables securitization facility was amended and restated to include JDI’s Italian subsidiary and further expand the total potential for securitization of trade receivables to $150 million.

Prior to the October 2003 amendment, the beneficial interest of accounts receivable sold under the arrangement was excluded from accounts receivable in our consolidated balance sheets in accordance with SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities–A replacement of FASB Statement No. 125.” As a result of the terms of the October 2003 amendment, the limitations in the articles of incorporation of JWPRC and the requirements for sale defined in SFAS No. 140, we were no longer able to exclude the accounts receivable sold under the arrangement from our consolidated balance sheets. At January 2, 2004, $95.2 million of eligible receivables (net of reserves) under the receivables securitization facility have been included in the consolidated accounts receivable balance. We expect to modify the articles of incorporation of JWPRC and be able to exclude accounts receivable sold under the arrangement from our consolidated balance sheet beginning in the first quarter of fiscal year 2004.

For the year ended January 2, 2004, JWPRC’s cost of borrowing under the receivables securitization facility is at a weighted average rate of about 2.29% per annum, which is significantly lower than our incremental borrowing rate.

Under the terms of the JDI senior secured credit facilities, JDI and certain of its subsidiaries must use any net proceeds from the receivables securitization facility first to prepay loans outstanding under the JDI senior secured credit facilities. In addition, the net amount of trade receivables at any time outstanding under this and any other securitization facility that JDI and its subsidiaries may enter into may not exceed $150 million in the aggregate.

Financial Covenants Under JDI Senior Secured Credit Facilities

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

Maximum Leverage Ratio. JDI is required to maintain a leverage ratio for each financial covenant period of no more than the maximum ratio specified in the JDI senior secured credit facilities for that financial covenant period. The maximum leverage ratio is the ratio of (1) JDI’s consolidated indebtedness (excluding up to $55 million of indebtedness incurred under our receivables securitization facility and indebtedness relating to specified interest rate hedge agreements) as of the last day of a financial covenant period using a weighted-average exchange rate for the relevant prior two fiscal quarters to (2) JDI’s consolidated EBITDA, as defined in the JDI senior secured credit facilities, for that same financial covenant period.

The amended JDI senior secured credit facilities require that JDI maintain a leverage ratio of no more than the ratio set forth below for each of the financial covenant periods ending nearest the corresponding date set forth below:

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

The amended JDI senior secured credit facilities require that JDI 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 JDI’s financial covenant period ended on January 2, 2004, JDI was in compliance with the maximum leverage ratio and minimum interest coverage ratio covenants contained in the JDI senior secured credit facilities.

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

JDI 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. Based on fiscal year 2003 capital expenditures of $135 million as compared to the $161 million maximum, JDI may exceed the fiscal year 2004 capital expenditure limit by an additional $26 million. As of January 2, 2004, JDI was in compliance with the limitation on capital expenditures for fiscal year 2003.

Restructuring Charges. The amended JDI senior secured credit facilities limit the amount of spending on restructuring and integration related activities in 2004 and 2005 to $145 million in the aggregate.

Post-Closing Adjustments to Acquisition Consideration

The consideration for the DiverseyLever business paid by Holdings and JDI 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 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 Holdings. In fiscal years 2003 and 2002, specified adjustments were finalized with Unilever and were paid to Unilever as adjustments to the purchase

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price. As of January 2, 2004, the aggregate amount of the adjustments to the purchase price during fiscal 2003 was a decrease of $19.8 million,. 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 JDI’s pre-acquisition debt balance exceeded its cash balance at the closing date of the acquisition, JDI was required to pay to Unilever about $11.8 million, representing a reduction to Unilever’s subscription price for Holdings’ equity interest. This amount, together with interest from and including the closing date, will be paid by JDI on the date on which Unilever ceases to own its equity interest in Holdings. The amount was recorded in our audited consolidated financial statements for fiscal year 2002 as an increase to purchase price. Also, based on JDI’s final pre-closing balance sheet, a comparison was made of the final working capital amount to a predetermined working capital amount set forth in the acquisition agreement. Because JDI’s final working capital amount exceeded the predetermined amount, Unilever will be required to pay JDI an amount representing a working capital adjustment to the subscription price. Based on a formula described in the acquisition agreement, Unilever will be required to pay to JDI about $30.9 million, representing an increase to the subscription price for Unilever’s equity interest in Holdings. The final amount of this adjustment has yet to be finalized with Unilever. However, Unilever would be required to pay the final agreed amount, together with interest from and including the closing date, to JDI on the date on which Unilever ceases to own its equity interest in Holdings.

In addition, based on a preliminary determination of the transferred pension assets and liabilities relating to specified plans JDI assumed in the acquisition, we anticipate that Unilever will be required to pay to JDI an aggregate of about $115 million, representing an adjustment to the purchase price for the DiverseyLever business. This adjustment is preliminary and is expected to be agreed to with Unilever by the end of our 2004 second quarter. The majority of this adjustment is to be paid by Unilever once the amounts are agreed in respect to a plan, with the remainder to be paid, together with interest from and including the closing date, on the date on which Unilever ceases to own its equity interest in Holdings. As of January 2, 2004, JDI had received about $67.5 million, including interest, representing a portion of Unilever’s payment of the transferred pension adjustment. The transferred pension adjustment represents the shortfall of transferred pension assets relative to liabilities, adjusted for tax, if applicable. Under the acquisition agreement, if the transferred assets are less than 90% of the value of the transferred liabilities of specified DiverseyLever pension plans, JDI is required to use the amounts received from Unilever in connection with the transferred pension adjustment to fund those plans up to 90% of the value of the transferred liabilities. Any amount received from Unilever over the required funding level may be used by JDI for other purposes. As of January 2, 2004, JDI had contributed an aggregate of about $23.2 million to the pension plans. We plan to make additional pension contributions of approximately $20.5 million in the first half of fiscal year 2004, pending the establishment of pension plans in several countries.

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 been finalized and agreed to with Unilever with them required to pay JDI $8.4 million. JDI received $5.6 million in cash from Unilever in December 2003. The remaining balance of $2.8 million is included in the long-term receivable from Unilever.

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.

Related Party Transactions

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

Holdings and JDI 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 Holdings, and the senior discount notes of Holdings. These agreements with Unilever are on arms-length terms.

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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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We have a significant amount of indebtedness, some of which is based in foreign currencies. In addition, as a result of the acquisition of the DiverseyLever business, JDI issued the JDI senior subordinated notes and entered into the JDI senior secured credit facilities and also significantly expanded its operations throughout the world. As a result, market risk exposure as it relates to interest and currency rates, as discussed below, has materially increased.

Interest Rate Risk

As of January 2, 2004, JDI had about $1.4 billion of debt outstanding under the JDI senior secured credit facilities. After giving effect to the interest rate swap transactions that JDI has entered into with respect to some of the borrowings under its senior secured credit facilities, $338 million of the debt outstanding remained subject to variable rates. In addition, as of January 2, 2004, JDI had $15 million of debt outstanding under foreign lines of credit, all of which were subject to variable rates. Accordingly, our earnings and cash flows are affected by changes in interest rates. At the above level of variable rate borrowings, we do not anticipate a significant impact on earnings in the event of a reasonable change in interest rates. In the event of a significant adverse change in interest rates, management would likely take actions that would mitigate our exposure to interest rate risk; however, due to the uncertainty of the actions and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effects of the change in the level of the overall economic activity that could exist in such an environment.

Foreign Currency Risk

Through JDI and its subsidiaries, we conduct our business in various regions of the world and export and import products to and from many countries. Our operations may, therefore, be subject to volatility because of currency fluctuations, inflation changes and changes in political and economic conditions in these countries. Sales and expenses are frequently denominated in local currencies, and results of operations may be affected adversely as currency fluctuations affect product prices and operating costs. We engage in hedging operations, including forward foreign exchange contracts, to reduce the exposure of our cash flows to fluctuations in foreign currency rates. All hedging instruments are designated and effective as hedges, in accordance with U.S. GAAP. Other instruments that do not qualify for hedge accounting are marked to market with changes recognized in current earnings. We do not engage in hedging for speculative investment reasons. There can be no assurance that our hedging operations will eliminate or substantially reduce risks associated with fluctuating currencies.

Based on our overall foreign exchange exposure, we estimate that a 10% change in the exchange rates would not materially affect our financial position and liquidity. The effect on our results of operations would be substantially offset by the impact of the hedged items.

ITEM 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, primarily due to going concern issues relating to Arthur Andersen LLP, 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 JDI’s fiscal years 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 JDI and

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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. The audit report of Arthur Andersen on the consolidated financial statements of JDI and its subsidiaries 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 JDI’s two fiscal years ended June 29, 2001, the fiscal six months ended December 28, 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.

None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred within JDI’s two most recent fiscal years.

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ITEM 9A. DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of Holding’s Disclosure Controls and Internal Controls. As of the end of the period covered by this annual report, we evaluated the effectiveness of the design and operation of our “disclosure controls and procedures” (“Disclosure Controls”). The controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

CEO & CFO Certifications. Attached as exhibits 31.1 and 31.2 to this annual report are certifications of the CEO and the CFO required in accordance with Rule 13a-14 of the Exchange Act. This portion of our annual report includes the information concerning the controls evaluation referred to in the certifications and should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Disclosure Controls. Disclosure Controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (“Exchange Act”), such as this annual report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controls include those components of our internal control over financial reporting that are designed to provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. GAAP. To the extent that components of our internal control over financial reporting are included in our Disclosure Controls, they are included in the scope of our quarterly evaluation of Disclosure Controls.

Limitations on the Effectiveness of Controls. Our Disclosure Controls were designed to provide reasonable assurance that the controls and procedures would meet their objectives. Our management, including the CEO and CFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the designed control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation. The evaluation of our Disclosure Controls included a review of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in this annual report. In the course of the controls evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were undertaken. This evaluation is done on a quarterly basis so that the conclusions of management, including the CEO and the CFO, concerning the effectiveness of the controls can be reported in our quarterly reports on Form 10-Q and our annual reports on Form 10-K. Many of the components of our Disclosure Controls are also evaluated on an ongoing basis by our internal audit department and by other personnel in our finance organization, as well as our independent auditors in connection with their audit and review activities. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and to make modifications as necessary; our intent in this regard is that the Disclosure Controls will be maintained as dynamic systems that change (including with improvements and corrections) as conditions warrant.

The acquisition of the DiverseyLever business in May 2002, and subsequent integration is a significant undertaking that has placed significant demands on our system of internal accounting controls and finance organization’s resources. As previously reported in JDI’s Form 10-K for the fiscal year ended January 3, 2003 and the subsequently filed quarterly reports on Form 10-Q for JDI in 2003, during the controls evaluation performed prior to each of the filing of JDI’s Form 10-K for fiscal year 2002 and subsequent Form 10-Q filings, matters representing material weaknesses in our internal control over financial reporting were identified related to the former

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DiverseyLever North America operations to the effect that cash reconciliations were not being performed in a timely manner and the processing of vendor invoices had been delayed, resulting in a requirement for increased accruals for third party services. In addition, certain intercompany accounts were not being reconciled in a timely manner. These individual material weaknesses collectively represented an overall material weakness in internal control over financial reporting that resulted primarily from inadequate finance staffing resources and processes, and monitoring and oversight of the finance function to support our post-merger financial reporting process.

Commencing in the first quarter of fiscal year 2003, we formulated our Finance Infrastructure Internal Control Improvement Plan to take additional actions to strengthen our internal control environment, including the hiring of additional finance personnel, strengthening of the internal audit function, development of expanded Sarbanes-Oxley Act Section 302 certification and monthly financial statement closing processes, expansion of Sarbanes-Oxley Act Section 404 internal control review activities, commencement of a skill set assessment survey of key members of the finance staff, and improved monitoring and oversight of the finance function. In addition, to assist management in assessing our control environment and related issues associated with the material weaknesses previously identified, we retained, commencing in the first quarter of fiscal year 2003, independent consulting firms with experience in internal controls. Through the implementation of the Finance Infrastructure Internal Control Improvement Plan and other process improvements, we corrected and resolved the specific individual material weaknesses identified in 2002 by clearing the vendor invoice processing backlog and completing the cash and intercompany reconciliations. Internal control process improvements have been embedded in our organization to help ensure accurate, complete and timely reconciliation of cash and intercompany accounts and processing of vendor invoices, and we have evaluated these specific controls as operating effectively. As of January 2, 2004, we continue to execute against our Finance Infrastructure Internal Control Improvement Plan.

In connection with the completion of its audit of, and the issuance of an unqualified report on, our consolidated financial statements for the year ended January 2, 2004, our auditors, Ernst & Young LLP, identified certain deficiencies in the design and operation of our internal controls related to the financial reporting process, which represent reportable conditions that collectively represent a material weakness in internal control over financial reporting. Matters identified include the complex process to finalize the accounting for the purchase of the DiverseyLever business, including the push down of pension and income tax adjustments for statutory purposes, and deficiencies in our process for accounting, analysis, and documentation of income taxes, documentation of our receivables securitization program, and accounting for fixed asset transfers arising from the integration of the business. Our auditors also believe that oversight of and communications between the finance function, including treasury and tax, and other departments should be further enhanced and strengthened to address the issues identified above.

We will continue the implementation of the Finance Infrastructure Internal Control Improvement Plan, which began in the first quarter of fiscal year 2003, to further strengthen the overall effectiveness of our system of internal controls and disclosure controls. In addition, we are commencing the following initiatives to specifically address the matters identified by our auditors in fiscal year 2004:

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We will continue to regularly update the Audit Committee on the status of these initiatives and the Finance Infrastructure Internal Control Improvement Plan. The actions taken, and to be taken, by us to correct the weaknesses identified constitute significant changes in internal controls that could significantly affect the effectiveness of internal controls subsequent to the date of the controls evaluation performed for this Form 10-K.

Conclusions. Based upon the controls evaluation, our CEO and CFO have concluded that, subject to the limitations noted above, our disclosure controls, including additional procedures performed and controls instituted by us in order to supplement our internal controls in order to mitigate the effect of the weaknesses identified, are effective to ensure that material information relating to JohnsonDiversey Holdings, Inc. and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our internal controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with accounting principles generally accepted in the United States.

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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 March 5, 2004, and their positions and offices:

S. Curtis Johnson III has been Chairman of Holdings since November 2001. He also has been Chairman of JDI since February 1996 and Chairman of Commercial Markets Holdco since December 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.

Gregory E. Lawton has been President and Chief Executive Officer of Holdings since August 2003 and has been a director since May, 2002. Mr. Lawton has also been a director and President and Chief Executive Officer of JDI since September 2000 and a director of Commercial Markets Holdco since April 2000. He joined JDI as President and Chief Operating Officer in December 1998 and was Chief Operating Officer until August 2000. Prior to joining JDI, 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, General Cable Corporation, a manufacturer and distributor of wire and cable products for the communications, energy and specialty markets, and Superior Metal Products, a manufacturer and finisher of decorative and functional metal products for the appliance, automotive, heating and ventilation, office furniture, health accessories and electronics industries.

Michael J. Bailey has served as Vice President, Chief Financial Officer and Treasurer of Holdings since August 2003 and served as President of Holdings from November 2001 until August 2003. Mr. Bailey has also served as Executive Vice President of JDI since March 2003 and as Chief Financial Officer of JDI since October 1999. He has also been the Senior Vice President and Chief Financial Officer of Commercial Markets Holdco since December 1999. From October 1999 until March 2003, Mr. Bailey also served as Senior Vice President of JDI. Before joining JDI, Mr. Bailey served as Senior Vice President, Finance and Administration and Chief Financial

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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 Vice President and Secretary of Holdings since November 2001 and as General Counsel of Holdings since August 2003. Ms. Brandes has also served as Executive Vice President of JDI since March 2003, as General Counsel and Secretary of JDI since October 1997 and as Chief Administrative Officer of JDI since January 2002. Ms. Brandes also served as Senior Vice President of JDI from October 1997 until March 2003. From October 1996 until October 1997, she was Vice President and General Counsel of JDI. 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. and Johnson Family Funds, Inc. She also is a Regent Emeritus of the University of Wisconsin System.

Todd C. Brown has been a director of Holdings since May 2002. Mr. Brown has also been a director of JDI since April 2001 and a director of Commercial Markets Holdco since April 2000. Since August 2003, Mr. Brown has served as Vice Chairman and Chairman of the board of directors for ShoreBank Corporation’s banking operations in Chicago and Detroit. Prior to that, Mr. Brown served as Executive Vice President of Kraft Foods, Inc. and President of its e-Commerce Division from January 2001 until June 2003. Mr. Brown has held various other 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.

Irene M. Esteves has been a director of Holdings since May 2002. Ms. Esteves has also been a director of JDI since June 1998 and a director of Commercial Markets Holdco since April 2000. She is currently the Chief Financial Officer of Putnam Investments, LLC, 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. Ms. Esteves is also a director of Timberland Company.

Robert M. Howe has been a director of Holdings since May 2002. He has also been a director of JDI since April 1996 and a director of Commercial Markets Holdco since April 2000. 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. On July 16, 2002, Scient filed a petition under Chapter 11 of the U.S. Bankruptcy Code. Mr. Howe served on a special committee supervising the winding up of Scient’s business. 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 American Management Systems, Inc., NorthStar and SBI Group. Mr. Howe earned a Bachelor in Business Administration degree from Southern Methodist University and a Master of Business Administration from Harvard University.

Helen P. Johnson-Leipold has been a director of Holdings since May 2002. Ms. Johnson-Leipold has also been a director of JDI since December 1999 and a director of Commercial Markets Holdco since April 2000. 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 Holdings.

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Clifton D. Louis has been a director of Holdings since May 2002. Mr. Louis has also been a director of JDI since December 1999 and a director of Commercial Markets Holdco since March 1999. 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.

Rudy Markham has been a director of Holdings since May 2002. Mr. Markham is the Financial Director of Unilever and has held this position since August 2000. Mr. Markham joined Unilever in 1968 and was appointed director in May 1998. Prior to serving as Financial Director, Mr. Markham held various positions with Unilever, including Strategy and Technology Director in 1998, Business Group President, North East Asia from 1996 until 1998, Chairman of Nippon Lever Japan from 1992 until 1996 and Group Treasurer from 1986 until 1989.

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

John Rice has been a director of Holdings since May 2002. Mr. Rice is the Business Group President and Chief Executive Officer of Unilever Bestfoods North America and Slim-Fast Worldwide. Mr. Rice has held this position since November 1, 2002. He joined Unilever in 1981 and was Business President of Latin America and Slim-Fast Worldwide from January 2001 until October 2002. Prior to that, he was the President and Chief Executive Officer of Lipton USA.

Reto Wittwer has been a director of Holdings since July 2002. Mr. Wittwer has also been a director of JDI 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.

Audit Committee

The audit committee of JDI’s board of directors recommends its independent auditors, reviews the scope and results of the audits with the auditors and management, approves the scope and results of the audits, monitors the adequacy of JDI’s system of internal controls and reviews the Holdings and JDI annual reports, auditors’ fees and non-audit services to be provided by the independent auditors. The members of JDI’s audit committee are Irene Esteves, chairperson of the audit committee, Robert Howe, Reto Wittwer and Todd Brown. JDI’s board of directors has determined that Ms. Esteves meets the definition of an audit committee financial expert, as set forth in Item 401(h)(2) of Regulation S-K, and has also determined that she meets the independence requirements of the SEC. There is currently no audit committee of Holdings’ board of directors.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information with respect to compensation earned during our last three fiscal years by Holdings’ Chief Executive Officer and its other most highly compensated executive officers. These executive officers are also executive officers of JDI. The compensation described below is paid to each of the executive officers in connection with their services as executive officers of both Holdings and JDI. All compensation has been, and will be, paid by JDI.

Summary Compensation Table