Management’s Discussion and Analysis exceeded its estimated implied fair value. The cumulative effect of accounting change reflects the write-down of the goodwill, net of income taxes, to its implied fair value. In performing our impairment reviews, we estimated the fair value of the various reporting units using a present value method that discounted future cash flows as we expect marketplace participants would, and we further assessed the reasonableness of the estimates by using valuation methods based on market multiples. Outlook:  We believe our sales volume will begin to recover from the relatively low level we experienced in our fourth quarter 2002, but we expect consolidated net sales for the full year will be lower in 2003 as compared to 2002. Benefits from actions taken in late 2002 to reduce costs, as well as continued productivity gains and an improved sales mix, should improve margins. As a result, we believe that consolidated earnings in 2003 will approximate earnings of 2002, as measured before the cumulative effect of the accounting change made in 2002. Earnings before the cumulative effect of accounting change and net earnings, as adjusted to eliminate goodwill-related amortization and associated income taxes, increased in 2001 over 2000. Income taxes were provided at an effective rate on adjusted earnings before income taxes of 38.1% in 2001 compared to 36.6% in 2000. The most significant reason for the lower rate in 2000 was related to the sale of our turbine control retrofit business, which allowed us to use capital loss carryforwards for which we previously provided valuation allowances. The spread between basic and diluted earnings per share increased in 2001 as compared to 2000, primarily because of increases in the price for our common stock during 2001. Results for 2000 included a gain on sale of the turbine control retrofit business, net of tax, of $17.1 million or $1.52 per basic share and $1.51 per diluted share. Without this gain, adjusted net earnings would have been $32.6 million or $2.89 per basic share and $2.88 per diluted share for 2000. Our results in 2000 also included costs to streamline operations after the sale, costs associated with reductions in our workforce, and certain other costs not indicative of normal operations which totaled, net of tax, $6.7 million or $0.60 per basic share and $0.59 per diluted share. The cumulative effect of accounting change is related to our October 1, 2001, adoption of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” We completed the transitional goodwill impairment reviews required by the new standard and determined that one of our Industrial Controls’ reporting units had a goodwill carrying value that 22 Earnings before the cumulative effect of accounting change and net earnings, as adjusted to eliminate goodwill-related amortization and associated income taxes, decreased in 2002 from 2001. Income taxes were provided at an effective rate on adjusted earnings before income taxes of 36.1% in 2002 compared to 38.1% in 2001. The most significant reason for the lower rate in 2002 was related to a transfer of our interest in a joint venture, which allowed us to reduce valuation allowances provided on deferred tax assets associated with a capital loss carryback. 2001 Compared to 2000 2002 Compared to 2001 and Outlook Consolidated Earnings In thousands, except per share amounts, for the year ended September 30, 2002 2001 2000 Adjusted earnings before income taxes and cumulative effect of accounting change $70,680 $90,433 $78,329 Adjusted income taxes 25,510 34,490 28,693 Adjusted earnings before cumulative effect of accounting change 45,170 55,943 49,636 Cumulative effect of accounting change, net of income taxes (2,489) — — Adjusted net earnings $42,681 $55,943 $49,636 Basic earnings per share amounts: Adjusted earnings before cumulative effect of accounting change $ 3.99 $ 4.94 $ 4.41 Adjusted net earnings 3.77 4.94 4.41 Diluted earnings per share amounts: Adjusted earnings before cumulative effect of accounting change $ 3.90 $ 4.84 $ 4.39 Adjusted net earnings 3.69 4.84 4.39