of the company’s ultimate environmental liabilities, man- agement believes that such liabilities, individually and in the aggregate, will not have a material adverse effect on the company’s financial condition or results of operations. in foreign currency exchange rates. The company uses  forward exchange contracts and other hedging activities  to hedge the U.S. dollar value resulting from anticipated foreign currency transactions. The company’s market risk on interest rates is the potential increase in fair value of long-term debt resulting from a potential decrease in inter- est rates. See further discussion of these market risks below. New Accounting Standards In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, “Business Com- binations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” Major provisions of these statements are as follows: all business combinations must now use  the purchase method of accounting, the pooling of interest method of accounting is now prohibited; intangible assets acquired in a business combination must be recorded sepa- rately from goodwill if they arise from contractual or other legal rights or are separable from the acquired entity and can be sold, transferred, licensed, rented or exchanged, either individually or as a part of a related contract, asset or liability; goodwill and intangible assets with indefinite lives are not amortized, but tested for impairment annu- ally, except in certain circumstances, and whenever there  is an impairment indicator; all acquired goodwill must be assigned to reporting units for purposes of impairment testing and segment reporting; effective August 1, 2002, goodwill is no longer subject to amortization. The com- pany has adopted the provisions of these statements as  of August 1, 2001. As required by SFAS 142, the company will perform an impairment test on goodwill and other intangible assets as of the adoption date. Thereafter, the company will perform impairment tests annually and whenever events or circumstances occur indicating that goodwill or other intangible assets might be impaired. Beginning August 1, 2001, amortization of goodwill will cease. Goodwill amortization expense was $3.8 million, $2.7 million and $0.7 million at July 31, 2001, 2000 and 1999, respectively. The company estimates that goodwill amortization expense would have been approximately $3.5 million in 2002. Market Risk The company’s market risk includes the poten- tial loss arising from adverse changes in foreign currency exchange rates and interest rates. The company manages foreign currency market risk, from time to time, through the use of a variety of financial and derivative instruments. The company does not enter into any of these instruments for trading purposes to generate revenue. Rather, the com- pany’s objective in managing these risks is to reduce fluctu- ations in earnings and cash flows associated with changes The foreign subsidiaries of the company purchase prod- ucts and parts in various currencies. As a result, the com- pany may be exposed to cost increases relative to local currencies in the markets to which it sells. To mitigate such adverse trends, the company, from time to time, enters into forward exchange contracts and other hedging The company maintains significant assets and opera- tions in Europe, countries of the Asia-Pacific Rim, South Africa and Mexico. As a result, exposure to foreign cur- rency gains and losses exists. A portion of the company’s foreign currency exposure is hedged by incurring liabilities, including bank debt, denominated in the local currency in which the company’s foreign subsidiaries are located. It is not possible to determine the true impact of foreign currency translation changes; however, the direct effect  on net sales and net earnings can be estimated. For the year ended July 31, 2001, the impact of foreign currency translation resulted in an overall decrease in net sales of $35.6 million and a decrease in net earnings of $3.2 mil- lion. The most significant impact on the company’s results due to foreign currency translation was in Europe, where the stronger U.S. dollar relative to both the euro and pound sterling directly resulted in a decrease in net sales of $23.2 million and a decrease in net earnings of $2.9 mil- lion. The strength of the U.S. dollar relative to the Japanese yen during 2001 resulted in a decrease in net sales of  $6.7 million and a decrease in net earnings of $0.2 million. In addition, fluctuation in the exchange rates for the Australian dollar and the South African rand also contributed to the company’s translation losses, resulting in a decrease in net sales of $2.4 million and $3.0 million respectively. Going forward, the company expects local currency results to remain strong; excluding the effect of translation, revenues outside the U.S. increased 14.4 per- cent for the year ended July 31, 2001. Foreign Currency During 2001, the U.S. dollar strengthened throughout the year relative to the currencies of the foreign countries in which the company operates. The stronger dollar had a negative impact on the company’s international results because the foreign denominated revenues and earnings directly translated into fewer U.S. dollars. 14