NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company is currently soliciting offers for the purchase of the specialty chemical and warranty businesses of Wynn’s. These businesses are valued at the estimated net cash proceeds from their sale plus estimated net earnings during the holding period and are reflected as Net assets held for sale on the Consolidated Balance Sheet. The Company has decided to suspend its efforts to sell the building systems business of Commercial Intertech. As such the net assets of the building systems business have been consolidated on the Consolidated Balance Sheet at June 30, 2001 and the results of operations of the building systems business have been included in the Consolidated Statement of Income beginning in the fourth quarter of fiscal 2001. At June 30, 2001 the Company was in the process of completing the divestiture of the metal forming business of Commercial Intertech. This business is valued at the estimated net cash proceeds from its sale and is reflected as Net assets held for sale on the Consolidated Balance Sheet. During 2001, $22,350 of income from operations and $6,564 of interest expense were excluded from the Consolidated Statement of Income and included in the carrying value of Net assets held for sale.  realignment charge is presented in the Consolidated Statement of Income for 2001 in the following captions: $12,071 in Cost of sales; $6,691 in Selling, general and administrative expenses; $3,009 in Interest and other (income), net; and $6,953 in (Gain) loss on disposal of assets. In 2000 the Company recorded a $8,555 charge ($5,560 after-tax or $.05 per share) related to the costs of appropriately structuring its businesses to operate in their current economic environment. The charge primarily related to severance costs attributable to approximately 250 employees principally associated with the Industrial International operations. As of June 30, 2000, the Company had made all severance payments. A change in the future utilization of long-lived assets at certain locations triggered an impairment review of these long-lived assets during 2000. The Company evaluated the recoverability of the long-lived assets and determined that the estimated future undiscounted cash flows were below the carrying value of these assets. Accordingly, the Company recorded a non-cash impairment loss of $4,875 ($3,169 after-tax or $.03 per share). Of the pre-tax amount, $3,499 relates to the Aerospace Segment and $1,376 relates to the Industrial Segment. The severance and impairment loss are presented in the Consolidated Statement of Income for 2000 in the following captions: $2,552 in Cost of sales; $2,476 in Selling, general and administrative expenses; and $8,402 in (Gain) loss on disposal of assets. On July 14, 1998 the Company acquired the equity of B.A.G. Acquisition Ltd., the parent company of Veriflo Corporation, a manufacturer of high-purity regulators and valves based in Richmond, California. On August 27, 1998 the Company acquired the equity of Fluid Power Systems, a manufacturer of hydraulic valves and electrohydraulic systems and controls located in Lincolnshire, Illinois. Combined annual sales for these operations, for their most recent fiscal year prior to acquisition, were approximately $107 million. Total purchase price for these businesses was approximately $85.2 million cash. These acquisitions were accounted for by the purchase method, and results are included as of the respective dates of acquisition. In 2001 the Company recorded a $55,548 gain ($34,662 after tax or $.30 per share) realized on the sale of real property located in Southern California. The property had served as a headquarters and manufacturing locale for the Company’s Aerospace Group and several of its divisions. Such operations have relocated to other previously owned or leased facilities in the area. The Company does not currently anticipate additional property sales of this magnitude occurring in the future. The gain is reflected in the Consolidated Statement of Income in the (Gain) loss on disposal of assets caption. In 2001 the Company recorded a $28,724 charge ($18,474 after-tax or $.16 per share) related to costs of appropriately structuring its businesses in response to current economic conditions. The business realignment charge includes severance costs and employee-related benefits of $17,673 and $11,051 of other costs, primarily certain asset impairments. The severance costs and employee- related benefits is attributable to approximately 1,126 employees associated with the Industrial North American operations, 310 employees associated with the Industrial International operations and 27 employees associated with operations in the Other segment. All severance and employee-related benefit payments are expected to be made by the end of fiscal 2002. The asset impairment portion represents the amount by which the carrying value of the assets exceeded their estimated future undiscounted cash flows. The business Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities.  A reconciliation of the Company's effective income tax rate to the statutory Federal rate follows: Income taxes before extraordinary items include the following: Note 4 Income Taxes Note 3 Gain on Sale of Real Property  and Charges Related to Business Realignment 2001 2000 1999  Federal  $103,215 $140,663 $113,011 Foreign  30,791  29,393 34,309  State and local  10,518  11,099 11,236  Deferred  44,902 12,800 8,637 $189,426  $193,955  $167,193 2001 2000 1999 Statutory Federal income tax rate 35.0% 35.0% 35.0% State and local income taxes  1.9 1.5 1.8 FSC income not taxed  (2.4) (1.7) (2.3)  Foreign tax rate difference  (1.1)  (1.1) .7  Nondeductible goodwill  2.3  1.2 1.3  Other  (.2) (.4) (1.5) Effective income tax rate  35.5%  34.5% 35.0%  28