Statements of Consolidated Cash Flows Woodward Governor Company and Subsidiaries Year Ended September 30, (In thousands) 2002 2001 2000  Cash flows from operating activities:  Net earnings $42,681 $53,068 $46,976  Adjustments to reconcile net earnings to net cash provided by operating activities:  Cumulative effect of accounting change, net of income taxes 2,489 — —  Depreciation and amortization 32,088 32,732 30,419  Impairment loss on equipment 3,000 — —  Net loss on sale of property, plant, and equipment 354 1,445 411  ESOP compensation expense 1,879 2,011 2,142  Deferred income taxes 1,243 1,303 (9)  Unrealized losses on derivatives — (1,374) —  Reclassification of unrealized losses on derivatives to earnings 154 — —  Equity in loss of unconsolidated affiliate — — 271  Gain on sale of business — — (25,500)  Changes in operating assets and liabilities, net of business acquisitions and sale: Accounts receivable 29,287 3,096 (3,997) Inventories 9,028 (25,126) (3,746) Accounts payable and accrued expenses (20,635) 12,219 3,994 Income taxes payable (14,563) 10,271 4,305 Other—net 4,389 (2,352) 451 Total adjustments 48,713 34,225 8,741  Net cash provided by operating activities 91,394 87,293 55,717  Cash flows from investing activities:  Payments for purchase of property, plant, and equipment (22,898) (26,903) (27,416)  Proceeds from sale of property, plant, and equipment 439 404 1,700  Proceeds from sale of business—net of direct costs — — 41,742  Payments associated with sale of business — (3,985) —  Investment in unconsolidated affiliate — — (290)  Business acquisitions, net of cash acquired (25,752) (31,215) —  Net cash provided by (used in) investing activities (48,211) (61,699) 15,736  Cash flows from financing activities:  Cash dividends paid (10,731) (10,526) (10,472)  Proceeds from sales of treasury stock 389 381 2,411  Purchases of treasury stock (286) — (1,762)  Net proceeds (payments) from borrowings under revolving lines (25,149) 9,124 (39,826)  Proceeds from long-term debt 75,000 — —  Payments of long-term debt (63,737) (22,500) (21,650)  Net cash used in financing activities (24,514) (23,521) (71,299)  Effect of exchange rate changes on cash 617 (846) (1,288)  Net change in cash and cash equivalents 19,286 1,227 (1,134)  Cash and cash equivalents, beginning of year 10,542 9,315 10,449  Cash and cash equivalents, end of year $29,828 $10,542 $ 9,315  Supplemental cash flow information:  Interest expense paid $ 2,982 $ 8,058 $11,854  Income taxes paid 38,140 19,769 22,656  Noncash investing:  Liabilities assumed in business acquisitions (sale)—net 5,040 501  (1,430) See accompanying Notes to Consolidated Financial Statements. 32