## Other Matters 

## Critical Accounting Policies 

We consider the accounting policies used in preparing our financial statements to be critical accounting policies when they are both important to the portrayal of our financial condition and results of operation, and require us to make difficult, subjective, or complex judgments. Critical accounting policies normally result from the need to make estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies are related to our accounting for goodwill, other long-lived assets, deferred tax asset valuation allowances, and retirement healthcare benefits. 

We test goodwill for impairment on an annual basis and more often if circumstances require. Estimates and assumptions, the most important of which are used to estimate the fair value of reporting units within the company, impact our test results. To estimate the fair value of reporting units, we estimate future cash flows, discount rates, and transaction multiples that we believe a marketplace participant would use in an arm’s length transaction. 

We test other long-lived assets, including property, plant, and equipment and other intangibles, for recoverability whenever events or changes in circumstances indicate that the carrying values may not be recoverable. The carrying value of a long-lived asset is reduced to its fair value whenever estimates of future cash flows are insufficient to indicate the carrying value is recoverable. To account for long-lived assets, we form judgments as to whether recoverability should be assessed, we estimate future cash flows, and we estimate fair value. Fair value estimates are most often based on estimated future cash flows and assumed discount rates. 

We establish valuation allowances to reflect the estimated amount of deferred tax assets that might not be realized. Our current valuation allowances are generally for deferred tax assets associated with state and foreign net operating loss carryforward limitations. We consider both positive and negative evidence in forming our judgment as to whether a valuation allowance is appropriate. 

We recognize the cost of retirement healthcare benefits over employee service periods using an actuarial-based attribution approach. To determine our net periodic benefit cost and net accrued benefit, we form judgments about the best estimate for each assumption used in the actuarial computation. The two most important assumptions that impact the computation are the healthcare cost trend rate and the discount rate. 

Our judgments, estimates, and assumptions for goodwill, other long-lived assets, deferred tax asset valuation allowances, and retirement healthcare benefits are impacted by conditions that change over time. As a result, in the future we could incur impairment charges, changes to our deferred tax asset valuation allowances, or changes in our retirement healthcare benefit costs and accruals that are material to our financial condition and results of operations. 

## Market Risks 

Our long-term debt and interest rate swap agreements are sensitive to changes in interest rates. We monitor trends in interest rates as a basis for determining whether to enter into fixed rate or variable rate debt agreements, the duration of such agreements, and whether to use hedging strategies. Our primary objective is to minimize our long-term costs of borrowing. At September 30, 2002, all long-term debt was denominated in United States dollars and consisted of fixed rate agreements. However, to effectively offset our exposure to changes in the fair value of a portion of our long-term debt, we have entered into interest rate swap agreements. Under these agreements, we are swapping fixed rate interest payments for interest payments at rates that vary with LIBOR. As measured at September 30, 2002, a hypothetical 1% immediate increase in interest rates would adversely affect our 2003 net earnings and cash flows by approximately $0.3 million and reduce the combined fair value of our long-term debt and interest rate swap agreements by approximately $4.2 million. Last year, a hypothetical 1% immediate increase in interest rates would have adversely affected our 2002 net earnings and cash flows by approximately $0.4 million and reduced the fair value of our long-term debt by approximately $0.5 million. 

