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## Discussion of Balance Sheet 

The Consolidated Balance Sheet shows the Company's financial position at year end, compared with the previous year end. This statement provides information to assist in assessing factors such as the Company's liquidity and financial resources. All year references are to fiscal years. 

The effect of currency rate changes during the year caused a $89.7 million decrease in Shareholders’ equity. These rate changes also caused significant decreases in accounts receivable, inventories, goodwill, plant and equipment, accounts payable and various accrual accounts. 

Working capital and the current ratio were as follows: 

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Accounts receivable are primarily receivables due from customers for sales of product ($810.7 million at June 30, 2001, compared to $777.1 million at June 30, 2000). The current year increase in accounts receivable is primarily due to acquisitions, partially offset by a decrease in volume experienced during the second half of 2001 in the Industrial operations. Days sales outstanding for the Company increased to 49 days in 2001 from 45 days in 2000. The increase in the allowance for doubtful accounts in 2001 is primarily due to receivables obtained through acquisitions. 

Inventories increased to $1,008.9 million at June 30, 2001, compared to $974.2 million a year ago. The increase was primarily due to acquisitions. Months supply of inventory on hand increased slightly from 2000. 

Net assets held for sale in 2001 represents the estimated net cash proceeds and estimated net earnings during the holding period of the metal forming business, which was acquired as part of the Commercial Intertech transaction and the specialty chemical and warranty businesses, which were acquired as part of the Wynn’s transaction. In 2000, net assets held for sale also included the building systems business, which was acquired as part of the Commericial Intertech transaction. The net assets of this business are now included in their respective separate line items of the balance sheet. At June 30, 2001 the Company was in the process of completing the divestiture of the metal forming business. 

Plant and equipment, net of accumulated depreciation, increased $207.8 million in 2001 as a result of acquisitions and capital expenditures which exceeded annual depreciation. 

Investments and other assets increased $56.7 million in 2001 primarily as a result of increases in qualified benefit plan assets. 

Excess cost of investments over net assets acquired increased $382.9 million in 2001 as a result of acquisitions, partially offset by current year amortization. Effective July 1, 2001 the Company adopted SFAS No. 142 and therefore further amortization of goodwill has been discontinued. 

Notes payable and long-term debt payable within one year increased $211.2 million primarily due to an increase in commercial paper borrowings which were used to fund acquisitions and the redemption of $100 million, 9.75 percent debentures due 2002-2021. 

Accounts payable, trade decreased $4.9 million in 2001 primarily due to lower balances in the North American Industrial operations due to lower production levels, partially offset by acquisitions. 

Accrued domestic and foreign taxes decreased to $61.9 million in 2001 from $84.2 million in 2000 primarily due to the utilization of net operating loss carryforwards and tax credits from acquisitions, as well as lower taxable income in 2001. 

Other accrued liabilities increased $39.1 million in 2001 primarily due to acquisitions, as well as an increase in accruals for business realignment charges. 

Long-term debt increased $155.3 million in 2001 compared to 2000. See the Cash Flows From Financing Activities section on page 22 for further discussion. 

The Company's goal is to maintain no less than an "A" rating on senior debt to ensure availability and reasonable cost of external funds. To meet this objective, the Company has established a financial goal of maintaining a ratio of debt to debt-equity of 34 to 37 percent. 

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Excluding the effect of the ESOP loan guarantee on both Long-term debt and Shareholders’ equity, the debt to debt-equity ratio at June 30, 2001 was 33.5 percent. 

In fiscal 2002 additional borrowings are not anticipated for the stock repurchase program, capital investments, or for working capital purposes. 

Pensions and other postretirement benefits increased 6.3 percent in 2001. These costs are explained further in Note 9 to the Consolidated Financial Statements. 

Other liabilities increased to $88.3 million in 2001 from $71.1 million in 2000 primarily due to increases in deferred compensation plans. 

Common stock in treasury decreased to $3.9 million in 2001 from $8.4 million in 2000. 

Quantitative and Qualitative Disclosures About Market Risk – The Company enters into forward exchange contracts, costless collar contracts and cross-currency swap agreements to reduce its exposure to fluctuations in related foreign currencies. The total value of open contracts and any risk to the Company as a result of these arrangements as well as the market risk of changes in near term interest rates is not material to the Company’s financial position, liquidity or results of operations. See the Significant Accounting Policies footnote on page 27 for further discussion. 

