August 31, 2003 Balance			Cash Payments				Currency Impact			November 30, 2003 Balance
Severance		$	8,407		$	(616	)		$	742		$	8,533
Exit costs			389			(203	)			28			214
Total reserve		$	8,796		$	(819	)		$	770		$	8,747

The following unaudited pro forma results of operations of the Company for the six months ended February 28, 2002 give effectexpects that cash payments related to the Kopp acquisition as thoughrestructuring reserve will increase in the transaction had occurred at the beginningsecond and third quarter of fiscal 2002.

The unaudited pro forma financial information presented above is not necessarily indicative of either2004 relative to the results of operations that would have occurred had the transaction taken place at the beginningfirst quarter of fiscal 2002 or the future results of operations.2004.

Note 3. Accounts Receivable Financing

The Company utilizes an accounts receivable securitization program whereby it sells certain of its United States trade accounts receivable to a wholly owned special purpose subsidiary which, in turn, sells participating interests in its pool of receivables to a financial institution. Sales of the participating interests in the trade receivables are reflected as a reduction of accounts receivable in the accompanying Condensed Consolidated Balance Sheets and the proceeds received are included in cash flows from operating activities in the accompanying Condensed Consolidated Statements of Cash Flows. Trade receivables sold and being serviced by the Company were $24.1$26.0 million and $24.9$23.9 million at February 28,November 30, 2003 and August 31, 2002,2003, respectively.

Accounts receivable financing costs of $0.1 million and $0.3 million for each of the three and six months ended February 28,November 30, 2003 and $0.3 million and $0.6 million for the three and six months ended February 28, 2002 respectively, are included in “Net Financing Costs” in the accompanying Condensed Consolidated Statements of Earnings. Total cash proceeds under the trade accounts receivable financing program were $28.1$24.5 million and $56.0$27.9 million for the three and six months ended February 28,November 30, 2003 and $34.9 million and $64.3 million for the three and six months ended February 28, 2002, respectively.

Note 4. Inventories, Net

The nature of the Company’s products is such that they generally have a very short production cycle. Consequently, the amount of work-in-process at any point in time is minimal. In addition, many parts or components are ultimately either sold individually or assembled with other parts making a distinction between raw materials and finished goods impractical to determine. Other locations maintain and manage their inventories using a job cost system where the distinction of categories of inventory by state of completion is also not available.

As a result of these factors, it is neither practical nor cost effective to segregate the amounts of raw materials, work-in-process or finished goods inventories at the respective balance sheet dates, as segregation would only be possible as the result of physical inventories which are taken at dates different from the balance sheet dates.

Note 5. Goodwill and Other Intangible Assets

The Company adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” in the first quarter of fiscal 2002. Under the transitional provisions of SFAS No. 142, the Company recorded a goodwill impairment loss associated with its Milwaukee Cylinder reporting unit of $7.2 million. The impairment loss was recorded as a cumulative effect of change in accounting

principle on the accompanying Condensed Consolidated Statements of Earnings for the six months ended February 28, 2002.

The changes in the carrying amount of goodwill for the year ended August 31, 2002 and for the sixthree months ended February 28,November 30, 2003 are as follows:

The gross carrying amount and accumulated amortization of the Company’s intangible assets that have defined useful lives and are subject to amortization as of February 28,November 30, 2003 and August 31, 20022003 are as follows:

The gross carrying amount of the Company’s intangible assets that have indefinite lives and are not subject to amortization as of November 30, 2003 and August 31, 2003 are as follows:

In connection with the acquisition of Kopp inKwikee, the first quarterCompany allocated $1.3 million and $0.6 million of fiscal 2003,the purchase price to its patents and customer relationships, respectively. The patents and customer relationships are being amortized over their useful lives of 13 and 15 years, respectively. In addition, the Company acquired certain patents totaling approximately $0.6 million that will be amortized over their estimated useful life of eight years. The Company also acquired the “Kopp” tradenametradenames valued at approximately $1.9$1.2 million, which isare classified as an indefinite lived intangible asset that isassets and are not subject to amortization. See Note 2, “Acquisition,“Acquisitions,” for further information about the acquisition of Kopp. As of February 28, 2003, the Company did not own any other indefinite lived intangible assets other than the tradename mentioned above.Kwikee.

Amortization expense recorded on the intangible assets listed in the above table was $0.5 million and $0.6 million for both the three months and six months ended February 28,November 30, 2003 and 2002, was $0.6 million and $1.2 million, respectively. The estimatedTotal fiscal 2004 amortization expense is estimated to be $2.0 million. Amortization expense for each of the next five fiscal years 2005 through 2009 is as follows:estimated to be $1.8 million per year.

Note 6. Accrued Product Warranty Costs

The Company recognizes the cost associated with its product warranties at the time of sale. The amount recognized is based on historical failureclaims rates and current claim cost experience. The following is a reconciliation of the changes in accrued product warranty for the reporting period:three months ended November 30, 2003:

Note 7. Debt

The Company’s indebtedness, other than short-term borrowings, as of February 28,November 30, 2003 and August 31, 20022003 was as follows:

In November 2003, the Company sold $150.0 million aggregate principal amount of Convertible Senior Subordinated Debentures (“Convertible Notes”) due November 15, 2023. The Convertible Notes bear interest at a rate of 2.00% annually which is payable on November 15 and May 15 of each year. Beginning with the six-month interest period commencing November 15, 2010, holders of the Convertible Notes will receive contingent interest if the trading price of the Convertible Notes equals or exceeds 120% of the principal amount of the Convertible Notes over a specified trading period. If payable, the contingent interest shall equal 0.25% of the average trading price of the Convertible Notes during the five days immediately preceding the applicable six-month interest period per $1,000 principal amount of Convertible Notes.

The Company has the right to repurchase for cash all or part of the Convertible Notes on or after November 20, 2010. The holders of the Convertible Notes have the right to require the Company to purchase all or a portion of the Convertible Notes on November 15, 2010, November 15, 2013 and November 15, 2018 or upon certain corporate events. The purchase price for these repurchases shall equal 100% of the principal amount of the Convertible Notes purchased plus accrued and unpaid interest.

The Convertible Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries on a senior subordinated basis. These guarantees will be released when the Company has no 13% Notes outstanding; provided that if the Company issues other senior subordinated debt that is guaranteed by one or more of the Company’s subsidiaries, then such subsidiaries will be required to guarantee the Convertible Notes on an unsecured senior subordinated basis.

The Convertible Notes are convertible into shares of the Company’s common stock at a conversion rate of 25.0563 shares per $1,000 principal amount of Convertible Notes, which equals a conversion price of approximately $39.91 per share (subject to adjustment) only under the following conditions: (i) during any fiscal quarter commencing after November 30, 2003, if the closing sale price of the Company’s common stock exceeds 120% of the conversion price for at least 20 trading days in the 30 consecutive trading day period ending on the last trading day of the preceding fiscal quarter, (ii) during any period in which the Company’s senior subordinated debt credit rating falls below certain thresholds, (iii) if a Convertible Note has been called for redemption and has not yet been redeemed, the holder may convert that Convertible Notes prior to the close of business on the last business day prior to the redemption date, or (iv) if specified corporate transactions occur. The Company has agreed to file a shelf registration statement with the Securities and Exchange Commission covering the resale of the Convertible Notes and the underlying common stock.

Net proceeds from the issuance of the Convertible Notes were $145.2 million. The Company used approximately $63.9 million of the net proceeds to fund the repurchase of $49.4 million of 13% Notes through open market and negotiated purchases, including premium payments and accrued interest. As a result of these repurchases the Company recorded a pre-tax charge of $15.1 million during the first quarter of fiscal 2004, consisting of bond

redemption premium payments and the non-cash write-off of the associated debt discount and debt issuance costs. In addition, the net proceeds were used to repay $33 million of borrowings under the senior secured credit agreement related to the acquisition of Kwikee, and the remaining 20% interest in Kopp, as well as the Kopp deferred purchase price. The Company also made optional prepayments on the term loan under the senior secured credit agreement and the Euro-denominated term loans totaling $17.3 million. The remaining net proceeds are in cash and cash equivalents on the Condensed Consolidated Balance Sheets and will be used for general corporate purposes, which may include, without limitation, repurchases of outstanding 13% Notes, working capital and possible future acquisitions.

During the first quarter of fiscal 2003, the Company retired $9.4 million (gross principal amount) of its 13% Notes acquired through open market and negotiated purchases. The Company recorded a pre-tax charge of $2.0 million related to the redemptionconsisting of the 13% Notes. The pre-tax charge consisted of a $1.7 million bond redemption premium paymentpayments and a $0.3 millionthe non-cash write-off of the associated debt discount and debt issuance costs.

In connection with the Kopp Acquisition, the Company assumed $5.5 million of Euro denominated term loans. Two of the loans assumed bear interest at floating rates ranging from EURIBOR plus 0.76% to EURIBOR plus 1.25% and are payable semiannually through June 2007. The third loan assumed bears interest at a fixed rate of 4.5% and is payable semiannually through September 2008. See Note 2, “Acquisition,” for more information on the Kopp acquisition.

The 13% Notes include fair value adjustments of $0.2 million$0.1 and $0.8$(0.4) million at November 30, 2003 and August 31, 2002 and February 28, 2003, respectively, which correspondrelated to the long-term asset recorded to reflect the fair value of an interest rate swap which converts $25 million of 13% Notes fromcontracts that convert fixed raterates to variable rate obligations.rates. See Note 11,10, “Derivatives” for further information.

Note 8.    Common Stock

In the second quarter of fiscal 2002, the Company sold, pursuant to an underwritten public offering, 3,450,000 shares of its Class A common stock at a price of $30.50 per share. Cash proceeds from the offering, net of underwriting discounts, were approximately $99.7 million. Excluding underwriting discounts, the Company incurred approximately $0.8 million of additional accounting, legal and other expenses related to the offering that were subsequently charged to additional paid-in capital. The proceeds were used to redeem a portion of the Company’s 13% Notes and retire portions of the Company’s term debt under its senior secured credit facility in the third quarter of fiscal 2002.

Note 9.8. Stock Option Plans

The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense has been recognized for its stock option plans. During the second quarter of fiscal 2003, the Company adopted the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” The following table illustrates the effect on net earnings and earnings per share had the Company adopted the fair value based method of accounting for stock-based employee compensation for all periods presented.

Note 10.9. Distribution of Electronics Segment

On January 25,July 31, 2000, the Company’s boardCompany effected the spin-off of directors authorized various actionsAPW Ltd., a Bermuda company organized to enable itown and operate its former Electronics Business. In conjunction with the spin-off and as is customary in these types of transactions, APW agreed to distributeindemnify the Company for certain claims and liabilities. However, as a result of APW’s bankruptcy filing discussed below, APW was released from its Electronics segment (“APW”)obligation to its shareholders (the “Distribution”). Refer to Note 2indemnify the Company for income tax matters relating to the consolidated financial statementsspin-off and periods prior to the spin-off. Accordingly, the Company is or may be subject to substantial liabilities of APW. In particular, the Company remains liable for tax obligations associated with the spin-off and related corporate restructuring transactions as well as APW’s and its potential tax obligations for periods prior to the spin-off.

During the third quarter of fiscal 2002, APW and one of APW’s wholly owned indirect subsidiaries, Vero Electronics, Inc., commenced prepackaged bankruptcy cases in the United States Bankruptcy Court for the Southern District of New York. On July 31, 2003, APW and Vero Electronics emerged from bankruptcy. Pursuant to the bankruptcy proceedings, APW rejected certain agreements entered into between APW and the Company at the time of the spin-off that governed a variety of indemnification matters between the parties. These agreements included the Tax Sharing and Indemnification Agreement, or TSA, in which APW agreed to indemnify the Company for income tax liabilities in excess of $1.0 million which could arise from any audit or other administrative or judicial

proceedings resulting in adjustments to the separate taxable income of APW or any of its subsidiaries which were included in the Company’s consolidated group for periods prior to the spin-off, as well as all taxes related to the spin-off and related corporate restructuring transactions. The Internal Revenue Service has commenced an audit of the Company’s tax return for fiscal 2000, which was the year in which the spin-off and related corporate restructuring transactions occurred. If any audit adjustments were to result in a tax liability, such liability would be payable by the Company. The amount of such additional tax liabilities may be substantial and could have a material adverse effect on the Company’s financial condition and results of operations.

On August 6, 2002, Annual Reportthe Company and APW entered into an agreement which provides, among other things, that the right of offset asserted by the Company with respect to approximately $23.8 million of funds (the “Offset Funds”) which it held on Form 10-Kbehalf of APW is an allowed secured claim which is unimpaired by the APW bankruptcy proceeding; and, further, that the Company may retain possession of the Offset Funds and may use such Offset Funds to, among other things, reimburse it for certain estimated costs of approximately $4.9 million and any tax adjustments arising from the Company’s spin-off of APW. In the event that such costs and adjustments exceed the Offset Funds, the Company will be responsible for any shortfall, and such excess amount could result in a discussionmaterially adverse impact upon its financial position and results of certain indemnification matters. operations. Pursuant to the agreement with APW, the Company will be required to pay an estimated $18 to $19 million of the Offset Funds to APW or other third parties as spin-off related contingencies are resolved. The Company estimates that these payments will be made sometime during fiscal 2005 although there can be no assurance as to the actual date these payments may in fact be made. The Offset Funds have been recorded in “Other Long-term Liabilities” and totaled $18.9 million as of November 30, 2003 and August 31, 2003.

Prior to the Distribution,spin-off, the Company, in the normal course of business, entered into certain real estate and equipment leases or guaranteed such leases on behalf of its subsidiaries, including those in itsthe Electronics Business segment. In conjunction with the Distribution,spin-off, the Company assigned its rights in the leases used in the Electronics Business segment to APW, but was not released as a responsible party from approximately one dozen ofall such leases by the lessors. As a result, the Company remains contingently liable for such leases. The discounted present value of future minimum lease payments for such leases totals, assuming no offset for sub-leasing, approximately $20.0$17.5 million at February 28,November 30, 2003. The future undiscounted minimum lease payments for these leases are as follows: $4.3 million in calendar 2004; $3.1 million in calendar 2005; $2.4 million in calendar 2006; $2.4 million in calendar 2007; $2.5 million in calendar 2008; and $9.1 million thereafter. The parties to these leases, which currently include both subsidiaries of APW and certain former APW subsidiaries that have been acquired by third parties, have not filed Chapter 11 cases and, as such, none of those leases have been rejected in the bankruptcies noted above. However, the Company remains contingently liable for those leases if these APW subsidiaries or their successors are unable to fulfill their obligations thereunder. A future breach of these leases by these APW subsidiaries or their successors could, therefore, potentially have a material adverse impact upon the Company’s financial position and results of operations.

Note 11.10. Derivatives

All derivatives are recognized on the balance sheet at their estimated fair value. At February 28,November 30, 2003 and August 31, 2002,2003, the Company was a party to two interest rate swap contracts to convert variable rate debt to a fixed rate with a combined notional value of $50 million and one interest rate swap contract to convert fixed rate debt to a variable rate withthat has a notional amount of $25 million. Unrealized gains (losses), net of income taxes, of $0.1 million and $0.2 million for the three and six months ended February 28, 2003, respectively and $0.4 million and $(0.3) million for the three and six months ended February 28, 2002, respectively, were recorded in other comprehensive incomeconverts fixed rate debt of 13% to recognize the fair value of the contracts to convert variable rate debt to a fixed rate. Duringbased on the second quarter of fiscal 2002,six-month LIBOR plus 9.63%. At November 30, 2003 the Company recorded interest expense of $0.2 million to recognize the portion of asix-month LIBOR was 1.26%. This swap contract that became ineffective duematures on May 1, 2009, which corresponds to the pay down of term debt as a resultmaturity date of the common stock offering.debt. No net gain or loss has been recorded in earnings related to changes in the fair value of thethis contract to convert fixed rate debt to floating rate since the contract is considered to be “effective” as the terms of the contract exactly match the terms of the underlying debt. Instead, the fair value of the contract is recorded as a $0.2$1.3 million and $0.8a $1.8 million long-term assetliability at November 30, 2003 and August 31, 2002 and February 28, 2003, respectively, with the offset recorded as a fair value adjustment to the 13% Notes.

The specific interest termsDuring the third quarter of each of ourfiscal 2003 the Company terminated an interest rate swap agreementscontract that had a notional amount of $25 million, which converted fixed rate debt to variable rate debt. The Company received a cash settlement of $1.6 million, representing the fair value of the swap contract, from the counterparty. Prior to the termination, hedge accounting treatment was used since the contract was considered to be “effective” as the terms of the contract exactly matched the terms of the underlying debt. Hedge accounting treatment resulted in no net gain or loss being recorded in earnings related to changes in the fair value of the contract. Because the swap was terminated, hedge accounting must also be discontinued. At November 30, 2003, the $1.4 million fair value adjustment to the 13% Notes is treated as follows:a premium to the underlying debt and is being amortized to net financing costs over the original remaining life of the contract.

At February 28,August 31, 2003, one-month LIBORthe Company was 1.34%, three-month LIBOR was 1.42%,a party to an interest rate swap contract to convert variable rate debt to a fixed rate with a notional value of $25 million. This contract matured on September 5, 2003. Unrealized gains, net of income taxes, of $0 and six-month LIBOR was 1.62%. The$0.1 million were recorded in other comprehensive income to recognize the fair value of interest rate swap contracts mature as follows: Swap #1, June 5, 2003; swap #2, September 5, 2003; and swap #3, May 1, 2009. These maturity dates correspond to the maturity dates of theconvert variable rate debt or the reset datesto a fixed rate for the interest on the debt.three months ended November 30, 2003 and 2002.

Note 12.11. Earnings Per Share

The reconciliations between basic and diluted earnings per share for all periods presented are as follows:

The convertible senior subordinated notes discussed in Note 7, “Debt,” have no impact on the Company’s earnings per share calculations because conditions under which the notes may be converted have not been satisfied.

Note 13.12. Comprehensive Income

The components of comprehensive income are as follows: