2.2.0.7falseSummary of Significant Accounting Policies0201 - Disclosure - Summary of Significant Accounting Policiestruefalsefalsefalse1USDfalsefalseUSDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0$20us-gaap_GeneralPoliciesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsetruefalsefalsefalsefalsefalsefalse1falsefalsefalsefalse00falsefalsefalsexbrli:stringItemTypestringNo definition available.false31us-gaap_SignificantAccountingPoliciesTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabelfalse1falsefalsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
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<div align="justify" style="font-size: 10pt; margin-top: 0pt"><i></i>
</div>
<div align="left">
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt"><i></i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Nature of Operations</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Hill-Rom Holdings, Inc. (the “Company,” “Hill-Rom,” “we,” “us,” or “our”) (formerly known as
Hillenbrand Industries, Inc.) was incorporated on August 7, 1969 in the State of Indiana and is
headquartered in Batesville, Indiana. We are a leading worldwide manufacturer and provider of
medical technologies and related services for the health care industry, including patient support
systems, safe mobility and handling solutions, non-invasive therapeutic products for a variety of
acute and chronic medical conditions, medical equipment rentals and information technology
solutions. Our comprehensive product and service offerings are used by health care providers across
the health care continuum in hospitals, extended care facilities and home care settings worldwide,
to enhance the safety and quality of patient care.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Basis of Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">On March 31, 2008, we completed the spin-off of our funeral services business operating under the
Batesville Casket name, through a tax-free stock dividend to our shareholders. In connection with
the distribution, we changed our name from Hillenbrand Industries, Inc. to Hill-Rom Holdings, Inc.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In accordance with our accounting for the impairment or disposal of long-lived assets, the results
of operations of the funeral services business have been presented as a discontinued operation for
the year ended September 30, 2008 in the Statement of Consolidated Income (Loss). The 2008
Statement of Consolidated Cash Flows is presented without separate classification of cash flows
from the funeral services business through March 31, 2008. Unless otherwise noted, the Notes to
Consolidated Financial Statements exclude information related to the funeral services business.
See Note 3 for a further discussion of the spin-off of the funeral services business.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Principles of Consolidation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Consolidated Financial Statements include the accounts of the Company and our majority-owned
subsidiaries. All subsidiaries are wholly-owned with the exception of the 60 percent owned joint
venture acquired during the first quarter of fiscal 2010 and discussed in Note 2. Intercompany
accounts and transactions have been eliminated in consolidation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Use of Estimates</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires our management to make estimates and assumptions that
affect the reported amounts of certain assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those estimates. Examples of
such estimates include our accounts receivable reserves (Note 1), accrued warranties (Note 1), the
impairment of intangibles (Note 5), investments (Note 7), income taxes (Note 11) and commitments
and contingencies (Note 16), among others.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Cash and Cash Equivalents</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We consider investments in marketable securities and other highly liquid instruments with a
maturity of three months or less at date of purchase to be cash equivalents. Investments which have
no stated maturity are also considered cash equivalents. All of our marketable securities may be
freely traded.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Investment and Investment Securities</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">At September 30, 2010, investment securities consisted primarily of AAA rated student loan auction
rate securities (“ARS”). These securities are generally insured through the U.S. government’s
Federal Family Education Loan Program, to the extent the borrowers meet certain prescribed criteria
in their underlying lending practices. As of September 30, 2010, we held $11.8 million of ARS that
were recorded at fair value and classified as available-for-sale with unrealized holding gains and
losses recorded in Accumulated Other Comprehensive Income (Loss) (“AOCL”).
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We also previously held ARS with UBS Financial Services (“UBS”). During the first quarter of 2009,
we entered into an enforceable, non-transferable right (the “Put”) with UBS, which allowed us to
exercise this Put at anytime during the period of June 30, 2010 through July 2, 2012. During the
quarter ended June 30, 2010, UBS redeemed $14.1 million of our ARS plus interest. On June 30, 2010,
we successfully exercised our rights under this Put for all remaining ARS held with UBS and
received cash proceeds of $12.0 million, including accrued interest, on July 1, 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We regularly evaluate all investments classified as available-for-sale for possible impairment
based on current economic conditions, credit loss experience and other criteria. The evaluation of
investments for impairment requires significant judgments to be made including (i) the
identification of potentially impaired securities; (ii) the determination of their estimated fair
value; (iii) the assessment of whether any decline in estimated fair value is other-than-temporary;
and (iv) the likelihood of selling before recovery. If there is a decline in a security’s net
realizable value that is other-than-temporary, the decline is separated into the amount of
impairment related to credit loss and the amount of impairment related to all other factors. The
decline related to the credit loss is recognized in earnings, while the decline related to all
other factors is recognized in AOCL.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">See Note 7 for further details on our fair value measurements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Trade Accounts Receivable</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Trade accounts receivable are recorded at the invoiced amount and do not bear interest, unless the
transaction is an installment sale with payment terms exceeding one year. Reserves for
uncollectible accounts represent our best estimate of the amount of probable credit losses and
collection risk in our existing accounts receivable. We determine such reserves based on historical
write-off experience by industry and reimbursement platform. Receivables are generally reviewed on
a pooled basis based on historical collection experience for each reimbursement and receivable
type. Receivables for capital sales transactions are also reviewed individually for collectability.
Account balances are charged against the allowance when we believe it is probable the receivable
will not be recovered. We do not have any off-balance-sheet credit exposure related to our
customers. If circumstances change, such as higher than expected claims denials, payment defaults,
adverse changes in general economic conditions, instability or disruption of credit markets, or an
unexpected material adverse change in a major customer’s or payor’s ability to meet its
obligations, our estimates of the realizability of trade receivables could be reduced by a material
amount.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Within
rental revenues, the domestic third-party payor’s reimbursement process requires extensive
documentation, which has had the effect of slowing both the billing and cash collection cycles
relative to the rest of the business, and therefore, increasing total accounts receivable. Because
of the extensive documentation required and the requirement to settle a claim with the primary
payor prior to billing the secondary and/or patient portion of the claim, the collection period for
a claim in a portion of our business may, in some cases, be extended.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We generally hold our trade accounts receivable until they are paid. Certain long-term receivables
are occasionally sold to third parties; however, any recognized gain or loss on such sales has
historically not been material.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Inventories</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Inventories are valued at the lower of cost or market. Inventory costs are determined by the
last-in, first-out (“LIFO”) method for approximately 65 percent and 55 percent of our inventories
at September 30, 2010 and 2009. Costs for other inventories have been determined principally by the
first-in, first-out (“FIFO”) method. During 2009, we made a change in cost method for certain
domestic production inventory from the FIFO method to the LIFO method. The change impacted
approximately 17 percent of our inventory and the effect on our Consolidated Financial Statements
was not significant. Inventories at September 30 consist of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000">September 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished products
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>64.2</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">57.4</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work in process
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.0</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>39.6</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32.6</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>108.5</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">92.0</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">If the FIFO method of inventory accounting, which approximates current cost, had been used for all
inventories, they would have been approximately $1.2 million and $3.6 million higher than reported
at September 30, 2010 and 2009.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Property, Plant and Equipment</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Property, plant and equipment is recorded at cost and depreciated over the estimated useful life of
the assets using principally the straight-line method. Ranges of estimated useful lives are as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Useful Life</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land improvements
</div></td>
<td> </td>
<td colspan="3" align="center">6 – 25 years</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings and building equipment
</div></td>
<td> </td>
<td colspan="3" align="center">20 – 40 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Machinery and equipment
</div></td>
<td> </td>
<td colspan="3" align="center">3 – 10 years</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equipment leased to others
</div></td>
<td> </td>
<td colspan="3" align="center">2 – 10 years</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">When property, plant and equipment is retired from service or otherwise disposed of, the cost and
related amount of depreciation or amortization are eliminated from the asset and accumulated
depreciation accounts. The difference, if any, between the net asset value and the proceeds on sale
are charged or credited to income. Total depreciation expense included within continuing operations
on the Statements of Consolidated Income (Loss) for fiscal years 2010, 2009 and 2008 was $72.8
million, $74.3 million and $81.0 million. The major components of property and the related
accumulated depreciation at September 30, were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000">September 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Accumulated</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Depreciation</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Depreciation</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land and land improvements
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>12.5</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>3.7</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12.0</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.5</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings and building equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>112.8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>75.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74.5</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Machinery and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>257.1</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192.2</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">269.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">199.0</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equipment leased to others
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>422.6</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>289.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">426.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">271.8</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>805.0</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>561.3</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">821.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">548.8</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Intangible Assets</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Intangible assets are stated at cost and consist predominantly of goodwill, software, patents and
trademarks. With the exception of goodwill and certain trademarks, our intangible assets are
amortized on a straight-line basis over periods generally ranging from 3 to 20 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We assess the carrying value of goodwill and non-amortizable intangibles annually, during the third
quarter of each fiscal year, or more often if events or changes in circumstances indicate there may
be impairment. Goodwill is allocated among the reporting units based on the relative fair value of
those units.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Our goodwill and many of our intangible assets are not deductible for income tax purposes. A
summary of intangible assets and the related accumulated amortization
and impairment losses as of September 30 was as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000">September 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Amortization</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>and Impairment</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">and Impairment</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>553.9</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>472.8</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">545.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">472.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Software
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>150.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>91.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">141.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75.7</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>123.9</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>46.1</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">111.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35.8</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>828.3</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>610.6</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">799.3</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">584.3</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Amortization expense included within continuing operations in the Statements of Consolidated Income
(Loss) for fiscal years 2010, 2009 and 2008 was $26.9 million, $25.9 million and $22.5 million.
Amortization expense for all intangibles is expected to approximate the following for each of the
next five fiscal years and thereafter: $29.7 million in 2011, $28.7 million in 2012, $23.8 million
in 2013, $15.8 million in 2014, $10.1 million in 2015 and $9.3 million thereafter.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Software consists mainly of capitalized costs associated with internal use software, including
applicable costs associated with the implementation/upgrade of our Enterprise Resource Planning
system. In addition, software includes capitalized development costs for software products to be
sold. The net book value of computer software costs, included within Intangible assets, was $58.8
million and $66.0 million at September 30, 2010 and 2009. Capitalized software costs are amortized
on a straight-line basis over periods ranging from three to ten years. Amortization expense
included within continuing operations in the Statements of Consolidated Income (Loss) approximated
$17.5 million, $16.6 million and $14.8 million for fiscal years 2010, 2009 and 2008.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Guarantees</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We routinely grant limited warranties on our products with respect to defects in material and
workmanship. The terms of these warranties are generally one year, however, certain components and
products have substantially longer warranty periods. We recognize a reserve with respect to these
obligations at the time of product sale, with subsequent warranty claims recorded directly against
the reserve. The amount of the warranty reserve is determined based on historical trend experience
for the covered products. For more significant warranty-related matters which might require a
broad-based correction, separate reserves are established when such events are identified and the
cost of correction can be reasonably estimated.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">A reconciliation of changes in our warranty reserve for fiscal years 2010, 2009 and 2008 is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at October 1
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>17.1</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">16.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">19.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for warranties during the period
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>16.0</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17.4</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty reserves acquired
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty claims incurred during the period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(17.3</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(20.3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(20.3</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at September 30
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>15.8</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">17.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">16.9</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In the normal course of business we enter into various other guarantees and indemnities in our
relationships with suppliers, service providers, customers, business partners and others. Examples
of these arrangements would include guarantees of product performance, indemnifications to service
providers and indemnifications of our actions to business partners. These guarantees and
indemnifications would not materially impact our financial condition or results of operations,
although indemnifications associated with our actions generally have no dollar limitations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In conjunction with our acquisition and divestiture activities, we have entered into select
guarantees and indemnifications of performance with respect to the fulfillment of our commitments
under applicable purchase and sale agreements. The arrangements generally indemnify the buyer or
seller for damages associated with breach of contract, inaccuracies in representations and
warranties surviving the closing date and satisfaction of liabilities and commitments retained
under the applicable contract. For those representations and warranties that survive closing, they
generally survive for periods up to five years or the expiration of the applicable statutes of
limitations. Potential losses under the indemnifications are generally limited to a portion of the
original transaction price, or to other lesser specific dollar amounts for select provisions. With
respect to sale transactions, we also routinely enter into non-competition agreements for varying
periods of time. Guarantees and indemnifications with respect to acquisition and divestiture
activities, if triggered, could have a materially adverse impact on our financial condition and
results of operations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Retirement Plans</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We sponsor retirement and postretirement plans covering select employees. Expense recognized in
relation to these defined benefit retirement plans and the postretirement health care plan is based
upon actuarial valuations and inherent in those valuations are key assumptions including discount
rates, and where applicable, expected returns on assets, projected future salary rates and
projected health care cost trends. The discount rates used in the valuation of our defined benefit
pension and postretirement plans are evaluated
annually based on current market conditions. In setting these rates we utilize long-term bond
indices and yield curves as a preliminary indication of interest rate movements, and then make
adjustments to the respective indices to reflect differences in the terms of the bonds covered
under the indices in comparison to the projected outflow of our obligations. Our overall expected
long-term rate of return on pension assets is based on historical and expected future returns,
which are inflation adjusted and weighted for the expected return for each component of the
investment portfolio. Our rate of assumed compensation increase is also based on our specific
historical trends of wage adjustments.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We account for our defined benefit pension and other postretirement plans by recognizing the funded
status of a benefit plan in the statement of financial position. We also recognize in Accumulated
Other Comprehensive Income (Loss) certain gains and losses that arose during the period. See Note 8
for key assumptions and further discussion related to our pension and postretirement plans.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Environmental Liabilities</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Expenditures that relate to an existing condition caused by past operations, and which do not
contribute to future revenue generation, are expensed. A reserve is established when it is probable
that a liability has been incurred and the amount of the loss can be reasonably estimated. These
reserves are determined without consideration of possible loss recoveries from third parties.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Specific costs included in environmental expense and reserves include site assessment, development
of a remediation plan, clean-up costs, post-remediation expenditures, monitoring, fines, penalties
and legal fees. Reserve amounts represent the expected undiscounted future cash outflows associated
with such plans and actions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Self Insurance</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We are generally self-insured up to certain limits for product/general liability, workers’
compensation, auto liability and professional liability insurance programs. These policies have
deductibles and self-insured retentions ranging from $150 thousand to $1.5 million per occurrence,
depending upon the type of coverage and policy period. We are also generally self-insured up to
certain stop-limits for certain employee health benefits, including medical, drug and dental. Our
policy is to estimate reserves based upon a number of factors including known claims, estimated
incurred but not reported claims and outside actuarial analysis, which are based on historical
information along with certain assumptions about future events. Such estimated reserves are
classified as Other Current Liabilities and Other Long-Term Liabilities within the Consolidated
Balance Sheets.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Revenue Recognition — Sales and Rentals</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Net revenues reflect gross revenues less sales discounts and allowances and customer returns for
product sales and a provision for uncollectible receivables for rentals. Revenue is evaluated under
the following criteria and recognized when each is met:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify"><i>Evidence of an arrangement: </i>An agreement with the customer reflecting the terms and
conditions to deliver products or services serves as evidence of an arrangement.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify"><i>Delivery: </i>For products, delivery is considered to occur upon receipt by the customer and
the transfer of title and risk of loss. For rental services, delivery is considered to occur
when the services are rendered.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify"><i>Fixed or determinable price: </i>The sales price is considered fixed or determinable if it is
not subject to refund or adjustment.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify"><i>Collection is deemed probable: </i>At or prior to the time of a transaction, credit reviews
of each customer are performed to determine the creditworthiness of the customer. Collection
is deemed probable if the customer is expected to be able to pay amounts under the
arrangement as those amounts become due. If collection is not probable, revenue is
recognized when collection becomes probable, generally upon cash collection.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As a general interpretation of the above guidelines, revenues for health care products in the
patient care environment are generally recognized upon delivery of the products to the customer and
their assumption of risk of loss and other risks and rewards of ownership. Local business customs
and non-standard sales terms can sometimes result in deviations to this normal practice in certain
instances; however, in no case is revenue recognized prior to the transfer of risk of loss and
rewards of ownership.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">For non-invasive therapy products and medical equipment management services, the majority of
product offerings are rental products for which revenues are recognized consistent with the
rendering of the service and use of products. For The Vest<sup style="font-size: 85%; vertical-align: text-top">®</sup> product, revenue is generally
recognized at the time of receipt of authorization for billing from the applicable paying entity as
this serves as evidence of the arrangement and sets a fixed or determinable price.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">For health care products and services aimed at improving operational efficiency and asset
utilization, various revenue recognition techniques are used, depending on the offering.
Arrangements to provide services, routinely under separately sold service and maintenance
contracts, result in the deferral of revenues until specified services are performed. Service
contract revenue is generally
recognized ratably over the contract period, if applicable, or as services are rendered.
Product-related goods are generally recognized upon delivery to the customer, similar to products
in the patient care environment.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Revenues are presented in the Statements of Consolidated Income (Loss) net of certain discounts and
sales adjustments. For product sales, we record reserves resulting in a reduction of revenue for
contractual discounts, as well as price concessions and product returns. Likewise, rental revenue
reserves, reflecting contractual and other routine billing adjustments, are recorded as a reduction
of revenues. Reserves for revenue are estimated based upon historical rates for revenue
adjustments.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Taxes Collected from Customers and Remitted to Governmental Units</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Taxes assessed by a governmental authority that are directly imposed on a revenue producing
transaction between us and our customers, including but not limited to sales taxes, use taxes, and
value added taxes, are accounted for on a net (excluded from revenues and costs) basis.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Cost of Revenues</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Cost of goods sold for capital sales consists primarily of purchased material costs, fixed
manufacturing expense, variable direct labor, overhead costs and costs associated with the
distribution and delivery of products to our customers. Rental expenses consist of costs associated
directly with rental revenue, including depreciation, maintenance, logistics and service center
facility and personnel costs.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Research and Development Costs</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Research and development costs are expensed as incurred. Costs included within continuing
operations in the Statements of Consolidated Income (Loss) were $58.3 million, $55.7 million and
$57.3 million for fiscal years 2010, 2009 and 2008.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In addition, certain software development technology costs are capitalized as intangibles and are
amortized over a period of three to five years once the software is ready for its intended use. The
amount spent during fiscal years 2010, 2009 and 2008 was approximately $4.8 million, $5.8 million
and $9.5 million.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Advertising Costs</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Advertising costs are expensed as incurred. Costs included within continuing operations in the
Statements of Consolidated Income (Loss) were $4.3 million, $4.0 million and $7.0 million for
fiscal years 2010, 2009 and 2008.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Comprehensive Income</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We include the net-of-tax effect of unrealized gains or losses on our available-for-sale
securities, foreign currency translation adjustments and pension or other defined benefit
postretirement plans’ actuarial gains or losses and prior service costs or credits in comprehensive
income.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The
composition of Accumulated Other Comprehensive Income (Loss) at September 30 is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>September
30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000">September
30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000">September
30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Available-for-sale securities and currency hedges
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(0.7</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.6</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustment
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(11.9</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(12.6</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2.4</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Items not yet recognized as a component of net periodic pension and
postretirement healthcare costs
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(49.2</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(46.4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6.0</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(61.8</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(59.9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(4.2</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Foreign Currency Translation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The functional currency of foreign operations is generally the local currency in the country of
domicile. Assets and liabilities of foreign operations are primarily translated into U.S. dollars
at year-end rates of exchange and the income statements are translated at the average rates of
exchange prevailing during the year. Adjustments resulting from translation of the financial
statements of foreign operations into U.S. dollars are excluded from the determination of net
income, but included as a component of Accumulated Other Comprehensive Income (Loss). Foreign
currency gains and losses resulting from foreign currency transactions are included in our results
of operations and are not material.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Stock-Based Compensation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We account for stock-based compensation under fair value provisions. Stock-based compensation cost
is measured at the grant date based on the value of the award and is recognized as expense over the
vesting period. In order to determine the fair value of stock options on the date of grant, we
utilize a Binomial model. Inherent in this model are assumptions related to a volatility factor,
expected life, risk-free interest rate, dividend yield and expected forfeitures. The risk-free
interest rate is based on factual data derived from public sources. The volatility factor, expected
life, dividend yield and expected forfeiture assumptions require judgment utilizing historical
information, peer data and future expectations. Deferred stock (also known as restricted stock
units (“RSUs”)) are measured based on the fair market price of our common stock on the date
of grant, as reported by the New York Stock Exchange, multiplied by the number of units granted.
See Note 13 for further details.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Income Taxes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company and its eligible domestic subsidiaries file a consolidated U.S. income tax return.
Foreign operations file income tax returns in a number of jurisdictions. Deferred income taxes are
computed using an asset and liability approach to reflect the net tax effects of temporary
differences between the financial reporting carrying amounts of assets and liabilities and the
corresponding income tax amounts. We have a variety of deferred tax assets in numerous tax
jurisdictions. These deferred tax assets are subject to periodic assessment as to recoverability
and if it is determined that it is more likely than not that the benefits will not be realized,
valuation allowances are recognized. In evaluating whether it is more likely than not that we would
recover these deferred tax assets, future taxable income, the reversal of existing temporary
differences and tax planning strategies are considered.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We account for uncertain income tax positions using a threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return. The difference between the tax benefit recognized in the financial statements for an
uncertain income tax position and the tax benefit claimed in the tax return is referred to as an
unrecognized tax benefit. See Note 11 for further details.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Derivative Instruments and Hedging Activity</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We use derivative financial instruments to manage the economic impact of fluctuations in currency
exchange rates. Derivative financial instruments related to currency exchange rates include forward
purchase and sale agreements which generally have terms no greater than 15 months. Additionally,
interest rate swaps have sometimes been used to convert a portion of our long-term debt from fixed
to variable interest rates.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Derivative financial instruments are recognized on the Consolidated Balance Sheets as either assets
or liabilities and are measured at fair value. Changes in the fair value of derivatives are
recorded each period in the Statement of Consolidated Income (Loss) or Accumulated Other
Comprehensive Income (Loss), depending on whether a derivative is designated and considered
effective as part of a hedge transaction, and if it is, the type of hedge transaction. Gains and
losses on derivative instruments reported in Accumulated Other Comprehensive Income (Loss) are
subsequently included in the Statement of Consolidated Income (Loss) in the periods in which
earnings are affected by the hedged item. These activities have not had a material effect on our
financial position or results of operations for the periods presented herein.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Recently Issued Accounting Guidance</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 1, 2009, we adopted the Financial Accounting Standard Board’s (“FASB”) authoritative
guidance related to business combinations, noncontrolling interests in consolidated financial
statements and assets acquired and liabilities assumed in a business combination that arise from
contingencies. Our adoption of this guidance was prospective and applies to business combinations
that occurred on or after October 1, 2009. See Note 2 for application of this guidance to the joint
venture entered into during our first fiscal quarter of 2010.
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 1, 2009, we adopted the FASB’s authoritative guidance related to the determination of
the useful life of intangible assets. Our adoption of this guidance was prospective and did not
have a material impact on our consolidated financial statements or the joint venture discussed in
Note 2.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 1, 2009, we early adopted the FASB’s authoritative guidance for arrangements with
multiple deliverables and arrangements that include software elements. Our adoption of this
guidance was prospective and did not have a material impact on our consolidated financial
statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In December 2008, the FASB issued new authoritative guidance related to employers’ disclosures
about postretirement benefit plan assets. This guidance requires detailed annual disclosures
regarding the investment strategies, fair value measurements, and concentration of risk of plan
assets of our defined benefit pension plans. Our adoption of this guidance is prospective and
became effective beginning September 30, 2010. See Note 8 for further details.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In June 2009, the FASB revised the authoritative guidance to require entities to provide more
information about sales of securitized financial assets and similar transactions, particularly if
the seller retains some risk with respect to the assets. This revised guidance will become
effective beginning October 1, 2010. We have evaluated the potential impact this guidance may have
on our consolidated financial statements and have concluded that it is not material to our existing
activity. When appropriate, we will consider and apply this guidance in connection with future
business transactions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In June 2009, the FASB revised the authoritative guidance to improve financial reporting by
companies involved with variable interest entities and to provide more relevant and reliable
information to users of financial statements. This revised guidance will become effective beginning
October 1, 2010. We have evaluated the potential impact this guidance may have on our consolidated
financial statements and have concluded that it is currently not applicable to us. When
appropriate, we will consider and apply this guidance in connection with future business
transactions.
</div>
</div>
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