<PAGE>

                                MARKET DATA

The Company's Common Stock is quoted on the NASDAQ market under the symbol CUNO.
The following table shows the quarterly high and low prices for the last two
fiscal years ended October 31:


<TABLE>
<CAPTION>
QUARTER                                   2001                  2000

                                     High       Low          High         Low
<S>                                <C>       <C>           <C>          <C>
First                              $ 31.00   $ 24.00       $ 25.75      $ 19.50
Second                               29.00     22.13         29.50        20.94
Third                                31.00     23.50         30.25        22.06
Fourth                               30.65     22.75         31.00        22.06
</TABLE>

As of October 31, 2001 CUNO had approximately 6,000 shareholders of
record.


                                       1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2001 - 1999
YEAR ENDED OCTOBER 31, 2001 COMPARED TO YEAR ENDED OCTOBER 31, 2000
NET SALES

         Net sales of $244.4 million in fiscal year 2001 represented a 0.6
percent increase over net sales of $243.1 million in fiscal year 2000. The
effects of foreign currency fluctuations reduced net sales in fiscal year 2001
by $11.3 million as compared to fiscal year 2000. Had currency values remained
unchanged from fiscal year 2000, net sales in fiscal year 2001 would have been
$255.8 million, or 5.2% greater than the prior year.

         CUNO's operations are affected by global and regional economic factors.
However, the global diversity of the Company's business has helped limit the
impact of any one industry or the economy of any single country on its
consolidated results. The following table displays the Company's sales by
geographic operating segment (dollars in thousands):

<TABLE>
<CAPTION>
                                                YEAR ENDED                                       CURRENCY
                                OCTOBER 31,                  OCTOBER 31,        PERCENT          ADJUSTED
                                  2001                         2000              CHANGE           CHANGE
<S>                             <C>                          <C>                <C>              <C>
North America                   $139,745                     $135,495              3.1%             3.1%
Europe                            35,323                       31,501             12.1%            18.5%
Japan                             34,390                       39,894            (13.8%)           (3.9%)
Asia/Pacific                      23,074                       22,791              1.2%            11.1%
Latin America                     11,917                       13,393            (11.0%)           10.9%
                                ---------------              ----------
Total Sales                     $244,449                     $243,074              0.6%             5.2%
</TABLE>


         Sales growth in the Company's North American operations was led by
Healthcare (up 12.0 percent) and, to a lesser extent, the Water Group (up 6.4
percent), a worldwide division of CUNO comprised of the potable water segment of
the business. Sales into the healthcare market have increased year over year due
primarily to an increase in sales to a large diagnostic customer. The Water
Group continues to record strong sales with its series of new filters designed
for OEM customers who serve various channels of distribution with final sales to
U.S. consumers.

         The Company's overseas sales decreased $2.9 million or 2.7 percent in
fiscal 2001 compared to 2000. Had the value of overseas currencies remained
unchanged in fiscal 2001 as compared to fiscal 2000, sales for these operations
would have increased $8.4 million or 7.8 percent. In Europe, sales increased
18.5 percent in local currency with this gain spread broadly across the three
markets. Sales by the European Water Group increased 30.4 percent due to
increased marketing efforts. Sales in Japan were down 3.9 percent on a local
currency basis as compared to the same period last year. All markets in Japan
have been impacted by the continued downturn in the Japanese economy. Local
currency sales growth in Asia/Pacific of 11.1 percent was due in large part to
strong gains in the Healthcare market as well as a strong economy in Australia.
Local currency sales in Latin America increased 10.9 percent in fiscal 2001
reflecting strong, broad improvements across all markets.

                                       8
<PAGE>
         The following table displays the Company's sales by market (dollars in
thousands):

<TABLE>
<CAPTION>
                                               YEAR ENDED                                         CURRENCY
                                OCTOBER 31,                 OCTOBER 31,         PERCENT           ADJUSTED
                                   2001                        2000              CHANGE            CHANGE

<S>                             <C>                         <C>                 <C>               <C>
Potable Water                   $107,263                    $101,483               5.7%              7.7%
Fluid Processing                  71,898                      78,781              (8.7%)            (2.6%)
Healthcare                        65,288                      62,810               3.9%             11.1%
                                --------                    --------               ---              ----
    Total Sales                 $244,449                    $243,074               0.6%              5.2%
                                ========                    ========               ===              ====
</TABLE>


         On a currency-adjusted basis, all geographic operating segments
continued to achieve sales increases in the potable water segment. This dollar
increase was driven by strong sales in North America associated with OEM
customers, direct marketing companies, and appliance manufacturers, as well as
increased foreign potable water sales (up 14.8 percent on a currency adjusted
basis). Fluid processing is the Company's most cyclical market and has been most
impacted by the U.S. economic slowdown. Healthcare sales continue to benefit
from a continued focus by management on competitively favorable niches. On a
currency-adjusted basis, international healthcare sales increased $4.5 million
or 10.6 percent over fiscal year 2000.

GROSS PROFIT

         The Company's gross profit increased $3.9 million to $108.4 million in
fiscal year 2001 from $104.5 million in 2000. Gross profit as a percentage of
net sales increased from 43.0 percent in 2000 to 44.3 percent in 2001. The
primary factor that contributed to the improved gross margin in 2001 was the
market mix of sales (increased Healthcare sales which generally carry higher
margins combined with decreased Fluid Processing sales which generally carry
lower margins).

OPERATING EXPENSES

         Selling, general and administrative ("SG&A") expenses increased $0.6
million in fiscal year 2001 over fiscal 2000, representing a 0.9 percent
increase. Expense categories within SG&A reflected nominal increases or
decreases consistent with the Company's cost-management strategy. Research,
development and engineering expenses increased 6.5 percent to $13.7 million in
fiscal 2001, reflecting the Company's continued focus on developing new products
and technologies. As a percentage of sales, research h, development and
engineering expenses were 5.6 percent of sales in fiscal 2001 compared to 5.3
percent of sales in fiscal 2000.

OPERATING INCOME

         As a result of the above, operating income increased $2.5 million, or
8.9 percent, to $30.4 million or12.4 percent of sales in fiscal 2001 as compared
to $27.9 million or 11.5 percent of sales in fiscal 2000.

NONOPERATING ACTIVITY

         Interest income increased by $0.6 million to $0.9 million in fiscal
year 2001 reflecting the Company's increased level of invested cash. (see
Liquidity and Capital Resources below). No other material nonoperating activity
occurred in either of the two fiscal years.

INCOME TAXES

         The Company's effective income tax rate for fiscal year 2001 was 35.0%
as compared to 36.8% in fiscal year 2000. The tax rate in 2001 was favorably
impacted by the utilization and benefit of operating loss carryforwards,
marginally lower worldwide tax rates, and a change in the mix of income
attributed to the various countries in which the Company does business.


                                       9
<PAGE>
YEAR ENDED OCTOBER 31, 2000 COMPARED TO YEAR ENDED OCTOBER 31, 1999

NET SALES

         Net sales of $243.1 million in fiscal year 2000 represented a 10.2
percent increase over net sales of $220.6 million in fiscal year 1999. The
majority of this increase can be attributed to an increase in the unit volume
(vs. price) of worldwide sales. The effects of foreign currency fluctuations
reduced net sales in fiscal year 2000 by $4.5 million as compared to fiscal year
1999. Had currency values remained unchanged from fiscal year 1999, net sales in
fiscal year 2000 would have been $247.6 million, or 12.2% greater than the prior
year.

         CUNO's operations are affected by global and regional economic factors.
However, the global diversity of the Company's business has helped limit the
impact of any one industry or the economy of any single country on its
consolidated results. The following table displays the Company's sales by
geographic operating segment (dollars in thousands):

<TABLE>
<CAPTION>
                                                YEAR ENDED                                       CURRENCY
                                OCTOBER 31,                  OCTOBER 31,        PERCENT          ADJUSTED
                                  2000                         1999              CHANGE           CHANGE

<S>                             <C>                          <C>                <C>              <C>
North America                   $135,494                     $124,990              8.4%             8.4%
Europe                            31,501                       32,985             (4.5%)           10.1%
Japan                             39,895                       29,373             35.8%            25.0%
Asia/Pacific                      22,791                       22,270              2.3%             7.0%
Latin America                     13,393                       10,966             22.1%            30.9%
                                --------------               ------------
    Total Sales                 $243,074                     $220,584             10.2%            12.2%
</TABLE>


         Sales growth in the Company's North American operations was led by the
Water Group (up 16.2 percent), a worldwide division of CUNO comprised of the
potable water segment of the business. The Water Group continues to record
strong sales with its series of new filters designed for OEM customers who serve
various channels of distribution with final sales to U.S. consumers.
Additionally, sales into the fluid processing market have continued to improve
in the U.S. while sales into the healthcare market have declined year over year
due mostly to a decline in sales to a large diagnostic customer.


         The Company's overseas sales increased $12.0 million or 12.5 percent in
2000 compared to 1999. Had the value of overseas currencies remained unchanged
in fiscal 2000 as compared to fiscal 1999, sales for these operations would have
increased $16.5 million or 17.2 percent. In Europe, sales increased 10.1 percent
in local currency with this gain spread broadly across the three markets. Sales
in Japan were 35.8 percent higher as compared to the same period last year, and
25.0 percent higher when expressed in local currency, reflecting strong
double-digit sales growth in all three markets. Local currency sales growth in
Asia/Pacific of 7.0 percent was due in large part to strong gains in the potable
water market as well as a general recovery of the Southeast Asian economy. Local
currency sales in Latin America increased 30.9 percent in fiscal 2000 reflecting
strong, broad improvements across all markets.


                                       10
<PAGE>
The following table displays the Company's sales by market (dollars in
thousands):

<TABLE>
<CAPTION>
                                              YEAR ENDED                                          CURRENCY
                                OCTOBER 31,                 OCTOBER 31,         PERCENT           ADJUSTED
                                   2000                        1999             CHANGE            CHANGE

<S>                             <C>                         <C>                 <C>               <C>
Potable Water                   $101,483                    $87,649             15.8%             17.1%
Fluid Processing                  78,781                     72,269              9.0%             11.0%
Healthcare                        62,810                     60,666              3.5%              6.7%
                                -----------               ----------
Total Sales                     $243,074                   $220,584             10.2%             12.2%
                                ===========               ==========            ====              ====
</TABLE>

         On a currency-adjusted basis, all geographic operating segments
experienced sales increases in the potable water segment. This dollar increase
was driven by strong sales (up 16.2 percent) in North America associated with
OEM customers, direct marketing companies, and appliance manufacturers, as well
as increased foreign potable water sales (up 21.7 percent on a currency-adjusted
basis). The increase in fluid processing sales primarily reflects the
strengthening worldwide demand in the electronics and oil & gas markets. A
decline in sales to a large diagnostic customer in North America was the primary
reason for decreased North American healthcare sales in fiscal 2000 as compared
to fiscal 1999. However, on a currency-adjusted basis, international healthcare
sales increased $6.7 million or 17.8 percent over fiscal year 1999.

GROSS PROFIT

         The Company's gross profit increased $7.9 million to $104.5 million in
fiscal year 2000 from $96.6 million in 1999. Gross profit as a percentage of net
sales was relatively flat - 43.8 percent in 1999 vs. 43.0 percent in 2000. The
primary factor that contributed to the lower gross margin in 2000 was lower
sales volume in the North American healthcare market which generally carries a
higher margin than most products in the other markets. Also, the Company's gross
profit was negatively impacted by a strong U.S. dollar prevailing throughout
much of fiscal 2000. The strong U.S. dollar negatively impacts the cost of
products and components manufactured in the US and shipped to overseas
subsidiaries.

OPERATING EXPENSES

         Selling, general and administrative expenses increased $2.5 million in
fiscal year 2000 over fiscal year 1999, representing a 4.0 percent increase.
Selling expenses accounted for $1.7 million of this growth, primarily reflecting
the continued growth of programs that support the worldwide growth of the Water
Group. Noncash compensation associated with employee stock plans decreased $0.5
million, reflecting a planned vesting of a significant program in fiscal year
1999. All other expense categories reflected minor increases consistent with
normal incentive and inflation-based increases. Research, development and
engineering expenses increased $1.2 million or 10.2 percent reflecting the
Company's continued focus on the development of new products and technologies.

OPERATING INCOME

         As a result of the above, operating income increased $4.3 million, or
18.1 percent, to $27.9 million or 11.5 percent of sales in fiscal year 2000 as
compared to $23.7 million or 10.7 percent of sales in fiscal year 1999.

NONOPERATING ACTIVITY

         Interest expense decreased by $0.5 million to $0.7 million in fiscal
year 2000 reflecting the Company's continued reduction in the level of debt
outstanding (see Liquidity and Capital Resources below). No other material
nonoperating activity occurred in either of the two fiscal years.

INCOME TAXES

         The Company's effective income tax rate for fiscal year 2000 was 36.8%
as compared to 34.9% in fiscal year 1999. The tax rate in 1999 was favorably
impacted by tax benefits related to 1996 spin-off expenses that were previously
considered nondeductible. This one-time benefit served to reduce the 1999
effective tax rate by 1.8%. Most other factors were not significant and, on a
net basis, were relatively consistent year over year.

LIQUIDITY AND CAPITAL RESOURCES

         The Company assesses its liquidity in terms of its ability to generate
cash to fund operating and investing activities. Of particular importance to the
management of liquidity are cash flows generated from operating activities,
capital expenditure levels and adequate external financing alternatives.


                                       11
<PAGE>
         The Company manages its worldwide cash requirements with consideration
of the cost effectiveness of the available funds from the many subsidiaries
through which it conducts its business. Management believes that its existing
cash position and other available sources of liquidity are sufficient to meet
current and anticipated requirements for the foreseeable future.

         Set forth below is selected key cash flow data (in thousands of
dollars):

                                                               YEAR ENDED
                                                               OCTOBER 31,

SOURCE / (USE) OF CASH                                     2001            2000
OPERATING ACTIVITIES:

Net cash provided by net income plus depreciation,
      amortization and non-cash compensation            $ 29,986       $ 27,203

Inventory                                                 (1,654)         3,511

Accounts receivable                                        2,890         (4,160)

Accounts payable and accrued expenses                         90          3,698

Net cash provided by operating activities                 27,944         34,523

INVESTING ACTIVITIES:

Acquisitions of companies, net of cash acquired           (4,489)        (2,885)

Proceeds from surrender of life insurance policies            --            569

Capital expenditures                                     (11,028)       (12,143)

FINANCING ACTIVITIES:

Net change in total debt                                    (606)       (11,103)

Retirement of Common Stock                                    --         (1,154)



         The net cash provided by net income plus depreciation, amortization and
non-cash compensation is an important measurement of cash generated from the
earnings process before significant non-cash charges. Net income plus
depreciation, amortization and non-cash compensation of $30.0 million increased
10.2 percent in fiscal 2001 as compared to fiscal 2000 primarily reflecting the
Company's increased gross profit and improved operating profit margin as
discussed above. The reduction in cash provided by inventories reflects changes
in the timing of production and certain sales shipments. The improvement in cash
provided by accounts receivable reflects the Company's continued strong
management of collection efforts. The reduction in cash provided by accounts
payable and accrued expenses relates to the overall timing of the Company's cash
disbursements.

         In the second quarter of fiscal 2001, CUNO closed on two acquisitions -
a product line in Australia and a distributor in Europe - for a total cost of
$4.5 million. These acquisitions did not have a material effect on the Company's
historical financial statements or pro forma operating results. In the second
quarter of fiscal 2000, the Company made a contingent consideration payment of
$2.9 million related to the previous acquisition of Chemical Engineering
Corporation (CEC). This payment was recorded as additional goodwill. There will
be no future contingency payments related to the CEC acquisition. The
acquisition of CEC included certain life insurance policies on key officers of
CEC. In the second quarter of 2000, CUNO elected to surrender these policies for
their cash surrender value upon settlement. Capital expenditures amounted to
$11.0 million in 2001 compared to $12.1 million in 2000. Expenditures in both
periods were primarily comprised of building additions and purchases of
machinery and equipment for the expansion of manufacturing capabilities.

         During the first quarter of 2000, a significant portion of the
Company's outstanding performance shares vested. In connection therewith, the
Company utilized $1.2 million in cash to pay applicable employee withholding
taxes on the common shares earned in return for shares of the Company's Common
Stock then retired.


                                       12
<PAGE>
Other selected financial data at October 31, follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                          2001            2000
<S>                                                     <C>            <C>
Long term debt, less current portion                    $  2,893       $  3,422

Stockholders' equity                                     140,171        119,518

Ratio of long term debt to total capitalization                2%             3%
</TABLE>



MARKET RISK DISCLOSURES

FOREIGN CURRENCY RISK

         Approximately 43% of the Company's operations consist of sales and
manufacturing activities in foreign countries. The Company manufactures a
significant portion of its products in the U.S. and sells some of these products
to affiliated companies overseas. As a result, the Company's financial results
could be significantly affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in the foreign markets in which the
Company distributes its products. The Company's currency exposures vary, but are
concentrated in the Japanese yen, Singapore dollar, Australian dollar, British
pound, Brazilian real, Argentine peso, and the Euro.

         The Company utilizes forward foreign exchange contracts to hedge
specific exposures relating to intercompany payments (primarily parent company
export sales to subsidiaries at pre-established U.S. dollar prices) and other
specific and identified exposures. The terms of the forward foreign exchange
contracts are matched to the underlying transaction being hedged, and are
typically under one year. Because such contracts are directly associated with
identified transactions, they are an effective hedge against fluctuations in the
value of the foreign currency underlying the transaction. The Company generally
does not hedge overseas sales denominated in foreign currencies or translation
exposures. The Company does not enter into financial instruments for speculation
or trading purposes.

         The Company utilizes bank loans and other debt instruments throughout
its worldwide operations. To mitigate foreign currency risk, such debt is
generally denominated in the underlying local currency of the branch or
subsidiary. In certain limited and specific instances, the Company will manage
risk by denominating a portion of debt outstanding in a currency other than the
local currency.

INTEREST RATE RISK

         The Company's interest income and expense are most sensitive to changes
in the general level of U.S. and Japanese interest rates. In this regard,
changes in these interest rates may affect the interest paid on debt. To
mitigate the impact of fluctuations in U.S. and Japanese interest rates, the
Company periodically evaluates alternative interest rate arrangements.

         Below is a table detailing, by maturity date, the Company's debt
portfolio and the associated interest rates for the fiscal years ended October
31, (dollars in thousands):


<TABLE>
<CAPTION>
                                                                                                                 FAIR
                            2002         2003        2004      2005       2006    THEREAFTER      TOTAL          VALUE
<S>                     <C>            <C>          <C>      <C>         <C>     <C>           <C>           <C>
Bank loans              $ 13,266           --          --        --         --                  $13,266       $13,266

Avg. Interest Rate                                                                                 0.67%

Long-term Debt:

Fixed Rate              $    728       $  844       $ 843    $  168      $ 165    $   873       $ 3,621       $ 3,888

Avg. Interest Rate          5.83%        5.79%       5.79%     4.97%      4.97%      5.01%         5.54%
</TABLE>


                                       13
<PAGE>
OTHER MATTERS

INFLATION

         Inflation had a negligible effect on the Company's operations during
fiscal years 2001 and 2000. The Company estimates that inflationary effects, in
the aggregate, were generally recovered or offset through increased pricing or
cost reductions in both fiscal years.

FORWARD LOOKING INFORMATION

         Because CUNO wants to provide shareholders with more meaningful and
useful information, this annual report contains statements relating to future
events and the predicted performance of CUNO which may constitute
forward-looking statements, as defined under the Private Securities Litigation
Act. CUNO has tried, wherever possible, to identify these "forward looking"
statements by using words such as "anticipate," "believe," "estimate," "expect"
and similar expressions. These statements reflect the Company's current beliefs
and are based on information currently available to it. Accordingly, these
statements are subject to risks and uncertainties which could cause the
Company's actual results, performance or achievements to differ materially from
those expressed in, or implied by, these statements. These risks and
uncertainties include the following: limited history as a stand-alone company;
economic and political conditions in the foreign countries in which the Company
conducts a substantial part of its operations and other risks associated with
international operations including taxation policies, exchange rate fluctuations
and the risk of expropriation; the Company's ability to protect its technology,
proprietary products and manufacturing techniques; volumes of shipments of the
Company's products, changes in the Company's product mix and product pricing;
costs of raw materials; the rate of economic and industry growth in the United
States and the other countries in which the Company conducts its business;
changes in technology, changes in legislative, regulatory or industrial
requirements and risks generally associated with new product introductions and
applications; and domestic and international competition in the Company's global
markets. CUNO undertakes no obligation to publicly release revisions to the
forward-looking statements to reflect new events or circumstances.


                                       14
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Stockholders and Board of Directors
CUNO Incorporated

         We have audited the accompanying consolidated balance sheets of CUNO
Incorporated as of October 31, 2001 and 2000, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended October 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CUNO
Incorporated at October 31, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 2001 in conformity with accounting principles generally accepted in
the United States.


[ERNST AND YOUNG LLP SIGNATURE]


Hartford, Connecticut

December 11, 2001


                                       15
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share amounts)


<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,                           2001              2000               1999
----------------------------------------------------------------------------------------------

<S>                                        <C>                <C>                <C>
Net sales                                  $    244,449       $    243,074       $    220,584

Operating expenses:

    Cost of products sold                       136,069            138,589            124,034

    Selling, general and administrative          64,240             63,665             61,193

    Research, development and engineering        13,729             12,893             11,704
                                            ------------      ------------       ------------
                                                214,038            215,147            196,931
                                            ------------      ------------       ------------
Operating income                                 30,411             27,927             23,653

Nonoperating income:

   Interest expense                                (545)              (695)            (1,202)

   Other income                                     931                363                323
                                            ------------      ------------       ------------
                                                    386               (332)              (879)
                                            ------------      ------------       ------------
Income before income taxes                       30,797             27,595             22,774

Income taxes (benefit):

   Current                                       11,576              7,490              7,632

   Deferred                                        (792)             2,658                311
                                            ------------      ------------       ------------
                                                 10,784             10,148              7,943
                                            ------------      ------------       ------------
Net income                                 $     20,013       $     17,447       $     14,831
                                            ===========       ============       ============
Basic earnings per common share            $       1.23       $       1.08       $       0.92

Diluted earnings per common share          $       1.20       $       1.05       $       0.91

Basic shares outstanding                     16,308,563         16,195,843         16,064,159

Diluted shares outstanding                   16,689,934         16,629,233         16,336,373
                                            ------------      ------------       ------------

See accompanying Notes
</TABLE>


                                       16
<PAGE>
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
OCTOBER 31,                                                                                2001            2000
-------------------------------------------------------------------------------------------------------------------
ASSETS

<S>                                                                                    <C>             <C>
Current assets
   Cash and cash equivalents                                                           $  25,628       $  13,814
   Accounts receivable (less allowances for doubtful accounts
     of $1,336 and $1,395, respectively)                                                  48,546          52,239
   Inventories                                                                            24,590          24,087
   Deferred income taxes                                                                   5,971           6,414
   Prepaid expenses and other current assets                                               4,329           2,101
                                                                                       -----------      ----------
      Total current assets                                                               109,064          98,655
Noncurrent assets
   Deferred income taxes                                                                   2,300           1,168
   Intangible assets, net                                                                 27,725          23,971
   Other noncurrent assets                                                                 1,941           1,918
   Property, plant and equipment, net                                                     65,595          63,187
                                                                                       ---------       ---------
      Total assets                                                                     $ 206,625       $ 188,899
                                                                                       =========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Bank loans                                                                         $  13,266       $  14,233
    Accounts payable                                                                      16,606          17,978
    Accrued payroll and related taxes                                                     12,294          11,851
    Other accrued expenses                                                                 7,265           7,675
    Accrued income taxes                                                                   3,468           4,251
    Current portion of long-term debt                                                        728             746
                                                                                       -----------      ----------
      Total current liabilities                                                           53,627          56,734
Noncurrent liabilities
    Long-term debt, less current portion                                                   2,893           3,422
    Deferred income taxes                                                                  4,005           4,786
    Retirement benefits                                                                    5,929           4,439
                                                                                       -----------      ----------
      Total noncurrent liabilities                                                        12,827          12,647

STOCKHOLDERS' EQUITY

    Preferred Stock, $.001 par value: 2,000,000 shares authorized; no shares issued           --              --
    Common Stock, $.001 par value: 50,000,000 shares authorized;
       16,392,244 and 16,279,198 shares issued and outstanding                                16              16
    Treasury Stock, at cost (2,747 and 747 shares)                                           (57)             --
    Additional paid-in-capital                                                            42,602          39,814
    Unearned compensation                                                                   (957)         (1,120)
    Accumulated other comprehensive (loss) income:
     Foreign currency translation adjustments                                             (5,224)         (3,546)
     Change in fair value of derivative financial instruments                                 94              --
     Minimum pension liability                                                              (670)             --
    Retained earnings                                                                    104,367          84,354
                                                                                       -----------      ----------
      Total stockholders' equity                                                         140,171         119,518
                                                                                       -----------      ----------
      Total liabilities and stockholders' equity                                       $ 206,625       $ 188,899
                                                                                       ===========      ==========
</TABLE>

See accompanying Notes.



                                       17
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                        ACCUMULATED
                                                                ADDITIONAL  UNEARNED     OTHER COM-                   TOTAL
                                            COMMON   TREASURY    PAID-IN    COMPEN-      PREHENSIVE     RETAINED   STOCKHOLDERS'
                                             STOCK    STOCK      CAPITAL    SATION      INCOME (LOSS)   EARNINGS      EQUITY
---------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>      <C>        <C>         <C>         <C>             <C>        <C>
BALANCE AT OCTOBER 31, 1998                  $ 16      $ --      $37,780    $(2,742)       $ 3,171      $ 52,076     $ 90,301
                                            ------   -------     -------    --------      --------      --------     ---------
Net income                                                                                                14,831       14,831
Other comprehensive income:
   Foreign currency translation adjustments                                                 (3,255)                    (3,255)
   Minimum pension liability adjustment,
    net of income taxes of $724                                                                524                        524
                                                                                                                    ----------
Comprehensive income                                                                                                   12,100
Amortization of unearned compensation                                         1,184                                     1,184
Shares awarded under employee stock plans                          2,501     (2,209)                                      292
Shares issued to employee benefit plans                              599                                                  599
Stock options exercised                                              118                                                  118
Unearned compensation adjustments                                 (1,081)     1,081                                        --
Other                                                               (138)       118                                       (20)
                                            ------   -------     -------    --------      --------      --------     ---------
BALANCE AT OCTOBER 31, 1999                    16        --       39,779     (2,568)           440        66,907      104,574
                                            ------   -------     -------    --------      --------      --------     ---------
Net income                                                                                                17,447       17,447
Other comprehensive income-
   Foreign currency translation adjustments                                                 (3,986)                    (3,986)
                                                                                                                    ----------
Comprehensive income                                                                                                   13,461
Amortization of unearned compensation                                           610                                       610
Shares awarded under employee stock plans                            816        (96)                                      720
Shares issued to employee benefit plans                              650                                                  650
Stock options exercised                                              254                                                  254
Retirement of Common Stock                                        (1,154)                                              (1,154)
Unearned compensation adjustments                                   (934)       934                                        --
Tax benefit on stock-based compensation                              403                                                  403
                                            ------   -------     -------    --------      --------      --------     ---------
BALANCE AT OCTOBER 31, 2000                    16        --       39,814     (1,120)        (3,546)       84,354      119,518
                                            ------   -------     -------    --------      --------      --------     ---------
Net income                                                                                                20,013        20,013
Other comprehensive income-
   Foreign currency translation adjustments                                                 (1,678)                    (1,678)
   Change in fair value of derivative
    financial instruments, net of deferred
    income taxes of $50                                                                         94                         94
   Minimum pension liability adjustment,
    net of income taxes of $418                                                               (670)                      (670)
                                                                                                                    ----------
Comprehensive income                                                                                                   17,759
Amortization of unearned compensation                                           727                                       727
Shares awarded under employee stock plans                          1,532       (564)                                      968
Shares issued to employee benefit plans                              632                                                  632
Stock options exercised                                              496                                                  496
Purchase of Treasury Stock                              (57)                                                              (57)
Tax benefit on stock-based compensation                              128                                                  128
                                            ------   -------     -------    --------      --------      --------     ---------
BALANCE AT OCTOBER 31, 2001                  $ 16      $(57)     $42,602      $(957)       $(5,800)     $104,367     $140,171
                                            ======   =======     =======    ========      ========      ========     =========
</TABLE>

See accompanying Notes.


                                       18
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,                                                                      2001            2000           1999
------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES

<S>                                                                                       <C>            <C>            <C>
   Net income                                                                             $ 20,013       $ 17,447       $ 14,831
   Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation and amortization                                                           9,052          8,866          8,275
     Noncash compensation recognized under employee stock plans                                921            890          1,379
     Gain on sales of property, plant and equipment                                            (59)           (17)           (44)
     Pension costs in excess of (less than) funding                                           (347)           304           (214)
     Deferred income taxes                                                                    (792)         2,658            393
Changes in operating assets and liabilities, net of acquisitions:
     Accounts receivable                                                                     2,890         (4,160)        (4,940)
     Inventories                                                                            (1,654)         3,511         (2,135)
     Accounts payable and accrued expenses                                                      90          3,698          3,740
     Accrued income taxes                                                                     (474)           887          3,583
     Prepaid expenses and other                                                             (1,696)           439           (474)
                                                                                          ---------       --------       ---------
Net cash provided by operating activities                                                   27,944         34,523         24,394

INVESTING ACTIVITIES
     Proceeds from sales of property, plant and equipment                                      104             72             61
     Proceeds from surrender of life insurance policies                                         --            569             --
     Acquisition of companies, net of cash acquired                                         (4,489)        (2,885)        (1,000)
     Capital expenditures                                                                  (11,028)       (12,143)       (11,695)
                                                                                          ---------       --------       ---------
Net cash used for investing activities                                                     (15,413)       (14,387)       (12,634)

FINANCING ACTIVITIES
     Proceeds from long-term debt                                                               --          5,200          6,100
     Principal payments on long-term debt                                                     (969)       (12,159)       (17,068)
     Net repayments under short-term bank loans                                                363         (4,144)           908
     Retirement of Common Stock                                                                 --         (1,154)            --
     Acquisition of Treasury Stock                                                             (57)            --             --
     Proceeds from stock options exercised                                                     496            254            118
                                                                                          ---------       --------       ---------
Net cash used for financing activities                                                        (167)       (12,003)        (9,942)
Effect of exchange rate changes on cash and cash equivalents                                  (550)          (505)           (65)
                                                                                          ---------       --------       ---------
Net change in cash and cash equivalents                                                     11,814          7,628          1,753
Cash and cash equivalents at beginning of year                                              13,814          6,186          4,433
                                                                                          ---------       --------       ---------
Cash and cash equivalents at end of year                                                  $ 25,628       $ 13,814       $  6,186
                                                                                          =========      ========         ========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
     Interest                                                                             $    572       $    760       $  1,236
     Income taxes                                                                           12,261          6,286          2,523
                                                                                          =========       ========       =========
</TABLE>

See accompanying Notes



                                       19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CUNO INCORPORATED

NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES

ORGANIZATION:

         CUNO Incorporated (the "Company" or "CUNO") designs, manufactures and
markets a comprehensive line of filtration products for the separation,
clarification and purification of liquids and gases. The Company's products,
which include proprietary depth filters and semi-permeable membrane filters, are
sold in the potable water, healthcare, and fluid processing markets throughout
the world.

CONSOLIDATION:

         The accounts of the Company and all of its subsidiaries are included in
the consolidated financial statements. All significant intercompany accounts and
transactions are eliminated in consolidation.

CASH EQUIVALENTS:

         The Company considers all highly liquid investments with a maturity of
three months or less, when purchased, to be cash equivalents. Cash equivalents
consist of time deposits in financial institutions.

INVENTORIES:

         Inventories are stated at the lower of cost or market. Inventories in
the United States are primarily valued by the last-in, first-out (LIFO) cost
method. The method used for all other inventories is first-in, first-out (FIFO).
Approximately 48 and 42 percent of worldwide inventories in 2001 and 2000,
respectively, are accounted for using the LIFO method. Inventories as of October
31 consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                       2001                           2000
<S>                                   <C>                            <C>
Raw materials                         $10,692                        $10,814

Work in process                         2,868                          2,435

Finished goods                         11,030                         10,838
                                    ---------                       --------
                                      $24,590                        $24,087
                                    =========                       ========
</TABLE>

         If all inventories were valued by the FIFO method, which approximates
replacement cost, inventories would have been $2,900,000 higher in 2001 and
$2,805,000 higher in 2000.

INTANGIBLES:

         Intangible assets as of October 31 follow (in thousands):

<TABLE>
<CAPTION>
                                                       2001           2000
<S>                                                  <C>          <C>
Goodwill, less accumulated amortization
(2001 - $9,105; 2000 - $8,321)                       $26,336      $23,222
Pension intangible asset                                 720           --
Other intangibles, less accumulated amortization
(2001 - $24,850; 2000 - $24,770)                         669          749
                                                     --------     --------
                                                     $27,725      $23,971
                                                     ========     =========
</TABLE>

         Goodwill, which is the excess of cost over the fair value of net assets
acquired, has historically been amortized on a straight-line basis over periods
ranging from 10 to 40 years. See "Newly Issued Accounting Standards" below.

         Other intangibles, including patents, know-how and trademarks, are
stated at their appraised value on the acquisition date less accumulated
amortization, which is provided using the straight-line method over periods
ranging from 10 to 25 years.


                                       20
<PAGE>
PROPERTIES AND DEPRECIATION:

         Property, plant and equipment are recorded at cost. Buildings and
equipment are depreciated principally by the straight-line method over their
useful lives, ranging from 10 to 40 years for buildings and 3 to 20 years for
machinery and equipment.

IMPAIRMENT OF LONG-LIVED ASSETS:

         In the event that facts and circumstances indicate that the carrying
value of intangibles and long-lived assets or other assets may be impaired, an
evaluation is performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if a write-down is required.

INCOME TAXES:

         The Company uses the liability method in measuring the provision for
income taxes and recognizing deferred income tax assets and liabilities in the
balance sheet. Deferred income tax assets and liabilities principally arise from
differences between the tax basis of an asset or liability and its reported
amount in the consolidated financial statements. Deferred income tax balances
are determined using provisions of currently enacted tax laws; the effects of
future changes in tax laws or rates are not anticipated.

         Provisions are made for income taxes on undistributed earnings of
foreign subsidiaries which are expected to be remitted to the Company in the
near term. Upon distribution of those earnings in the form of dividends or
otherwise, the Company would be subject to both U.S. income taxes (subject to an
adjustment for foreign tax credits) and withholding taxes payable to the various
foreign countries. Determination of the amount of any unrecognized deferred U.S.
income tax liability is not practicable because of the complexities associated
with its hypothetical calculation.

TRANSLATION OF FOREIGN CURRENCIES:

         Revenue and expense accounts are translated at the average exchange
rate for the year while all assets and liability accounts are translated at the
end of year exchange rate. Resulting translation adjustments are recorded as a
separate component of accumulated other comprehensive income.

REVENUE RECOGNITION:

         Revenue is recognized when the earning process is complete and the
risks and rewards of ownership have transferred to the customer, which is
considered to have occurred upon shipment of the finished product. Shipping and
handling costs associated with sales are charged to cost of sales.

RESEARCH AND DEVELOPMENT:

         Costs associated with the development of new products and improvements
to existing products are charged to operations as incurred. Research and
development costs were $7,343,000, $6,508,000, and $5,599,000 in 2001, 2000 and
1999, respectively.

ADVERTISING:

         Advertising costs are expensed as incurred and included in "selling,
general and administrative expenses." Advertising expenses were $2,774,000,
$3,203,000, and $3,469,000 in 2001, 2000, and 1999, respectively.

EMPLOYEE STOCK OPTIONS:

         The Company accounts for employee stock options under the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees" and related interpretations. Accounting for the issuance of stock
options under the provisions of APB Opinion No. 25 typically does not result in
compensation expense for the Company since the exercise price of options is
normally established at the market price of the Company's Common Stock on the
date granted.


                                       21
<PAGE>
OTHER INCOME:

         Other income as reported in the accompanying Consolidated Statements of
Income for the years ended October 31 consisted of the following (amounts in
thousands):

<TABLE>
<CAPTION>
                                                      2001        2000       1999

<S>                                                  <C>         <C>         <C>
Interest income                                      $ 944       $ 364       $ 199
Exchange gains                                          46           5         120
Gains on sales of property, plant and equipment         59          17          44
Other expenses                                        (118)        (23)        (40)
                                                     ------      ------      ------
Total                                                $ 931       $ 363       $ 323
                                                     ======      ======      ======
</TABLE>

EARNINGS PER SHARE:

         The following table sets forth the computation of basic and diluted
earnings per share for the years ended October 31:

<TABLE>
<CAPTION>
                                                   2001               2000                1999
NUMERATOR:

<S>                                             <C>                <C>                <C>
Net Income                                      $ 20,013,000       $ 17,447,000       $ 14,831,000
                                                =============       ============      =============
DENOMINATORS:

Weighted average shares outstanding               16,367,826         16,326,697         16,233,591
Issued but unearned performance shares                  (762)           (67,636)          (110,322)
Issued but unearned restricted shares                (58,501)           (63,218)           (59,110)
                                                -------------       ------------      -------------
Denominator for basic earnings per share          16,308,563         16,195,843         16,064,159
                                                =============       ============      =============
Weighted average shares outstanding               16,367,826         16,326,697         16,233,591
Effect of dilutive employee stock options            322,108            302,536            102,782
                                                -------------       ------------      -------------
Denominator for diluted earnings per share        16,689,934         16,629,233         16,336,373
Basic earnings per share                        $       1.23       $       1.08       $       0.92
Diluted earnings per share                      $       1.20       $       1.05       $       0.91
                                                =============       ============      =============
</TABLE>

FOREIGN CURRENCY EXCHANGE CONTRACTS:

         The Company utilizes forward foreign exchange contracts to hedge
specific exposures relating primarily to export sales with pre-established U.S.
dollar amounts at specified dates. A forward foreign exchange contract obligates
the Company to exchange predetermined amounts of specified foreign currencies at
specified exchange rates on specified dates. Open, matured and terminated
contracts are marked to market for changes in the spot exchange rate with
resulting gains and losses recognized in the Financial Statements. See
"Newly Issued Accounting Standards" below.

USES OF ESTIMATES:

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

NEWLY ISSUED ACCOUNTING STANDARDS:

FASB 133

         As of November 1, 2000, the Company adopted Financial Accounting
Standards Board ("FASB") Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement 133"). The adoption of Statement
133 did not effect the Company's financial statements since the accounting
treatment from the financial instruments held at the time did not change.


                                       22
<PAGE>
         As a result of adoption of Statement 133, the Company recognizes all
derivative financial instruments, such as interest rate swap contracts and
foreign exchange contracts, in the consolidated financial statements at fair
value regardless of the purpose or intent for holding the instrument. Changes in
the fair value of derivative financial instruments are either recognized
periodically in income or in shareholders' equity as a component of accumulated
other comprehensive income depending on whether the derivative financial
instrument qualifies for hedge accounting, and if so, whether it qualifies as a
fair value hedge or cash flow hedge. Generally, changes in fair values of
derivatives accounted for as fair value hedges are recorded in income along with
the portions of the changes in the fair values of the hedged items that relate
to the hedged risk(s). Changes in fair values of derivatives accounted for as
cash flow hedges, to the extent they are effective as hedges, are recorded in
other comprehensive income net of deferred income taxes. Changes in fair values
of derivatives not qualifying as hedges are reported in income.

Statement 141 and 142
         In June 2001, the FASB issued Statement No. 141, "Business
Combinations," and No. 142, "Goodwill and Other Intangible Assets." Under the
latter new statement, goodwill (and other intangible assets deemed to have
indefinite lives) will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will be amortized over their useful
lives.

         The Company will apply No. 142 to existing goodwill and other
intangible assets beginning November 1, 2001 (first quarter of fiscal 2002) and
No. 141 to all future acquisitions. No impairment will result from the initial
adoption of No. 142. Further, had No. 142 been in effect as of the beginning of
fiscal 2001, amortization expense would have been reduced by $1,316,000 and net
income would have been increased by $1,260,000 or approximately $0.07 per share.

RECLASSIFICATIONS:

         Certain reclassifications have been made to the prior year amounts to
conform to the current year presentation.

NOTE 2 - PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment as of October 31 is comprised of the
following (in thousands):

<TABLE>
<CAPTION>
                                      2001          2000

<S>                                <C>           <C>
Land and land improvements         $  6,064      $  6,335
Buildings                            30,326        29,691
Machinery and equipment              82,907        77,728
Construction in progress             15,086        11,844
                                   --------      ---------
                                    134,383       125,598
Less accumulated depreciation        68,788        62,411
                                   --------      ---------
                                   $ 65,595      $ 63,187
                                   ========      =========
</TABLE>

         Depreciation expense was $7,898,000 in 2001, $7,649,000 in 2000, and
$6,939,000 in 1999.

NOTE  3 - DEBT

         Debt amounted to $3,621,000 and $4,168,000 at October 31, 2001 and
2000, respectively, and primarily relates to debt instruments used to finance
certain capital expenditures and acquisitions, including certain debt which has
been discounted at 6.0 percent and is payable over five years. Principal
payments due after October 31, 2001 are: 2002 - $728,000; 2003 - $844,000; 2004
- $843,000; 2005 - $168,000; 2006 - $165,000 and thereafter - $873,000.

         Outstanding bank loans at October 31, 2001 and 2000 had weighted
average interest rates of 0.67 and 1.3 percent in 2001 and 2000, respectively.
The bank loans and unused short-term lines of credit are payable upon demand and
are unsecured. There are no significant commitment fees related to the bank
loans or unused lines of credit.

         The Company had available uncommitted, unused short-term lines of
credit in various countries totaling approximately $16.3 million at October 31,
2001. Borrowings under the unused short-term lines of credit are subject to the
bank's approval.


                                       23
<PAGE>
NOTE  4 - CAPITAL STOCK

         The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, par value $.001 per share, and 2,000,000 shares of
Preferred Stock, par value $.001 per share.

COMMON STOCK

         Subject to preferences that may be applicable to any outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. Holders of Common Stock are entitled to one vote per share
in all matters to be voted upon by shareholders. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of the Company's
liabilities and the liquidation preferences of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive rights and no rights to convert their
Common Stock into any other securities, and there are no redemption provisions
with respect to such shares. All of the outstanding shares of Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which the Company may issue in the
future.

PREFERRED STOCK

         The authorized class of Preferred Stock may be issued in series from
time to time with such designations, relative rights, priorities, preferences,
qualifications, limitations and restrictions thereof as the Board of Directors
determines. The rights, priorities, preferences, qualifications, limitations and
restrictions of different series of Preferred Stock may differ with respect to
dividend rates, amounts payable on liquidation, voting rights, conversion
rights, redemption provisions, sinking fund provisions and other matters. The
Board of Directors may authorize the issuance of Preferred Stock which ranks
senior to the Common Stock with respect to the payment of dividends and the
distribution of assets upon liquidation. In addition, the Board is authorized to
fix the limitations and restrictions, if any, upon the payment of dividends on
Common Stock to be effective while any shares of Preferred Stock are
outstanding.

STOCKHOLDER RIGHTS PLAN

         The Company has a Stockholder Rights Plan, pursuant to which a
preferred share purchase right (a "Right") is associated with, and trades with,
each share of Common Stock outstanding. Each Right, when it becomes exercisable,
entitles its holder to purchase from the Company one-hundredth of a share of
Series A Junior Participating Preferred Stock ("Series A Preferred Stock"), par
value $.001 per share, of the Company at a price of $60 per one-hundredth share,
subject to adjustment. The Rights are not exercisable until the earlier of (i)
the acquisition of 15% or more of the Company's Common Stock by a person or
group of affiliated persons (an "Acquiring Person"); or (ii) 10 days following
the commencement or announcement of an intention to make a tender or exchange
offer which would result in a person or group becoming an Acquiring Person. Each
holder of a Right will have the right to receive, upon exercise, the number of
shares of Common Stock or one-hundredths of a share of Series A Preferred Stock
having a value (immediately prior to such triggering event) equal to two times
the exercise price of such Right. In the event that the Company is acquired in a
merger or acquisition, as defined, each holder of a Right shall have the right
to receive, upon exercise, common shares of the acquiring company having a value
equal to two times the exercise price of the Right. The Rights expire on August
8, 2006.

NOTE 5 - OPERATING LEASES

         The Company has certain lease agreements for various facilities and
equipment. Rent expense under operating leases was approximately $2,430,000 in
2001, $2,694,000 in 2000, and $2,812,000 in 1999.

         Future minimum lease payments under noncancellable operating leases
with an initial term of one year or more at October 31, 2001 were as follows:
2002 - $2,087,000; 2003 - $1,752,000; 2004 - $1,500,000; 2005 - $1,452,000; and
2006 - $1,475,000.


                                       24
<PAGE>
NOTE 6 - BENEFIT PLANS

         The Company has noncontributory defined benefit plans for substantially
all of its U.S. employees. Pension benefits for the hourly employees covered by
these plans are expressed as a flat benefit rate times years of continuous
service. Benefits for salaried employees are based upon a percentage of the
employee's average compensation during the preceding ten years, reduced by 50
percent of the Social Security Retirement Benefit. The Company funds amounts at
least sufficient to exceed the minimum funding requirements set forth in the
Employee Retirement Income Security Act of 1974, plus such additional amounts as
may be deemed appropriate.

         The Company also has contributory defined benefit pension plans
covering its employees in Japan. Benefits under these plans are based on years
of service and compensation in the period immediately preceding retirement.
Funding is predicated on minimum contributions as required by local laws and
regulations plus additional amounts, if any, as may be deemed appropriate.

         The following table sets forth the funded status and amounts recognized
in the Consolidated Balance Sheets at October 31, 2001 and 2000 for the
Company's U.S. and Japanese defined benefit pension plans (in thousands):

<TABLE>
<CAPTION>
                                                    2001                                2000
                                                PLANS WHOSE            PLANS WHOSE ASSETS       PLANS WHOSE
                                             ACCUMULATED BENEFITS     EXCEED ACCUMULATED    ACCUMULATED BENEFITS
                                                 EXCEED ASSETS             BENEFITS             EXCEED ASSETS

<S>                                          <C>                      <C>                   <C>
Projected benefit obligation                    $(38,806)                  $(21,162)                  $(13,051)
                                                ==========                 ==========                 =========
Market value of plan assets                     $ 27,009                   $ 23,277                   $  6,908
                                                ==========                 ==========                 =========
Projected benefit obligation less than
    (in excess of) plan assets                   (11,797)                     2,115                     (6,143)
Unrecognized net (gain) loss                       7,426                     (3,871)                     1,592
Unrecognized prior service cost                    1,304                      1,349                        201
Unrecognized transition obligation                  (666)                        --                        318
Additional minimum liability                      (2,196)                        --                         --
                                                ----------                 ----------                 ---------
 Net pension liability                          $ (5,929)                  $   (407)                  $ (4,032)
                                                ==========                 ==========                 =========
</TABLE>

         In fiscal 2001, all of the Company's pension plans had accumulated
benefit obligations in excess of their assets. The Company's net pension
liability at the end of fiscal 2001 was adversely impacted by weakened equity
markets and lower interest rates. The Company believes these two factors are
temporary in nature and should not adversely impact the Plans over their long
term estimated lives.

         Plan assets at October 31, 2001 are invested in publicly traded and
restricted mutual funds, various corporate and government bonds, guaranteed
income contracts and listed stocks, including common stock of the Company having
a market value of $1,297,000 (50,000 shares) at that date.

         A summary of the various components of net periodic pension cost for
defined benefit plans and cost information for other plans for the three-year
period is shown below (in thousands):

<TABLE>
<CAPTION>
                                      2001        2000            1999
DEFINED BENEFIT PLANS:

<S>                                 <C>           <C>           <C>
Service cost                        $ 1,794       $ 1,915       $ 2,043
Interest cost                         1,947         1,908         1,702
Expected return on plan assets       (1,750)       (2,000)       (3,043)
Net amortization and deferral          (647)          (60)        1,433
                                    --------      --------      -------
Net pension expense                 $ 1,344       $ 1,763       $ 2,135
                                    ========      ========      ========
</TABLE>



                                       25
<PAGE>
         A summary of the changes in the projected benefit obligation is shown
below (amounts in thousands):

<TABLE>
<CAPTION>
                                              2001            2000

<S>                                         <C>            <C>
Benefit obligation - beginning of year      $ 34,213       $ 33,643
Service cost                                   1,794          1,915
Interest cost                                  1,947          1,908
Benefits and expenses paid                    (1,520)        (1,819)
Actuarial assumption changes                   4,645           (948)
Plan amendments                                 (950)            --
Foreign currency exchange rate changes        (1,323)          (486)
                                            ---------      ---------
Benefit obligation - end of year            $ 38,806       $ 34,213
                                            =========      =========
</TABLE>



         A summary of the changes in the plan assets is shown below (amounts in
thousands):

<TABLE>
<CAPTION>
                                                2001           2000

<S>                                          <C>            <C>
Plan assets - beginning of year              $ 30,185       $ 28,441
Actual return on assets                        (2,645)         2,329
Employer contributions                          1,770          1,561
Benefits and expenses paid                     (1,520)        (1,819)
Foreign currency exchange rate changes           (781)          (327)
                                             ---------      ---------
Plan assets - end of year                    $ 27,009       $ 30,185
                                             =========      =========
</TABLE>


         Assumptions used in the accounting for the defined benefit plans as of
October 31 were:

<TABLE>
<CAPTION>
                                                    2001        2000
DOMESTIC PLANS

<S>                                                 <C>        <C>
Weighted-average discount rate                      7.25%       7.75%
Rates of increase in compensation levels            4.50%       5.00%
Expected long-term rate of return on assets         9.75%      10.00%

FOREIGN PLAN (JAPAN)
Weighted-average discount rate                      2.50%      2.75%
Rates of increase in compensation levels            2.75%      3.00%
Expected long-term rate of return on assets         5.00%      5.00%
</TABLE>


         The changes in the actuarial assumptions referred to above had no
impact on pension expense for 2001. Due to assumptions inherent in the actuarial
computations, it is reasonably possible that future actual expenses will differ
from current actuarial estimates.

         The Company sponsors a defined contribution plan that provides all U.S.
employees of the Company an opportunity to accumulate funds for their
retirement. The Company currently matches 50% of employee contributions up to 6%
of qualified wages. Company matching contributions charged to income amounted to
$678,000, $638,000, and $567,000 in 2001, 2000, and 1999, respectively. Company
matching contributions are made annually in shares of the Company's Common Stock
subsequent to the Plan's calendar year end.


                                       26
<PAGE>
NOTE 7 - INCOME TAXES

         The components of income before income taxes and the provision for
income taxes are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                           2001           2000           1999

<S>                                     <C>            <C>            <C>
Income before income taxes
   Domestic                             $ 22,109       $ 19,675       $ 16,887
   Foreign                                 8,688          7,920          5,887
                                        --------       ---------      ---------
                                          30,797         27,595         22,774

Income taxes (benefit)
   Current

     Domestic - Federal                    7,159          3,108          4,290
              - State and local              915            567            916
     Foreign                               3,767          3,815          2,629
     Operating loss carryforwards           (265)            --           (203)
                                        --------       ---------      ---------
                                          11,576          7,490          7,632
   Deferred

     Domestic - Federal                     (645)         2,518             36
              - State and local             (147)           449             (1)
     Foreign                                  --           (309)           276
                                        --------       ---------      ---------
                                            (792)         2,658            311
                                        --------       ---------      ---------
                                          10,784         10,148          7,943
                                        --------       ---------      ---------
Net Income

     Domestic                             14,827         13,033         11,646
     Foreign                               5,186          4,414          3,185
                                        --------       ---------      ---------
                                        $ 20,013       $ 17,447       $ 14,831
                                       =========       =========      =========
</TABLE>

         A reconciliation of the statutory U.S. federal rate to the effective
income tax rate follows:


<TABLE>
<CAPTION>
                                                         2001       2000        1999

<S>                                                     <C>         <C>         <C>
Statutory U.S. federal income tax rate                  35.0%       35.0%       35.0%
State and local taxes on income, net of domestic
     federal income tax benefit                          1.6         2.4         2.5
Impact of foreign subsidiaries on effective rate         1.0         1.2         1.2
Benefit of operating loss carryforwards                 (0.9)       --          (0.3)
Tax credits                                             (2.3)       (2.7)       (2.2)
Prior year tax provision adjustments                    (0.2)        0.4        (1.8)
Goodwill amortization with no tax benefit                1.0         1.2         1.5
All other                                               (0.2)        (.7)       (1.0)
                                                       ------       -----       ------
Effective income tax rate                               35.0%       36.8%       34.9%
                                                       ======       =====       ======
</TABLE>


                                       27
<PAGE>
         Significant components of the Company's deferred income tax liabilities
and assets as of October 31 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                2001        2000
<S>                                                           <C>         <C>
Deferred income tax liabilities:
 Property, plant and equipment                                $5,136      $5,135
 Other                                                            --          34
                                                              -------     ------
  Total deferred income tax liabilities                        5,136       5,169
Deferred income tax assets:
 Pension liability                                             1,986       1,433
 Employee benefits                                             2,655       2,492
 Net operating loss carryforwards                                116         350
 Other accruals and reserves                                   1,845       1,559
 Inventories                                                   1,334       1,288
 Other                                                         1,582       1,193
                                                              -------     ------
  Total deferred income tax assets                             9,518       8,315
  Less: valuation allowance for deferred income tax assets       116         350
                                                              -------     ------
  Deferred income tax assets, after valuation allowance        9,402       7,965
                                                              -------     ------
Net deferred income tax assets                                $4,266      $2,796
                                                              =======     ======
</TABLE>

         The valuation allowance for deferred income tax assets as of October
31, 1999 was $189,000. The decrease in the valuation allowance during fiscal
2001 relates to the utilization of net operating loss carry forwards in Italy
and Germany. Although realization of the net deferred income tax asset of
$9,402,000 is not assured, management believes it is more likely than not that
all of such net deferred income tax assets will be realized. The amount of the
net deferred income tax assets considered realizable, however, could be reduced
if estimates of future taxable income are reduced.

         The net operating loss carryforwards in Germany are available
indefinitely; the net operating loss carryforwards in Italy expire in 2005.

NOTE  8 - ACQUISITIONS

         In the second quarter of fiscal 2001, CUNO closed on two acquisitions -
a product line in Australia and a distributor in Europe - for a total cost of
$4.5 million. These acquisitions do not have a material effect on the Company's
historical financial statements or its pro forma operating results. The amount
of goodwill recorded in connection with these acquisitions amounted to $4.3
million. In the second quarter of fiscal 2000, the Company made a contingent
consideration payment of $2.9 million related to the previous acquisition
of Chemical Engineering Corporation (CEC). This payment was recorded as
additional goodwill. There will be no future contingency payments related to the
CEC acquisition. The acquisition of CEC included certain life insurance policies
on key officers of CEC. In the second quarter of fiscal 2000, CUNO elected to
surrender these policies for their cash surrender value upon settlement.


                                       28
<PAGE>
NOTE 9 - SEGMENT FINANCIAL DATA

         For management reporting and control, the Company is divided into five
geographic operating segments as presented below. Each segment has general
operating autonomy over its products.

         Operating segment data include the results of all subsidiaries,
consistent with the management reporting of these operations. Financial
information by geographic operating segment as of and for each of the years
ended October 31 is summarized below (amounts in thousands):

<TABLE>
<CAPTION>
                                           2001           2000            1999
NET SALES:

<S>                                    <C>             <C>             <C>
Europe                                 $  42,337       $  36,724       $  40,696
Japan                                     34,807          40,593          30,143
Asia/Pacific                              25,427          25,322          24,315
Latin America                             12,406          13,788          11,287
                                       ---------       ---------       ---------
Subtotal - Foreign Sales                 114,977         116,427         106,441
North America                            160,824         157,846         146,248
Elimination of intercompany sales        (31,352)        (31,199)        (32,105)
                                       ---------       ---------       ---------
 Consolidated                           $ 244,449       $ 243,074      $ 220,584
                                       =========       =========       =========
</TABLE>

         Each geographic operating segment primarily sells its products to
external customers within its country of domicile.

         One of the Company's customers accounted for approximately 11.5% of
fiscal 2001 sales. The Company believes that no other customer accounts for more
than ten percent of sales.

<TABLE>
<CAPTION>
                                   2001          2000           1999
OPERATING INCOME:

<S>                             <C>            <C>            <C>
North America                   $ 19,032       $ 17,503       $ 15,313
Europe                             2,465          1,330          2,384
Japan                              3,380          3,504          1,083
Asia/Pacific                       3,543          3,662          3,190
Latin America                      1,991          1,928          1,683
                                --------       --------       ---------
Segment total                     30,411         27,927         23,653
                                --------       --------       ---------
Interest expense                    (545)          (695)        (1,202)
Other income, net                    931            363            323
                                --------       --------       ---------
Income before income taxes      $ 30,797       $ 27,595       $ 22,774
                                ========       ========       =========
</TABLE>

         Segment operating income consists of net sales less operating expenses.
Interest expense and other income, net have not been allocated to segments.


                                       29
<PAGE>
<TABLE>
<CAPTION>
                               2001            2000           1999
ASSETS:

<S>                         <C>             <C>             <C>
North America               $ 144,484       $ 153,830       $ 144,385
Europe                         30,236          18,972          24,028
Japan                          27,868          31,824          31,558
Asia/Pacific                   12,601          11,923          13,239
Latin America                   6,441           6,345           5,763
General Corporate              25,628          13,814           6,186
Eliminations and other        (40,633)        (47,809)        (40,817)
                            ----------      ----------      ----------
     Consolidated           $ 206,625       $ 188,899       $ 184,342
                            ==========      ==========      ==========
</TABLE>

         General corporate assets (principally cash and investments) are not
allocated to segments.

         Eliminations and other is primarily comprised of intercompany
receivables and investments in subsidiaries, both of which are eliminated in the
Company's consolidated financial statements.



<TABLE>
<CAPTION>
                               2001         2000        1999
CAPITAL EXPENDITURES:

<S>                          <C>          <C>          <C>
North America                $ 7,842      $10,185      $10,127
Europe                           754          450          648
Japan                            812          675          390
Asia/Pacific                     975          511          429
Latin America                    645          322          101
                             -------      -------      --------
     Consolidated            $11,028      $12,143      $11,695
                             =======      =======      ========
</TABLE>


<TABLE>
<CAPTION>
                                      2001        2000        1999
DEPRECIATION AND AMORTIZATION:

<S>                                  <C>         <C>         <C>
North America                        $6,878      $6,996      $6,274
Europe                                  894         668         804
Japan                                   541         540         524
Asia/Pacific                            428         460         500
Latin America                           311         202         173
                                     ---------   -------     -------
     Consolidated                    $9,052      $8,866      $8,275
                                     =========   =======     =======
</TABLE>

         CUNO sells its products into three principle markets. The potable water
market includes applications designed for residential, commercial, and food
service customers. The fluid processing market includes customers in industries
as diverse as chemical, petrochemical, oil & gas, paints and resins, and
electronics. The healthcare market customers include food & beverage providers
which require absolute clarity and stability of their products and
pharmaceutical and biotechnology companies which require cost-efficient
filtration and high levels of purity for production of sterile, contaminate free
drugs and diagnostic test kits.


                                       30
<PAGE>
         The Company's sales by market are summarized for each of the years
ended October 31 (amounts in thousands):

<TABLE>
<CAPTION>
                        2001          2000           1999
NET SALES:

<S>                   <C>           <C>           <C>
Potable Water         $107,263      $101,483      $ 87,649
Fluid Processing        71,898        78,781        72,269
Healthcare              65,288        62,810        60,666
                      --------      --------      ---------
     Consolidated     $244,449      $243,074      $220,584
                      ========      ========      =========

</TABLE>


NOTE 10 - STOCK OPTIONS AND AWARDS

         The Company has a stock option and award plan which allows for granting
a number of stock incentive instruments, including nonqualified and incentive
stock options, restricted stock, performance shares and stock appreciation
rights which may be granted as part of a stock option or as a separate right to
the holders of any rights previously granted. The plan permits the granting of
such stock awards of up to 2,200,000 shares of Common Stock. Accordingly, such
shares have been authorized and reserved.

         The options are exercisable at various dates and have varying
expiration dates. Approximately 488,000 shares of Common Stock are reserved for
issuance to key employees and nonemployee directors under the provisions of
these option and award plans as of October 31, 2001.

         Awards of performance shares totaled 6,333 in 1999. No such awards were
made in 2001 or 2000. Awards of restricted shares totaled 20,219, 5,500 and
111,402 in 2001, 2000, and 1999, respectively. When rights or awards are
granted, associated compensation expense is accrued from the date of the grant
to the date such options or awards are exercisable. Shares earned under the plan
are based on a formula which may be adjusted at the discretion of the Company's
Compensation Committee.

         A summary of stock option activity follows:

<TABLE>
<CAPTION>
                                                  OPTIONS         EXERCISE PRICE

<S>                                              <C>              <C>
Outstanding at October 31, 1998                   492,002         5.96  - 21.50
                                                 ----------       -------------
Options granted                                   209,000         14.13 - 15.00
Options exercised                                  (9,144)        5.96  - 15.13
Options forfeited                                 (16,500)        14.13 - 15.13
                                                 ----------       -------------
Outstanding at October 31, 1999                   675,358         7.94  - 21.50
                                                 ----------       -------------
Options granted                                   211,250         19.75 - 30.06
Options exercised                                 (16,350)        15.13 - 15.25
Options forfeited                                 (20,500)        14.13 - 27.50
                                                 ----------       -------------
Outstanding at October 31, 2000                   849,758         7.94  - 30.06
                                                 ----------       -------------
Options granted                                   204,410         25.05 - 30.00
Options exercised                                 (34,722)        14.13 - 21.50
Options forfeited                                 (11,250)        14.13 - 27.88
                                                 ----------       -------------
Outstanding at October 31, 2001                 1,008,196          7.94 - 30.06
                                                 ----------       -------------
</TABLE>




                                       31
<PAGE>
         The weighted-average grant-date fair value of options granted was
$12.93, $5.69, and $8.86 in 2001, 2000, and 1999, respectively. The following
table summarizes information concerning currently outstanding options:

<TABLE>
<CAPTION>
                 OPTIONS OUTSTANDING                                                OPTIONS EXERCISABLE
---------------------------------------------------------------          ---------------------------------------
                                  WEIGHTED-
RANGE OF                           AVERAGE      WEIGHTED-                                         WEIGHTED-
EXERCISE         NUMBER           REMAINING      AVERAGE                   NUMBER                  AVERAGE
 PRICES        OUTSTANDING          LIFE      EXERCISE PRICE             EXERCISABLE            EXERCISE PRICE
<S>            <C>                <C>         <C>                        <C>                   <C>
$ 5 -$10           26,438           2.50          $ 8.79                     26,438                $ 8.79

 10 - 15          230,598           6.11           13.18                    142,098                 12.59

 15 - 20          521,750           6.43           17.30                    407,250                 15.93

 20 - 25            7,500           6.77           21.28                      7,000                 21.50

 25 - 30          219,160           9.01           27.63                         --                    --

 30 - 35            2,750           9.52           30.02                         --                     --
                 ---------                                                 ----------
                 1,008,196                                                  582,786
</TABLE>


 Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), which also requires that the information
be determined as if the Company had accounted for its employee stock options
granted subsequent to October 31, 1995, under the fair-value method of SFAS 123.
The fair value for these options was estimated at the date of grant using the
Black-Scholes pricing model with the following assumptions: risk-free interest
rates ranging from 3.8% to 6.5%, no dividend yield, expected volatility of the
market price of Company Common Stock ranging from 14% to 69%, and an expected
option life of five years.

         The risk-free interest rate is based on short-term treasury bill rates.
For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.

         The Company's pro forma information compared to as reported information
follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                   2001       2000       1999

<S>                            <C>                <C>       <C>        <C>
Net Income:                    As reported        $20,013   $17,447    $14,831

                               Pro forma           18,822    16,602     13,968


Basic earnings per share:      As reported           1.23      1.08       0.92

                               Pro forma             1.15      1.03       0.87


Diluted earnings per share:    As reported           1.20      1.05       0.91

                               Pro forma             1.13      1.00       0.86
</TABLE>


         These pro forma effects may not be representative of the effects on
future years because of the prospective application required by SFAS 123, and
the fact that options vest over several years and new grants generally are
made each year.


                                       32
<PAGE>
NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used by the Company in
estimating its fair value disclosures of financial instruments:

CASH AND CASH EQUIVALENTS:

       The carrying amounts reported for cash and cash equivalents approximate
fair value.

LONG AND SHORT-TERM DEBT:

         The carrying amounts of the Company's borrowings under its short-term
credit agreements approximate their fair value. The fair values of the long-term
debt are estimated using discounted cash flow analysis, based on the Company's
incremental borrowing rates for similar types of borrowing arrangements. The
fair value of the Company's long-term debt approximates its carrying value
because of the variable interest rate of the majority of the debt.

         The carrying amounts and fair values of the Company's financial
instruments follows:

<TABLE>
<CAPTION>
                                                     OCTOBER 31,
                                           2001                          2000
                            -----------------------------------------------------------
                            CARRYING VALUE    FAIR VALUE    CARRYING VALUE   FAIR VALUE

<S>                         <C>               <C>           <C>              <C>
Cash and cash equivalents          $25,628       $25,628           $13,814      $13,814

Bank loans                          13,266        13,266            14,233       14,233

Long-term debt                       3,621         3,888             4,168        3,566
</TABLE>


         The carrying amounts of accounts receivable and accounts payable and
accrued expenses approximate fair value because of the short-term nature of
those transactions.

FOREIGN CURRENCY EXCHANGE CONTRACTS:

         The Company utilizes forward foreign exchange contracts to hedge
specific exposures relating to intercompany payments (primarily parent company
export sales to subsidiaries at pre-established U.S. dollar prices) and other
specific and identified exposures. The terms of the forward foreign exchange
contracts are matched to the underlying transaction being hedged, and are
typically under one year. Because such contracts are directly associated with
identified transactions, they are an effective hedge against fluctuations in the
value of the foreign currency underlying the transaction.

         At October 31, 2001 and 2000, the Company held contracts for $6,288,880
and $3,041,000 respectively, with fair values of $6,414,442 and $3,181,000,
respectively. The fair value of foreign currency exchange contracts is estimated
based on quoted exchange rates at year end.

NOTE 12 - CONTINGENCIES

         The Company is, from time to time, subject to various legal actions,
governmental audits, and proceedings relating to various matters incidental to
its business including product liability and environmental claims. While the
outcome of such matters cannot be predicted with certainty, in the opinion of
management, after reviewing such matters and consulting with the Company's
counsel and considering any applicable insurance or indemnifications, any
liability which may ultimately be incurred is not expected to materially affect
the consolidated financial position, cash flows or results of operations of the
Company.


                                       33
<PAGE>
NOTE 13 - QUARTERLY DATA (UNAUDITED)

         A summary of the Company's quarterly data follows (in thousands, except
per-share amounts):

<TABLE>
<CAPTION>
2001                              FIRST        SECOND         THIRD         FOURTH        TOTAL

<S>                             <C>           <C>           <C>           <C>           <C>
Net sales                       $ 58,586      $ 60,186      $ 63,441      $ 62,236      $244,449

Gross profit                      25,062        26,667        28,287        28,364       108,380

Net income                         3,828         4,522         5,704         5,959        20,013


Basic earnings per share        $   0.24      $   0.28      $   0.35      $   0.37      $   1.23

Diluted earnings per share      $   0.23      $   0.27      $   0.34      $   0.36      $   1.20


2000

Net sales                       $ 57,734      $ 58,910      $ 62,795      $ 63,635      $243,074

Gross profit                      24,325        25,474        27,115        27,571       104,485

Net income                         3,258         3,872         5,019         5,298        17,447


Basic earnings per share        $   0.20      $   0.24      $   0.31      $   0.33      $   1.08

Diluted earnings per share      $   0.20      $   0.23      $   0.30      $   0.32      $   1.05
</TABLE>


         Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not
necessarily equal the total for the year.


                                       34
<PAGE>
SUMMARY OF FINANCIAL DATA

(in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
                                                      2001            2000           1999           1998(1)         1997
INCOME DATA

<S>                                                  <C>            <C>            <C>            <C>            <C>
Net sales                                            $244,449       $243,074       $220,584       $198,845       $187,478
Gross profit                                          108,380        104,485         96,550         86,304         81,312
Operating income                                       30,411         27,927         23,653         11,923         20,231
Income before income taxes                             30,797         27,595         22,774         11,249         18,593
Net income                                             20,013         17,447         14,831          6,355         12,085
Basic earnings per share                                 1.23           1.08           0.92           0.40           0.83
Diluted earnings per share                               1.20           1.05           0.91           0.39           0.81


OTHER FINANCIAL DATA

Total assets                                          206,625        188,899        184,342        171,566        146,325
Working capital                                        55,437         41,921         35,309         31,164         24,949
Net plant investment                                   65,595         63,187         60,352         56,072         48,529
Capital expenditures                                   11,028         12,143         11,695         11,860          7,589
Long-term debt                                          2,893          3,422          8,761         15,437          4,779
Stockholders' equity                                  140,171        119,518        104,574         90,301         81,890

RATIOS

Gross profit to net sales                                44.3%          43.0%          43.8%          43.4%          43.4%
Operating income to net sales                            12.4%          11.5%          10.7%           6.0%          10.8%
Net income to net sales                                   8.2%           7.2%           6.7%           3.2%           6.4%
Effective income tax rate                                35.0%          36.8%          34.9%          43.5%          35.0%
Net income to average stockholders' equity               15.4%          15.6%          15.2%           7.4%          19.3%
Ratio of current assets to current liabilities          2.0:1          1.7:1          1.6:1          1.5:1          1.5:1
Ratio of long-term debt to stockholders' equity
 plus long-term debt                                      2.0%           2.8%           7.7%          14.7%           5.5%
</TABLE>

(1) Included in the 1998 results are an unusual charge for inventory write-down
reducing gross profit by $2,245 and reorganization and other unusual charges of
$7,439, reducing operating income by $9,684 and net income by $6,937 (net of
income taxes of $2,747), or $0.43 per share.


                                       35