UNITED STATES

                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
            ACT OF 1934

For the fiscal year ended           December 31, 2000
                          -------------------------------------------------
                                                            OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

For the transition period from                            to
                               --------------------------    ----------------

Commission file number - 1-9294

                               Imo Industries Inc.
             (Exact name of registrant as specified in its charter)

        Delaware                                   21-0733751
(State or other jurisdiction of       (I.R.S. Employer Identification No.)
 incorporation or organization)

  997 Lenox Drive, Suite 111
  Lawrenceville, New Jersey                             08648
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code 609-896-7600.

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .

    Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained,  and will not be contained,  to the best
of Registrant's knowledge, in this Form 10-K or any amendment to this Form 10-K.
(X )

Shares of Registrant's common stock, $.01 par value, outstanding as of
 March 30, 2001 ......................100

                       DOCUMENTS INCORPORATED BY REFERENCE

  Identification of Documents                    Part into which Incorporated
  ---------------------------                   -----------------------------
            None



                                     PART I

Item 1. Business.


General

Imo  Industries  Inc.  (hereinafter  with its  subsidiaries  referred  to as the
"Company")  is an  integrated  multinational  manufacturer  of a broad  range of
engineered  industrial  products  designed  primarily  to  transfer  liquids  or
regulate and control motion in a variety of industrial applications. The Company
markets its  products  on a  worldwide  basis to a diverse  customer  base.  The
Company  operates  in  two  distinct  industry  segments:   Fluid  Handling  and
Industrial Positioning.

         Fluid Handling. The Fluid Handling segment designs and produces a broad
range of pumps, including screw,  centrifugal and gear pumps. The pumps designed
and produced by the Fluid Handling  segment serve a variety of  applications  in
the following industries: chemicals, marine and offshore engineering, energy and
power generation,  sewage and environmental  engineering,  pulp and paper, water
treatment and other process industries.  In Fluid Handling,  the Company markets
its products principally under the Imo and Warren brand names.

         Industrial Positioning.  The Industrial Positioning segment designs and
produces  a wide  range of  power  transmission  and  motion  control  products,
including enclosed gear drives, speed reducers, open gearing components,  AC and
DC motor  controllers,  push-pull  cable,  remote control systems and marine and
power equipment after-market products. In Industrial Positioning,  the Company's
Boston Gear and Morse Controls units are among sales leaders in their respective
market  segments.  Boston Gear  products  have  applications  in a wide range of
industrial  manufacturing  operations,  ranging  from  packaging  machinery  and
equipment to integrated steel and pulp and paper mills.  Morse Controls products
are sold into a variety of end use markets with a  concentration  in the marine,
mobile  equipment and aviation  sectors.  On February 13, 2001, the Company sold
the  assets  of its Morse  Controls  division  and  stock of the  Morse  related
subsidiaries  to Teleflex  Incorporated  ("Teleflex")  pursuant to an  agreement
dated November 15, 2000 for $135 million in cash, subject to final adjustment.

History

The Company,  founded in 1901 in the United States by Dr. Carl Gustaf Patrick de
Laval, a Swedish  scientist,  was incorporated in Delaware on March 2, 1959. The
Company was acquired by Transamerica  Corporation  ("Transamerica") in 1963, and
in 1964, Transamerica merged its existing wholly owned manufacturing subsidiary,
General  Metals  Corporation,  into the  Company.  At the close of  business  on
December 18, 1986,  Transamerica  distributed  all of the issued and outstanding
shares of the Company common stock to holders of record of  Transamerica  common
stock on the basis of one share of Company  common  stock for each ten shares of
Transamerica common stock held and since that time the Company has operated on a
stand-alone basis.

On August 28, 1997, Colfax Corporation ("Colfax"), acquired approximately 93% of
the Company's  outstanding  shares of common stock  pursuant to its tender offer
for all outstanding  shares of common stock of the Company (the  "Acquisition").
The consideration  paid was $7.05 per share of common stock or $112.1 million in
total.  On July 2, 1998, Imo Merger Corp., a wholly owned  subsidiary of Colfax,
merged with and into Imo,  pursuant to a short-form  merger  under  Delaware law
("back-end merger").  The Company was the surviving  corporation in the back-end
merger and as result became a wholly owned subsidiary of Colfax.

Information  regarding the  Acquisition of the Company is contained in Note 2 to
the  Consolidated  Financial  Statements  included  in Part IV of this Form 10-K
Report as indexed at Item 14(a)(1).

Industry Segments

A description  of the principal  products and services  offered by each business
segment of the Company,  as well as the principal  markets for such products and
services,  are set forth below.  Certain  information with respect to net sales,
operating  profit,  and  identifiable  assets of each of these  segments  and by
geographic  area  is  contained  in  Note  10  to  the  Consolidated   Financial
Statements.

Fluid Handling
The Fluid  Handling  business  segment is a leading  worldwide  manufacturer  of
rotary screw pumps.  The three units that comprise the Fluid Handling segment --
Imo Pump,  Imo AB and Warren  Pumps Inc.  -- design and  manufacture  screw-type
fuel, lube oil and hydraulic pumps for use primarily by the marine, process, oil
and gas and elevator industries. The segment's three-screw pumps are the leading
low-noise-level  pumps used in United States Navy and commercial vessels.  These
pumps are also used to power hydraulic  elevators,  lubricate diesel engines and
fuel gas turbines.  The segment's two-screw pumps are used by the pulp and paper
industry and in other high-viscosity process applications.

Industrial Positioning
The Industrial  Positioning  business  segment  produces speed  reducers,  loose
gearing,  and precision  mechanical and electronic control products and systems,
that are recognized as leading products in their market niches.  This segment is
comprised  of four units:  Boston  Gear,  a leading  producer of gears and speed
reducers, Fincor Electronics,  a producer of adjustable-speed motor controllers,
Morse Controls, a manufacturer of push-pull cable and control systems and Sierra
International  Inc.,  a marketer  of  after-market  marine  and power  equipment
products.  Speed  reducers  are used to reduce the output speed and increase the
torque of power trains in numerous products,  ranging from industrial  machinery
to exercise  treadmills.  Adjustable-speed  motor  controllers  are used for the
accurate control of electric motor speed,  torque,  shaft position and direction
of rotation  in  applications  such as ski lifts,  textile  machinery,  overhead
cranes and large printing presses.  These operations also produce worm gear sets
used as speed reducers by original  equipment  manufacturers  and by oil and gas
and industrial machinery customers. Push-pull cable and control systems are used
to control and actuate functions,  such as steering and valve adjustment,  as an
alternative to electrical  systems.  Applications  include  throttle control and
steering systems for both off-the-road vehicles and pleasure boats. After-market
marine and power equipment  products  include engine parts and flexible hose for
pleasure craft and lawn and garden equipment.  On February 13, 2001, the Company
sold the assets of its Morse  Controls  division and stock of the Morse  related
subsidiaries  to Teleflex  Incorporated  ("Teleflex").

Discontinued Operations

On  February  27,  1998,  the  Company  completed  the sale of its Roltra  Morse
business  to  Magna  International  Inc.  for  cash  of $30  million,  plus  the
assumption of Roltra Morse's debt. The sale price  approximated the recorded net
book value of the  business.  Net proceeds were used to reduce  domestic  senior
debt.

In accordance with APB Opinion No. 30, the disposal of this business segment has
been accounted for as a discontinued  operation and, accordingly,  the operating
results have been  segregated  and reported as  Discontinued  Operations  in the
accompanying Consolidated Statements of Income.

See Note 3 to the  Consolidated  Financial  Statements  for  additional  details
regarding the discontinued operations.

Cost Reduction Programs

In connection  with the  Acquisition,  the Company  implemented a cost reduction
program.  The cost of this  program  was $18.6  million  and was  accrued for in
accordance  with the  purchase  method of  accounting.  It is comprised of $10.5
million related to severance and  termination  benefits as a result of headcount
reductions at the Company's corporate  headquarters.  In addition,  $1.2 million
and $6.9  million  of costs for the  Company's  Fluid  Handling  and  Industrial
Positioning  segments,  respectively,   related  to  severance  and  termination
benefits  resulting from headcount  reductions and the  consolidation of certain
manufacturing  facilities.  The program was completed in 1999. The required cash
outlay  related to this program was $8.1  million in 1997,  $7.4 million in 1998
and $3.1 million in 1999.

Competition

The  Company's  products and services  are marketed on a worldwide  basis.  Most
markets in which the Company  operates  are highly  competitive.  The  principal
elements of competition  for the products  manufactured in each of the Company's
business segments are design features,  product quality,  customer service,  and
price.  Because the Company  competes in certain narrowly defined niche markets,
there is not any single  company that competes  directly with the Company across
all of the Company's product lines.

Product Distribution and Customers

During 2000, sales by the Company's direct sales forces were  approximately  81%
and 44% of the Fluid Handling and Industrial Positioning segments, respectively.
The Company's remaining sales are made through distributors, dealers and agents.

None of the Company's business segments is dependent on any single customer or a
few  customers,  the loss of which would have a material  adverse  effect on the
respective segments, or on the Company as a whole. No customer accounted for 10%
or more of consolidated sales from continuing operations in 2000, 1999 or 1998.

Backlog

The Company's backlog of unfilled orders at February 23, 2001, February 25, 2000
and at December 31, 2000, 1999 and 1998, by business segment, was as follows:

                    February 23,   February 25,             December 31,
                    ------------   ------------            ------------
                        2001           2000       2000       1999          1998
                        ----           ----       ----       ----          ----
                                         (Dollars in millions)
Fluid Handling         $ 35.3         $27.9     $ 30.4      $ 25.7       $ 32.1
Industrial Positioning   12.5          36.6       32.9        33.3         30.2
                         ----          ----       ----        ----         ----
                       $ 47.8        $ 64.5     $ 63.3      $ 59.0       $ 62.3
                        ======        ======     ======      ======       ======

Of the total  backlog at December 31, 2000,  the Company  believes  that all but
approximately  $1.9  million of its orders will be filled in 2001.  The February
23, 2001 backlog does not include the Morse Controls  division which was sold on
February 13, 2001.


Raw Materials

The Company  obtains raw materials,  component parts and supplies from a variety
of sources,  generally from more than one supplier.  The Company's principal raw
materials  are metals and plastics.  The Company's  suppliers and sources of raw
materials are based in both the United States and  internationally.  The Company
believes  that its sources of raw  materials  are adequate for its needs for the
foreseeable  future.  The loss of any one  supplier  would  not have a  material
adverse effect on the Company's financial condition or results of operations.

Patents, Licenses and Trademarks

The Company owns numerous  unexpired U.S. patents (currently having a term of 17
years from the date of issuance and expiring at various times in the future) and
foreign  patents  (having an  initial  term that is  governed  by the law of the
country and expiring at various times in the future),  including counterparts of
certain of its U.S.  patents,  in major  industrial  countries of the world. The
Company's  products are marketed under various trade names and  registered  U.S.
and foreign  trademarks  (having an initial  term that is governed by the law of
the country and expiring at various times in the future). The Company,  however,
does not consider any one patent or trademark,  or any group thereof,  essential
to its  business as a whole,  or to any of its  business  segments.  The Company
relies,  to an  extent,  on  proprietary  product  knowledge  and  manufacturing
processes in its operations.

Research and Development

The Company's ongoing research and development  programs involve the development
of  new   technologies   to  enhance  the  performance  or  lower  the  cost  of
manufacturing its products, and the redesign of existing product lines either to
increase their efficiency or to lower their manufacturing cost. Expenditures for
research and development  charged against  continuing  operations for 2000, 1999
and 1998 by business segment were as follows:




                                                    Year Ended December 31,
                                       2000              1999             1998
                                       ----              ----             ----
                                                  (Dollars in millions)
Fluid Handling                        $ 1.1              $1.5             $2.1
Industrial Positioning                  2.9               2.8              3.2
                                        ---               ---              ---
                                      $ 4.0              $4.3             $5.3
                                      =====              ====             ====

Environmental Matters

In connection with the Company's  separation from Transamerica in 1986, three of
the Company's  properties required compliance with the New Jersey  Environmental
Cleanup  Responsibility  Act, which was amended by the Industrial  Site Recovery
Act  ("ISRA").  ISRA required  that the  Company's  three New Jersey  industrial
establishments  undergo an approved remediation.  Remediation has been completed
at two sites and final closure  approvals  have been sought.  As a result of the
sale of a portion of the third  establishment,  this site has been  divided into
two separate sites for ISRA compliance.  Both sites have undergone cleanup,  but
the New Jersey  Department of Environmental  Protection and Energy has requested
and  received  from the  Company  additional  sampling  information.  If further
cleanup is required,  the Company does not expect it to have a material  adverse
effect on its financial condition.

The Company  has been  identified  in a number of  instances  as a  "Potentially
Responsible  Party"  by the U.S.  Environmental  Protection  Agency,  and in one
instance by the State of  Washington,  with respect to the disposal of hazardous
wastes at a number of facilities  that have been targeted for clean-up  pursuant
to the  Comprehensive  Environmental  Response  Compensation  and  Liability Act
("CERCLA") or similar state law. Similarly, the Company has received notice that
it is one of a number  of  defendants  named in an  action  filed in the  United
States District Court,  for the Southern  District of Ohio Western Division by a
group of plaintiffs who are attempting to allocate a share of cleanup costs, for
which they are responsible,  to a large number of additional parties,  including
the Company.  Although CERCLA and corresponding state law liability is joint and
several,  the  Company  believes  that its  liability  will not have a  material
adverse effect on the financial  condition of the Company since it believes that
it  either  qualifies  as a de  minimis  or  minor  contributor  at  each  site.
Accordingly,  the Company believes that the portion of remediation costs that it
will be responsible for will not be material.

The Company has current and former  operations  in numerous  locations,  some of
which require environmental remediation.  The Company, however, does not know of
or believe that any such matters or the cost of any required corrective measure,
either individually or in the aggregate,  will have a material adverse effect on
the financial condition of the Company. There can be no assurance, however, that
these matters, or other environmental matters not currently known to the Company
will not have such a material adverse effect.

Seasonality

General economic conditions worldwide continue to create business  opportunities
for the  coming  year in many of the  markets  in which  the  Company  operates.
Management  believes that because of the nature of its  industrial  products and
the fact that the Company sells diverse products to many markets, the Company is
not  significantly  affected by the cyclical  behavior,  or seasonality,  of any
particular market that it serves.

Associates

At February  23,  2001,  the Company  employed  approximately  1,000  associates
worldwide.  Approximately 900 associates were employed in the United States, and
approximately  100 associates were employed outside of the United States.  There
are  approximately  100 associates  worldwide  covered by collective  bargaining
agreements with various unions expiring in 2001 through 2004. The Morse Controls
division  is not  included  as it was sold on  February  13,  2001.  The Company
considers its relations with its associates to be satisfactory.

Item 2. Properties.

The location of the Company's manufacturing  facilities at February 23, 2001 are
as follows:

Location                       Product                            Owned/Leased

Fluid Handling
Monroe, North Carolina     Three-screw and two-screw pumps              Owned
Columbia, Kentucky         Three-screw and gear pumps                   Owned
Warren, Massachusetts      Two-screw, gear and centrifugal pumps        Owned
Stockholm, Sweden          Three-screw pumps                            Owned
Paris, France              Three-screw pumps                            Leased

Industrial Positioning
Charlotte, North Carolina  Open gearing and clutches                    Owned
Louisburg, North Carolina  Worm gear speed reducers                     Owned
York, Pennsylvania         Electronic drives                            Owned

The Company believes that its machinery,  plants and offices are in satisfactory
operating  condition  and are  adequate  for the uses to which they are put. The
Company  believes that its properties have sufficient  capacity to substantially
increase  its  current  utilization  without  incurring  significant  additional
capital expenditures.

Item 3. Legal Proceedings.

The Company and one of its  subsidiaries are two of a large number of defendants
in a number of lawsuits brought in various  jurisdictions by approximately 4,500
claimants who allege injury caused by exposure to asbestos. Although neither the
Company nor any of its  subsidiaries has ever been a producer or direct supplier
of asbestos,  it is alleged that the industrial and marine  products sold by the
Company and the subsidiary named in such complaints  contained  components which
contained  asbestos.  Suits  against the Company  and its  subsidiary  have been
tendered to its insurers,  who are defending  under their stated  reservation of
rights.  In  addition,  the  Company  and the  subsidiary  are  named in  cases,
involving   approximately   40,000  claimants,   which  were   "administratively
dismissed" by the U.S.  District Court for the Eastern District of Pennsylvania.
Cases that have been "administratively  dismissed" may be reinstated only upon a
showing  to  the  Court  that  (i)  there  is   satisfactory   evidence   of  an
asbestos-related injury; and (ii) there is probative evidence that the plaintiff
was exposed to products or equipment  supplied by each  individual  defendant in
the case. The Company  believes that it has adequate  insurance  coverage or has
established appropriate reserves to cover potential liabilities related to these
cases.

The Company is a defendant in a lawsuit in the Supreme Court of British Columbia
alleging breach of contract  arising from the sale of a steam turbine  delivered
by the Company's  former Delaval Turbine Division and claiming damages in excess
of $10 million.  The Company  believes that there are legal and factual defenses
to the claim and intends to defend the action vigorously.

The Company was a defendant  in a lawsuit in the Circuit  Court of Cook  County,
Illinois alleging performance  shortfalls in products delivered by the Company's
former  Delaval  Turbine  Division.  The  Company has  reached an  agreement  on
December 7, 1999,  with the plaintiff  settling all claims  between the parties.
However,  a co-defendant,  Federal  Insurance  Company,  continues to pursue its
counterclaim  against the Company for attorney's  fees it alleges it incurred in
its role as surety for the project from which the litigation  arose. The Company
believes  that there are legal and factual  defenses to the claim and intends to
defend the action vigorously.

On June 3, 1997,  the Company was served with a complaint  in a case  brought in
the Superior Court of New Jersey which alleges  damages in excess of $10 million
incurred as a result of losses under a Government  Contract Bid  transferred  in
connection  with  the  sale  of the  Company's  former  Electro-Optical  Systems
business.  The  Electro-Optical  Systems business was sold in a transaction that
closed on June 2, 1995. The sales contract provided certain  representations and
warranties  as to the status of the business at the time of sale.  The complaint
alleges that the Company failed to provide  notice of a "reasonably  anticipated
loss" under a bid that was pending at the time of the  transfer of the  business
and  therefore a  representation  was  breached.  The contract was  subsequently
awarded to the Company's Varo subsidiary and thereafter transferred to the buyer
of the  Electro-Optical  Systems  business.  The Company believes that there are
legal and  factual  defenses  to the  claims  and  intends  to defend the action
vigorously.

The operations of the Company,  like those of other companies engaged in similar
businesses, involve the use, disposal and clean up of substances regulated under
environmental  protection  laws.  In a number of instances  the Company has been
identified  as  a  Potentially  Responsible  Party  by  the  U.S.  Environmental
Protection Agency,  with respect to the disposal of hazardous wastes at a number
of facilities that have been targeted for clean-up pursuant to CERCLA or similar
state law. Similarly, the Company has received notice that it is one of a number
of defendants  named in an action filed in the United States District Court, for
the Southern  District of Ohio Western Division by a group of plaintiffs who are
attempting to allocate a share of cleanup costs, for which they are responsible,
to a large number of additional parties,  including the Company. Although CERCLA
and corresponding state law liability is joint and several, the Company believes
that its  liability  will not have a material  adverse  effect on the  financial
condition  of the Company  since it believes  that it either  qualifies  as a de
minimis or minor  contributor at each site.  Accordingly,  the Company  believes
that the portion of remediation  costs that it will be responsible  for will not
be material.

The Company is also involved in various other pending legal proceedings  arising
out of the  ordinary  course  of the  Company's  business.  None of these  legal
proceedings  are  expected to have a material  adverse  effect on the  financial
condition of the Company.  With respect to these  proceedings and the litigation
and claims  described in the  preceding  paragraphs,  management  of the Company
believes that it either will  prevail,  has adequate  insurance  coverage or has
established appropriate reserves to cover potential liabilities. There can be no
assurance,  however, as to the ultimate outcome of any of these matters,  and if
all or  substantially  all of  these  legal  proceedings  were to be  determined
adversely  to the  Company,  there  could be a  material  adverse  effect on the
financial condition of the Company.


Item 4. Submission of Matters to a Vote of Security Holders.

None

                                     PART II

Item 5. Market for the Registrant's Common Equity and Related
            Stockholder Matters.

The Company  delisted its Common Stock from the New York Stock  Exchange on July
2, 1998. The Common Stock was deregistered under the Securities  Exchange Act of
1934.

<TABLE>
Item 6. Selected Financial Data.
(Dollars in millions except per share amounts) (a)
<CAPTION>


                                                                                 Post-Acquisition Pre-Acquisition
                                                 Year        Year        Year        August 29,       January 1,      Year
                                                Ended       Ended       Ended         1997 to          1997 to        Ended
                                               December     December   December      December 31,     August 28,    December
                                               31, 2000*   31, 1999*   31, 1998*        1997             1997       31, 1996
---------------------------------------------- ----------- ----------- ----------- -------------- -------------- -----------
<S>                                                <C>         <C>         <C>           <C>           <C>           <C>
Net sales                                          $329.4      $292.7      $314.4        $108.3        $213.5        $314.4
Income (loss) from continuing operations
  before extraordinary item                          16.4        15.3        10.9          (5.7)        (31.3)       (33.1)
Discontinued operations, net of taxes                 ---         ---         ---         (12.2)          2.4        (16.8)
Extraordinary item (net of tax)                       ---        (0.2)       (5.2)         (3.3)          ---         (8.5)
Net income (loss)                                    16.4        15.1         5.7         (21.2)        (28.9)       (58.4)
---------------------------------------------- ----------- ----------- ----------- -------------- ------------- ------------
(Loss) earnings per share, basic and diluted:
  Continuing operations before extraordinary item                                          (.33)        (1.82)       (1.93)
  Discontinued operations, net of taxes                                                    (.71)          .14        ( .99)
  Extraordinary item                                                                       (.20)          ---         (.49)
  Net loss                                                                                (1.24)        (1.68)       (3.41)
Cash dividends per share                              ---         ---         ---           ---           ---          ---
---------------------------------------------- ----------- ----------- ----------- -------------- ------------ ------------
Total assets                                        371.9       377.1       389.0         463.3                      330.9
Total long-term debt, including current portion     164.9       169.1       174.3         223.4                      276.0
============================================== =========== =========== =========== ============== ============ ============


(a)    The notes to the consolidated  financial statements located in Part IV of
       this  Form 10-K  Report as  indexed  at Item  14(a)(l)  should be read in
       conjunction with this summary.

* As a result of the back-end merger on July 2, 1998,  earnings per share is not
presented for 2000, 1999 and 1998.
</TABLE>



Item 7.       Management's Discussion and Analysis of Financial
                       Condition and Results of Operations.


The following  discussion and analysis of the Company's  consolidated results of
operations  and  financial  condition  should  be read in  conjunction  with the
audited  Consolidated  Financial Statements included elsewhere in this Form 10-K
Report. Comparisons of the results of operations for the year ended December 31,
2000, with the results for the years ended December 31, 1999 and 1998, are being
presented on a historical basis.

Recent Events

Morse Controls Sale: On February 13, 2001, the Registrant sold the assets of its
Morse Controls division and stock of the Morse related subsidiaries, to Teleflex
pursuant to an  agreement  dated  November  15,  2000 for $135  million in cash,
subject to final  adjustment.  Cash proceeds have been  principally  used by the
Company  to  pay  down  its  domestic   senior  debt  and  accounts   receivable
securitization.  The  transaction  will be reflected in the Company's  financial
statements in the first quarter of 2001.

Results of Operations

The Company's  former Roltra Morse  business is accounted for as a  discontinued
operation.  Accordingly,  the  operating  results  of this  business  have  been
segregated and reported as Discontinued  Operations in the audited  Consolidated
Financial Statements included elsewhere in this Form 10-K Report. The discussion
that  follows  concerns  only the results of  continuing  operations,  which are
grouped  into two business  segments  for  management  and  financial  reporting
purposes: Fluid Handling and Industrial Positioning.

2000 Compared to 1999

Sales.  Net sales from  continuing  operations in 2000 increased 12.6% to $329.4
million, compared with $292.7 million in 1999, as a result of the Fluid Handling
segment's  sales  decreasing  2.6% and an  increase  of 20.7% in the  Industrial
Positioning segment's sales. The decrease in the Fluid Handling segment sales is
due to  cyclicality  in  the  federal  and  chemical  markets  during  2000  and
unfavorable foreign currency  fluctuations of the Swedish Krona. The increase in
the Industrial  Positioning segment is due to the purchase of Sierra on December
1, 1999.

Gross Profit.  Gross profit in 2000  increased as a percentage of sales to 31.7%
compared with 31.6% in 1999, as a result of  productivity  improvements  in each
segment.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  decreased  to 17.1% of net sales in the twelve  months
ended  December  31,  2000,  as  compared  with  17.3% in the 1999  period.  The
decreased expenses as a percentage of sales in 2000 were the result of continued
cost reduction programs in each of the Company's operating units.

Interest Expense.  Average  borrowings in 2000 were  approximately  $2.3 million
higher than in 1999,  due to the  increase  in  borrowings  for the  purchase of
Sierra.  Total  interest  expense of $19.5 million in 2000 was $2.8 million,  or
16.8%, higher than in 1999.

Income from  Continuing  Operations.  The  Company  had income  from  continuing
operations of $16.4 million in 2000, compared with $15.3 million in 1999.



1999 Compared to 1998

Sales.  Net sales from  continuing  operations in 1999  decreased 6.9% to $292.7
million, compared with $314.4 million in 1998, as a result of the Fluid Handling
segment's  sales  decreasing  10.4%  and a  decrease  of 4.9% in the  Industrial
Positioning  segment's  sales. The decrease in the Fluid Handling segment is due
to cyclicality in the crude oil,  machinery support and pulp & paper markets and
unfavorable  effects  of a 4.6%  change in the  exchange  rates for the  Swedish
Krona. The decrease in the Industrial Positioning segment is due to lower demand
in the agricultural and power transmission sectors, unfavorable foreign currency
fluctuations, the sale of the conveyor business in Germany on July 31, 1998, and
inventory reduction programs initiated by key customers.

Gross Profit.  Gross profit in 1999  decreased as a percentage of sales to 31.6%
compared  with  31.9%  in  1998,  as  a  result  of  reduced  sales  volume  and
manufacturing levels.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  decreased  to 17.3% of net sales in the twelve  months
ended  December  31,  1999,  as  compared  with  18.0% in the 1998  period.  The
decreased  expenses as a percentage of sales in 1999 was the result of continued
cost reduction programs in each of the Company's operating units.

Interest Expense.  Average borrowings in 1999 were  approximately  $33.2 million
lower than in 1998.  Total  interest  expense of $16.7  million in 1999 was $4.6
million,  or 21.6%,  lower than in 1998, due primarily to the reduction of debt,
through the generation of operating cash flow.

Income from  Continuing  Operations.  The  Company  had income  from  continuing
operations of $15.3 million in 1999, compared with $10.9 million in 1998, due to
the decrease in interest expense.

Other Operating Results

Extraordinary Items. The year ended December 31, 1999, includes an extraordinary
charge of $0.2 million net of tax, related to the early  extinguishment  of $3.5
million of its 11.75% senior subordinated notes due in 2006.

The year ended  December  31,  1998,  includes an  extraordinary  charge of $5.2
million net of tax,  representing charges related to the early extinguishment of
the Company's debt under its current  senior  secured credit  facilities and its
Notes, as well as the write-off of previously deferred loan costs.

Provision for Income Taxes.  Income tax expense from  continuing  operations was
$10.9  million,  $8.8  million,  and $7.0  million  for  2000,  1999  and  1998,
respectively.

Income tax expense for the year ended  2000,  represents  current tax expense of
$3.4  million for federal  alternative  minimum  tax,  foreign and state  income
taxes,   as  the  Company  is  utilizing   existing  U.S.  net  operating   loss
carryforwards to offset its domestic earnings.

The net deferred  tax asset  currently  recorded at December 31, 2000,  is $25.3
million, a level where management  believes that it is more likely than not that
the tax benefit will be realized.

The Company establishes  valuation  allowances in accordance with the provisions
of  FASB  Statement  No.  109,   "Accounting  for  Income  Taxes."  The  Company
continually  reviews the adequacy of the valuation  allowance and is recognizing
these  benefits only as  reassessment  indicates that it is more likely than not
that the benefits will be realized. The valuation allowance was $1.7 million for
December 31, 2000 and December 31, 1999.

The Company has net operating loss carryforwards of approximately  $76.5 million
expiring in years 2001 through  2018,  and minimum tax credits of  approximately
$2.7  million,   which  may  be  carried   forward   indefinitely.   Tax  credit
carryforwards  include  foreign  tax  credits  of  approximately  $5.3  million,
expiring beginning in the year 2002. These carryforwards are available to offset
future taxable income, and may be subject to Section 382 limitations, due to the
Acquisition.

Taxes have not been provided on the unremitted earnings of foreign  subsidiaries
since it is the Company's  intention to  indefinitely  reinvest  these  earnings
overseas.  The  amount of  foreign  withholding  taxes  that would be payable on
remittance of these earnings is approximately $0.5 million.

Liquidity and Capital Resources

Short-term and Long-term Debt

As of December 31, 2000,  the Company had $6.3  million of  outstanding  standby
letters of credit.  The Company had $6.0  million in foreign  short-term  credit
facilities  with  no  amounts  outstanding  at  December  31,  2000.  Due to the
short-term nature of these debt instruments it is the Company's opinion that the
carrying amounts approximate the fair value.

In addition,  the Company had  outstanding  $75.0  million of its 11.75%  senior
subordinated  notes due in 2006, $27.3 million of term loan borrowings and $62.5
million in revolver borrowings.

Cash Flow

The  Company's  operating  activities  provided  cash of $12.4  million in 2000,
compared  with cash  provided  of $39.5  million in 1999.  The cash  provided by
operating activities in 2000 was attributable to net operating profits offset by
the increase in working capital in the period.  Cash and cash  equivalents  were
$5.2  million at December  31, 2000  compared  with $2.9 million at December 31,
1999.

The Company's total debt as a percent of its total  capitalization  decreased to
55.8% at December 31,  2000,  compared  with 59.2% at December  31,  1999,  as a
result of the debt paid down due to internal cash generation.

Capital expenditures of continuing operations decreased to $4.8 million compared
with the 1999 level of $6.4 million.  In 2000 capital  spending was used for the
purpose of  maintaining  and improving  competitive  advantages at the Company's
operations.  The Company  anticipates  that  capital  expenditures  in 2001 will
increase  over the 2000  level  primarily  due to  expenditures  related  to new
product  development  in  the  operating   segments.   There  were  no  material
outstanding commitments for the acquisition of property, plant, and equipment at
December 31, 2000.

Management  believes  that cash flow from  operations  and cash  available  from
unused credit facilities will be sufficient to fund future  anticipated  working
capital needs, capital spending requirements and debt service requirements.

Seasonality; Customer Concentration; Inflation

General economic conditions worldwide continue to create business  opportunities
for the  coming  year in many of the  markets  in which  the  Company  operates.
Management  believes that because of the nature of its  industrial  products and
the fact that the Company sells diverse products to many markets, the Company is
not  significantly  affected by the cyclical  behavior,  or seasonality,  of any
particular market that it serves.

None of the Company's business segments is dependent on any single customer or a
few  customers,  the loss of which would have a material  adverse  effect on the
respective segments, or on the Company as a whole. No customer accounted for 10%
or more of consolidated sales in 2000, 1999 or 1998.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES  LITIGATION  REFORM ACT OF 1995. Except for historical  matters,  the
matters discussed in this Form 10-K Report are forward-looking  statements based
on current  expectations  and involve risks and  uncertainties.  Forward-looking
statements  include,  but are not limited  to,  statements  under the  following
headings:  (i) Item 1 - "Backlog, Raw Materials and Environmental Matters" - the
expected ability to fill existing orders in 2001, the continued  adequacy of the
Company's raw materials sources, and the future impact of environmental  matters
on the financial  condition of the Company;  (ii) Item 3 - "Legal Proceedings" -
the  future  impact  of legal  proceedings  on the  financial  condition  of the
Company.  The  Company  wishes to caution  the reader  that,  in addition to the
matters  described  above,  various factors such as delays in contracts from key
customers,  demand and market  acceptance  risk for new  products,  continued or
increased competitive pricing and the effects of under-utilization of plants and
facilities,  particularly  in  Europe,  and the  impact  of  worldwide  economic
conditions on demand for the Company's  products,  could cause results to differ
materially from those in any forward-looking statement.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

During 1999, the Company  periodically  entered into foreign exchange  contracts
for  purposes  of  hedging  its  exposure  to  foreign  currency  exchange  rate
fluctuations.  These contracts hedged firm commitments between the Swedish Krona
and the German  Deutschmark and the United States Dollar.  At December 31, 1999,
the  Company had foreign  currency  contracts  with  notional  amounts  totaling
approximately  $0.1 million with various expiration dates through June 2000. The
amount of deferred gain or loss associated with these contracts is not material.
There were no foreign currency contracts outstanding at December 31, 2000.

All foreign  currency  derivative  agreements are with major  commercial  banks;
therefore the risk of credit loss from nonperformance by the banks is considered
by management to be minimal.  The Company  evaluates its exposure to credit loss
on an ongoing basis.

Item 8. Financial Statements and Supplementary Data.

The consolidated  financial  statements and supplementary  data required by Part
II,  Item 8 of Form 10-K are  included  in Part IV of this  Form 10-K  Report as
indexed at Item 14(a)(1).


Item 9. Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure.

None

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

Not Applicable

Item 11. Executive Compensation.

Not Applicable

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Not Applicable

Item 13. Certain Relationships and Related Transactions.

None

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)  (1)    Financial Statements

            The Financial Statements and Supplementary Data required by Part II,
               Item 8 of Form  10-K are  included  in this  Part IV of this
               Form 10-K Report as follows:

               Consolidated Financial Statements

                  Consolidated Statements of Income and Comprehensive Income for
                    the Years Ended December 31, 2000, 1999 and 1998
                  Consolidated Balance Sheets at December 31, 2000 and 1999
                  Consolidated Statements of Cash Flows for the Years Ended
                    December 31, 2000, 1999 and 1998
                  Consolidated Statements of Shareholders' Equity (Deficit)
                    for the Years Ended December 31, 2000, 1999 and 1998
                  Notes to Consolidated Financial Statements
                  Report of Independent Public Accountants
                  Report of Independent Public Accountants on Schedule II
                  Quarterly Financial Information (unaudited)

     (2)     Financial Statement Schedules

         The following  consolidated  financial statement schedule for the years
         ended December 31, 2000,  1999 and 1998 is filed as part of this Report
         and  should  be read in  conjunction  with the  Company's  Consolidated
         Financial Statements.


                Schedule

                   II              Valuation and Qualifying Accounts

          All  other   schedules  for  which  provision  is  made  in  the
          applicable  regulation of the Securities  and Exchange  Commission are
          omitted  because they are not required under the related  instructions
          or  because  the  required  information  is  given  in  the  financial
          statements or notes thereto.

     (3)     Exhibits

          The Exhibits  listed in the  accompanying  Index to Exhibits are
            filed as part of this Report.

 (b)       Reports on Form 8-K

            None



                                  EXHIBIT INDEX

Exhibit No. Note No.         Description
----------  -------         -------------

    3(i)    (23) The Company's Restated Certificate of Incorporation, as amended
                 March 10, 1989 and November 10, 1992 and April 30, 1997

    3(ii)   (28) The Company's Bylaws

    4.1 (A) (18) Indenture, dated as of April 15, 1996, between the Company and
                 IBJ Schroder Bank & Trust Company, as Trustee

        (B) (28) Second Supplemental Indenture, dated as of August 26, 1997,
                 between the Company and IBJ Schroder Bank & Trust Company, as
                 Trustee

    4.3     (18) Registration Rights Agreement, dated as of April 23, 1996,
                 between the Company and the Initial Purchasers

    4.3 (A) (20) Rights Agreement dated as of April 30, 1997 between the Company
                 and First Chicago Trust Company of New York, which includes, as
                 Exhibit A thereto, the Certificate of Designation, Preferences
                 and Rights of Series B Junior Participating Preferred Stock of
                 Imo Industries Inc., as Exhibit B thereto, the Form of Rights
                 Certificate and as Exhibit C thereto, the Summary of Rights to
                 Purchase Preferred Stock.

        (B) (21) Amendment to Rights Agreement dated June 25, 1997 between the
                 Company and First Chicago Trust Company of New York

        (C) (22) Second Amendment to Rights Agreement dated July 25, 1997
                 between the Company and First Chicago Trust Company of New York

        (D) (24) Third Amendment to Rights Agreement dated August 21, 1997
                 between the Company and First Chicago Trust Company of New York

        (E) (29) Fourth Amendment to Rights Agreement dated April 30, 1998
                 between the Company and First Chicago Trust Company of New York

          Management Contracts, Compensatory Plans and Arrangements:
         -------------------------------------------------------------

   10.1     (14) Amended and restated Equity Incentive Plan for Key Employees

   10.2     (16) Amended and restated 1988 Equity Incentive Plan for Outside
                 Directors

   10.3     (15) 1995 Equity Incentive Plan for Outside Directors

   10.4     (17) The Company's  Supplemental Retirement Income Plan

   10.5      (8) Change in Control Agreement dated January 9, 1987 between the
                 Company and John J. Carr

   10.6      (8) Change in Control Agreement dated August 5, 1992 between the
                 Company and William M. Brown

   10.7      (8) Change in Control Agreement dated August 13, 1992 between the
                 Company and Thomas J. Bird

   10.8     (10) Change in Control Agreement dated September 13, 1993 between
                 the Company and Donald K. Farrar

   10.9     (19) Change in Control Agreement dated May 21, 1996 between the
                 Company and Donald N. Rosenberg

  10.10     (19) Severance Agreement dated February 6, 1997 between Imo
                 Industries (UK) Limited and Brian Lewis

  10.11     (19) Consultancy Agreement dated February 13, 1997 between Imo
                 Industries Inc. and Brian Lewis

          Other Material Contracts:
         ---------------------------

  10.12(A)(3),(4) The Company's Salaried Employees Stock Savings Plan as amended
                  on July 1, 1987 and as amended on  June 14, 1988

       (B)   (7)  Amendment dated March 16, 1989 to the Imo Industries Inc.
                  Employees Stock Savings Plan

       (C)   (5)  Amendments dated September 6, 1990 and February 14, 1991 to
                  the Imo Industries Inc. Employees Stock Savings Plan

       (D)   (6)  Amendment dated May 9, 1991 to the Imo Industries Inc.
                  Employees Stock Savings Plan

       (E)   (8)  Amendments dated December 30, 1991 and August 3, 1992 to the
                  Imo Industries Inc. Employees Stock Savings Plan

       (F)  (12)  Trust Agreement for the Imo Industries Inc. Employees Stock
                  Savings Plan as of March 1, 1995 between the Company and Eagle
                  Trust Company

   10.13     (1)  Distribution Agreement dated December 18, 1986 between
                  Transamerica Corporation and the Company

   10.14     (1)  Tax Agreement between the Company and Transamerica Corporation

   10.15 (J) (9)  Warrant dated July 15, 1993 issued by the Company to The
                  Prudential Insurance Company of America

   10.16     (2)  Stock Purchase Agreement dated  November 30, 1987 between the
                  Company and TRIFIN B.V.

   10.17     (5)  Stock Purchase Agreement dated as of May 31, 1990 among United
                  Scientific Holdings PLC, United Scientific Inc. and the
                  Company

   10.18    (10)  Stock Purchase Agreement dated as of October 28, 1993 among
                  the Company, Imo Industries GmbH, Mark Controls Corporation
                  and Mark Controls GmbH i. Gr., as amended

   10.19 (A)(18)  Credit Agreement dated as of April 29, 1996 among the Company,
                  as Borrower, Varo Inc., as Guarantor, Warren Pumps Inc. as
                  Guarantor, the Institutions from time to time party thereto as
                  Lenders and Issuing Banks, and Citicorp USA, Inc., as Agent

   10.19 (B)(19)  First Amendment dated as of February 19, 1997 to the Credit
                  Agreement dated as of April 29, 1996 among the Company, as
                  Borrower, Varo Inc., as Guarantor, Warren Pumps, Inc. as
                  Guarantor, the Institutions from time to time party thereto as
                  Lenders and Issuing Banks, and Citicorp USA, Inc., as Agent

   10.20 (A)(11)  Asset Purchase Agreement dated as of November 4, 1994 by and
                  among the Company, Imo Industries International Inc. and
                  Mannesmann Capital Corporation

         (B)(12)  Agreement, Amendment and Waiver dated January 17, 1995 by and
                  among the Company and Mannesmann Capital Corporation

   10.21    (12)  Asset and Stock Purchase Agreement dated as of January 1, 1995
                  by and among the Company and Thermo Jarrell Ash Corporation

   10.22    (13)  Purchase and Sale Agreement among Litton Industries, Inc., and
                  Litton Systems, Inc. and Imo Industries Inc., Baird
                  Corporation, Optic-Electronic International, Inc. and Varo
                  Inc. dated May 11, 1995 and amended and restated as of
                  June 2, 1995

   10.23 (A)(19)  Asset Purchase Agreement dated as of September 13, 1996
                  between Varo Inc. and Varo Acquisition Corp.

         (B)(19)  Reinstatement Agreement dated January 28, 1997 between Varo
                  Inc. and Varo Acquisition Corp.

   10.24    (21)  Agreement and Plan of Merger, dated June 26, 1997, among
                  United Dominion Industries Limited, UD Delaware Corp. and Imo
                  Industries Inc.

   10.25    (22)  Share Purchase Agreement, dated July 25, 1997, between II
                  Acquisition Corp. and the Company

   10.26    (25)  Asset Purchase Agreement dated as of August 29, 1997 among the
                  Registrant and certain of its subsidiaries and Danaher
                  Corporation and certain of its subsidiaries

   10.27 (A)(26)  Credit and Guaranty Agreement dated as of August 29, 1997
                  among the Company, as Borrower, II Acquisition Corp., as
                  Guarantor, Certain Financial Institutions, as Lenders,
                  The Bank of Nova Scotia, as Administrative and Documentation
                  Agent and Nationsbanc Capital Markets, Inc., as Syndication
                  Agent for the Lenders

         (B)(28)  First Amendment to Credit and Guaranty Agreement dated as of
                  November 6, 1997

         (C)(28)  Second Amendment to Credit and Guaranty Agreement dated as of
                  December 2, 1997

         (D)(28)  Third Amendment to Credit and Guaranty Agreement dated as of
                  February 16, 1998

         (E)(30)  Fourth Amendment to Credit and Guaranty Agreement dated as of
                  March 9, 1998

         (F)(31)  Fifth Amendment to Credit and Guaranty Agreement dated as of
                  June 1, 1998

         (G)(32)  Sixth Amendment to Credit and Guaranty Agreement dated as of
                  October 15, 1998

         (H)(33)  Seventh Amendment to Credit and Guaranty Agreement dated as of
                  August 3, 1999

         (I)(33)  Eighth Amendment to Credit and Guaranty Agreement dated as of
                  November 29, 1999

         (J)      Ninth Amendment to Credit and Guaranty Agreement dated as of
                  January 26, 2001

   10.28    (27)  Stock Purchase Agreement dated as of January 30, 1998 between
                  the Registrant and Magna International Inc.

   10.29    (33)  Receivables Purchase Agreement dated as of November 29, 1999
                  among Imo Funding Company, LLC, Imo Industries Inc., Liberty
                  Street Funding Corp. and The Bank of Nova Scotia

   10.30    (33)  Purchase and Sale Agreement dated as of November 29, 1999
                  among the Originators named herein, Imo Industries Inc. and
                  Imo Funding Company, LLC

   10.31    (33)  Stock Purchase Agreement by and between Echlin Inc. and Imo
                  Industries, Inc. dated as of October 13, 1999

   10.32    (34)  Asset Purchase Agreement dated as of November 15, 2000 between
                  the Registrant and Teleflex Incorporated.

   10.33          Amendment to Asset Purchase Agreement dated as of February 11,
                  2001 to be effective as of November 15, 2000 between the
                  Registrant and Teleflex Incorporated.

   21             Subsidiaries of the Company as of December 31, 2000

   27             Financial Data Schedule as of December 31, 2000

-----------------------------------------------
NOTES

(1)     Incorporated  by reference to the Company's Form 8 Amendment No. 2 filed
        with the  Commission on December 9, 1986 amending the Company's  Form 10
        as filed with the Commission on October 15, 1986.
(2)     Incorporated by reference to the Company's Form 8-K filed with the
        Commission on February 17, 1987.
(3)     Incorporated by reference to the Imo Industries Inc. Employees Stock
        Savings Plan Form 11-K filed with the Commission on April 13, 1988.
(4)     Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 29, 1990.
(5)     Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 28, 1991.
(6)     Incorporated by reference to the Company's Form S-8 filed with the
        Commission on June 17, 1991.
(7)     Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 26, 1992.
(8)     Incorporated by reference to the Company's Form 10-K filed with the
        Commission on April 19, 1993.
(9)     Incorporated by reference to the Company's Form 10-K/A filed with the
        Commission on August 6, 1993
        amending the Company's Form 10-K as filed with the Commission on
        April 19, 1993.
(10)    Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 31, 1994.
(11)    Incorporated by reference to the Company's Form 10-Q filed with the
        Commission on November 14, 1994.
(12)    Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 29, 1995.
(13)    Incorporated by reference to the Company's Form 8-K filed with the
        Commission on June 19, 1995.
(14)    Incorporated by reference to the Company's Form S-8 as filed with the
        Commission on June 23, 1995,
        Registration No. 33-60533
(15)    Incorporated by reference to the Company's Form S-8 as filed with the
        Commission on June 23, 1995,
        Registration No. 33-60535
(16)    Incorporated by reference to the Company's Form 10-Q filed with the
        Commission on November 13, 1995.
(17)    Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 28, 1996.
(18)    Incorporated by reference to the Company's Form S-4 (Registration No.
        333-3477) filed with the Commission on May 10, 1996.
(19)    Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 27, 1997.
(20)    Incorporated by reference to the Company's Form 8-A Registration
        Statement filed with the Commission on May 2, 1997.
(21)    Incorporated by reference to the Company's Schedule 14D-9
        Solicitation/Recommendation Statement filed with the Commission on July
        2, 1997.
(22)    Incorporated by reference to the Company's Schedule 14D-9
        Solicitation/Recommendation Statement filed with the Commission on July
        31, 1997.
(23)    Incorporated by reference to the Company's Form 10-Q filed with the
        Commission on August 14, 1997.
(24)    Incorporated by reference to the Company's Form 8-K filed with the
        Commission on August 27, 1997.
(25)    Incorporated by reference to the Company's Form 8-K filed with the
        Commission on September 15, 1997.
(26)    Incorporated by reference to the Company's Form 10-Q filed with the
        Commission on November 14, 1997.
(27)    Incorporated by reference to the Company's Form 8-K filed with the
        Commission on March 13, 1998.
(28)    Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 31, 1998.
(29)    Incorporated by reference to the Company's Form 8-A/A filed with the
        Commission on May 1, 1998.
(30)    Incorporated by reference to the Company's Form 10-Q filed with the
        Commission on May 13, 1998.
(31)    Incorporated by reference to the Company's Form 10-Q filed with the
        Commission on August 14, 1998.
(32)    Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 31, 1999.
(33)    Incorporated by reference to the Company's Form 10-K filed with the
        Commission on March 30, 2000.
(34)    Incorporated by reference to the Company's Form 8-K filed with the
        Commission on February 28, 2001.




                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934, Imo Industries Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date: April 16, 2001
                                       IMO INDUSTRIES INC.


                                       By: /s/ G. SCOTT FAISON
                                               G. Scott Faison
                                     Vice President and Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of Imo Industries Inc.
and in the capacities and on the dates indicated.


/s/ JOHN A. YOUNG                  Chief Executive Officer
John A. Young                      and President
                                   (principal executive officer)  April 16, 2001


/s/ G. SCOTT FAISON                Vice President and
G. Scott Faison                    Chief Financial Officer
                                   (principal financial officer)  April 16, 2001


/s/ STEVEN M. RALES                Director                       April 16, 2001
Steven M. Rales


/s/ MITCHELL P. RALES              Director                       April 16, 2001
Mitchell P. Rales


/s/ NEIL D. COHEN                  Director                       April 16, 2001
Neil D. Cohen

/s/ PHILIP W. KNISELY              Director                       April 16, 2001
Philip W. Knisely


<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(Dollars in thousands)
<CAPTION>
                                                             Year Ended        Year Ended       Year Ended
                                                            December 31,      December 31,     December 31,
                                                                2000              1999             1998
---------------------------------------------------------- ---------------- ----------------- ---------------
<S>                                                               <C>               <C>             <C>
Net Sales                                                         $329,444          $292,694        $314,372
Cost of products sold                                              225,009           200,123         214,081
---------------------------------------------------------- ---------------- ----------------- ---------------

Gross Profit                                                       104,435            92,571         100,291

Selling, general and administrative expenses                        56,340            50,516          56,464
Research and development expenses                                    3,995             4,344           5,317
---------------------------------------------------------- ---------------- ----------------- ---------------

Income From Operations                                              44,100            37,711          38,510

Other income                                                         2,754             1,045             684
Loss / (Gain) on sale of assets                                         24            (2,066)            ---
Interest expense                                                    19,492            16,668          21,293
---------------------------------------------------------- ---------------- ----------------- ---------------

Income From Continuing Operations Before
  Income Taxes and Extraordinary Item                               27,338           24,154          17,901

Income taxes                                                        10,890             8,840           7,008
---------------------------------------------------------- ---------------- ----------------- ---------------

Income From Continuing Operations Before
  Extraordinary Item                                                16,448           15,314          10,893

Extraordinary item - loss on extinguishment of debt,
    (net of tax)                                                       ---            (216)          (5,223)
-------------------------------------------------------------------------------------------------------------

Net Income                                                        $ 16,448         $ 15,098          $5,670
============================================================================================================

Other comprehensive loss, net of taxes -
     Foreign currency translation adjustments                       (3,599)           (1,774)          (266)
---------------------------------------------------------- ---------------- ----------------- ---------------

Comprehensive Income                                              $ 12,849          $ 13,324          $5,404
========================================================== ================ ================= ===============



The accompanying notes are an integral part of these consolidated financial statements


</TABLE>




<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands except par value)
<CAPTION>

December 31,                                                                2000           1999
----------------------------------------------------------------- --------------- --------------
<S>                                                                      <C>             <C>
Assets
Current Assets
Cash and cash equivalents                                                 $5,152         $2,898
Trade accounts and notes receivable, less allowance of
  $1,404 in 2000 and $1,348 in 1999                                       36,931         30,075
Inventories                                                               55,989         57,844
Deferred income tax assets                                                 6,112         11,972
Prepaid expenses and other current assets                                  3,051          3,051
----------------------------------------------------------------- --------------- --------------
Total Current Assets                                                     107,235        105,840
----------------------------------------------------------------- --------------- --------------
Property, plant and equipment:
Land                                                                       4,501          4,710
Buildings and improvements                                                20,005         20,745
Machinery and equipment                                                   51,592         49,040
----------------------------------------------------------------- --------------- --------------
                                                                          76,098         74,495
Less accumulated depreciation and amortization                           (18,951)       (12,911)
----------------------------------------------------------------- --------------- ---------------
Net property, plant and equipment                                         57,147         61,584
Intangible assets, principally goodwill, net                             175,324        180,746
Investments in and advances to unconsolidated companies                    5,509          5,069
Deferred income tax assets                                                19,231         20,845
Pension and other assets                                                   7,417          2,637
----------------------------------------------------------------- --------------- --------------
Total Assets                                                           $ 371,863      $ 376,721
================================================================= =============== ==============
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable                                                             $    1        $ 1,295
Trade accounts payable                                                    18,393         21,854
Accrued expenses and other liabilities                                    26,720         31,928
Accrued costs related to discontinued operations                           1,610          2,559
Income taxes payable                                                       4,195            ---
Current portion of long-term debt                                         39,666          9,447
----------------------------------------------------------------- --------------- --------------
Total Current Liabilities                                                 90,585         67,083
----------------------------------------------------------------- --------------- --------------
Long-term debt                                                           125,207        159,624
Accrued postretirement benefits - long-term                                8,547          8,555
Accrued pension expense and other liabilities                             17,085         23,869
----------------------------------------------------------------- --------------- --------------
Total Liabilities                                                        241,424        259,131
----------------------------------------------------------------- --------------- --------------
Shareholders' Equity
Preferred stock:  $1.00 par value; authorized and
  unissued 5,000,000 shares                                                  ---            ---
Common stock:  $1.00 par value; authorized and issued
   100 shares                                                                  1              1
Additional paid-in capital                                               120,751        120,751
Retained earnings (deficit)                                               15,996           (452)
Cumulative foreign currency translation adjustments                       (6,309)        (2,710)
----------------------------------------------------------------- --------------- --------------
Total Shareholders' Equity                                               130,439        117,590
----------------------------------------------------------------- --------------- --------------
Total Liabilities and Shareholders' Equity                             $ 371,863      $ 376,721
================================================================= =============== ==============

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

</TABLE>


<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
<CAPTION>

                                                               Year Ended     Year Ended      Year Ended
                                                              December 31,   December 31,    December 31,
                                                                  2000           1999            1998
------------------------------------------------------------ --------------- -------------- ---------------
<S>                                                                <C>            <C>               <C>
OPERATING ACTIVITIES
Net income                                                         $ 16,448       $ 15,098          $5,670
Adjustments to reconcile net income to net cash
   provided by continuing operations:
     Depreciation                                                     7,118          5,597           4,880
     Amortization                                                     5,610          5,354           6,872
     Provision for deferred income taxes                              7,474          7,730           4,668
     Extraordinary item                                                 ---            216           5,223
     Other                                                               80            111              49

     Other changes in operating assets and liabilities (excluding the effects of
     acquisitions and dispositions):
          Accounts and notes receivable, excluding effects
             of securitization                                       (6,081)        (5,628)         13,549
          Inventories                                                   711          5,737          11,774
          Accounts payable and accrued expenses                      (7,801)        (5,330)        (21,019)
          Other operating assets and liabilities                     (7,973)        (8,713)          9,163
------------------------------------------------------------ ---------------- --------------- -------------
     Net cash provided by continuing operations                      15,586         20,172          40,829
     Net cash used by discontinued operations                          (949)        (1,730)         (1,219)
-----------------------------------------------------------------------------------------------------------

Net Cash Provided by Operating Activities                            14,637         18,442          39,610
------------------------------------------------------------ --------------- -------------- ---------------
INVESTING ACTIVITIES
Net proceeds from sale of businesses and sales
    of property, plant and equipment                                    255          2,332          32,726
Purchases of property, plant and equipment                           (4,750)        (6,402)         (6,049)
Acquisition of Sierra International Inc.                                ---        (33,036)            ---
Net investing activities of discontinued operations                     ---            ---          (1,164)
Other                                                                   ---            ---              80
------------------------------------------------------------ --------------- -------------- ---------------

Net Cash (Used by) Provided by Investing Activities                  (4,495)       (37,106)         25,593
------------------------------------------------------------ ---------------- --------------- -------------
FINANCING ACTIVITIES
(Decrease) increase in notes payable                                 (1,169)           511          (2,421)
Proceeds from sale of accounts receivable                               ---         21,041             ---
Repurchase of receivables for securitization                         (2,234)           ---             ---
Proceeds from long-term borrowings                                   67,650         68,500          23,559
Principal payments on long-term debt                                (71,779)       (73,685)        (71,583)
Purchase of minority shares                                             ---            ---          (6,247)
Premium payment on repurchase of long-term debt                         ---           (210)         (5,822)
Other                                                                   ---            ---             (37)
------------------------------------------------------------ --------------- -------------- ----------------

Net Cash Used by Financing Activities                                (7,532)        16,157         (62,551)
------------------------------------------------------------ ---------------- --------------- -------------
Effect of exchange rate changes on cash                                (356)          (825)             50
------------------------------------------------------------ ---------------- --------------- -------------
Increase (Decrease) in Cash and Cash Equivalents                      2,254         (3,332)          2,702
Cash and cash equivalents at beginning of the period                  2,898          6,230           3,528
------------------------------------------------------------ --------------- -------------- ---------------
Cash and Cash Equivalents at End of the Period                       $5,152         $2,898          $6,230
============================================================ =============== ============== ===============
Supplemental  disclosures of cash flow information:  Cash paid during the period for:

        Interest                                                    $18,857        $15,560         $22,443
        Income taxes                                                $ 2,171        $ 2,671         $ 2,725

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

</TABLE>


<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Dollars in thousands)
<CAPTION>
                                                                       Cumulative
                                                                        Foreign
                                             Additional    Retained     Currency
                                  Common      Paid-in     Earnings    Translation
                                  Stock       Capital     (Deficit)    Adjustments     Total
------------------------------- ----------- ------------- ----------- ------------- ------------
<S>                               <C>          <C>         <C>               <C>        <C>
Balance at
  December 31, 1997               $ 17,128     $ 106,805   $ (33,016)        $(670)     $90,247
Net income                             ---           ---       5,670           ---        5,670
Purchase of minority interest          ---        (3,181)     11,796           ---        8,615
New equity structure upon
  merger with Imo Merger
  Corp.                            (17,127)       17,127         ---           ---          ---
Foreign currency translation
  adjustments                          ---           ---         ---          (266)        (266)
------------------------------- ----------- ------------- ----------- ------------- ------------
Balance at
  December 31, 1998                      1       120,751     (15,550)         (936)     104,266
Net income                             ---           ---      15,098           ---       15,098
Foreign currency translation
  adjustments                          ---           ---         ---        (1,774)      (1,774)
------------------------------- ----------- ------------- ----------- ------------- ------------
Balance at
  December 31, 1999                      1       120,751        (452)       (2,710)     117,590
Net income                             ---           ---      16,448           ---       16,448
Foreign currency translation
  adjustments                          ---           ---         ---        (3,599)      (3,599)
------------------------------- ----------- ------------- ----------- ------------- ------------
Balance at
  December 31, 2000                  $   1     $ 120,751     $15,996       $(6,309)    $130,439
=============================== =========== ============= =========== ============= ============

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

</TABLE>



Notes to Consolidated Financial Statements

Note 1  Significant Accounting Policies
---------------------------------------

Consolidation: The consolidated financial statements include the accounts of Imo
Industries Inc. (the "Company") and its majority-owned subsidiaries. Significant
intercompany  transactions  have been eliminated in  consolidation.  The Company
uses the equity method to account for  investments in  corporations  in which it
does  not  own a  majority  voting  interest  but has the  ability  to  exercise
significant influence over operating and financial policies.

Translation  of Foreign  Currencies:  Assets and  liabilities  of  international
operations are translated into U.S. dollars at year-end  exchange rates.  Income
and  expense  accounts  are  translated  into U.S.  dollars at average  rates of
exchange prevailing during the year. Translation  adjustments are reflected as a
separate component of shareholders' equity and comprehensive income.

Cash Equivalents:  Cash equivalents include investments in government securities
funds and  certificates of deposit.  Investment  periods are generally less than
one month.

Inventories:  Inventories are carried at the lower of cost or market, cost being
determined  principally on the basis of standards which approximate actual costs
on the first-in, first-out method, and market being determined by net realizable
value. Appropriate  consideration is being given to deterioration,  obsolescence
and other factors in evaluating net realizable value.

Revenue Recognition: Revenues are recorded generally when the Company's products
are shipped.

Shipping and  Handling:  The Company  adopted  Emerging  Issues Task Force Issue
00-10  "Accounting  for Shipping and Handling  Fees and Costs,"  which  requires
amounts  billed to  customers  for  shipping  and  handling  to be included as a
component of sales.  Shipping and handling  costs are included as a component of
cost of sales.

Depreciation  and  Amortization:  Depreciation  and  amortization  of plant  and
equipment are computed  principally on a straight-line  basis over the estimated
useful  lives of the assets as follows:  buildings  and  improvements,  10 to 40
years and machinery and equipment, 3 to 15 years.

Earnings Per Share: As a result of the back-end merger on July 2, 1998, earnings
per share is not presented for 2000, 1999 and 1998. (See Note 2).

Recent  Accounting  Pronouncements:  In  June  1998,  the  Financial  Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative  Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other  contracts,  and for hedging  activities.  This statement is effective for
fiscal years beginning after June 15, 2000. The Company believes that results of
operations will not be impacted by the adoption of this statement.

During the fourth quarter of 1999, the Company  adopted SFAS 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
which provides accounting and reporting standards for sales,  securitization and
servicing  of  receivables  and other  financial  assets and  extinguishment  of
liabilities.  The  provisions of the Statement do not have a material  impact on
the results of operations of the Company.

Intangible  Assets:  Goodwill of businesses  acquired is being  amortized on the
straight-line  basis over 40 years.  The carrying  value of goodwill is reviewed
when  indicators of impairment are present,  by evaluating  future cash flows of
the  associated  operations  to  determine  if  impairment  exists.  Goodwill at
December 31, 2000 and 1999 was $172.6 million and $177.2 million,  respectively,
net of respective  accumulated  amortization of $16.6 million and $12.0 million.
Patents are amortized over the shorter of their legal or estimated useful lives.

Management 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 revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.


Note 2  Acquisition By Colfax Corporation
-----------------------------------------

On August 28, 1997, Colfax Corporation ("Colfax"), acquired approximately 93% of
the Company's  outstanding  shares of common stock  pursuant to its tender offer
for  all   outstanding   shares  of  the  common   stock  of  the  Company  (the
"Acquisition").  The  consideration  paid was $7.05 per share of common stock or
$112.1  million in total.  On July 2, 1998,  Imo Merger  Corp.,  a wholly  owned
subsidiary of Colfax,  merged with and into Imo, pursuant to a short-form merger
under  Delaware  law  ("back-end   merger").   The  Company  was  the  surviving
corporation  in the  back-end  merger  and  as  result  became  a  wholly  owned
subsidiary  of Colfax.  As of  December  31,  2000,  972,961 of the  outstanding
1,221,888 common shares held by minority  shareholders were converted to cash. A
payable of $1.8 million was accrued as of December 31, 2000,  for the  remaining
248,927 shares that were not converted as of that date. Total  consideration for
the purchase of Imo was $120.7 million.

Cost Reduction Programs
In connection  with the  Acquisition,  the Company  implemented a cost reduction
program.  The cost of this  program  was $18.6  million  and was  accrued for in
accordance  with the  purchase  method of  accounting.  It is comprised of $10.5
million related to severance and  termination  benefits as a result of headcount
reductions at the Company's corporate  headquarters.  In addition,  $1.2 million
and $6.9  million  of costs for the  Company's  Fluid  Handling  and  Industrial
Positioning  segments,  respectively,   related  to  severance  and  termination
benefits  resulting from headcount  reductions and the  consolidation of certain
manufacturing  facilities.  The program was completed in 1999.  The cash outlays
related to this program were $7.4 million in 1998 and $3.1 million during 1999.


Note 3  Discontinued Operations
-------------------------------

On  February  27,  1998,  the  Company  completed  the sale of its Roltra  Morse
business  to  Magna  International  Inc.  for  cash  of $30  million,  plus  the
assumption of Roltra Morse's debt. The sale price  approximated the recorded net
book value of the  business.  Net proceeds were used to reduce  domestic  senior
debt.

In accordance with APB Opinion No. 30, the disposal of this business segment has
been accounted for as a discontinued  operation and, accordingly,  the operating
results have been  segregated  and reported as  Discontinued  Operations  in the
accompanying Consolidated Statements of Income and Comprehensive Income.

The income  (loss)  from  operations  of the  Discontinued  Operations  for 1998
includes allocated interest expense of $0.2 million.  Allocated interest expense
is an allocation of corporate  interest expense to the  Discontinued  Operations
based  on the  ratio  of net  assets  to be  sold  to the  sum of the  Company's
consolidated net assets, if positive, plus consolidated debt. The operating loss
of $0.9 million for Roltra Morse for the two months ended  February 28, 1998 was
accrued as a portion of the estimated loss on disposal as of December 31, 1997.


Note 4 Restructuring Asset Sales
--------------------------------

2000 Assets  Sales:  During  2000,  the Company  completed  the sales of certain
non-operating real estate for net proceeds of $0.3 million.

1999 Assets  Sales:  During  1999,  the Company  completed  the sales of certain
non-operating real estate for net proceeds of $0.1 million.

1998 Assets  Sales:  On February  27,  1998,  the Company  sold its Roltra Morse
business segment to Magna International. During 1998, the Company also completed
the sales of certain non-operating real estate for net proceeds of $0.6 million.


Note 5 Inventories
------------------

Inventories are summarized as follows:

December 31 (Dollars in thousands)                  2000                   1999
-------------------------------------------------------------------------------
Finished products                               $ 21,336               $ 24,740
Work in process                                   11,248                 14,277
Materials and supplies                            24,225                 19,904
-------------------------------------------------------------------------------
                                                  56,809                 58,921
Less customers' progress payments                   (820)                (1,077)
-------------------------------------------------------------------------------
                                                $ 55,989               $ 57,844
===============================================================================


Note 6  Accrued Expenses and Other Liabilities
----------------------------------------------

Accrued expenses and other liabilities consist of the following:

December 31 (Dollars in thousands)                 2000                    1999
-------------------------------------------------------------------------------
Accrued payroll and related items                $9,397                  $8,403
Accrued product warranty costs                    2,780                   2,507
Accrued interest payable                          2,473                   2,496
Accrued litigation and claims costs               1,639                   7,124
Accrued environmental costs                       1,129                   1,548
Accrued divestiture costs                           993                     977
Advance customer payments                           765                     539
Accrued restructuring costs                         308                     909
Other                                             7,236                   7,425
-------------------------------------------------------------------------------
                                               $ 26,720                $ 31,928
===============================================================================


Note 7  Income Taxes
--------------------

The components of income tax expense from continuing operations are:

Year Ended December 31
(Dollars in thousands)                    2000           1999            1998
------------------------------------------------------------------------------

Current:
     Federal                             $  59         $ (449)          $ 233
     Foreign                             2,971          1,326           1,801
     State                                 386            233             306
------------------------------------------------------------------------------
                                         3,416          1,110           2,340
------------------------------------------------------------------------------

Deferred:
     Federal                             7,754          6,450           4,668
     Foreign and State                    (280)         1,280             ---
------------------------------------------------------------------------------
                                         7,474          7,730           4,668
------------------------------------------------------------------------------

                                       $10,890         $8,840          $7,008
==============================================================================

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's  deferred tax assets and  liabilities  as of December 31, 2000 and
1999 are as follows:

<TABLE>
December 31
(Dollars in thousands)                                 2000                          1999
------------------------------------------ ----------------------------- -----------------------------
                                             Current       Long-term       Current       Long-term
------------------------------------------ ------------ ---------------- ------------ ----------------

Deferred tax assets:
<S>                                              <C>            <C>           <C>             <C>
     Postretirement benefit obligation           $ 234          $ 2,996       $  234          $ 3,235
     Expenses not currently deductible           7,082            4,999       12,942            6,467
     Net operating loss carryover                  ---           26,785          ---           29,026
     Tax credit carryover                          ---            8,021          ---            6,071
------------------------------------------ ------------ ---------------- ------------ ----------------
Total deferred tax assets                        7,316           42,801       13,176           44,799
Valuation allowance for
   deferred tax assets                          (1,204)            (516)      (1,204)            (516)
------------------------------------------ ------------- ---------------- ------------ ----------------

Net deferred tax assets                          6,112           42,285       11,972           44,283
------------------------------------------ ------------ ---------------- ------------ ----------------
Deferred tax liabilities:
     Tax over book depreciation                    ---           17,436          ---           16,835
     Other                                         ---            5,618          ---            6,603
------------------------------------------ ------------ ---------------- ------------ ----------------
Total deferred tax liabilities                     ---           23,054          ---           23,438
------------------------------------------ ------------ ---------------- ------------- ---------------
Net deferred tax assets                        $ 6,112          $19,231     $ 11,972         $ 20,845
========================================== ============ ================ ============= ===============
</TABLE>

The net  deferred  tax asset  currently  recorded at December  31, 2000 is $25.3
million, a level where management  believes that it is more likely than not that
the tax benefit  will be  realized.  Although the Company has a history of prior
losses,  these losses were  primarily  attributable  to divested  businesses and
unusual items.

The Company establishes  valuation  allowances in accordance with the provisions
of  FASB  Statement  No.  109,   "Accounting  for  Income  Taxes."  The  Company
continually  reviews the adequacy of the valuation  allowance and is recognizing
these  benefits only as  reassessment  indicates that it is more likely than not
that the benefits will be realized. The valuation allowance was $1.7 million for
December 31, 2000 and December 31, 1999.

At  December  31,  2000,   unremitted  earnings  of  foreign  subsidiaries  were
approximately $27.3 million. Since it is the Company's intention to indefinitely
reinvest these earnings, no U.S. taxes have been provided.  Determination of the
amount of unrecognized  deferred tax liability on these  unremitted  earnings is
not practicable.  The amount of foreign  withholding taxes that would be payable
upon remittance of those earnings is approximately $.5 million.

The  components  of income from  continuing  operations  before income taxes and
extraordinary item:


Year Ended December 31
(Dollars in thousands)                  2000          1999          1998
------------------------------------------------------------------------------
United States                        $ 17,395      $ 14,291       $ 7,963
Foreign                                 9,943         9,863         9,938
------------------------------------------------------------------------------
                                     $ 27,338       $24,154       $17,901
==============================================================================

U.S. income tax expense (benefit) at the statutory tax rate is reconciled below
to the overall U.S. and foreign income tax expense.


 Year Ended December 31
(Dollars in thousands)                  2000           1999          1998
------------------------------------------------------------------------------
Tax at U.S. federal income tax rate    $9,568       $ 8,454         $ 6,265
State taxes, net of federal income
  tax effect                              250           151             198
Impact of foreign tax rates and
  credits, and tax refunds               (789)       (1,247)         (1,677)
Net U.S. tax on distributions of
  current foreign earnings                385           486             266
Goodwill amortization and write-off     1,540         1,574           1,995
Other                                     (64)         (578)            (39)
-------------------------------------------------------------------------------
Income tax expense                   $ 10,890       $ 8,840         $ 7,008
===============================================================================

The Company has net operating loss carryforwards of approximately  $76.5 million
expiring in years 2001 through  2018,  and minimum tax credits of  approximately
$2.7  million,   which  may  be  carried   forward   indefinitely.   Tax  credit
carryforwards  include  foreign tax credits of  approximately  $5.3 million that
expire beginning in the year 2002. These  carryforwards  are available to offset
future  federal  taxable  income,   and  may  be  subject  to  the  Section  382
limitations, due to the Acquisition.


Note 8  Long-Term Debt and Notes Payable
----------------------------------------

Long-Term Debt
Long-term debt consists of the following:

December 31 (Dollars in thousands)                      2000               1999
-------------------------------------------------------------------------------
Term Loans                           (1) (2)        $ 27,290           $ 36,689
Revolver Loans                       (1) (2)          62,500             52,250
Due to Ameridrives International, L.P.  (3)              ---              5,000
Senior subordinated notes with interest at 11.75%,
  due May 1, 2006, net of unamortized discount of
  $0.7 million in 2000 and $0.8 million in 1999       74,299             74,217
Other                                                    784                915
-------------------------------------------------------------------------------
                                                     164,873            169,071
Less current portion                                 (39,666)            (9,447)
-------------------------------------------------------------------------------
                                                    $125,207           $159,624
===============================================================================


(1)  A portion of the proceeds from the sale of the Morse  Controls  division on
     February  13,  2001 was used to pay  down the term  loan by $17.3  million.
     Quarterly  principal  payments are as follows:  $1.1 million due  quarterly
     February 28, 2001 to August 29, 2001;  $1.7 million due quarterly  November
     29, 2001 to August 29, 2002.  All  revolver  balances are due on August 29,
     2002.
(2)  These  loans bear  interest at prime plus .50%,  or LIBOR plus  1.75%.  The
     prime and LIBOR margins are a sliding  scale based on the  Company's  total
     debt  to  EBITDA  (Earnings  Before  Interest,   Taxes,   Depreciation  and
     Amortization.)
(3)  The majority  shareholders of Ameridrives  International, L.P. are also the
     majority  shareholders of the Company.  This loan bears interest at LIBOR
     + 1.50%.
-------------------------------------------------------------------

On  February  27,  1998,  the  Company  completed  the sale of its Roltra  Morse
business to Magna International Inc. (See Note 3). The net proceeds were used to
reduce  domestic  senior debt by $30 million on February 27, 1998,  including $8
million of the outstanding  Term Loans.  The sale of Roltra Morse and use of the
proceeds to reduce its domestic senior debt increased the availability under its
revolving   credit   facility  to  purchase  a  portion  of  its  11.75%  senior
subordinated notes (the "Notes") on the open market.

The aggregate  annual  maturities of long-term debt, in thousands,  for the four
years subsequent to 2001 are:

(Dollars in thousands)
------------------------------------------------------------------------------
2002                                                                 $ 125,207
2003                                                                       ---
2004                                                                       ---
2005                                                                       ---
Thereafter                                                                 ---
------------------------------------------------------------------------------

Total                                                                 $125,207
==============================================================================

The Term Loans have required mandatory prepayments under certain conditions such
as from proceeds from asset sales, specified percentages of net proceeds of debt
or equity  issuances,  and a  percentage  of excess  cash  flow.  The  mandatory
prepayments  will be  applied  to the  Term  Loans  pro  rata,  and  then to the
repayment of the Revolver Loans. Mandatory prepayments applied to the Term Loans
reduce the  scheduled  quarterly  principal  payments on a pro rata  basis.  The
interest rates on the Revolver and Term Loans are based on current market rates.
Consequently, the carrying value of the Term Loans approximates fair value.

The Credit  Agreement  requires  the  Company to meet  certain  objectives  with
respect  to  financial  ratios.  The  Credit  Agreement  and the  Notes  contain
provisions,  which place certain  limitations  on dividend  payments and outside
borrowings.  Under the most restrictive of such provisions, the Credit Agreement
requires the Company to maintain certain minimum interest coverage, fixed charge
coverage and maximum permitted debt levels and prohibits dividends.  The Company
was in  compliance  with all of its  covenants  under the  Credit  Agreement  at
December 31, 2000.

During  March of 2001,  the  Company  plans to  exercise  its option to call the
entire  issue of the  11.75%  senior  subordinated  notes due May 1,  2006,  for
redemption  on May 1,  2001,  at a  redemption  price  of 106% of the  principal
amount.

The Company intends to finance the redemption with proceeds from the sale of the
Morse Controls division, as well as additional revolver borrowings.

The year ended  December  31,  1999,  includes an  extraordinary  charge of $0.2
million, as a result of the early extinguishment of a portion of its Notes.

The year  ended  December  31,  1998,  include an  extraordinary  charge of $5.2
million net of tax,  representing charges related to the early extinguishment of
the Company's debt under its current  senior  secured credit  facilities and its
Notes, as well as the write-off of previously deferred loan costs.

Notes Payable
The  Company's  continuing  operations  had $6.0  million in foreign  short-term
credit  facilities with $0.001 million  outstanding at December 31, 2000. Due to
the short-term nature of these debt instruments it is the Company's opinion that
the carrying  amounts  approximate  the fair value. As of December 31, 2000, the
Company had $6.3 million of outstanding standby letters of credit.


Note 10  Operations by Industry Segment and Geographic Area
-----------------------------------------------------------

The Company  classifies its continuing  operations  into two business  segments:
Fluid  Handling  and  Industrial  Positioning.  Detailed  information  regarding
products by segment is contained in the section entitled  "Business" included in
Part I, Item 1 of this Form 10-K Report.  Amounts related to pre-Acquisition and
post-Acquisition  have not been  separated,  as the effect of the Acquisition on
the segments was not material.  Information about the business of the Company by
business segment, foreign operations and geographic area is presented below:
<TABLE>

Year Ended December 31
(Dollars in thousands)                                                2000             1999            1998
----------------------------------------------------------- --------------- ---------------- ---------------
Net Sales
<S>                                                                <C>             <C>             <C>
     Fluid Handling                                                $99,170         $101,854        $113,688
     Industrial Positioning                                        230,274          190,840         200,684
----------------------------------------------------------- --------------- ---------------- ---------------
Total net sales                                                   $329,444         $292,694        $314,372
=========================================================== =============== ================ ===============
Segment operating income
     Fluid Handling                                               $ 23,108         $ 22,779        $ 21,462
     Industrial Positioning                                         30,024           23,198          26,323
----------------------------------------------------------- --------------- ---------------- ---------------
Total segment operating income                                      53,132           45,977          47,785
----------------------------------------------------------- --------------- ---------------- ---------------
Equity in income of unconsolidated companies                           742              ---              31
Unallocated corporate expenses                                      (8,332)          (7,344)         (9,275)
(Loss) / Gain on sale of assets                                        (24)           2,066             ---
Interest income / (expense), net                                   (19,157)         (16,545)        (20,640)
Other non operating                                                    977              ---             ---
----------------------------------------------------------- --------------- ---------------- ---------------
Income from continuing operations before income taxes and
extraordinary item                                                $ 27,338         $ 24,154        $ 17,901
=========================================================== =============== ================ ===============
</TABLE>

A reconciliation of segment operating income to income from operations follows:
<TABLE>

Year Ended December 31
(Dollars in thousands)                                 2000               1999                1998
---------------------------------------- ------------------- ------------------ -------------------
<S>                                                <C>                <C>                 <C>
Segment operating income                           $ 53,132           $ 45,977            $ 47,785
Unallocated corporate expenses                       (8,332)            (7,344)             (9,275)
Other income                                           (700)              (922)                ---
---------------------------------------- ------------------- ------------------ -------------------
Income from operations                             $ 44,100           $ 37,711            $ 38,510
======================================== =================== ================== ===================
</TABLE>


Year Ended December 31
(Dollars in thousands)                                  2000               1999
-------------------------------------------------------------------------------
Identifiable assets
     Fluid Handling                                 $ 55,129           $ 53,536
     Industrial Positioning                          126,469            125,018
     Corporate                                       190,265            198,167
-------------------------------------------------------------------------------
Total identifiable assets                           $371,863           $376,721
===============================================================================
Depreciation and amortization
     Fluid Handling                                  $ 2,023            $ 1,978
     Industrial Positioning                            5,045              3,360
     Corporate                                         5,660              5,613
-------------------------------------------------------------------------------
Total depreciation and amortization                  $12,728            $10,951
===============================================================================
Capital expenditures
     Fluid Handling                                   $1,312             $1,362
     Industrial Positioning                            3,396              4,738
     Corporate                                            42                302
-------------------------------------------------------------------------------
Total capital expenditures                            $4,750             $6,402
===============================================================================

Identifiable  assets of corporate at December 31, 2000 and 1999 include goodwill
of  $172.6  million  and  $177.2  million  related  to the  Acquisition  of Imo,
respectively (See Note 2).

The continuing operations of the Company on a geographic basis are as follows:
<TABLE>

Year Ended December 31
(Dollars in thousands)                                    2000               1999                1998
-------------------------------------------- ------------------ ------------------ -------------------
Net sales
<S>                                                   <C>                <C>                 <C>
     United States                                    $250,387           $203,659            $207,795
     Foreign                                            79,057             89,035             106,577
-------------------------------------------- ------------------ ------------------ -------------------
Total net sales                                       $329,444           $292,694            $314,372
============================================ ================== ================== ===================
Segment operating income
     United States                                    $ 42,163           $ 34,881             $34,523
     Foreign                                            10,969             11,096              13,262
-------------------------------------------- ------------------ ------------------ -------------------
Total segment operating income                        $ 53,132           $ 45,977             $47,785
============================================ ================== ================== ===================


Year Ended December 31
(Dollars in thousands)                                    2000               1999                1998
-------------------------------------------- ------------------ ------------------ -------------------
Identifiable assets
  Continuing Operations:
     United States                                    $319,328           $319,711            $327,720
     Foreign                                            52,535             57,010              61,252
-------------------------------------------- ------------------ ------------------ -------------------
Total identifiable assets                             $371,863           $376,721            $388,972
============================================ ================== ================== ===================

Export sales
     Asia                                               $3,650             $3,463              $5,277
     Canada                                              9,705              5,616               3,801
     Europe                                              4,656              3,461               3,288
     Middle East & North Africa                          1,148                544                 769
     Central and South America                           3,583              4,320               8,272
     Other                                               1,572              2,183               3,440
-------------------------------------------- ------------------ ------------------ -------------------
Total export sales                                    $ 24,314           $ 19,587            $ 24,847
============================================ ================== ================== ===================
</TABLE>

No one customer accounted for 10% or more of consolidated sales in 2000, 1999 or
1998.


Note 11  Pension Plans and Other Postretirement Benefits
--------------------------------------------------------

The  Company  and  its   subsidiaries   have  various   pension  plans  covering
substantially  all of their  employees.  Benefits  under these pension plans for
substantially all U.S.  employees ceased to accrue on January 31, 1999, when the
Company froze  benefits  under its primary  pension plan. At the same time,  the
Company  increased the length of service  credit for the pension plan by 20% and
enhanced  its  401k  plan.  Curtailment  of  the  pension  plan  resulted  in  a
curtailment gain of $6.5 million, while the increased length of service resulted
in a loss of $4.9 million. Both changes were contemplated at the Acquisition and
were recorded as purchase accounting adjustments.

It is the general  policy of the Company to fund its pension plans in conformity
with  requirements  of applicable  laws and  regulations.  Net periodic  pension
(income) cost was $(4.9) million in 2000,  $(3.8) million in 1999,  $0.7 million
in 1998, and includes  amortization of prior service cost and transition amounts
for periods of 5 to 15 years.  The 2000,  1999 and 1998 expense  includes  costs
related to retained pension liabilities of discontinued operations.

In addition to providing pension  benefits,  the Company provides certain health
care and life  insurance  benefits  for certain  retired  union  employees.  The
Company's  unionized  retiree  benefits  are  determined  by their  individually
negotiated  contracts.  The Company's  contribution  toward the full cost of the
benefits is based on the retiree's age and continuous unbroken length of service
with the Company. The Company's policy is to pay the cost of medical benefits as
claims are incurred. Life insurance costs are paid as insured premiums are due.

The  following  sets forth the funded  status of the plans as of the most recent
actuarial valuation using a measurement date of December 31.
<TABLE>

                                                              Pension Benefits                Other Benefits
------------------------------------------------------ ------------------------------- ------------------------------
Year Ended December 31
(Dollars in thousands)                                      2000           1999            2000            1999
------------------------------------------------------ --------------- -------------- ---------------- --------------
Change in benefit obligation:
<S>                                                          <C>            <C>                <C>          <C>
Benefit obligation at beginning of year                      $206,762       $219,638           $9,014       $ 10,004
Service cost                                                       38            331               13             19
Interest cost                                                  15,625         14,882              659            643
Actuarial loss (gain)                                            5,246       (12,813)             (26)          (705)
Effect of plan change                                             ---            407              ---            ---
Estimated benefits paid                                       (15,079)       (15,683)            (969)          (947)
------------------------------------------------------ --------------- -------------- ---------------- --------------
Benefit obligation at end of year                            $212,592       $206,762           $8,691         $9,014
------------------------------------------------------ --------------- -------------- ---------------- --------------

Change in plan assets:
Fair value of plan assets at beginning of year              $ 235,714       $ 214,742          $  ---          $  ---
Estimated return on plan assets                                 2,333          35,811             ---             ---
Employer contribution                                             309             844             969             947
Estimated benefits paid                                       (15,079)        (15,683)           (969)          (947)
------------------------------------------------------ --------------- --------------- --------------- ---------------
Fair value of plan assets at end of year                    $ 223,277       $ 235,714          $  ---          $  ---
------------------------------------------------------ --------------- --------------- --------------- ---------------

Funded status                                                $ 10,685        $ 28,952        $ (8,691)      $ (9,014)
Unrecognized actuarial gain                                    (6,376)        (30,056)           (205)          (197)
Unrecognized prior service cost                                   493             583              72             79
Unrecognized net obligation                                       127             153             ---            ---
------------------------------------------------------ --------------- --------------- --------------- --------------
Accrued benefit (cost)                                         $4,929          $ (368)       $ (8,824)      $ (9,132)
====================================================== =============== =============== =============== ==============

                                                              Pension Benefits                 Other Benefits
------------------------------------------------------ ------------------------------- -------------------------------
Year Ended December 31
(Dollars in thousands)                                      2000            1999            2000            1999
------------------------------------------------------ --------------- --------------- --------------- ---------------
Discount rate                                                   7.75%           7.75%           7.75%           7.75%
Expected return on plan assets                                  9.25%           9.25%             ---             ---
</TABLE>

For measurement purposes, a 5% annual rate of increase in the per capita cost of
covered  health care benefits was assumed for 2000 and in all future years.  The
rate of  compensation  increase  was zero in 2000 and 1999  because the plan was
frozen on January 31, 1999.
<TABLE>



                                                              Pension Benefits                 Other Benefits
------------------------------------------------------ ------------------------------- -------------------------------
Year Ended December 31
(Dollars in thousands)                                      2000            1999            2000            1999
------------------------------------------------------ --------------- --------------- --------------- ---------------
Components of net periodic benefit cost:
<S>                                                              <C>            <C>              <C>             <C>
Service cost                                                     $ 38           $ 331            $ 13            $ 19
Interest cost                                                  15,625          14,882             659             643
Expected return on plan assets                                (20,721)        (19,128)            ---             ---
Amortization                                                      162             132             (12)              6
                                                                  ---             ---             ---             ---
------------------------------------------------------ ---------------- -------------- --------------- ---------------
Net periodic (income) benefit cost                           $ (4,896)       $ (3,783)           $660            $668
====================================================== ================ ============== =============== ===============
</TABLE>

The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with  accumulated  benefit  obligations  in
excess of plan  assets  were  $10.1  million,  $9.8  million  and $8.4  million,
respectively,  as of  December  31,  2000 and  related to the Varo and Morse Ltd
pension plans. The projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for the  pension  plans with  accumulated  benefit
obligations  in excess of plan assets were $2.8  million,  $2.8 million and $1.4
million,  respectively,  as of December 31, 1999 and related to the US Salaried,
Louisburg, Warren and Varo pension plans

Assumed  health care cost trend rates have a  significant  effect on the amounts
reported  for the health  care plan.  A  one-percentage-point  change in assumed
health care cost trend rates would have the following effects:

                                        1-Percentage-Point   1-Percentage-Point
(Dollars in thousands)                       Increase             Decrease
-------------------------------------------------------------------------------
Effect on total of service and interest
  cost components                             $  45               $ (39)
Effect on the postretirement benefit
  obligation                                  $ 595               $(519)


Plan assets at December 31, 2000 are invested in fixed  income  investments  and
equity  securities  whose values are subject to  fluctuations  of the securities
market.

The  Company   maintains  a  defined   contribution   plan   ("Plan")   covering
substantially  all  domestic,   non-union  employees.   Eligible  employees  may
generally  contribute from 1% to 15% of their compensation on a pre-tax basis to
the Plan.  The Company's  expense for 2000,  1999 and 1998 was $2.6 million,  $2
million and $.4 million,  respectively,  related to the Plan. Effective February
1,  1999,  the  Company  contributions  are based on 50% of the first 6% of each
participant's  pre-tax  contribution.   In  addition,   the  Company  will  also
contribute  3%  of  all  employees'  salary  (including   non-contribution  plan
participants) to the defined contribution plan, effective January 1, 1999.


Note 12  Leases
---------------

The Company leases certain manufacturing and office facilities,  equipment,  and
automobiles  under long-term  leases.  Future minimum rental  payments  required
under operating  leases of continuing  operations that have initial or remaining
noncancelable lease terms in excess of one year, as of December 31, 2000, are:

 (Dollars in thousands)
-------------------------------------------------------------------------------
2001                                                                    $ 3,433
2002                                                                      2,698
2003                                                                      2,047
2004                                                                        830
2005                                                                        508
Thereafter                                                                2,915
-------------------------------------------------------------------------------

Total minimum lease payments                                           $ 12,431
===============================================================================

Total  rental  expense  under  operating   leases  charged  against   continuing
operations  was $6.0  million in 2000,  $6.5 million in 1999 and $7.3 million in
1998.


Note 13  Foreign Exchange Contracts
-----------------------------------

The Company  periodically enters into foreign exchange contracts for purposes of
hedging its  exposure to foreign  currency  exchange  rate  fluctuations.  These
contracts  hedged firm  commitments  between  the  Swedish  Krona and the German
Deutschmark and the United States Dollar.  At December 31, 1999, the Company had
foreign currency  contracts with notional amounts  totaling  approximately  $0.1
million with various  expiration  dates  through June 2000.  The Company did not
have any foreign currency contracts outstanding at December 31, 2000.

All foreign  currency  derivative  agreements are with major  commercial  banks;
therefore the risk of credit loss from nonperformance by the banks is considered
by management to be minimal.  The Company  evaluates its exposure to credit loss
on an ongoing basis.


Note 14  Sierra International Inc. Acquisition
----------------------------------------------

On December 1, 1999,  the Company  purchased  the stock of Sierra  International
Inc. ("Sierra") from Echlin Inc., a subsidiary of Dana Corporation. Sierra sells
and distributes  replacement  parts for marine and power equipment  applications
and marine hose  products.  Sierra has become part of the  Company's  Industrial
Positioning  segment.  On February 13, 2001,  Sierra was sold with the Company's
Morse Controls division. (See Note 16).


Note 15   Accounts Receivable Securitization
--------------------------------------------

On November 29, 1999, the Company  entered into an agreement to sell an interest
in accounts receivable to finance a portion of the Sierra acquisition. Under the
program,  the Company  entered into an agreement to sell, on a revolving  basis,
certain  of  its  accounts   receivable  to  a  wholly-owned   bankruptcy-remote
subsidiary,  Imo Funding  Company,  LLC,  which  entered  into an  agreement  to
transfer,  on a revolving basis, an undivided percentage ownership interest in a
pledged  pool of accounts  receivable  to an  unrelated  third party  purchaser,
Scotia Capital.  Amounts  pledged to the purchaser under this agreement  include
the accounts receivable from the Company's US operations of the Imo Pump, Boston
Gear and Morse Controls divisions.

At December 31, 2000 and 1999,  approximately  $23.2 million and $22.4  million,
respectively, of  accounts  receivable  had been  pledged,  and of this  amount,
approximately  $18.8 million and $21.0 million,  respectively  had actually been
sold to Scotia  Capital  under  this  agreement.  The sales are  reflected  as a
reduction  of  accounts  receivable  and  are  net  of a  discount  amount  that
approximates the purchaser's  financing cost of issuing its own commercial paper
backed by these  accounts  receivable.  The  retained  interest in the  accounts
receivables  sold are valued at the  carrying  amount of the  retained  accounts
receivable net of applicable  loss reserve and related  commercial  paper rates,
which approximates fair value.  During the year,  management monitors the change
in the  outstanding  retained  interest  and makes  adjustments  to its carrying
amount based on actual and  projected  losses as well as any changes in interest
rates.

As of December 31, 2000 and 1999, the  delinquencies on the amounts pledged were
approximately $1.1 million and $0.9 million, respectively. During 2000 and 1999,
the actual  losses on the pledged  amounts were  approximately  $0.2 million and
$0.1 million,  respectively.  At December 31, 2000, a 10 and 20 percent  adverse
change in the expected  losses would have  approximately a $0.1 million and $0.2
million,  impact on  residual  interest,  respectively.  Any changes in interest
rates would only have only a marginal impact on residual interest.

The Company, as agent for the purchaser,  retains servicing responsibilities for
the pledged  receivables.  The fees  received by the Company for these  services
during 2000 and 1999,  were  recorded at fair value,  and  therefore  no related
assets have been  recorded.  The discount  fees arising from the  securitization
transactions were approximately $1.5 million and $0.1 million for 2000 and 1999,
respectively,  recorded  as  interest  expense  and are  based  on the  level of
receivables sold and related commercial paper rates.

A portion  of the  proceeds  from the sale of the  Morse  Controls  division  on
February  13,  2001 was used to  fully  repay  the  entire  accounts  receivable
securitization.  As a result,  the Company's  ownership  interest in the pledged
pool of accounts receivable was returned.

SFAS No. 125,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments of Liabilities," provides accounting and reporting standards for
sales,  securitization  and servicing of receivables and other financial  assets
and  extinguishments  of  liabilities.  The Company adopted the Statement in the
1999 fourth  quarter.  The  provisions  of the  Statement do not have a material
impact on the accounting for actual or future sales of trade accounts receivable
under the  securitization  agreement referred to above. SFAS 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
a Replacement  of FASB  Statement  125,"  provides for  accounting and reporting
standards  for sales,  securitization  and  servicing of  receivables  and other
financial  assets and  extinguishments  of liabilities.  The Company adopted the
Statement's disclosure requirements in the 2000 fourth quarter.


Note 16  Subsequent Events
--------------------------

Sale of Morse  Controls - On February 13,  2001,  the Company sold the assets of
its Morse  Controls  division and stock of the Morse  related  subsidiaries,  to
Teleflex  Incorporated  ("Teleflex") pursuant to an agreement dated November 15,
2000 for $135 million in cash,  subject to final adjustment.  Cash proceeds have
been  principally  used by the Company to pay down its domestic  senior debt and
accounts  receivable  securitization.  The transaction  will be reflected in the
Company's financial  statements in the first quarter of 2001.


Note 17   Contingencies
-----------------------

The Company and one of its  subsidiaries are two of a large number of defendants
in a number of lawsuits brought in various  jurisdictions by approximately 4,500
claimants who allege injury caused by exposure to asbestos. Although neither the
Company nor any of its  subsidiaries has ever been a producer or direct supplier
of asbestos,  it is alleged that the industrial and marine  products sold by the
Company and the subsidiary named in such complaints  contained  components which
contained  asbestos.  Suits  against the Company  and its  subsidiary  have been
tendered to its insurers,  who are defending  under their stated  reservation of
rights.  In  addition,  the  Company  and the  subsidiary  are  named in  cases,
involving   approximately   40,000  claimants,   which  were   "administratively
dismissed" by the U.S.  District Court for the Eastern District of Pennsylvania.
Cases that have been "administratively  dismissed" may be reinstated only upon a
showing  to  the  Court  that  (i)  there  is   satisfactory   evidence   of  an
asbestos-related injury; and (ii) there is probative evidence that the plaintiff
was exposed to products or equipment  supplied by each  individual  defendant in
the case. The Company  believes that it has adequate  insurance  coverage or has
established appropriate reserves to cover potential liabilities related to these
cases.

The Company is a defendant in a lawsuit in the Supreme Court of British Columbia
alleging breach of contract  arising from the sale of a steam turbine  delivered
by the Company's  former Delaval Turbine Division and claiming damages in excess
of $10 million.  The Company  believes that there are legal and factual defenses
to the claim and intends to defend the action vigorously.

The Company was a defendant  in a lawsuit in the Circuit  Court of Cook  County,
Illinois alleging performance  shortfalls in products delivered by the Company's
former  Delaval  Turbine  Division.  The  Company has  reached an  agreement  on
December 7, 1999,  with the plaintiff  settling all claims  between the parties.
However,  a co-defendant,  Federal  Insurance  Company,  continues to pursue its
counterclaim  against the Company for attorney's  fees it alleges it incurred in
its role as surety for the project from which the litigation  arose. The Company
believes  that there are legal and factual  defenses to the claim and intends to
defend the action vigorously.

On June 3, 1997,  the Company was served with a complaint  in a case  brought in
the Superior Court of New Jersey which alleges  damages in excess of $10 million
incurred as a result of losses under a Government  Contract Bid  transferred  in
connection  with  the  sale  of the  Company's  former  Electro-Optical  Systems
business.  The  Electro-Optical  Systems business was sold in a transaction that
closed on June 2, 1995. The sales contract provided certain  representations and
warranties  as to the status of the business at the time of sale.  The complaint
alleges that the Company failed to provide  notice of a "reasonably  anticipated
loss" under a bid that was pending at the time of the  transfer of the  business
and  therefore a  representation  was  breached.  The contract was  subsequently
awarded to the Company's Varo subsidiary and thereafter transferred to the buyer
of the  Electro-Optical  Systems  business.  The Company believes that there are
legal and  factual  defenses  to the  claims  and  intends  to defend the action
vigorously.

The operations of the Company,  like those of other companies engaged in similar
businesses, involve the use, disposal and clean up of substances regulated under
environmental  protection  laws.  In a number of instances  the Company has been
identified  as  a  Potentially  Responsible  Party  by  the  U.S.  Environmental
Protection Agency,  with respect to the disposal of hazardous wastes at a number
of facilities that have been targeted for clean-up pursuant to CERCLA or similar
state law. Similarly, the Company has received notice that it is one of a number
of defendants  named in an action filed in the United States District Court, for
the Southern  District of Ohio Western Division by a group of plaintiffs who are
attempting to allocate a share of cleanup costs, for which they are responsible,
to a large number of additional parties,  including the Company. Although CERCLA
and corresponding state law liability is joint and several, the Company believes
that its  liability  will not have a material  adverse  effect on the  financial
condition  of the Company  since it believes  that it either  qualifies  as a de
minimis or minor  contributor at each site.  Accordingly,  the Company  believes
that the portion of remediation  costs that it will be responsible  for will not
be material.

The Company is also involved in various other pending legal proceedings  arising
out of the  ordinary  course  of the  Company's  business.  None of these  legal
proceedings  are  expected to have a material  adverse  effect on the  financial
condition of the Company.  With respect to these  proceedings and the litigation
and claims  described in the  preceding  paragraphs,  management  of the Company
believes that it either will  prevail,  has adequate  insurance  coverage or has
established appropriate reserves to cover potential liabilities. There can be no
assurance,  however, as to the ultimate outcome of any of these matters,  and if
all or  substantially  all of  these  legal  proceedings  were to be  determined
adversely  to the  Company,  there  could be a  material  adverse  effect on the
financial condition of the Company.

The Company is self-insured  for a portion of its product  liability and certain
other liability  exposures.  Depending on the nature of the liability claim, and
with certain exceptions, the Company's maximum self-insured exposure ranges from
$250,000 to $500,000 per claim with certain maximum  aggregate policy limits per
claim year. With respect to the exceptions,  which relate  principally to diesel
and turbine units sold before 1991, the Company's maximum self-insured  exposure
is $5 million per claim.




                    Report of Independent Public Accountants
                    ----------------------------------------


To the Shareholders and Board of Directors of
Imo Industries Inc.:

We have audited the accompanying  consolidated  balance sheets of Imo Industries
Inc. (a Delaware corporation) and subsidiaries as of December 31, 2000 and 1999,
and the related  consolidated  statements  of income and  comprehensive  income,
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 2000. 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 an 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 consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Imo Industries Inc.
and  subsidiaries  as of December  31,  2000 and 1999,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting  principles  generally accepted
in the United States.


                                         ARTHUR ANDERSEN LLP



Richmond, Virginia
March 28, 2001






             Report of Independent Public Accountants on Schedule II
             -------------------------------------------------------


To the Shareholders and Board of Directors of
Imo Industries Inc.:

We have audited in accordance with auditing standards  generally accepted in the
United States the consolidated  financial  statements  included in the Form 10-K
Annual Report of Imo Industries Inc. (a Delaware  corporation)  and subsidiaries
as of December 31, 2000 and 1999,  and for each of the three years in the period
ended  December 31,  2000,  and have issued our report  thereon  dated March 28,
2001.  Our audits  were made for the  purpose of forming an opinion on the basic
consolidated  financial statements taken as a whole. Schedule II filed as a part
of the Company's Form 10-K Annual Report is the  responsibility of the Company's
management  and is presented for purposes of complying  with the  Securities and
Exchange  Commission's  rules  and  is  not a part  of  the  basic  consolidated
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures applied in the audit of the basic consolidated  financial  statements
and, in our opinion, fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.


                                         ARTHUR ANDERSEN LLP



Richmond, Virginia
March 28, 2001





<TABLE>

Imo Industries Inc. and Subsidiaries
Quarterly Financial Information (Unaudited)
Quarterly financial information for 2000 and 1999 is as follows:
<CAPTION>


                                                                    1st           2nd           3rd           4th
2000 (Dollars in thousands)(a)                                    Quarter       Quarter       Quarter       Quarter

<S>                                                                  <C>           <C>           <C>           <C>
Net Sales                                                            $83,424       $89,130       $78,840       $78,050
Gross profit                                                          26,711        28,873        24,439        24,412
Income from continuing operations
  before extraordinary item                                            4,533         6,111         3,557         2,247
Net income                                                           $ 4,533       $ 6,111       $ 3,557        $2,247


                                                                    1st           2nd           3rd           4th
1999 (Dollars in thousands)(a)                                    Quarter       Quarter       Quarter       Quarter

Net Sales                                                           $ 75,843      $ 77,211      $ 68,371      $ 71,269
Gross profit                                                          23,768        25,650        20,899        22,254
Income from continuing operations
  before extraordinary item                                            3,321         5,352         2,278         4,363
Extraordinary Item                                                      (216)          ---           ---           ---
Net income                                                             3,105         5,352         2,278         4,363
</TABLE>

(a) The notes to the  consolidated  financial  statements  located in Part IV of
    this Form 10-K Report as indexed at Item 14(a)(1) should be read in
    conjunction with this summary.
<TABLE>

                                   SCHEDULE II
                      IMO INDUSTRIES INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                             (Dollars in thousands)
<CAPTION>

THREE-YEAR PERIOD ENDED DECEMBER 31, 2000
---------- ------------------------------------ ---------------- ------------------------------ ---------------

                                                                        ADDITIONS
                                                   BALANCE      -------------------------
                                                 AT BEGINNING     CHARGED TO      OTHER -       DEDUCTIONS -       BALANCE AT
                                                   OF YEAR      COSTS EXPENSES    DESCRIBE      DESCRIBE           END OF YEAR

YEAR ENDED DECEMBER 31, 2000:
<S>                                                <C>               <C>           <C>              <C>             <C>
Allowance for doubtful accounts                    $1,348            $ 538            $  ---         $  477   (3)      $1,404
                                                                                                          5   (1)
                                                =============    =============     ============   =============     =============
Inventory valuation allowance                      $5,682           $1,995            $  ---         $1,504   (5)      $6,097
                                                                                                         76   (1)
                                                =============    =============     ============   =============     =============
Valuation allowance for deferred
  tax assets                                       $1,720           $  ---            $  ---          $  ---           $1,720

                                                =============    =============     ============    =============    =============
Accrued product warranty liability                 $2,507           $1,841            $  ---          $1,554   (4)     $2,780
                                                                                                          14   (1)
                                                =============    =============     ============    =============    =============
YEAR ENDED DECEMBER 31, 1999:

Allowance for doubtful accounts                    $1,058            $ 360            $ 200   (7)      $  50   (2)     $1,348
                                                                                                         220   (3)
                                                =============    =============     ============    =============    =============
Inventory valuation allowance                      $7,222           $1,211            $  36   (2)     $2,810   (5)     $5,682
                                                                                        821   (7)        700   (2)
                                                                                                          98   (1)
                                                =============    =============     ============    =============    =============
Valuation allowance for deferred
  tax assets                                       $1,720           $  ---           $  ---           $  ---           $1,720
                                                =============    =============     ============    =============    =============

Accrued product warranty liability                 $1,423           $1,655            $ 602   (2)     $1,349   (4)     $2,507
                                                                                        176   (7)
                                                =============    =============     ============    =============    =============
YEAR ENDED DECEMBER 31, 1998:

Allowance for doubtful accounts                    $1,435            $(158)           $   3   (2)      $ 229   (3)     $1,058
                                                                                                          (7)  (1)
                                                =============    =============     ============    =============    =============
Inventory valuation allowance                      $9,508            $ 974            $  53   (2)     $3,249   (5)     $7,222
                                                                                                          64   (1)
                                                =============    =============     ============    =============    =============
Valuation allowance for deferred
  tax assets                                      $53,257           $  ---           $  ---          $51,537   (6)     $1,720

                                                =============    =============     ============    =============    =============
Accrued product warranty liability                 $1,844           $1,224            $  46           $1,691   (4)     $1,423

                                                =============    =============     ============    =============    =============


(1)  Foreign exchange adjustments.
(2)  Reclassifications and adjustments.
(3)  Uncollectible accounts written off, net of recoveries.
(4)  Product warranty claims honored during the year.
(5)  Charges against inventory valuation account during the year.
(6)  True up balances and reduce valuation reserve due to management's belief that it is more likely than not that Deferred tax
     benefits will be utilized in the future.
(7)  Sierra acquisition (not included in the beginning balance).

</TABLE>