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, 1996
                                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)

      1009 Lenox Drive, Building Four West
          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:


                                            Name of each exchange on
            Title of each class                which registered

        Common Stock, $1.00 par value       New York Stock Exchange

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  herein,
and  will not be contained, to the best of Registrant's knowledge,
in  definitive  proxy  or information statements  incorporated  by
reference in Part III of this Form 10-K or any amendment  to  this
Form 10-K.  (X)

     Aggregate  market  value  of  the  voting  stock  held   by
non-affiliates  of  the Registrant computed by  reference  to  the
closing  price of such stock on the New York Stock Exchange,  Inc.
on March 14, 1997 .........................$51,376,077

Shares  of Registrant's common stock, $1.00 par value, outstanding
as of March 14, 1997 .......................17,125,359

               DOCUMENTS INCORPORATED BY REFERENCE
  Identification of Documents              Part into which Incorporated
  Portions of the Company's Proxy           Items 10,11,12 of Part III
  Statement for its Annual Meeting of
  Stockholders to be held May 20, 1997

                           TABLE OF CONTENTS
                                PART I
Item

1. Business..............................................           
       General...........................................           
       History...........................................           
       Industry Segments.................................           
       Discontinued Operations...........................           
       Restructuring Plans...............................           
       Competition.......................................           
       Product Distribution and Customers................           
       Backlog...........................................           
       Raw Materials.....................................           
       Patents, Licenses and Trademarks..................           
       Research and Development..........................           
       Environmental Matters.............................           
       Employees.........................................           
2. Properties............................................           
3. Legal Proceedings.....................................           
4. Submission of Matters to a Vote of Security Holders...          
Executive Officers of the Registrant.....................          



                                PART II

5. Market for the Registrant's Common Equity
    and Related Stockholder Matters......................           
6. Selected Financial Data...............................           
7. Management's Discussion and Analysis of
    Financial Condition and Results of Operations........          
8. Financial Statements and Supplementary Data...........          
9. Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure...............           


                                PART III

10. Directors and Executive Officers of the Registrant...           
11. Executive Compensation...............................           
12. Security Ownership of Certain Beneficial Owners
     and Management......................................           
13. Certain Relationships and Related Transactions.......           


                                PART IV

14. Exhibits, Financial Statement Schedules and
     Reports on Form 8-k.................................          
Exhibit Index............................................          
Signatures...............................................          


                                PART I

Item 1.            Business.


General

Imo Industries Inc. (hereinafter with its subsidiaries
referred to as the "Company") is an integrated  multinational
industrial manufacturer of a broad range of industrial
products through its five core business segments - Power
Transmission, Pumps, Instrumentation, Morse Controls and
Roltra-Morse. The Company's products are designed to regulate
and control motion, transfer liquids and monitor fluids. The
Company markets its products on a worldwide basis to a
diverse customer base. In November 1996, the Company
announced that it was withdrawing Roltra-Morse from
divestiture because threats made by an unsuccessful bidder
made it impossible for the Company to receive fair value for
the business.  As a result of this announcement, Roltra-Morse
has been reclassified as a continuing operation and the
Company has re-focused its operations on its five core
business segments, as follows:

The Power Transmission business segment designs and produces
electronic adjustable-speed motor drives, gears and speed
reducers.

The Pumps business segment designs and produces a broad range
of rotary pumps, including a proprietary line of two and
three-screw pumps.

The Instrumentation business segment designs and produces
transducers and switches for sensing, measuring and
controlling pressure, temperature and liquid level and flow.

The  Morse Controls  business segment designs and produces push-
pull cable and remote control systems.

The Roltra-Morse business segment designs and produces
automotive products including actuators, window controls,
latches and door panels/assemblies.

In addition to the five segments comprising the Company's
continuing core operations, the Company has a sixth business
segment entitled Other included in its continuing operations
for financial reporting purposes.  This segment includes
operations previously sold and non-operating assets to be
sold as part of the Company's asset divestiture program.

The Company's Electro-Optical Systems and Turbomachinery
businesses are accounted for as discontinued operations and,
accordingly, have been excluded from the Company's segments.
The Company sold its Turbomachinery and most of its Electro-
Optical Systems businesses in 1995. The previously reported
financial information has been reclassified to reflect the
Roltra-Morse business segment as a continuing operation.


History

The Company, founded in 1901 in the United States by  Dr.
Carl Gustaf Patrick de Laval, a Swedish scientist, was
acquired by Transamerica Corporation ("Transamerica") in
1963.  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 (the "Distribution") and since that time
the Company has operated on a stand-alone basis as a publicly
traded company.

Industry Segments

A description of the principal products and services offered
by each core business segment of the Company, as well as the
principal markets for such products and services, are set
forth below.   Certain information in response to this item
with respect to net sales, operating profit, and identifiable
assets of each of these segments and by geographic area is
contained in Note 10 of the Notes to Consolidated Financial
Statements included in Part IV of this Form 10-K Report as
indexed at Item 14(a)(1).  Information regarding the
businesses sold and held for sale and the discontinued
operations is provided later in this section and is contained
in Notes 2 and 3 to the Consolidated Financial Statements.

Power Transmission
The Power Transmission business segment operations produce
speed reducers and loose gearing that are recognized as
leading products in their market niches.  This segment is
comprised of two units: Boston Gear, a leading producer of
gears and speed reducers, and Fincor Electronics, a producer
of adjustable-speed motor controllers.   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.

Pumps
The Pumps business segment is the largest worldwide
manufacturer of rotary screw pumps. The three businesses that
comprise the Pumps 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 vessels and in many 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.

Instrumentation
The Instrumentation business segment operations design and
manufacture products that perform a wide variety of critical
sensing, measuring, monitoring and control functions. This
business segment is comprised of two units: Gems Sensors, a
leading producer of level and flow switches, and
TransInstruments, a leading producer of pressure transducers
in Europe.

Tank level indicators, level switches, solid state relays and
flow meters are manufactured principally for marine and
general industrial applications.  These products are used in
ocean-going tankers, military vessels, petrochemical
facilities and industrial and commercial products around the
world.   Hundreds of varieties of liquid-level monitors,
indicators and switches are manufactured for use by more than
30,000 customers.   Pressure transducers are used to measure
pressure as a continuous function and are sold to a wide
segment of the general industrial market.

Morse Controls
The Morse Controls business segment is a leading worldwide
manufacturer of precision mechanical and electronic control
products and systems that are primarily used for pleasure
marine and industrial vehicle applications.

This segment produces, among other products; push-pull cable
and control systems used to control and actuate functions,
such as steering and valve adjustment, and as an alternative
to electrical systems.  Applications include throttle control
and steering systems for both off-the-road vehicles and
pleasure boats.

Roltra-Morse
The Roltra-Morse business segment is Italy's leading
manufacturer of latches, lifters and cables for automobile
doors, windows, trunks, and seats. Its product line also
includes pre-assembled door panels that carry all  functional
components.

Roltra-Morse products also include remote cable gear control
systems that employ push-pull cables to transmit motion from
the gear lever to the transmission.  The segment also offers
a broad range of flexible cables for both auto and industrial
vehicle applications.

Discontinued Operations

In January 1994 and in August 1994, the Board of Directors
approved the Company's plans to sell its Electro-Optical
Systems operations and its Turbomachinery operations,
respectively.  In accordance with APB Opinion No. 30, the
disposals of these business segments have been accounted for
as discontinued operations and, accordingly, their operating
results have been segregated and reported as Discontinued
Operations in the accompanying Consolidated Statements of
Income.

Electro-Optical Systems
On January 3, 1995, the Company completed the sale of its
Baird Analytical Instruments Division to Thermo Instruments
Systems Inc. for approximately $12.3 million, which was used
to repay a portion of the Company's domestic senior debt
outstanding under its previous credit facility (the "Old
Credit Agreement"). On June 2, 1995, the Company completed
the sale of the Optical Systems and Ni-Tec divisions of Varo
Inc. and the Optical Systems division of Baird Corporation,
which represented the major part of its Electro-Optical
Systems business, to Litton Industries for approximately book
value. The proceeds were used on June 2, 1995 to reduce
amounts outstanding under the Old Credit Agreement by $8
million and to redeem $40 million of the Company's then
outstanding 12.25% senior subordinated debentures on July 6,
1995.

The Company entered into a definitive agreement in September
1996 to sell the Varo Electronic Systems division, the
remaining portion of its former Electro-Optical Systems
business, to a small defense contractor for approximately net
book value.  This agreement expired in November 1996 and was
subsequently renegotiated and reinstated in January 1997.
The buyer has secured the necessary financing to purchase
this business.  The Company expects the sale to be completed
in the second quarter of 1997, and intends to use the
proceeds to reduce debt.  The sale of this business will
complete the disposal of the Electro-Optical Systems
business.

Turbomachinery
On January 17, 1995, the Company completed the sale of its
Delaval Turbine and TurboCare divisions and its 50% interest
in the Dutch partnership Delaval-Stork, to Mannesmann Demag.
The final adjusted purchase price was $119 million of which,
$109 million was received at closing, with the remainder
earning interest to the Company and to be received at
specified future contract dates subject to adjustment as
provided in the sale agreement.  It is management's
expectation that there will be no further adjustment to the
purchase price.  A portion of the proceeds were used by the
Company to pay off its domestic senior debt in January 1995
and in March 1995 the Company redeemed $40 million of its
then outstanding 12.25% senior subordinated debentures with
the remainder of the proceeds.

See Note 2 to the Consolidated Financial Statements located
in Part IV of this Form 10-K Report as indexed at Item 14
(a)(1) for additional details regarding the discontinued
operations.


Restructuring Plans

Asset Sales
In October 1992, the Company announced a plan to strengthen
its balance sheet through the sale of certain businesses and
the application of the proceeds to reduce debt.  Pursuant to
this plan, the Company divested its Heim Bearings, Aerospace,
Barksdale Controls and CEC Instruments businesses. These
proceeds, net of related expenses, were used to repay senior
debt in the amount of $81.9 million in 1993 and $13.2 million
in 1994, in accordance with the terms of the 1993
restructured credit facilities.

In the fourth quarter of 1993, management initiated a
strategy to reposition the Company on its less capital
intensive businesses that exhibited strong brand name
recognition, a broad customer base and market leadership,
with less dependence on U.S. Government sales.  In connection
with this strategy, the Company divested its Turbomachinery
and substantially all of its Electro-Optical Systems
businesses in 1995 and had planned to sell its Roltra-Morse
business in 1996. The Company used these 1995 proceeds, net
of related expenses, to repay senior debt outstanding under
its Old Credit Agreement in the amount of $89.7 million and
to redeem $80 million of its then outstanding 12.25% senior
subordinated debentures (See above discussion regarding
Discontinued Operations).  During 1996, the Company completed
the sales of five of its non-operating real estate holdings
for net proceeds of $8.6 million.  The proceeds were used to
repay the Company's domestic senior debt.

Other than the remaining Electro-Optical Systems business as
discussed in the Discontinued Operations discussion above, the
remaining assets currently held for sale include non-strategic
business units of the Company's Power Transmission and Morse
Controls segments, as well as certain non-operating real estate
originally identified for sale in October 1992. The operating
units produced income before taxes of $.1 million for the full
year 1996, net of $2.3 million of interest expense, which has
been allocated, based on net assets of approximately $21.5
million.  The fourth quarter of 1996 includes a charge of $17.1
million to adjust the value of these non-strategic businesses to
their expected net realizable values. The Company targets
completion of these sales over the next 12 months and intends to
apply the proceeds to reduce debt.

Cost Reduction Programs
1996 Program.  The fourth quarter of 1996 includes a charge
of $7.4 million in continuing operations for restructuring
measures taken at several of the Company's European
operations to further reduce operating expenses.  The Company
completed an evaluation of its Roltra-Morse operations during
the fourth quarter to determine what structural and other
changes were necessary to position this business for
profitable future growth.  The portion of the charge related
to Roltra-Morse was $6.2 million, which includes severance
and  certain other costs, and a write-off of goodwill. These
restructuring measures at Roltra-Morse are expected to reduce
operating expenses, improve the effectiveness of engineering
resources and produce cost savings in 1997.  The remaining
restructuring charges relate to severance costs and other
expenses related to further restructuring at the Company's
Gems European operations and Morse German operation.

The 1996 cost reduction program is expected to reduce
expenses by approximately $2.6 million in 1997 and $3.8
million annually thereafter. This program includes a
reduction of 126 employees in Europe, or 3.3% of the total
number of Company employees at the end of 1996. The required
cash outlay related to this program was $.4 million in 1996
and the expected cash requirements during 1997 are $3.1
million.  The remainder represents non-cash charges.

1995 Program.  In the fourth quarter of 1995, the Company
recorded a charge to continuing operations of $5.2 million,
including severance and other expenses related to a Company-
wide program to reduce general and administrative costs.
This program includes a reduction of 65 employees, or 2% of
the total number of Company employees, including a reduction
of the corporate headquarters staff by 20%.  This program
reduced general and administrative expenses by approximately
$2.7 million in 1996, and is expected to reduce general and
administrative expenses by approximately $3.2 million in
1997, $4.1 million in 1998 and annually thereafter.  The
required cash outlays related to this program were $.6
million and $3.1 million in 1995 and 1996, respectively. The
expected final cash outlay during 1997 related to the
restructuring of the Company's Morse German operation, which
was delayed in 1996, is $.3 million.   The remainder
represents non-cash charges.

See "Recent Events", "Restructuring Plans" and "Liquidity and
Capital Resources" sections of "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in
Part II, Item 7, and Note 3 to the Consolidated Financial
Statements located in Part IV of this Form 10-K Report as
indexed at Item 14(a)(1) for additional details regarding the
asset divestiture and restructuring programs.


Competition

The Company's products and services are marketed on a
worldwide basis.  Approximately 90% of the Company's products
are marketed outside of the United States through wholly
owned subsidiaries, sales offices and several joint ventures.
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.

Product Distribution and Customers

The Company's products are sold primarily through the
Company's direct sales forces.  During 1996, sales by the
Company's direct sales forces were approximately 28%, 75%,
88%, 87% and 100% of the Power Transmission, Pumps,
Instrumentation, Morse Controls and Roltra-Morse segments,
respectively.  The Company's remaining sales are made through
distributors, dealers and agents.

The Roltra-Morse segment had sales to one commercial customer
(Fiat S.p.A. and its subsidiaries) that accounted for 95%,
90% and 95% of segment sales, and 16%, 19% and 21% of
consolidated sales in 1996, 1995 and 1994, respectively.
None of the other 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 other than Fiat
S.p.A. and its subsidiaries accounted for 10% or more of
consolidated sales in 1996, 1995 or 1994.


Backlog

The Company's continuing operations' backlog of unfilled
orders at month end February 1997 and 1996 and at December
31, 1996, 1995 and 1994, by business segment, was as follows:

                  February 28,   February 29,          December 31,
                      1997           1996         1996     1995     1994
                           (Dollars in millions)

Power Transmission   $ 8.2          $ 9.0         $7.7     $8.5     $9.6
Pumps                 37.9           34.3         31.6     33.7     28.9
Instrumentation       18.2           20.9         18.4     18.3     19.2
Morse Controls        21.8           21.6         21.3     21.9     22.8
Roltra-Morse          24.0           23.1         24.9     28.0     27.6

                    $110.1         $108.9       $103.9   $110.4   $108.1

Backlog is considered significant only to the Warren Pumps
business of the Pumps segment, given that the products of
that operation require long lead times for manufacture, and
to the Roltra-Morse segment, the backlog of which is directly
tied to a major customer's production schedule.  Of the total
backlog from continuing operations at December 31, 1996, the
Company believes that all but approximately $1.4 million of
its orders will be filled in 1997.

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 foreign
countries and 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.

Following the removal of the distinctive modifier
"Transamerica" from the corporate name prior to the
Distribution, the Company changed its name to "Imo Delaval
Inc." in 1986 and to "Imo Industries Inc." in 1989.  The
Company's use of the name "Delaval" is restricted as a result
of a contract by which the Company's assets were acquired
from their former Swedish owner preceding the acquisition of
the Company by Transamerica.  In January 1995, the Company
transferred its rights to use the "Delaval" name in
connection with certain products of the Turbomachinery
segment to Mannesmann Demag as part of the divestiture of its
Turbomachinery business.

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 1996, 1995 and 1994 by business
segment were as follows:

                              Year Ended December 31,
                           1996        1995        1994
                              (Dollars in millions)

Power Transmission        $  .6       $  .7       $  .7
Pumps                       2.1         1.5         1.8
Instrumentation             1.2          .9          .7
Morse Controls              1.7         1.7         1.3
Roltra-Morse                3.7         2.9         1.5
Other                       ---         ---          .1

                           $9.3        $7.7        $6.1


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 by the New Jersey Department of
Environmental Protection and Energy (the "NJ DEP").
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 NJ DEP 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 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.  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
therefore not be material.

The Company has 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.

Employees

At December 31, 1996, the Company employed approximately
3,900 persons worldwide, of which 3,700 relate to continuing
operations.  Approximately 2,000 persons were employed in the
United States, and approximately 1,900 persons were employed
outside of the United States.  Approximately 1,800 of the
employees associated with continuing operations are located
in the United States.  There are approximately 900 persons
worldwide covered by collective bargaining agreements with
various unions expiring at various dates in 1997 through
1999.  The Company considers its relations with its employees
to be satisfactory.

Item 2.            Properties.

The Company's continuing operations have 27 manufacturing
facilities in 9 states in the United States, the United
Kingdom, Germany, Italy, France, Poland, Singapore, Sweden,
Switzerland, and Australia of which 18 are owned and 9 are
leased.  In addition, the Company owns 7 closed manufacturing
facilities (approximately .8 million square feet of building
space on 110 acres of land) that are being offered for sale.
The properties owned by the Company consist of approximately
2.2 million square feet of building space, inclusive of the
 .8 million square feet of the closed facilities, on
approximately 324 acres (including 169.6 acres of undeveloped
land).  The leases expire over a period of years from 1998 to
2054 with renewal options for varying terms contained in 3 of
the leases.  The Company's executive office, which is leased
by the Company, is located in Lawrenceville, New Jersey, and
occupies approximately 37,140 square feet.

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 their current utilization without incurring
significant additional capital expenditures.

The manufacturing facilities of the Company (excluding those
held for sale) by business segment are summarized below:

                                                Square Feet of
                                                Building Space
                         Number of Plants       (In thousands)
                         Owned     Leased       Owned     Leased

Power Transmission         4         ---          366        ---
Pumps                      4           1          570          2
Instrumentation            3         ---          107        ---
Morse Controls             5           5          335        268
Roltra-Morse               2           3           55        260
   Continuing Operations  18           9        1,433        530
Discontinued Operations  ---           2          ---        140
                          18          11        1,433        670


Item 3.             Legal Proceedings.


In August 1985, the Company was named as defendant in a
lawsuit filed in the U.S. District Court, Southern District
of New York, by Long Island Lighting Company ("LILCO")
following the severing of a crankshaft in a diesel generator
sold to LILCO by the Company.  LILCO's complaint contained 11
counts, including counts for breach of warranty, negligence
and fraud, and sought $250 million in damages.  In various
decisions from 1986 through 1990, 10 of the original 11
counts and various additional amended counts were dismissed,
with only the original breach of warranty count remaining.
In September 1993, the Second Circuit Court of Appeals
affirmed a previous trial court decision entering a judgment
against the Company in the amount of $18.3 million, and in
October 1993, the judgment was satisfied by payment to LILCO
of approximately $19.3 million (which amount included
approximately $1.0 million of post-judgment interest) by
International Insurance Company ("International") and Granite
State Insurance Co. ("Granite State").

In January 1993, the Company was served with a complaint in a
case brought in the U.S. District Court for the Northern
District of California by International alleging that, among
other things, because International policies did not cover
the matters in question in the LILCO case, it was entitled to
recover $10 million in defense costs previously paid in
connection with such case and $1.2 million of the judgment
which was paid on behalf of the Company.  In June 1995, the
Court entered a judgment in favor of International awarding
it $11.2 million, plus interest from March 1995 (the
"International Judgment").  The International Judgment,
however, was not supported by an order, and in July 1995, the
court vacated the International Judgment as being premature
because certain outstanding issues of recoverability of the
$10 million in defense costs had not been finally determined.
The Company is awaiting a final decision.  If the
International Judgment is reinstated, the Company intends to
appeal.  If the ultimate outcome of this matter is
unfavorable, the Company will record a charge for the
judgment amount plus accrued interest.

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 6,100 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 their insurers who are
defending under their stated reservation of rights.  In
addition, the Company and the subsidiary are named in cases
involving approximately 20,000 claimants which in 1996 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.
Should settlements for these claims be reached at levels
comparable to those reached by the Company in the past, they
would not be expected to have a material effect on the
Company.

There are lawsuits pending against the Company in the U.S.
District Court for the Western District of Pennsylvania
alleging component failures in equipment sold by its former
diesel engine division and claiming damages of approximately
$3.0 million, and in the Circuit Court of Cook County,
Illinois, alleging performance shortfalls in products
delivered by the Company's former Delaval Turbine Division
and claiming damages of approximately $8.0 million.  Each
lawsuit is in the discovery stage and the Cook County suit is
scheduled for trial in late 1997.

The major portion of the Company's former Electro-Optical
Systems business was sold to Litton Industries in a
transaction, which closed on June 2, 1995.  The sales
contract between the Company and Litton Industries provided
certain representations and warranties as to the status of
the business at the time of the sale.  By letters dated
November 19, 1996 and November 26, 1996, Litton has notified
the Company of claims under the representations and warranty
provisions for:  (1) environmental losses of unspecified
amounts, and (2) anticipated losses in excess of $9 million
under a U.S. Government contract as a result of the Company's
alleged failure to notify Litton of a reasonably anticipated
loss under a bid that was pending at the time of transfer of
the business.  The contract was subsequently awarded to the
Company's Varo subsidiary and thereafter transferred to
Litton.  The Company has preliminarily analyzed the
supporting documentation provided by Litton and has notified
Litton that it disputes the nature, validity, and amount of
the claims of losses and objects to the timeliness of
submission of notice to the Company with respect to the
claims.  The Company believes the claims are without merit
and intends to vigorously defend against the claims.

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, 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 CERCLA or similar State
law.  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. For additional information see section entitled
Environmental Matters in Part I, Item 1 of this Form 10-K
Report.

With respect to the litigation and claims described in the
preceding paragraphs, management of the Company believes that
it either expects to 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.

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 is
expected to have a material adverse effect on the financial
condition of the Company.  A range of possible outcomes for
all of these legal proceedings currently cannot be estimated.
However, 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.

See Note 14 to the Consolidated Financial Statements located
in Part IV of this Form 10-K Report as indexed at Item
14(a)(1) for additional details relating to Contingencies.



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

No matter was submitted to a vote of the Company's security
holders during the fourth quarter of 1996.

Executive Officers of the Registrant

The following table sets forth information concerning the
names, ages and principal occupations of the executive
officers of the Company:

Name                         Age    Principal Occupation

Donald K. Farrar *            58    Chairman, Chief Executive Officer and
                                          President
Thomas J. Bird, Jr.           53    Executive Vice President, General Counsel
                                          and Secretary
William M. Brown              54    Executive Vice President, Chief Financial
                                          Officer and Corporate Controller
John J. Carr                  54    Executive Vice President
Donald N. Rosenberg           56    Senior Vice President, Human Resources
Robert A. Derr II             51    Vice President and Treasurer
Frederick W. Wojtowicz        45    Vice President and Director of Tax

* This executive officer is a director of the Company whose
current term as a director will expire in 1998.

Donald K. Farrar joined the Company as Chief Executive
Officer and President in September 1993 and was elected
Chairman in June 1994.  Prior to joining the Company, Mr.
Farrar held various positions with Textron, Inc. and Avco
Corporation for 24 years.  He served as President, Chief
Operating Officer and director of Avco until its 1985
acquisition by Textron.  Thereafter, he served as Senior
Executive Vice President, Operations and a director of
Textron, Inc. until December 1989.  From January 1990 until
joining the Company, Mr. Farrar was a private investor.

Thomas J. Bird, Jr. was promoted to his current position in
October 1994. Mr. Bird served as Senior Vice President,
General Counsel and Secretary from June 1992 to October 1994,
and as Vice President and Associate General Counsel from July
1990 to June 1992.  Prior to joining the Company in July
1990, Mr. Bird held various positions with General Electric
Company for 18 years, most recently as Group Counsel, RCA
Aerospace and Defense division from August 1987 to February
1988 and as General Counsel to GE Aerospace of General
Electric Company from February 1988 until joining the
Company.

William M. Brown joined the Company as Executive Vice
President and Chief Financial Officer in June 1992, and
assumed the additional responsibility of Corporate Controller
in January 1996. Prior to joining the Company, Mr. Brown held
various positions with ITT Corporation for 25 years, most
recently as Corporate Assistant Controller and General
Auditor from December 1986 to April 1991 and as Corporate
Vice President and Assistant Controller from April 1991 until
joining the Company.

John J. Carr was promoted to his current position in July
1989.   From July 1985 to July 1989, Mr. Carr was a Group
Vice President of the Company.  Mr. Carr is responsible for
the Morse Controls, Pumps, Power Transmission and
Instrumentation business segments of the Company.

Donald N. Rosenberg joined the company in his current
position in May 1996.  Previously, he was Director, Global
Compensation, Benefits and HR Systems for Halliburton Energy
Services from 1995 to May 1996.  From 1992 to 1995, Mr.
Rosenberg was an independent human resources consultant, with
Jostens Inc. as a primary client.  Prior to 1992, Mr.
Rosenberg held various positions with Xerox Corporation for
25 years, most recently as Corporate Manager, U.S. and
International Compensation.

Robert A. Derr II joined the Company as Vice President and
Corporate Controller in 1988. Mr. Derr was promoted to Vice
President and Treasurer in January 1996.  Prior to joining
the Company, Mr. Derr held various positions with The Stanley
Works for nine years, most recently as Director of Corporate
Accounting from 1982 to 1986 and as the Controller of the
Vidmar Division of The Stanley Works from 1986 until joining
the Company.

Frederick W. Wojtowicz was promoted to his current position
in October 1994.  Mr. Wojtowicz served as Executive Director
of Tax from July 1988 to October 1994.  Prior to joining the
Company in July 1988, Mr. Wojtowicz held various positions
with Ernst & Young LLP, most recently as Senior Tax Manager.

Each of these executive officers will hold office until his
successor is chosen and qualifies or until his earlier
resignation or removal.  Any officer may be removed at any
time by the Board of Directors without prejudice to any
contract rights that he may have.



                             PART II

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

The Company's common stock (the "Common Stock") is listed on
the New York Stock Exchange (stock symbol IMD).  The
following table sets forth, for the quarters indicated, the
high and low closing price per share for the Common Stock as
reported on the New York Stock Exchange Composite Tape and
the amount of per share cash dividends declared by the
Company during each quarter on its Common Stock.

                                          Declared
                                          Dividend
                     High       Low       Per Share

1995:
1st Quarter          11-1/2     6-1/4         ---
2nd Quarter           9-1/8     6-1/2         ---
3rd Quarter           9-7/8     8-1/4         ---
4th Quarter           9         5-3/4         ---


1996:
1st Quarter           7-5/8     5-3/4         ---
2nd Quarter           8-1/8     5-3/8         ---
3rd Quarter           5-7/8     4-7/8         ---
4th Quarter           5-1/2     2-3/4         ---


1997:
1st Quarter           3-7/8     2-7/8         ---
  (through March 14, 1997)


The last sale price for the Company's Common Stock as
reported by the New York Stock Exchange on March 14, 1997,
was $3 per share.  As of March 14, 1997, there were
approximately 18,490 holders of record of the Company's
Common Stock.

Two of the Company's long-term debt agreements contain, among
other provisions, a restriction on retained earnings
available for payment of dividends.  Under the most
restrictive provisions the Company is prohibited from
declaring or paying cash dividends through at least April 30,
2003.



Item 6.      Selected Financial Data.
(Dollars in millions except per share amounts)

Year Ended December 31, (a)   1996     1995*     1994*     1993*     1992*

Net sales                   $468.6    $472.4    $463.9    $494.2    $573.2
Gross profit                 132.6     131.9     130.8     144.5     143.9
Selling, general and
  administrative expenses     95.2      87.9      86.8     108.5     112.7
Research and development
  expenses                     9.3       7.7       6.2       9.2       9.9
Unusual items                 24.6      10.2       ---      15.7      16.7
Income from continuing
  operations before
  interest expense, income
  taxes, minority interest,
  extraordinary item and
  change in accounting
  principle                    4.9      29.3      40.5      12.0       7.0
Interest expense              33.3      31.5      34.0      38.4      44.5
Income (loss) from
  continuing operations
  before extraordinary
  item and cumulative
  effect of change in
  accounting principle       (41.8)     12.5       3.6     (40.1)    (25.8)
Discontinued operations,
  net of taxes                (8.1)     21.6       5.6    (212.4)    (29.2)
Extraordinary item            (8.5)     (4.4)     (5.3)    (18.1)      ---
Cumulative effect of
  change in accounting
  principle, net of taxes (b)  ---       ---       ---       ---     (27.6)
Net income (loss)            (58.4)     29.7       3.9    (270.6)    (82.6)
Earnings (loss) per share:
  Continuing operations
    before extraordinary
    item and cumulative
    effect of change in
    accounting principle     (2.44)      .73       .22     (2.37)    (1.53)
  Discontinued operations     (.48)     1.27       .32    (12.58)    (1.73)
  Extraordinary item          (.49)     (.26)     (.31)    (1.07)      ---
  Cumulative effect of
    change in accounting
    principle                  ---       ---       ---       ---     (1.64)
  Net income (loss)          (3.41)     1.74       .23    (16.02)    (4.90)
Cash dividends per share       ---       ---       ---       ---      .375
Capital expenditures          18.0      20.9       9.2      10.4      15.0
Depreciation and
  amortization expense        19.8      19.1      22.0      23.2      24.2
Working capital               44.1      62.8     135.2     107.1     111.0
Total assets:
  Continuing operations      396.8     422.0     414.3     454.9     583.8
  Discontinued operations     14.8      12.9     145.0     141.7     328.0
      Total assets           411.6     434.9     559.3     596.6     911.8
Total long-term debt
 including current portion   266.9     233.9     394.0     362.3     399.4
Shareholders' equity
 (deficit)                   (54.9)      5.3     (28.0)    (35.7)    239.4


(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.

(b)  In 1992, the Company adopted FASB Statement No. 106 "Employer's
     Accounting for Postretirement Benefits Other Than Pensions."

*Restated to conform to 1996 presentation.



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.

Recent Events

In April 1996, the Company refinanced all of its domestic
debt.  Under the terms of the refinancing, the Company issued
$155 million of 11.75% senior subordinated notes due in 2006
(the "Notes"), priced at a discount to yield 12%.  The
Company also entered into an agreement for $175 million in
senior secured credit facilities with a group of lenders (the
"New Credit Agreement"), which provides for a $70 million
revolving credit facility (including a letter of credit sub-
facility) through April 30, 2001.  In addition, the New
Credit Agreement provided a $25 million term loan amortizing
to April 2001, a $35 million term loan amortizing to April
2001, and a $45 million term loan amortizing to April 2003.
See "Liquidity and Capital Resources" for further details.

On November 11, 1996 the Company announced the withdrawal
from its divestiture program of the Roltra-Morse business,
the Company's Italian subsidiary, because threats made by an
unsuccessful bidder for the business to revoke certain
license agreements made it impossible for the Company to
receive fair value for the business.  The Company has filed a
lawsuit to resolve this matter. Roltra-Morse has been
reclassified as a continuing operation and prior years
results have been restated to reflect this change.

The Company had a net loss of $58.4 million on sales of
$468.6 million for the year ended December 31, 1996, largely
as a result of nonrecurring charges as described in the
paragraphs below.   In 1995 and 1994, net income was $29.7
million and $3.9 million, on sales of $472.4 million and
$463.9 million, for each of these years, respectively.  Net
income (loss) per share by component is summarized below:

Earnings (loss) per share:        1996        1995        1994

Continuing Operations
   Before Extraordinary Item   $ (2.44)     $  .73       $ .22
Discontinued Operations           (.48)       1.27         .32
Extraordinary Item                (.49)       (.26)       (.31)
Net income (loss)              $ (3.41)     $ 1.74       $ .23


Both the fourth quarter and the full year 1996 results were
negatively impacted by the withdrawal of Roltra-Morse from
sale.  Roltra-Morse had an operating loss before interest,
taxes and minority interest of $10.2 million for the fourth
quarter of 1996 and an $8.9 million loss for the year,
compared to income of $6.3 million for the full year 1995.
The 1996 loss corresponds to a decrease in sales for the year
of $18.9 million or 19%, reflecting the decline in Fiat auto
sales in Italy, the principal market for the auto components
produced by Roltra-Morse. In addition, the 1996 loss includes
$6.2 million in restructuring charges and write-off of
goodwill. These restructuring measures are expected to reduce
operating expenses, improve the effectiveness of engineering
resources and produce cost savings in 1997.

In addition to the Roltra-Morse operating results, the 1996
results were severely impacted by $27.1 million of other non-
cash charges, necessitated by the withdrawal of Roltra-Morse
from sale.  These charges included a $17.1 million fourth
quarter charge to reflect the expected realizable values of
other assets approved for sale in replacement of Roltra-Morse
and the third quarter reversal of $10 million of favorable
tax benefits that had been associated with the planned Roltra-
Morse divestiture.

The 1996 results also reflect largely non-cash charges of
$8.1 million related to discontinued operations previously
sold, and $8.5 million related to the Company's debt
refinancing in April 1996.

The third and fourth quarter 1996 losses placed the Company
in technical violation of certain covenants under the New
Credit Agreement. The Company initially received a waiver of
these violations through December 20, 1996, which waiver was
extended through February 20, 1997.  On February 19, 1997,
the Company reached an agreement with its senior lenders to
amend the covenants of the New Credit Agreement under which
all previous defaults have been permanently waived and the
Company intends to sell approximately $50.0 million of non-
core assets, about one third of which is non-operating real
estate, and use the proceeds to reduce senior debt.

On March 21, 1997, the Company announced that it had retained
Credit Suisse First Boston to help it explore strategic
alternatives including the possibility of a merger or sale of
the Company.  The impact of this action, if any, on the
remaining asset sales is uncertain at this time.


Restructuring Plans

Background

In October 1992, the Company determined that it needed to de-
lever its balance sheet through the sale of certain
businesses and the application of the proceeds from the
divestitures to reduce debt.  Pursuant to this decision, the
Company divested its Heim Bearings, Aerospace, Barksdale
Controls and CEC Instruments businesses. In 1993, management,
under Donald K. Farrar, who became Chief Executive Officer in
September 1993, initiated a strategy to reposition the
Company to focus on its less capital intensive businesses
that exhibited strong brand name recognition, a broad
customer base and market leadership with less dependence on
U.S. Government sales.  In connection with this strategy, the
Company divested its Turbomachinery and most of its Electro-
Optical Systems businesses during 1995 and had planned to
sell its Roltra-Morse business in 1996.  See "Liquidity and
Capital Resources" for further details.

In January 1997, other assets were identified and approved
for sale in replacement of the previously planned sale of
Roltra-Morse.  These assets include non-strategic business
units within the Company's Power Transmission and Morse
Controls segments.


1996 Asset Sales

During 1996, the Company completed the sales of five of its
non-operating real estate holdings for net proceeds of $8.6
million.  The proceeds were used to repay the Company's
domestic senior debt.

Remaining Asset Sales

The Company entered into a definitive agreement in September
1996 to sell the Varo Electronic Systems division, the
remaining portion of its former Electro-Optical Systems
business, to a small defense contractor for approximately net
book value.  This agreement expired in November 1996 and was
subsequently renegotiated and reinstated in January 1997.
The buyer has secured the necessary financing to purchase
this business.  The Company expects to complete the sale in
the second quarter of 1997 and will use the net proceeds to
reduce debt.

Assets currently held for sale include non-strategic business
units of the Company's Power Transmission and Morse Controls
segments, as well as certain non-operating real estate
originally identified for sale in October 1992.  The fourth
quarter of 1996 includes a charge of $17.1 million to adjust
the value of these assets to the expected net realizable
values.  The Company targets completion of these sales over
the next 12 months and will apply the net proceeds to reduce
debt.

Cost Reduction Programs

1996 Program.  The fourth quarter of 1996 includes a charge
of $7.4 million to continuing operations for restructuring
measures taken at several of the Company's European
operations to further reduce operating expenses.  The Company
completed an evaluation of its Roltra-Morse operations during
the fourth quarter to determine what structural and other
changes were necessary to position this business for
profitable future growth.  The portion of the charge related
to Roltra-Morse was $6.2 million, which includes severance,
certain other costs and a write-off of goodwill. The
restructuring measures at Roltra-Morse are expected to reduce
operating expenses, improve the effectiveness of engineering
resources and produce cost savings in 1997.  The remaining
restructuring charges relate to severance costs and other
expenses related to further restructuring at the Company's
Gems European operations and Morse German operation.

The 1996 cost reduction program is expected to reduce
expenses by approximately $2.6 million in 1997 and $3.8
million annually thereafter. This program includes a
reduction of 126 employees in Europe, or 3.3% of the total
number of Company employees at the end of 1996. The required
cash outlay related to this program was $.4 million in 1996
and the expected cash requirements during 1997 are $3.1
million.  The remainder represents non-cash charges.

1995 Program.  In the fourth quarter of 1995, the Company
recorded a charge to continuing operations of $5.2 million,
including severance and other expenses related to a Company-
wide program to reduce general and administrative costs.
This program included a reduction of 65 employees, or 2% of
the total number of Company employees at the end of 1995,
including a reduction of the corporate headquarters staff by
20%.  This program reduced general and administrative
expenses by approximately $2.7 million in 1996, and is
expected to reduce general and administrative expenses by
approximately $3.2 million in 1997, $4.1 million in 1998 and
annually thereafter.  The 1996 benefit realized from this
program was offset by certain increases in selling and other
expenses.  See "Results of Operations" below.  The required
cash outlays related to this program were $.6 million and
$3.1 million in 1995 and 1996, respectively.  The expected
final cash outlay during 1997 related to the restructuring of
the Company's Morse German operation which was delayed in 1996, is
$.3 million.  The remainder represents non-cash charges.


Results of Operations

The Company's remaining Electro-Optical Systems 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 five business
segments for management and segment reporting purposes: Power
Transmission, Pumps, Instrumentation, Morse Controls and
Roltra-Morse.


1996 Compared to 1995

Sales.  Net sales from continuing operations in 1996 were
$468.6 million, compared with $472.4 million in 1995.  Sales
increases of 14.0%, 3.7% and 4.5% in the Pumps,
Instrumentation and Morse Controls segments, respectively,
were offset by decreases of 5.9% in the Power Transmission
segment and 19.1% in the Roltra-Morse segment in 1996
compared with 1995.  See "Segment Operating Results" below.

Gross Profit.  The gross profit in 1996 increased slightly to
28.3% of sales compared with 27.9% in 1995. See "Segment
Operating Results" below.

Selling, General and Administrative Expenses.  Selling,
general and administrative expenses increased $7.4 million,
or 8.4%, in 1996 over the 1995 level. The net increase
reflects approximately $2.0 million in additional costs
related to the recent acquisitions of RMH in late December
1995 and Imo Pompes SA in March 1996, other net increases
of approximately $8.6 million from the Company's operating
segments and approximately $1.0 million in costs associated
with the unsuccessful attempt to sell Roltra-Morse.  These
increases were partially offset by a decrease in expenses of
$2.7 million associated with the cost reduction program
adopted in the fourth quarter of 1995, net reductions of
approximately $1.2 million to previously recorded provisions,
and a net reduction of approximately $.5 million in other
expenses.   The net increase of $8.6 million from the
operating segments reflects increased selling expenses of
$2.0 million primarily related to planned increases at the
Pumps and Instrumentation segments and increased general and
administrative expenses of $6.6 million related primarily to
the Roltra-Morse segment representing a series of
individually insignificant items and the effect of expense
reductions experienced in 1995 which did not recur in 1996.
See also discussion of Pensions and Retiree Medical and Life
Insurance under "Other Operating Results" below.

Interest Expense.  Average borrowings in 1996 were
approximately $2.8 million higher than in 1995.  Total
interest expense (before allocation to discontinued
operations) of $35.1 million in 1996 was $1.3 million, or
3.6%, less than in 1995, principally due to the refinancing
of the corporate debt at more favorable interest rates.
Interest expense for continuing operations excludes interest
expense allocated to discontinued operations of $1.8 million
in 1996 and $5.0 million in 1995.

Income (Loss) from Continuing Operations.  The Company had a
loss from continuing operations of $41.8 million, or $2.44
per share, in 1996, which included unusual charges of $24.6
million and a reversal of a previously recognized deferred
tax benefit of $10.0 million.  A significant portion of the
1996 loss is attributable to the poor results of the
Company's Roltra-Morse business and to the fact that the
Company was unable to sell this business as previously
planned.  In 1995, income from continuing operations was
$12.5 million, or $.73 per share, which included unusual
charges of $10.2 million and a deferred tax benefit of $17.0
million.  See "Other Operating Results" for discussion
regarding Unusual Items and Provision for Income Taxes.

Income (Loss) from Discontinued Operations.  The Company had
a loss from discontinued operations of $8.1 million, or $.48
per share, in 1996 as compared to income of $21.6 million
(net of income tax expense of $5.2 million), or $1.27 per
share, in 1995.

Operating results from discontinued operations was income of
$.4 million and a loss of $1.4 million in 1996 and 1995,
respectively.  Results from operations for the discontinued
operations include allocations for interest of $1.8 million
in 1996 and $5.0 million in 1995. The 1996 net income was
netted against the increase in estimated reserve
requirements, while the 1995 net loss, including allocated
interest, was charged against the reserve for anticipated
losses previously established by the Company.

The loss on sale of discontinued operations of $8.1 million
in 1996 represents charges recorded by the Company in the
third and fourth quarters of 1996 related to changes in
estimates on legal and other reserve requirements of retained
liabilities associated with its former Electro-Optical and
Turbomachinery businesses. The Company performs a review of
the assumptions used in determining the estimated loss from
discontinued operations on a quarterly basis. Management
believes that the recorded amount is adequate.  The amounts
of the recorded liabilities, which are based on current
estimates, may differ from actual results.  The gain on sale
of discontinued operations recorded in 1995 includes an
aggregate net gain of $21.6 million on the sale of the
Company's former Turbomachinery business and substantially
all of its former Electro-Optical Systems business.

The Company retained certain liabilities upon the 1995 sales
of the Electro-Optical Systems and Turbomachinery businesses
of approximately $21.0 million and $28.0 million,
respectively. Required cash outlays in 1996 and 1995 were
$6.5 million and $5.7 million, related to the former Electro-
Optical Systems business, and $4.1 million and $14.1 million,
related to the former Turbomachinery business.  The expected
1997 cash requirements are approximately $4.6 million and
$3.9 million for liabilities related to the Electro-Optical
Systems and Turbomachinery sales, respectively.

Net Income (Loss).  The net loss in 1996 was $58.4 million
compared with income of $29.7 million in 1995.  Net loss per
share in 1996 was $3.41 compared with net income per share of
$1.74 in 1995.


1995 Compared to 1994

Sales.  Net sales from continuing operations in 1995 were
$472.4 million, compared with $463.9 million in 1994.  Sales
from core operations (excluding operations sold in 1994 that
were not accounted for as discontinued operations) increased
2.9% in 1995 compared with the 1994 level of $459.1 million.
All sales in 1995 were from core operations.  The Company's
Power Transmission, Pumps, Instrumentation and Morse Controls
business segments contributed to this 1995 sales increase,
partially offset by a decrease in sales from the Roltra-Morse
business compared to 1994.  See "Segment Operating Results"
below.

Gross Profit.  The gross profit in 1995 remained relatively
constant at 27.9% of sales compared with 28.2% in 1994. See
"Segment Operating Results" below.

Selling, General and Administrative Expenses.  Selling,
general and administrative expenses as a percent of sales
remained relatively constant at 18.6% in 1995 compared with
18.7% in 1994.  General and administrative expenses decreased
in 1995 due principally to a full year of cost savings
attributable to a year-end 1993 cost reduction program.  A
portion of the savings was offset by increased selling
expenses resulting from the Instrumentation segment's efforts
to expand marketing of transducer products in the United
States and Gems products in Europe, as well as to increase
sales in the Far East markets.  Research and development
expenditures were 1.3% of sales in both 1995 and 1994.

Interest Expense.  Average borrowings in 1995 were
approximately $120 million lower than in 1994.  As a result,
total interest expense (before allocation to discontinued
operations) of $36.4 million in 1995 was $15.3 million, or
30%, less than in 1994.  Interest expense for continuing
operations excludes interest expense allocated to
discontinued operations of $5.0 million in 1995 and $17.4
million in 1994.

Income from Continuing Operations.  The Company had income
from continuing operations of $12.5 million, or $.73 per
share, in 1995, which included unusual charges of $10.2
million and a deferred tax benefit of $17.0 million.  In
1994, income from continuing operations was $3.7 million, or
$.22 per share.  See "Other Operating Results" for discussion
regarding Unusual Items and Provision for Income Taxes.

Income from Discontinued Operations.  The Company had income
from discontinued operations of $21.6 million (net of income
tax expense of $5.2 million), or $1.27 per share, in 1995 as
compared to income of $5.6 million (net of income tax expense
of $.8 million), or $.32 per share, in 1994.  The income
recorded in 1995 includes an aggregate net gain of $21.6
million on the sale of the Company's former Turbomachinery
business and substantially all of its former Electro-Optical
Systems business.  Results from operations for the
discontinued operations include allocations for interest of
$5.0 million and $17.4 million for 1995 and 1994,
respectively.

Net Income.  Net income in 1995 was $29.7 million compared
with $3.9 million in 1994.  Net income per share in 1995 was
$1.74 compared with a net income per share of $.23 in 1994.


Other Operating Results

Unusual Items.  During the fourth quarter of 1996, the
Company recognized unusual charges of $24.6 million in income
from continuing operations.  Restructuring charges totaled
$7.4 million, including $4.6 million in severance benefits
and other expenses related to measures taken to further
reduce general and administrative costs and $2.8 million
related to the impairment of certain long-lived assets ($.9
million included in the Instrumentation segment, $.3 million
included in the Morse Controls segment and $6.2 million
included in the Roltra-Morse segment).  Additionally, a
charge of $17.1 million was recognized related to the write-
down of other assets approved for sale in replacement of
Roltra-Morse and certain non-operating real estate to net
realizable value (included in Corporate Expense).  Of the
$24.6 million of unusual charges, the required cash outlay in
1996 was $.4 million and the expected cash requirements
during 1997 are $4.1 million.  The remainder represents non-
cash charges.

During the fourth quarter of 1995, the Company recognized
unusual charges of $10.2 million in income from continuing
operations.  These charges include $5.2 million in severance
benefits and other expenses related to a Company-wide program
to reduce general and administrative costs ($.9 million
included in the Instrumentation segment, $1.5 million
included in the Morse Controls segment, $1.2 million included
in the Roltra-Morse segment, and $1.6 million included in
Corporate Expense).  In addition, the unusual charges include
$5.0 million related to the write-down of non-operating real
estate to net realizable value (included in Corporate
Expense).  Of the $10.2 million of unusual charges, the
required cash outlays in 1995 and 1996 were $.6 million and
$3.1 million, respectively, and the expected cash
requirements during 1997 are $.3 million.  The remainder
represents non-cash charges.

Extraordinary Items.  As a result of the 1996 refinancing of
the Company's domestic debt, the twelve months ended December
31, 1996 include an extraordinary charge of $8.5 million
after-tax, representing the charges incurred in connection
with the early extinguishment of debt as well as the write-
off of previously deferred loan costs.

The twelve months ended December 31, 1995 include an
extraordinary charge of $4.4 million after-tax, representing
charges related to the early extinguishment of portions of
the Company's debt under its previous credit facility (the
"Old Credit Agreement") and its formerly outstanding 12.25%
senior subordinated debentures.

The twelve months ended December 31, 1994 include an
extraordinary charge of $5.3 million after-tax, $.31 per
share, representing fees and charges related to
extinguishment of debt in connection with the restructuring
of the Company's credit facilities in August 1994.

Provision for Income Taxes.  Income tax expense from
continuing operations was expense of $13.7 million for 1996,
a benefit of $13.9 million for 1995, and expense of $2.4
million for 1994.   The 1996 amount includes current tax
expense of $3.7 million representing foreign and state income
taxes. Additionally, as a result of withdrawing Roltra-Morse
from sale in 1996 the Company recognized a provision of $10.0
million against deferred tax benefits previously recognized
based on an anticipated gain on the sale.  In 1995, the
Company reduced the valuation allowance applied against the
net operating loss carryforwards by $17.0 million based upon
reasonable and prudent tax planning strategies and future
income projections including the planned sale of Roltra-
Morse.  As a result of withdrawing Roltra-Morse from sale in
1996, the Company recorded a provision of $10.0 million
against deferred tax benefits previously recognized based on
an anticipated gain on this sale.  This reduced the deferred
tax benefit to $5.1 million at December 31, 1996, to a level
where management believes that it is more likely than not
that the tax benefit will be realized. The total amount of
future taxable income in the U.S. necessary to realize the
asset is approximately $14.0 million.  The Company expects to
generate this income principally through the implementation
of reasonable tax planning strategies and future income
projections, including an anticipated reduction of interest
expense of approximately $2.5 million in 1997 and $5.0
million annually thereafter.  This interest cost savings is
based on debt reductions from proceeds of the planned sale of
approximately $50.0 million of non-core assets. See "Recent
Events" above. Although the Company has a history of prior
losses, these losses were primarily attributable to divested
businesses and unusual items.  The remaining valuation
allowance is necessary due to the uncertainty of future
income estimates.

The 1995 amount includes current tax expense of $3.1 million
representing foreign and state income taxes, as the Company
is utilizing existing U.S. net operating loss carryforwards
on its domestic earnings.  This amount is offset by a
deferred tax benefit in 1995 of $17.0 million, representing a
reduction, taken when Roltra-Morse was approved to be held
for sale, in the deferred tax valuation allowance against
U.S. net operating loss carryforwards. The 1994 income tax
expense represents foreign and state income taxes.

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 Company has net operating loss carryforwards of
approximately $106 million expiring in years 2002 through
2011, and minimum tax credits of approximately $2.1 million,
which may be carried forward indefinitely.  Included in the
net operating loss carryforwards are foreign tax credits of
approximately $7.4 million, expiring through 2001, which for
financial and tax reporting purposes, are reflected as
deductible foreign taxes. These carryforwards are available
to offset future taxable income.  These existing tax loss
carryforwards will allow the Company's future earnings to be
essentially free from the payment of U.S. taxes for the
foreseeable future.

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 $.9 million.

Pensions and Retiree Medical and Life Insurance.  In March
1994, the Company amended its policy regarding retiree
medical and life insurance plans. This amendment, which
affects some current retirees and all future retirees, phased
out the Company subsidy for retiree medical and life
insurance over the three-year period ended December 31, 1996.
The Company amortized the associated reserves to income from
continuing operations over the phase-out period. The pre-tax
amounts amortized to income from continuing operations were
$4.3 million, $4.6 million and $4.4 million in 1996, 1995 and
1994, respectively. The Company did not experience a
significant increase or decrease in cash requirements related
to this change in policy during this phase-out period.

Effective with the December 31, 1996 measurement date, the
Company revised certain assumptions including the discount
rate, the expected long-term rate of return on assets and
mortality assumptions to reflect current market and
demographic conditions.  These changes are not expected to
have a material effect on future year's pension expense or
Company expenses related to retiree medical and life
insurance.

Segment Operating Results

Operating results by business segment for the years 1996,
1995 and 1994 are summarized below:


Power Transmission:     1996       1995       1994
                              (in millions)
Net Sales             $ 89.5     $ 95.1     $ 93.3
Segment Operating
  Income                 9.0       11.3        8.9

Power Transmission segment net sales and operating income
decreased 5.9% and 21.0%, respectively, in 1996 compared with
1995.  The sales decrease was due to a market shift from DC
to AC drives and a downturn in the U.S. gear market in 1996,
resulting in major customers' adjusting their inventory
levels, after a relatively strong year in 1995.  The 21.0%
decrease in segment operating income resulted from the sales
decrease and the higher unabsorbed costs experienced at the
decreased volumes.

In 1996, the segment successfully launched two compact new AC
variable speed drives for controlling electric motors from
1/6-to-1-horsepower, a range that covers 40% of the total
market for packaged drives in North America.  Designed
primarily for use on pumps and ventilator fans, the new
"micro" inverter has more features and a lower price than
competitive units.

Power Transmission segment net sales remained strong across
substantially all markets in 1995, increasing 1.9% over 1994,
despite a nearly $2.0 million decline in sales to the
printing market. Operating income rose more than 25% for the
year, largely as a result of cost containment efforts and a
shift in product mix, which resulted in a higher level of
manufacturing activity.


Pumps:                  1996       1995       1994
                              (in millions)
Net Sales            $ 107.6     $ 94.4     $ 90.4
Segment Operating
  Income                11.5        9.9       10.4

Pumps segment net sales increased 14.0% and operating income
increased 16.7% in 1996 compared with the prior year.  The
results of Imo Pompes SA, a French licensee acquired in March
1996, contributed 5.7% and 9.7% to the net sales and segment
operating income increases in 1996.  Additionally, the
segment is experiencing continued growth in its U.S.
industrial markets and strong export demand, driven by
products in crude oil transfer, power generation and general
industrial markets, as well as increased demand in the U.S.
marine market.

Pumps segment net sales in 1995 were up 4.4% from 1994, 2.1%
of which was the result of effects of foreign exchange rate
changes.  However, segment operating income decreased 5.4%
due to a shift in product mix. Startup costs related to a new
line of corrosive-resistant composite pumps also adversely
affected income, as did expenses caused by now resolved
technical difficulties related to a custom, high performance
product order.


Instrumentation:        1996       1995       1994
                              (in millions)
Net Sales             $ 78.9     $ 76.1     $ 72.2
Segment Operating
  Income (1)             7.4        6.7        9.8

(1) The Instrumentation segment's operating income includes
unusual charges of $.9 million in both 1996 and 1995.

Instrumentation segment net sales increased 3.7% in 1996,
while operating income increased 9.3% compared to the prior
year.  The segment's operating income continues to benefit
from the operational improvements made at a factory in
England, which were part of the 1995 restructuring program,
and increased demand in the U.S.  Partially offsetting this
increase is the slowdown experienced in the European market
in general and a problem of delayed shipments from the U.K.
facility.  A new management team has been put into place at
the Gems European operation, and the operation is beginning
to show improved results, particularly in relation to solving
the problem of delayed shipments from the U.K. facility.
Operating income was also negatively impacted in 1996 by $.9
million of restructuring charges for additional measures
being implemented in Europe.

The Instrumentation segment experienced a double-digit growth
rate in its industrial business in 1995, offset by a 40% drop
in sales to the U.S. Navy.  The result was an overall
increase in net sales of 5.4% for the year.  1995 earnings
were negatively impacted by the costs associated with a
restructuring of this segment's European operations coupled
with a significant investment in new marketing and sales
initiatives.

During 1995, the Instrumentation segment closed its plant in
Frankfurt, Germany and shifted production of certain products
into a lower-cost manufacturing facility in the U.K. Total
fourth quarter costs relating to this relocation exceeded
$1.2 million, including $.9 million of unusual items.  In
response to the growing global markets for fluid sensor
products, the Company spent an additional $2.0 million in
1995 to upgrade its sales and marketing organization and
launched several new marketing initiatives.  The marketing
efforts included an aggressive new trade-advertising program
designed to produce a continuing source of new sales leads.


Morse Controls:         1996       1995       1994
                              (in millions)
Net Sales            $ 112.5    $ 107.7    $ 100.1
Segment Operating
  Income (1)             8.6        5.3        5.7

(1) The Morse Controls segment's operating income includes
unusual charges of $.3 million and $1.5 million in 1996 and
1995, respectively.

Morse Controls segment net sales of $112.5 million were up
4.5% for 1996, as compared with 1995 net sales.  Segment
operating income increased 62.2% compared to the 1995 period.
Excluding unusual charges in both periods, operating income
increased 30.9% in 1996.  The segment has been favorably
affected in 1996 by the acquisition of a Swedish manufacturer
of specialized electronic controls, which was completed in
late December 1995, and accounted for 4.9% of the net sales
increase and 16.6% of the segment operating income increase
of 30.9% (excluding unusual charges).  Operating income also
started to experience benefits in 1996 from improvements at
the segment's operation in Germany, which was restructured to
consolidate facilities and reduce costs as part of the
restructuring program adopted in late 1995.

Morse Controls segment net sales of $107.7 million were up
7.6% for 1995, as compared with $100.1 million in net sales
in 1994, due to increases in the mobile equipment, aviation
and other general industrial markets.   1995 segment
operating income of $5.3 million decreased $.4 million as
compared with the 1994 level of $5.7 million. In the fourth
quarter of 1995, the segment recorded unusual charges of $1.5
million related to a major downsizing of its European
operations, and non-cash adjustments of $1.5 million,
principally related to inventory.  Excluding unusual items
and non-cash charges, segment operating income increased to
$8.3 million in 1995, as compared with $5.7 million in 1994.

Roltra-Morse:           1996       1995       1994
                              (in millions)
Net Sales             $ 80.2     $ 99.1    $ 103.1
Segment Operating
  Income (1)            (8.4)       6.0        9.2

(1) The Roltra-Morse segment's operating income includes
unusual charges of $6.2 million and $1.2 million in 1996 and
1995, respectively.

Roltra-Morse segment net sales decreased to $80.2 million in
1996, or 19.1%, from $99.1 million in 1995.  Segment
operating results were a loss of $8.4 million in 1996
compared with segment operating income of $6.0 million in the
1995 period.  Excluding unusual charges in both periods,
segment operating results were a loss of $2.2 million
compared with income of $7.2 million in 1995.  This
significant decrease in net sales and operating income in
1996 was due to the decline in Fiat auto sales in Italy, the
major market for the auto components produced by Roltra-
Morse.  The volumes were directly affected by weak auto sales
in Italy, where continuing political and economic uncertainty
and reduced government spending have depressed consumer
spending.  Additionally, the strengthening of the lira had a
negative impact on exports.

During the fourth quarter of 1996, the Company completed an
evaluation of the Roltra-Morse operation to determine
structural and other changes to position this business for
profitable future growth. As a result of this evaluation,
unusual charges of $6.2 million were recorded in the fourth
quarter of 1996, consisting of restructuring charges and
goodwill write-offs.  These measures were taken to reduce
operating expenses and improve the effectiveness of
engineering resources, which are expected to result in cost
savings of approximately $1.4 in 1997 and $2.2 million
annually thereafter.  The 1995 unusual charges of $1.2
million related to the shutdown of a plant in southern Italy
and the related loss on the sale of that building.

Roltra-Morse has now expanded its manufacturing operations into
Poland, Brazil and Turkey to supply auto components to Fiat
and other auto makers, while maintaining its leading supplier
role in Italy. The popular new mid-size Fiat Marea, launched
in 1996, is fitted with Roltra-Morse window regulators, seat
latches and accelerator, clutch and brake cables. During
1996, new business was also secured from a number of other
European auto makers, including Opel, Saab, Porsche, Rover
and Rolls Royce.   In 1996 the corporate headquarters funded
$3.5 million to Roltra-Morse for product growth, expansion
into Brazil and implementing restructuring cost improvements. In
the first quarter of 1997, an additional $6.5 million has
been funded to Roltra-Morse.

Company-Wide Fourth Quarter Results

Net sales from continuing operations in the fourth quarter of
1996 were $114.1 million, compared with $111.3 million in the
fourth quarter of 1995.  The Company had a loss from
continuing operations of $32.2 million, or $1.87 per share,
in the fourth quarter of 1996 compared with income from
continuing operations of $3.2 million, or $.19 per share, in
the comparable 1995 period.   Fourth quarter 1996 results
were severely impacted by unusual charges of $24.6 million
and a Roltra-Morse segment operating loss excluding unusual
charges of $3.5 million. Income from continuing operations in
the fourth quarter of 1995 benefited from a reduction in
deferred tax asset valuation allowances of $17.0 million,
partially offset by unusual charges of $10.2 million.

Power Transmission segment net sales of $22.4 million and
segment operating income of $2.2 million remained flat in the
fourth quarter of 1996 compared with the 1995 period.
Although 1995 was a relatively strong year as a whole, the
fourth quarter of 1995 started to show the effects of the
downturn in the U.S. gear market. This resulted in major
customers' adjusting their inventory levels in late 1995 and
maintaining these levels throughout 1996.

Pumps segment net sales of $27.5 million were up 10.9% in the
fourth quarter of 1996 compared to the same period in 1995.
Segment operating income increased 40.0% to $2.3 million,
when compared to the same period in 1995.  The 1996 period
benefited from the results of Imo Pompes SA, a French
licensee acquired in March 1996. In addition the segment
experienced continued growth in its U.S. industrial markets
and strong export demand, driven by products in crude oil
transfer, power generation and general industrial markets, as
well as increased demand in the U.S. marine market.

Instrumentation segment fourth quarter 1996 net sales were
$19.9 million, an increase of 6.8%, compared with the same
period in 1995.  Fourth quarter 1996 segment operating income
increased to $.4 million compared with $.2 million in the
fourth quarter of 1995.  The 1996 and 1995 fourth quarter
periods were negatively impacted by unusual charges of $.9
million in both periods related to restructuring of the
segment's European operation.  Excluding unusual charges in
both fourth quarter periods, operating income increased 12.2%
in the 1996 period.  The North American operation's fourth
quarter results improved significantly compared with the 1995
period, with increases in net sales and segment operating
income of 25% and 48%, respectively.  These positive
results were partially offset by decreased sales and
profitability in Europe in the fourth quarter of 1996.

The Gems European operation is beginning to show improved
results as a result of the new management team put into place
in 1996, particularly in relation to solving the problem of
delayed shipments from the U.K. facility.

Morse Controls segment net sales in the fourth quarter of
1996 were $25.7 million, an increase of 6.4% compared with
the 1995 period.  Segment operating income was $1.2 million
for the three months ended December 31, 1996, compared with
an operating loss of $1.9 million in the fourth quarter of
1995.  Unusual charges of $.3 million and $1.5 million in the
fourth quarters of 1996 and 1995, respectively, were recorded
related to a major downsizing of its European operations.
Additionally, fourth quarter 1995 results were negatively
impacted by approximately $1.5 million of non-cash
adjustments principally related to inventory.

Roltra-Morse segment net sales decreased 12.5% to $18.6
million in the fourth quarter of 1996 compared with the 1995
period.  The segment had an operating loss of $9.8 million in
the fourth quarter of 1996, compared with break-even results
in the same period of 1995.  This significant decrease in net
sales in 1996 was due to the decline in Fiat auto sales in
Italy, the major market for the auto components produced by
Roltra-Morse.  The volumes were directly affected by weak
auto sales in Italy, where continuing political and economic
uncertainty and reduced government spending have depressed
consumer spending. Additionally, the strengthening of the
lira had a negative impact on exports.

The segment's operating results were negatively impacted by
the decreased volumes, in addition to unusual charges of $6.2
million which were recorded in the fourth quarter of 1996,
consisting of restructuring charges and goodwill write-offs.
The fourth quarter of 1995 included unusual charges of $1.2
million related to the shutdown of a plant in southern Italy
and the related loss on the sale of that building.


Liquidity and Capital Resources

Short-term and Long-term Debt

On April 29, 1996, the Company completed the refinancing of
its Old Credit Agreement, its 12% senior subordinated
debentures and its then remaining 12.25% senior subordinated
debentures.  Under terms of the refinancing, the Company
issued $155 million of the Notes and also entered into the
New Credit Agreement under which the Company obtained a $70
million revolving credit facility (including a letter of
credit sub-facility) through April 30, 2001, a $25 million
term loan amortizing to April 2001, a $35 million term loan
amortizing to April 2001, and a $45 million term loan
amortizing to April 2003.  Proceeds of the Notes and the New
Credit Agreement were used to redeem the remaining $70
million of the Company's 12.25% senior subordinated
debentures due 1997 and all $150 million of its 12% senior
subordinated debentures due 2001, together with accrued
interest and a prepayment premium for the latter issue, and
to refinance all obligations under the Old Credit Agreement.
The cost of issuance of the Notes and the implementation of
the New Credit Agreement, which totaled $9.5 million, is
being amortized over the terms of the respective agreements.
The Company reached agreement with its senior lenders to
amend the covenants of the New Credit Agreement on February
19, 1997.  See "Recent Events" above for further discussion
regarding this amendment.

As a result of the refinancing, an extraordinary charge of
approximately $8.5 million was recorded in the second quarter
ended June 30, 1996, representing the costs incurred in
connection with the early extinguishment of debt and the
write-off of previously deferred loan costs.

The Company's domestic liquidity requirements are served by
the $70 million revolving credit facility (including a letter
of credit sub-facility) under the New Credit Agreement, while
its needs outside the U.S. continue to be covered by short
and intermediate term credit facilities from foreign banks.
As of December 31, 1996, there were $19.3 million of
revolving credit borrowings and $5.5 million of standby
letters of credit outstanding under the New Credit Agreement.
The Company also has, in the aggregate, foreign short-term
credit facilities of approximately $38.2 million.  As of
December 31, 1996, $24.0 million was outstanding under those
foreign facilities.

At December 31, 1996, the Company also had outstanding under
the New Credit Agreement $22.5 million in a term loan
amortizing to April 2001, $28.1 million in a second term loan
amortizing to April 2001, and  $44.8 million in a third term
loan amortizing to April 2003. In addition, the Company had
outstanding $155 million of the Notes.

While the inability to sell Roltra-Morse as planned was a
setback in completing the program the Company began in 1993
to reduce debt, the Notes and the New Credit Agreement
eliminated near-term debt maturities and the New Credit
Agreement provides the Company a liquidity source for the
foreseeable future.  Management continues to review ways to
improve the capital structure of the Company.  See "Recent
Events" above, for discussion regarding the March 21, 1997
announcement made by the Company.

Cash Flow

The Company's operating activities used cash of $13.2 million
in 1996, compared with a use of  $30.0 million in 1995.   The
use of cash in both periods is due principally to cash
related to discontinued operations and other divested
businesses.  Net cash used in investing activities was $12.7
million in 1996, compared with cash provided of $145.5
million in 1995.  Net proceeds from the sale of properties
held for sale in 1996 yielded $12.6 million; however, this
was more than offset by 1996 investments in capital equipment
and acquisitions.  The 1995 net cash provided by investing
activities is principally a result of $174.9 million of net
proceeds generated from the sale of businesses and assets in
1995, partially offset by purchases of property, plant and
equipment and acquisitions.  Cash and cash equivalents were
$4.9 million at December 31, 1996, a slight decrease from
$5.5 million at December 31, 1995.

Working capital at December 31, 1996 was $44.1 million, a
decrease of $18.7 million from the end of 1995, due
principally to an increase in notes payable at Roltra-Morse
and an increase in the current portion of long-term debt at
December 31, 1996.  The ratio of current assets to current
liabilities was 1.3 at December 31, 1996, compared with 1.4
at December 31, 1995.  Principally as a result of the 1996
loss, the Company's total debt as a percent of its total
capitalization was 121.5% at December 31, 1996, compared with
98.1% at December 31, 1995.

Capital expenditures of continuing operations decreased
slightly to $18.0 million compared with the 1995 level of
$20.9 million.  In 1996 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 1997 will increase slightly over the
1996 level primarily to improve productivity. There were no
material outstanding commitments for the acquisition of
property, plant and equipment at December 31, 1996.

Management of the Company believes that cash flow from
operations, cash available from unused credit facilities and
cash generated by additional asset sales will be sufficient
to meet its foreseeable liquidity needs.

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.  With the exception of
the Roltra-Morse segment, 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.

The Roltra-Morse segment had sales to one commercial customer
(Fiat S.p.A. and its subsidiaries) that accounted for 95%, 90%
and 95% of segment sales, and 16%, 19% and 21% of
consolidated sales in 1996, 1995 and 1994, respectively.
None of the other 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 other than Fiat S.p.A.
and its subsidiaries accounted for 10% or more of
consolidated sales in 1996, 1995 or 1994.

Approximately 35% of the property, plant and equipment of the
Company's continuing operations has been acquired over the
past five years and has a remaining useful life ranging from
five years to fifteen years for equipment to thirty years for
buildings. In addition, property, plant and equipment of the
businesses acquired by the Company have been adjusted to
their fair value at the time of acquisition. Assets acquired
in prior years are expected to be replaced at higher costs,
but this will take place over many years. The newer assets
will result in higher depreciation charges but, in many
cases, due to technological improvements, there will be
operating cost savings as well. The Company considers these
matters in establishing its pricing policies.

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 7 -
"Restructuring Plans" - the likelihood of closing the sale of
the Varo Electronic Systems Division and the impact of
various cost reduction programs; (ii) Item 5 - Legal
Proceedings - the future impact of legal proceedings on the
financial condition of the Company; (iii) Item 7 - "Segment
Operating Results" - the future performance of various
programs in each segment and the impact of such programs on
future sales and on operating income; and, (iv) Item 7 -
"Recent Events" and "Liquidity and Capital Resources" -
statements concerning the Company's ability to sell
approximately $50.0 million of non-core assets and non-
operating real estate and repay outstanding debt under the
New Credit Agreement and statements regarding the possibility
of a merger or sale of the Company and the impact of such an
action, if any, on the remaining asset sales. 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 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.

Not Applicable.



                             PART III

Item 10.    Directors and Executive Officers of the Registrant.

Reference is made to the information to be set forth in the
section entitled "Election of Directors" in the Company's
Proxy Statement, for the Annual Meeting of Stockholders which
will be held on May 20, 1997 (the "Proxy Statement"), which
section is incorporated herein by reference.  The Proxy
Statement will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1996,
pursuant to Regulation 14A of the Securities Exchange Act of
1934, as amended.

The information under the caption "Executive Officers of the
Company," following Item 4 of Part I of this Form 10-K
Report, is incorporated herein by reference.

None of the executive officers or directors of the Company is
related to any of the other executive officers or directors
of the Company.


Item 11.    Executive Compensation.

Reference is made to the information to be set forth in the
section entitled "Executive Compensation" in the Proxy
Statement, which section (except for its Compensation
Committee Report and its Performance Graph) is incorporated
herein by reference.


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

Reference is made to the information to be set forth in the
section entitled "Beneficial Ownership of Common Stock" in
the Proxy Statement, which section is incorporated herein by
reference.

Item 13.    Certain Relationships and Related Transactions.

Not Applicable.

                             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                            Page

         Consolidated Statements of Income for the Years
          Ended December 31, 1996, 1995 and 1994.....................F-1
         Consolidated Balance Sheets at December 31, 1996 and 1995...F-2
         Consolidated Statements of Cash Flows for the Years
          Ended December 31, 1996, 1995 and 1994.....................F-3
         Consolidated Statements of Shareholders' Equity (Deficit)
          for the Years Ended December 31, 1996, 1995 and 1994.......F-4
         Notes to Consolidated Financial Statements..................F-5
         Report of Independent Auditors..............................F-31
         Quarterly Financial Information.............................F-32

   (2)   Financial Statement Schedules

         The following consolidated financial statement schedule for the
         year ended December 31, 1996, 1995 and 1994 is filed as part of
         this Report and should be read in conjunction with the Company's
         Consolidated Financial Statements.

         Schedule                                                    Page

          II     Valuation and Qualifying Accounts..................  S-1

         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

         On November 12, 1996, the Company filed a report on Form 8-K,
         reporting under Item 5, disclosing the announcement that it was
         withdrawing its Roltra-Morse business from sale, and disclosing its
         restated third quarter 1996 results.



EXHIBIT INDEX


 Exhibit No.     Note No      Description


    3(i)         (9)          The Company's Restated Certificate of
                              Incorporation, as amended March 10, 1989 and
                              November 10, 1992

    3(ii)                     The Company's Bylaws

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

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

    4.3   (A)    (3)          Rights Agreement dated as of April 22, 1987
                              between the Company and Philadelphia National
                              Bank, as Rights Agent


          (B)    (9)          Amendment dated December 16, 1991 between the
                              Company and First Chicago Trust Company of
                              New York

                              Management Contracts, Compensatory Plans and
                              Arrangements:

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

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

   10.3          (16)         1995 Equity Incentive Plan for Outside
                              Directors

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

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

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

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

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

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

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

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


 Exhibit No.     Note No.     Description

                              Other Material Contracts:

   10.12 (A)     (4), (5)     The Company's Salaried Employees Stock Savings
                              Plan as amended on July 1, 1987 and as amended
                              on June 14, 1988

         (B)     (8)          Amendment dated March 16, 1989 to the Imo
                              Industries Inc. Employees Stock Savings Plan

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

         (D)     (7)          Amendment dated May 9, 1991 to the Imo
                              Industries Inc. Employees Stock Savings Plan

         (E)     (9)          Amendments dated December 30, 1991 and August
                              3, 1992 to the Imo Industries Inc. Employees
                              Stock Savings Plan

         (F)     (13)         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)      (10)         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         (6)          Stock Purchase Agreement dated as of May 31,
                              1990 among United Scientific Holdings PLC,
                              United Scientific Inc. and the Company

   10.18         (11)         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)      (19)         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

        (B)                   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

 Exhibit No.     Note No.     Description

   10.20(A)      (12)         Asset Purchase Agreement dated as of November
                              4, 1994 by and among the Company, Imo
                              Industries International Inc. and Mannesmann
                              Capital Corporation

        (B)      (13)         Agreement, Amendment and Waiver dated January
                              17, 1995 by and among the Company and
                              Mannesmann Capital Corporation

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

   10.22         (14)         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)                   Asset Purchase Agreement dated as of September
                              13, 1996 between Varo Inc. and Varo Acquisition
                              Corp.

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

   20                         Proxy Statement for the Company's 1996 Annual
                              Meeting of Stockholders (incorporated by
                              reference to the Company's Proxy Statement to
                              be filed separately with the Commission
                              pursuant to Regulation 14A of the Securities
                              Exchange Act of 1934, as amended)

   21                         Subsidiaries of the Company

   23                         Consent of Ernst & Young LLP dated March 25,
                              1997

   27                         Financial Data Schedule as of December 31, 1996

_______________________________________________
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 Company's Form 8-K filed with the
     Commission on May 4, 1987
(4)  Incorporated by reference to the Imo Industries Inc. Employees Stock
     Savings Plan Form 11-K filed with the Commission on April 13, 1988.
(5)  Incorporated by reference to the Company's Form 10-K filed with the
     Commission on March 29, 1990.
(6)  Incorporated by reference to the Company's Form 10-K filed with the
     Commission on March 28, 1991.
(7)  Incorporated by reference to the Company's Form S-8 filed with the
     Commission on June 17, 1991.
(8)  Incorporated by reference to the Company's Form 10-K filed with the
     Commission on March 26, 1992.
(9)  Incorporated by reference to the Company's Form 10-K filed with the
     Commission on April 19, 1993.
(10) 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.
(11) Incorporated by reference to the Company's Form 10-K filed with the
     Commission on March 31, 1994.
(12) Incorporated by reference to the Company's Form 10-Q filed with the
     Commission on November 14, 1994.
(13) Incorporated by reference to the Company's Form 10-K filed with the
     Commission on March 29, 1995.
(14) Incorporated by reference to the Company's Form 8-K filed with the
     Commission on June 19, 1995.
(15) Incorporated by reference to the Company's Form S-8 as filed with the
     Commission on June 23, 1995, Registration No. 33-60533
(16) Incorporated by reference to the Company's Form S-8 as filed with the
     Commission on June 23, 1995, Registration No. 33-60535
(17) Incorporated by reference to the Company's Form 10-Q filed with the
     Commission on November 13, 1995.
(18) Incorporated by reference to the Company's Form 10-K filed with the
     Commission on March 28, 1996.
(19) Incorporated by reference to the Company's Form S-4 (Registration No.
     333-3477) filed with the Commission on May 10, 1996.




                             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: March 27, 1997

                                                  IMO INDUSTRIES INC.


                                                  By: /s/ DONALD K. FARRAR
                                                      Donald K. Farrar
                                                      Chief Executive Officer,
                                                      President and Director


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/ DONALD K. FARRAR              Chief Executive Officer,
Donald K. Farrar                  President and Director
                                  (principal executive officer) March 27, 1997


/s/ WILLIAM M. BROWN              Executive Vice President,
William M. Brown                  Chief Financial Officer/
                                  Corporate Controller
                                  (principal financial and
                                   accounting officer)          March 27, 1997


/s/ JAMES B. EDWARDS              Director                      March 27, 1997
James B. Edwards


/s/ RICHARD J. GROSH              Director                      March 27, 1997
Richard J. Grosh


/s/ CARTER P. THACHER             Director                      March 27, 1997
Carter P. Thacher


/s/ DONALD C. TRAUSCHT            Director                      March 27, 1997
Donald C. Trauscht


/s/ ARTHUR E. VAN LEUVEN          Director                      March 27, 1997
Arthur E. Van Leuven



<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands except per share amounts)

<CAPTION>
Year Ended December 31,                  1996        1995*       1994*
<S>                                 <C>         <C>         <C>

Net Sales                           $ 468,645   $ 472,367   $ 463,891
Cost of products sold                 336,017     340,469     333,098

Gross Profit                          132,628     131,898     130,793

Selling, general and administrative
  expenses                             95,232      87,875      86,758
Research and development expenses       9,290       7,736       6,173
Unusual items                          24,573      10,208         ---

Income from Operations                  3,533      26,079      37,862

Interest expense                       33,317      31,463      33,971
Interest income                        (1,524)     (2,229)     (1,714)
Other income                             (444)       (739)       (876)
Equity in (income) loss of
  unconsolidated companies                552        (302)        ---

Income (Loss) From Continuing
  Operations Before Income
  Taxes, Minority Interest
  and Extraordinary Item              (28,368)     (2,114)      6,481

Income taxes (benefit):
          Current                       3,700       3,082       2,433
          Deferred                     10,000     (17,000)        ---
  Total Income Taxes (Benefit)         13,700     (13,918)      2,433

Minority Interest                        (295)       (725)        393

Income (Loss) From Continuing
  Operations Before
  Extraordinary Item                  (41,773)     12,529       3,655

Discontinued operations:
  Income from operations (net of
    income tax expense of
    $.8 million)                          ---         ---       5,575
  Estimated gain (loss) on disposal
    (net of income taxes of $5.2
    million in 1995)                   (8,142)     21,625         ---
   Total Income (Loss) from
    Discontinued Operations            (8,142)     21,625       5,575

Extraordinary Item - Loss on
  Extinguishment of Debt               (8,455)     (4,444)     (5,299)

Net Income (Loss)                   $ (58,370)   $ 29,710     $ 3,931

Earnings (loss) per share:
     Continuing operations
       before extraordinary item     $  (2.44)   $    .73     $   .22
     Discontinued operations         $   (.48)   $   1.27     $   .32
     Extraordinary item              $   (.49)   $   (.26)    $  (.31)
     Net income (loss)               $  (3.41)   $   1.74     $   .23

Weighted average number of shares
  outstanding                       17,100,359  17,048,622  16,926,071

See accompanying notes to consolidated financial statements.
*Restated to conform to 1996 presentation.
                                     F-1
</TABLE>

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

<CAPTION>
December 31,                                  1996       1995*
<S>                                       <C>        <C>

Assets
Current Assets
Cash and cash equivalents                  $ 4,863    $ 5,539
Trade accounts and notes
  receivable, less allowance of
  $1,877 in 1996 and $2,197 in 1995         78,955     76,962
Inventories-net                             94,433     97,151
Deferred income taxes                        9,165     11,371
Net assets of discontinued
  operations - current                       7,214      6,810
Prepaid expenses and other current
  assets                                     7,877      7,182
Total Current Assets                       202,507    205,015
Property, Plant and Equipment - on
  the basis of cost
Land                                         9,616     10,407
Buildings and improvements                  43,474     44,786
Machinery and equipment                    159,266    151,543
                                           212,356    206,736
Less allowances for depreciation
  and amortization                        (112,581)  (104,938)
Net Property, Plant and Equipment           99,775    101,798
Intangible Assets, Principally
  Goodwill                                  69,402     81,309
Investments in and Advances to
  Unconsolidated Companies                   9,872      5,481
Deferred Income Taxes - Long-Term              ---      4,609
Net Assets of Discontinued
  Operations - Noncurrent                    7,615      6,066
Other Assets                                22,443     30,644
Total Assets                              $411,614   $434,922
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable                             $ 43,338   $ 37,068
Trade accounts payable                      42,821     49,408
Accrued expenses and other
  liabilities                               42,632     43,222
Accrued costs related to
  discontinued operations                    8,586      3,055
Income taxes payable                         6,011      7,109
Current portion of long-term debt           14,994      2,376
Total Current Liabilities                  158,382    142,238
Long-Term Debt                             251,860    231,561
Deferred Income Taxes                        4,069        ---
Accrued Postretirement Benefits -
  Long-Term                                 17,418     24,372
Accrued Pension Expense and Other
  Liabilities                               33,815     30,203
Total Liabilities                          465,544    428,374
Minority Interest                              954      1,206
Shareholders' Equity (Deficit)
Preferred stock:  $1.00 par value;
  authorized and unissued 5,000,000
  shares                                       ---        ---
Common stock:  $1.00 par value;
  authorized 25,000,000 shares;
  issued 18,796,897 and 18,756,397
  in 1996 and 1995, respectively            18,797     18,756
Additional paid-in capital                  80,466     80,275
Retained earnings (deficit)               (134,962)   (76,592)
Cumulative foreign currency
  translation adjustments                    2,057      2,724
Minimum pension liability
  adjustment                                (2,503)    (1,801)
Unearned compensation                         (719)       ---
Treasury stock at cost - 1,672,788
  shares in 1996 and 1995                  (18,020)   (18,020)
Total Shareholders' Equity (Deficit)       (54,884)     5,342
Total Liabilities and
  Shareholders' Equity (Deficit)          $411,614   $434,922

See accompanying notes to consolidated financial statements.
* Restated to conform to 1996 presentation.
                             F-2
</TABLE>

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

<CAPTION>
Year Ended December 31,                        1996       1995*       1994*
<S>                                      <C>         <C>         <C>

OPERATING ACTIVITIES
Net income (loss)                         $ (58,370)  $ 29,710    $  3,931
Adjustments to reconcile net income
  (loss) to net cash (used by) provided
  by continuing operations:
    Discontinued operations                   8,142    (21,625)     (5,575)
    Depreciation                             15,566     15,200      15,650
    Amortization                              4,268      3,902       6,343
    Provision (credit) for deferred
      income taxes                           10,000    (17,000)        ---
    Extraordinary item                        8,455      4,444       5,299
    Unusual items                            24,573     10,208         ---
    Other                                     1,378       (642)      1,059

    Other changes in operating
    assets and liabilities:
      (Increase) decrease in accounts
        and notes receivable                   (176)     8,254      (6,957)
      Decrease (increase) in inventories      3,294     (9,357)     (1,583)
      Decrease in recoverable income
        taxes                                   ---        ---       3,826
      Decrease in accounts payable and
        accrued expenses                    (15,655)   (13,173)     (3,171)
      Other operating assets
        and liabilities                      (7,886)   (15,670)     (5,816)
    Net cash (used by) provided by
        continuing operations                (6,411)    (5,749)     13,006
    Net cash (used by) provided by
        discontinued operations              (6,789)   (24,264)      3,772

Net Cash (Used in) Provided by Operating
  Activities                                (13,200)   (30,013)     16,778

INVESTING ACTIVITIES
Net proceeds from sale of businesses and
  sales of property, plant and equipment     12,570    174,922      13,568
Purchases of property, plant and
  equipment                                 (18,002)   (20,871)     (9,206)
Acquisitions, net of cash acquired           (7,218)    (7,002)        ---
Net investing activities of discontinued
  operations                                    (69)    (1,419)     (3,995)
Other                                            30       (103)       (675)
Net Cash (Used in) Provided by Investing
  Activities                                (12,689)   145,527        (308)

FINANCING ACTIVITIES
Increase (decrease) in notes payable          6,159     23,607     (31,346)
Proceeds from long-term borrowings          266,895      5,257      86,951
Principal payments on long-term debt       (233,350)  (166,196)    (56,759)
Payment of debt financing costs             (14,660)      (401)    (11,277)
Proceeds from stock options exercised           ---        535         415
Other                                            89         59          15
Net Cash Provided by (Used in) Financing
  Activities                                 25,133   (137,139)    (12,001)

Effect of exchange rate changes on cash          80        222         117
(Decrease) Increase in Cash and Cash
  Equivalents                                  (676)   (21,403)      4,586
Cash and cash equivalents at
  beginning of year                           5,539     26,942      22,356
Cash and Cash Equivalents at
  End of Year                              $  4,863   $  5,539   $  26,942

See accompanying notes to consolidated financial statements.
*Restated to conform to 1996 presentation.
                             F-3
</TABLE>

<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity (Deficit)
(Dollars in thousands)
<CAPTION>
                                              Cumulative
                          Addit-              Foreign      Minimum
                          ional    Retained   Currency     Pension     Unearned
                  Common  Paid-in  Earnings   Translation  Liability   Compen-   Treasury
                  Stock   Capital  (Deficit)  Adjustment   Adjustment  sation    Stock     Total 
<S>              <C>     <C>      <C>        <C>          <C>         <C>       <C>       <C>
Balance at
  January 1,
  1994 *         $18,584  $79,080  $(110,233)  $ (3,361)    $ (1,768)  $   ---   $(18,020)  $(35,718)
Net income           ---      ---      3,931        ---          ---       ---        ---      3,931
Foreign currency
  translation
  adjustments        ---      ---        ---      2,063          ---       ---        ---      2,063
Minimum pension
  liability
  adjustment         ---      ---        ---        ---          915       ---        ---        915
Shares issued
  under stock
  option plan         56      359        ---        ---          ---       ---        ---        415
Restricted shares
  issued under
  the equity
  incentive plan      40      350        ---        ---          ---       ---        ---        390
Balance at
  December 31,
  1994 *           18,680  79,789   (106,302)    (1,298)        (853)      ---     (18,020)  (28,004)
Net income            ---     ---     29,710        ---          ---       ---         ---    29,710
Foreign currency
  translation
  adjustments         ---     ---        ---      4,022          ---       ---         ---     4,022
Minimum pension
  liability
  adjustment          ---     ---        ---        ---         (948)      ---         ---      (948)
Shares issued
  under stock
  option plan          73     462        ---        ---          ---       ---         ---       535
Restricted shares
  issued under
  the equity
  incentive plan        3      24        ---        ---          ---       ---         ---        27
Balance at
  December 31,
  1995 *           18,756  80,275    (76,592)     2,724       (1,801)      ---     (18,020)    5,342
Net income (loss)     ---     ---    (58,370)       ---          ---       ---         ---   (58,370)
Foreign currency
  translation
  adjustments         ---     ---        ---       (667)         ---       ---         ---      (667)
Minimum pension
  liability
  adjustment          ---     ---        ---        ---         (702)      ---         ---      (702)
Restricted shares
  issued under
  the equity
  incentive plan       41     191        ---        ---          ---      (166)        ---        66
Other                 ---     ---        ---        ---          ---      (553)        ---      (553)
Balance at
  December 31,
  1996            $18,797 $80,466  $(134,962)   $ 2,057     $ (2,503)   $ (719)   $(18,020) $(54,884)

See accompanying notes to consolidated financial statements.
* Restated to conform to current year presentation.
                                    F-4
</TABLE>

                                   F-28
                   Imo Industries Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1  Significant Accounting Policies


Consolidation:  The consolidated financial statements
include the accounts of 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 current 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.

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.

Depreciation and Amortization:  Depreciation and
amortization of plant and equipment are computed
principally by the straight-line method based on the
estimated useful lives of the assets as follows:
buildings, 10 to 35 years and machinery and equipment, 3
to 15 years.

Interest Expense:  Interest expense incurred during the
construction of facilities and equipment is capitalized
as part of the cost of those assets.  Total interest
paid by the Company amounted to $36.7 million in 1996,
$39.5 million in 1995 and $49.5 million in 1994.  There
was no interest capitalized in 1996 and 1995.  Interest
capitalized in 1994 was $.2 million.

Earnings Per Share:  Earnings per share are based upon
the weighted average number of shares of common stock
outstanding.  Common stock equivalents related to stock
options are excluded because their effect is not
material or is anti-dilutive.

Impact of Recently Issued Accounting Standards:  In
February 1997, the FASB issued Statement No. 128,
"Earnings Per Share", which specifies the computation,
presentation, and disclosure requirements for earnings
per share. The Statement is effective for annual periods
ending after December 15, 1997 and early adoption is not
permitted.  The Company does not believe the effect of
adoption will be material.

Intangible Assets:  Goodwill of companies 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 related to
continuing operations at December 31, 1996 and 1995 was
$58.4 million and $75.2 million, respectively, net of
respective accumulated amortization of $16.7 million and
$17.9 million.  As a result of the withdrawal of the
Company's Roltra-Morse business from sale during 1996,
certain other non-strategic businesses were approved for
sale in replacement of Roltra-Morse. Goodwill related to
these non-strategic businesses of approximately $13.6
million was written-off at December 31, 1996 as the
carrying values of these businesses were written down to
reflect expected realizable values.  In addition,
goodwill associated with the Roltra-Morse business in
the amount of $2.8 million was written off at December
31, 1996, as part of the restructuring of the Roltra-
Morse operations (See Note 3).  Patents are amortized
over the shorter of their legal or estimated useful
lives.

Management Estimates:  The preparation of financial
statements in conformity with generally accepted
accounting principles 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.

Restatements:   The Consolidated Financial Statements
and the notes thereto, have been restated to reflect the
Company's Roltra-Morse business segment as a continuing
operation due to its withdrawal from potential sale.
Certain prior year amounts have been reclassified to
conform to the current year presentation.


Note 2  Discontinued Operations


In January 1994 and in August 1994, the Board of
Directors approved the Company's plans to sell its
Electro-Optical Systems operations and its
Turbomachinery operations, respectively.  In accordance
with APB Opinion No. 30, the disposals of these business
segments have been accounted for as discontinued
operations and, accordingly, their operating results
have been segregated and reported as Discontinued
Operations in the accompanying Consolidated Statements
of Income.

Discontinued operations include management's best
estimates of amounts expected to be realized at the time
of disposal. The amounts the Company will ultimately
realize could differ materially in the near term from
the amounts used to determine the gain or loss on
disposal of the discontinued operations.

Electro-Optical Systems
On January 3, 1995, the Company completed the sale of
its Baird Analytical Instruments Division to Thermo
Instruments Systems Inc. for approximately $12.3
million, which was used to repay a portion of the
Company's domestic senior debt outstanding under its
previous credit facility (the "Old Credit Agreement").
On June 2, 1995, the Company completed the sale of the
Optical Systems and Ni-Tec divisions of Varo Inc. and
the Optical Systems division of Baird Corporation, which
represented the major part of its Electro-Optical
Systems business, to Litton Industries for approximately
book value. The proceeds were used on June 2, 1995 to
reduce amounts outstanding under the Old Credit
Agreement by $8 million and to redeem $40 million of the
Company's then outstanding 12.25% senior subordinated
debentures on July 6, 1995.

The Company entered into a definitive agreement in
September 1996 to sell the Varo Electronic Systems
division, the remaining portion of its former Electro-
Optical Systems business, to a small defense contractor
for approximately net book value.  This agreement
expired in November 1996 and was subsequently
renegotiated and reinstated in January 1997.  The buyer
has secured the necessary financing to purchase this
business.  The Company expects the sale to be completed
in the second quarter of 1997, and will use the proceeds
to reduce debt.  The sale of this business will complete
the disposal of the Electro-Optical Systems business.

The Company retained certain liabilities related to the
Electro-Optical Systems business of approximately $21.0
million. At December 31, 1993, the Company provided for
estimated losses on disposal of this segment in the
amount of $168.0 million, which included a provision for
anticipated operating losses prior to disposal. During
1995, the Company recognized an additional $13.3 million
loss on disposal. The additional loss included $6.8
million related to the resolution of contingencies
associated with the sale of the business and fourth
quarter charges of $6.5 million recorded primarily to
write down remaining non-operating real estate to net
realizable value. During 1996, the Company recorded an
additional $5.2 million loss on disposal ($.8 million in
the fourth quarter), which related to changes in
estimates on legal and other reserve requirements
associated with retained liabilities of this business.

Turbomachinery
On January 17, 1995, the Company completed the sale of
its Delaval Turbine and TurboCare divisions and its 50%
interest in Delaval-Stork, to Mannesmann Demag. The
final adjusted purchase price was $119 million, of which
$109 million was received at closing, with the remainder
earning interest to the Company and to be received at
specified future contract dates subject to adjustment as
provided in the agreement.  It is management's
expectation that there will be no further adjustment to
the purchase price.  A portion of the proceeds were used
by the Company to pay off its domestic senior debt in
January 1995 and in March 1995 the Company redeemed $40
million of its then outstanding 12.25% senior
subordinated debentures with the remainder of the
proceeds.

The Company retained certain liabilities related to the
Turbomachinery business of approximately $28.0 million.
As a result of the sale of this business in 1995, the
Company recognized an estimated gain on disposal of
$35.0 million, net of income taxes of $5.2 million.
During 1996, the Company recorded an additional $2.9
million loss on disposal.  The additional loss included
charges related to changes in estimates on legal and
other reserve requirements associated with retained
liabilities of this business.

The Company reviews quarterly the assumptions used in
determining the estimated gain or loss from discontinued
operations and the adequacy of the recorded liabilities.
Management believes that the recorded amount of
estimated liabilities related to the Discontinued
Operations at December 31, 1996 is adequate, however,
the amounts estimated may differ from actual results.

Net assets and liabilities of the Discontinued
Operations consist of the following:

December 31 (Dollars in thousands)      1996      1995

     Current Assets:
          Receivables                $ 1,949   $ 2,959
          Inventories                  7,737     9,363
          Other current assets           113       542
                                       9,799    12,864
     Current Liabilities:
          Trade accounts payable       1,953     2,012
          Other current liabilities      632     4,042
                                       2,585     6,054

     Net Current Assets              $ 7,214   $ 6,810

     Long-term Assets:
          Property                   $ 2,024   $ 2,971
          Other long-term assets       7,033    10,296
                                       9,057    13,267

     Long-term Liabilities             1,442     7,201

     Net Long-term Assets            $ 7,615   $ 6,066

     Net Assets                      $14,829   $12,876

Net assets related to the Electro-Optical Systems
business are $14.4 million and $11.9 million as of
December 31, 1996 and 1995, respectively, and net assets
related to the Turbomachinery business are $.5 million
and $1.0 million as of December 31, 1996 and 1995,
respectively.

Total long-term debt of the Discontinued Operations
amounted to $1.5 million and $1.6 million as of December
31, 1996 and 1995, respectively. Of these amounts, $.1
million represents the current portion.

A condensed summary of operations for the Discontinued
Operations is as follows:

Year Ended December 31
(Dollars in thousands)              1996        1995        1994

     Net Sales                   $22,814     $60,199    $341,550

     Income from operations
       before income taxes
       and minority interest         ---         ---       6,375

     Income taxes                    ---         ---         800

     Income from operations      $   ---     $   ---    $  5,575

Operating results from the Discontinued Operations was
income of $.4 million, a loss of $1.4 million and a loss
of $.6 million in 1996, 1995 and 1994, respectively. The
Electro-Optical Systems business 1996 net income of $.4
million was offset by an increase in estimated reserve
requirements, while the 1995 and 1994 net losses of $1.0
million and $6.2 million, respectively, including
allocated interest, were charged against the reserve for
anticipated losses previously established by the
Company. The Turbomachinery business income in 1994 of
$5.6 million was recognized since an overall gain was
expected on that business.

The income from operations of the Discontinued
Operations for 1996, 1995 and 1994 includes allocated
interest expense of $1.8 million, $5.0 million, and
$17.4 million, respectively.  Allocated interest expense
includes interest on debt of the Discontinued Operations
to be assumed by the buyer, and 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.


Note 3 Restructuring Plans


Asset Sales
In October 1992, the Company announced a plan to
strengthen its balance sheet through the sale of certain
businesses and the application of the proceeds to reduce
debt.  Pursuant to this plan, the Company divested its
Heim Bearings, Aerospace, Barksdale Controls and CEC
Instruments businesses. These proceeds, net of related
expenses, were used to repay senior debt in the amount
of $81.9 million in 1993 and $13.2 million in 1994, in
accordance with the terms of the 1993 restructured
credit facilities.

In the fourth quarter of 1993, management initiated a
strategy to reposition the Company on its less capital
intensive businesses that exhibited strong brand name
recognition, a broad customer base and market leadership
with less dependence on U.S. Government sales.  In
connection with this strategy, the Company divested its
Turbomachinery and substantially all of its Electro-
Optical Systems businesses in 1995. The Company used
these 1995 proceeds, net of related expenses, to repay
senior debt outstanding under its Old Credit Agreement
in the amount of $89.7 million and to redeem $80 million
of its then outstanding 12.25% senior subordinated
debentures (See Note 2). During 1996, the Company
completed the sales of five of its non-operating real
estate holdings for net proceeds of $8.6 million.  The
proceeds were used to repay the Company's domestic
senior debt.

The Company expects to complete the sale of its Varo
Electronic Systems division, the remaining portion of
its former Electro-Optical Systems business, in the
second quarter of 1997, and intends to use the proceeds
to reduce debt (See Note 2).

The remaining assets currently held for sale include non-
strategic business units of the Company's Power
Transmission and Morse Controls segments which were
approved for sale in replacement of Roltra-Morse, as
well as certain non-operating real estate originally
identified for sale in October 1992. The operating units
produced income before taxes of $.1 million for the full
year 1996, net of $2.3 million of interest expense,
which has been allocated, based on net assets of
approximately $21.5 million.  The fourth quarter of 1996
includes a charge of $17.1 million to adjust the value
of these non-strategic businesses to their expected net
realizable values (See Note 6). The Company targets
completion of these sales over the next 12 months and
intends to apply the proceeds to reduce debt.



Cost Reduction Programs

1996 Program
The fourth quarter of 1996 includes a charge of $7.4
million in continuing operations for restructuring
measures taken at several of the Company's European
operations to further reduce operating expenses (See
Note 6).  The Company completed an evaluation of its
Roltra-Morse operations during the fourth quarter to
determine what structural and other changes were
necessary to position this business for profitable
future growth.  The portion of the charge related to
Roltra-Morse was $6.2 million, which includes severance
and certain other costs, and a write-off of goodwill.
These restructuring measures at Roltra-Morse are
expected to reduce operating expenses, improve the
effectiveness of engineering resources and produce cost
savings in 1997.  The remaining restructuring charges
relate to severance costs and other expenses related to
further restructuring at the Company's Gems European
operations and Morse German operation.  This program
includes a reduction of 126 employees in Europe
consisting of both administrative and production
employees, or 3.3% of the total number of Company
employees at the end of 1996.

This program is expected to reduce expenses by
approximately  $2.6 million in 1997 and $3.8 million
annually thereafter.  The required cash outlay related
to this program was $.4 million in 1996 and the expected
cash requirements during 1997 are $3.1 million.  The
remainder represents non-cash charges.

1995 Program
In the fourth quarter of 1995, the Company recorded a
charge to continuing operations of $5.2 million,
including severance and other expenses related to a
Company-wide program to reduce general and
administrative costs (See Note 6).  This program
includes a reduction of 65 employees, or 2% of the total
number of Company employees, including a reduction of
the corporate headquarters staff by 20%.  This program
reduced general and administrative expenses by
approximately $2.7 million in 1996, and is expected to
reduce general and administrative expenses by
approximately $3.2 million in 1997, and $4.1 million in
1998 and annually thereafter.  The required cash outlays
related to this program were $.6 million and $3.1
million in 1995 and 1996, respectively. The final cash
outlay of $.3 million is expected during 1997. The
remainder represents non-cash charges.


Note 4 Inventories

Inventories are summarized as follows:

December 31 (Dollars in thousands)           1996           1995

Finished products                        $ 46,905       $ 39,332
Work in process                            30,802         33,604
Materials and supplies                     30,641         36,605
                                          108,348        109,541
Less customers' progress payments           2,710            689
Less valuation allowance                   11,205         11,701

                                         $ 94,433       $ 97,151



Note 5  Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:

December 31 (Dollars in thousands)           1996           1995

Accrued product warranty costs          $   2,596      $   3,464
Accrued litigation and claims costs         2,132          1,674
Payroll and related items                  17,610         16,077
Accrued interest payable                    3,731          6,511
Accrued restructuring costs                 3,422          4,076
Accrued divestiture costs                   2,460          2,861
Other                                      10,681          8,559

                                         $ 42,632       $ 43,222


Note 6  Unusual Items

During the fourth quarter of 1996, the Company
recognized unusual charges of $24.6 million ($1.44 per
share) in income from continuing operations.  These
charges include $4.6 million related to the
restructuring and cost reduction programs within the
Company's operating units, $2.8 million related to the
impairment of certain long-lived assets, and $17.1
million related to the write-down of certain businesses
being held for sale and certain non-operating real
estate being held for sale to net realizable value (See
Note 3).

During the fourth quarter of 1995, the Company
recognized unusual charges of $10.2 million ($.59 per
share) in income from continuing operations. These
charges include $5.2 million in severance benefits and
other expenses related to a Company-wide program to
reduce general and administrative costs (See Note 3) and
$5.0 million related to the write-down of certain non-
operating real estate to net realizable value (See Note
3).


Note 7  Income Taxes

The components of income tax expense (benefit) from
continuing operations are:

Year Ended December 31
(Dollars in thousands)         1996      1995      1994

Current:
     Federal                 $  ---    $  ---    $  ---
     Foreign                  3,423     2,779     1,973
     State                      277       303       460
                              3,700     3,082     2,433

Deferred:
     Federal                 10,000   (17,000)      ---
     Foreign and State          ---       ---       ---
                             10,000   (17,000)      ---

                            $13,700  $(13,918)   $2,433

Income tax expense for 1994 from discontinued operations
was $.8 million. There was no income tax expense for
discontinued operations in 1996 or 1995.

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, 1996 and 1995
are as follows:

December 31
(Dollars in thousands)             1996                     1995
                            Current    Long-term     Current    Long-term
Deferred tax assets:
   Postretirement benefit
     obligation             $   595    $   6,367     $   765    $   8,940
   Expenses not currently
     deductible              21,516        7,185      19,101        9,895
   Net operating loss
     carryover                  ---       37,269         ---       30,041
   Tax credit carryover         ---        2,133         ---        5,033
Total deferred tax assets    22,111       52,954      19,866       53,909
Valuation allowance for
  deferred tax assets       (12,946)     (31,119)     (8,495)     (23,180)

Net deferred tax assets       9,165       21,835      11,371       30,729

Deferred tax
liabilities:
   Tax over book
     depreciation               ---       18,289         ---       18,593
   Other                        ---        7,615         ---        7,527
Total deferred tax
  liabilities                   ---       25,904         ---       26,120
Net deferred tax
  assets (liabilities)     $  9,165     $ (4,069)   $ 11,371     $  4,609

At December 31, 1996, unremitted earnings of foreign
subsidiaries were approximately $23.6 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 $.9 million.

The components of income (loss) from continuing
operations before income taxes, minority interest and
extraordinary item:

Year Ended December 31
(Dollars in thousands)         1996        1995        1994

United States              $(16,061)    $(8,084)    $(2,322)
Foreign                     (12,307)      5,970       8,803

                           $(28,368)    $(2,114)     $6,481

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

Year Ended December 31
(Dollars in thousands)              1996       1995      1994

Tax at U.S. federal income
  tax rate                       $(9,929)   $  (740)  $ 2,268
State taxes, net of federal
  income tax effect                  188        197       299
Impact of foreign tax rates
  and credits                       (238)       689    (1,108)
Net  U.S. tax on distributions
  of current foreign earnings        755        586       935
Goodwill amortization and
  write-off                        4,276        643       656
Change in valuation reserve       12,390    (21,685)      ---
Nondeductible foreign losses       7,956        ---       ---
Other                             (1,698)     6,392      (617)
Income tax expense (benefit)     $13,700   $(13,918)  $ 2,433

Net income taxes paid during 1996, 1995 and 1994 were
$4.8 million, $6.3 million and $.2 million,
respectively.

The Company has net operating loss carryforwards of
approximately $106 million expiring in years 2002
through 2011, and minimum tax credits of approximately
$2.1 million, which may be carried forward indefinitely.
Included in the net operating loss carryforwards are
foreign tax credits of approximately $7.4 million,
expiring through 2001, which, for financial and tax
reporting purposes, are reflected as deductible foreign
taxes.  These carryforwards are available to offset
future federal taxable income.

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.

In 1995, the Company reduced the valuation allowance
applied against the net operating loss carryforwards by
$17.0 million based upon reasonable and prudent tax
planning strategies and future income projections
including the planned sale of Roltra-Morse.  As a result
of withdrawing Roltra-Morse from potential sale in 1996,
the Company recorded a provision of $10.0 million
against deferred tax benefits previously recognized
based on an anticipated gain on this sale.  This reduced
the deferred tax benefit to $5.1 million at December 31,
1996, to a level where management believes that it is
more likely than not that the tax benefit will be
realized. The total amount of future taxable income in
the U.S. necessary to realize the asset is approximately
$14.0 million.  The Company expects to generate this
income principally through the implementation of
reasonable tax planning strategies and future income
projections, including an anticipated reduction of
interest expense of approximately $2.5 million in 1997 and
$5.0 million annually thereafter. This interest cost savings
is based on debt reductions from proceeds of the planned
sale of approximately $50.0 million of non-core assets.
Although the Company has a history of prior losses,
these losses were primarily attributable to divested
businesses and unusual items. The remaining valuation
allowance is necessary due to the uncertainty of future
income estimates.



Note 8  Notes Payable and Long-Term Debt

On April 29, 1996, the Company completed the refinancing
of its domestic senior debt, its 12% senior subordinated
debentures and its remaining 12.25% senior subordinated
debentures.  Under terms of the refinancing, the Company
issued $155 million of 11.75% senior subordinated notes
due 2006 (the "Notes"), priced at a discount to yield
12%.  The Company also entered into an agreement for
$175 million in senior secured credit facilities with a
group of lenders (the "New Credit Agreement"). Initial
borrowings under the New Credit Agreement were
approximately $112 million.  Proceeds of the Notes and
the New Credit Agreement were used to redeem the
remaining $70 million of the Company's 12.25% senior
subordinated debentures due 1997 and all $150 million of
its 12% senior subordinated debentures due 2001,
together with accrued interest and a prepayment premium
for the latter issue, and to refinance all obligations
under the Company's Old Credit Agreement. The costs of
issuance of the Notes and implementation of the New
Credit Agreement is being amortized over their
respective terms.

The Notes are not redeemable prior to May 1, 2001,
except that, until May 1, 1999, the Company may redeem,
at its option, up to an aggregate of $55 million of the
principal amount of the Notes at 110% of their principal
amount plus accrued interest with the net proceeds of
one or more public equity offerings provided that at
least $100 million of the principal amount of the Notes
remains outstanding after each such redemption. On or
after May 1, 2001, the Notes are redeemable at the
option of the Company, in whole or in part, at 106% of
their principal amount, plus accrued interest, declining
to 100% of their principal amount plus accrued interest
on or after May 1, 2004. Interest is payable semi-
annually on May 1 and November 1.  The fair value of
these instruments at December 31, 1996, based on market
bid prices, was $ 144.2 million.

The New Credit Agreement, which is secured by the assets
of the Company's domestic operations and all or a
portion of the stock of certain subsidiaries, provides
for a $70 million revolving credit facility through
April 30, 2001, a $25 million term loan amortizing to
April 30, 2001 ("Term Loan A"), a $35 million term loan
amortizing to April 30, 2001 ("Term Loan B"), and a $45
million term loan amortizing to April 30, 2003 ("Term
Loan C"). The interest rates on the Term Loans are based
on the Company's current market rates. Consequently, the
carrying value of the Term Loans approximates fair
value.

Pursuant to the New Credit Agreement, net cash proceeds
from the asset sales must be applied to first repay Term
Loan B and then Term Loans A and C.  During 1996,
proceeds from the sale of certain non-operating real
estate were used to repay $6.9 million of Term Loan B.

As of December 31, 1996, the Company had borrowings of
$19.3 million outstanding under the revolving credit
facility of the New Credit Agreement in addition to $5.5
million of outstanding standby letters of credit. The
Company's continuing operations currently have $38.2
million in foreign short-term credit facilities with
amounts outstanding at December 31, 1996 of $24.0
million.  Due to the short-term nature of these debt
instruments it is the Company's opinion that the
carrying amounts approximate the fair value.  The
weighted average interest rate on short-term notes
payable was 9.5% and 9.4% at December 31, 1996, and
1995, respectively.

Borrowings under the revolving credit facility of the
New Credit Agreement are due and payable in 2001,
concurrent with the expiration of the revolving credit
portion of the New Credit Agreement.  Although the terms
of the New Credit Agreement require borrowings under the
revolving credit facility of this agreement to be
classified as current in accordance with generally
accepted accounting principles, it is the Company's
intent to defer repayment of these outstanding
borrowings beyond the next year and thereby not require
the use of current assets to satisfy this borrowing.

Long-term debt of continuing operations consists of the
following:

December 31
(Dollars in thousands)                            1996          1995

Term Loan A, $1.25 million due quarterly
  July 31, 1996 to April 30, 2001 (1)         $ 22,500       $   ---
Term Loan B, $2.2 million due quarterly
  July 31, 1997 to April 30, 2001 (2) (3)       28,122           ---
Term Loan C, $.125 million due quarterly
  July 31, 1996 to April 30, 2001 and
  $5.3 million due quarterly July 31,
  2001 to April 30, 2003  (2)                   44,750           ---
Senior subordinated debentures with
  interest at 12.25%, due August 15,
  1997                                             ---        70,000
Senior subordinated debentures with
  interest at 12%, due November 1, 1999
  to 2001                                          ---       150,000
Senior subordinated notes with
  interest at 11.75%, due May 1, 2006,
  net of unamortized discount of $2.1
  million                                      152,858           ---
Other                                           18,624        13,937
                                               266,854       233,937
Less current portion                            14,994         2,376

                                              $251,860      $231,561

(1)  These loans bear interest at prime plus 1.0% or 1, 2,
     3, or 6 months LIBOR plus 2.5%.
(2)  These loans bear interest at prime plus 1.5% or 1, 2,
     3, or 6 months LIBOR plus 3.0%.
(3)  Last payment differs due to principal prepayments.
________________________________________________________


The aggregate annual maturities of long-term debt from
continuing operations, in thousands, for the four years
subsequent to 1997 are: 1998 - $15,809; 1999 - $17,172;
2000 - $15,396; and 2001 - $20,808.

Total debt of the Discontinued Operations, in thousands,
amounted to $1,491 and $1,604 as of December 31, 1996
and 1995, respectively. Of these amounts, $1,442 and
$1,555 represent the long-term portion.

The New Credit Agreement requires the Company to meet
certain objectives with respect to financial ratios.
The New 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 New Credit Agreement
requires the Company to maintain certain minimum
consolidated net worth levels, interest coverage and
fixed charge coverage levels and the Company is
prohibited from declaring or paying cash dividends
through April 30, 2003.  At December 31, 1996, the
Company was in violation of certain covenants under the
New Credit Agreement, which were subsequently amended.
The Company plans to sell approximately $50 million of
non-core assets, about one third of which is unused real
estate, and use the proceeds to reduce senior debt.

As a result of the refinancing, an extraordinary charge
of $8.5 million ($.49 per share) was recorded in the
second quarter of 1996. This charge represents the cash
costs of $5.1 million incurred in connection with the
early extinguishment of the debt as well as the write-
off of previously deferred loan costs.

In connection with the early repayment and redemption of
domestic senior debt and $80 million of 12.25% senior
subordinated debentures in 1995, the Company recorded a
$4.4 million ($.26 per share) charge as an extraordinary
item.  The charge consisted of the write-off of deferred
debt expense associated with portions of the domestic
senior debt repaid and the 12.25% senior subordinated
debentures redeemed.

Bank, advisory and legal fees associated with the 1994
refinancing of the Old Credit Agreement amounted to
approximately $5.6 million in 1994.  In addition, a $5.3
million ($.31 per share) charge related to the
extinguishment of senior debt under previous domestic
senior credit facilities was recorded as an
extraordinary charge in 1994.  The $5.3 million charge
is comprised of a $3.7 million premium paid in 1994 on
the prepayment of its $30 million 12.75% senior
promissory note and the write-off of approximately $1.6
million of previously deferred loan costs.


Note 9  Shareholders' Equity


Equity Incentive Plans

The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related Interpretations in
accounting for its employee stock options because, as
discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, "Accounting
for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in
valuing employee stock options.  Under APB 25, because
the exercise price of the Company's employee stock
options equals the market price of the underlying stock
on the date of grant, no compensation expense is
recognized other than for restricted stock awards.

Under the Company's Equity Incentive Plan for Key
Employees, up to 3,050,000 shares of the Company's $1.00
par value common stock can be issued pursuant to the
granting of stock options, stock appreciation rights,
restricted stock awards and restricted unit awards to
key employees.  Options can be granted at no less than
100 percent of the fair market value of the Company's
common stock on the date of grant or on the prospective
date fixed by the Board of Directors.  None of these
options can be exercised for at least a one-year period
from the date of grant.  After this waiting period, 25
percent of each option, on a cumulative basis, can be
exercised in each of the following four years.
Additionally, each option shall terminate no later than
10 years from the date of grant.

On August 17, 1993, the Board of Directors approved the
repricing of certain outstanding non-qualified stock
options granted on previous dates under the Plan. This
resulted in the replacement of 468,000 non-qualified
stock options at various exercise prices ranging from
$10.375 to $20.375, by 272,865 non-qualified stock
options at an exercise price of $7.375, the fair market
value at the date of the replacement grant, subject to
the market price of the Company's common stock exceeding
$10 per share for a period of 30 days.  During 1994, the
aforementioned criterion was met.  Vested dates are
based on the original grant dates of the replaced
options.

On June 20, 1994, certain additional outstanding non-
qualified stock options, granted on previous dates under
the Plan, were repriced pursuant to the August 17, 1993
Board of Directors approval.  This resulted in the
replacement of 15,000 non-qualified stock options at
various exercise prices ranging from $11.625 to $20.375,
by 9,970 non-qualified stock options at an exercise
price of $10.25, the fair market value at the date of
the replacement grant.  Vested dates are based on the
original grant dates of the replaced options.

On June 23, 1995, the Company's Equity Incentive Plan
for Key Employees was amended to increase the total
issuable shares by 850,000 to 3,050,000 and to prohibit
repricing without prior shareholder approval.

The Plan permits awards of restricted stock to key
employees subject to a restricted period and a purchase
price, if any, to be paid by the employee as determined
by the Committee administering the Equity Incentive
Plan.  Grants of 35,000 shares and 40,000 shares of
restricted stock were made in 1996 and 1994,
respectively, all of which were outstanding as of
December 31, 1996.  No such grants were made in 1995.
Vesting of such awards is subject to a defined vesting
period and to the Company's common stock achieving
certain performance levels during such period.

A summary of the Company's stock option activity under
the Equity Incentive Plan for Key Employees and related
information is as follows:

Year Ended                        Weighted-       Weighted-        Weighted-
December 31                  1996 Average    1995 Average     1994 Average
(Shares in thousands)             Exercise        Exercise         Exercise
                                  Price           Price            Price
Options:
     Granted                  254   $4.08     250   $6.00      410   $9.74
     Exercised                ---     ---     (73)  $7.32      (56)  $7.37
     Forfeited               (292)  $8.12    (210) $10.27     (159) $15.11
     Repricing
       Canceled               ---     ---     ---     ---      (15) $14.83
       Issued                 ---     ---     ---     ---       10  $10.25
Outstanding at end of year  1,426   $7.32   1,464   $8.02    1,497   $8.65
Exercisable at end of year    718   $8.15     691   $8.24      654   $8.67
Available for grant at end
 of year                      868             865               55
Weighted-average fair
 value of options granted
 during the year            $2.50           $3.53              ---

At December 31, 1996, the Company had outstanding
1,386,236 options with exercise prices ranging from
$3.375 to $9.75 and 40,060 options with exercise prices
ranging from $10.25 to $20.375.  A summary by range for
the Plan is as follows:

                                  $3.375 - $9.75       $10.25 - $20.375

     Weighted-Average Exercise
       Price                              $7.13                 $13.96
     Weighted-Average Remaining
       term                           7.6 years              4.6 years
     Exercisable Options                680,486                 37,310
     Weighted-Average Exercise
       Price of Exercisable Options       $7.82                 $14.21

During 1988, the Company adopted the Equity Incentive
Plan for Outside Directors.  This Plan provided for the
granting of non-qualified stock options of up to 360,000
shares of the Company's common stock to directors of the
Company who are not employees of the Company or any of
its affiliates.  Pursuant to this plan, options could be
granted at no less than 100 percent of the fair market
value of the Company's common stock on a date five
business days after the option is granted and no option
granted may be exercised during the first year after its
grant.  After this waiting period, 25 percent of each
option, on a cumulative basis, can be exercised in each
of the following four years.  Each option terminates no
later than 10 years from the date of grant.  In February
1988, 320,000 stock options were granted at $16.19 per
share, all of which were exercisable as of December 31,
1996.  In December 1990, 40,000 stock options were
granted at $10.375 per share, all of which were
exercisable as of December 31, 1996.  In June 1995, the
Plan was amended to reduce the number of shares issuable
to an aggregate of 360,000 and to provide that no future
options could be granted thereunder.

In June 1995, the Company adopted the 1995 Equity
Incentive Plan for Outside Directors.  This Plan
provides for the granting of restricted stock awards and
non-qualified stock options of up to 240,000 shares of
the Company's common stock to outside directors of the
Company who are not employees of the Company or any of
its affiliates.  Pursuant to this Plan, each outside
director will be granted, on an annual basis, options to
purchase 4,000 shares of the Company's common stock. The
exercise price of the options will be 100 percent of the
fair market value of the common stock at the date of
grant and no option granted may be exercised during the
first year after its grant subject to certain plan
provisions.  After this waiting period, the options
become exercisable in four equal annual installments of
1,000 shares. Additionally, each option terminates no
later than 10 years from the date of grant.  This plan
also provides for the granting of an annual restricted
stock award of 1,000 shares of the Company's common
stock. Each award is made in four quarterly installments
of 250 shares beginning July 1, 1995. The shares
comprising the restricted stock awards may not be sold
or otherwise transferred by the outside director until
termination from service.  Restricted stock awards of
5,500 and 3,000 were granted during 1996 and 1995,
respectively.

A summary of the Company's stock option activity under
the 1995 Equity Incentive Plan for Outside Directors and
related information is as follows:

Year Ended                                 Weighted-       Weighted-
December 31                          1996  Average   1995  Average
(Shares in thousands)                      Exercise        Exercise
                                           Price           Price
Options:
     Granted                           20    $7.88     24    $8.00
     Exercised                        ---      ---    ---      ---
     Forfeited                        ---      ---    ---      ---
Outstanding at end of year             44    $7.94     24    $8.00
Exercisable at end of year              6    $8.00    ---      ---
Available for grant at end
 of year                              188             213
Weighted-average fair value
 of options granted during
 the year                           $5.58           $5.61

Exercise prices for options outstanding as of December
31, 1996 for this Plan ranged from $7.875 to $8.00.  The
weighted-average remaining term of the stock options
granted under this Plan is 8.9 years.

Pro forma net income (loss) and earnings (loss) per
share determined as if the Company has accounted for its
employee stock options granted subsequent to December
31, 1994 under the fair value method of Statement 123
follows:


(Amounts in thousands except per share amounts)   1996        1995

Net income (loss) - as reported               $(58,370)    $29,710
Net income (loss) - pro forma                 $(58,643)    $29,668
Earnings (loss) per share - as reported         $(3.41)      $1.74
Earnings (loss) per share - pro forma           $(3.42)      $1.74

The fair value for these options and restricted stock
awards was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-
average assumptions for the Equity Incentive Plans:

Equity Incentive Plan             1996                       1995
  for Key Employees       -----------------------           -------
                          Stock      Restricted             Stock
                          Options    Stock Awards           Options

Expected stock price
 volatility                 0.528          0.510              0.495
Risk-free interest rate     6.16%          6.26%              5.93%
Expected life of equity
 instrument               7 years        5 years            7 years
Expected dividend yield        0%             0%                 0%


During 1995, there were no restricted stock awards under
the Equity Incentive Plan for Key Employees.


1995 Equity Incentive Plan           1996                       1995
  for Outside Directors      ----------------------     ---------------------
                             Stock     Restricted       Stock     Restricted
                             Options   Stock Awards     Options   Stock Awards

Expected stock price
 volatility                    0.522         0.523        0.512         0.497
Risk-free interest rate        6.31%         5.93%        6.31%         5.93%
Expected life of equity
 instrument                  7 years       4 years      7 years       5 years
Expected dividend yield           0%            0%           0%            0%

The expected life of the restricted stock awards under
the Plan represents the weighted-average of the
remaining years until each of the members of the Board
of Directors attains the mandatory retirement age of 72.
This assumes that each of the directors will continue
their directorships until the mandatory retirement age.

The risk-free interest rates are based on U.S. Treasury
Notes on the date of grant with maturities equal to the
respective stock option and restricted stock award
expected lives.

The Black-Scholes option valuation model was developed
for use in estimating the fair value of traded options
and restricted stock awards.  Option and restricted
stock valuation models require the input of highly
subjective assumptions including the expected stock
price volatility.  Because changes in the subjective
input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models
do not necessarily provide a reliable single measure of
the fair value of stock options and restricted stock
awards granted by the Company.

For purposes of pro forma disclosures, the estimated
fair value of the options and restricted stock awards is
amortized to expense over the options' vesting period.
Because Statement 123 is applicable only to options
granted subsequent to December 31, 1994, its pro forma
effect will not be fully reflected until 1997.

Total compensation expense related to stock-based
compensation awards under Statement 123 for 1996 and
1995 was approximately $300,000 and $48,000,
respectively.  Compensation expense recorded by the
Company under APB 25 in 1996 and 1995 for awards granted
during those years was approximately $27,000 and $6,000,
respectively.

Preferred Stock Purchase Rights
On April 22, 1987, the Board of Directors declared a
distribution of one Preferred Stock Purchase Right for
each share of common stock outstanding.  Each right will
entitle the holder to buy from the Company a unit
consisting of 1/100 of a share of Junior Participating
Preferred Stock, Series A, at an exercise price of $70
per unit.  The rights become exercisable ten days after
public announcement that a person or group has acquired
20 percent or more of the Company's common stock or has
commenced a tender offer for 30 percent or more of
common stock.  The rights may be redeemed prior to
becoming exercisable by action of the Board of Directors
at a redemption price of $0.025 per right.  If more than
35 percent of the Company's common stock becomes held by
a beneficial owner, other than pursuant to an offer
deemed in the best interest of the shareholders by the
Company's independent directors, each right may be
exercised for common stock, or other property, of the
Company having a value of twice the exercise price of
each right.  If the Company is acquired by any person
after the rights become exercisable, each right will
entitle its holder to receive common stock of the
acquiring company having a market value of twice the
exercise price of each right.  The rights expire on May
4, 1997.  The Company is evaluating extending the rights
beyond the current expiration date.

Employees Stock Savings Plan
Up to 1,600,000 shares of the Company's common stock are
reserved for issuance under the Company's Employees
Stock Savings Plan.  (See Note 11)

Common Stock Warrants
In July 1993, the Company issued warrants to purchase
200,000 shares of its common stock at $9.02 per share
(subject to adjustment in certain events), to one of its
senior lenders in connection with the restructuring of
its senior credit facilities.  The warrants are
exercisable on or before December 31, 1998.


Note 10  Operations by Industry Segment and Geographic Area

The Company classifies its continuing operations into
five core business segments: Power Transmission, Pumps,
Instrumentation, Morse Controls and Roltra-Morse.
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. A sixth
business segment entitled Other is included in
continuing operations for financial reporting purposes,
and includes operations previously sold as part of the
Company's asset divestiture program, such as units of
the Company's aerospace business and certain other non-
strategic businesses, which no longer fit into its core
business segments as redefined in 1993 and 1995. The
1995 and 1994 amounts have been restated to reflect
Roltra-Morse as a continuing operation.  Information
about the business of the Company by business segment,
foreign operations and geographic area is presented
below:


Year Ended December 31
(Dollars in thousands)         1996         1995         1994

Net Sales
     Power Transmission   $  89,456    $  95,075    $  93,308
     Pumps                  107,567       94,375       90,428
     Instrumentation         78,911       76,113       72,226
     Morse Controls         112,488      107,664      100,075
     Roltra-Morse            80,223       99,140      103,106
     Other                      ---          ---        4,748

Total net sales           $ 468,645    $ 472,367    $ 463,891
Segment operating
 income (loss)
     Power Transmission   $   8,965    $  11,348    $   8,905
     Pumps                   11,538        9,884       10,447
     Instrumentation          7,373        6,746        9,791
     Morse Controls           8,581        5,292        5,743
     Roltra-Morse            (8,492)       6,002        9,188
     Other                      ---          ---         (216)
Total segment operating
 income                      27,965       39,272       43,858
Equity in income (loss)
 of unconsolidated
 companies                     (552)         302          ---
Unallocated corporate
 expenses                   (23,988)     (12,454)      (5,120)
Net interest expense        (31,793)     (29,234)     (32,257)
Income (loss) from
 continuing operations
 before income taxes,
 minority interest and
 extraordinary item       $ (28,368)   $  (2,114)   $   6,481


A reconciliation of segment operating income to income
from operations follows:

Year Ended December 31
(Dollars in thousands)          1996         1995        1994

Segment operating
 income                     $ 27,965     $ 39,272    $ 43,858
Unallocated corporate
 expenses                    (23,988)     (12,454)     (5,120)
Other income                    (444)        (739)       (876)
Income from operations      $  3,533     $ 26,079    $ 37,862

Segment operating income for the year ended December 31,
1996, includes $7.4 million of unusual charges, of which
$.9 million, $.3 million, and $6.2 million relate to the
Instrumentation, Morse Controls and Roltra-Morse
segments, respectively.  Unallocated corporate expenses
include unusual charges of $17.1 million for the year
ended December 31, 1996.

Segment operating income for the year ended December 31,
1995, includes $3.6 million of unusual charges, of which
$.9 million, $1.5 million, and $1.2 million relate to
the Instrumentation, Morse Controls and Roltra-Morse
segments, respectively. Unallocated corporate expenses
include unusual charges of $6.6 million for the year
ended December 31, 1995.

The Roltra-Morse segment had sales to one commercial
customer (Fiat S.p.A. and its subsidiaries) that
accounted for 16%, 19% and 21% of consolidated sales in
1996, 1995, and 1994, respectively.  No other customer
accounted for 10% or more of consolidated sales in 1996,
1995 or 1994.

Year Ended December 31
(Dollars in thousands)           1996         1995         1994

Identifiable assets
     Power Transmission     $  70,533    $  86,343    $  88,284
     Pumps                     73,806       69,347       63,172
     Instrumentation           40,222       42,538       44,862
     Morse Controls           110,141      111,482      107,471
     Roltra-Morse              74,317       72,569       66,203
     Other                     10,800       13,321       18,054
     Corporate                 16,966       26,446       26,298
     Discontinued Operations:
        Electro-Optical        14,356       11,893       85,000
        Turbomachinery            473          983       59,970
Total identifiable assets   $ 411,614    $ 434,922    $ 559,314

Depreciation and
 amortization
     Power Transmission     $   4,438    $   4,618    $   4,778
     Pumps                      4,114        3,972        3,578
     Instrumentation            1,593        1,840        1,464
     Morse Controls             3,335        3,392        4,155
     Roltra-Morse               4,843        3,880        3,390
     Other                        ---          ---          655
     Corporate                  1,511        1,400        3,973
Total depreciation and
 amortization               $  19,834    $  19,102    $  21,993

Capital expenditures
     Power Transmission     $   2,699    $   3,384    $   1,245
     Pumps                      4,568        7,367        2,164
     Instrumentation            1,101        1,445        1,177
     Morse Controls             2,554        2,131        1,080
     Roltra-Morse               6,869        6,271        2,999
     Other                        ---          ---           39
     Corporate                    211          273          502
Total capital expenditures  $  18,002    $  20,871    $   9,206

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

Year Ended December 31
(Dollars in thousands)           1996         1995         1994


Net sales
     United States           $254,720     $244,341     $246,601
     Foreign
      (principally Europe)    213,925      228,026      217,290
Total net sales              $468,645     $472,367     $463,891

Segment operating income
     United States           $ 30,762     $ 29,642     $ 31,679
     Foreign                   (2,797)       9,630       12,179
Total segment operating
 income                      $ 27,965     $ 39,272     $ 43,858

Identifiable assets
  Continuing Operations:
     United States           $209,551     $234,382     $238,916
     Foreign                  187,234      187,664      175,428
  Discontinued Operations:
     United States             14,829       12,876      141,053
     Foreign                      ---          ---        3,917
Total identifiable assets    $411,614     $434,922     $559,314

Export sales
     Asia                    $  6,472     $  4,060     $  2,763
     Canada                     3,239        4,643        3,748
     Europe                     3,422        2,704        2,857
     Latin America                978          483          861
     Middle East &
      North Africa              1,948          236          459
     South America              6,822        2,736        2,368
     Other                      3,536        2,332        2,834
Total export sales           $ 26,417     $ 17,194     $ 15,890



Note 11  Pension Plans


The Company and its subsidiaries have various pension
plans covering substantially all of their employees.
Benefits are based on either years of service or years
of service and average compensation during the years
immediately preceding retirement. It is the general
policy of the Company to fund its pension plans in
conformity with requirements of applicable laws and
regulations.  Effective December 31, 1996 all domestic,
pay-related plans were merged into the Imo Industries
Inc. Retirement Plan for U.S. Salaried Employees.
Pension benefits were not affected by the merger.

Pension expense was $4.3 million in 1996, $4.2 million
in 1995 and $7.9 million in 1994, and includes
amortization of prior service cost and transition
amounts for periods of 5 to 15 years. The 1996 and 1995
expense includes costs related to retained pension
liabilities of discontinued operations.  In 1994 these
amounts were charged to discontinued operations.  The
Company included $2.0 million of curtailment and
settlement losses in its gain on disposal related to the
discontinued operations in 1995. Net pension expense
(including $5.7 million charged to discontinued
operations in 1994) is comprised of the following:

Year Ended December 31
(Dollars in thousands)            1996       1995       1994

Service cost                   $ 4,282    $ 4,297    $ 7,237
Interest cost on projected
  benefit obligation            14,471     13,429     14,158
Actual return on plan assets   (20,868)   (17,797)      (449)
Net amortization and
  deferral                       6,374      4,274    (12,963)
Net pension expense            $ 4,259    $ 4,203    $ 7,983

Assumptions used to determine the net pension expense of
the Company-sponsored defined benefit plans are as follows:

Year Ended December 31            1996       1995       1994

Weighted average discount rate    7.5%       8.5%       7.5%
Rate of increase in
  compensation levels             5.3%       5.3%       5.3%
Expected long-term rate of
  return on assets                9.0%       9.0%       9.0%


The following table sets forth the funded status and
amounts recognized in the consolidated balance sheet for
the defined benefit pension plans using discount rates
of 7.75% and 7.5% at December 31, 1996 and 1995,
respectively. The assumed rate of increase in compensation
levels was 5.3% in both years.

Year Ended December 31
(Dollars in thousands)                      1996
                                    Assets       Accumulated
                                    Exceed         Benefits
                                 Accumulated        Exceed
                                   Benefits         Assets
Actuarial present value of
benefit obligations:
     Vested benefit obligation     $163,375      $ 29,395
     Accumulated benefit
       obligation                  $166,927      $ 29,783
Projected benefit obligation       $182,288      $ 30,723
Plan assets at fair value           180,889        16,800
Plan assets in excess of (less
  than) projected benefit
  obligation                         (1,399)      (13,923)
Unrecognized net (gain) or loss      (2,908)        2,734
Prior service cost not yet
  recognized in net periodic
  pension cost                        2,884         1,097
Unrecognized net (asset)
  obligation at transition            1,836             4
Adjustment required to recognize
  minimum liability                     ---        (3,797)
Pension asset (liability)
  recognized in the balance sheet  $    413      $(13,885)


Year Ended December 31
(Dollars in thousands)                     1995
                                    Assets      Accumulated
                                    Exceed        Benefits
                                 Accumulated       Exceed
                                   Benefits        Assets
Actuarial present value of
benefit obligations:
     Vested benefit obligation     $117,455      $ 46,445
     Accumulated benefit
       obligation                  $124,808      $ 46,564
Projected benefit obligation       $138,866      $ 47,454
Plan assets at fair value           148,275        35,226
Plan assets in excess of (less
  than) projected benefit
  obligation                          9,409       (12,228)
Unrecognized net (gain) or loss      (9,566)          107
Prior service cost not yet
  recognized in net periodic
  pension cost                        2,812           956
Unrecognized net (asset)
  obligation at transition            2,037           171
Adjustment required to recognize
  minimum liability                     ---        (3,132)
Pension asset (liability)
recognized in the balance sheet    $  4,692      $(14,126)


Effective with the December 31, 1996 measurement date,
the discount rate, expected long-term rate of return on
assets and mortality assumptions were revised to reflect
current market and demographic conditions.  As a result
of these changes, the December 31, 1996 projected
benefit obligation increased by approximately $11.0
million. These changes had no effect on the 1996 pension
expense and are not expected to have a material effect
on future year's expense.

Plan assets at December 31, 1996 are invested in fixed
dollar guaranteed investment contracts, U.S. Government
obligations, fixed income investments, guaranteed
annuity contracts and equity securities whose values are
subject to fluctuations of the securities market.

The Company maintains two defined contribution
(Employees Stock Savings) plans covering substantially
all domestic, non-union employees.  Eligible employees
may generally contribute from 1% to 12% of their
compensation on a pre-tax basis.  Company contributions
to the plans are based on a percentage of employee
contributions.  In July 1995, the Company restored its
matching contribution, previously suspended in July
1992, at 25% of the first 6% of each participant's pre-
tax contribution.  The Company's expense for 1996 and
1995 was $.7 million and $.3 million, respectively.


Note 12  Postretirement Benefits

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.

In March 1994, the Company amended its policy regarding
non-union retiree medical and life insurance. This
amendment, which affected all current and future non-
union retirees, phased out the Company subsidy for
retiree medical and life insurance over the three-year
period ended December 31, 1996. The pre-tax amount
amortized to income from continuing operations was $4.3
million, $4.6 million and $4.4 million in 1996, 1995 and
1994, respectively. The amendment did not result in a
significant increase or decrease in cash requirements
during the phase-out period.

The following tables set forth the plans' combined
status reconciled with the amounts included in the
consolidated balance sheet:

December 31
(Dollars in thousands)                        1996
                                              Life
                                 Medical    Insurance
                                  Plans       Plans      Total
Accumulated postretirement
benefit obligation:
     Retirees                    $ 7,551    $ 1,965    $ 9,516
     Fully eligible active plan
       participants                  206         46        252
     Other active plan
       participants                  395         47        442
                                   8,152      2,058     10,210
Plan assets                          ---        ---        ---
Unrecognized prior service cost      ---      1,605      1,605
Unrecognized net gain              6,502        801      7,303
Postretirement benefit
  liability recognized in the
  balance sheet                  $14,654    $ 4,464    $19,118


December 31
(Dollars in thousands)                        1995
                                              Life
                                 Medical    Insurance
                                  Plans       Plans      Total
Accumulated postretirement
benefit obligation:
     Retirees                    $11,780    $ 4,974    $16,754
     Fully eligible active plan
       participants                1,277        312      1,589
     Other active plan
       participants                1,011         81      1,092
                                  14,068      5,367     19,435
Plan assets                          ---        ---        ---
Unrecognized prior service cost    3,109      3,924      7,033
Unrecognized net gain (loss)       2,379     (2,290)        89
Postretirement benefit
  liability recognized in the
  balance sheet                  $19,556    $ 7,001    $26,557

The 1996 accrued postretirement benefits amount is
classified as follows: $1.7 million current liabilities
and $17.4 million long-term liabilities.  For 1995,
these amounts are $2.2 million current liabilities and
$24.4 million long-term liabilities.

Effective January 1, 1997, the Company subsidy for
medical coverage under the Warren Pump Union plan was
terminated.  This termination resulted in a curtailment
gain of $.6 million for the year ended December 31,
1996.

Net periodic postretirement benefit cost (including $2.3
million to discontinued operations in 1994) included the
following components:


Year Ended December 31
(Dollars in thousands)                     1996
                                           Life
                              Medical    Insurance
                              Plans        Plans       Total

Service cost                  $    24     $     2    $    26
Interest cost                     650         157        807
Amortization of prior
  service cost                 (3,110)     (2,318)    (5,428)
Amortization of gain             (449)        (44)      (493)
Net periodic postretirement
  benefit cost                $(2,885)    $(2,203)   $(5,088)


Year Ended December 31
(Dollars in thousands)                     1995
                                           Life
                              Medical    Insurance
                              Plans        Plans       Total

Service cost                  $    59     $     5    $    64
Interest cost                   1,057         415      1,472
Amortization of prior
  service cost                 (3,110)     (2,319)    (5,429)
Amortization of (gain) loss      (166)        102        (64)
Net periodic postretirement
  benefit cost                $(2,160)    $(1,797)   $(3,957)


Year Ended December 31
(Dollars in thousands)                     1994
                                           Life
                              Medical    Insurance
                              Plans        Plans       Total

Service cost                  $   100     $     7    $   107
Interest cost                   1,547         289      1,836
Amortization of prior
  service cost                 (5,955)     (1,967)    (7,922)
Amortization of loss              543         103        646
Net periodic postretirement
  benefit cost                $(3,765)    $(1,568)   $(5,333)

Actual negotiated health care premiums were used in
calculating 1996, 1995 and 1994 health care costs.  It
is expected that the annual increase in medical costs
will be 7.0% from 1996 to 1997, grading down in future
years by 1.0% per year until it reaches a future general
medical inflation level of 5%. The health care cost
trend rate assumption has a significant effect on the
amounts reported.  For example, a 1% increase in the
health care trend rate would increase the accumulated
postretirement benefit obligation at December 31, 1996
by $.8 million and the net periodic cost by $.1 million
for the year.  Effective January 1, 1995, the Company
changed its medical inflation rate to reflect actual
experience.  Such change resulted in a reduction of the
1995 net periodic cost of $.8 million.  The weighted
average discount rate used in determining the
accumulated postretirement benefit obligation was 7.75%
and 7.5% in 1996 and 1995, respectively.



Note 13  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, 1996, are:

 (Dollars in thousands)
1997                            $5,994
1998                             4,961
1999                             3,556
2000                             1,781
2001                             1,370
Thereafter                       6,193

Total minimum lease payments   $23,855

Total rental expense under operating leases charged
against continuing operations was $8.0 million in 1996,
$7.5 million in 1995 and $8.9 million in 1994.


Note 14  Contingencies


LILCO Litigation.  In August 1985, the Company was named
as defendant in a lawsuit filed in the U.S. District
Court, Southern District of New York, by Long Island
Lighting Company ("LILCO") following the severing of a
crankshaft in a diesel generator sold to LILCO by the
Company.  LILCO's complaint contained 11 counts,
including counts for breach of warranty, negligence and
fraud, and sought $250 million in damages.  In various
decisions from 1986 through 1990, 10 of the original 11
counts and various additional amended counts were
dismissed, with only the original breach of warranty
count remaining.  In September 1993, the Second Circuit
Court of Appeals affirmed a previous trial court
decision entering a judgment against the Company in the
amount of $18.3 million, and in October 1993, the
judgment was satisfied by payment to LILCO of
approximately $19.3 million (which amount included
approximately $1.0 million of post-judgment interest) by
International Insurance Company ("International") and
Granite State Insurance Co. ("Granite State").

In January 1993, the Company was served with a complaint
in a case brought in the U.S. District Court for the
Northern District of California by International
alleging that, among other things, because International
policies did not cover the matters in question in the
LILCO case, it was entitled to recover $10 million in
defense costs previously paid in connection with such
case and $1.2 million of the judgment which was paid on
behalf of the Company.  In June 1995, the Court entered
a judgment in favor of International awarding it $11.2
million, plus interest from March 1995 (the
"International Judgment").  The International Judgment,
however, was not supported by an order, and in July
1995, the court vacated the International Judgment as
being premature because certain outstanding issues of
recoverability of the $10 million in defense costs had
not been finally determined.  The Company is awaiting a
final decision.  If the International Judgment is
reinstated, the Company intends to appeal.  If the
ultimate outcome of this matter is unfavorable, the
Company will record a charge for the judgment amount
plus accrued interest.

Additional Litigation and Claims.  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 6,100 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 their insurers who are defending under their
stated reservation of rights.  In addition, the Company
and the subsidiary are named in cases involving
approximately 20,000 claimants which in 1996 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. Should settlements for
these claims be reached at levels comparable to those
reached by the Company in the past, they would not be
expected to have a material effect on the Company.

There are lawsuits pending against the Company in the
U.S. District Court for the Western District of
Pennsylvania alleging component failures in equipment
sold by its former diesel engine division and claiming
damages of approximately $3.0 million, and in the
Circuit Court of Cook County, Illinois, alleging
performance shortfalls in products delivered by the
Company's former Delaval Turbine Division and claiming
damages of approximately $8.0 million.  Each lawsuit is
in the discovery stage and the Cook County suit is
scheduled for trial in late 1997.

The major portion of the Company's former Electro-
Optical Systems business was sold to Litton Industries
in a transaction, which closed on June 2, 1995.  The
sales contract between the Company and Litton Industries
provided certain representations and warranties as to
the status of the business at the time of the sale.  By
letters dated November 19, 1996 and November 26, 1996,
Litton has notified the Company of claims under the
representations and warranty provisions for:  (1)
environmental losses of unspecified amounts, and (2)
anticipated losses in excess of $9 million under a U.S.
Government contract as a result of the Company's alleged
failure to notify Litton of a reasonably anticipated
loss under a bid that was pending at the time of
transfer of the business.  The contract was subsequently
awarded to the Company's Varo subsidiary and thereafter
transferred to Litton.  The Company has preliminarily
analyzed the supporting documentation provided by Litton
and has notified Litton that it disputes the nature,
validity, and amount of the claims of losses and objects
to the timeliness of submission of notice to the Company
with respect to the claims.  The Company believes the
claims are without merit and intends to vigorously
defend against the claims.

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, 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 CERCLA or similar State law.  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.

With respect to the litigation and claims described in
the preceding paragraphs, management of the Company
believes that it either expects to 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.

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
is expected to have a material adverse effect on the
financial condition of the Company.  A range of possible
outcomes for all of these legal proceedings currently
cannot be estimated.  However, 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.


                            F-31


REPORT OF INDEPENDENT AUDITORS


Board of Directors,
Imo Industries Inc.

We have audited the accompanying consolidated balance sheets of
Imo Industries Inc. and subsidiaries as of  December 31, 1996 and
1995, and the related consolidated statements of income, cash flows
and shareholders' equity (deficit) for each of the three years
in the period ended December 31, 1996.  Our audits also included
the financial statement schedule listed in the Index at Item
14(a).  These financial statements and schedule are the
responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule
based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Imo Industries Inc. and subsidiaries
at December 31, 1996 and 1995, and the consolidated results
of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial
statements as a whole, presents fairly in all material
respects the information set forth therein.



                                    ERNST & YOUNG LLP

Princeton, New Jersey
February 19, 1997




                                         F-32

Imo Industries Inc. and Subsidiaries
Quarterly Financial Information (Unaudited)
Quarterly financial information for 1996 and 1995 is as follows:

                                        1st       2nd       3rd       4th
1996 (Dollars in thousands except     Quarter   Quarter   Quarter   Quarter
per share amounts) (a)                  (b)       (b)

Net Sales                            $121,415  $119,988  $113,095  $114,147
Gross profit                           35,558    34,582    30,893    31,595
Income (loss) before
 extraordinary item:
     Continuing Operations              1,940       856   (12,417)  (32,152)
     Discontinued Operations              ---       ---    (7,349)     (793)
Extraordinary Item                        ---    (8,455)      ---       ---
Net income (loss)                       1,940    (7,599)  (19,766)  (32,945)
Earnings (loss) per share:
     Before extraordinary item:
          Continuing Operations           .11       .05      (.73)    (1.87)
          Discontinued Operations         ---       ---      (.43)     (.05)
     Extraordinary Item                   ---      (.49)      ---       ---
     Net income (loss)                    .11      (.44)    (1.16)    (1.92)


                                        1st*      2nd*      3rd*      4th*
1995 (Dollars in thousands except     Quarter   Quarter   Quarter   Quarter
per share amounts) (a)

Net Sales                            $124,372  $127,231  $109,428  $111,336
Gross profit                           36,212    35,758    31,009    28,919
Income (loss) before
 extraordinary item:
     Continuing Operations              3,550     3,410     2,327     3,242
     Discontinued Operations           39,613       ---    (6,750)  (11,238)
Extraordinary Item                     (4,140)      ---      (304)      ---
Net income (loss)                      39,023     3,410    (4,727)   (7,996)
Earnings (loss) per share:
     Before extraordinary item:
          Continuing Operations           .21       .20       .14       .19
          Discontinued Operations        2.32       ---      (.40)     (.66)
     Extraordinary Item                  (.24)      ---      (.02)      ---
     Net income (loss)                   2.29       .20      (.28)     (.47)

*     Restated to conform to 1996 full year presentation.

(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.

(b)  Amounts previously reported have been restated to reflect Roltra-Morse
     in continuing operations and the inclusion of Corporate interest
     previously allocated to discontinued operations in continuing
     operations.  The effect of the restatement on 1st Quarter results was
     an increase to sales of $22.0 million, a decrease to income (loss) from
     continuing operations before extraordinary item and net income of
     $.8 million ($.5 million related to previously allocated Corporate
     interest) and a decrease to earnings (loss) per share continuing
     operations and net income of $.05 cents. The effect of the restatement
     on 2nd Quarter results was an increase to sales of $22.3 million, a
     decrease to income (loss) from continuing operations before
     extraordinary item and net income of $1.2 million ($.6 million related
     to previously allocated Corporate interest) and a decrease to earnings
     (loss) per share continuing operations and net income of $.07 cents.

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

THREE-YEAR PERIOD ENDED DECEMBER 31, 1996
<CAPTION>
                                                ADDITIONS
                              BALANCE AT   CHARGED TO                              BALANCE
                              BEGINNING    COSTS AND    OTHER -      DEDUCTIONS -  AT END
                              OF YEAR      EXPENSES     DESCRIBE     DESCRIBE      OF YEAR
<S>                          <C>          <C>          <C>          <C>           <C>
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful
   accounts                  $  2,197     $     333    $    ---     $     57 (1)  $  1,877
                                                                         596 (3)
Inventory Valuation
   Allowance                 $ 11,701     $   1,453    $     99 (1) $  2,293 (5)  $ 11,205
                                                            245 (2)
Valuation allowance for
   deferred tax assets       $ 31,675     $  12,390    $    ---     $    ---      $ 44,065
Accrued product warranty
   liability                 $  3,464     $   2,409    $    ---     $     24 (1)  $  2,596
                                                                         288 (2)
                                                                       2,965 (4)

YEAR ENDED DECEMBER 31, 1995: *
Allowance for doubtful
   accounts                  $  2,659     $     394    $     91 (1) $    959 (3)  $  2,197
                                                             12 (6)
Inventory Valuation
   Allowance                 $ 12,133     $   2,454    $    313 (1) $    190 (2)  $ 11,701
                                                             30 (6)    3,039 (5)
Valuation allowance for
   deferred tax assets       $ 68,910     $     ---    $    ---     $ 15,550 (2)  $ 31,675
                                                                      17,000 (7)
                                                                       4,685 (8)
Accrued product warranty
   liability                 $  5,037     $   1,563    $     45 (1) $  2,253 (2)  $  3,464
                                                            404 (2)    1,341 (4)
                                                              9 (6)

YEAR ENDED DECEMBER 31, 1994: *
Allowance for doubtful
   accounts                  $  2,951     $     745    $     13 (1) $    179 (2)  $ 2,659
                                                                         871 (3)
Inventory Valuation
   Allowance                 $ 11,821     $   5,452    $    ---     $    764 (2)  $ 12,133
                                                                       4,376 (5)
Valuation allowance for
   deferred tax assets       $ 60,215     $     ---    $  8,695 (2) $    ---      $ 68,910
Accrued product warranty
   liability                 $  4,050     $   1,915    $     17 (1) $    945 (4)  $  5,037


*    Restated to conform to the 1996 presentation (continuing operations).

(1) Foreign exchange adjustments.
(2) Reclassification 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) Opening balance of companies acquired during the year.
(7) Adjustment due to revaluation of realizable tax benefit.
(8) Utilization of net operating loss carryforwards by discontinued
    operations.


                                   S-1
</TABLE>