ITT Corporation

ITT Industries Reports Net Income Up 14.1 Percent in 1997


                - Diluted EPS is $0.60 for 4th Quarter, $2.10 for Year
                   - A Year of Change Reflected in Improved Results
        WHITE PLAINS, N.Y., Jan. 27 /PRNewswire/ -- ITT Industries, Inc.
    (NYSE: IIN) today announced that full year 1997 net income rose 14.1 percent
    to $253.9 million, excluding special charges taken in the third quarter.
    Diluted EPS of $2.10 per share was $0.25 per share ahead of the $1.85 per
    share reported in 1996.  Full year operating income from ongoing segments,
    excluding the special charges, reached $594.9 million, up $34.4 million or
    6.1 percent for the year.  Full year 1997 sales from ongoing segments were
    $8.59 billion, up from $8.37 billion reported in 1996.
        In the fourth quarter, net income was $72.3 million, or $0.60 per share.
    Fourth quarter operating income from ongoing segments was $167.1 million, up
    6.4 percent from the period last year, representing an overall operating
    margin improvement.  Sales from ongoing segments in the fourth quarter were
    $2.26 billion, or 4.5 percent higher than the fourth quarter 1996.
        "During 1997, we met our commitment to double digit earnings growth
    despite unfavorable foreign exchange rate movements and challenging conditions
    in a number of the markets we serve," said Travis Engen, Chairman, President
    and Chief Executive of ITT Industries.  "The year was marked by a number of
    strategic actions as we continue to direct our capital to maximize shareholder
    value.  We have refocused our company through the purchase of Goulds Pumps and
    Kaman Sciences, and through the divestiture of a number of non-strategic
    assets.  Together with the operational restructuring announced in the third
    quarter, these actions position the company to deliver another solid year
    in 1998."
        During 1997, the company achieved some significant milestones, including
    the following:
        -- ITT Industries purchased Goulds Pumps for its Fluid Technology business
           area in May, adding more than $750 million in annual sales and making
           ITT Industries the world's largest pump manufacturer.  Assimilation of
           Goulds' operations began immediately, and sales improvements, product
           rationalization and cost-savings initiatives are now well underway.
           Goulds' operations had a positive impact on ITT Industries' earnings
           per share in 1997.
        -- ITT Industries purchased Kaman Sciences, the high technology services
           arm of Kaman Corporation, for its Defense & Electronics business area
           in December.  The purchase added approximately $150 million in annual
           sales in a high growth market.  It increases the scope of services that
           ITT Industries can provide for the U.S. military as the military
           accelerates its outsourcing of services.
        -- Full year free cash flow from operations was $319.9 million, nearly
           double that of 1996.  This was driven by improved cash flow from
           working capital.
        -- Through its Defense & Electronics unit, ITT Industries established a
           40 percent share in a joint venture that will supply a state-of-the-art
           tactical communications system to the British military.  The program's
           initial value is $3.2 billion, and provides opportunity for additional
           international sales of more than $1 billion.
        -- ITT Automotive secured contracts to supply a new electronic stability
           program (ESP) to a number of auto manufacturers, including
           Mercedes-Benz for its M-Class sport utility vehicle, the M L 430.  ESP
           will offer drivers enhanced vehicle stability during acceleration,
           cornering and braking.
        -- In the third quarter, ITT Industries announced a series of actions to
           further improve financial performance.  The actions included a
           restructuring of the Automotive unit, integrating Goulds' operations,
           and writing down assets related to planned divestitures.  As a result,
           the company took an after-tax charge of $145.8 million.
        Primary Business Results
        Automotive recorded 1997 operating income of $311.0 million before special
    charges taken in the third quarter, compared to $337.1 million in 1996.  Sales
    for 1997 were $5.17 billion, compared to $5.49 billion last year.  Foreign
    currency translation and the divestiture of several non-core businesses had a
    significant impact on 1997 results.  These items accounted for most of the
    decline in operating income.  Adjusting for these factors, 1997 sales were up
    3.3 percent over 1996, despite continuing industry price pressure.  Automotive
    saw promising volume gains across the business.  During the year, the company
    launched a campaign to increase awareness and sales of its four-wheel
    anti-lock brakes in North America.
        Defense & Electronics
        Defense & Electronics increased its operating income by 15.5 percent in
    1997 to $127.2 million, representing an increase in operating margin.  Sales
    were up 6.1 percent for the year to $1.67 billion, reflecting increased orders
    in both the defense and interconnect segments of the business.  The defense
    business increased its international sales by 13.6 percent over 1996, marking
    the sixth straight year of double digit growth in that segment.
        In the interconnect area, ITT Cannon saw continued strong growth in sales
    and margins within its information systems and military/aerospace markets.
    Adjusting for negative foreign currency translation, ITT Cannon increased
    sales by 11.4 percent for the year.  Operating income increased by
    18.7 percent, and ITT Cannon continues its track record of double-digit
    operating income growth year over year since 1992.
        Fluid Technology
        Fluid Technology reported 1997 operating income of $156.7 million
    excluding special charges reported in the third quarter, up 38.4 percent from
    1996.  Annual sales increased 34.9 percent to $1.76 billion.  These results
    reflect the acquisition of Goulds Pumps in May and strong performance in the
    ITT Flygt submersible pump business.  Fluid Technology sees significant
    opportunities to continue expanding its business through increased integration
    with Goulds units.  Among a number of "combination orders" received by former
    Goulds and Fluid Technology units during the fourth quarter were:  AC Pump and
    Goulds Pumps for a refinery in the Middle East;  ITT Flygt and Vogel Pumps for
    a wastewater treatment plant in China, and in the submersible drainage pump
    business, an order for the huge Oresundsbron -- the bridge and tunnel project
    between Sweden and Denmark.
         ITT Industries Fourth Quarter and Full Year Financial Results, 1997
                              (in millions, except EPS)
                                   Fourth Quarter               Full Year
                                  1997          1996      1997(A)          1996
        Total Sales           $2,299.2      $2,231.2     $8,777.1      $8,718.1
        Operating Income        $150.0        $141.8       $525.6        $508.4
        Net Income               $72.3         $71.2       $253.9        $222.6
        Shares, Diluted          121.5         120.5        121.0         120.4
        Diluted EPS (B)          $0.60         $0.59        $2.10         $1.85
        (A) Adjusted to exclude one-time charges of $145.8 after-tax or $1.21 per
        (B) Diluted EPS for 1997 and 1996 is consistent with SFAS No. 128
        ITT Industries ( ) is a leading worldwide
    diversified manufacturing company, with 1997 sales of $8.8 billion in its
    three primary business segments: Automotive, Defense & Electronics, and Fluid
    Technology.  ITT Automotive is one of the largest independent suppliers of
    systems and components to automotive manufacturers. ITT Defense & Electronics
    is a leader in the design, manufacture and support of high technology
    electronic systems and components for defense and commercial markets.  ITT
    Fluid Technology is the world's leading manufacturer of pumps, systems and
    services for the movement, measurement and control of fluids.
        In addition to the New York Stock Exchange, ITT Industries' stock is
    traded under the symbol ("IIN") on the Midwest, Pacific, London, Frankfurt and
    Paris exchanges.
                            CONSOLIDATED INCOME STATEMENTS
                           (In millions, except per share)
                                Three Months Ended                  Years Ended
                                       December 31,                 December 31,
                                  1997          1996         1997          1996
                            (Unaudited)  (Unaudited)
        Net sales             $2,299.1     $ 2,231.2     $8,777.1     $ 8,718.1
        Cost of sales          1,908.1       1,912.7      7,413.3       7,483.6
        Gross margin             391.0         318.5      1,363.8       1,234.5
        Selling, general,
         and administrative
         expenses                224.2         194.9        805.3         739.4
        Other operating
         (income) expenses        16.8        (18.2)         32.9         (13.3)
        Operating income(A)      150.0         141.8        525.6         508.4
        Interest expense         (31.8)       (45.6)       (133.2)       (169.0)
        Interest income            5.4          17.1         17.5          32.7
        Miscellaneous income
         (expense), net            4.2           3.6         15.5          (1.1)
        Income before income
         taxes, special charges
         and cumulative effect
         of accounting change (A)127.8         116.9        425.4         371.0
        Income tax expense       (49.9)       (45.7)       (165.9)       (148.4)
        Income before special
         charges and cumulative
         effect of
         accounting change (A)    77.9          71.2        259.5         222.6
        Special charges,
         net of tax                 --            --       (145.8)           --
        Cumulative effect of
         accounting change,
         net of tax benefit
         of $3.6                  (5.6)           --         (5.6)           --
        Net income (reported)    $72.3         $71.2       $108.1        $222.6
        Earnings Per Share:
        Net income
        Diluted (A)               $.60          $.59        $2.10         $1.85
        Diluted (reported)        $.60          $.59         $.89         $1.85
        Basic (reported)          $.61          $.60         $.91         $1.89
        Average Common Equivalent
         Shares - Diluted        121.4         120.5        121.0         120.4
        Average Common Equivalent
         Shares - Basic          118.4         118.3        118.4         117.9
        (A) Excludes special charges of $239.0 pre-tax and $145.8 after-tax
                    (In millions, except for shares and per share)
                                                  December 31,December 31,
                                                          1997        1996
        Current Assets:
        Cash and cash equivalents                       $192.2      $121.9
        Receivables, net                               1,252.4     1,189.8
        Inventories, net                                 812.8       856.9
        Other current assets                             120.0       120.5
          Total current assets                         2,377.4     2,289.1
        Plant, property, and equipment, net            2,024.3     2,166.7
        Deferred U.S. income taxes                       258.8       205.1
        Goodwill, net                                  1,116.5       349.8
        Other assets                                     443.5       480.5
                                                      $6,220.5    $5,491.2
        Liabilities and Shareholders' Equity
        Current Liabilities:
        Accounts payable                                $848.3      $731.8
        Accrued expenses                                 884.3       874.2
        Accrued taxes                                    161.5        96.8
        Notes payable and current maturities
         of long-term debt                             1,656.7       835.6
        Total current liabilities                      3,550.8     2,538.4
        Pension and postretirement costs                 870.6     1,126.7
        Long-term debt                                   526.3       583.2
        Deferred foreign, state and local income taxes    31.6       109.5
        Other liabilities                                418.9       334.2
                                                       5,398.2     4,692.0
        Shareholders' Equity:
        Cumulative Preferred Stock:
          Authorized 50,000,000 shares,
          no par value, none issued                         --          --
        Common stock:
          Authorized 200,000,000 shares, $1 par value
           per share Outstanding 118,445,259 shares
           and 118,436,579 shares                        118.4       118.4
        Capital surplus                                  397.0       418.2
        Unrealized gain (loss) on investment securities    1.6          --
        Cumulative translation adjustments               116.8       111.2
        Retained earnings                                188.5       151.4
                                                         822.3       799.2
                                                      $6,220.5    $5,491.2
        The accompanying notes to consolidated condensed financial statements are
    an integral part of the above balance sheet.
                                    (In millions)
                                                      Twelve Months Ended
                                                             December 31,
                                                       1997            1996
        Operating Activities
        Net income                                   $108.1          $222.6
        Adjustments to net income:
        Special charges, net of tax                   145.8              --
        Depreciation                                  377.7           399.4
        Amortization                                   58.7            33.6
        Change in receivables, inventories,
         accounts payable, and accrued expenses       129.8          (136.5)
        Change in accrued and deferred taxes           20.2            78.1
        Other, net                                    (57.2)            (.5)
        Cash from continuing operations               783.1           596.7
        Cash used for discontinued operations            --          (123.8)
        Cash from (used for) operating activities     783.1           472.9
        Investing Activities
        Additions to plant, property, and equipment  (459.7)         (406.3)
        Proceeds from sale of assets                  167.8           200.4
        Acquisitions                               (1,103.9)             --
        Other, net                                     (3.5)          (16.7)
        Cash used for investing activities         (1,399.3)         (222.6)
        Financing Activities
        Short-term debt, net                        1,058.6          (111.4)
        Long-term debt repaid                        (259.7)          (66.5)
        Long-term debt issued                           1.4             1.1
        Repurchase of common stock                    (67.8)          (11.4)
        Dividends paid                                (71.1)          (53.4)
        Other, net                                     36.0            31.1
        Cash from financing activities                697.4          (210.5)
        Exchange Rate Effects on Cash and
         Cash Equivalents                             (10.9)          (12.1)
        Increase in cash and cash equivalents          70.3            27.7
        Cash and cash equivalents - beginning of period121.9           94.2
        Cash and cash equivalents - end of period    $192.2          $121.9
        NOTE TO EDITORS: ITT Industries and its subsidiaries' press releases are
    available at no charge via fax and the Internet.  To receive releases by fax,
    call 800-758-5804, extension 110006.  For ITT Industries' news on the
    Internet, visit or
    SOURCE  ITT Industries, Inc.

    Web site:
    CONTACT: Thomas R. Martin, 914-641-2157, or Thomas E. Glover,
    914-641-2160, both of ITT Industries
    NOTE TO EDITORS: This is ITT Industries (NYSE: IIN) not ITT
    Corporation (NYSE: ITT). Any shorthand reference to ITT will be

About ITT

ITT is a diversified leading manufacturer of highly engineered critical components and customized technology solutions for the transportation, industrial, and oil and gas markets. Building on its heritage of innovation, ITT partners with its customers to deliver enduring solutions to the key industries that underpin our modern way of life. ITT is headquartered in White Plains, N.Y., with employees in more than 35 countries and sales in a total of approximately 125 countries. The company generated 2016 revenues of $2.4 billion.


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