ITT INDUSTRIES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
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COMMISSION FILE NO. 1-5627
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ITT INDUSTRIES, INC.

INCORPORATED IN THE STATE OF INDIANA 13-5158950
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

4 WEST RED OAK LANE, WHITE PLAINS, NY 10604
(PRINCIPAL EXECUTIVE OFFICE)

TELEPHONE NUMBER: (914) 641-2000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT, ALL OF WHICH ARE
REGISTERED ON THE NEW YORK STOCK EXCHANGE, INC.:
COMMON STOCK, $1 PAR VALUE (ALSO REGISTERED ON PACIFIC STOCK EXCHANGE)
SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS (ALSO
REGISTERED ON PACIFIC STOCK EXCHANGE)
8 7/8% SENIOR DEBENTURES DUE JUNE 2003
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 (sec.229.405 of this chapter) 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]

Indicate by check mark whether the registration is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes.... No....
X

The aggregate market value of the Common Stock of the registrant held by
non-affiliates of the registrant on June 30, 2002 was approximately $6.5
billion.

As of February 28, 2003, there were outstanding 91,846,834 shares of Common
Stock, $1 par value, of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant's definitive proxy statement filed or to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A involving the
election of directors at the annual meeting of the shareholders of the
registrant scheduled to be held on May 13, 2003, is incorporated by reference in
Part III of this Form 10-K.
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TABLE OF CONTENTS

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* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.

PART I

ITEM 1. BUSINESS

ITT Industries, Inc., with 2002 sales of approximately $4.99 billion, is a
global multi-industry company engaged directly and through its subsidiaries in
the design and manufacture of a wide range of engineered products and the
provision of related services. Our four principal business segments are Fluid
Technology, Defense Electronics & Services, Motion & Flow Control, and
Electronic Components. Prior to January 1, 2002 these segments were named Pumps
& Complementary Products, Defense Products & Services, Specialty Products and
Connectors & Switches. Also prior to January 1, 2002, Engineered Valves, now
part of our Fluid Technology Segment, reported into Specialty Products (now,
Motion & Flow Control). Material herein is presented on a basis consistent with
those business segment changes.

Our World Headquarters is located at 4 West Red Oak Lane, White Plains, NY
10604. We have approximately 38,000 employees based in 48 countries. Unless the
context otherwise indicates, references herein to "ITT Industries," the
"Company," and such words as "we," "us," and "our" include ITT Industries, Inc.
and its subsidiaries. ITT Industries, Inc. was incorporated on September 5, 1995
in Indiana. Reference is made to "-- COMPANY HISTORY AND CERTAIN RELATIONSHIPS."
Our telephone number is (914) 641-2000.

1

The table below shows, in percentage terms, our consolidated sales and
revenues and operating income attributable to each of our ongoing lines of
business for the last three years. Operating income percentages for 2001 and
2000 are adjusted to exclude the impact of goodwill amortization:

BUSINESS AND PRODUCTS

FLUID TECHNOLOGY

Fluid Technology, with sales and revenues of approximately $1.96, billion,
$1.83 billion, and $1.83 billion for 2002, 2001 and 2000, respectively, is
engaged in the design, development, production, sale, and after-sale support of
products, systems and services used to move, measure, and manage fluids. Fluid
Technology is a leading worldwide supplier of a broad range of pumps, mixers,
heat exchangers, valves, and systems for municipal, industrial, residential,
agricultural, and commercial applications. Major production and assembly
facilities are located in Argentina, Australia, Austria, Canada, China, England,
Germany, Italy, Malaysia, Mexico, the Philippines, South Korea, Sweden, and the
United States. Principal customers are in North America, Europe, the Middle
East, Africa, Latin America, and the Asia/Pacific region. No single customer
accounted for more than 2% of 2002 sales for Fluid Technology. Sales are made
directly and through independent distributors and representatives.

Fluid Technology offers a wide range of product and system solutions for
the water, wastewater, building trades, industrial and process market areas and
biopharm market.

Water

Goulds Pumps ("Goulds") provides pumps and accessories for residential,
agriculture, irrigation, sewage, and drainage. In the residential market, Goulds
offers a wide range of water systems products, including state-of-the-art
submersible and jet pumps, pressure tanks, controls and special use pumps for
the home water well industry. Over one quarter of all well water pumps in North
America are supplied by Goulds.

Other products serving the water market are supplied by Lowara. Its pumps
are used in residential, agriculture, and irrigation applications. Lowara is a
leader in stainless steel manufacturing technology.

Submersible pumps and line shaft turbine pumps provide for the pumping
needs of agriculture, aquaculture, golf courses, and similar applications.

Wastewater

Our Flygt Group is the world's originator and largest manufacturer of
submersible pumps and mixers. These pumps and mixers form the heart of many of
the world's sewage and wastewater treatment facilities. As the world's leading
producer of fluid handling pumps and related products for treating and recycling
wastewater, ITT Industries actively promotes more efficient use and re-use of
water and endeavors to raise the level of awareness of the need to preserve and
protect the earth's water resources.

We are, through our Sanitaire(R) and ABJ(TM) brands, leaders in aeration
products and systems for municipal and industrial wastewater treatment. This
broad range of products includes ceramic and membrane fine bubble diffusers,
stainless steel coarse bubble diffusers, in-place cleaning systems, and complete
activated sludge plants. Combining Flygt's submersible pumps and mixers with
Sanitaire and ABJ products provides a solution to customers' needs for complete
system solutions in wastewater treatment. Dry mount pumps from A-C Pump provide
an alternative technical solution to submersible pumps. Typical application
areas are sewage and sludge handling, circulating water applications for power
plants, desalinization, and flood control.

Building Trades

Through our Fluid Handling Division, which includes leading brands such as
Bell & Gossett(R), McDonnell & Miller(R), Hoffman Specialty(R),

2

and ITT Standard(R), we provide a broad variety of products for environmental
control in buildings and for building service and utility applications. For our
group of products, we are market leaders in liquid-based heating and air
conditioning systems and in liquid level control and steam trap products for
boiler and steam systems.

Our wide range of submersible drainage pumps from Flygt serves the
construction market by dewatering construction sites on a global basis. A-C Pump
has been in the forefront of developing, designing and custom building a wide
range of fire pump systems, including prefabricated, turnkey fire pump packages,
and house units that meet every fire protection need.

Industrial & Process

In the industrial & process business, Fluid Technology offers a broad line
of industrial pumps for moving abrasives, corrosives, slurries, solids or other
liquids. We are the ANSI standard process pump market leader. Our chemical
process pumps and valves are available in a wide variety of alloys. Other unique
non-metallic pumps and valves provide advantages when handling severe
corrosives. A line of "sealless" magnetic drive pumps from our Goulds and
Richter units is offered for services where leakage cannot be tolerated. In
mining and mineral applications, our pumps and valves provide a wide range of
corrosion and abrasion resistance. The pumps are designed for vertical,
horizontal, and submersible situations for coal prep plants, mine slurries, and
dewatering applications. Vertical turbine pumps, API process pumps, vertical can
pumps for low NPSH, fire pumps and submersibles as well as high performance
valves are available for the oil refining and gas processing industries. Our
heavy duty stock pumps and a complete line of double suction and LoPulse(R) fan
pumps are designed for pulp and paper applications.

BioPharm

The biopharm market and other similar hygienic applications such as food
and cosmetics processing is served entirely by our Engineered Valves Division
with a wide array of valve and turnkey systems that are at the heart of
extremely demanding manufacturing processes, especially of biological and
pharmaceutical compounds.

Engineered Valves designs and manufactures precision valves under the brand
name Pure-Flo(R). The design, engineering, fabrication, and installation of high
purity process piping systems and stainless steel vessels for the biopharm and
hygienic industries are served through Engineered Valves' Pure-Flo Cotter and
Pure-Flo Precision lines. Turnkey systems from Pure-Flo Cotter include process
skid systems for CIP, chromatography, fermentation, and UF, flow transfer
panels.

Life Cycle Costing

Life cycle cost is the total system cost over the life of that system. It
includes installation, energy costs, maintenance, decommissioning, as well as
the original purchase price -- which generally is a small fraction of the
overall life cycle cost. ITT Industries is focused on improving the total life
cycle cost for customers through the application of technology. With energy
conservation becoming increasingly important from a cost control as well as an
environmental perspective, life cycle costing initiatives create another factor
in market differentiation.

Global Service and Customer Care

ITT Fluid Technology is building a global network of service centers for
aftermarket customer care. Our aftermarket capabilities include the repair and
service of all brands of pumps and rotating equipment, engineering upgrades,
contract maintenance, and inventory management services. We offer field service
solutions for troubleshooting, disassembly, on-site repairs, and emergency
service.

ITT Fluid Technology -- On-Line

Electronic commerce at ITT Industries is exemplified by the web site of our
Bell & Gossett unit. On this website, contractors and specifying engineers are
now able to view products, select and quote complex pumping systems, use
software for pipe sizing and pressure drop analysis, as well as engage in
helpful on-line engineering dialogue.

3

The following table illustrates the percentage of sales and revenues for
the listed categories for the periods specified:

Our management believes that Fluid Technology has a solid technology base
and proven expertise in designing its products to meet customer needs.
Management believes that the continuing development of new products will enable
Fluid Technology to maintain and build market leadership positions in served
markets.

Order backlog for Fluid Technology was $339.8 million in 2002, compared
with $297.6 million in 2001 and $278.0 million in 2000.

Brand names include ABJ(TM), A-C(TM) Pump, Bell & Gossett(R), Flygt(R),
Goulds Pumps(R), Hoffman Specialty(R), ITT Standard(R), Lowara(R), McDonnell &
Miller(R), Richter(R), Sanitaire(R), and Vogel(R).

The level of activity in Fluid Technology is dependent upon economic
conditions in the markets served, weather conditions, in the case of municipal
markets, the ability of municipalities to fund projects for our products and
services, and other factors. See "-- COMPETITION."

Fluid Technology companies have an aggregate of approximately 11,600
employees and have 300 facilities in 137 countries.

DEFENSE ELECTRONICS & SERVICES

Defense Electronics & Services, with sales and revenues of approximately
$1.51 billion, $1.30 billion, and $1.33 billion for 2002, 2001 and 2000,
respectively, develops, manufactures, and supports high technology electronic
systems and components for worldwide defense and commercial markets as well as
provides communications systems and engineering and applied research. Operations
are in North America, Europe, and the Middle East.

Defense Electronics & Services consists of the two major areas of (i)
systems and services and (ii) defense electronics. Systems and services consists
of our systems business and our advanced engineering and sciences business.
Defense electronics consists of our aerospace and communications business, our
night vision business, our radar business, and our avionics business.

Systems and Services

The Systems Division is involved in support services and systems
engineering. The business provides support services including operations and
maintenance services for surveillance systems, communications electronics
including sensors, radars and command and control, and combat service support,
and base support and range support for government sites around the world.

The Advanced Engineering & Sciences Division designs and manufactures
advanced digital communications and sensor products and systems, and is involved
in engineering and applied research. This business provides advanced technology
services and customized products to governmental, industrial, and commercial
customers in the areas of information technology, consulting and technical
assistance, military systems effects and analysis, and hardware design, test,
and evaluation.

Defense Electronics

The ITT Aerospace/Communications Division ("A/CD") designs and manufactures
wireless networking products and software that facilitate communications in the
forward area battlefield. A/CD produces the Single Channel Ground and Airborne
Radio System ("SINCGARS") and has a contract to produce the Near Term Digital
Radio ("NTDR"), a wideband networking radio which has data transmission capacity
twenty times greater than SINCGARS. A/CD is the provider of the combat net radio
and the high capacity data radio for the UK Bowman program. A/CD is developing a
communications system for the U.S. Army that will provide audio, video and data
networking to soldiers on the battlefield. A/CD is also developing air traffic
control radios for the Federal Aviation Administration. A/CD also produces
sophisticated sounding and imaging instruments such as those used by the
National Oceanographic and Atmospheric Agency in remote sensing space payloads
to track hurricanes, tornadoes, and other weather patterns. In addition, A/CD
provides navigation payloads for the Global Positioning System ("GPS")
navigation satellite.

4

The Night Vision Division provides advanced night vision products for
airborne and ground applications enabling United States and allied military
forces to conduct night combat operations. Night Vision is the leading full
service supplier of Generation III night vision products to the United States
and allied military forces. Night Vision also produces a commercial line of
night vision products, supplying high-performance night vision devices to
federal, state and local law enforcement officers in support of Homeland
Security. It also offers night vision products for consumer recreational
applications.

The Avionics Division produces information and electronic warfare
technologies for a broad range of military aircraft to help protect aircraft
from radar-guided weapons. Avionics is developing for the United States Army and
Special Operation Forces the next-generation fully integrated airborne
electronic warfare system for rotary wing aircraft called a Suite of Integrated
Radio Frequency Countermeasures ("SIRFC"). In addition, the company has
developed a SIRFC based system for fixed wing aircraft such as the F-16, and is
also the supplier for the United States Integrated Defensive Countermeasures
("IDECM") system for fixed wing aircraft such as the F/A-18 E/F fighter fleet.
The Avionics Division is a co-developer of the integrated communications,
navigation and identification system for the U.S. Air Force F-22 Raptor.

The ITT Gilfillan Division produces and installs ship and air defense radar
and air traffic control systems both in the United States and internationally.

The following table illustrates the percentage of sales and revenues for
the listed categories for the periods specified:

Defense Electronics & Services sells its products to a wide variety of
governmental and non-governmental entities located throughout the world.
Approximately 97% of 2002 sales and revenues of Defense Electronics & Services
was to governmental and international entities, of which approximately 73% was
to the United States Government (principally in defense programs).

A substantial portion of the work of Defense Electronics & Services is
performed in the United States under prime contracts and subcontracts, some of
which by statute are subject to profit limitations and all of which are subject
to termination by the United States Government. Apart from the United States
Government, international customers and commercial customers accounted for
approximately 23% and 3%, respectively, of 2002 sales and revenues for Defense
Electronics & Services.

Sales and revenues to non-governmental entities as a percentage of total
sales and revenues for Defense Electronics & Services were 3% in 2002, 4% in
2001 and 3% in 2000. Certain products sold by Defense Electronics & Services
have particular commercial application, including night vision devices. In
addition, Defense Electronics & Services, in partnership with California
Commercial Spaceport, Inc. in a venture known as Spaceport Systems
International, provides full service payload processing and launch capability
for small to medium satellite systems in low polar earth orbits.

Funded order backlog for Defense Electronics & Services was $2.85 billion
in 2002, compared with $2.58 billion in 2001 and $2.41 billion in 2000.

The level of activity in Defense Electronics & Services is affected by
overall defense budgets, the portion of those budgets devoted to products and
services of the type provided by Defense Electronics & Services, demand and
budget availability for such products and services in areas other than defense,
and other factors. See "-- COMPETITION."

Defense Electronics & Services companies have an aggregate of approximately
9,700 employees and are present in 149 facilities in 21 countries.

MOTION & FLOW CONTROL

Motion & Flow Control, with sales and revenues of approximately $935.5
million,

5

$898.7 million and $888.9 million, for 2002, 2001 and 2000, respectively,
comprises a group of units operating in the motion control and flow control
market segments. Operations are located principally in North America and Europe,
with sales in Latin America and Asia supported through joint ventures or
distribution arrangements. Motion & Flow Control consists of Fluid Handling
Systems, Galfer, Jabsco, Koni, Aerospace Controls, HydroAir, and Conoflow.

ITT Fluid Handling Systems designs and produces engineered tubing systems
and connectors for use in applications such as braking systems, fuel supply, and
other fluid transfer applications in transportation or industrial uses. Fluid
Handling Systems' principle customers are the major North American and European
automotive makers, their key Tier 1 suppliers, and other similar customers.
Ford, General Motors, and Daimlar Chrysler, with their respective affiliates,
account for approximately 27%, 14%, and 10%, respectively, of the 2002 sales of
this unit. Fluid Handling Systems also owns 50% of a joint venture with Sanoh
Industrial Co. of Japan that supplies similar products to the major Japanese
transplant manufacturers in the United States.

Galfer designs and manufactures quality friction pads and backplates for
braking applications on vehicles. From three facilities in Italy, Galfer
services most European OEM auto makers and also operates a substantial facility
for research and testing of new materials. Approximately 61% of Galfer's 2002
business is in aftermarket activity.

The Jabsco Division is the world's leading producer of pumps and related
products for the leisure marine market. Products are sold worldwide under the
brand names Jabsco(R), Rule(R), Flojet(R), and Danforth(R). Flojet is also a
leading producer of pumps and components for beverage applications. Both Jabsco
and Flojet also produce pumps for other specialty industrial fluid dispensing
applications.

Koni designs and markets adjustable shock absorbers under the brand name
KONI(R) for high performance vehicles, trucks, buses, and railways. Customers
are principally in Europe, North America, and Asia.

ITT Aerospace Controls designs switches, valves, and controls for aerospace
applications. Principal customers are North American aircraft manufacturers
where the quality and performance required for FAA certification is a key
factor. This unit also sells switches to industrial customers for service
applications.

The HydroAir Division designs and manufacturers jets, pumps and other
components for manufacturers of whirlpool baths and hot tub spas.

ITT Conoflow markets pressure regulators and diaphragm seals for industrial
applications and natural gas vehicles.

The following table illustrates the percentage of sales and revenues for
the listed categories for the periods specified:

The level of activity for Motion & Flow Control depends upon economic
conditions in the served markets, particularly the automotive, airplane, and
marine and leisure markets. See "-- COMPETITION." Order backlog is not a
significant factor in this segment.

Motion & Flow Control companies have an aggregate of approximately 5,800
employees and have 36 facilities located in 10 countries.

ELECTRONIC COMPONENTS

Electronic Components, with sales and revenues of approximately $583.5
million, $647.0 million, $774.6 million, for 2002, 2001, and 2000, respectively,
develops and manufactures connectors, interconnects, cable assemblies, switches,
key pads, multi-function grips, panel switch assemblies, dome arrays,
input/output (I/O) card kits, smart card systems, LAN components,
high-speed/high-bandwidth network systems, and related services.

Electronic Components consists of products and services for the areas of
communications, industrial, transportation, military/aerospace, commercial
aircraft, computer, and consumer uses.

6

In the communications area, Electronic Components designs products and
provides services specifically for today's transmission and networking
industries. These products and services include connectors, interconnects, cable
assemblies, keypads, switches, panel switch assemblies, I/O card kits, smart
card systems, and LAN components, as well as high-speed/high-bandwidth network
systems and services. They are used in wireless, carrier networks, enterprise
networks, datacommunications, transmission, and switching applications.
In the industrial area, Electronic Components' products are incorporated in
various industrial equipment and control products, including DL zero insertion
force connectors, cable assemblies, electromechanical switches, and device
control interfaces. They are used in industrial controls, production equipment,
and instrument applications. Medical applications include robotic surgical,
ultrasound, and other diagnostic equipment.

In the transportation area, Electronic Components' products are
incorporated in off-highway, heavy-vehicle, and automotive applications. The
products include high reliability connectors, multi-function control assemblies,
and switches used in powertrain, instrument controls, and chassis applications.

In the military/aerospace area, Electronic Components supplies products for
mission-critical applications ranging from below the ocean to deep in space. The
products include circular, microminiature, fiber optic, and "special" connectors
used in military electronics, missiles, and space applications.

In the commercial aircraft area, Electronic Components supplies highly
reliable light, space-saving products for technically advanced aircraft. The
products include rack and panel, circular, and fiber optic connectors. Their
applications range from avionics (flight control, communications and navigation)
to passenger in-flight entertainment systems.

In the computer area, Electronic Components supplies keypads, connectors,
and switches for computers and computer peripherals.

In the consumer area, Electronic Components primarily supplies keypads for
remote control devices.

The following table illustrates the percentage of sales and revenues for
the listed categories for the periods specified:

Order backlog for Electronic Components was $143.9 million in 2002 compared
with $154.6 million in 2001 and $207.9 million in 2000.

Electronic Components products are marketed primarily under the Cannon(R)
brand name.

The level of activity for Electronic Components is affected by overall
economic conditions in the markets served and the competitive position with
respect to price, quality, technical expertise, and customer service. See
"-- COMPETITION."

Electronic Components companies have an aggregate of approximately 10,600
employees and have 22 facilities located in 9 countries.

See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and see Note 23, "BUSINESS SEGMENT INFORMATION," in the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for further details with respect to
business segments.

ACQUISITIONS, DIVESTITURES, RESTRUCTURING, AND RELATED MATTERS

We have been involved in an ongoing program of acquiring businesses that
provide a rational fit with businesses we presently conduct and divesting
businesses that do not enhance that fit.

During 2002, we acquired the business and assets of a number of companies
for our Fluid Technology segment. These include the Pure Water division of
Waterlink, Inc. which designs and manufactures commercial, industrial and
municipal water purification systems. We also acquired the assets of PCI
Membranes from Thames Water. PCI Membranes products add chlorination
disinfection and membrane technology to Sanitaire's filtration and disinfection
businesses. In the municipal and wastewater area, we purchased the business and
assets of the

7

Royce Instrument Corporation relating to manufacture, monitoring and control
instrumentation and sensors for municipal and industrial wastewater treatment.
We also acquired the business and assets of Precision Stainless, Inc. which
provides process vessels for biopharmaceutical companies and we purchased the
business and assets of the Biopharm Manufacturing Division of Martin Petersen
Company, Inc., a manufacturer of process systems for the biopharmaceutical
industry. In wastewater applications, we acquired Svedala Robot B.V., a
manufacturer of high quality submersible pumps and pump systems used in
wastewater applications. We also acquired Flowtronex PSI Inc., a leading global
manufacturer of modular pumping systems for golf courses and other turf
irrigation, sports fields, municipal and commercial properties for our Fluid
Technology segment.

For Defense Electronics & Services, we acquired the business and assets of
Xybion Electronic Systems (XES), a designer and manufacturer of intensified
imaging systems, digital and complimentary metal-oxide semiconductor (CMOS)
cameras on December 12, 2002 and during 2002 we sold a defense related joint
venture

On January 31, 2003 we acquired the VEAM/TEC division of Northrop Grumman's
Component Technologies sector, which manufactures cylindrical, filter and fiber
optic connectors for the military/aerospace, industrial, transit, entertainment
and nuclear markets for our Electronics Components segment.

During 2001, we acquired the business and assets of a number of companies
for our Fluid Technology segment. These include Cotter Corporation, which
manufactures modular processing systems and subsystems; the Water Systems
Division of The Marley Company, which manufactures water pumping equipment;
Production Castings Incorporated, American Alloy Products, Inc., Production
Machine Inc., and Impeller Repair Services, Inc., these last four being in the
business of producing pump parts and cast repair parts. Also for our Fluid
Technology segment, during 2001, we purchased the stock of 1448170 Ontario
Limited, which sells repair parts and repairs pumps, rotating equipment and
other production and factory equipment. In 2001 we purchased the business and
assets of BIW Connector Systems, LLC, a designer and manufacturer of power
connectors for harsh environments, for our Electronic Components segment.

During 2000, we acquired C&K Components, Inc., a designer and manufacturer
of switches for the communications, computer, and electronic equipment markets.
We also acquired the Man Machine Interface business of TRW, a manufacturer of
multi-layer switch components and assemblies for the wireless mobile handset
market. Both acquisitions are for our Electronic Components segment. In
addition, we acquired the business of Aerotherm Corporation, a company that
makes guidance systems for target missiles, and sold our GaAsTEK business, both
with respect to our Defense Electronics & Services segment. In addition, we
acquired the business of HydroAir International for our Motion & Flow Control
segment.

See Note 4, "RESTRUCTURING AND ASSET IMPAIRMENT CHARGES," in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS regarding restructuring matters. See also
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- LIQUIDITY AND CAPITAL RESOURCES -- STATUS OF RESTRUCTURING
ACTIVITIES."

See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- RISKS AND UNCERTAINTIES -- SALES OF AUTOMOTIVE
BUSINESSES" AND NOTE 5, "DISCONTINUED OPERATIONS," in the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS for information regarding the resolution of certain
disputes relating to the sales of automotive businesses during 1998 and further
information regarding discontinued operations.

GEOGRAPHIC MARKETS

The geographic sales base of Fluid Technology is broad. In 2002,
approximately 56% of the sales and revenues of Fluid Technology was derived from
North America, while approximately 30% was derived from Europe. The geographic
sales mix differs among products and among divisions of Fluid Technology. Our
management anticipates growth opportunities in Eastern Europe, Central Asia,
Africa/Middle East, Latin America, and the Asia/Pacific region. In China, Fluid
Technology has manufacturing and distribution facilities to produce and sell
submersible pumps for the sewage handling and mining markets and a joint venture
that produces vertical turbine pumps and includes a foundry operation. It also
has joint venture sales and manufacturing and other operations in Eastern
Europe, Latin America, Africa/Middle East, and other locations in the
Asia/Pacific region.

8

The geographic sales base of Defense Electronics & Services is
predominantly the United States, which accounted for approximately 77% of 2002
sales and revenues. Management of Defense Electronics & Services has been in the
process of increasing its international defense business and anticipates growth
opportunities in the Asia/Pacific region, Europe, and the Middle East.

The geographic sales base of Motion & Flow Control is predominantly in
North America and Europe. In 2002, approximately 60% of sales and revenues of
Motion & Flow Control were to customers in North America, and approximately 37%
of sales were to customers in Europe. Management of ITT Industries sees growth
opportunities in North America, Europe and Asia.

The geographic sales base of Electronic Components in Europe accounted for
35% of 2002 sales and revenues, North America accounted for 39% of 2002 sales
and revenues, and the Asia/Pacific region accounted for 24% of 2002 sales and
revenues. Electronic Components has manufacturing facilities within North
America, Europe, and the Asia/Pacific region. These operations supply connectors
across a broad market spectrum, including carrier networks, wireless,
transportation, military/aerospace, commercial aircraft, computer, industrial
and consumer sectors.

See Note 23, "BUSINESS SEGMENT INFORMATION," in the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS for further geographical information concerning sales and
revenues and long-lived assets.

COMPETITION

Substantially all of our operations are in highly competitive businesses.
The nature of the competition varies across all business segments. A number of
large companies engaged in the manufacture and sale of similar lines of products
and the provision of similar services are included in the competition, as are
many small enterprises with only a few products or services. Technological
innovation, price, quality, reliability, and service are primary factors in the
markets served by the various segments of our businesses.

The Fluid Technology segment is affected by strong competition, changing
economic conditions, industry overcapacity that leads to intense pricing
pressures, and public bidding in some markets. Management of Fluid Technology
responds to competitive pressures by utilizing strong distribution networks,
strong brand names, broad product lines focused on market niches, a global
customer base, a continuous stream of new products developed from a strong
technology base, a focus on quality and customer service, and through continuous
cost improvement programs and life cycle cost initiatives.

In Defense Electronics & Services, government defense budgets, particularly
in the United States, generally have begun to increase after years of
significant declines. Business consolidations continue to change the competitive
environment. We have adjusted to these changes by focusing on the defense
electronics and services markets, by making process improvements, and through
capacity rationalization. In most of the markets served by Defense Electronics &
Services, competition is based primarily upon price, quality, technological
expertise, cycle time, and service.

In Motion & Flow Control, competition is a significant factor which has
resulted in increased pressure to reduce prices and, therefore, costs. Product
capability, quality, engineering support, and experience are also important
competitive factors.

In Electronic Components, competitive pressures continue on a global basis.
In most of the markets served, competition is based primarily upon price,
quality, technical expertise, and customer service.

EXPOSURE TO CURRENCY FLUCTUATIONS

Our companies conduct operations worldwide. We, therefore, are exposed to
the effects of fluctuations in relative currency values. Although our companies
engage in various hedging strategies with respect to their foreign currency
exposure where appropriate, it is not possible to hedge all such exposure.
Accordingly, our operating results may be impacted by fluctuations in relative
currency values.

See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- MARKET RISK EXPOSURES" and Note 18, "FINANCIAL
INSTRUMENTS," in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

9

CYCLICALITY

Many of the markets in which our businesses operate are cyclical and can be
affected by general economic conditions in those markets. Since we manufacture
and sell products used in historically cyclical industries, such as the
construction, mining and minerals, transportation, automotive, and aerospace
industries, as well as other industries served by our Electronic Components
business, we could be adversely affected by negative cycles affecting those and
other industries.

GOVERNMENTAL REGULATION AND RELATED MATTERS

A number of our businesses are subject to governmental regulation by law or
through contractual arrangements. Our Defense Electronics & Services businesses
perform work under contracts with the United States Department of Defense and
similar agencies in certain other countries. These contracts are subject to
security and facility clearances under applicable governmental regulations,
including regulations requiring background investigations for high-level
security clearances for our executive officers. Most of such contracts are
subject to termination by the respective governmental parties on various
grounds, although such terminations have rarely occurred in the past.

ENVIRONMENTAL MATTERS

We are subject to stringent environmental laws and regulations concerning
air emissions, water discharges and waste disposal. In the United States such
environmental laws and regulations include the Federal Clean Air Act, the Clean
Water Act, the Resource, Conservation and Recovery Act, and the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA" or
"Superfund"). Environmental requirements are significant factors affecting all
operations. Management believes that our companies closely monitor all of their
respective environmental responsibilities, together with trends in environmental
laws. We have established an internal program to assess compliance with
applicable environmental requirements for all of our facilities, both domestic
and overseas. The program is designed to identify problems in a timely manner,
correct deficiencies and prevent future noncompliance. Over the past several
years we have conducted regular, thorough audits of our major operating
facilities. As a result, management believes that our companies are in
substantial compliance with current environmental regulations. Management does
not believe, based on current circumstances, that we will incur compliance costs
pursuant to such regulations that will have a material adverse effect on our
financial position, results of operations or cash flows. In addition, we have
purchased insurance protection against certain unknown risks.

See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- RISKS AND UNCERTAINTIES -- ENVIRONMENTAL MATTERS" and
"LEGAL PROCEEDINGS".

RAW MATERIALS

All of our businesses require various raw materials (e.g., metals and
plastics), the availability and prices of which may fluctuate. Although some
cost increases may be recovered through increased prices to customers, our
operating results are exposed to such fluctuations. We attempt to control such
costs through purchasing and various other programs. In recent years, our
businesses have not experienced significant difficulties in obtaining an
adequate supply of raw materials necessary for our manufacturing processes.

RESEARCH, DEVELOPMENT, AND ENGINEERING

Our businesses require substantial commitment of resources for research,
development, and engineering activities to maintain significant positions in the
markets we serve. Such activities are conducted in laboratory and engineering
facilities at several of our major manufacturing locations. Although most of our
funds dedicated to research, development, and engineering activities are applied
to areas of high technology, such as aerospace and applications involving
electronic components, these activities are important in all of our business
segments. Expenditures by ITT Industries for research, development, and
engineering relating to our on-going lines of business totaled $519.1 million in
2002, $424.7 million in 2001 and $391.2 million in 2000. Of those amounts 78.0%
in 2002, 76.4% in 2001 and 74.6% in 2000, was expended pursuant to customer
contracts.

INTELLECTUAL PROPERTY

While we own and control a number of patents, trade secrets, confidential
information, trademarks, trade names, copyrights, and other intellectual
property rights which, in the aggre-
10

gate, are of material importance to our business, management believes that our
business, as a whole, is not materially dependent upon any one intellectual
property or related group of such properties. We are licensed to use certain
patents, technology, and other intellectual property rights owned and controlled
by others, and, similarly, other companies are licensed to use certain patents,
technology, and other intellectual property rights owned and controlled by us.

Patents, patent applications, and license agreements will expire or
terminate over time by operation of law, in accordance with their terms or
otherwise. Such expiration or termination of patents, patent applications, and
license agreements is not expected by our management to have a material adverse
effect on our financial position, results of operations or cash flows.

At the time of the Distribution (see -- "COMPANY HISTORY AND CERTAIN
RELATIONSHIPS"), we obtained from ITT Destinations certain exclusive rights and
licenses to use the "ITT" name, mark, and logo. In 1999, we acquired all right,
title, and interest in and to the "ITT" name, mark, and logo and an assignment
of certain agreements granting The Hartford and ITT Educational Services, Inc.
(ESI) limited rights to use the "ITT" name, mark, and logo in their businesses.
These agreements are perpetual, and the licenses are subject to maintenance of
certain quality standards by both The Hartford and ESI.

EMPLOYEES

As of December 31, 2002, ITT Industries and its subsidiaries employed an
aggregate of approximately 38,000 people. Of this number, approximately 17,961
are employees in the United States, of whom approximately 30% are represented by
labor unions. Generally, labor relations have been maintained in a normal and
satisfactory manner.

COMPANY HISTORY AND CERTAIN RELATIONSHIPS

ITT Industries, Inc. is an Indiana corporation incorporated on September 5,
1995 as ITT Indiana, Inc. It is the successor pursuant to a statutory merger of
ITT Corporation, a Delaware corporation ("ITT Delaware"), into ITT Indiana, Inc.
effective December 20, 1995, whereupon its name became ITT Industries, Inc. ITT
Delaware, originally incorporated in Maryland in 1920 as International Telephone
and Telegraph Corporation, was reincorporated in Delaware in 1968. It changed
its name to ITT Corporation in 1983. On December 19, 1995, ITT Delaware made a
distribution (the "Distribution") to its stockholders consisting of all the
shares of common stock of ITT Destinations, Inc., a Nevada corporation ("ITT
Destinations"), and all the shares of common stock of ITT Hartford Group, Inc.,
a Delaware corporation (now known as The Hartford Financial Services Group, Inc.
or "The Hartford"), both of which were wholly-owned subsidiaries of ITT
Delaware. In connection with the Distribution, ITT Destinations changed its name
to ITT Corporation. On February 23, 1998, ITT Corporation was acquired by
Starwood Hotels & Resorts Worldwide, Inc.

ITT Delaware, ITT Destinations, and The Hartford entered into a
Distribution Agreement (the "Distribution Agreement") providing for, among other
things, certain corporate transactions required to effect the Distribution and
other arrangements among the three parties subsequent to the Distribution.

The Distribution Agreement provides for, among other things, assumptions of
liabilities and cross-indemnities generally designed to allocate the financial
responsibility for the liabilities arising out of or in connection with (i) the
former automotive, defense & electronics, and fluid technology segments to ITT
Industries and its subsidiaries, (ii) the hospitality, entertainment, and
information services businesses to ITT Destinations and its subsidiaries, and
(iii) the insurance businesses to The Hartford and its subsidiaries. The
Distribution Agreement also provides for the allocation of the financial
responsibility for the liabilities arising out of or in connection with former
and present businesses not described in the immediately preceding sentence to or
among ITT Industries, ITT Destinations, and The Hartford on a shared basis. The
Distribution Agreement provides that neither ITT Industries, ITT Destinations
nor The Hartford will take any action that would jeopardize the intended tax
consequences of the Distribution.

ITT Industries, ITT Destinations, and The Hartford also entered into
agreements in connection with the Distribution relating to intellectual
property, tax, and employee benefit matters.

One member of the Board of Directors of ITT Industries also serves on the
Board of Directors of The Hartford.

11

INTERNET ADDRESS AND INTERNET ACCESS TO CURRENT AND PERIODIC REPORTS

ITT Industries' website address is http:/ /www.itt.com. ITT Industries
makes available free of charge on or through http:/ /www.itt. com/
ir/secfilings frameset.html our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and all amendments to those reports as soon as reasonably practicable after
such material is electronically filed with or furnished to the Securities and
Exchange Commission (the "SEC").
------------------------

See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- FORWARD-LOOKING STATEMENTS" for information regarding
forward-looking statements and cautionary statements relating thereto.
------------------------

ITEM 2. PROPERTIES

Our principal executive offices are in leased premises located in White
Plains, NY. We consider the many offices, plants, warehouses, and other
properties that we own or lease to be in good condition and generally suitable
for the purposes for which they are used. These properties are located in
several states in the United States, as well as in numerous countries throughout
the world. See "BUSINESS" for further information with respect to properties in
each of our business segments, including the numbers of facilities and countries
in which they are located. See also Note 15, "Leases and Rentals," in the Notes
to Consolidated Financial Statements for further information.

ITEM 3. LEGAL PROCEEDINGS

ITT Industries and its subsidiaries are responsible, in whole or in part,
or are alleged to be responsible for environmental investigation and remediation
at approximately 104 sites in various countries. Of those sites, ITT Industries
has received notice that it is considered a Potentially Responsible Party
("PRP") at a limited number of sites by the United States Environmental
Protection Agency ("EPA") and/or a similar state agency under CERCLA or its
state equivalent. Other situations generally involve either actions brought by
private parties relating to sites formerly owned or operated by subsidiaries of
the Company seeking to recoup incurred costs or shift environmental liability to
ITT Industries pursuant to contractual language, or situations discovered by ITT
Industries through its internal environmental assessment program.

In Glendale, California ITT Industries has been involved in an
environmental proceeding relating to the San Fernando Valley aquifer. ITT
Industries is one of numerous PRPs who are alleged by the EPA to have
contributed to the contamination of the aquifer. In January 1999, the EPA filed
a complaint in the United States District Court for the Central District of
California against ITT Industries and Lockheed Martin Corporation, United States
v. ITT Industries, Inc. and Lockheed Martin Corp. CV99-00552 SVW AIJX, to
recover costs it has incurred in connection with the foregoing. In May 1999, the
EPA and the PRPs, including ITT Industries and Lockheed Martin, reached a
settlement, and a consent decree requiring the PRPs to perform additional
remedial activities was entered in August 2000. Under the settlement, the PRPs
including the Company, have constructed and are operating a water treatment
system. The PRPs have agreed to operate the system for an additional 10 years.

ITT operated a facility in Madison County Florida from 1968 until 1991. In
1995, elevated levels of contaminants were detected at the site. Since then, ITT
has been investigating the site in coordination with state and federal
environmental authorities. A remedy for the site has not yet been selected.

ITT has been involved with a number of PRPs regarding property in the City
of Bronson, Michigan operated by a former subsidiary of ITT, Higbie
Manufacturing, prior to the time ITT acquired the company. ITT and other PRPs
are investigating and remediating discharges of industrial waste which occurred
in the 1930's.

In a suit filed several years ago by ITT Industries in the California
Superior Court, Los Angeles County, ITT Corporation, et al. v. Pacific Indemnity
Corporation et al. against its insurers, ITT Industries is seeking recovery of
costs it had incurred in connection with its environmental liabilities including
the three listed above. In April 1999, the California Superior Court granted
partial summary judgment under California law, dismissing certain claims in the
California action. The California Court of Appeals accepted ITT Industries'
petition for review of the California Superior Court's order and, in March 2001,
dismissed the petition without prejudice, allowing ITT Industries to reassert
two of its

12

arguments in the California Superior Court. ITT Industries presented those
arguments to the Court and in January 2002, the Court dismissed a number of
sites from the California case. ITT appealed and the matter is before the
California Court of Appeals from a decision by the California Superior Court
dismissing claims where the costs incurred were due solely to administrative
(versus judicial) actions. ITT Industries has negotiated settlements with
certain defendant insurance companies, is engaged in negotiations with others,
and is prepared to pursue its legal remedies where reasonable negotiations are
not productive.

ITT and its subsidiary Goulds have been joined as defendants with numerous
other industrial companies in product liability lawsuits alleging injury due to
asbestos. These actions against the Company have been managed by our historic
product liability insurance carriers, and all claims, including all defense and
settlement costs, have been covered by those same carriers. These claims stem
primarily from products sold prior to 1985 that contained a part manufactured by
a third party, e.g., a gasket, which allegedly contained asbestos. The asbestos
was encapsulated in the gasket (or other) material and was non-friable. In
certain other cases, it is alleged that ITT companies were distributors for
other manufacturers' products that may have contained asbestos.

Frequently, the plaintiffs are unable to demonstrate any injury or do not
identify any ITT or Goulds product as a source of asbestos exposure. During the
past 12 months, ITT and Goulds resolved approximately 800 cases through
settlement or dismissal. The average amount of settlement per claim has been
nominal.

The Company is involved in two actions, Cannon Electric, Inc. et al. v. Ace
Property & Casualty Company et al. Superior Court, County of Los Angeles, CA,
Case No. BC 290354, and Pacific Employers Insurance Company et al., v. ITT
Industries, Inc., et al., Supreme Court, County of New York, N.Y., Case No.
03600463, both of which commenced after December 31, 2002. The parties in both
cases are seeking an appropriate allocation of responsibility for the Company's
historic asbestos liability exposures among its insurers. The California action
is filed in the same venue where the Company's environmental insurance recovery
litigation has been pending for several years. The Company is continuing to
receive insurance payments during the pendency of these actions. The Company
does not believe that the existence or pendency of these actions will have any
impact on the Company's consolidated financial position, results of operations,
or cash flows.

The Company has received notice of a suit filed in El Paso, Texas relating
to its Gilfillian Division, Bund zur Unterstutzung Radargeschadigter et al. v.
ITT Industries et al., Sup. Ct., El Paso, Texas C.A. No. 2002-4730. This
Complaint, filed by both U.S. and German citizens, alleges that ITT and four
other major companies failed to warn the plaintiffs of the dangers associated
with exposure to x-ray radiation from radar devices. The Complaint also seeks
the certification of a class of similarly injured persons. The Company's insurer
has accepted the defense of this matter.

The Company has received notice of a product liability suit filed in
Superior Court of New York, Danis v. Rule Industries et al., Sup. Ct. N.Y., C.A.
No. 115975-02, seeking damages for injuries sustained in a boat explosion. The
suit contains a number of causes of action against various defendants including
the boat manufacturer, the marina operator, and individuals working at the
marina. As to the Company, the Complaint alleges that a fume detector,
manufactured by ITT's subsidiary Rule Industries, Inc. prior to the date the
Company acquired Rule, malfunctioned. The Company's insurer has accepted the
defense of this matter.

The Company has received a Notice of Claim from Rayonier, Inc., a former
subsidiary of the Company's predecessor ITT Corporation. This claim stems from
the 1994 Distribution Agreement for the spinoff of Rayonier by ITT Corporation
and seeks an allocation of proceeds from certain settlements in connection with
the Company's environmental insurance recovery litigation. The parties are
currently in negotiations.

The Company and its subsidiaries from time to time are involved in legal
proceedings that are incidental to the operation of their businesses. Some of
these proceedings allege damages against the Company relating to, environmental
liabilities (including toxic tort, property damage and remediation),
intellectual property matters (including patent, trademark and copyright
infringement, and licensing disputes), personal injury claims (including
injuries due to product failure, design or warnings issues, asbestos expo-

13

sure, or other product liability related matters), employment and pension
matters, government contract issues and commercial or contractual disputes,
sometimes related to acquisitions or divestitures. The Company will continue to
vigorously defend itself against all claims. Although the ultimate outcome of
any legal matter cannot be predicted with certainty, based on present
information including the Company's assessment of the merits of the particular
claim, as well as its current reserves and insurance coverage, the Company does
not expect that such legal proceedings will have any material adverse impact on
the cash flow, results of operations, or financial condition of the Company on a
consolidated basis in the foreseeable future.

Reference is made to "BUSINESS -- COMPANY HISTORY AND CERTAIN
RELATIONSHIPS" for information concerning the allocation of certain liabilities
among the parties to the Distribution Agreement.

Other Legal Proceedings

In 2002, the SEC announced that it would review the annual reports on Form
10-K submitted by all Fortune 500 companies during the year. As a result, the
Company's annual report on Form 10-K for the year ended December 31, 2001 was
reviewed by the SEC and we received a comment letter from the SEC following its
review. The comments in the SEC letter primarily focused on supplemental
disclosure for items related to the divestiture of the majority of our
automotive components business in 1998, an expanded discussion of restructuring
activities, references to non-GAAP measures and further segmentation of revenues
and working capital. The Company submitted detailed responses to the SEC's
initial comment letter and two follow-up letters. Since submitting its last
response on February 10, 2003, the Company has not received further comments
from the SEC and it does not anticipate receiving any further comments.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS

No matter was submitted to a vote of our shareholders during the fourth
quarter of the fiscal year covered by this report.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following information is provided regarding the executive officers of
ITT Industries:

Each of the above-named officers was elected to his or her present position
to serve at the pleasure of the Board of Directors.

Throughout the past five years, all of the above-named officers have held
executive positions with ITT Industries bearing at least sub-

14

stantially the same responsibilities as those borne in their present offices,
except that (i) Mr. Anderson, prior to his election as Senior Vice President and
Chief Financial Officer (1999), was Senior Vice President and Chief Financial
Officer of Newport News Shipbuilding (1996); (ii) Mr. Ayers, prior to his
election as Senior Vice President (2001), was Vice President (1998) and
President of Fluid Technology (1999), and, prior to that, was President of
Sulzer Bingham Pumps Inc. (1990); (iii) Mr. Crum, prior to his election as
Senior Vice President (2002) was Corporate Vice President, Motorola Corporation
Broadband Communications Sector (2000) and Senior Vice President for
Administration and Employee Resources at General Instrument Corporation (1997);
(iv) Mr. Driesse, prior to his election as Senior Vice President (2001), was
Vice President and President of Defense (2000), and, prior to that, was
President of ITT Avionics (1991); (v) Mr. Foley, prior to his election as Senior
Vice President, (2003), was Vice President, Treasurer, Director of Taxes. Mr.
Foley was elected Vice President and Treasurer in 1996, and was named to the
position of Director of Taxes in 2001; (vi) Mr. Gendron, prior to his election
as Senior Vice President (2001), was Vice President (1998), and President of
Cannon Worldwide (1997); (viii) Mr. Giuliano, prior to his election as Chairman,
President, Chief Executive Officer and Director (2001), was President and Chief
Operating Officer (1998), and, prior to that, was Senior Vice President (1995);
(ix) Mr. Martin, prior to his election as Senior Vice President, Director of
Corporate Relations (1999), was Vice President, Director of Corporate Relations
(1996); (x) Ms. Reichelderfer, prior to her election as Senior Vice President
and President of Motion & Flow Control (2002), was Vice President and President
Motion & Flow Control and held other executive positions with ITT Industries;
and (xi) Mr. Williams, prior to his election as Senior Vice President (2001),
was Vice President and Corporate Controller (1998), and, prior to that, was Vice
President and Controller of our Defense & Electronics business.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

COMMON STOCK -- MARKET PRICES AND DIVIDENDS

The above table reflects the range of market prices of our common stock as
reported in the consolidated transaction reporting system of the New York Stock
Exchange, the principal market in which this security is traded (under the
trading symbol "ITT"). During the period from January 1, 2003 through February
28, 2003, the high and low reported market prices of our common stock were
$62.09 and $54.11, respectively.

We declared dividends of $.15 per share of common stock in each of the four
quarters of 2001 and 2002. In the first quarter of 2003, we declared a dividend
of $.16 per share.

Dividend decisions are subject to the discretion of our Board of Directors
and will be based on, and affected by, a number of factors, including operating
results and financial requirements. Therefore, there can be no assurance as to
what level of dividends, if any, will be paid in the future.

There were approximately 33,243 holders of record of our common stock on
February 28, 2003.

ITT Industries common stock is listed on the following exchanges:
Frankfurt, London, Midwest, New York, Pacific, and Paris.

15

ITEM 6. SELECTED FINANCIAL DATA

- ------------
(a) Operating income (loss) and income (loss) from continuing operations in
2002, 2001, 1999 and 1998 includes income (expense) of $3.5, $(97.7), $4.6
and $(399.4) pretax, respectively, or $2.4, $(63.5), $2.9 and $(243.6),
after-tax, respectively, for restructuring and asset impairment charges. See
Note 4 "Restructuring and Asset Impairment Charges," in the Notes to
Consolidated Financial Statements for additional information on these
topics.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

- ---------------

* The Company adopted Statement of Financial Accounting Standards No. 142 and
discontinued the amortization of goodwill as of January 1, 2002 (see Footnote
2, "Changes in Accounting Pronouncements," for further detail). Total costs
and expenses for 2001 and 2000 exclude goodwill amortization expense for
comparative purposes.

17

YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001:

Sales and revenues in 2002 were $4.99 billion, an increase of $309.6
million, or 6.6%, from 2001. Cost of sales and revenues for the year ended
December 31, 2002 increased $167.4, or 5.5% from 2001. The increases were
primarily attributable to increased sales in the Defense Electronics & Services,
Fluid Technology, and Motion & Flow Control segments partially offset by volume
declines in the Electronic Components segment.

Selling, general and administrative ("SG&A") expenses in 2002 were $720.2
million, an increase of $48.9 million, or 7.3%, from 2001. The increase was
primarily attributable to increased marketing expenses in the Fluid Technology
segment and costs associated with process improvement initiatives, increased
information technology spending and increased other administrative expenses
across all businesses.

Research, development and engineering ("RD&E") expenses increased $94.4
million, or 22.2% in 2002 compared to 2001, primarily due to increased spending
in the Defense Electronics & Services segment.

During 2002 management conducted quarterly progress reviews of the
Company's remaining restructuring actions and determined that $13.1 million of
planned cash expenditures would not be incurred. Accordingly, $13.1 million of
restructuring accruals, primarily relating to the 2001 Restructuring Plan, were
reversed into income. Also, during the fourth quarter of 2002, the Company
recorded a restructuring charge of $9.6 million related to the termination of
292 persons and the closure of two facilities. During 2001 the Company recorded
a $97.7 million restructuring and asset impairment charge to reduce structural
costs and improve profitability. Refer to the section entitled "Status of
Restructuring and Asset Impairments" and Note 4, "Restructuring and Asset
Impairment Charges," in the Notes to Consolidated Financial Statements for
additional information regarding these matters.

Operating income of $537.6 million in 2002 was $140.8 million, or 35.5%,
higher than the prior year (excluding goodwill amortization expense the increase
was $100.1 million, or 22.9%). Operating margin of 10.8%, was 230 basis points
higher than the margin for 2001 (approximately 140 basis points higher than
2001, excluding goodwill amortization expense). Excluding goodwill amortization
expense, the increases were primarily due to the $97.7 million restructuring and
asset impairment charge recorded in 2001 and increased segment volume, these
items partially offset by lower operating margins in the Electronic Components
segment, reflecting higher SG&A expenses. Increased corporate expenditures
reflecting the cost of process improvement initiatives, increased information
technology spending, and increased administrative expenses, also offset the
improved margin.

Interest expense of $32.4 million (net of interest income of $11.0 million)
decreased $29.6 million from 2001 primarily due to a favorable change in average
interest rates and lower average debt levels as a result of increased cash from
operations.

The effective income tax rate for 2002 was 25.3% compared to 35.0% for
2001. The decrease in the 2002 effective tax rate is due to approximately $31
million of tax gains related to a capital loss carryback and the benefit of
several foreign tax planning initiatives initiated in 2002 and 2001 to reduce
the structural rate. The elimination of goodwill expense, pursuant to the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 142
"Goodwill and Other Intangible Assets" ("SFAS No. 142") also contributed to the
decline in the effective tax rate.

Income from continuing operations in 2002 was $379.9 million, or $4.06 per
diluted share, compared to $216.7 million, or $2.39 per diluted share. The
increase was due to higher operating income and lower interest expense. These
items were partially offset by higher income tax expense.

During the fourth quarter of 2001, the Company reassessed accruals for
discontinued operations, determined that activities related to those accruals
would be completed for $60.0 million less than originally estimated and reversed
the related accruals into income. The excess was primarily related to favorable
foreign tax rulings. See the section entitled "Discontinued Operations" and Note
5, "Discontinued Operations," in the Notes to Consolidated Financial Statements
for additional information.

18

YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000:

Sales and revenues in 2001 were $4.68 billion, a decrease of $153.7
million, or 3.2%, from 2000. Cost of sales and revenues for the year ended
December 31, 2001 decreased $150.8 million, or 4.7% from 2000. The decreases
were primarily attributable to the downturn in the communications and industrial
connectors markets of Electronic Components and the scheduled wind down of
certain Defense Electronics & Services contracts. These declines were partially
offset by new contract revenue at Defense Electronics & Services and revenues
from acquisitions made in 2000.

SG&A expenses in 2001 were $671.3 million, a decrease of $42.3 million, or
5.9%, from 2000. The decrease is primarily attributable to lower marketing
expenses at Fluid Technology and Electronic Components and reduced
administrative expenses at Electronic Components. RD&E expenses increased $33.5
million, or 8.6%, in 2001 compared to 2000, primarily due to increased spending
in the Defense Electronics & Services segment.

In December 2001, the Company announced a restructuring program to reduce
structural costs and improve profitability. Accordingly, a charge of $83.3
million was recorded. In addition, based on a review of long lived assets in the
Electronic Components segment, the Company recorded an impairment charge of
$14.4 million. Refer to the section entitled "Status of Restructuring and Asset
Impairments" and Note 4, "Restructuring and Asset Impairment Charges," in the
Notes to Consolidated Financial Statements for additional information on these
topics. There were no restructuring or asset impairment charges recorded in
2000.

Operating income of $396.8 million in 2001 was $96.3 million, or 19.5%,
lower than the prior year due to the $97.7 million restructuring and asset
impairment charges taken in 2001. Operating margin of 8.5%, was approximately
170 basis points lower than the margin for 2000. The decrease is primarily due
to the above mentioned restructuring and asset impairment charges and lower
sales volume. These items were partially offset by cost reduction efforts
related to non-production purchases and savings from headcount reductions,
primarily reflecting normal employee attrition. Improved product mix also
partially offset the decline.

Interest expense of $62.0 million (net of interest income of $6.8 million)
decreased $13.2 million from 2000 due to a favorable change in average interest
rates and increased cash from operations, partially offset by higher average
debt in the first half of 2001 associated with several acquisitions made in
2000.

The effective income tax rate for 2001 was 35.0% compared to 37.0% for
2000. The decrease in the 2001 effective tax rate was due to several initiatives
taken in 2001 and 2000 to reduce the structural rate.

Income from continuing operations in 2001 was $216.7 million or $2.39 per
diluted share compared to $264.5 million, or $2.94 per diluted share. The
decrease in net income, was primarily due to restructuring and asset impairment
charges discussed above, partially offset by a decrease in interest expense and
the lower effective tax rate.

During the fourth quarter of 2001, the Company reassessed accruals for
discontinued operations, determined that activities related to those accruals
would be completed for $60.0 million less than originally estimated and reversed
the related accruals into income. The excess was primarily related to favorable
foreign tax rulings. See the section entitled "Discontinued Operations" and Note
5, "Discontinued Operations," in the Notes to Consolidated Financial Statements
for additional information.

BUSINESS SEGMENT INFORMATION

YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001:

Fluid Technology sales and revenues of $1.96 billion increased $126.6
million, or 6.9%, from 2001. Cost of sales and revenues increased $82.6 million,
or 6.9%. The increases reflect increased volume in the Water/Wastewater and
Engineered Process Solutions Group businesses, and the contribution of 2002
acquisitions, partially offset by volume declines in the Industrial Pump
business. SG&A expenses increased $20.3 million, or 5.8%, during 2002 primarily
due to increased marketing costs. During 2002, management conducted quarterly
progress reviews of the remaining restructuring actions and reversed $1.5
million of the segment's restructuring accruals that were deemed unnecessary.
Additionally, during the fourth quarter of 2002, the Fluid Technology segment
recorded a restructuring charge of $6.0 million,
19

primarily for the reduction of 147 employees and the closure of one facility.
During the fourth quarter of 2001, the segment recorded a $16.0 million
restructuring charge. Refer to the section entitled "Status of Restructuring and
Asset Impairments" and Note 4, "Restructuring and Asset Impairment Charges," in
the Notes to Consolidated Financial Statements for additional information on
this topic. Operating income, excluding goodwill amortization expense increased
$30.9 million, or 14.0%, due to the factors discussed above.

Defense Electronics & Services sales and revenues of $1.51 billion
increased $209.1 million, or 16.0%, compared to 2001. Cost of sales and revenues
increased $99.8 million, or 13.4% from 2001. The increases were primarily
attributable to increased volume across all businesses. SG&A expenses were flat
with prior year. RD&E costs increased $86.8 million, or 26.5%, in 2002 due to
the fulfillment of increased expenditures related to customer contracts across
all businesses. During the fourth quarter of 2002, management reviewed the
remaining restructuring actions and reversed $1.0 million of the segment's
restructuring accruals that were deemed unnecessary. Refer to the section
entitled "Status of Restructuring and Asset Impairments" and Note 4,
"Restructuring and Asset Impairment Charges," in the Notes to Consolidated
Financial Statements for additional information on this topic. Operating income
for 2002 was $21.9 million, or 16.6%, greater than 2001 operating income,
excluding goodwill amortization, due to the factors mentioned above. The Defense
Electronics & Services segment's total backlog was $2.8 billion and $2.6 billion
at December 31, 2002 and 2001, respectively. The Company generally records new
contract awards into backlog when funding has been authorized and appropriated
by the customer. Management utilizes the backlog measurement when analyzing the
operations of the Defense Electronics & Services segment and believes that it is
a good indicator of the future performance of our defense businesses.

Motion & Flow Control recorded sales and revenues of $935.5 million and
cost of sales and revenues of $692.8 million for the year, representing
increases of $36.8 million, or 4.1%, and $26.5 million, or 4.0%, respectively,
over 2001. The increases were primarily due to increased volume in the
automotive fluid handling systems business due to higher North American build
rates in 2002, market share gains in the friction materials business and market
growth in the leisure marine business, partially offset by declines at Aerospace
Controls. SG&A expenses increased $4.9 million, or 6.0%, due to higher marketing
expense and fixed asset losses during 2002, partially offset by decreased
administrative expenses. During the second half of 2002, management reviewed the
remaining restructuring actions and reversed $1.5 million of the segment's
restructuring accruals that were deemed unnecessary. Additionally, during the
fourth quarter of 2002, the Motion & Flow Control segment recorded a
restructuring charge of $3.0 million, primarily for the reduction of 140
employees, the closure of one facility, and the consolidation of selected
functions. During the fourth quarter of 2001, the segment recorded a
restructuring charge of $8.1 million. Refer to the section entitled "Status of
Restructuring and Asset Impairments" and Note 4, "Restructuring and Asset
Impairment Charges," in the Notes to Consolidated Financial Statements for
additional information on this topic. Excluding goodwill amortization expense,
operating income of $122.4 million increased $8.3 million, or 7.3%, from 2001
due to the above mentioned factors.

Electronic Components sales and revenues and cost of sales and revenues
declined $63.5 million, or 9.8%, and $41.8 million, or 9.6%, respectively, from
2001. The declines reflect general softness in all of the segment's markets.
SG&A expenses increased $11.8 million, or 13.5%, during 2002 due to increased
general and administrative costs. During the second half of 2002, management
reviewed the remaining restructuring actions and reversed $8.7 million of the
segment's restructuring accruals that related to favorable completion of planned
actions and the determination that certain planned actions were not economically
feasible. Additionally, during the fourth quarter of 2002, the segment recorded
a restructuring charge of $0.6 million. During 2001, the Company recorded
restructuring and asset impairment charges of $55.2 million and $14.4 million,
respectively. Refer to the section entitled "Status of Restructuring and Asset
Impairments" and Note 4, "Restructuring and Asset Impairment Charges," in the
Notes to Consolidated Financial Statements for additional information on these
topics. Excluding goodwill amortization expense, operating income of $70.4
million was up $44.6 million from 2001 due to the above mentioned factors.
20

YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000:

Fluid Technology sales and revenues of $1.83 billion declined $4.5 million,
or 0.2%, from 2000. Cost of sales and revenues declined $1.6 million, or 0.1%.
The decreases reflect the impact of foreign currency translation and continued
weakness in the industrial pump markets partially offset by higher volume within
the water and wastewater markets. SG&A expenses decreased $11.2 million, or
3.1%, during 2001 due to cost reduction initiatives, and lower marketing
expense. Additionally, during the fourth quarter of 2001, the Fluid Technology
segment recorded a restructuring charge of $16.0 million. Refer to the section
entitled "Status of Restructuring and Asset Impairments" and Note 4,
"Restructuring and Asset Impairment Charges," in the Notes to Consolidated
Financial Statements for additional information on this topic. Operating income
decreased $3.8 million, or 1.8%, due to the factors discussed above.

Defense Electronics & Services sales and revenues of $1.30 billion
decreased $29.8 million, or 2.2%, compared to 2000. The decline was primarily
due to the scheduled wind down of certain large contracts partially offset by
the contribution of new contract revenue. Cost of sales and revenues decreased
$75.2 million, or 9.1%, from 2000 due to lower sales volume, improved margins on
certain mature contracts and higher profitability on new contracts. SG&A
expenses of $98.1 million increased $6.1 million, or 6.6% due to higher
administrative costs. RD&E costs increased $33.0 million, or 11.2%, in 2001 due
to increased spending in most businesses. Operating income for 2001 was $6.3
million, or 5.4%, greater than 2000 operating income due to the factors
mentioned above. The Defense Electronics & Services segment's total backlog was
$2.6 billion and $2.4 billion at December 31, 2001 and 2000, respectively. The
Company generally records new contract awards into backlog when funding has been
authorized and appropriated by the customer. Management utilizes the backlog
measurement when analyzing the operations of the Defense Electronics & Services
segment and believes that it is a good indicator of the future performance of
our defense businesses.

Motion & Flow Control recorded sales and revenues of $898.7 million in
2001, representing an increase of $9.8 million, or 1.1%, over 2000. The increase
is due to automotive market share gains in Europe and North America and sales
growth in the Aerospace Controls business partially offset by softness in the
leisure marine market, the impact of the decline in North American automotive
build rates and the impact of foreign currency translation. During 2001, cost of
sales and revenues increased $12.1 million, or 1.8%, due to increased volume and
start-up costs associated with new European programs at Fluid Handling Systems
partially offset by process improvements at North American Fluid Handling
Systems. SG&A expenses increased $2.1 million, or 2.7%, due to increased
administrative expenses. During 2001, the segment recorded an $8.1 million
restructuring charge. Refer to the section entitled "Status of Restructuring and
Asset Impairments" and Note 4, "Restructuring and Asset Impairment Charges," in
the Notes to Consolidated Financial Statements for additional information on
this topic. Operating income of $109.6 million declined $14.7 million, or 11.8%,
from 2000 due to the above mentioned factors.

Electronic Components sales and revenues were $647.0 million in 2001,
representing a decrease of $127.6 million, or 16.5%, from 2000. The decrease
reflects a downturn in the communications and industrial markets and the
negative impact of foreign currency translation partially offset by revenues
from acquisitions made in 2000 (which combined added approximately $64 million
of incremental sales). Cost of sales and revenues decreased $86.3 million, or
16.5%, during 2001 due to lower sales volume. SG&A expenses declined $34.9
million, or 28.5%, during 2001 due to cost reduction actions and headcount
reductions resulting from normal employee attrition. RD&E expenses of $28.6
million in 2001 increased $2.1 million, or 7.9% due to increased spending. Also,
during 2001, the Company recorded restructuring and asset impairment charges of
$55.2 million and $14.4 million, respectively. Refer to the section entitled
"Status of Restructuring and Asset Impairments" and Note 4, "Restructuring and
Asset Impairment Charges," in the Notes to Consolidated Financial Statements for
additional information on these topics. Operating income of $16.3 million was
down $82.7 million, or 83.5%, from 2000 due to the above mentioned factors.

21

STATUS OF RESTRUCTURING
AND ASSET IMPAIRMENTS

2002 RESTRUCTURING ACTIVITIES
During the fourth quarter of 2002 the Company recorded a $9.6 million
restructuring charge primarily for the closure of two facilities and the
severance of 292 persons. Severance of $8.5 million represents a majority of the
charge and lease payments and other costs represent the remainder.

Listed below, by business segment, is background information on the 2002
restructuring plan (in millions).

The actions within the Fluid Technology segment represent a reduction of
its cost structure that management deemed necessary in response to continued
weakness within certain of the segment's markets. Planned measures include the
closure of one facility in Fairfield, N.J. and the termination of 147 persons,
comprised of 78 office workers, 65 factory workers and four management
employees.

The restructuring plan within the Motion & Flow Control segment was driven
by the anticipated loss of certain platforms in the automotive fluid handling
systems business during 2003 and the resulting excess capacity. Planned actions
include the closure of one facility in Rochester, N.Y., the consolidation of
manufacturing and administrative processes, and the termination of 140
employees, comprised of 40 office workers, 97 factory workers and three
management employees.

The actions within the Electronic Components segment represent cost control
actions required by continuing difficult market conditions. These actions
include the termination of five employees, comprised of three office workers and
two management employees.

The following table displays a rollforward of the restructuring accruals
for the 2002 restructuring program (in millions):

As of December 31, 2002, remaining actions under restructuring activities
announced during 2002 were to close two facilities, and reduce headcount by 232
persons. All of the actions contemplated by the 2002 restructuring program will
be completed in 2003. Some severance run-off payments will occur in 2004 and
closed facility costs will continue through 2007. Future restructuring
expenditures will be funded with cash from operations, supplemented, as
required, with commercial paper borrowings.

The projected future cash savings from the 2002 restructuring plan are
approximately $7 million in 2003 and approximately $46 million between 2004 and
2007. The savings represents lower salary and wage expenditures and decreased
facility operating costs. The impact will be reflected in cost of sales and
revenues and selling, general and administrative expenses.

2001 RESTRUCTURING ACTIVITIES

On December 14, 2001, the Company announced a restructuring program to
reduce structural costs and improve profitability whereby the Company recorded a
charge of $83.3 million related to the closure of five facilities, the
discontinuance of 21 products (10 in the Switch product group and 11 in the
Connectors group), the severance of 3,400 persons and other asset impairments.
The cash portion of the charge of $61.0 million primarily relates to severance
and lease termination costs. The non-cash portion of the charge of $22.3 million
primarily relates to machinery and equipment that became impaired as a result of
the announced plans.

22

Listed below, by business segment, is background information on the 2001
restructuring plan (in millions).

In 2001, sales in the Electronic Components segment decreased $127.6
million, or 16.5%, and operating income, excluding restructuring, decreased
$13.1 million, or 13.2%. Excluding the contribution of acquisitions made in
2001, sales decreased approximately $192 million. The decrease was primarily due
to a downturn in the communication and industrial markets. In addition,
management expected further sales declines in 2002, specifically in the
communications, industrial, and commercial aircraft markets.

The combination of the downturn in these markets and the businesses
acquired in 2000 and late 1999 resulted in excess capacity and prompted
management to seek opportunities to reduce costs. As a result of this review,
management decided to consolidate manufacturing functions as well as other
administrative tasks throughout the segment. These planned actions included the
outsourcing of production operations from Weinstadt, Germany to third party
suppliers in Poland and Hungary, the transfer of ten product lines from five
locations in North America and Europe (Loveland, Colorado; Santa Ana,
California; Weinstadt, Germany; Basingstoke, UK; and Dole, France) to two
locations in China (Shenzhen and Tianjin), the consolidation of European
administrative functions, the transfer of production operations from Santa Ana,
California to Nogales, Mexico, the closure of manufacturing facilities in Eden
Prairie, Minnesota and Watertown, Massachusetts and other smaller actions
consisting primarily of the elimination of administrative functions. In
addition, management also decided to discontinue 21 older connector and switch
products. Revenue in 2001 from these products totaled $29.3 million.

The above planned actions included the termination of 2,753 persons,
comprised of 2,395 factory workers, 348 office workers and 10 management
employees, and resulted in a cash charge of $37.0 million (which included $33.0
million for severance) and an asset impairment charge of $18.2 million
(primarily for machinery and equipment that will be disposed of as a result of
the restructuring activities).

Actions within the Fluid Technology segment, the Motion & Flow Control
segment and Corporate Headquarters were identified as cost improvement
opportunities. Processes and functions were identified that could be outsourced,
performed at other existing facilities, or eliminated as redundant. These
measures were prompted primarily by management's efforts to reduce costs and
their projections of no recovery in the Industrial Pumps businesses and
anticipated declines in worldwide automotive build rates.

The planned actions within the Fluid Technology segment included the
outsourcing of manufacturing functions in City of Industry, California, Seneca
Falls, New York and Ashland, Pennsylvania to third party suppliers in the United
States, Mexico and China, the consolidation of tasks throughout the segment and
the closure of a foundry in Nanjing, China. These actions incorporated the
termination of 436 persons, comprised of 236 factory workers, 189 office workers
and 11 management employees, and resulted in a cash charge of $13.1 million
(which included $10.5 million for severance) and asset impairment charges of
$2.9 million (primarily for machinery and equipment that was scrapped).

The planned actions in the Motion & Flow Control segment included the
closure of a manufacturing facility in Costa Mesa, California, where the
operations were to be consolidated into three existing facilities, the closure
of a

23

manufacturing facility in Saffron Walden, England, where the operations were to
be consolidated into a facility in Denmark, the closure of a sales office in
Germany and the consolidation of other administrative tasks. These actions
included the projected termination of 183 persons comprised of 144 factory
workers, 28 office workers and 11 management employees and resulted in a cash
charge of $7.3 million (which included $4.9 million for severance) and asset
impairment charges of $0.8 million (primarily for machinery and equipment that
was discarded).

The planned actions at the Company's corporate headquarters and other
shared service facilities consisted of the consolidation of administrative tasks
which included the termination of 28 persons comprised of 26 office workers and
two management employees and resulted in a cash charge of $3.6 million (which
included $3.5 million for severance) and an asset impairment charge of $0.4
million.

During 2002 and 2001 the Company funded restructuring activities with cash
from operations. The Company plans to fund future cash requirements for
restructuring activities with cash from operations, supplemented, as required,
by commercial paper borrowings.

The following table displays a rollforward of the restructuring accruals
for the 2001 restructuring program (in millions):

During the third and fourth quarters of 2002, $1.7 million and $10.1
million of restructuring accruals were reversed into income as a result of
quarterly reviews of the Company's remaining restructuring actions,
respectively. The reversals primarily reflect less than anticipated severance
costs on completed actions at each of the segments, the decision not to transfer
five product lines (from Santa Ana, California; Weinstadt, Germany; Dole,
France, and Basingstoke, UK, to Shenzhen and Tianjin, China), as supply chain
issues eliminated the financial viability of the transfers, and the decision to
continue partial operations at one of the Electronic Component's facilities. In
addition, management determined that one facility within the F