Coltec Industries Inc, et al. – ‘S-4/A’ on 8/17/98

As of:  Monday, 8/17/98   ·   Accession #:  950123-98-7721   ·   File #s:  333-53005, -01, -02, -03, -04, -05, -06, -07, -08, -09, -10, -11, -12, -13, -14, -15, -16, -17

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Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Amendment No. 4 to S-4                               143    742K 
 2: EX-23.2     Consent of Arthur Andersen LLP                         1      9K 

S-4/A   —   Amendment No. 4 to S-4
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 17, 1998 

                                                      REGISTRATION NO. 333-53005
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 4 

TO
Form S-4
REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933

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

3590
(Primary Standard Industrial Classification Code Number)

                                                        [Enlarge/Download Table]

   (Exact name of registrant as   (State or other jurisdiction of   (I.R.S. Employer  
    specified in its charter)     incorporation or organization)   Identification No.)
                                                                                      
Coltec Industries Inc                 Pennsylvania                     13-1846375     
AMI Industries, Inc.                  Colorado                         84-1045236     
CII Holdings Inc                      Delaware                         13-3314412     
Coltec Canada Inc                     Delaware                         13-3887111     
Coltec Holdings Inc                   Delaware                         52-1571894     
Coltec Industrial Products Inc        Delaware                         23-2825769     
Coltec International Services Co      Delaware                         13-3895074     
Coltec North Carolina Inc             North Carolina                   58-2043890     
Coltec Technical Services Inc         Delaware                         13-3314406     

                                                        [Enlarge/Download Table]

   (Exact name of registrant as  (State or other jurisdiction of   (I.R.S. Employer  
    specified in its charter)    incorporation or organization)   Identification No.)
                                                                                     
Delavan Inc                          Delaware                         42-1467902     
Garlock Inc                          Ohio                             13-2838953     
Garlock International Inc            Delaware                         13-3035538     
Garlock Overseas Corporation         Delaware                         16-1010822     
Haber Tool Inc                       Michigan                         38-3147840     
Jamco Products LLC                   Texas                            76-0559044     
Menasco Aerosystems Inc              Delaware                         13-3799120     
Stemco Inc                           Texas                            06-0943080     
Walbar Inc                           Delaware                         04-2895576     

ROBERT J. TUBBS, ESQ. 
3 COLISEUM CENTRE 
2550 WEST TYVOLA ROAD 
CHARLOTTE, N.C. 28217 
(704) 423-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service) 

Copy to:

GEORGE W. BILICIC, JR., ESQ.
CRAVATH, SWAINE & MOORE 
WORLDWIDE PLAZA 
825 EIGHTH AVENUE 
NEW YORK, NY 10019
(212) 474-1000
------------------------------------
   Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.                

If the securities being registered on this Form are to be offered in    
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. [ ]                             

If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, check the following box and   
list the Securities Act registration statement number of the earlier effective  
registration statement for the same offering. [ ]..........................     

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. [ ]..........................                            
------------------------------------
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME     
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), 
MAY DETERMINE.                                                                  
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PROSPECTUS                                                                      

$300,000,000

Offer for all Outstanding 7 1/2% Senior Notes Due 2008
of
COLTEC INDUSTRIES INC 
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK

CITY TIME ON SEPTEMBER 15, 1998, UNLESS EXTENDED. 

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

Coltec Industries Inc ("Coltec" or the "Company") hereby offers (the    
"Exchange Offer"), upon the terms and subject to the conditions set forth in    
this Prospectus and the accompanying Letter of Transmittal (the "Letter of      
Transmittal"), to exchange up to $300.0 million aggregate principal amount of   
its 7 1/2% Series B Senior Notes Due 2008 (the "Exchange Notes") that have been 
registered under the Securities Act of 1933, as amended (the "Securities Act"), 
pursuant to a Registration Statement (as defined herein) of which this          
Prospectus, constitutes a part, for a like principal amount of its 7 1/2% Senior
Notes Due 2008 (the "Outstanding Notes" and, together with the Exchange Notes,  
the "Senior Notes") with the holders thereof. The terms of the Exchange Notes   
are identical in all material respects to the Outstanding Notes except for      
certain transfer restrictions and registration rights relating to the           
Outstanding Notes and except that, if the Exchange Offer is not consummated by  
October 13, 1998, the interest rate borne by the Outstanding Notes will increase
by amounts specified herein until the Exchange Offer is consummated. The        
Exchange Notes will evidence the same indebtedness as the Outstanding Notes and 
will be issued under and entitled to the same benefits under the Indenture (as  
defined herein) as the Outstanding Notes. In addition, the Exchange Notes and   
the Outstanding Notes will be treated as one series of securities under the     
Indenture. The Outstanding Notes were issued on April 16, 1998 (the "Issue      
Date"), pursuant to an offering (the "Original Senior Notes Offering") exempt   
from registration under the Securities Act.                                     

    Interest on the Exchange Notes will be payable on April 15 and October 15 of
each year, commencing October 15, 1998. The Exchange Notes will be redeemable at
any time, in whole or in part, at the option of the Company at the redemption   
price set forth herein and will not be entitled to the benefit of any sinking   
fund. The Exchange Notes will be senior obligations of the Company and will rank
pari passu in right of payment with all existing and future senior obligations  
of the Company (including indebtedness under the Amended Credit Agreement (as   
defined herein)) and will rank senior in right of payment to all subordinated   
obligations of the Company. As of March 29, 1998 and December 31, 1997, on a pro
forma basis after giving effect to the Original Senior Notes Offering and the   
concurrent TIDES Offering (as defined herein) (collectively the "Offerings") and
the application of the estimated net proceeds therefrom to reduce indebtedness  
under the Amended Credit Agreement, the Company would have had approximately    
$424.5 million and $323.9 million of other senior indebtedness, respectively    
($372.5 million and $262.0 million, respectively, of which would have been      
indebtedness outstanding under the Amended Credit Agreement). The Exchange Notes
will be unconditionally guaranteed, jointly and severally, on a senior basis, by
the Subsidiary Guarantors (as defined herein). The Subsidiary Guarantees (as    
defined herein) will be senior obligations of the Subsidiary Guarantors and will
rank pari passu in right of payment with all existing and future senior         
obligations of the Subsidiary Guarantors (including guarantees of indebtedness  
under the Amended Credit Agreement) and will rank senior to all subordinated    
obligations of such Subsidiary Guarantors. The Subsidiary Guarantees may be     
released without action on the part of the holders of Senior Notes in certain   
circumstances. See "Description of the Senior Notes -- Guarantees". As of March 
29, 1998 and December 31, 1997, after giving effect to the Offerings and the    
application of the estimated net proceeds therefrom to reduce indebtedness under
the Amended Credit Agreement, the Subsidiary Guarantors would have had          
approximately $372.5 and $262.0 million of other senior indebtedness,           
respectively (all of which would have been guarantees of indebtedness under the 
Amended Credit Agreement). The Indenture does not contain any limitation on the 
incurrence of additional indebtedness by the Company or its subsidiaries.       

    The Exchange Notes and the Subsidiary Guarantees will be secured, subject to
the provisions of the Amended Collateral Documents (as defined herein), equally 
and ratably with the indebtedness of the Company and the Subsidiary Guarantors  
under the Amended Credit Agreement and related documents and liability in       
connection with interest rate protection and other hedging agreements           
contemplated by the Amended Credit Agreement, by a security interest in the     
Collateral (as defined herein). The Collateral may be released without action on
the part of the holders of Senior Notes in certain circumstances. See           
"Description of the Senior Notes -- Collateral". As of March 29, 1998 and       
December 31, 1997, on a pro forma basis after giving effect to the Offerings and
the application of the estimated net proceeds therefrom to reduce indebtedness  
under the Amended Credit Agreement, the Company and its subsidiaries would have 
had approximately $372.5 million and $262.0 million of other secured            
indebtedness outstanding, respectively (all of which would have been            
indebtedness outstanding under the Amended Credit Agreement). See "Description  
of the Senior Notes".                                                           

   The Company will accept for exchange any and all Outstanding Notes that are
validly tendered and not withdrawn on or prior to midnight, New York City time, 
on the date the Exchange Offer expires (the "Expiration Date"), which will be   
September 16, 1998, unless the Exchange Offer is extended. Tenders of           
Outstanding Notes may be withdrawn at any time prior to midnight, New York City 
time, on the Expiration Date. The Exchange Offer is not conditioned upon any    
minimum principal amount of Outstanding Notes being tendered for exchange.      
Outstanding Notes may be tendered only in integral multiples of $1,000. See "The
Exchange Offer".                                                                

For each Outstanding Note accepted for exchange, the holder of such     
Outstanding Notes will receive an Exchange Note having a principal amount equal 
to that of the surrendered Outstanding Note. Interest on the Exchange Notes will
accrue from the last interest payment date on which interest was paid on the    
Outstanding Notes surrendered in exchange therefor, or if no interest has been  
paid on the Outstanding Notes surrendered in exchange therefor, or if no        
interest has been paid on the Outstanding Notes, from the Issue Date. Holders of
Outstanding Notes whose Outstanding Notes are accepted for exchange will not    
receive any interest payment in respect of interest on such Outstanding Notes   
otherwise payable on any interest payment date the record date for which occurs 
on or after the consummation of the Exchange Offer. Consequently, holders who   
exchange their Outstanding Notes for Exchange Notes will receive the same       
interest payment on October 15, 1998 (the first interest payment date with      
respect to the Outstanding Notes and the Exchange Notes) that they would have   
received had they not accepted the Exchange Offer. See "the Exchange Offer --   
Interest on the Exchange Notes".                                                

                                                  (Cover continued on next page)
------------------

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO
TENDER THEIR OUTSTANDING NOTES FOR EXCHANGE NOTES IN THE EXCHANGE OFFER, SEE
"RISK FACTORS" BEGINNING ON PAGE 10.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES 
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. 

The date of this Prospectus is August 18, 1998

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(Cover continued from previous page)                                            

  The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as   
defined herein). See "The Exchange Offer -- Consequences of Exchanging          
Outstanding Senior Notes" for a discussion of the Company's belief, based on    
interpretations by the staff of the Securities and Exchange Commission (the     
"SEC" or the "Commission") as set forth in no-action letters issued to third    
parties, as to the transferability of the Exchange Notes upon satisfaction of   
certain conditions. Each broker-dealer that receives Exchange Notes for its own 
account pursuant to the Exchange Offer must acknowledge that it will deliver a  
prospectus in connection with any resale of such Exchange Notes. The Letter of  
Transmittal states that by so acknowledging and by delivering a prospectus, a   
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or         
supplemented from time to time, may be used by a broker-dealer in connection    
with resales of Exchange Notes received in exchange for Outstanding Notes where 
such Outstanding Notes were acquired by such broker-dealer as a result of       
market-making activities or other trading activities. The Company has agreed    
that for a period of 180 days after the Expiration Date, it will make this      
Prospectus available to any broker-dealer for use in connection with any resale 
of Exchange Notes. See "Plan of Distribution".                                  

    There is no established trading market for the Exchange Notes, and there can
be no assurance regarding the future development of a market for the Exchange   
Notes, or the ability of the holders of the Exchange Notes to sell their        
Exchange Notes or the price at which such holders may be able to sell their     
Exchange Notes. The Company does not currently intend to list the Exchange Notes
on any securities exchange or to seek approval for quotation of the Exchange    
Notes on any securities exchange or to seek approval for quotation of the       
Exchange Notes through any automated quotation system. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Exchange  
Notes.                                                                          

The Company will not receive any proceeds for the Exchange Offer. The   
Company will pay all of the expenses incident to the Exchange Offer. In the     
event the Company terminates the Exchange Offer and does not accept for exchange
any Outstanding Notes, the Company will promptly return the Outstanding Notes to
the holders thereof. See "The Exchange Offer".                                  

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AVAILABLE INFORMATION 

Coltec is subject to the informational requirements of the Securities 
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance        
therewith files reports and other information with the Securities and Exchange  
Commission (the "SEC" or the "Commission"). Such reports, proxy statements and  
other information filed by Coltec with the Commission may be inspected and      
copied at the public reference facilities of the Commission at Room 1024,       
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the     
Commission's regional offices at 7 World Trade Center, 13th floor, New York, New
York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite    
1400, Chicago, Illinois 60661. Such material may also be accessed electronically
by means of the Commission's home page on the Internet at http://www.sec.gov.   
Such reports and other information may also be inspected at the offices of the  
New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 
10005 and the Pacific Exchange Incorporated (the "PSE"), 301 Pine Street, Suite 
1104, San Francisco, California 94104.                                          

    This Prospectus constitutes a part of a registration statement on form S-4
(the "Registration Statement") filed by the Company with the Commission under   
the Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the        
Registration Statement and the exhibits and schedules thereto and reference is  
hereby made to the Registration Statement and exhibits and schedules thereto for
further information with respect to the Company and the securities offered      
hereby. Statements contained herein concerning the provisions of any documents  
filed as an exhibit to the Registration Statement or otherwise filed with the   
Commission are not necessarily complete, and in each instance reference is made 
to the copy of such document so filed. Each such statement is qualified in its  
entirety by such reference.                                                     

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

  The following documents filed by Coltec pursuant to the Exchange Act are
incorporated in this Prospectus by reference:                                   

          (i)   Annual Report on Form 10-K for the year ended December 31, 1997;

       (ii)   Quarterly Report on Form 10-Q for the period ended March 29,
1998;                                                                 

      (iii)  Quarterly Report on Form 10-Q for the period ended June 28,
1998;                                                                 

(iv)  Current Report on Form 8-K, dated March 30, 1998;     

(v)  Current Report on Form 8-K, dated April 8, 1998;       

(vi)  Current Report on Form 8-K, dated April 14, 1998; and 

(vii) Current Report on Form 8-K, dated May 15, 1998.       

     All documents filed by the Company with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the Exchange Offer shall be deemed to be        
incorporated by reference in this Prospectus and to be a part of this Prospectus
from the date of filing of such documents.                                      

Any statement contained in a document, all or a portion of which is   
incorporated or deemed to be incorporated by reference herein, or contained in  
this Prospectus, shall be deemed to be modified or superseded for purposes of   
this Prospectus to the extent that a statement contained herein or in any       
subsequently filed document which also is or is deemed to be incorporated by    
reference herein modifies or supersedes such statement. Any such statement so   
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.                                        

The Company will provide without charge to each person to whom this   
Prospectus is delivered, on the written or oral request of any such person, a   
copy of any or all of the above documents incorporated or deemed to be          
incorporated herein by reference (other than exhibits to such documents, unless 
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates) and any other information requested thereby as    
described above under "Available Information". Written or oral requests should  
be directed to the Company's principal executive office at: Coltec Industries   
Inc, 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina 28217, 
Attention: Corporate Secretary (telephone (704) 423-7000).                      

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PROSPECTUS SUMMARY

   The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,    
including the notes thereto, appearing elsewhere in this Prospectus. Certain    
capitalized terms used but not defined are used as defined elsewhere in this    
Prospectus.                                                                     

THE COMPANY 

     Coltec and its consolidated subsidiaries manufacture and sell a diversified
range of highly engineered aerospace and industrial products primarily in the   
United States, Canada and Europe. Coltec's operations are conducted through its 
two principal segments -- Aerospace and Industrial. Through its Aerospace       
segment, which in 1997 accounted for approximately 42% of total Company sales   
and approximately 37% of total Company operating profit, Coltec is a leading    
manufacturer of landing gear systems, engine fuel controls, flight attendant and
cockpit seats, turbine blades, fuel injectors, nozzles and related components   
for commercial and military aircraft. Through its Industrial segment, which in  
1997 accounted for approximately 58% of total Company sales and approximately   
63% of total Company operating profit, Coltec is a leading manufacturer of      
industrial seals, gaskets, packing products, self-lubricating bearings and oil  
seals and hubodometers for trucks and trailers and is a producer of             
technologically advanced spray nozzles for agricultural, home heating and       
industrial applications. Coltec also produces high-horsepower diesel engines for
naval ships and diesel, gas and dual-fuel engines for electric power plants and 
produces air compressors and tooling for industrial applications.               

The Company derived approximately 50% of sales in 1997 from its       
aftermarket, or parts and services, business. Aftermarket sales tend to generate
significantly higher margins and tend to be less affected by general economic   
cycles than the Company's sales of products to original equipment manufacturers 
("OEMs"). In addition, management believes the Company is benefiting from       
several other industry trends which will help the Company achieve its growth and
operating goals. These trends include strong growth in world airline fleets,    
preference by OEMs to source complex integrated systems rather than component   
parts, an increased preference to consolidate purchasing of consumable products 
from a single full line supplier and customer demand for integrated sales and   
service providers.                                                              

In 1997, Coltec had sales and EBITDA (as defined herein) of $1,314.9  
million and $236.2 million, an increase of 13.4% and 22.0%, respectively, from  
1996. Year end 1997 backlog increased 29.1% to $875.6 million from $678.3       
million at year end 1996. For the quarter ended March 29, 1998, Coltec had sales
and EBITDA of $374.4 million and $65.7 million, respectively, an increase of    
21.1% and 23.0%, respectively, from the first quarter of 1997. Backlog at the   
end of the first quarter of 1998 increased 10.6% to $968.2 million from $875.6  
million at year end 1997. Coltec's common stock is listed on the NYSE, and based
on the closing price of $20 1/4 per share on July 14, 1998, the Company had a   
total equity market capitalization of approximately $1,338.5 million.           

BUSINESS STRATEGY 

    The Company's strategy is to develop and maintain market leading positions
and attractive margins for its products through technological innovation, cost  
efficiencies, product differentiation and superior quality and service. The     
Company emphasizes targeted development of highly engineered, value-added       
products designed to meet specific customer requirements. This emphasis enables 
the Company to maintain close, interactive relationships with major aircraft    
manufacturers as well as the Company's principal industrial customers and to    
develop new products in response to customer needs. Coltec views its superior   
customer responsiveness as one of its key competitive strengths. Successful     
introduction of new products, cost reductions, productivity improvements and    
selected divestitures have helped the Company maintain operating margins        
averaging more than 12.5% over the last five years.                             

    Through "Coltec 2000", the Company's three-year growth and operating plan,
the Company has set specific growth and operating targets focused on achieving  
annual revenues of $2 billion by the year 2000 while maintaining the quality of 
earnings. The plan calls for substantial growth internally, complemented by     
strategic                                                                       

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acquisitions which extend product offerings of the Company's existing businesses
and leverage the Company's existing distribution network. The key elements of   
the plan are as follows:                                                        

-  Focus on Aftermarket -- For the year ended December 31, 1997,      
approximately 50% of the Company's sales were derived from the    
 aftermarket. The Company's products sold in the aftermarket include
      industrial seals, hub systems and a variety of aftermarket parts used in
      the maintenance of engines, compressors, pumps and gas turbines. A broad
       and fragmented buyer base coupled with the critical nature of replacement
parts generates sales with generally higher margins than sales to 
     original equipment manufacturers. In addition, because the products are
       consumable in nature and are replaced over time, the aftermarket provides
a stable source of income.                                        

-  Develop New Products -- The Company believes that responsiveness to
     customer demands is a critical success factor in both its Aerospace and
     Industrial markets. As a result, the Company has undertaken a number of
 initiatives to reduce the time and cost of bringing new products to
   market and has established a long term objective of generating 50% of
    sales from products introduced within the prior five years. Recent new
  product and application introductions have included (i) landing gear
     systems for the Boeing 777, (ii) Power$ync II computerized controls for
      compressors, (iii) QuickSet(TM) 9001 packing systems and Tandem Seal(TM)
     industrial sealing products, (iv) the Raindrop Ultra agricultural spray
      nozzle, (v) new versions of FADEC electronic fuel controls for aircraft,
     (vi) fuel injectors for the Rolls-Royce RB211 which allowed the Company
   to enter the large jet engine market and (vii) the Company's Chandler
   Evans Control Systems Division's agreement to develop and utilize its
    advanced Variable Displacement Vane Pump technology in aircraft engine
applications.                                                     

-  Focus on Globalization -- For the year ended December 31, 1997,    
     approximately 10% of the Company's revenues were generated from outside
       of the United States and Canada. As part of its Coltec 2000 strategy, the
  Company seeks to grow its international operations, through a mix of
      internal growth and acquisitions. Given the global nature of many of the
markets in which the Company competes, management believes that an
increased global presence will lead to substantial operating      
     efficiencies, as fixed development and operating costs can be amortized
      over a greater sales base. In terms of internal growth, the Company will
   emphasize the development and expansion of its international customer
base, through the sale of products such as the fuel injectors to  
     Rolls-Royce for the RB211 and the BMW aircraft engines. The Company has
established sales and distribution capabilities in Asian and South
American countries and will pursue international growth through   
 complementary acquisitions such as its recent acquisition of Groupe
Carbone Lorraine's sealing products business.                     

     -  Total Systems Sourcing -- Management believes that many of the Company's
     largest customers, including The Boeing Company ("Boeing"), are placing
       increased emphasis on suppliers which are capable of providing integrated
       systems rather than component parts. The Company believes that its design
       and engineering competencies and cellular manufacturing processes provide
 a competitive advantage in the design and manufacture of integrated
     systems and are areas in which the Company will continue to invest. For
      example, in 1995 the Company supplied Boeing with non-integrated landing
      gear systems. However, in 1996 with the Boeing 737 and 757, Coltec began
     providing fully integrated landing gear which includes the installation
    of wheels, tires, brakes, hydraulics, electrical harnesses, lights and
  sensing systems on the base landing gear. In 1997, the Company began
 providing fully integrated landing gear for the Boeing 777 aircraft
    thereby increasing revenue by more than 20% per unit. The Company will
       begin providing fully integrated landing gear for the Boeing 767 in 1998.

  -  Productivity Initiatives -- A number of productivity initiatives have
     been implemented which have been designed to reduce lead times, curtail
     scrap and enhance throughput, which are expected among other things, to
       improve inventory turns. Such initiatives have included the consolidation
 of multiple product lines into common production facilities and the
    relocation of the Company's Delavan Spray Technologies Division to new
    state-of-the-art facilities near major transportation hubs. Cycle time
reductions have reduced required inventory levels while improving 
       customer responsiveness. For example, during 1997, Walbar Arizona reduced
   cycle times on damper seal production by approximately 70%, while the
       Company's Menasco Division reduced production time for Boeing 737 landing
gear main cylinders from                                          

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       20 weeks to 12. The Company intends to continue to enhance its production
processes through optimization of workflow, investment in upgraded
  manufacturing technologies and robotics, and related initiatives. In
      addition, all of the Company's major divisions are in the late stages of
implementing new enterprise reporting systems. The new systems are
   enhancing shop floor reporting, materials management, order entry and
      cost evaluation and control. Management believes that these programs are
  leading to productivity and efficiency improvements and are having a
       positive impact on operating performance. The new enterprise systems have
the added benefit of addressing year 2000 systems issues. See     
      "Management's Discussion and Analysis of Financial Condition and Results
of Operations".                                                   

   Coltec is a Pennsylvania corporation with its principal executive offices
located at 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina  
28217. The telephone number of Coltec is (704) 423-7000.                        

TIDES OFFERING

    Concurrently with the Original Senior Notes Offering, Coltec Capital Trust
(the "Trust") offered and sold, by means of a separate offering circular (the   
"TIDES Offering"), 3,000,000 5 1/4% Convertible Preferred Securities (the       
"Convertible Preferred Securities"), liquidation preference $50 per Convertible 
Preferred Security, which are guaranteed to the extent set forth therein by, and
convertible into common stock of, the Company. The Company issued to the Trust  
5 1/4% Convertible Subordinated Deferrable Interest Debentures Due 2028 (the    
"TIDES Debentures"), which have an aggregate principal amount, interest,        
conversion and other terms substantially similar or analogous to those of the   
Convertible Preferred Securities. Indebtedness under the TIDES Debentures is    
unsecured and subordinated to the Senior Notes and all other Senior Debt (as    
defined in the Indenture relating to the TIDES Debentures) of the Company.      

RECENT DEVELOPMENT

     On May 15, 1998, the Company completed the previously-announced sale of the
capital stock of its Holley Performance Products subsidiary ("Holley") to       
Kohlberg & Co., L.L.C., a private merchant banking firm located in Mount Kisco, 
New York, for $100 million in cash. The proceeds from this acquisition were     
applied toward reducing debt. For 1997, Holley had gross revenues and operating 
income of approximately $99.0 million and $8.0 million, respectively.           

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THE EXCHANGE OFFER

The Exchange Offer relates to the exchange of up to $300.0 million    
aggregate principal amount of Outstanding Notes for an equal aggregate principal
amount of Exchange Notes. The Exchange Notes will evidence the same indebtedness
as the Outstanding Notes and will be issued under and entitled to the same      
benefits as the Outstanding Notes under the Indenture (the "Indenture"), dated  
as of April 16, 1998 among the Company, the Subsidiary Guarantors and Bankers   
Trust Company, as Trustee (the "Trustee"). In addition, the Exchange Notes and  
the Outstanding Notes will be treated as one series of securities under the     
Indenture.                                                                      

Securities Offered.........  Up to $300.0 million aggregate principal amount of 
                           7 1/2% Senior Exchange Notes Due 2008, which have
                             been registered under the Securities Act. The terms
                             of the Exchange Notes are identical in all material
                      respects to the Outstanding Notes except for
                        certain transfer restrictions and registration
                             rights relating to the Outstanding Notes and except
                           that, if the Exchange Offer is not consummated on
                         or prior to October 13, 1998, the interest rate
                         borne by the Outstanding Notes will increase by
                           amounts specified herein until the Exchange Offer
                        is consummated. See "Description of the Senior
                          Notes -- Registered Exchange Offer; Registration
Rights".              

The Exchange Offer.........  The Exchange Notes are being offered in exchange   
                          for a like principal amount of Outstanding Notes
                             validly tendered pursuant to the Exchange Offer. As
                         of the date hereof, $300.0 million in aggregate
                   principal amount of Outstanding Notes are
                          outstanding. The Company will issue the Exchange
                            Notes to tendering holders of Outstanding Notes on
                             or promptly after the Expiration Date. The issuance
                          of the Exchange Notes is intended to satisfy the
                     obligations of the Company contained in the
                          Registration Rights Agreement. For procedures on
                 tendering, see "The Exchange Offer" and
                        "Description of the Senior Notes -- Registered
               Exchange Offer; Registration Rights".

Expiration of the                                                               
Exchange Offer...........  Midnight, New York City time, on September 16,   
                         1998, unless the Exchange Offer is extended, in
                         which case the term "Expiration Date" means the
                             latest date and time to which the Exchange Offer is
                           extended. See "The Exchange Offer -- Terms of the
                         Exchange Offer; Period of Tendering Outstanding
Notes".               

Tenders; Withdrawal........  The tender of Outstanding Notes pursuant to the    
                           Exchange Offer may be withdrawn at any time prior
                           to the Expiration Date. Any Outstanding Notes not
                      accepted for exchange for any reason will be
                          returned without expense to the tendering holder
                      thereof as promptly as practicable after the
                          expiration or termination of the Exchange Offer.

Conditions to the                                                               
Exchange Offer...........  The Exchange Offer shall not be subject to any   
                             conditions, other than that the Exchange Offer does
                      not violate applicable law or any applicable
                        interpretation of the staff of the Commission.
                           There can be no assurance that any such condition
                           will not occur. Holders of Outstanding Notes will
                           have certain rights under the Registration Rights
                             Agreement should the Company fail to consummate the
                            Exchange Offer. See "The Exchange Offer -- Certain
            Conditions to the Exchange Offer".

United States Taxation                                                          
 Considerations...........  The exchange pursuant to the Exchange Offer should
                       not be a taxable event for Federal income tax
                 purposes. See "United States Taxation".

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Exchange Agent.............  Bankers Trust Company, the Trustee under the       
                          Indenture, is serving as the exchange agent (the
                           "Exchange Agent") in connection with the Exchange
Offer.                

Use of Proceeds............  There will be no cash proceeds payable to the      
                         Company from the issuance of the Exchange Notes
                     pursuant to the Exchange Offer. See "Use of
                            Proceeds" for a description of the use of proceeds
                     from the issuance of the Outstanding Notes.

CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES

  Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions of the Indenture regarding transfer and exchange of the          
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as 
set forth in the legend thereon as a consequence of the issuance of the         
Outstanding Notes pursuant to exemptions from, or in transactions not subject   
to, the registration requirements of the Securities Act and applicable state    
securities laws. In general, the Outstanding Notes may not be offered or sold,  
unless registered under the Securities Act, except pursuant to an exemption     
from, or in a transaction not subject to, the Securities Act and applicable     
state securities laws. The Company does not currently anticipate that it will   
register Outstanding Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third  
parties, the Company believes that Exchange Notes issued pursuant to the        
Exchange Offer in exchange for Outstanding Notes may be offered for resale,     
resold or otherwise transferred by holders thereof (other than any such holder  
which is an "affiliate" of the Company within the meaning of Rule 405 under the 
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no       
arrangement with any person to participate in the distribution of such Exchange 
Notes. However, the Company does not intend to request the Commission to        
consider, and the Commission has not considered, the Exchange Offer in the      
context of a no-action letter and there can be no assurance that the staff of   
the Commission would make a similar determination with respect to the Exchange  
Offer as in such other circumstances. Each holder, other than a broker-dealer,  
must acknowledge that (i) the Exchange Notes received by such holder will be    
acquired in the ordinary course of its business, (ii) at the time of the        
consummation of the Exchange Offer such holder will have not engaged in, and    
does not intend to engage in, a distribution of Exchange Notes and has no       
arrangement or understanding to participate in a distribution of Exchange Notes 
and (iii) such holder is not an affiliate of the Company within the meaning of  
Rule 405 of the Securities Act or if it is such an affiliate, that it will      
comply with the registration and prospectus delivery requirements of the        
Securities Act, to the extent applicable. If any holder is an affiliate of the  
Company, is engaged in or intends to engage in or has any arrangement or        
understanding with respect to the distribution of the Exchange Notes to be      
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the  
applicable interpretations of the staff of the Commission and (ii) must comply  
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives     
Exchange Notes for its own account pursuant to the Exchange Offer must          
acknowledge that it will deliver a prospectus in connection with any resale of  
such Exchange Notes. The Letter of Transmittal states that by so acknowledging  
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This           
Prospectus, as it may be amended or supplemented from time to time, may be used 
by a broker-dealer in connection with resales of Exchange Notes received in     
exchange for Outstanding Notes, where such Outstanding Notes were acquired by   
such broker-dealer as a result of market-making activities or other trading     
activities. The Company has agreed that, for a period of 180 days after the     
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution". However, to 
comply with state securities laws, the Exchange Notes may not be offered or sold
in any state unless they have been registered or qualified for sale in such     
state or an exemption from registration or qualification is available and is    
complied with. The offer and sale of the Exchange Notes to "qualified           
institutional buyers" (as such term is defined under Rule 144A of the Securities
Act) is generally exempt from registration or qualification under state         
securities laws. The Company currently does not intend to register or qualify   
the sale of the Exchange Notes in any state where an exemption from registration
or qualification is required and not available. See "The Exchange               
Offer -- Consequences of Failure to Exchange and Requirements for Transfer of   
Exchange Notes".                                                                

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SUMMARY DESCRIPTION OF EXCHANGE NOTES 

Securities Offered.........  $300.0 million aggregate principal amount of 7 1/2%
                            Series B Senior Notes Due April 15, 2008 of Coltec
Industries Inc.       

Maturity Date..............  April 15, 2008.                                    

Interest Payment Dates.....  April 15 and October 15 of each year, commencing   
                          October 15, 1998. Interest on the Exchange Notes
                            will accrue from the last interest payment date on
                          which interest was paid on the Outstanding Notes
                             surrendered in exchange therefor, or if no interest
                          has been paid on the Outstanding Notes, from the
                        Issue Date. Holders of Outstanding Notes whose
                          Outstanding Notes are accepted for exchange will
                           not receive any payment in respect of interest on
                         such Outstanding Notes otherwise payable on any
                         interest payment date the record date for which
                         occurs on or after consummation of the Exchange
                         Offer. Consequently, holders who exchange their
                           Outstanding Notes for Exchange Notes will receive
                            the same interest payment on October 15, 1998 (the
                         first interest payment date with respect to the
                         Senior Notes) that they would have received had
                        they not accepted the Exchange Offer. See "The
                            Exchange Offer -- Interest on the Exchange Notes".

Optional Redemption........  The Senior Notes are redeemable, in whole or in    
                             part, at any time, at the option of the Company, at
                             a redemption price equal to the greater of (i) 100%
                          of the principal amount of such Senior Notes and
                            (ii) the sum of the present value of the remaining
                      scheduled payments of principal and interest
                          thereon from the redemption date to the maturity
                      date, discounted to the redemption date on a
                   semiannual basis (assuming a 360-day year
                             consisting of twelve 30-day months) at the Treasury
                            Rate plus 37.5 basis points, plus accrued interest
                             thereon to the date of redemption. The Senior Notes
                        are not entitled to the benefit of any sinking
fund.                 

Ranking....................  The Senior Notes are senior obligations of the     
                      Company and will rank pari passu in right of
                     payment with all existing and future senior
                            obligations of the Company (including indebtedness
                           under the Amended Credit Agreement) and will rank
                        senior in right of payment to all subordinated
                        obligations of the Company. As of December 31,
                           1997, on a pro forma basis after giving effect to
                            the Offerings and the application of the estimated
                             net proceeds therefrom to reduce indebtedness under
                         the Amended Credit Agreement, the Company would
                        have had approximately $323.9 million of other
                            senior indebtedness ($262.0 million of which would
                      have been indebtedness outstanding under the
                           Amended Credit Agreement). The Indenture does not
                     contain any limitation on the incurrence of
                 additional indebtedness by the Company.

Guarantees.................  The Senior Notes are unconditionally guaranteed,   
                          jointly and severally, on a senior basis, by the
                          Subsidiary Guarantors. The Subsidiary Guarantees
                      will be senior obligations of the Subsidiary
                         Guarantors and will rank pari passu in right of
                     payment with all existing and future senior
                             obligations of the Subsidiary Guarantors (including
                             guarantees of indebtedness under the Amended Credit
                             Agreement) and will rank senior to all subordinated
                        obligations of such Subsidiary Guarantors. The
                       Subsidiary Guarantees may be released without
                           action on the part of the holders of Senior Notes
                            in certain circumstances. As of December 31, 1997,
                         on a pro forma basis after giving effect to the
                            Offerings and the application of the estimated net
                             proceeds therefrom to reduce indebtedness under the
                             Amended Credit Agreement, the Subsidiary Guarantors
      would have had approximately
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                             $262.0 million of other senior indebtedness (all of
                          which would have been guarantees of indebtedness
                            under the Amended Credit Agreement). The Indenture
                           relating to the Senior Notes does not contain any
                    limitation on the incurrence of additional
                     indebtedness by the Company's subsidiaries.

Security...................  The Senior Notes and the Subsidiary Guarantees are 
                           secured, subject to the provisions of the Amended
                            Collateral Documents, equally and ratably with the
                        indebtedness of the Company and the Subsidiary
                           Guarantors under the Amended Credit Agreement and
                         related documents and liabilities in connection
                         with interest rate protection and other hedging
                       agreements contemplated by the Amended Credit
                  Agreement, by a security interest in the
                            Collateral. The Collateral may be released without
                           action on the part of the holders of Senior Notes
                            in certain circumstances. As of December 31, 1997,
                      after giving effect to the Offerings and the
                             application of the estimated net proceeds therefrom
                         to reduce indebtedness under the Amended Credit
                           Agreement, the Company and its subsidiaries would
                        have had approximately $262.0 million of other
                        secured indebtedness outstanding (all of which
                            would have been indebtedness outstanding under the
                             Amended Credit Agreement). For a description of the
                          Collateral and the Amended Collateral Documents,
                     see "Description of Other Indebtedness" and
            "Description of the Senior Notes".

Restrictive Covenants......  The Indenture contains certain covenants that limit
                      (i) the granting of certain additional liens
                       without securing the Senior Notes equally and
                             ratably, (ii) the entering into of certain sale and
                  leaseback transactions and (iii) certain
                          consolidations, mergers and transfers of assets.
                            However, these limitations are subject to a number
                          of important qualifications. See "Description of
                    the Senior Notes -- Certain Covenants" and
                       "-- Merger, Consolidation or Sale of Assets".

Use of Proceeds............  There will be no cash proceeds to the Company from 
the Exchange Offer.   

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA 

    The following table sets forth summary consolidated financial and other data
of Coltec for the five years ended December 31, 1997 and for three months ended 
March 30, 1998 and March 29, 1998. The information should be read in conjunction
with Coltec's consolidated financial statements and notes thereto and           
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" included elsewhere in this Prospectus and incorporated by reference 
herein. The statement of earnings data and other financial data for 1993, 1994  
and 1995 have been restated to reflect the sale of the Company's automotive     
original equipment components business in 1996, which was accounted for as a    
discontinued operation. The summary consolidated financial and other data, with 
the exception of order backlog, at and for the years ended December 31, 1993    
through 1997, were derived from the consolidated financial statements of Coltec 
which have been audited by Arthur Andersen LLP, independent public accountants. 
The selected consolidated financial and other data, with the exception of order 
backlog, at and for the three months ended March 30, 1997 and March 29, 1998    
were derived from the unaudited consolidated financial statements of Coltec     
which are incorporated by reference herein.                                     

                                                        [Enlarge/Download Table]

                                                                                                         THREE MONTHS ENDED  
                                                               YEARS ENDED DECEMBER 31,                 ---------------------
                                                 ----------------------------------------------------   MARCH 30,   MARCH 29,
                                                   1993       1994       1995       1996       1997       1997        1998   
                                                 --------   --------   --------   --------   --------   ---------   ---------
                                                                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)                
                                                                                                                             
STATEMENT OF EARNINGS DATA:                                                                                                  
Net sales....................................... $1,061.4   $1,000.2   $1,099.6   $1,159.7   $1,314.9   $  309.2    $  374.4 
Cost of goods sold..............................    703.9      648.3      744.2      811.1      898.3      211.7       260.1 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Gross profit....................................    357.5      351.9      355.4      348.6      416.6       97.5       114.3 
Selling and administrative......................    183.8      186.7      186.4      191.0      218.8       52.6        61.0 
Special charge(a)...............................     25.2         --       27.0         --         --         --          -- 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Operating income(b).............................    148.5      165.2      142.0      157.6      197.8       44.9        53.3 
Interest expense and other, net.................    110.2       89.5       89.9       74.9       54.0       12.4        15.1 
Income taxes....................................     13.7       27.2       17.6       28.1       48.9       11.0        13.0 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Earnings from continuing operations before                                                                                   
  extraordinary item(b).........................     24.6       48.5       34.5       54.6       94.9       21.5        25.2 
Discontinued operations(c)......................     40.6       45.5       36.7       57.1         --         --          -- 
Extraordinary item(d)...........................    (17.8)      (1.5)       (.3)     (30.6)        --         --          -- 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Net earnings.................................... $   47.4   $   92.5   $   70.9   $   81.1   $   94.9   $   21.5    $   25.2 
                                                 ========   ========   ========   ========   ========   ========    ======== 
Earnings (loss) per common share:(e)                                                                                         
  Before extraordinary item..................... $    .35   $    .70   $    .49   $    .79   $   1.42   $    .32    $    .38 
  Discontinued operations.......................      .59        .65        .53        .82         --         --          -- 
  Extraordinary item............................     (.26)      (.02)        --       (.44)        --         --          -- 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Net earnings per share.......................... $    .68   $   1.33   $   1.02   $   1.17   $   1.42   $    .32    $    .38 
                                                 ========   ========   ========   ========   ========   ========    ======== 

                                                        [Enlarge/Download Table]
                                                                                                                            
BALANCE SHEET DATA (AT END OF PERIOD):                                                                                      
Working capital................................. $  163.1   $  189.6   $  208.9   $  215.6   $  187.9   $  217.2   $  228.4 
Total assets....................................    796.5      847.5      894.5      849.5      933.0      851.9    1,076.1 
Total debt......................................  1,033.6      970.1      945.8      720.3      759.4      731.3      860.0 
Shareholders' equity............................   (625.5)    (525.6)    (453.8)    (417.0)    (359.2)    (413.7)    (335.2)
OTHER FINANCIAL DATA:                                                                                                       
EBITDA(f)....................................... $  197.5   $  207.3   $  184.1   $  193.6   $  236.2   $   53.4   $   65.7 
Cash flows from operating activities............    105.2       98.2       91.0       49.5       61.4       12.7       10.1 
Cash flows from investing activities............     (9.9)     (41.4)     (66.8)     284.6     (141.9)     (13.6)     (96.3)
Cash flows from financing activities............    (96.7)     (58.4)     (24.5)    (323.0)      80.2       (6.4)      92.6 
Capital expenditures............................     38.6       38.2       42.5       44.6       81.2       13.6       15.0 
Order backlog (at end of period)(g).............    598.6      594.2      657.1      678.3      875.6      805.9      968.2 
Ratio of earnings to fixed charges(h)...........     1.3x       1.8x       1.6x       2.1x       3.5x       3.5x       3.4x 
Ratio of EBITDA to interest expense(i)..........     1.8x       2.3x       2.0x       2.6x       4.4x       4.3x       4.4x 
Ratio of total debt to EBITDA(j)................     5.2x       4.7x       5.1x       3.7x       3.2x      13.7x      13.1x 

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

(a) In 1997, Coltec incurred a special charge of $10.0 million for the          
   restructuring of its Industrial segment. In 1997, the remaining $10.0 million
  accrual for the 1995 special charge was reversed. In 1995, Coltec incurred a
 special charge of $27.0 million primarily in the Aerospace Segment to cover
the costs of closing the Walbar compressor blade facility in Canada. The  
  charge also covered selected workforce reductions throughout the Company. In
  1993, Coltec incurred a special charge of $25.2 million to cover the cost of
consolidation and rearrangement of certain manufacturing facilities and   
related workforce reductions primarily in the Aerospace segment.          

(b) Operating income for 1996 included a charge of $14.2 million related to the 
  bankruptcy of Fokker Aircraft B.V. ("Fokker"), a major aerospace customer of
Coltec.                                                                   

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(c) See note 2 to the audited consolidated financial statements of Coltec       
included elsewhere in this Prospectus.                                    

(d) See note 3 to the audited consolidated financial statements of Coltec       
   included elsewhere in this Prospectus. Extraordinary charges relate to either
early retirement of debt or debt refinancings.                            

(e) Represents diluted earnings per common share. See note 5 to the audited     
consolidated financial statements and note 3 to the unaudited interim     
consolidated financial statements of Coltec included elsewhere in this    
  Prospectus. The Company's reported earnings per common share for 1996, 1995,
   1994 and 1993 equaled diluted earnings per share as set forth in Statement of
Financial Accounting Standards No. 128.                                   

(f) "EBITDA" as used herein means earnings from continuing operations before    
extraordinary item plus interest expense, taxes, depreciation and         
 amortization. EBITDA is presented because the Company believes that it is a
 widely accepted indicator of cash flow and a company's ability to incur and
 service indebtedness. However, EBITDA should not be considered as a measure
of operating performance or as an alternative to, or more meaningful than,
operating income, net income or cash flows from operations (as measured by
U.S. generally accepted accounting principles). EBITDA as presented herein
may not be comparable to similarly titled measures presented by other     
companies. EBITDA for 1993 would have been $222.7 million excluding the   
  special charge of $25.2 million described in note (a) above. EBITDA for 1995
would have been $211.1 million excluding the $27.0 million special charge 
described in note (a) above.                                              

(g) Of the $875.6 million backlog at December 31, 1997, $267.2 million was      
scheduled to be shipped after 1998.                                       

(h) For purposes of calculating the ratio of earnings to fixed charges, earnings
 are determined by adding fixed charges (excluding capitalized interest) and
income taxes to earnings from continuing operations before extraordinary  
item. Fixed charges consist of interest expense, capitalized interest and 
that portion of rental expense deemed to be representative of the interest
factor.                                                                   

(i) The ratio of EBITDA to interest expense for 1993 and 1995, based upon EBITDA
  of $222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 2.0x and 2.3x, respectively.                       

(j) The ratio of total debt to EBITDA for 1993 and 1995, based upon EBITDA of   
$222.7 million and $211.1 million, respectively, as described in note (f) 
above, would have been 4.6x and 4.5x, respectively.                       

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RISK FACTORS

Prospective holders of the Exchange Notes should carefully review the 
information contained elsewhere in this Prospectus and should particularly      
consider the following factors.                                                 

     This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All      
statements other than statements of historical fact included in this Prospectus,
including, without limitation, the statements under "Prospectus Summary",       
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and "Business" and located elsewhere herein regarding industry      
prospects, the Company's prospects and the Company's financial position are     
forward-looking statements. Although the Company believes that the expectations 
reflected in such forward-looking statements are reasonable, there can be no    
assurance that such expectations will prove to have been correct. Important     
factors that could cause actual results to differ materially from the Company's 
expectations (the "Cautionary Statements") are disclosed in this Prospectus,    
including, without limitation, those factors described below. All subsequent    
written and oral forward-looking statements attributable to the Company or      
persons acting on its behalf are expressly qualified in their entirety by the   
Cautionary Statements.                                                          

SUBSTANTIAL LEVERAGE; SHAREHOLDERS' DEFICIT                                     

     As of March 29, 1998 and December 31, 1997, Coltec's total indebtedness was
$860.0 million and $759.4 million, respectively. At such dates, Coltec had total
assets of $1,076.1 million and $933.0 million, respectively, and a shareholders'
deficit of $335.2 million and $359.2 million, respectively. As of March 29, 1998
and December 31, 1997, after giving effect to the Offerings and the use of the  
estimated net proceeds therefrom to reduce indebtedness under the Amended Credit
Agreement, Coltec's indebtedness would have been $724.5 million and $623.9      
million, respectively, and Coltec also would have had outstanding $150 million  
of company-obligated mandatorily redeemable Convertible Preferred Securities.   

   The degree to which Coltec is leveraged could have important consequences
to the holders of Senior Notes. Coltec's substantial indebtedness could         
materially adversely limit its capacity to respond to changing business and     
economic conditions. Insofar as changing business and economic conditions may   
affect the financial condition and financing requirements of Coltec, they could 
impose significant risks to the holders of the securities offered hereby.       
Furthermore, the ability of Coltec to satisfy its obligations and to service,   
repay or refinance its debt will be dependent upon the future performance of    
Coltec, which will be subject to prevailing economic conditions and to          
financial, business and other factors, including factors beyond the control of  
Coltec, affecting the business and operations of Coltec.                        

RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS                     

  The Amended Credit Agreement imposes significant operating and financial
restrictions on Coltec. Such restrictions affect, and in many respects          
significantly limit or prohibit, among other things, the ability of Coltec to   
incur additional indebtedness, create liens, sell assets, engage in mergers and 
acquisitions, make certain capital expenditures or pay dividends. These         
restrictions, in combination with the highly leveraged nature of Coltec, could  
limit the ability of Coltec to effect future financings and otherwise limit     
future business activities, which, in each case, could have a material adverse  
effect on Coltec. See "Description of Other Indebtedness".                      

CYCLICAL BUSINESS; GOVERNMENT CONTRACTS                                         

    The Aerospace, Industrial and other business sectors to which Coltec sells
its products are, to varying degrees, cyclical and have historically experienced
periodic downturns, which often have had a negative effect on demand for        
Coltec's products. Prior downturns have resulted in negative effects on Coltec's
net sales, gross margin and net income. Although Coltec believes that, by       
concentrating on products with strong aftermarket demand, it has reduced its    
exposure to such business downturns, any future material weakness in demand in  
any of these industries could have a material adverse effect on the business,   
financial condition and results of operations of Coltec. See "Management's      
Discussion and Analysis of Financial Condition and Results of Operations".      
Additionally, many of Coltec's competitors have substantially greater financial 
resources than Coltec and may be better able to withstand the effects of such   
periodic downturns.                                                             
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    Certain of the contracts under which Coltec is a supplier, including those
with commercial aviation manufacturers and the United States government, contain
provisions allowing for early termination, including termination due to lack of 
congressional appropriation or for convenience. In addition, substantially all  
of Coltec's government contracts are fixed-price contracts under which Coltec   
agrees to perform the work for a fixed price and, accordingly, realizes all the 
benefit or detriment occasioned by decreased or increased costs of performing   
the contracts. From time to time, Coltec accepts fixed-price contracts for      
products that have not been previously developed. In such cases, Coltec is      
subject to the risk of delays and cost overruns. See "Business -- Contract      
Risks".                                                                         

ASBESTOS LITIGATION                                                             

     The historical business operations of Coltec have resulted in a substantial
volume of asbestos litigation, in which plaintiffs have alleged personal injury 
or death as a result of exposure to asbestos fibers in a number of products     
which were manufactured or distributed by two of the Company's subsidiaries.    
While the Company believes that several factors, including agreed upon funding  
agreements with its insurance carriers, will provide resources sufficient to    
meet the vast majority of the currently anticipated costs and expenses          
associated with this litigation, the large volume of current and potential      
future asbestos claims, the depletion of insurance coverage of a small          
non-operating subsidiary, the payment of some non-insured litigation costs and  
the unavailability of insurance for claims alleging first exposure to asbestos  
after July 1, 1984 may result in liabilities to the Company in the future that  
could have a material adverse effect on the Company's business, financial       
condition and results of operations. See "-- Potential Exposure to Environmental
Liabilities" below and "Business -- Legal Proceedings -- Asbestos Litigation".  

POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES                                 

   Coltec is subject to various federal, state and local environmental laws,
ordinances and regulations, including those governing discharges of pollutants  
into the air and water, the storage, handling and disposal of solid wastes,     
hazardous wastes and hazardous substances and the health and safety of employees
("Environmental Laws"). Violations of Environmental Laws could result in        
liability for government penalties, claims by third parties for personal injury 
and property damage, costs of investigation and remediation of contamination and
the cost of natural resource damage. Agencies responsible for enforcing         
Environmental Laws have authority to impose significant civil or criminal       
penalties for non-compliance. Coltec believes it is currently in material       
compliance with all applicable requirements of Environmental Laws, but there can
be no assurance that some future non-compliance will not result in the          
imposition of significant liabilities.                                          

Future events, such as new information concerning past releases of    
hazardous substances, changes in existing Environmental Laws or their           
interpretation, and more rigorous enforcement by regulatory authorities, may    
give rise to additional expenditures, compliance requirements or liabilities    
that could have a material adverse effect on the business, financial condition  
and results of the operations of Coltec. See "Management's Discussion and       
Analysis of Financial Conditions and Results of Operations -- Environmental     
Matters" and "Business -- Environmental Matters".                               

COLLATERAL                                                                      

    The Senior Notes are secured, equally and ratably, with indebtedness under
the Amended Credit Agreement and related documents and liabilities in connection
with interest rate protection and other hedging agreements contemplated by the  
Amended Credit Agreement, by a security interest in the Collateral pursuant to  
the Amended Collateral Documents. The Amended Collateral Documents may be       
amended to, among other things, secure additional extensions of credit or add   
additional secured creditors without the consent of the Senior Noteholders or   
the Trustee under the Indenture. See "Description of Other Indebtedness -- The  
Amended Credit Agreement -- Collateral" for a description of the Collateral and 
the Amended Collateral Documents.                                               

   In the event of foreclosure on the Collateral, the proceeds from the sale
of the Collateral may not be sufficient to satisfy the Company's obligations    
under the Senior Notes and the Amended Credit Agreement in full. The amount to  
be received upon such a sale would be dependent upon numerous factors including 
the timing and the manner of the sale. In addition, the book value of the       
Collateral should not be relied upon as a measure of                            

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realizable value. By its nature, the Collateral will be illiquid and may have no
readily ascertainable market value. Accordingly, there can be no assurance that 
the Collateral can be sold in a short period of time. A significant portion of  
the Collateral includes assets which may only be usable as part of the existing 
operating businesses of the Company. Accordingly, any such sale of the          
Collateral, including the real property portion thereof, separate from the sale 
of certain of the Company's operating businesses, may not be feasible or of     
significant value. To the extent that third parties enjoy Permitted Liens (as   
defined herein) or liens otherwise permitted under the Indenture, such third    
parties may have rights and remedies with respect to the property subject to    
such permitted Liens that, if exercised, could adversely affect the value or    
availability of the Collateral. In addition, the ability of the holders of      
Senior Notes to realize upon any of the Collateral may be subject to certain    
bankruptcy law limitations in the event of a bankruptcy.                        

Under the Amended Collateral Documents, the control of foreclosure    
proceedings, the enforcement and amendment of the Amended Collateral Documents  
and the right to take other actions with respect to the Collateral belong solely
to the Collateral Agent and the lenders under the Amended Credit Agreement. The 
lenders under the Amended Credit Agreement may release Collateral, in whole or  
in part, from time to time, and in such event, the Collateral so released will  
be automatically released as security for the Senior Notes without any action on
the part of the Trustee or the Senior Noteholders. In addition, all Collateral  
under the Amended Credit Agreement and the Amended Collateral Documents will be 
automatically released upon the Company's long-term indebtedness being rated    
BBB- by Standard & Poor's Ratings Group and Baa3 by Moody's Investors Service,  
Inc., and in such event, all Collateral securing the Senior Notes will also be  
automatically released without any action on the part of the Trustee or the     
Senior Noteholders. See "Description of Other Indebtedness -- The Amended Credit
Agreement -- Collateral".                                                       

CERTAIN SUBSIDIARIES NOT INCLUDED AS SUBSIDIARY GUARANTORS                      

 The Subsidiary Guarantors include only the domestic subsidiaries of the
Company that have guaranteed the Company's obligations under the Amended Credit 
Agreement. However, the consolidated financial information included in this     
Offering Circular is presented on a consolidated basis, including both domestic 
and foreign subsidiaries of the Company. See note 20 to the Company's audited   
consolidated financial statements and note 6 to the Company's unaudited interim 
financial statements included elsewhere in this Prospectus for Subsidiary       
Guarantor financial information.                                                

LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES                                    

   The Outstanding Notes are currently owned by a small number of beneficial
owners. The Outstanding Notes have not been registered under the Securities Act 
and are subject to significant restrictions on resale. The Exchange Notes will  
be a new issue of securities for which there is currently no trading market.    
There can be no assurance regarding the future development of a market for the  
Exchange Notes, or the ability of holders of the Exchange Notes to sell their   
Exchange Notes or the price at which holders may be able to sell their Exchange 
Notes. If the Exchange Notes are traded after their initial issuance, they may  
trade at a discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities and other factors, including  
general economic conditions and the financial condition and performance of, and 
prospects for, the Company. To the extent that Outstanding Notes are tendered   
and accepted in the Exchange Offer, the trading market for untendered and       
tendered but unaccepted Outstanding Notes could be adversely affected. The      
Company does not intend to apply for listing of the Exchange Notes on any       
securities exchange, or for quotation of the Exchange Notes on any automated    
quotation system.                                                               

    Historically, the market for non-investment grade debt securities has from
time to time been subject to disruptions that have caused substantial volatility
in the prices of such securities. There can be no assurance that the market for 
the Senior Notes will not be subject to similar disruptions. Any such           
disruptions may have an adverse effect on the holders of the Senior Notes and   
the Exchange Notes.                                                             

EXCHANGE OFFER PROCEDURES                                                       

   Issuance of the Exchange Notes in exchange for Outstanding Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
Outstanding Notes, a properly completed and duly executed Letter of Transmittal 
or an Agent's Message (as defined herein) in lieu thereof and all other required
documents.                                                                      

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Therefore, holders of the Outstanding Notes desiring to tender their Outstanding
Notes in exchange for Exchange Notes should allow sufficient time to ensure     
timely delivery. The Company is under no duty to give notification of defects or
irregularities with respect to the tenders of Outstanding Notes for exchange.   
Outstanding Notes that are not tendered or are tendered but not accepted will,  
following the consummation of the Exchange Offer, continue to be subject to the 
existing restrictions on transfer thereof. See "The Exchange Offer".            

CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF EXCHANGE   
NOTES                                                                           

  Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of the          
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as 
set forth in the legend thereon as a consequence of the issuance of the         
Outstanding Notes pursuant to exemptions from or in transactions not subject to,
the registration requirements of the Securities Act and applicable state        
securities laws. In general, the Outstanding Notes may not be offered or sold,  
unless registered under the Securities Act, except pursuant to an exemption     
from, or in a transaction not subject to, the Securities Act and applicable     
state securities laws. The Company does not currently anticipate that it will   
register Outstanding Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third  
parties, the Company believes that Exchange Notes issued pursuant to the        
Exchange Offer in exchange for Outstanding Notes may be offered for resale,     
resold or otherwise transferred by holders thereof (other than any such holder  
which is an "affiliate" of the Company within the meaning of Rule 405 under the 
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no       
arrangement with any person to participate in the distribution of such Exchange 
Notes. However, the Company does not intend to request the Commission to        
consider, and the Commission has not considered, the Exchange Offer in the      
context of a no-action letter and there can be no assurance that the staff of   
the Commission would make a similar determination with respect to the Exchange  
Offer as in such other circumstances. Each holder, other than a broker-dealer,  
must acknowledge that (i) the Exchange Notes received by such holder will be    
acquired in the ordinary course of its business, (ii) at the time of the        
consummation of the Exchange Offer such holder will have not engaged in, and    
does not intend to engage in, a distribution of Exchange Notes and has no       
arrangement or understanding to participate in a distribution of Exchange Notes 
and (iii) such holder is not an affiliate of the Company within the meaning of  
Rule 405 of the Securities Act or if it is such an affiliate, that it will      
comply with the registration and prospectus delivery requirements of the        
Securities Act, to the extent applicable. If any holder is an affiliate of the  
Company, is engaged in or intends to engage in or has any arrangement or        
understanding with respect to the distribution of the Exchange Notes to be      
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the  
applicable interpretations of the staff of the Commission and (ii) must comply  
with the registration and prospectus delivery requirement of the Securities Act 
in connection with any resale transaction. Each broker-dealer that receives     
Exchange Notes for its own account pursuant to the Exchange Offer must          
acknowledge that it will deliver a prospectus in connection with any resale of  
such Exchange Notes. The Letter of Transmittal states that by so acknowledging  
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This           
Prospectus, as it may be amended or supplemented from time to time, may be used 
by a broker-dealer in connection with resales of Exchange Notes received in     
exchange for Outstanding Notes, where such Outstanding Notes were acquired by   
such broker-dealer as a result of market-making activities or other trading     
activities. The Company has agreed that, for a period of 180 days after the     
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution". However, to 
comply with state securities laws, the Exchange Notes may not be offered or sold
in any state unless they have been registered or qualified for sale in such     
state or an exemption from registration or qualification is available and is    
complied with. The offer and sale of the Exchange Notes to "qualified           
institutional buyers" (as such term is defined under Rule 144A of the Securities
Act) is generally exempt from registration or qualification under state         
securities laws. The Company currently does not intend to register or qualify   
the sale of the Exchange Notes in any state where an exemption from registration
or qualification is required and not available. See "The Exchange               
Offer -- Consequences of Failure to Exchange and Requirements for Transfer for  
Exchange Notes".                                                                

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THE EXCHANGE OFFER

TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING NOTES             

   Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept for      
exchange Outstanding Notes which are properly tendered on or prior to the       
Expiration Date and not withdrawn as permitted below. As used herein, the term  
"Expiration Date" means midnight, New York City time, on September 16, 1998;    
provided, however, that if the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open, the term "Expiration Date" 
means the latest time and date to which the Exchange Offer is extended.         

As of the date of this Prospectus, $300.0 million aggregate principal 
amount of the Outstanding Notes is outstanding. This Prospectus, together with  
the Letter of Transmittal, is first being sent on or about August 18, 1998, to  
all holders of Outstanding Notes known to the Company. The Company's obligation 
to accept Outstanding Notes for exchange pursuant to the Exchange Offer is      
subject to certain conditions as set forth below under "-- Certain Conditions to
the Exchange Offer".                                                            

     The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer remains open, and  
thereby delay acceptance for exchange of any Outstanding Notes, by giving oral  
or written notice of such extension in the manner described below. During any   
such extension, all Outstanding Notes previously tendered will remain subject to
the Exchange Offer and may be accepted for exchange by the Company. Any         
Outstanding Notes not accepted for exchange for any reason will be returned     
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the Exchange Offer.                            

   Outstanding Notes tendered in the Exchange Offer must be in denominations
of principal amounts of $1,000 and any integral multiples thereof.              

     The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore     
accepted for exchange, upon the occurrence of any of the events specified below 
under "-- Certain Conditions to the Exchange Offer". The Company will give oral 
or written notice of any extension, amendment, non-acceptance or termination to 
the holders of the Outstanding Notes as promptly as practicable, such notice in 
the case of any extension to be issued by means of press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business  
day after the previously scheduled Expiration Date.                             

PROCEDURES FOR TENDERING OUTSTANDING NOTES                                      

   The tender to the Company of Outstanding Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding 
agreement between the tendering holder and the Company upon the terms and       
subject to the conditions set forth in this Prospectus and in the accompanying  
Letter of Transmittal. Except as set forth below, a holder who wishes to tender 
Outstanding Notes for exchange pursuant to the Exchange Offer must transmit a   
properly completed and duly executed Letter of Transmittal, including all other 
documents required by such Letter of Transmittal or (in the case of a book-entry
transfer) an Agent's Message in lieu of such Letter of Transmittal, to the      
Exchange Agent at the address set forth below under "-- Exchange Agent" on or   
prior to the Expiration Date. In addition, either (i) certificates for such     
Outstanding Notes must be received by the Exchange Agent along with the Letter  
of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a       
"Book-Entry Confirmation") of such Outstanding Notes, if such procedure is      
available, into the Exchange Agent's account at The Depository Trust Company    
("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedure for     
book-entry transfer described below, must be received by the Exchange Agent     
prior to the Expiration Date with the Letter of Transmittal or Agent's Message  
in lieu of such Letter of Transmittal, or (iii) the holder must comply with the 
guaranteed delivery procedures described below. The term "Agent's Message" means
a message, transmitted by the Book-Entry Transfer Facility to and received by   
the Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment    
from the tendering participant, which acknowledgment states that such           
participant has received and agrees to be bound by, and makes the               
representations and warranties contained in,                                    

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the Letter of Transmittal and that the Company may enforce such Letter of       
Transmittal against such participant. THE METHOD OF DELIVERY OF THE OUTSTANDING 
NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE     
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. 
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.      
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT         
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NO LETTER OF TRANSMITTAL OR          
OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.                                

 Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national       
securities exchange or of the National Association of Securities Dealers, Inc., 
a commercial bank or trust company having an office or correspondent in the     
United States or a firm which is otherwise an "eligible guarantor institution"  
within the meaning of Rule 17Ad-15 under the Exchange Act (collectively,        
"Eligible Institutions"), unless the Outstanding Notes tendered pursuant thereto
are tendered (i) by a registered holder of the Outstanding Notes who has not    
completed the box entitled "Special Issuance Instructions" or "Special Delivery 
Instructions" on the Letter of Transmittal or (ii) for the account of an        
Eligible Institution. If Outstanding Notes are registered in the name of a      
person other than a signer of the Letter of Transmittal, the Outstanding Notes  
surrendered for exchange must be endorsed by, or be accompanied by a written    
instrument or instruments of transfer or exchange, in satisfactory form as      
determined by the Company in its sole discretion, duly executed by, the         
registered holder with the signature thereon guaranteed by an Eligible          
Institution.                                                                    

If the Letter of Transmittal is signed by a person other than the     
registered holder or holders of any Outstanding Notes listed therein, such      
Outstanding Notes must be endorsed or accompanied by appropriate powers of      
attorney, in either case signed exactly as the name of the registered holder or 
holders appears on the Outstanding Notes.                                       

     If the Letter of Transmittal or any Outstanding Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative      
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must 
be submitted with the Letter of Transmittal.                                    

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be   
determined by the Company in its sole discretion, which determination will be   
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Outstanding Notes not properly tendered or to not     
accept any particular Outstanding Notes the Company's acceptance of which would,
in the opinion of the Company or its counsel, be unlawful. The Company also     
reserves the absolute right to waive any defects or irregularities or conditions
of the Exchange Offer as to any particular Outstanding Notes either before or   
after the Expiration Date (including the right to waive the ineligibility of any
holder who seeks to tender Outstanding Notes in the Exchange Offer). The        
Company's interpretation of the terms and conditions of the Exchange Offer as to
any particular Outstanding Notes either before or after the Expiration Date     
(including the Letter of Transmittal and the instructions therein) will be final
and binding on all parties. Unless waived, any defects or irregularities in     
connection with tenders of Outstanding Notes must be cured within such time as  
the Company shall determine. Neither the Company, the Exchange Agent nor any    
other person shall be under any duty to give notification of defects or         
irregularities with respect to tenders of Outstanding Notes nor shall any of    
them incur any liability for failure to give such notification. Tenders of      
Outstanding Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Outstanding Notes received by the Exchange Agent 
that are not properly tendered and as to which the defects or irregularities    
have not been cured or waived will be returned without cost by the Exchange     
Agent to the tendering holder of such Outstanding Notes unless otherwise        
provided in the Letter of Transmittal as soon as practicable following the      
Expiration Date.                                                                

   In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding       
subsequent to the Expiration Date, or, as set forth under "-- Certain           

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Conditions to the Exchange Offer", to terminate the Exchange Offer and (b) to   
the extent permitted by applicable law, purchase Outstanding Notes in the open  
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers may differ from the terms of the Exchange Offer.            

By tendering, each holder of Outstanding Notes will represent to the  
Company that, among other things, the Exchange Notes acquired pursuant to the   
Exchange Offer are being obtained in the ordinary course of business of the     
person receiving such Exchange Notes, whether or not such person is the holder, 
and that neither the holder nor any other person has any arrangement or         
understanding with any person to participate in the distribution of the Exchange
Notes. In the case of a holder that is not a broker-dealer, each such holder, by
tendering, will also represent to the Company that such holder is not engaged   
in, or intends to engage in, a distribution of the Exchange Notes. If any holder
or any such other person is an "affiliate," as defined under Rule 405 of the    
Securities Act, of the Company, or is engaged in or intends to engage in or has 
an arrangement or understanding with any person to participate in a distribution
of such Exchange Notes to be acquired pursuant to the Exchange Offer, such      
holder or any such other person (i) could not rely on the applicable            
interpretations of the staff of the Commission and (ii) must comply with the    
registration and prospectus delivery requirements of the Securities Act in      
connection with any resale transaction. Each broker-dealer that receives        
Exchange Notes for its own account in exchange for Outstanding Notes, where such
Outstanding Notes were acquired by such broker-dealer as a result of            
market-making activities or other trading activities, must acknowledge that it  
will deliver a prospectus in connection with any resale of such Exchange Notes. 
See "Plan of Distribution". The Letter of Transmittal states that by so         
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.  

ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES        

     Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Outstanding    
Notes properly tendered and will issue the Exchange Notes promptly after        
acceptance of the Outstanding Notes. See "--Certain Conditions to the Exchange  
Offer".                                                                         

 For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Outstanding Notes for exchange when, as and if the   
Company has given oral or written notice thereof to the Exchange Agent, with    
written confirmation of any oral notice to be given promptly thereafter.        

For each Outstanding Note accepted for exchange, the holder of such   
Outstanding Note will receive an Exchange Note having a principal amount equal  
to that of the surrendered Outstanding Note. Interest on the Exchange Notes will
accrue from the last interest payment date on which interest was paid on the    
Outstanding Notes surrendered in exchange therefor, or if no interest has been  
paid on the Outstanding Notes, from the Issue Date. Holders of Outstanding Notes
whose Outstanding Notes are accepted for exchange will be deemed to have waived 
the right to receive any payment in respect of interest on such Outstanding     
Notes otherwise payable on any interest payment date the record date for which  
occurs on or after consummation of the Exchange Offer. Consequently, holders who
exchange their Outstanding Notes for Exchange Notes will receive the same       
interest payment on October 15, 1998 (the first interest payment date with      
respect to the Outstanding Notes and the Exchange Notes) that they would have   
received had they not accepted the Exchange Offer.                              

 In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after    
timely receipt by the Exchange Agent of (i) certificates for such Outstanding   
Notes or a timely Book-Entry Confirmation of such Outstanding Notes into the    
Exchange Agent's account at the Book-Entry Transfer Facility, (ii) a properly   
completed and duly executed Letter of Transmittal or an Agent's Message in lieu 
thereof and (iii) all other required documents. If any tendered Outstanding     
Notes are not accepted for any reason set forth in the terms and conditions of  
the Exchange Offer or if Outstanding Notes are submitted for a greater principal
amount that the holder desired to exchange, such unaccepted or non-exchanged    
Outstanding Notes will be returned without expense to the tendering holder      
thereof (or, in the case of Outstanding Notes tendered by book-entry transfer   
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant  
to the book-entry procedures described below, such non-exchanged Outstanding    
Notes will be credited to an account maintained with such Book-Entry Transfer   
Facility) as promptly as practicable after the expiration or termination of the 
Exchange Offer.                                                                 

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BOOK-ENTRY TRANSFER                                                             

     The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and  
any financial institution that is a participant in the Book-Entry Transfer      
Facility's systems may make book-entry delivery of Outstanding Notes by causing 
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the    
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with 
such Book-Entry Transfer Facility's procedures for transfer. However, although  
delivery of Outstanding Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof 
or an Agent's Message in lieu thereof), with any required signature guarantees  
and any other required documents, must, in any case, be transmitted to and      
received by the Exchange Agent at one of the addresses set forth below, under   
"-- Exchange Agent" on or prior to the Expiration Date or the guaranteed        
delivery procedures described below must be complied with.                      

GUARANTEED DELIVERY PROCEDURES                                                  

     Any registered holder who desires to tender its Outstanding Notes (i) whose
Outstanding Notes are not immediately available, (ii) who cannot deliver their  
Outstanding Notes, the Letter of Transmittal, or any other required documents to
the Exchange Agent prior to the Expiration Date, or (iii) who cannot complete   
the procedure for book-entry transfer on a timely basis, may effect a tender if:

(a) The tender is made through an Eligible Institution;     

      (b) Prior to the Expiration Date, the Exchange Agent receives from
    such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
    setting forth the name and address of the holder of the Outstanding Notes,
the certificate number or numbers of such Outstanding Notes and the   
    principal amount of Outstanding Notes tendered, stating that the tender is
     being made thereby, and guaranteeing that, within three business days after
the Expiration Date, the certificates for all physically tendered     
Outstanding Notes, in proper form for transfer, or a Book-Entry       
  Confirmation, as the case may be, together with a properly completed and
   duly executed Letter of Transmittal (or a facsimile thereof or an Agent's
  Message in lieu thereof), with any required signature guarantees and any
     other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and                 

          (c) The certificates for all physically tendered outstanding Notes, in
     proper form for transfer, or a Book-Entry Confirmation, as the case may be,
    together with a properly completed and duly executed Letter of Transmittal
 (or a facsimile thereof or an Agent's Message in lieu thereof) with any
required signature guarantees, and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three 
business days after the Expiration Date.                              

WITHDRAWAL OF TENDERS                                                           

  Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to midnight, New York City time, on the Expiration  
Date.                                                                           

  For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to         
midnight, New York City time, on the Expiration Date. Any such notice of        
withdrawal must (i) specify the name of the person having tendered the          
Outstanding Notes to be withdrawn (the "Depositor"), (ii) include a statement   
that the Depositor is withdrawing its election to have Outstanding Notes        
exchanged, and identify the Outstanding Notes to be withdrawn (including the    
certificate number or numbers and principal amount of such Outstanding Notes),  
and (iii) where certificates for Outstanding Notes have been transmitted,       
specify the name in which such Outstanding Notes are registered, if different   
from that of the Depositor. If certificates for Outstanding Notes have been     
delivered or otherwise identified to the Exchange Agent, then, prior to the     
release of such certificates the withdrawing holder must also submit the serial 
numbers of the particular certificates to be withdrawn and signed notice of     
withdrawal with signatures guaranteed by an Eligible Institution unless such    
holder is an Eligible Institution. If Outstanding Notes have been tendered      
pursuant                                                                        

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to the procedure for book-entry transfer described above, any notice of         
withdrawal must specify the name and number of the account at the Book-Entry    
Transfer Facility to be credited with the withdrawn Outstanding Notes and       
otherwise comply with the procedures of such facility. All questions as to the  
validity, form and eligibility (including time of receipt) for such withdrawal  
notices will be determined by the Company, whose determination shall be final   
and binding on all parties. Any Outstanding Notes so withdrawn will be deemed   
not to have been validly tendered for purposes of the Exchange Offer and no     
Exchange Notes will be issued with respect thereto unless the Outstanding Notes 
so withdrawn are validly retendered. Any Outstanding Notes which have been      
tendered but which are not accepted for exchange for any reason will be returned
to the holder thereof without cost to such holder (or, in the case of           
Outstanding Notes tendered by book-entry transfer into the Exchange Agent's     
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer 
procedures described above, such Outstanding Notes will be credited to an       
account maintained with such Book-Entry Transfer Facility for the Outstanding   
Notes) as soon as practicable after withdrawal, rejection of tender or          
termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be  
retendered by following one of the procedures described above under             
"-- Procedures for Tendering Outstanding Notes" at any time prior to midnight,  
New York City time, on the Expiration Date.                                     

CERTAIN CONDITIONS TO THE EXCHANGE OFFER                                        

  The Exchange Offer is not subject to any conditions, other than that the
Exchange Offer does not violate applicable law or any applicable interpretation 
of the staff of the Commission. There can be no assurance that any such         
condition will not occur. Holders of Outstanding Notes will have certain rights 
under the Registration Rights Agreement should the Company fail to consummate   
the Exchange Offer.                                                             

    If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Outstanding Notes and     
return any Outstanding Notes that have been tendered to the holders thereof,    
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior  
to the Expiration Date, subject to the rights of such holders of tendered       
Outstanding Notes to withdraw their tendered Outstanding Notes, or (iii) waive  
such termination event with respect to the Exchange Offer and accept all        
properly tendered Outstanding Notes that have not been withdrawn. If such waiver
constitutes a material change in the Exchange Offer, the Company will disclose  
such change by means of a supplement to this Prospectus that will be distributed
to each registered holder of Outstanding Notes, and the Company will extend the 
Exchange Offer for a period of five to ten business days, depending upon the    
significance of the waiver and the manner of disclosure to the registered       
holders of the Outstanding Notes, if the Exchange Offer would otherwise expire  
during such period.                                                             

EXCHANGE AGENT                                                                  

   The Trustee under the Indenture, has been appointed as Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to   
the Exchange Agent at one of the addresses set forth below. Questions and       
requests for assistance and requests for additional copies of this Prospectus or
of the Letter of Transmittal should be directed to the Exchange Agent addressed 
as follows:                                                                     

                                                        [Enlarge/Download Table]
                                                                                                
            By Mail:                         By Hand:                  By Overnight Courier:    
  BT Services Tennessee, Inc.         Bankers Trust Company         BT Services Tennessee, Inc. 
        P.O. Box 292737           Corporate Trust & Agency Group  Corporate Trust & Agency Group
Nashville, Tennessee 37229-2737     Receipt & Delivery Window          Reorganization Group     
    (registered or certified     123 Washington Street, 1st Floor     648 Grassmere Park Road   
       mail recommended)             New York, New York 10006       Nashville, Tennessee 37211  
    Facsimile Transmission:                                            Confirm by Telephone:    
         (615) 835-3701                                                   (615) 835-3572        

     DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH     
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.       

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FEES AND EXPENSES                                                               

     The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer.                                   

    The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated to be $100,000.             

TRANSFER TAXES                                                                  

Holders who tender their Outstanding Notes for exchange will not be   
obligated to pay any transfer taxes in connection therewith, except that holders
who instruct the Company to register Exchange Notes in the name of, or request  
that Outstanding Notes not tendered or not accepted in the Exchange Offer be    
returned to, a person other than the registered tendering holder will be        
responsible for the payment of any applicable transfer tax thereon.             

CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES                                    

  Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of the          
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as 
set forth in the legend thereon as a consequence of the issuance of the         
Outstanding Notes pursuant to exemptions from, or in transactions not subject   
to, the registration requirements of the Securities Act and applicable state    
securities laws. In general, the Outstanding Notes may not be offered or sold,  
unless registered under the Securities Act, except pursuant to an exemption     
from, or in a transaction not subject to, the Securities Act and applicable     
state securities laws. The Company does not currently anticipate that it will   
register Outstanding Notes under the Securities Act. See "Description of the    
Senior Notes -- Registered Exchange Offer; Registration Rights". Based on       
interpretations by the staff of the Commission, as set forth in no-action       
letters issued to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Outstanding Notes may be offered 
for resale, resold or otherwise transferred by holders thereof (other than any  
such holder which is an "affiliate" of the Company within the meaning of Rule   
405 under the Securities Act) without compliance with the registration and      
prospectus delivery provisions of the Securities Act, provided that such        
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement with any person to participate in the          
distribution of such Exchange Notes. However, the Company does not intend to    
request the Commission to consider, and the Commission has not considered, the  
Exchange Offer in the context of a no-action letter and there can be no         
assurance that the staff of the Commission would make a similar determination   
with respect to the Exchange Offer as in such other circumstances. Each holder, 
other than a broker-dealer, must acknowledge that (i) the Exchange Notes        
received by such holder will be acquired in the ordinary course of its business,
(ii) at the time of the consummation of the Exchange Offer such holder will have
not engaged in, and does not intend to engage in, a distribution of Exchange    
Notes and has no arrangement or understanding to participate in a distribution  
of Exchange Notes and (iii) such holder is not an affiliate of the Company      
within the meaning of Rule 405 of the Securities Act or if it is such an        
affiliate, that it will comply with the registration and prospectus delivery    
requirements of the Securities Act, to the extent applicable. If any holder is  
an affiliate of the Company, is engaged in or intends to engage in or has any   
arrangement or understanding with respect to the distribution of the Exchange   
Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not  
rely on the applicable interpretations of the staff of the Commission and (ii)  
must comply with the registration and prospectus delivery requirement of the    
Securities Act in connection with any resale transaction. Each broker-dealer    
that receives Exchange Notes for its own account in exchange for Outstanding    
Notes must acknowledge that such Outstanding Notes were acquired by such        
broker-dealer as a result of market-making activities or other trading          
activities and that it will deliver a prospectus in connection with any resale  
of such Exchange Notes. The Letter of Transmittal states that by so             
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.  
This Prospectus, as it may be amended or supplemented from time to time, may be 
used by a broker-dealer in connection with resales of                           

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Exchange Notes received in exchange for Outstanding Notes, where such           
Outstanding Notes were acquired by such broker-dealer as a result of            
market-making activities or other trading activities. The Company has agreed    
that, for a period of 180 days after the Expiration Date, it will make this     
Prospectus available to any broker-dealer for use in connection with any such   
resale. See "Plan of Distribution." In addition, to comply with state securities
laws, the Exchange Notes may not be offered or sold in any state unless they    
have been registered or qualified for sale in such state or an exemption from   
registration or qualification is available and is complied with. The offer and  
sale of the Exchange Notes to "qualified institutional buyers" (as such term is 
defined under Rule 144A of the Securities Act) is generally exempt from         
registration or qualification under state securities laws. The Company currently
does not intend to register or qualify the sale of the Exchange Notes in any    
state where an exemption from registration or qualification is required and not 
available.                                                                      

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USE OF PROCEEDS 

 There will be no cash proceeds payable to the Company from the Exchange
Offer.                                                                          

The Exchange Offer is intended to satisfy certain of the Company's    
obligations under the Registration Rights Agreement. The Company will not       
receive any proceeds from the issuance of the Exchange Notes offered hereby. In 
consideration for issuing the Exchange Notes contemplated in this Prospectus,   
the Company will receive Outstanding Notes in like principal amount, the form   
and terms of which are the same as the form and terms of the Exchange Notes     
(which they replace), except as otherwise described herein. The Outstanding     
Notes surrendered in exchange for Exchange Notes will be retired and canceled   
and cannot be reissued. Accordingly, the issuance of the Exchange Notes will not
result in any increase or decrease in the indebtedness of the Company.          

   The aggregate net proceeds to the Company from the Original Offering were
approximately $435.5 million. The net proceeds from the Original Offering were  
used by the Company to reduce indebtedness under the Amended Credit Agreement.  

CAPITALIZATION

     The following table sets forth the consolidated capitalization of Coltec as
of December 31, 1997 and as of March 29, 1998 on a historical basis, and as     
adjusted to give effect to the Offerings and the use of the estimated net       
proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, as
if such transactions had occurred on December 31, 1997 and on March 29, 1998,   
respectively. The table should be read in conjunction with the consolidated     
financial statements and notes thereto included elsewhere in this Prospectus and
incorporated by reference. See "Selected Consolidated Financial and Other Data".

                                                        [Enlarge/Download Table]

                                                       DECEMBER 31, 1997          MARCH 29, 1998     
                                                    -----------------------   -----------------------
                                                     ACTUAL     AS ADJUSTED    ACTUAL     AS ADJUSTED
                                                    ---------   -----------   ---------   -----------
                                                                 (DOLLARS IN THOUSANDS)              
                                                                                                     
Cash and cash equivalents.........................  $  14,693    $  14,693    $  21,075    $  21,075 
                                                    =========    =========    =========    ========= 
Current maturities of long-term debt..............  $   1,811    $   1,811    $   4,184    $   4,184 
Long-term debt (excluding current maturities):                                                       
  Amended Credit Agreement........................    697,500      262,000      808,000      372,500 
  Senior Notes due 2008...........................         --      300,000           --      300,000 
  Other debt due 1999-2010........................     60,078       60,078       47,854       47,854 
                                                    ---------    ---------    ---------    --------- 
          Total long-term debt....................    759,389      623,889      860,038      724,538 
                                                    ---------    ---------    ---------    --------- 
Company-obligated mandatorily redeemable                                                             
  convertible preferred securities of Coltec                                                         
  Capital Trust...................................         --      150,000           --      150,000 
                                                    ---------    ---------    ---------    --------- 
Shareholders' equity:                                                                                
  Preferred Stock, $.01 par value, 2,500,000                                                         
     shares authorized; no shares outstanding.....         --           --           --           -- 
  Common Stock, $.01 par value, 100,000,000 shares                                                   
     authorized, 70,517,363 shares issued at March                                                   
     29, 1998 and 70,501,948 shares issued at                                                        
     December 31, 1997 (excluding 25,000,000                                                         
     shares held by a wholly owned subsidiary)....        705          705          705          705 
Capital surplus...................................    642,828      642,828      641,815      641,815 
Retained deficit..................................   (912,029)    (912,029)    (886,808)    (886,808)
Other equity......................................    (11,112)     (11,112)     (13,495)     (13,495)
Less cost of 4,542,000 shares at March 31, 1998                                                      
  and 4,666,406 shares at December 31, 1997 of                                                       
  Common Stock in treasury........................    (79,553)     (79,553)     (77,445)     (77,445)
                                                    ---------    ---------    ---------    --------- 
          Total shareholders' equity..............   (359,161)    (359,161)    (335,228)    (335,228)
                                                    ---------    ---------    ---------    --------- 
          Total capitalization....................  $ 400,228    $ 414,728    $ 524,810    $ 539,310 
                                                    =========    =========    =========    ========= 

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth selected consolidated financial and other
data of Coltec for the five years ended December 31, 1997 and for the three     
months ended March 30, 1997 and March 29, 1998. The information should be read  
in conjunction with Coltec's consolidated financial statements and notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of 
Operations" included elsewhere in this Prospectus and incorporated by reference 
herein. The statement of earnings data and other financial data for 1993, 1994  
and 1995 have been restated to reflect the sale of the Company's automotive     
original equipment components business in 1996, which was accounted for as a    
discontinued operation. The selected consolidated financial and other data, with
the exception of order backlog, at and for the years ended December 31, 1993    
through 1997, were derived from the consolidated financial statements of Coltec 
which have been audited by Arthur Andersen LLP, independent public accountants. 
The selected consolidated financial and other data, with the exception of order 
backlog, at and for the three months ended March 30, 1997 and March 29, 1998    
were derived from the unaudited consolidated financial statements of Coltec     
which are incorporated by reference herein.                                     

                                                        [Enlarge/Download Table]

                                                                                                         THREE MONTHS ENDED  
                                                               YEARS ENDED DECEMBER 31,                 ---------------------
                                                 ----------------------------------------------------   MARCH 30,   MARCH 29,
                                                   1993       1994       1995       1996       1997       1997        1998   
                                                 --------   --------   --------   --------   --------   ---------   ---------
                                                                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)                
                                                                                                                             
STATEMENT OF EARNINGS DATA:                                                                                                  
Net sales....................................... $1,061.4   $1,000.2   $1,099.6   $1,159.7   $1,314.9   $  309.2    $  374.4 
Cost of goods sold..............................    703.9      648.3      744.2      811.1      898.3      211.7       260.1 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Gross profit....................................    357.5      351.9      355.4      348.6      416.6       97.5       114.3 
Selling and administrative......................    183.8      186.7      186.4      191.0      218.8       52.6        61.0 
Special charge(a)...............................     25.2         --       27.0         --         --         --          -- 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Operating income(b).............................    148.5      165.2      142.0      157.6      197.8       44.9        53.3 
Interest expense and other, net.................    110.2       89.5       89.9       74.9       54.0       12.4        15.1 
Income taxes....................................     13.7       27.2       17.6       28.1       48.9       11.0        13.0 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Earnings from continuing operations before                                                                                   
  extraordinary item(b).........................     24.6       48.5       34.5       54.6       94.9       21.5        25.2 
Discontinued operations(c)......................     40.6       45.5       36.7       57.1         --         --          -- 
Extraordinary item(d)...........................    (17.8)      (1.5)       (.3)     (30.6)        --         --          -- 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Net earnings.................................... $   47.4   $   92.5   $   70.9   $   81.1   $   94.9   $   21.5    $   25.2 
                                                 ========   ========   ========   ========   ========   ========    ======== 
Earnings (loss) per common share:(e)                                                                                         
  Before extraordinary item..................... $    .35   $    .70   $    .49   $    .79   $   1.42   $    .32    $    .38 
  Discontinued operations.......................      .59        .65        .53        .82         --         --          -- 
  Extraordinary item............................     (.26)      (.02)        --       (.44)        --         --          -- 
                                                 --------   --------   --------   --------   --------   --------    -------- 
Net earnings per share.......................... $    .68   $   1.33   $   1.02   $   1.17   $   1.42   $    .32    $    .38 
                                                 ========   ========   ========   ========   ========   ========    ======== 
BALANCE SHEET DATA (AT END OF PERIOD):                                                                                       
Working capital................................. $  163.1   $  189.6   $  208.9   $  215.6   $  187.9   $  217.2    $  228.4 
Total assets....................................    796.5      847.5      894.5      849.5      933.0      851.9     1,076.1 
Total debt......................................  1,033.6      970.1      945.8      720.3      759.4      731.3       860.0 
Shareholders' equity............................   (625.5)    (525.6)    (453.8)    (417.0)    (359.2)    (413.7)     (335.2)
OTHER FINANCIAL DATA:                                                                                                        
EBITDA(f)....................................... $  197.5   $  207.3   $  184.1   $  193.6   $  236.2   $   53.4    $   65.7 
Cash flows from operating activities............    105.2       98.2       91.0       49.5       61.4       18.7        10.1 
Cash flows from investing activities............      9.9      (41.4)     (66.8)     284.6     (141.9)     (13.6)      (96.3)
Cash flows from financing activities............     96.7      (58.4)     (24.5)    (323.0)      80.2       (6.4)       92.6 
Capital expenditures............................     38.6       38.2       42.5       44.6       81.2       13.6        15.0 
Order backlog (at end of period)(g).............    598.6      594.2      657.1      678.3      875.6      805.9       968.2 
Ratio of earnings to fixed charges(h)...........     1.3x       1.8x       1.6x       2.1x       3.5x       3.5x        3.4x 
Ratio of EBITDA to interest expense(i)..........     1.8x       2.3x       2.0x       2.6x       4.4x       4.3x        4.4x 
Ratio of total debt to EBITDA(j)................     5.2x       4.7x       5.1x       3.7x       3.2x      13.7x       13.1x 

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

(a) In 1997, Coltec incurred a special charge of $10.0 million for the          
   restructuring of its Industrial segment. In 1997, the remaining $10.0 million
  accrual for the 1995 special charge was reversed. In 1995, Coltec incurred a
 special charge of $27.0 million primarily in the Aerospace Segment to cover
the costs of closing the Walbar compressor blade facility in Canada. The  
  charge also covered selected workforce reductions throughout the Company. In
  1993, Coltec incurred a special charge of $25.2 million to cover the cost of
consolidation and rearrangement of certain manufacturing facilities and   
related workforce reductions primarily in the Aerospace segment.          

(b) Operating income for 1996 included a charge of $14.2 million related to the 
bankruptcy of Fokker, a major aerospace customer of Coltec.               
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(c) See note 2 to the audited consolidated financial statements of Coltec       
included elsewhere in this Prospectus.                                    

(d) See note 3 to the audited consolidated financial statements of Coltec       
   included elsewhere in this Prospectus. Extraordinary charges relate to either
early retirement of debt or debt refinancings.                            

(e) Represents diluted earnings per common share. See note 5 to the audited     
consolidated financial statements and note 3 to the unaudited interim     
consolidated financial statements of Coltec included elsewhere in this    
  Prospectus. The Company's reported earnings per common share for 1996, 1995,
   1994 and 1993 equaled diluted earnings per share as set forth in Statement of
Financial Accounting Standards No. 128.                                   

(f) "EBITDA" as used herein means earnings from continuing operations before    
extraordinary item plus interest expense, taxes, depreciation and         
 amortization. EBITDA is presented because the Company believes that it is a
 widely accepted indicator of cash flow and a company's ability to incur and
 service indebtedness. However, EBITDA should not be considered as a measure
of operating performance or as an alternative to, or more meaningful than,
operating income, net income or cash flows from operations (as measured by
U.S. generally accepted accounting principles). EBITDA as presented herein
may not be comparable to similarly titled measures presented by other     
companies. EBITDA for 1993 would have been $222.7 million excluding the   
  special charge of $25.2 million described in note (a) above. EBITDA for 1995
would have been $211.1 million excluding the $27.0 million special charge 
described in note (a) above.                                              

(g) Of the $875.6 million backlog at December 31, 1997, $267.2 million was      
scheduled to be shipped after 1998.                                       

(h) For purposes of calculating the ratio of earnings to fixed charges, earnings
 are determined by adding fixed charges (excluding capitalized interest) and
income taxes to earnings from continuing operations before extraordinary  
item. Fixed charges consist of interest expense, capitalized interest and 
that portion of rental expense deemed to be representative of the interest
factor.                                                                   

(i) The ratio of EBITDA to interest expense for 1993 and 1995, based upon EBITDA
  of $222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 2.0x and 2.3x, respectively.                       

(j) The ratio of total debt to EBITDA for 1993 and 1995, based upon EBITDA of   
$222.7 million and $211.1 million, respectively, as described in note (f) 
above, would have been 4.6x and 4.5x, respectively.                       

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS 

OVERVIEW                                                                        

In conjunction with the divestitures of the Company's automotive OEM  
components operations during 1996 (see note 2 to the Company's audited          
consolidated financial statements included elsewhere in this Prospectus), the   
Company was realigned into two operating segments. The following are the major  
products in each industry segment:                                              

          Aerospace:  Menasco landing gear and flight control actuation systems;
Walbar blades, vanes and discs for jet and other gas turbine engines; 
Chandler Evans fuel pumps and control systems; Delavan gas turbine    
     products; Lewis Engineering cockpit instrumentation and sensors; AMI flight
attendant seats.                                                      

       Industrial:  Garlock seals, gaskets, packings, bearings, valves and
tape; Quincy air compressors; Delavan spray nozzles; France compressor
    products; FM Engine large diesel and dual-fuel engines; Haber and Sterling
dies; Ortman Fluid Power cylinders.                                   

   In January 1998, Coltec acquired Marine & Petroleum Mfg., Inc.,'s ("M&P")
manufacturing facilities based in Texas for approximately $17.0 million and     
Tex-o-Lon and Repro-Lon for approximately $25.0 million. The M&P facilities     
produce flexible graphite and PTFE fluid sealing products used in the           
petrochemical business. Tex-o-Lon manufactures, machines and distributes PTFE   
products, primarily for the semiconductor industry. Repro-Lon reprocesses PTFE  
compounds for the chemical and semiconductor industries. These acquisitions were
combined into one division, Coltec Specialty Products. See note 19 to the       
Company's audited consolidated financial statements included elsewhere in this  
Prospectus.                                                                     

   In February 1998, Coltec purchased the Sealing Division of Groupe Carbone
Lorraine which will be segregated into two divisions. Cefilac, based in Saint   
Etienne and Montbrison, France, produces seals, gaskets and packings, metal     
o-rings and spiral-wound gaskets used in the chemical, power and refining       
industries. Helicoflex, based in Columbia, South Carolina, produces metal       
o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing products  
are specifically designed for equipment and processes exposed to high           
temperatures, cryogenic temperatures, high pressures, vacuum conditions,        
radioactive environments or corrosive applications. See note 19 to the Company's
audited consolidated financial statements included elsewhere in this Prospectus.

     On May 15, 1998, the Company completed the previously-announced sale of the
capital stock of its Holley Performance Products subsidiary to Kohlberg & Co.,  
L.L.C., a private merchant banking firm located in Mount Kisco, New York, for   
$100 million in cash. The proceeds from this acquisition were applied toward    
reducing debt. For 1997, Holley had gross revenues and operating income of      
approximately $99.0 million and $8.0 million, respectively.                     

The financial review that follows is based on continuing operations,  
excluding the impact of the 1996 discontinued operations discussed in note 2 to 
the audited consolidated financial statements of Coltec included elsewhere in   
this Prospectus, and Coltec's two operating segments, Aerospace and Industrial. 
The 1995 information has been restated to reflect the discontinued operations   
and Coltec's two realigned operating segments. Earnings per share information   
represents diluted earnings per common share (see note 5 to the audited         
consolidated financial statements and note 3 to the unaudited interim financial 
statements of Coltec included elsewhere in this Prospectus). The following      
discussion of operating results has been structured to provide an analysis from 
the perspective of Coltec as a whole, followed by a more detailed analysis for  
each operating segment.                                                         

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INDUSTRY SEGMENT INFORMATION                                                    

     The following table shows financial information by industry segment for the
five years ended December 31, 1997 and the three months ended March 30, 1997 and
March 29, 1998.                                                                 

                                                        [Enlarge/Download Table]

                                                                                        THREE MONTHS ENDED  
                                         YEARS ENDED DECEMBER 31,                     ----------------------
                         ---------------------------------------------------------    MARCH 30,    MARCH 29,
                           1993        1994        1995        1996        1997         1997         1998   
                         --------    --------    --------    --------    ---------    ---------    ---------
                                                        (DOLLARS IN MILLIONS)                               
                                                                                                            
Net sales:                                                                                                  
  Aerospace............. $  356.9    $  339.2    $  378.3    $  433.5    $   558.3    $   119.1    $  166.2 
  Industrial............    705.4       662.7       722.6       726.9        757.6        190.1       209.2 
  Intersegment                                                                                              
    elimination(a)......      (.9)       (1.7)       (1.3)        (.7)        (1.0)          --        (1.0)
                         --------    --------    --------    --------    ---------    ---------    -------- 
    Total............... $1,061.4    $1,000.2    $1,099.6    $1,159.7    $ 1,314.9    $   309.2    $  374.4 
                         ========    ========    ========    ========    =========    =========    ======== 
Operating income:                                                                                           
  Aerospace............. $   44.5(c) $   51.0    $   32.4(d) $   51.6(e) $    97.7(f) $    18.3    $   26.1 
  Industrial............    135.6(c)    145.4       146.6       147.1        139.8(f)      36.3        37.3 
                         --------    --------    --------    --------    ---------    ---------    -------- 
  Total segments........    180.1       196.4       179.0       198.7        237.5         54.6        63.4 
  Corporate                                                                                                 
    unallocated(b)......    (31.6)      (31.2)      (37.0)(d)    (41.1)      (39.7)        (9.7)      (10.1)
                         --------    --------    --------    --------    ---------    ---------    -------- 
    Total............... $  148.5(c) $  165.2    $  142.0(d) $  157.6(e) $   197.8(f) $    44.9    $   53.3 
                         ========    ========    ========    ========    =========    =========    ======== 
Operating margin:                                                                                           
  Aerospace.............    12.5%       15.0%        8.6%       11.9%        17.5%        15.4%       15.7% 
  Industrial............     19.2        21.9        20.3        20.2         18.5         19.1        17.9 
    Total...............    14.0%       16.5%       12.9%       13.6%        15.0%        14.5%       14.2% 
Return on total                                                                                             
  assets:(g)                                                                                                
  Aerospace.............    12.7%       14.3%        8.3%       12.4%        22.3%        17.2%       19.0% 
  Industrial............     49.8        53.3        49.1        51.2         45.0         46.7        32.6 
    Total...............    18.6%       19.5%       15.9%       18.5%        21.2%        21.1%       19.8% 
Backlog:(h)                                                                                                 
  Aerospace............. $  475.1    $  445.7    $  538.0    $  560.7    $   734.3    $   674.2    $  804.9 
  Industrial............    124.0       148.5       119.5       117.8        142.0        132.6       163.3 
  Intersegment                                                                                              
    elimination.........      (.5)         --         (.4)        (.2)         (.7)         (.9)         -- 
                         --------    --------    --------    --------    ---------    ---------    -------- 
    Total............... $  598.6    $  594.2    $  657.1    $  678.3    $   875.6    $   805.9    $  968.2 
                         ========    ========    ========    ========    =========    =========    ======== 

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

(a) Reflects elimination of intercompany sales between divisions in different   
segments.                                                               

(b) Represents corporate selling and administrative expense, including other    
  income and expense, that is not allocable to individual industry segments.

(c) Operating income for 1993 included a special charge of $25.2 million as     
follows: $17.2 million in the Aerospace Segment and $8.0 million in the 
Industrial Segment. Excluding the special charge, operating income,     
  operating margin and return on total assets for 1993 would have been $61.7
  million, 17.3% and 17.6%, respectively, for Aerospace, and $143.6 million,
20.4% and 52.7%, respectively, for Industrial.                          

(d) Operating income for 1995 included a special charge of $27.0 million as     
follows: $23.4 million in the Aerospace Segment and $3.6 million in     
Corporate Unallocated. Excluding the special charge, operating income,  
  operating margin and return on total assets for 1995 would have been $55.8
million, 14.7% and 13.4%, respectively, for Aerospace.                  

(e) Operating income for 1996 included a charge of $14.2 million related to the 
 bankruptcy of a major aerospace customer (Fokker). Excluding this charge,
    operating income, operating margin and return on total assets for 1996 would
 have been $65.8 million, 15.2% and 18.1%, respectively, for Aerospace and
$171.8 million, 15.9% and 22.0%, respectively, for the Company.         

(f)  Operating income for 1997 included a special charge of $10.0 million for   
the restructuring of its Industrial Segment. In 1997 the remaining $10.0
    million accrual for the 1995 special charge related to the Aerospace Segment
was reversed.                                                           

(g) Return on total assets is calculated for each segment by dividing annualized
segment operating income by segment total assets at end of applicable   
    period, and for total Company by dividing total Company annualized operating
income by total assets at end of applicable period.                     

(h) Of the $875.6 million backlog at December 31, 1997, $267.2 million was      
scheduled to be shipped after 1998.                                     

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RESULTS OF OPERATIONS -- FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997      

COMPANY REVIEW                                                              

 Net sales for first quarter 1998 increased 21.1% to $374.4 million from
$309.2 million for first quarter 1997 primarily driven by increases in the      
Aerospace Segment. Gross profit increased to $114.3 million for first quarter   
1998 from $97.5 million in first quarter 1997. The gross profit margin decreased
slightly to 30.5% in first quarter 1998 from 31.5% in first quarter 1997 as a   
result of slightly lower gross profit margins in the Industrial Segment. Selling
and administrative expenses totaled $61.0 million, or 16.3% of sales, in first  
quarter 1998 compared to $52.6 million, or 17.0% of sales in first quarter 1997.

Operating income increased to $53.3 million in first quarter 1998 from
$44.9 million in first quarter 1997. Operating margin for first quarter 1998 was
14.2% compared to 14.5% for first quarter 1997. The margin decrease related to a
slight decrease in operating margin in the Industrial Segment.                  

     Interest expense increased to $15.1 million in first quarter 1998 (interest
expense in the first quarter of 1998 would have been $15.8 million after giving 
pro forma effect to the Offerings and use of the estimated net proceeds         
therefrom) from $12.4 million for first quarter 1997. This increase was a result
of increased outstanding amounts under the credit facility due to acquisitions  
discussed below under "-- Liquidity and Capital Resources."                     

The effective tax rate was 34% in the first quarter of 1998 and 1997. 

As a result of the foregoing, net earnings were $25.2 million in first
quarter 1998, or $0.38 per share, compared to net earnings of $21.5 million, or 
$0.32 per share, in first quarter 1997.                                         

SEGMENT REVIEW -- AEROSPACE                                                 

Sales in first quarter 1998 for the Aerospace Segment totaled $166.2  
million increasing 39.5% from $119.1 million in first quarter 1997. At Menasco, 
which represented approximately 50% of this increase, sales increased           
significantly due to rising commercial aircraft production as well as improved  
military sales. Menasco deliveries of main landing gear systems for the Boeing  
737 increased from 33 shipsets in first quarter 1997 to 69 shipsets in first    
quarter 1998, while military sales benefited primarily from higher shipset      
deliveries for the F-15 and F-16 programs. At Walbar, a sales increase of       
approximately $10.0 million was primarily due to increased customer demand and  
expanding product lines. Aerospace Segment sales were also favorably impacted by
the acquisition of AMI Industries, Inc. ("AMI") in July 1997.                   

  Operating income for the Aerospace Segment increased to $26.1 million in
first quarter 1998 from $18.3 million in first quarter 1997. Operating margin   
for first quarter 1998 was 15.7% compared to 15.4% for first quarter 1997. At   
Menasco's Aerospace Division, operating margin was impacted by a favorable mix  
of landing gear systems for certain commercial airline programs as well as      
improved manufacturing efficiencies due to higher production. Walbar also       
yielded improved manufacturing efficiencies as a result of its higher production
levels. The increased margin was also driven by higher sales volumes and        
improved margins for the Segment's other businesses.                            

SEGMENT REVIEW -- INDUSTRIAL                                                

 Industrial sales increased to $209.1 million in first quarter 1998 from
$190.1 million in first quarter 1997. The Stemco and Quincy Compressor Divisions
experienced solid sales volume increases totaling approximately $4.0 million.   
Sales for Garlock Sealing Technologies increased by approximately $8.0 million  
primarily due to the acquisition of the sheet rubber and conveyor belt business 
of Dana Corporation's Boston Weatherhead division. Holley sales decreased by    
approximately $4.0 million due to curtailed orders by two major customers.      
Industrial sales increased by more than $10.0 million as a result of first      
quarter 1998 Industrial Segment acquisitions, Tex-o-Lon, and Repro-Lon and the  
Sealing Division of Group Carbone Lorraine.                                     

 Operating income for the Industrial Segment increased slightly at $37.3
million in first quarter 1998 compared to $36.3 million in first quarter 1997.  
Operating income increased for Garlock Sealing Technologies and Quincy          
Compressor Divisions due to higher sales volumes. Operating results at Holley   
were approximately                                                              

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$1.0 million lower due to decreased sales volumes and an unfavorable mix of     
products sold. Excluding Holley, operating income in the Industrial Segment     
increased 6% on a 14% sales increase. On May 15, 1998 the Company completed its 
previously-announced sale of Holley for $100 million. See "-- Overview".        
Operating margins were also negatively impacted by the Industrial Segment       
acquisitions although the acquisitions were immediately accretive.              

LIQUIDITY AND CAPITAL RESOURCES                                             

The Company generated $10.1 million of operating cash flows in first  
quarter 1998 compared with $12.7 million for first quarter 1997. The lower      
operating cash flows in 1998 were primarily due to negative cash flow generated 
by working capital requirements primarily from the increase in accounts         
receivable. The change in assets and liabilities generated negative cash flow of
$28.8 million in first quarter 1998 compared to negative cash flow of $1.7      
million in first quarter 1997. This negative cash flow impact was offset by     
increased net earnings and decreased payments related to liabilities of         
discontinued operations and asbestos claims.                                    

 The current ratio of current assets to current liabilities at March 29,
1998 was 1.91, increasing from 1.78 at December 31, 1997. Cash and cash         
equivalents increased to $21.1 million at March 29, 1998 from $14.7 million at  
December 31, 1997.                                                              

    In the first quarter of 1998 the Company invested $15.0 million in capital
expenditures compared to $13.6 million during the same prior year period. Debt  
increased by $100.6 million at March 29, 1998 compared to December 31, 1997     
through additional borrowings under the Company's revolving credit facility     
primarily for first quarter 1998 acquisitions.                                  

    In January 1998, the Company acquired certain M&P manufacturing facilities
based in Texas for approximately $17.0 million. Combined annual sales for these 
facilities are expected to approximate $18.0 million. The Company also acquired 
Tex-o-Lon and Repro-Lon for approximately $25.0 million. These two Texas        
businesses have combined annual sales of $15.0 million. The acquisitions were   
accounted for as purchases; accordingly, the purchase prices, which were        
financed through available cash resources, were allocated to the acquired assets
based upon their fair market values. See "-- Overview".                         

In February 1998, the Company purchased the Sealing Division of Groupe
Carbone Lorraine for $45.6 million. Sales for this division in 1998 are expected
to approximate $38.0 million. This acquisition was accounted for as a purchase  
and the purchase price, also financed through available cash resources, was     
allocated to the acquired assets based upon their fair market values. See       
"-- Overview".                                                                  

RESULTS OF OPERATIONS -- 1997 COMPARED TO 1996                                  

COMPANY REVIEW                                                              

   Net sales for 1997 increased 12.9% to $1.31 billion from $1.16 billion in
1996 primarily driven by increases in the Aerospace Segment. Gross profit       
increased to $416.6 million in 1997 from $348.6 million in 1996. The gross      
profit margin increase in 1997 to 31.7% from 30.1% in 1996 primarily resulted   
from the 1996 bankruptcy of a major aerospace customer (Fokker). Selling and    
administrative expenses totaled $218.8 million, or 16.6%, of sales in 1997      
compared to $191.0 million, or 16.5%, of sales (15.9% excluding the Fokker      
impact) in 1996. The increase resulted from costs associated with expanding     
Coltec's businesses, both domestically and internationally.                     

Operating income amounted to $197.8 million in 1997 compared to $157.6
million for 1996. The 1996 amount includes the effect of the $14.2 million      
charge related to the bankruptcy of Fokker. Operating margin for 1997 was 15.0% 
and was 13.6% (14.8% excluding the effect of the charge related to Fokker) for  
1996.                                                                           

Interest expense decreased 27.8% from $74.9 million in 1996 to $54.0  
million in 1997 (interest expense in 1997 would have been $54.7 million after   
giving pro forma effect to the Offerings and the use of the estimated net       
proceeds therefrom), a result of lower interest rates primarily from refinancing
high-cost, fixed-rate debt with lower-cost, variable-rate bank debt, and a full 
year impact of applying a substantial portion of the proceeds from the 1996     
second quarter sale of Coltec's automotive original equipment ("OE") components 
operations to debt reduction.                                                   

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The effective tax rate was 34.0% in 1997 and 1996.                    

     The 1996 results of discontinued operations reflect the aforementioned 1996
second quarter sale of the automotive OE components operations as well as the   
1996 fourth quarter sale of Farnam Sealing Systems. Note 2 to the Company's     
audited consolidated financial statements describes these transactions.         

   The 1996 extraordinary charge of $30.6 million relates to the refinancing
of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In      
January and December 1996, Coltec redeemed $605.8 million of such high-cost     
debt.                                                                           

     Net earnings and earnings from continuing operations were $94.9 million, or
$1.42 per share, in 1997 while 1996 net earnings amounted to $81.1 million, or  
$1.17 per share, with earnings from continuing operations for 1996 of $54.6     
million, or $0.79 per share. The 1996 charge related to Fokker impacted earnings
by $0.13 per share. The reduction in interest expense increased earnings by     
$0.20 per share in 1997.                                                        

SEGMENT REVIEW -- AEROSPACE                                                 

    Sales in 1997 for the Aerospace Segment aggregated $558.3 million, a 28.8%
increase over 1996 sales of $433.5 million. At Menasco, which represented       
approximately 50% of this increase, sales increased due to rising commercial    
aircraft production as well as improved military sales. Menasco deliveries of   
main landing gear systems for the Boeing 737 increased to 196 shipsets in 1997  
from 72 shipsets in 1996, while military sales benefited primarily from higher  
shipset deliveries for the F-15 and F-16 programs (151 shipsets in 1997 versus  
83 shipsets in 1996). At Chandler Evans, higher sales were primarily due to     
increased sales of spare parts while original equipment sales also improved.    
Aerospace Segment sales were favorably impacted by the acquisition of AMI in    
July 1997 (see note 2 to the Company's audited consolidated financial statements
included elsewhere in this Prospectus). Sales in 1997 for the other aerospace   
businesses increased due to increased sales volumes resulting from the continued
strengthening of the commercial aircraft market and regional airlines.          

     Operating income for the Aerospace Segment increased 48.5% to $97.7 million
in 1997, before the reversal of $10.0 million of the 1995 special charge which  
primarily related to the closing of the Walbar compressor blade facility in     
Canada. In 1995, the special charge included amounts for contractual obligation 
with customers which the Company could not fulfill upon the closing of the      
facility, and related legal fees. These amounts were reversed during 1997       
because the customers did not enforce the contracts. Operating income was $65.8 
million in 1996, excluding the 1996 charge for the Fokker bankruptcy. The       
Segment's operating margin for 1997 was 17.3% (15.7% excluding the special      
charge reversal) versus 15.2% in 1996 excluding the Fokker bankruptcy charge. At
the Menasco Aerospace division, operating margin was impacted by improved       
manufacturing efficiencies due to higher production. Chandler Evans realized    
higher margins due to higher after-market sales and selling price increases for 
certain products. The increase was also driven by higher sales volumes and      
improved margins for the other engine components businesses.                    

SEGMENT REVIEW -- INDUSTRIAL                                                

  Industrial Segment sales increased to $757.6 million in 1997 from $726.9
million in 1996. During 1997, Quincy Compressor and Fairbanks Morse Engine ("FM 
Engine") divisions had significant sales volume increases. The FM Engine        
increase was due to increased orders and the recovery from a ten-week strike in 
1996. Garlock Sealing Technologies ("Garlock") also experienced sales increases 
in part as a result of Coltec's acquisition of the sheet rubber and conveyor    
belt business from Dana Corporation's Boston Weatherhead division (see note 2 to
the Company's audited consolidated financial statements included elsewhere in   
this Prospectus). The above increases, totaling approximately $35.0 million,    
were partially offset by lower sales volumes of $8.6 million at Holley.         

Operating income for the Industrial Segment was $139.8 million in 1997
($149.8 million excluding the special charge of $10.0 million for restructuring 
costs in the Industrial Segment; see Note 4 to the consolidated financial       
statements) compared to $147.1 million in 1996. The Segment's operating margin  
for 1997 was 18.5% (19.8% before the $10.0 million special charge) compared to  
20.2% in 1996. Operating income increased for Quincy Compressor and FM Engine by
approximately $10.0 million due to the higher sales volumes as                  

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mentioned above while Garlock's income was impacted by approximately $2.0       
million of increased costs related to international initiatives. Holley's       
operating income was $4.7 million lower primarily as a result of decreased sales
volumes.                                                                        

RESULTS OF OPERATIONS -- 1996 COMPARED TO 1995                              

COMPANY REVIEW                                                              

  Net sales for 1996 increased 5.5% to $1.16 billion from $1.10 billion in
1995 primarily due to increases in the Aerospace Segment. Gross profit decreased
to $348.6 million in 1996 from $355.4 million in 1995. The gross profit decline 
in 1996 to 30.1% from 32.3% in 1995 stemmed from the impact of the bankruptcy of
a major aerospace customer (Fokker), increased spending related to asbestos (see
note 16 to the Company's consolidated financial statements included elsewhere in
this Prospectus) and higher other manufacturing costs. Selling and              
administrative expenses totaled $191.0 million, or 16.5% of sales (15.9%        
excluding the Fokker impact), in 1996 compared to $186.4 million, or 17.0% of   
sales, in 1995.                                                                 

Operating income amounted to $157.6 million in 1996 compared to $142.0
million for 1995. These amounts include the effect of the $14.2 million charge  
in 1996 related to the bankruptcy of Fokker and the 1995 special charge of $27.0
million. Operating margin for 1996 was 13.6% (14.8% excluding the effect of the 
charge related to Fokker) and 1995 was 12.9% (15.4% excluding the special       
charge). The operating margin decrease to 14.8% from 15.4% related to the same  
reasons as those explaining the decrease in overall gross profit margin         
(excluding Fokker).                                                             

Interest expense decreased 16.7% from $89.9 million in 1995 to $74.9  
million in 1996, a direct result of applying a substantial portion of the       
proceeds from the second quarter sale of the Company's automotive OE components 
operations to debt reduction. The Company also benefited from the January 1996  
redemption of $46.4 million of 11 1/4% debentures which was funded with         
lower-cost, variable-rate bank debt.                                            

The effective tax rate was 34.0% in 1996 and 33.8% in 1995.           

  The results of discontinued operations reflect the aforementioned second
quarter sale of the automotive OE components operations as well as the fourth   
quarter sale of Farnam Sealing Systems. Note 2 to the Company's audited         
consolidated financial statements included elsewhere in this Prospectus         
describes these transactions.                                                   

   The 1996 extraordinary charge of $30.6 million relates to the refinancing
of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In      
January and December 1996, the Company redeemed $605.8 million of such high-cost
debt.                                                                           

     As a result of the foregoing, net earnings were $81.1 million, or $1.17 per
share, in 1996 while 1995 net earnings amounted to $70.9 million, or $1.02 per  
share. Earnings from continuing operations in 1996 were $54.6 million, or $0.79 
per share, compared to 1995 earnings from continuing operations of $34.5        
million, or $0.49 per share. The 1996 charge related to Fokker impacted earnings
by $0.13 per share while the 1995 special charge affected earnings by $0.25 per 
share. The aforementioned reduction in interest expense increased earnings by   
$0.14 per share in 1996.                                                        

SEGMENT REVIEW -- AEROSPACE                                                 

    Sales in 1996 for the Aerospace Segment aggregated $433.5 million, a 14.6%
increase over 1995 sales of $378.3 million. At Menasco, deliveries doubled in   
1996 (41 versus 20) for shipsets of landing gear systems for the Boeing 777     
while shipset deliveries for the McDonnell Douglas MD-80 increased more than    
50%. These increases more than offset the lost business for the F-70 and F-100  
programs due to the bankruptcy of Fokker, resulting in a net increase in Menasco
sales of approximately $12.0 million. Sales for Walbar increased by greater than
$30.0 million due to a change in the billing practices for consigned inventory  
at its Arizona facility although profitability levels were not affected. Sales  
in 1996 for the other aerospace businesses increased due to higher sales volumes
resulting from the continued strength of the commercial and regional airline    
markets, as well as higher selling prices for certain products and new product  
sales.                                                                          

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     Operating income for the Aerospace Segment increased 18.0% to $65.8 million
in 1996 from $55.8 million in 1995, excluding the 1996 charge for the Fokker    
bankruptcy and the 1995 special charge. Excluding such charges, the Segment's   
operating margin for 1996 was 15.2% versus 14.7% in 1995. Contributing to this  
increase were the significant improvement in 1996 operating results of Walbar's 
Canadian operations due to the closing of the compressor blade facility, as well
as higher margins which were achieved at its turbine blade business, yielding an
increase in operating income at Walbar of $7.7 million. The increase was also   
driven by higher sales volumes and improved margins for the other engine        
components businesses. At Menasco, operating results were flat compared to 1995 
with the improvement from the Boeing 777 and MD-80 programs offsetting the loss 
of the Fokker business. Menasco was also impacted by a less favorable mix of    
landing gear systems for certain commercial airline programs.                   

SEGMENT REVIEW -- INDUSTRIAL                                                

    Industrial Segment sales increased slightly to $726.9 million in 1996 from
$722.6 million in 1995. During 1996, Garlock realized the full year benefit of  
its December 1995 acquisition of certain assets of Furon Company's metallic     
gasket business. Garlock's sales were also favorably impacted by continued      
volume increases for KLOZURE oil seals, cut gaskets and GYLON gasketing products
for a total increase of $18.0 million. Moderate sales increases were registered 
by the Holley and France Compressor Products ("France Compressor") divisions. FM
Engine sales were unfavorably affected by approximately $12.0 million from lower
shipments of commercial, government and Alco engines due to the effects of a ten
week strike. The Stemco division also experienced a downturn in sales due to    
lower trailer production levels.                                                

  Operating income for the Industrial Segment was essentially unchanged at
$147.1 million in 1996 compared to $146.6 million in 1995. The Segment's        
operating margin for 1996 was 20.2% compared to 20.3% in 1995. Operating income 
increased by a total of $6.3 million for Garlock, Holley and France Compressor  
primarily due to higher sales volumes. The negative impact of the strike at FM  
Engine of approximately $6.0 million was offset by the gain on the sale of      
Stemco's truck exhaust business (see note 2 to the Company's audited            
consolidated financial statements included elsewhere in this Prospectus).       

LIQUIDITY AND CAPITAL RESOURCES                                                 

CASH FLOWS                                                                  

The Company generated cash from operations of $61.4 million in 1997   
compared to $49.5 million in 1996. The increase in operating cash flows stemmed 
from the increase in net earnings. The increase in inventory in response to the 
ramp-up for certain aircraft was offset by the increase in accounts payable.    
Working capital at December 31, 1997 of $187.9 million was $27.7 million lower  
than year-end 1996 as a result of the sale of $82.5 million of trade accounts   
receivable (see note 6 to the Company's consolidated financial statements       
included elsewhere in this Prospectus) partially offset by a $12.5 million      
increase of accounts receivable prior to sale and a $52.5 million increase of   
inventories. The 1997 ratio of current assets to current liabilities was 1.78   
compared to 1.95 in 1996. Cash and cash equivalents decreased to $14.7 million  
in 1997 from $15.0 million in 1996.                                             

 Net cash used in investing activities in 1997 included $81.2 million of
capital expenditures and $60.7 million for business acquisitions (see note 2 to 
the Company's audited consolidated financial statements included elsewhere in   
this Prospectus). Net cash provided by investing activities of $284.6 million in
1996 consisted of proceeds from divestitures amounting to $329.1 million (see   
note 2 to the Company's audited consolidated financial statements included      
elsewhere in this Prospectus) with capital expenditures totaling $44.6 million  
in 1996.                                                                        

 Financing activities in 1997 generated $80.2 million primarily from the
$82.5 million proceeds from sale of accounts receivable (see note 6 to the      
Company's audited consolidated financial statements included elsewhere in this  
Prospectus). The purchase of $42.7 million of treasury stock was offset by a    
$39.5 million net increase in the Company's revolving facility. Financing       
activities in 1996 used cash of $323.0 million. A substantial portion of the    
proceeds from the 1996 second quarter sale of the Company's automotive OE       
components operations was applied to debt reduction. During 1996, Coltec        
refinanced $617.0 million of high-cost, fixed-rate debt with lower-cost,        
variable-rate bank debt. Coltec also purchased treasury stock with a cost of    
$46.4 million in 1996.                                                          

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CAPITAL EXPENDITURES                                                        

    Capital expenditures increased to $81.2 million in 1997 from $44.6 million
in 1996 and $42.5 million in 1995, as Coltec continued to invest in capital     
improvements to increase efficiency, reduce costs, pursue new opportunities,    
expand production capacity and improve facilities. The level of capital         
expenditures has and will vary from year to year, affected by the timing of     
capital spending for production equipment for new products, periodic plant and  
facility expansion, and cost reduction and labor efficiency programs. Capital   
expenditures during 1997 included amounts for the construction of and equipment 
purchases for significant production expansions at Menasco's original equipment 
facilities. Coltec estimates capital expenditures for 1998 to approximate $60.0 
million, including amounts for equipment purchases related to capacity          
expansions and upgrades.                                                        

ENVIRONMENTAL MATTERS                                                       

 Coltec's policy is to accrue environmental remediation costs when it is
both probable that a liability was incurred and the amount can be reasonably    
estimated. Coltec currently estimates its future non-capital expenditures       
related to environmental matters to range between $27.0 million and $50.0       
million. Investigations have been completed for approximately 17 sites and      
continuing investigations are being done at approximately 11 sites. Accruals are
provided for all sites based on the factors discussed above. As remediation     
plans are written and implemented, estimated costs become more fact-based and   
less judgment-based. In connection with these environmental expenditures, Coltec
had accrued $31.7 million at December 31, 1997 representing management's best   
estimate of probable non-capital expenditures. These non-capital expenditures   
are estimated to be incurred over the next 10 to 20 years. In addition, capital 
expenditures aggregating $5.0 million may be required during the next two years 
related to environmental matters. Although Coltec is pursuing insurance recovery
in connection with certain of these matters, no receivable has been recorded    
with respect to any potential recovery of costs in connection with any          
environmental matter. During 1997, costs associated with environmental          
remediation and ongoing assessment were not significant. See "Risk              
Factors -- Potential Exposure to Environmental Liabilities" and                 
"Business -- Environmental Matters".                                            

ASBESTOS LITIGATION                                                         

The Company and certain of its subsidiaries are defendants in various 
lawsuits involving asbestos-containing products. See "Risk Factors -- Potential 
Exposure to Environmental Liabilities", "Business -- Legal                      
Proceedings -- Asbestos Litigation" and note 16 to the Company's audited        
consolidated financial statements and note 4 to the unaudited interim           
consolidated financial statements of the Company included elsewhere in this     
Prospectus. Based on the factors discussed in such sections and notes as well as
the experience of the Company's subsidiaries and other defendants in asbestos   
litigation, the likely sharing of judgments among multiple responsible          
defendants, and the substantial amount of insurance coverage that the Company   
expects to be available from its solvent carriers, the Company believes that    
pending and reasonably anticipated future actions are not likely to have a      
material effect on the Company's results of operations and financial condition. 

OTHER COMMITMENTS                                                           

Liabilities of discontinued operations at December 31, 1997 of $159.9 
million relate to contingent contractual obligations, reserves for              
postretirement benefits and other future estimated costs for various            
discontinued operations. The Company expects future cash payments will extend at
least over the next five to ten years.                                          

   Consistent with industry practice, the Company uses the program method of
accounting for long-term commercial jet aircraft programs. The program method of
accounting involves the use of various estimates related to total program       
revenues and costs. These estimates involve various assumptions and projections 
relative to the outcome of future events, including the quantity and timing of  
shipset deliveries. Also included are assumptions relative to future labor      
performances and rates, and projections relative to material and overhead costs.
These assumptions involve various levels of expected performance improvements.  
The Company reevaluates its estimates periodically and reflects changes in      
estimates in current operations.                                                

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   As is the case with most other companies, the Company recognizes the need
to ensure its operations will not be adversely impacted by the Year 2000 date   
transition and is faced with the task of addressing related issues. The Company 
is evaluating whether the effect of the Year 2000 transition issues resulting   
from relationships with customers, suppliers and other constituents will have an
impact on the Company's results of operations or financial condition. At        
December 31, 1997, the Company estimates that expenditures over the next two    
years for the cost of modifying its existing software for the Year 2000 date    
transition will have an immaterial impact on consolidated operating results.    

FINANCIAL RESOURCES                                                         

  At December 31, 1997, total debt was $759.4 million compared with $720.3
million at year-end 1996. In December 1996, the Company amended the Amended     
Credit Agreement increasing the total commitment to $850.0 million from $465.0  
million and extending the maturity date to December 15, 2001. The additional    
commitment was used to redeem substantially all of the Company's outstanding    
high-cost, fixed-rate debt. The Amended Credit Agreement also provides for a    
maximum issuance of $125.0 million for letters of credit and reductions in the  
total commitment of $75.0 million and $100 million at December 15, 1999 and     
2000, respectively. In December 1997, the Company amended the Amended Credit    
Agreement to establish an $80.0 million sublimit for Canadian borrowings under  
the existing facility. At December 31, 1997, $697.5 million of borrowings and   
$40.1 million of letters of credit were outstanding under the credit facility,  
leaving availability of $112.4 million. In February 1998, the Company amended   
the Amended Credit Agreement to increase the commitment thereunder from $850    
million to $900 million. In connection with the Offerings, the Amended Credit   
Agreement was further amended, among other things, to permit the TIDES Offering 
and the Original Offering, to provide that the Senior Notes would be secured    
equally and ratably with the lenders under the Amended Credit Agreement and to  
provide that the total commitment thereunder would be reduced by two-thirds of  
the gross proceeds to the Company from the Offerings in lieu of the $75.0       
million and $100.0 million reductions described above. On a pro forma basis     
after giving effect to such amendment and the completion of the Offerings       
(assuming gross proceeds therefrom of $450 million), as of March 29, 1998 and   
December 31, 1997, the Company would have had $372.5 million and $262.0 million,
respectively, of borrowings and $30.9 million and $40.1 million, respectively,  
of letters of credit outstanding and $196.6 million and $297.9 million,         
respectively, available for borrowing under the Amended Credit Agreement. The   
Company believes that internally generated funds and borrowings available under 
the Amended Credit Agreement will be sufficient to meet its foreseeable working 
capital, capital expenditure and debt service requirements.                     

    During 1997, Coltec entered into interest rate swaps to reduce (hedge) the
impact of interest rate changes for variable rate borrowings under its credit   
facility. The agreements include an aggregate notional amount of $405.0 million,
fixed interest rates ranging from 5.78% to 6.40% and maturity dates ranging from
April 1998 to October 2002. The Company's hedging activities had an immaterial  
impact on consolidated operating results for the year ended December 31, 1997.  

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BUSINESS

     Coltec and its consolidated subsidiaries manufacture and sell a diversified
range of highly engineered aerospace and industrial products primarily in the   
United States, Canada and Europe. Coltec's operations are conducted through its 
two principal segments -- Aerospace and Industrial. Through its Aerospace       
segment, which in 1997 accounted for approximately 42% of total Company sales   
and approximately 37% of total Company operating profit, Coltec is a leading    
manufacturer of landing gear systems, engine fuel controls, flight attendant and
cockpit seats, turbine blades, fuel injectors, nozzles and related components   
for commercial and military aircraft. Through its Industrial segment, which in  
1997 accounted for approximately 58% of total Company sales and approximately   
63% of total Company operating profit, Coltec is a leading manufacturer of      
industrial seals, gaskets, packing products, self-lubricating bearings and oil  
seals and hubodometers for trucks and trailers and is a producer of             
technologically advanced spray nozzles for agricultural, home heating and       
industrial applications. Coltec also produces high-horsepower diesel engines for
naval ships and diesel, gas and dual-fuel engines for electric power plants and 
produces air compressors and tooling for industrial applications.               

The Company derived approximately 50% of sales in 1997 from its       
aftermarket, or parts and services, business. Aftermarket sales tend to generate
significantly higher margins and tend to be less affected by general economic   
cycles than the Company's sales of products to OEMs. In addition, management    
believes the Company is benefiting from several other industry trends which will
help the Company achieve its growth and operating goals. These trends include   
strong growth in world airline fleets, preference by OEMs to source complex     
integrated systems rather than component parts, an increased preference to      
consolidate purchasing of consumable products from a single full line supplier  
and customer demand for integrated sales and service providers.                 

In 1997, Coltec had sales and EBITDA (as defined herein) of $1,314.9  
million and $236.2 million, an increase of 13.4% and 22.0%, respectively, from  
1996. Year end 1997 backlog increased 29.1% to $875.6 million from $678.3       
million at year end 1996. For the quarter ended March 29, 1998, Coltec had sales
and EBITDA of $374.4 million and $65.7 million, respectively, an increase of    
21.1% and 23.0%, respectively, from the first quarter of 1997. Backlog at the   
end of the first quarter of 1998 increased 10.6% to $968.2 million from $875.6  
million at year end 1997. Coltec's common stock is listed on the NYSE, and based
on the closing price of $20 1/4 per share on July 14, 1998, the Company had a   
total equity market capitalization of approximately $1,338.5 million.           

BUSINESS STRATEGY                                                               

    The Company's strategy is to develop and maintain market leading positions
and attractive margins for its products through technological innovation, cost  
efficiencies, product differentiation and superior quality and service. The     
Company emphasizes targeted development of highly engineered, value-added       
products designed to meet specific customer requirements. This emphasis enables 
the Company to maintain close, interactive relationships with major aircraft    
manufacturers as well as the Company's principal industrial customers and to    
develop new products in response to customer needs. Coltec views its superior   
customer responsiveness as one of its key competitive strengths. Successful     
introduction of new products, cost reductions, productivity improvements and    
selected divestitures have helped the Company maintain operating margins        
averaging more than 12.5% over the last five years.                             

    Through "Coltec 2000", the Company's three-year growth and operating plan,
the Company has set specific growth and operating targets focused on achieving  
annual revenues of $2 billion by the year 2000 while maintaining the quality of 
earnings. The plan calls for substantial growth internally, complemented by     
strategic acquisitions which extend product offerings of the Company's existing 
businesses and leverage the Company's existing distribution network. The key    
elements of the plan are as follows:                                            

-  Focus on Aftermarket -- For the year ended December 31, 1997,      
approximately 50% of the Company's sales were derived from the    
 aftermarket. The Company's products sold in the aftermarket include
      industrial seals, hub systems and a variety of aftermarket parts used in
      the maintenance of engines, compressors, pumps and gas turbines. A broad
       and fragmented buyer base coupled with the critical nature of replacement
parts generates sales with generally higher margins than sales to 
     original equipment manufacturers. In addition, because the products are
       consumable in nature and are replaced over time, the aftermarket provides
a stable source of income.                                        

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-  Develop New Products -- The Company believes that responsiveness to
     customer demands is a critical success factor in both its Aerospace and
     Industrial markets. As a result, the Company has undertaken a number of
 initiatives to reduce the time and cost of bringing new products to
   market and has established a long term objective of generating 50% of
    sales from products introduced within the prior five years. Recent new
  product and application introductions have included (i) landing gear
     systems for the Boeing 777, (ii) Power$ync II computerized controls for
      compressors, (iii) QuickSet(TM) 9001 packing systems and Tandem Seal(TM)
     industrial sealing products, (iv) the Raindrop Ultra agricultural spray
      nozzle, (v) new versions of FADEC electronic fuel controls for aircraft,
     (vi) fuel injectors for the Rolls-Royce RB211 which allowed the Company
   to enter the large jet engine market and (vii) the Company's Chandler
   Evans Control Systems Division's agreement to develop and utilize its
    advanced Variable Displacement Vane Pump technology in aircraft engine
applications.                                                     

-  Focus on Globalization -- For the year ended December 31, 1997,    
     approximately 10% of the Company's revenues were generated from outside
       of the United States and Canada. As part of its Coltec 2000 strategy, the
  Company seeks to grow its international operations, through a mix of
      internal growth and acquisitions. Given the global nature of many of the
markets in which the Company competes, management believes that an
increased global presence will lead to substantial operating      
     efficiencies, as fixed development and operating costs can be amortized
      over a greater sales base. In terms of internal growth, the Company will
   emphasize the development and expansion of its international customer
base, through the sale of products such as the fuel injectors to  
     Rolls-Royce for the RB211 and the BMW aircraft engines. The Company has
established sales and distribution capabilities in Asian and South
American countries and will pursue international growth through   
 complementary acquisitions such as its recent acquisition of Groupe
Carbone Lorraine's sealing products business.                     

     -  Total Systems Sourcing -- Management believes that many of the Company's
    largest customers, including Boeing, are placing increased emphasis on
     suppliers which are capable of providing integrated systems rather than
   component parts. The Company believes that its design and engineering
     competencies and cellular manufacturing processes provide a competitive
   advantage in the design and manufacture of integrated systems and are
      areas in which the Company will continue to invest. For example, in 1995
   the Company supplied Boeing with non-integrated landing gear systems.
  However, in 1996 with the Boeing 737 and 757, Coltec began providing
      fully integrated landing gear which includes the installation of wheels,
 tires, brakes, hydraulics, electrical harnesses, lights and sensing
    systems on the base landing gear. In 1997, the Company began providing
fully integrated landing gear for the Boeing 777 aircraft thereby 
  increasing revenue by more than 20% per unit. The Company will begin
 providing fully integrated landing gear for the Boeing 767 in 1998.

  -  Productivity Initiatives -- A number of productivity initiatives have
     been implemented which have been designed to reduce lead times, curtail
     scrap and enhance throughput, which are expected among other things, to
       improve inventory turns. Such initiatives have included the consolidation
 of multiple product lines into common production facilities and the
    relocation of the Company's Delavan Spray Technologies Division to new
    state-of-the-art facilities near major transportation hubs. Cycle time
reductions have reduced required inventory levels while improving 
       customer responsiveness. For example, during 1997, Walbar Arizona reduced
   cycle times on damper seal production by approximately 70%, while the
       Company's Menasco Division reduced production time for Boeing 737 landing
      gear main cylinders from 20 weeks to 12. The Company intends to continue
   to enhance its production processes through optimization of workflow,
 investment in upgraded manufacturing technologies and robotics, and
    related initiatives. In addition, all of the Company's major divisions
      are in the late stages of implementing new enterprise reporting systems.
       The new systems are enhancing shop floor reporting, materials management,
   order entry and cost evaluation and control. Management believes that
    these programs are leading to productivity and efficiency improvements
and are having a positive impact on operating performance. The new
       enterprise systems have the added benefit of addressing year 2000 systems
      issues. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".                                       

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AEROSPACE                                                                       

    Through its Aerospace segment, Coltec is a leading manufacturer of landing
gear systems, engine fuel controls, flight attendant and cockpit seats, turbine 
blades, fuel injectors, nozzles and related components for commercial and       
military aircraft. The operating units and principal products, markets and      
competitors of the Aerospace segment are as follows:                            

                                                        [Enlarge/Download Table]

   OPERATING UNITS       PRINCIPAL PRODUCTS      PRINCIPAL MARKETS     PRINCIPAL COMPETITORS
   ---------------       ------------------      -----------------     ---------------------
                                                                                            
Menasco............... Aircraft landing gear   Commercial and          B.F. Goodrich,       
                       and flight control      military aircraft       Messier- Dowty       
                       actuators, landing      manufacturers,                               
                       gear parts, repairs     airlines, U.S. Gov-                          
                       and overhaul            ernment                                      
Walbar................ Aircraft and            Aircraft and            Chromalloy, Howmet   
                       industrial gas turbine  stationary gas turbine                       
                       engine and services,    engine manufacturers,                        
                       turbocharger rotating   diesel engine                                
                       assemblies              manufacturers                                
Chandler Evans         Aircraft fuel pump and  Aircraft engine         Argotech, Hamilton   
  Control............. control systems         manufacturers, U.S.     Standard, Sundstrand,
                                               Government and          AlliedSignal Controls
                                               aftermarket             and Accessories      
Delavan Gas Turbine                                                                         
  Products............ Aircraft engine fuel    Aircraft engine         Parker-Hannifin,     
                       nozzles, valves and     manufacturers, U.S.     Textron              
                       afterburner spray bars  Government and                               
                                               aftermarket                                  
Lewis Engineering..... Aircraft                Commercial and          Ametek, Rogerson,    
                       instrumentation,        military aircraft,      Rosemont, Norwich    
                       temperature sensors,    engine manufacturers    Aerospace            
                       and level control       and process industries                       
                       products and                                                         
                       electrical harnesses                                                 
AMI Industries,        Aircraft flight         Commercial aircraft     IPECO, Sicma         
  Inc................. attendant and cockpit   manufacturers, and                           
                       seats                   airlines                                     

   Menasco.  Menasco is one of the leading suppliers of landing gear systems
for medium-to-heavy commercial and military aircraft. The design, manufacture   
and test of aircraft landing gear and components, and related overhaul and      
repair, comprise 90% of Menasco's sales volume. Landing gear and precision      
components are highly engineered and manufactured to customer specifications and
sold to aircraft manufacturers, aircraft operators and to the United States     
Government ("U.S. Government"), both as original equipment and as spare parts   
for existing aircraft. Menasco's historical concentration of landing gear sales 
among a limited number of companies reflects the relatively small number of     
medium and heavy aircraft manufacturers. Landing gear systems generally account 
for up to 2% of the total cost of an aircraft. Menasco also provides spare parts
for landing gear and landing gear overhaul services. Aftermarket business       
represented 22% of Menasco's total sales in 1997. The remaining 10% of Menasco's
sales are primarily flight control actuators. Menasco produces large hydraulic  
and mechanical actuators and has the capability to produce shock mitigation     
equipment for both military and commercial applications.                        

Walbar.  Walbar is an original equipment manufacturer and coating and 
repair service center for aircraft and industrial gas turbine engine components.
Its product base ranges from complex precision machined turbine parts to        
high-technology protective coatings. Its primary machined products are turbine  
blades, vanes and other related turbine airfoil components. Walbar also         
manufactures disks, integrally bladed rotors and complex impellers, as well as  
complete rotating assemblies for flight and auxiliary power engines and         
locomotive turbochargers. Following the reduction in U.S. Government            
appropriation for military aircraft engines, Walbar                             

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has successfully increased its focus on non-aerospace applications, and now     
enjoys significant market share in the locomotive turbocharger market and the   
gas turbine power generation market.                                            

    Chandler Evans.  Chandler Evans Control Systems Division ("CECO") produces
gas turbine engine fuel controls and pumps, and pneumatic and hydraulic         
components for use in aircraft and helicopter engines and aircraft systems. CECO
has carved a niche market in the area of small engine fuel pumps and controls   
for both commercial and military applications. CECO also supplies small turbine 
engines with Full Authority Digital Electronic Control ("FADEC") systems.       
Computerized electronics in a FADEC system make aircraft safer and less         
expensive to operate. In 1997, a CECO FADEC was successfully operated in the    
first flight test of the U.S. Army's Boeing/Sikorsky Rah-66 Comanche helicopter.

     CECO continues to supply the military market with fuel pump technology. Its
combination main and afterburner centrifugal fuel pump for the Boeing F/A-18 E/F
fighter was successfully flight tested in 1997. Additionally in 1997, CECO's    
latest metering fuel pump, the Variable Displacement Vane Pump, was selected as 
a fueldraulic pump to be used for multinational advanced vectoring exhaust      
nozzle applications.                                                            

During 1997, CECO's aftermarket sector contributed 49% of its revenues
compared to 42% during 1996. This was due, in part, to increased Company focus  
on this market coupled with the recovery in the worldwide airline and general   
aviation market, and also an increase in U.S. Government contracts.             

Delavan Gas Turbine Products.  Delavan Gas Turbine Products Division  
("Delavan") is a custom designer and manufacturer of fuel injectors, flow       
control valves, fuel manifolds, afterburner spray bars and other accessories for
commercial and military gas turbine engines. Product applications in the        
aerospace industry include products for engines powering large commercial and   
regional airliners, business aircraft, military and commercial helicopters,     
military fighters and transports and auxiliary power units. In the industrial   
sector, Delavan fuel injectors and valves are utilized in large land-based gas  
turbines found in electrical power generation plants and natural gas pipeline   
installations.                                                                  

Lewis Engineering.  Lewis Engineering designs, develops and produces  
electromechanical and electronic instrumentation for aircraft cockpits, landing 
gear electrical harnesses and temperature sensors for aircraft and engine       
systems. These products are used in commercial transport, general aviation and  
military markets.                                                               

  AMI Industries, Inc.  AMI, a Colorado-based company, was acquired in the
third quarter of 1997. AMI is a leading designer and manufacturer of flight     
attendant and cockpit seats and is recognized for supplying high comfort cabin  
attendant seats.                                                                

  One customer (Boeing) in the Aerospace segment represented approximately
14% of Coltec's 1997 total sales.                                               

INDUSTRIAL                                                                      

Through its Industrial segment, Coltec is a leading manufacturer of   
industrial seals, gaskets, packing products, self-lubricating bearings and oil  
seals and hubodometers for trucks and trailers. The Industrial segment also     
produces spray nozzles for agricultural, home heating and industrial            
applications, as well as high-horsepower diesel engines for naval ships and     
diesel, gas and dual-fuel engines for electric power plants. Coltec also        
produces air compressors and automotive products. The operating units and       
principal products, markets and competitors of the Industrial segment are as    
follows:                                                                        

                                                        [Enlarge/Download Table]

   OPERATING UNITS       PRINCIPAL PRODUCTS      PRINCIPAL MARKETS    PRINCIPAL COMPETITORS
   ---------------       ------------------      -----------------    ---------------------
                                                                                           
Garlock Sealing        Seals, gaskets,         Chemical, pulp and     Applied Industrial   
  Technologies........ packings and expansion  paper, refining,       Technologies, CR     
                       joints, butterfly       utilities, industrial  Industries, A.W.     
                       valves, PTFE sheet and  and electronics        Chesterton, Richard  
                       film, OEM parts and                            Klinger, AMRI, Durco,
                       gaskets                                        Neotecha, Dewal, W.  
                                                                      Gore, Durametallic,  
                                                                      John Crane           

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                                                        [Enlarge/Download Table]

   OPERATING UNITS       PRINCIPAL PRODUCTS      PRINCIPAL MARKETS     PRINCIPAL COMPETITORS 
   ---------------       ------------------      -----------------     --------------------- 
                                                                                             
Fairbanks Morse        Diesel, gas and         U.S. Navy, marine,      Caterpiller, Cooper   
  Engine.............. dual-fuel engines       locomotive and          Industries, General   
                                               stationary power        Motors                
                                               markets                                       
Quincy Compressor..... Air compressors and     Manufacturing, climate  Gardner-Denver,       
                       vacuum pumps            control, oil and gas    Sullair,              
                                               industries              Ingersoll-Rand,       
                                                                       Champion              
Garlock Bearings...... Self-lubricated         Automotive and          Kolbenschmidt, Rexnord
                       bearings                equipment                                     
                                               manufacturers                                 
Stemco................ Heavy duty wheel-end    Fleet truck operators,  CR Industries, Federal
                       systems, oil seals,     truck parts             Mogul, Nelson,        
                       hubcaps and             distributors and        Donaldson             
                       hubodometers, hubnuts   vehicle assemblers                            
Delavan Spray          Spray nozzles,          Home heating,           Spraying Systems,     
  Technologies........ accessories, pumps and  industrial and          Danfoss               
                       systems                 agriculture                                   
France Compressor      Compressor valves and   Compressor              Hoerbiger, C. Lee Cook
  Products............ seals                   manufacturers and end                         
                                               users                                         
Haber Tool............ Cold-forming dies       Fastener and            Form Flow             
                                               automotive                                    
                                               manufacturers                                 
Plastomer Products.... PTFE tape               Industrial              Fluoroglas, W. Gore   
                                               manufacturers                                 
Sterling Die.......... Thread-rolling dies     Fastener manufacturers  Reed Rico             
Ortman Fluid Power.... Hydraulic and           Fluid power market      Parker-Hannifin,      
                       pneumatic cylinders                             Miller Fluid Power    
Garlock Rubber         Sheet rubber products   Steel mills, chemical   B.F. Goodrich         
  Technologies........                         processors, refineries                        
                                               and paper mills                               
Danti Tool............ Details, jigs,          Machinery builders,     Uclid, Burdette       
                       fixtures, precision     automotive parts                              
                       machining               manufacturers, other                          
                                               production facilities                         
Coltec Specialty       Engineered polytetra-   Semiconductor,          Furon, EGC            
  Products(1)......... fluoroethylene (PTFE)   petrochemical refining                        
                       products                plants                                        
Cefilac(1)............ Seals, gaskets and      Chemical, power,        John Crane, Laddy     
                       packing, metal o-rings  petrochemical refining                        
                       and spiral wound        plants                                        
                       gaskets                                                               
Helicoflex(1)......... Metal o-rings; spring   Power generation,       Advanced Products     
                       loaded seals            petrochemical refining                        
                                               plants                                        

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

(1) Purchased in early 1998.                                                    

The more significant operating units in the Industrial segment are    
discussed below.                                                                

 Garlock Sealing Technologies.  Garlock Sealing Technologies ("Garlock")
produces and markets fluid sealing devices that prevent leakage and exclude     
contaminants from rotating and reciprocating machinery. Garlock also produces   
seal joints for high temperature and corrosive environment applications.        

The newest Garlock products are positioned to meet current emission   
standards for valves, pumps and flanges. To assist customers in complying with  
more stringent global regulations for fugitive volatile organic compound        
emissions, Garlock has developed a variety of products using traditional and    
newly developed                                                                 
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materials. Garlock products include compression packings, gaskets and gasketing 
materials, hydraulic, oil and mechanical seals, elastomeric expansion joints,   
industrial textiles, metallic gaskets and other specialized industrial products.

   Sophisticated Garlock products protect equipment in industry applications
where performance is vital to safety and environmental concerns. These          
applications include natural resource recovery, petroleum refining, chemicals,  
primary metals, food and pharmaceuticals, power generation, mining, pulp and    
paper, water and waste treatment, construction and transportation.              

In October 1997, Coltec acquired the assets of the sheet rubber and   
conveyor belt business of Dana Corporation's Boston Weatherhead Division. This  
division, now known as Garlock Rubber Technologies manufactures high-quality    
rubber sheet products used for gasketing and other applications in steel mills, 
chemical processing, refineries and paper production including conveyor belts.  

   All of Garlock Rubber Technologies' products are consumable. Although the
products are also purchased for use in original equipment, in 1997 the          
maintenance and replacement aftermarket accounted for approximately 80% of      
Garlock's total sales.                                                          

Quincy Compressor.  The Quincy Compressor Division ("Quincy") is a    
manufacturer of a wide range of helical screw and reciprocating air compressors 
and vacuum pumps. Quincy products vary in size from one-third to 350 horsepower 
and are used in a variety of industrial applications, including industrial base 
load, pneumatic temperature and instrument control, diesel and gas engine       
starting, paint spraying and emergency standby service. Much of Quincy's        
business is in the highly competitive industrial and climate control compressor 
markets.                                                                        

  Garlock Bearings.  Garlock Bearings is a leading producer of specialized
self-lubricating bearings, which consist of either steel or reinforced epoxy    
composite backings with non-metallic bearing surfaces of polytetrafluoroethylene
("PTFE") fibers or a mixture that includes PTFE. PTFE provides maintenance-free 
performance and reduced friction. Garlock Bearings' products typically perform  
as sleeve bearings or thrust washers under conditions of no lubrication, minimal
lubrication or pre-lubrication. Garlock Bearings has a major share of the       
self-lubricating bearing market in North America. In 1997, approximately 80% of 
sales were to original equipment manufacturers, with major competition coming   
from companies in Japan and Germany.                                            

   Fairbanks Morse.  The Fairbanks Morse Engine Division ("Fairbanks Morse")
offers a broad range of heavy-duty diesel engines. Fairbanks Morse has the      
capacity to provide diesel engines from 640 to 29,320 horsepower. In addition,  
Fairbanks Morse manufactures dual-fuel, gas and diesel engines ranging in size  
from four to 18 cylinders. Engines are offered in both conventional "V" and     
in-line, four-cycle versions as well as in-line, two-cycle opposed-piston       
configurations. They are used for marine propulsion and marine power generation 
and in pump, compressor and electrical power generation applications. In        
September 1997, Fairbanks Morse acquired the assets related to the Alco         
locomotive business of General Electric Company ("GE"). The assets pertain to   
the manufacture and sale of Alco locomotive engines and turbochargers and Alco  
locomotive chassis components. Fairbanks Morse can now sell FM/ALCO locomotive  
products throughout the world except India, where GE has retained rights to     
manufacture and sell such products.                                             

  Stemco.  The Stemco Division is a developer and producer of unitized hub
systems, hub oil seals, hubcaps, axle nuts and distance-measuring devices for   
medium and heavy-duty trucks.                                                   

Delavan Spray Technologies.  The Delavan Spray Technologies Division  
(formerly Delavan Commercial Products Division) is a designer and producer of   
atomizers for combustion and industrial applications and atomizers, pumps and   
accessories for agricultural, industrial and oil burner metering applications.  

    Danti Tool.  In September 1997, Coltec acquired DM&T, Inc., doing business
as Danti Tool, which makes many of the tooling products utilized by Haber Tool's
existing customer base.                                                         

SUBSEQUENT ACQUISITIONS                                                         

In January 1998, Coltec purchased Tex-o-Lon and Repro-Lon and certain 
assets of Marine & Petroleum Mfg., Inc., Texas-based businesses. The            
acquisitions were combined into one division, Coltec Specialty Products. Coltec 
Specialty Products manufactures PTFE fluid sealing products for the             
semiconductor industry and reprocesses PTFE compounds for the chemical and      
semiconductor industry.                                                         
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   In February 1998, Coltec purchased the Sealing Division of Groupe Carbone
Lorraine which will be segregated into two divisions. Cefilac, based in Saint   
Etienne and Montbrison, France, produces seals, gaskets and packings,           
metal-o-rings and spiral-wound gaskets used in the chemical, power and refining 
industries. Helicoflex, based in Columbia, South Carolina, produces             
metal-o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing     
products are specifically designed for equipment and processes exposed to high  
temperatures, cryogenic temperatures, high pressures, vacuum conditions,        
radioactive environments or corrosive applications. See note 19 to the Company's
audited consolidated financial statements included elsewhere in this Prospectus.

INTERNATIONAL OPERATIONS                                                        

Coltec's international operations, mainly in Canada and France, are   
conducted through foreign-based manufacturing or sales subsidiaries, or both,   
and include export sales of domestic divisions to unrelated foreign customers.  
Export sales of diesel engines are made either directly or through foreign      
representatives. Compressors are sold through foreign distributors. Certain     
products of Coltec's Industrial segment are sold in foreign countries through   
salesmen and sales representatives or sales agents.                             

Coltec's Canadian operations include the manufacture of landing gear  
systems and aircraft flight controls, the provision of overhaul services for    
these systems and controls for Canadian and other customers and the manufacture 
of turbine components and turbine and compressor rotating parts primarily for   
aircraft gas turbine engines. The Canadian operations also manufacture and      
market seals, gasketing material, packings and truck products, and market parts 
for Fairbanks Morse diesel engines and accessories and other products for use in
Canada and other countries.                                                     

  Coltec operates 18 plants in Canada, Mexico, France, the United Kingdom,
Australia, Germany and Poland. In addition, Coltec occupies leased office and   
warehouse space in various foreign countries.                                   

  Devaluations or fluctuations relative to the United States dollar in the
exchange rates of the currency of any country where Coltec has foreign          
operations could adversely affect the profitability of such operations in the   
future.                                                                         

     For financial information on operations by geographic segments, see note 17
to the Company's audited consolidated financial statements included elsewhere in
this Prospectus.                                                                

     Coltec's contracts with foreign nations for delivery of military equipment,
including components, are subject to deferral or cancelation by U.S. Government 
regulation or orders regulating sales of military equipment abroad. Any such    
action on the part of the U.S. Government could have an adverse effect on       
Coltec.                                                                         

SALES BY CLASS OF PRODUCTS                                                      

     During the last three fiscal years, landing gear systems was the only class
of similar products that accounted for at least 10% of total Coltec sales. In   
1997, 1996 and 1995, sales of landing gear systems constituted 18%, 15% and 14%,
respectively, of Coltec's total sales.                                          

BACKLOG                                                                         

   At December 31, 1997, Coltec's backlog of firm unfilled orders was $875.6
million compared with $678.3 million at December 31, 1996. Approximately $267.2 
million of the 1997 year-end backlog is scheduled to be shipped after 1998.     

CONTRACT RISKS                                                                  

  Coltec, through its various operating units, primarily Menasco, Chandler
Evans, Walbar and Delavan Gas Turbine Products, produces products for           
manufacturers of commercial aircraft pursuant to contracts that generally call  
for deliveries at predetermined prices over varying periods of time and that    
provide for termination payments intended to compensate for certain costs       
incurred in the event of cancelation. In addition, certain commercial aviation  
contracts contain provisions for termination for convenience similar to those   
contained in                                                                    

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U.S. Government contracts described below. Longer-term agreements normally      
provide for price adjustments intended to compensate for deferral of delivery   
depending upon market conditions.                                               

   A portion of the business of Coltec's Menasco, Chandler Evans, Walbar and
Delavan Gas Turbine Products divisions has been as a subcontractor and as a     
prime contractor in supplying products in connection with military programs.    
Substantially all of Coltec's U.S. Government contracts are firm fixed-price    
contracts. Under firm fixed-price contracts, Coltec agrees to perform certain   
work for a fixed price and, accordingly, realizes all the benefit or detriment  
occasioned by decreased or increased costs of performing the contracts. From    
time to time, Coltec accepts fixed-price contracts for products that have not   
been previously developed. In such cases, Coltec is subject to the risk of      
delays and cost overruns. Under U.S. Government regulations, certain costs,     
including certain financing costs, portions of research and development costs,  
and certain marketing expenses related to the preparation of competitive bids   
and proposals, are not allowable. The U.S. Government also regulates the methods
under which costs are allocated to U.S. Government contracts. With respect to   
U.S. Government contracts that are obtained pursuant to an open bid process and 
therefore result in a firm fixed price, the U.S. Government has no right to     
renegotiate any profits earned thereunder. In U.S. Government contracts where   
the price is negotiated at a fixed price rather than on a cost-plus basis, as   
long as the financial and pricing information supplied to the U.S. Government is
current, accurate and complete, the U.S. Government similarly has no right to   
renegotiate any profits earned thereunder. If the U.S. Government later conducts
an audit of the contractor and determines that such data was inaccurate or      
incomplete and that the contractor thereby made an excessive profit, the U.S.   
Government may take action to recoup the amount of such excessive profit, plus  
treble damages, and take other enforcement actions.                             

  U.S. Government contracts are, by their terms, subject to termination by
the U.S. Government either for its convenience or for default of the contractor.
Fixed-price type contracts provide for payment upon termination for items       
delivered to and accepted by the U.S. Government, and, if the termination is for
convenience, for payment of the contractor's costs incurred plus the costs of   
settling and paying claims by terminated subcontractors, other settlement       
expenses, and a reasonable profit on its costs incurred. However, if a contract 
termination is for default by the contractor (a) the contractor is paid such    
amount as may be agreed upon for completed and partially-completed products and 
services accepted by the U.S. Government, (b) the U.S. Government is not liable 
for the contractor's costs with respect to unaccepted items, and is entitled to 
repayment of advance payments and progress payments, if any, related to the     
terminated portions of the contracts, and (c) the contractor may be liable for  
excess costs incurred by the U.S. Government in procuring undelivered items from
another source.                                                                 

In addition to the right of the U.S. Government to terminate, U.S.    
Government contracts are conditioned upon the continuing availability of        
Congressional appropriations. Congress usually appropriates funds on a fiscal-  
year basis even though contract performance may take many years. Consequently,  
at the outset of a major program, the contract is usually partially funded, and 
additional monies are normally committed to the contract by the procuring agency
only as appropriations are made by Congress for future fiscal years.            

See "Risk Factors -- Cyclical Business; Government Contracts".        

RESEARCH AND PATENTS                                                            

Most divisions of Coltec maintain staffs of manufacturing and product 
engineers whose activities are directed at improving the products and processes 
of Coltec's operations. Manufactured and development products are subject to    
extensive tests at various divisional plants. Total research and development    
cost, including product development, was $46.5 million for 1997, $44.1 million  
for 1996 and $45.1 million for 1995.                                            

    Coltec owns a number of United States and other patents and trademarks and
has granted licenses under some of such trademarks. Management does not consider
the business of Coltec as a whole to be materially dependent upon any patent,   
patent right or trademark.                                                      

EMPLOYEE RELATIONS                                                              

    As of December 31, 1997, Coltec had approximately 9,100 employees, of whom
approximately 3,700 were salaried. Approximately 41% of the hourly employees are
represented by unions for collective bargaining                                 

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purposes. Union agreements relate, among other things, to wages, hours and      
conditions of employment, and the wages and benefits finished are generally     
comparable to industry and area practices.                                      

    In 1997, three collective bargaining agreements covering approximately 350
hourly employees were renegotiated. Coltec considers the labor relations of     
Coltec to be satisfactory, although it has experienced work stoppages from time 
to time in the past. One collective bargaining agreement covering approximately 
200 employees was due to expire in 1998 and has been renegotiated for a         
five-year term.                                                                 

    Coltec is subject to extensive U.S. Government regulations with respect to
many aspects of its employee relations, including increasingly important        
occupational health and safety and equal employment opportunity matters. Failure
to comply with certain of these requirements could result in ineligibility to   
receive U.S. Government contracts. These conditions are common to the various   
industries in which Coltec participates and entail risks of financial and other 
exposure.                                                                       

PROPERTIES                                                                      

 Coltec operates 62 manufacturing plants in 22 states in the U.S. and in
Canada, Mexico, France, the United Kingdom, Australia, Germany and Poland. In   
addition, Coltec has other facilities throughout the United States and in       
various foreign countries, which include sales offices, repair and service      
shops, light manufacturing and assembly facilities, administrative offices and  
warehouses.                                                                     

Certain information with respect to Coltec's significant manufacturing
plants that are owned in fee, all of which (other than the Palmyra, New York and
Ontario Facilities) are encumbered pursuant to a certain credit agreement       
between Coltec and certain banks and related security documents, is set forth   
below:                                                                          

                                                        [Enlarge/Download Table]

                                                          APPROXIMATE NUMBER  APPROXIMATE
SEGMENT                              LOCATION               OF SQUARE FEET      ACREAGE  
-------                   ------------------------------  ------------------  -----------
                                                                                         
Aerospace................ West Hartford, Connecticut(a)        538,000             71    
                          Euless, Texas                        442,000             42    
                          Oakville, Ontario                    280,000             14    
                          Mississauga, Ontario                 141,000              7    
Industrial............... Palmyra, New York                    677,000            137    
                          Beloit, Wisconsin                    856,000             73    
                          Longview, Texas                      265,000             52    

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

(a) Approximately 239,000 square feet are utilized by the Aerospace Segment with
the balance leased to third parties.                                    

  In addition to the owned facilities, certain manufacturing activities of
some industry segments are conducted within leased premises, the largest of     
which is in the Industrial segment, located in Quincy, Illinois, and covers     
approximately 173,000 square feet. Some of these leases provide for options to  
purchase or to renew the lease with respect to the leased premises.             

    Coltec's total manufacturing facilities presently being utilized aggregate
approximately 4,902,000 square feet of floor area of which approximately        
4,230,000 square feet of area are owned in fee and the balance is leased from   
third parties.                                                                  

   Coltec leases approximately 35,000 square feet at 3 Coliseum Centre, 2550
West Tyvola Road, Charlotte, North Carolina, for its executive offices, and has 
renewal options under such lease through 2011.                                  

    In the opinion of management, Coltec's principal properties, whether owned
or leased, are suitable and adequate for the purposes for which they are used   
and are suitably maintained for such purposes.                                  

ENVIRONMENTAL MATTERS                                                           

   The Company's operations are subject to extensive Environmental Laws. The
Company takes a proactive approach in addressing the applicability of all       
Environmental Laws as they relate to its manufacturing operations and in        
proposing and implementing any remedial plans that may be necessary. The Company
believes it is either                                                           
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in material compliance with all currently applicable regulations or is operating
in accordance with the appropriate variances and compliance schedules or similar
arrangements. The Company has identified certain situations that will require   
future capital and non-capital expenditures to maintain or improve compliance   
with current Environmental Laws. The majority of the identified situations      
relate to remediation projects at former operating sites which have been sold or
closed and primarily deal with soil and groundwater remediation.                

    The Company has been notified that it is among the potentially responsible
parties under Environmental Laws, for the costs of investigating and, in some   
cases, remediating contamination by hazardous materials at approximately 28     
sites. Such laws can impose joint and several liability for the costs of        
investigating and remediating properties contaminated by hazardous materials.   
Liability for these costs can be imposed on present and former owners or        
operators of the properties or on parties who generated the wastes that         
contributed to the contamination. The Company's policy is to accrue             
environmental remediation costs when both it is probable that a liability has   
been incurred and the amount can be reasonably estimated. The measurement of    
liability is based on an evaluation of currently available facts with respect to
each individual situation and takes into consideration factors such as existing 
technology, presently enacted laws and regulations and prior experience in      
remediation of contaminated sites. Investigations have been completed for       
approximately 17 sites and continuing investigations are being done at          
approximately 11 sites. Accruals are provided for all sites based on the factors
discussed above. As remediation plans are written and implemented, estimated    
costs become more fact-based and less judgment-based. As assessments and        
remediation progress at individual sites, these liabilities are reviewed        
periodically and adjusted to reflect additional technical and legal information.

  The Company currently estimates that its future non-capital expenditures
related to environmental matters will range between $27.0 million and $50.0     
million, representing management's best estimate of probable non-capital        
expenditures. At December 31, 1997, Coltec had accrued $31.7 million for        
expenditures which will be incurred over the next 10 to 20 years. In addition,  
capital expenditures aggregating $5.0 million related to environmental matters, 
may be required during the next two years. Although the Company is pursuing     
insurance recovery in connection with certain of the underlying matters, no     
receivable has been recorded with respect to any potential recovery of costs in 
connection with any environmental matter. During 1997, costs associated with    
environmental remediation and ongoing assessment were not significant.          

     Actual costs to be incurred for identified situations in future periods may
vary from estimates, given inherent uncertainties in evaluating environmental   
exposures due to unknown conditions, changing government regulations and legal  
standards regarding liability and evolving related technologies. Subject to the 
imprecision in estimating future environmental costs, the Company believes that 
compliance with current Environmental Laws will not require significant capital 
expenditures or have a material adverse effect on its consolidated results of   
operations or financial position.                                               

See "Risk Factors -- Potential Exposure to Environmental Liabilities".

LEGAL PROCEEDINGS                                                               

ASBESTOS LITIGATION                                                         

   As of December 31, 1997 and 1996, two subsidiaries of Coltec were among a
number of defendants (typically 15 to 40) in approximately 110,000 and 94,700   
actions, respectively (including approximately 2,400 and 5,100 actions,         
respectively, in advanced stages of processing), filed in various states by     
plaintiffs alleging injury or death as a result of exposure to asbestos fibers. 
During 1997, 1996 and 1995, these two subsidiaries of Coltec were named         
defendants in approximately 38,200, 39,900 and 44,000 new actions, respectively.
Through December 31, 1997, approximately 199,000 of the approximately 309,000   
total actions brought have been settled or otherwise disposed of.               

     The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1 million or more in compensatory damages and $2 
million or more in punitive damages from an extensive list of defendants.       
Although the law in each state differs to some extent, it appears, based on     
advice of counsel, that liability for compensatory damages would be shared among
all responsible defendants, thus limiting the potential monetary impact of such 
judgments on any individual defendant.                                          

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    Following a decision of the Pennsylvania Supreme Court, in a case in which
neither Coltec nor any of its subsidiaries were parties, that held insurance    
carriers are obligated to cover asbestos-related bodily injury actions if any   
injury or disease process, from first exposure through manifestation, occurred  
during a covered policy period (the "continuous trigger theory of coverage"),   
Coltec settled litigation with its primary and most of its first-level excess   
insurance carriers, substantially on the basis of the Pennsylvania Supreme      
Court's ruling. Coltec has negotiated a final agreement with most of its excess 
carriers that are in the layers of coverage immediately above its first layer.  
Coltec is currently receiving payments pursuant to this agreement. Coltec       
believes that, with respect to the remaining carriers, a final agreement can be 
achieved without litigation and on substantially the same basis that it has     
resolved the issues with its other carriers.                                    

  Payments were made by the Company with respect to asbestos liability and
related costs aggregating $59.2 million in 1997, $71.3 million in 1996 and $56.7
million in 1995, substantially all of which were covered by insurance.          
Settlements are generally made on a group basis with payments made to individual
claimants over periods of one to four years. Related to payments not covered by 
insurance, Coltec recorded charges to operations amounting to $8.0 million in   
1997, $8.0 million in 1996 and $5.0 million in 1995. The average cost to the    
Company for unreimbursed expenses and liability per case disposed was           
approximately $253 in 1997, $404 in 1996 and $318 in 1995.                      

In accordance with Coltec's internal procedures for the processing of 
asbestos product liability actions and due to the proximity to trial or         
settlement, certain outstanding actions have progressed to a stage where Coltec 
can reasonably estimate the cost to dispose of these actions. As of December 31,
1997, Coltec estimates that the aggregate remaining cost of the disposition of  
the settled actions for which payments remain to be made and actions in advanced
stages of processing, including associated legal costs, is approximately $47.3  
million and Coltec expects that this cost will be substantially covered by      
insurance.                                                                      

 With respect to the 107,600 outstanding actions as of December 31, 1997
which are in preliminary procedural stages, Coltec lacks sufficient information 
upon which judgments can be made as to the validity or ultimate disposition of  
such actions, thereby making it difficult to estimate with reasonable certainty 
the potential liability or costs to Coltec. The lawsuits are disposed of over a 
period of time ranging from one year to more than five years, with the majority 
being disposed of by the third year after filing. When asbestos actions are     
received they are typically forwarded to local counsel to ensure that the       
appropriate preliminary procedural response is taken. The complaints typically  
do not contain sufficient information to permit a reasonable evaluation as to   
their merits at the time of receipt, and in jurisdictions encompassing a        
majority of the outstanding actions, the practice has been that little or no    
discovery or other action is taken until several months prior to the date set   
for trial. Accordingly, Coltec generally does not have the information necessary
to analyze the actions in sufficient detail to estimate the ultimate liability  
or costs to Coltec, if any, until the actions appear on a trial calendar. A     
determination to seek dismissal, to attempt to settle or to proceed to trial is 
typically not made prior to the receipt of such information.                    

The Company believes that it will continue to receive some number of  
asbestos lawsuits into the foreseeable future. It is difficult, however, to     
predict the number of asbestos lawsuits that Coltec's subsidiaries will receive 
or the time frame in which they will be received. Coltec has noted that, with   
respect to recently settled actions or actions in advanced stages of processing,
the mix of the injuries alleged and the mix of the occupations of the plaintiffs
have been changing from those traditionally associated with Coltec's            
asbestos-related actions. Coltec is not able to determine with reasonable       
certainty whether this trend will continue. Based upon the foregoing, and due to
the unique factors inherent in each of the actions, including the nature of the 
disease, the occupation of the plaintiff, the presence or absence of other      
possible causes of a plaintiff's illness, the availability of legal defenses,   
such as the statute of limitations or state of the art, the jurisdiction in     
which a lawsuit is filed, the pendency of tort reform and whether the lawsuit is
an individual one or part of a group, management is unable to estimate with     
reasonable certainty the cost of disposing of outstanding actions in preliminary
procedural stages or of actions that may be filed in the future. However, Coltec
believes that its subsidiaries are in a favorable position compared to many     
other defendants because, among other things, the asbestos fibers in its        
asbestos-containing products were encapsulated. Subsidiaries of Coltec continue 
to distribute encapsulated asbestos-bearing product in the United States with   
annual sales of less than $1.5 million. All sales are accompanied by appropriate
warnings. The                                                                   

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end users of such product are sophisticated users, who utilize the product for  
critical applications where no known substitutes exist or have been approved.   

     Insurance coverage of a small nonoperating subsidiary formerly distributing
asbestos-bearing products is nearly depleted. Considering the foregoing, as well
as the experience of Coltec's subsidiaries and other defendants, and given the  
substantial amount of other insurance coverage that Coltec expects to be        
available from its solvent carriers to cover the majority of its exposure,      
Coltec believes that pending and reasonably anticipated future actions are not  
likely to have a materially adverse effect on Coltec's results of operations and
financial condition. Although the insurance coverage which Coltec has is        
substantial, it should be noted that insurance coverage for asbestos claims is  
not available to cover exposures initially occurring on and after July 1, 1984. 
Coltec's subsidiaries continue to be named as defendants in new cases, some of  
which allege initial exposure after July 1, 1984.                               

    In addition to claims for personal injury, Coltec's subsidiaries have been
involved in an insignificant number of property damage claims based upon        
asbestos-containing materials found in schools, public facilities and private   
commercial buildings. Based upon the proceedings to date, the overwhelming      
majority of these claims have been resolved without a material adverse impact on
Coltec. Likewise, the insignificant number of claims to be resolved are not     
expected to have a materially adverse effect on Coltec's results of operations  
and financial condition.                                                        

 Coltec has recorded an accrual for its liabilities for asbestos-related
matters that are deemed probable and can be reasonably estimated (settled       
actions and actions in advanced states of processing), and has separately       
recorded an asset equal to the amount of such liabilities that is expected to be
recovered by insurance. In addition, Coltec has recorded a receivable for that  
portion of payments previously made for asbestos product liability actions and  
related litigation costs that is recoverable from its insurance carriers.       
Liabilities for asbestos-related matters and the receivable from insurance      
carriers included in the consolidated balance sheets of Coltec were as follows  
at December 31, 1997 and 1996 (in thousands):                                   

                                                                [Download Table]

                                                               1997      1996  
                                                              -------   -------
                                                                               
Accounts and notes receivable...............................  $56,039   $67,012
Other assets................................................   16,249    18,728
Accrued expenses............................................   50,688    60,659
Other liabilities...........................................    2,682    10,879

See "Risk Factors -- Asbestos Litigation".                            

OTHER LITIGATION                                                            

    In September 1983, the local employees' union at Menasco Canada Ltee. (now
Coltec Aerospace Canada Ltd.) ("Menasco Canada"), a federation of trade unions  
and several member-employees filed a complaint in the Province of Quebec        
Superior Court against Menasco Canada, alleging, among other things, an illegal 
lock-out, failure to negotiate in good faith, interference with the affairs of  
the union and various violations of local law. The plaintiffs are collectively  
seeking approximately Cdn. $14.0 million in damages, and Menasco Canada has     
filed a cross-claim for Cdn. $21.0 million and has closed its operations in     
Quebec Province. Coltec does not believe that this action will have a material  
effect on Coltec's consolidated results of operations and financial condition.  

On September 24, 1986, approximately 150 former salaried employees of 
Crucible Inc (a former subsidiary of Coltec) commenced an action claiming       
benefits under a corporate employment policy that had been established in 1962  
and was terminated in 1972 by the corporation's Board of Directors. (George W.  
Henglein, et al. v. Colt Industries Operating Corporation Informal Plan for     
Plant Shutdown Benefits for Salaried Employees, et al., U.S. District Court for 
the Western District of Pennsylvania, 86-cv-2021). Plaintiffs alleged that the  
policy continued after the Board of Directors' action by reason of the Company's
failure to notify them of elimination of the employment policy. As a result of  
that failure to notify, the policy was converted into a welfare or pension      
benefit plan upon the passage of the Employee Retirement Income Security Act in 
1974. Based upon the occurrence of this conversion, the plaintiffs were entitled
to benefits in 1982 when Crucible Inc's Midland operations closed. Following a  
non-jury trial in the U.S. District Court for the Western District of           
Pennsylvania,                                                                   

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defendant's motion to dismiss was granted and the plaintiffs appealed. The Court
of Appeals for the Third Circuit remanded the case to the District Court        
directing it to make specific findings of fact and conclusions of law and also  
found for the defendant on the jurisdiction of the District Court. The defendant
again moved for dismissal and again defendant's motion to dismiss was granted by
the District Court. This second decision of the District Court was appealed to  
the Court of Appeals for the Third Circuit and the case was again remanded to   
the District Court for additional findings as to the application of the law. On 
February 10, 1994, the District Court for the third time dismissed the          
plaintiffs' complaint and the plaintiffs appealed to the Third Circuit Court of 
Appeals. On September 26, 1994, the Third Circuit Court of Appeals for the third
time remanded the case to the District Court. The Circuit Court held the record 
established by plaintiffs in the District Court was insufficient to allow the   
Court the ability to apply the appropriate legal standard. On November 4, 1994  
the Court of Appeals for the Third Circuit denied the defendant's request for a 
rehearing. The defendant petitioned the U.S. Supreme Court for a writ of        
Certiorari; its petition was denied in 1995. The defendant again moved for      
dismissal before the District Court based upon the holding of the Circuit Court 
that plaintiffs had failed to establish their case at trial. The District Court 
denied the motion and sua sponte ordered a new trial de novo. A trial was held  
during July 1996 with both parties introducing evidence. A decision was rendered
in 1997 finding the existence of an informal plan. The District Court remanded  
to the administrator of Coltec's employee benefit plans the duties of           
calculating the benefits due to those plaintiffs entitled.                      

  The District Court held that all but six of the named plaintiffs' claims
were time barred. Both the defendants and plaintiffs filed timely notices of    
appeal. Notwithstanding its filing of a notice of appeal, defendant has claimed 
and so notified the Circuit Court that it was of the opinion that the District  
Court's order was not final and thus not now appealable. As of December 1997,   
plaintiffs have concurred in defendant's position. Coltec does not believe that 
this action will have a material effect on Coltec's consolidated results of     
operations and financial condition.                                             

  In addition to the litigation described above, there are various pending
legal proceedings involving Coltec which are routine in nature and incidental to
the business of Coltec. Coltec does not believe that these proceedings will have
a material effect on Coltec's consolidated results of operations and financial  
condition.                                                                      

 The U.S. Government conducts investigations into procurement of defense
contracts as a part of a continuing process. Under current federal law, if such 
investigations establish the existence of improper activities, among other      
matters, debarment or suspension of a company from participating in the         
procurement of defense contracts could result. These conditions are common to   
the aerospace and government industries in which Coltec participates and entail 
the risk of financial and other exposure. See "-- Contract Risks" above. Coltec 
is not aware of any such investigation, nor is Coltec aware of any facts which, 
if known to investigators, might prompt any investigation.                      

PRODUCT LIABILITY INSURANCE                                                     

 Coltec has product liability insurance coverage for liabilities arising
from aircraft products which management believes to be adequate. In addition,   
with respect to other products (exclusive of liability for exposure to asbestos 
products), Coltec has product liability insurance in amounts exceeding $2.5     
million per occurrence, which management believes to be adequate.               

     Coltec is self-insured (for claims arising after July 1984) with respect to
liability for exposure to asbestos products since third party insurance became  
unavailable in July 1984.                                                       

EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS                          

    Inflation and foreign currency fluctuations have not had a material impact
on the operating results and financial position of Coltec during the past three 
years. Coltec generally has been able to offset the effects of inflation with   
price increases, cost-reduction programs and operating efficiencies. Coltec's   
foreign operations, which are primarily located in Canada and France, do not    
operate in hyper-inflationary economies, except for Mexico, which Coltec does   
not believe will have a material effect on Coltec's consolidated results of     
operations and financial condition.                                             

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MANAGEMENT

The directors and executive officers of Coltec are set forth below.   

                                                        [Enlarge/Download Table]

NAME                                                AGE                    POSITION                 
----                                                ---                    --------                 
                                                                                                    
John W. Guffey, Jr................................. 60   Chairman, Chief Executive Officer and      
                                                         Director.                                  
Nishan Teshoian.................................... 56   President, Chief Operating Officer and     
                                                         Director.                                  
David D. Harrison.................................. 51   Executive Vice President, Chief Financial  
                                                         Officer and Director.                      
Laurence H. Polsky................................. 54   Executive Vice President, Administration.  
Robert J. Tubbs.................................... 51   Executive Vice President, General Counsel  
                                                         and Secretary.                             
Michael J. Burdulis................................ 52   Senior Vice President, Group Operations.   
Richard L. Dashnaw................................. 61   Senior Vice President, Group Operations and
                                                           President of the Fairbanks Morse Engine  
                                                           Division.                                
Paul R. Kuhn....................................... 56   Senior Vice President, Group Operations.   
Joseph F. Andolino................................. 45   Group President and Vice President, Taxes. 
John N. Maier...................................... 46   Vice President and Controller.             
Joseph R. Coppola.................................. 67   Director.                                  
William H. Grigg................................... 65   Director.                                  
David I. Margolis.................................. 68   Director.                                  
Joel Moses......................................... 56   Director.                                  
Richard A. Stuckey................................. 66   Director.                                  

  Mr. Guffey has been Chairman of the Board and Chief Executive Officer of
Coltec since January 1998. Chairman of the Board, Chief Executive Officer and   
President of Coltec from February 1995 to December 1997. Member of the Executive
Committee and member of the Nominating Committee of Coltec. President and Chief 
Operating Officer of Coltec from prior to 1993 to January 1995. Director of     
Gleason Corp., a manufacturer of machine tools.                                 

 Mr. Teshoian, President and Chief Operating Officer since January 1998.
Chairman of the Board and Chief Executive Officer of Keystone from August 1995  
to December 1997. Executive Vice President of Operations of the Tools and       
Hardware Division of Cooper Industries from June 1993 to July 1995. President of
the Belden Division of Cooper Industries from prior to 1993 to August 1993.     

Mr. Harrison, Executive Vice President and Chief Financial Officer of 
Coltec since January 1997. Executive Vice President, Chief Financial Officer and
Treasurer of Coltec from October 1996 to January 1997. Executive Vice President 
and Chief Financial Officer of Pentair Inc., a diversified manufacturing        
company, from February 1994 to August 1996. From prior to 1993 to February 1994 
Vice President, Finance of General Electric Appliances Canada, a manufacturing  
company from February 1994 to August 1996. From prior to 1992 to February 1994  
Vice President, Finance of General Electric Appliances Canada (CAMCO).          

  Mr. Polsky, Executive Vice President, Administration since January 1994.
Senior Vice President, Administration from April 1992 to December 1993.         

  Mr. Tubbs, Executive Vice President, General Counsel and Secretary since
January 1997. Senior Vice President, General Counsel and Secretary from November
1995 to January 1997. Senior Vice President and General Counsel from March 1995 
to November 1995. General Counsel-Operations of Olin Corporation ("Olin"), a    
chemical and metals manufacturing company, from May 1993 to February 1995.      
Deputy General Counsel of Olin from prior to 1993 to May 1993.                  

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Mr. Burdulis, Senior Vice President, Group Operations since June 1996.
Group President from January 1995 to May 1996. President of the Garlock Sealing 
Technologies Division from February 1994 to December 1994. President of the     
Central Moloney Transformer Division from prior to 1993 to January 1994.        

   Mr. Dashnaw, Senior Vice President, Group Operations and President of the
Fairbanks Morse Engine Division since January 1994. Group President and         
President of the Fairbanks Morse Engine Division from prior to 1993 to December 
1993.                                                                           

     Mr. Kuhn, Senior Vice President, Group Operations since January 1998, Group
President and President of Chandler Evans Control Systems Division from January 
1993 to December 1997.                                                          

  Mr. Andolino, Group President and Vice President, Taxes since July 1997.
Vice President, Taxes from March 1997 to June 1997. Staff Vice President, Taxes 
from June 1995 to March 1997. Senior Tax Counsel of AlliedSignal Inc., a        
diversified manufacturing company, from prior to 1993 to May 1995.              

Mr. Maier, Vice President and Controller since March 1997. Staff Vice 
President and Controller from March 1995 to March 1997. Vice President and      
Controller of Lukens, Inc., a speciality steel and industrial products company, 
from prior to 1993 to February 1995.                                            

    Mr. Coppola, Member of the Audit Committee, member of the Stock Option and
Compensation Committee (the "Compensation Committee") and Chairman of the       
Nominating and Corporate Governance Committee (the "Nominating Committee") of   
Coltec. Chairman, Chief Executive Officer and President of Giddings & Lewis,    
Inc. ("Giddings & Lewis"), a machine tool manufacturing company from July 1993  
to retirement from Giddings & Lewis in July 1997. From prior to 1993 to July    
1993 he was Senior Vice President, Manufacturing Services of Cooper Industries, 
Inc. ("Cooper Industries"), a diversified manufacturing company. Director of    
Belden Inc., a manufacturer of electrical wire and cable.                       

 Mr. Grigg, Chairman of the Audit Committee and member of the Nominating
Committee of Coltec. Chairman and Chief Executive Officer of Duke Power Company,
now Duke Energy Corporation, ("Duke"), a public utility company, from April 1994
to June 1997. Mr. Grigg retired from Duke in December 1997. Vice Chairman of    
Duke from prior to 1993 to April 1994. Director of Duke and the following mutual
funds: Hatteras Income Securities Inc., Nations Fund Inc., Nations Fund Trust,  
Nations Fund Portfolios Inc., Nations LifeGoal Portfolios Inc., Nations         
Institutional Reserves Inc., Nations Government Income Term Trust 2003, Inc.,   
Nations Government Income Term Trust 2004, Inc. and Nations Balanced Target     
Maturity Inc. Director of Shaw Group, Inc. a designer, manufacturer and service 
provider of complex piping systems.                                             

   Mr. Margolis, Chairman of the Executive Committee of Coltec since October
1994. Chairman of the Board and Chief Executive Officer of Coltec from prior to 
1993 to retirement from Coltec in January 1995. Director of Burlington          
Industries, Inc., a manufacturer of textiles.                                   

Mr. Moses, Chairman of the Compensation Committee and member of the   
Executive Committee of Coltec. Provost, Massachusetts Institute of Technology   
("MIT"), since June 1995. D.C. Jackson Professor of Computer Science and        
Engineering, MIT since June 1995. Dean, School of Engineering, MIT, from prior  
to 1993 to June 1995. Director of Analog Devices, Inc., a manufacturer of       
integrated circuits.                                                            

   Mr. Stuckey, member of the Audit Committee and member of the Compensation
Committee of Coltec. Chief Economist, E.I. du Pont de Nemours and Company, Inc.,
a diversified chemical manufacturing company, from prior to 1993 to retirement  
from du Pont in December 1994. Economic consultant since January 1995.          

     Certain of the Company's officers are participants in or parties to certain
employee benefit and compensation plans and agreements which provide for        
accelerated or increased benefits upon a change of control of the Company. Such 
plans and agreements are described in more detail in the Company's Proxy        
Statement for its 1998 Annual Meeting of Shareholders, the relevant part of     
which is incorporated by reference into the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. See "Available Information".              

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DESCRIPTION OF THE SENIOR NOTES 

GENERAL                                                                         

 The Senior Notes were, and the Exchange Notes will be, issued under the
Indenture among the Company, the Subsidiary Guarantors and Bankers Trust        
Company, as Trustee.                                                            

The following is a summary of certain provisions of the Indenture, the
Amended Collateral Documents, and the Senior Notes, a copy of each of which,    
together with the form of Senior Notes, is available upon request to the Company
at the address set forth under "Available Information". The following summary of
certain provisions of the Indenture and such documents and instruments does not 
purport to be complete and is subject to, and is qualified in its entirety by   
reference to, all the provisions of the Indenture and such documents and        
instruments, including the definitions of certain terms therein and those terms 
made a part thereof by the TIA. Capitalized terms used herein and not otherwise 
defined have the meanings set forth under "-- Certain Definitions". For purposes
of this summary, the term "Company" refers only to Coltec Industries Inc and not
to any Subsidiary of the Company.                                               

 Principal of, premium, if any, and interest on the Senior Notes will be
payable, and the Senior Notes may be exchanged or transferred, at the office or 
agency of the Company in the Borough of Manhattan, The City of New York (which  
initially shall be the corporate trust office of the Trustee, in New York, New  
York), except that, at the option of the Company, payment of interest may be    
made by check mailed to the registered holders of the Senior Notes at their     
registered addresses.                                                           

The Senior Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No     
service charge will be made for any registration of transfer or exchange of     
Senior Notes, but the Company may require payment of a sum sufficient to cover  
any transfer tax or other similar governmental charge payable in connection     
therewith.                                                                      

  For each Outstanding Note accepted for exchange, the Holder thereof will
receive an Exchange Note having a principal amount equal to that of the         
surrendered Outstanding Note.                                                   

   The terms of the Exchange Notes are identical in all material respects to
the terms of the Outstanding Notes, except for certain transfer restrictions and
registration rights relating to the Outstanding Notes and except that, if the   
Exchange Offer is not consummated on or prior by October 13, 1998, the rate per 
annum at with the Outstanding Notes bear interest will be increased by amounts  
specified herein. See "-- Registered Exchange Offer; Registration Rights."      

   The Exchange Notes will evidence the same indebtedness as the Outstanding
Notes and will be issued under and entitled to the same benefits under the      
Indenture as the Outstanding Notes. In addition, the Exchange Notes and the     
Outstanding Notes will be treated as one series of securities under the         
Indenture.                                                                      

TERMS OF THE SENIOR NOTES                                                       

 The Senior Notes are senior obligations of the Company, limited to $300
million aggregate principal amount, and will mature on April 15, 2008. The      
Senior Notes are secured to the extent set forth below under "-- Collateral" and
are guaranteed by the Subsidiary Guarantors to the extent set forth below under 
"-- Guarantees".                                                                

    Each Senior Note will bear interest at a rate per annum shown on the front
cover of this Prospectus from April 16, 1998 or from the most recent date to    
which interest has been paid or provided for, payable semiannually to Senior    
Noteholders of record at the close of business on the April 1 or October 1      
immediately preceding the interest payment date on April 15 and October 15 of   
each year, commencing October 15, 1998. Interest on the Senior Notes will be    
computed on the basis of a 360-day year of twelve 30-day months.                

OPTIONAL REDEMPTION                                                             

   The Senior Notes are redeemable, in whole or in part, at any time, at the
option of the Company, at a redemption price equal to the greater of (i) 100% of
the principal amount of such Senior Notes and (ii) the sum of the present value 
of the remaining scheduled payments of principal and interest thereon from the  
redemption date to the maturity date, discounted to the redemption date on a    
semiannual basis (assuming a 360-day year                                       

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consisting of twelve 30-day months) at the Treasury Rate plus 37.5 basis points,
plus accrued interest thereon to the date of redemption.                        

   "Treasury Rate" means, with respect to any redemption date for the Senior
Notes, (i) the yield, under the heading which represents the average for the    
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is published  
weekly by the Board of Governors of the Federal Reserve System and which        
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the  
maturity corresponding to the Comparable Treasury Issue (if no maturity is      
within three months before or after the Maturity Date, yields for the two       
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated 
from such yields on a straight line basis, rounding to the nearest month) or    
(ii) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per    
annum equal to the semi-annual equivalent yield to maturity of the Comparable   
Treasury Issue, calculated using a price for the Comparable Treasury Issue      
(expressed as a percentage of its principal amount) equal to the Comparable     
Treasury Price for such redemption date. The Treasury Rate shall be calculated  
on the third Business Day preceding the redemption date.                        

"Comparable Treasury Issue" means the United States Treasury security 
selected by an Independent Investment Banker as having a maturity comparable to 
the remaining term of the Senior Notes to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in   
pricing new issues of corporate debt securities of comparable maturity to the   
remaining term of such Senior Notes. "Independent Investment Banker" means one  
of the Reference Treasury Dealers appointed by the Trustee after consultation   
with the Company.                                                               

   "Comparable Treasury Price" means with respect to any redemption date for
the Senior Notes (i) the average of four Reference Treasury Dealer Quotations   
for such redemption date, after excluding the highest and lowest such Reference 
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such 
Reference Treasury Dealer Quotations, the average of all such quotations.       

"Reference Treasury Dealer" means each of Credit Suisse First Boston  
Corporation, BT Alex. Brown Incorporated and two other primary U.S. Government  
securities dealers in New York City (each, a "Primary Treasury Dealer")         
appointed by the Trustee in consultation with the Company; provided, however,   
that if any of the foregoing shall cease to be a Primary Treasury Dealer, the   
Company shall substitute therefor another Primary Treasury Dealer.              

"Reference Treasury Dealer Quotations" means, with respect to each    
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue      
(expressed in each case as a percentage of its principal amount) quoted in      
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the    
third Business Day preceding such redemption date.                              

   Notice of any redemption will be mailed at least 30 days but no more than
60 days before the redemption date to each holder of Senior Notes to be         
redeemed. Unless the Company defaults in payment of the redemption price, on and
after the redemption date interest will cease to accrue on the Senior Notes or  
portions thereof called for redemption.                                         

Except as set forth above, the Senior Notes are not redeemable by the 
Company prior to maturity and are not entitled to the benefit of any sinking    
fund.                                                                           

RANKING                                                                         

   The Senior Notes are senior obligations of the Company and will rank pari
passu in right of payment with all existing and future senior obligations of the
Company (including indebtedness under the Amended Credit Agreement) and will    
rank senior in right of payment to all subordinated obligations of the Company, 
including the TIDES Debentures issued by the Company. The Senior Notes are      
secured to the extent set forth below under "-- Collateral" and guaranteed by   
the Subsidiary Guarantors to the extent set forth below under "-- Guarantees".  

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As of March 29, 1998 and December 31, 1997, on a pro forma basis after
giving effect to the Offerings and the application of the estimated net proceeds
therefrom to reduce indebtedness under the Amended Credit Agreement, the Company
would have had approximately $724.5 million and $623.9 million of total         
consolidated long-term indebtedness, respectively. As of March 29, 1998 and     
December 31, 1997, approximately $424.5 million and $323.9 million,             
respectively, of such indebtedness ($372.5 million and $262.0 million,          
respectively, of which would have been indebtedness outstanding under the       
Amended Credit Agreement) would have been senior indebtedness. As of March 29,  
1998 and December 31, 1997, $372.5 million and $262.0 million, respectively, of 
such indebtedness (all of which would have been indebtedness outstanding under  
the Amended Credit Agreement) would have been secured indebtedness. The         
Indenture does not contain limitations on the amount of additional indebtedness 
which the Company may incur.                                                    

GUARANTEES                                                                      

     Each Subsidiary Guarantor will fully and unconditionally guarantee, jointly
and severally, to each Holder and the Trustee, on a senior basis, the full and  
prompt payment of principal of and interest on the Senior Notes, and of all     
other obligations of the Company under the Indenture. The Subsidiary Guarantees 
(including the payment of principal of, premium, if any, and interest on the    
Senior Notes) are senior obligations of such Subsidiary Guarantors and will rank
pari passu in right of payment with all existing and future senior obligations  
of the Subsidiary Guarantors and will rank senior to all subordinated           
obligations of such Subsidiary Guarantors. The Subsidiary Guarantees are secured
to the extent set forth below under "-- Collateral".                            

As of March 29, 1998 and December 31, 1997 on a pro forma basis after 
giving effect to the Offerings and the application of the estimated net proceeds
therefrom to reduce indebtedness under the Amended Credit Agreement, $372.5     
million and $262.0 million, respectively, of the indebtedness of the Subsidiary 
Guarantors would have been senior indebtedness (all of which would have been    
guarantees of indebtedness under the Amended Credit Agreement). As of March 29, 
1998 and December 31, 1997, $372.5 million and $262.0 million, respectively, of 
the indebtedness of the Subsidiary Guarantors would have been secured           
indebtedness (all of which would have been guarantees of indebtedness           
outstanding under the Amended Credit Agreement). The Indenture does not contain 
any limitation on the amount of additional indebtedness that the Company's      
Subsidiaries, including the Subsidiary Guarantors, may incur. See note 20 to the
Company's audited consolidated financial statements and note 6 to the unaudited 
interim consolidated financial statements of the Company included elsewhere in  
this Prospectus.                                                                

 The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed           
liabilities of such Subsidiary Guarantor (including any guarantees of           
indebtedness under the Amended Credit Agreement) and after giving effect to any 
collections from or payments made by or on behalf of any other Subsidiary       
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the  
Indenture, result in the obligations of such Subsidiary Guarantor under the     
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent     
transfer under federal or state law.                                            

The Indenture provides that any Subsidiary Guarantor may, without the 
consent of the holders of any outstanding Senior Notes, consolidate with or sell
or lease as, or substantially as, an entirety its assets to, or merge with or   
into, any other Person; provided that (i) immediately after giving effect to    
such transaction, no Event of Default under the Indenture, and no event which,  
after notice or the lapse of time, or both, would become such an Event of       
Default shall have occurred and be continuing and (ii) an officers' certificate 
and legal opinion covering such condition shall be delivered to the Trustee.    
Notwithstanding the foregoing, each Subsidiary Guarantor may consolidate with or
merge into or sell its assets to the Company or another Subsidiary Guarantor.   

   Upon the sale or other disposition of all of the assets of any Subsidiary
Guarantor, by way of merger, consolidation or otherwise, or a sale or other     
disposition of all of the Capital Stock of such Subsidiary Guarantor, then, in  
each case in accordance with the preceding paragraph, such Subsidiary Guarantor 
(in the event of a sale or other disposition, by way of such a merger,          
consolidation or otherwise, of all the Capital Stock of such Subsidiary         
Guarantor) shall be automatically released from all its obligations under the   
Indenture and the Subsidiary Guarantee without any action on the part of the    
Trustee or the Holders.                                                         

  Until such time as all Guarantees by the Subsidiary Guarantors under the
Indenture shall have been released in accordance with the next succeeding       
sentence, the Company shall cause each Subsidiary that Guarantees the           

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Company's obligations under the Credit Agreement (other than Foreign            
Subsidiaries) to become a Subsidiary Guarantor under the Indenture and thereby  
Guarantee the Senior Notes on the terms and conditions set forth in the         
Indenture. Upon the release of a Guarantee by a Subsidiary of the Company's     
obligations under the Credit Agreement, the Subsidiary Guarantee of such        
Subsidiary under the Indenture will be released and discharged at such time and 
will not be reinstated or renewed in the event any such Subsidiary thereafter   
Guarantees obligations of the Company under the Credit Agreement, so long as the
Guarantee by such Subsidiary under the Credit Agreement remains released (i)    
until the next succeeding refinancing, restatement, renewal, extension or       
replacement of the Credit Agreement or amendment to increase the available      
principal amount thereunder, or (ii) for a period of 90 consecutive days,       
whichever is later.                                                             

COLLATERAL                                                                      

    The Senior Notes and the Subsidiary Guarantees are secured, subject to the
terms of the Collateral Documents, equally and ratably with the indebtedness of 
the Company under the Amended Credit Agreement and related documents and        
liabilities in connection with interest rate protection and other hedging       
agreements contemplated by the Amended Credit Agreement, by a security interest 
in the collateral (the "Collateral") under the Amended Collateral Documents     
described under "Description of Other Indebtedness -- The Amended Credit        
Agreement -- Collateral".                                                       

   In the event of foreclosure on the Collateral, the proceeds from the sale
of the Collateral may not be sufficient to satisfy the Company's obligations    
under the Senior Notes and the Amended Credit Agreement in full. The amount to  
be received upon such a sale would be dependent upon numerous factors including 
the timing and the manner of the sale. In addition, the book value of the       
Collateral should not be relied upon as a measure of realizable value. By its   
nature, the Collateral will be illiquid and may have no readily ascertainable   
market value. Accordingly, there can be no assurance that the Collateral can be 
sold in a short period of time. A significant portion of the Collateral,        
including the real property portion thereof, includes tangible and intangible   
assets which may only be usable as part of the existing operating businesses of 
the Company. Accordingly, any such sale of the Collateral, including the real   
property portion thereof, separate from the sale of certain of the Company's    
operating businesses, may not be feasible or of significant value. To the extent
that third parties enjoy Permitted Liens or Liens otherwise permitted by the    
covenant described under "-- Certain Covenants -- Limitations on Liens", such   
third parties may have rights and remedies with respect to the property subject 
to such Liens that, if exercised, could adversely affect the value of the       
Collateral. In addition, the ability of the Senior Noteholders to realize upon  
any of the Collateral may be subject to certain bankruptcy law limitations in   
the event of a bankruptcy. See "Risk Factors -- Collateral".                    

    Upon the termination of all obligations under the Amended Credit Agreement
or the release by the lenders under the Amended Credit Agreement of all         
Collateral, the Amended Collateral Documents will terminate and the Collateral  
will be released. Under the Amended Collateral Documents, the control of        
foreclosure proceedings, the enforcement and amendment of the Amended Collateral
Documents and the right to take other actions with respect to the Collateral    
belong solely to the Collateral Agent and the lenders under the Amended Credit  
Agreement. The lenders under the Amended Credit Agreement may release           
Collateral, in whole or in part, from time to time, and in such event, the      
Collateral so released will be automatically released as security for the Senior
Notes without any action on the part of the Trustee or the Senior Noteholders.  
In addition, all Collateral under the Amended Credit Agreement and the Amended  
Collateral Documents will be automatically released upon the Company's long-term
indebtedness being rated BBB- by Standard & Poor's and Baa3 by Moody's, and in  
such event, all Collateral securing the Senior Notes will also be automatically 
released without any action on the part of the Trustee or the Senior            
Noteholders. For a further description of the Amended Collateral Documents, see 
"Description of Other Indebtedness -- The Amended Credit                        
Agreement -- Collateral".                                                       

CERTAIN COVENANTS                                                               

   The Indenture contains covenants, including, among others, the following:

          LIMITATION ON LIENS.  The Indenture provides that, with respect to the
  Senior Notes, neither the Company nor any Subsidiary Guarantor will, nor
     will they permit any of their Subsidiaries (excluding Foreign Subsidiaries)
    to, create, incur, or permit to exist, any Lien on any of their respective
 assets, whether now owned or hereafter acquired, in order to secure any
Indebtedness of either of the Company or any                          
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   Subsidiary Guarantor, without effectively providing that the Senior Notes
   shall be equally and ratably secured until such time as such Indebtedness
    is no longer secured by such Lien, except: (i) Liens securing Indebtedness
   arising under the Credit Agreement, so long as such Liens also secure the
    Senior Notes, equally and ratably; (ii) Liens on cash and cash equivalents
     securing obligations in respect of letters of credit in accordance with the
    terms of the Credit Agreement, (iii) Liens existing as of the closing date
   of the Senior Notes Offering (the "Closing Date"); (iv) Liens existing as
    of the Closing Date or granted after the Closing Date on any assets of the
   Company or any Subsidiary Guarantor or any of their Subsidiaries securing
     Indebtedness of the Company or any Subsidiary Guarantor created in favor of
 the Holders of the Senior Notes; (v) Liens securing Indebtedness of the
   Company or any Subsidiary which is incurred to extend, renew or refinance
   Indebtedness which is secured by Liens permitted to be incurred under the
     Indenture; provided that such Liens do not extend to or cover any assets of
the Company or any Subsidiary other than the assets securing the      
   Indebtedness being extended, renewed or refinanced and that the principal
 amount of such Indebtedness does not exceed the principal amount of the
Indebtedness being extended, renewed or refinanced at the time of such
extension, renewal or replacement, or at the time the Lien was issued,
    created or assumed or otherwise permitted; (vi) Permitted Liens; and (vii)
     Liens created in substitution of or as replacements for any Liens permitted
  by the preceding clauses (i) through (vi) or this clause (vii), provided
     that, based on a good faith determination of an officer of the Company, the
asset encumbered under any such substitute or replacement Lien is     
  substantially similar in nature to the asset encumbered by the otherwise
permitted Lien which is being replaced.                               

  Notwithstanding the foregoing and the covenant described under
    "-- Limitation on Sale and Lease-Back Transactions" below, the Company and
     any Subsidiary may, without securing any of the Senior Notes, create, incur
or permit to exist Liens which would otherwise be subject to the      
   restrictions set forth in the preceding paragraph, if after giving effect
    thereto and at the time of determination, the aggregate amount of Exempted
Debt does not exceed the greater of (x) $100 million and (y) 15% of   
Consolidated Net Assets.                                              

  LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.  The Indenture
  provides that neither the Company nor any Subsidiary Guarantor will, nor
     will they permit any of their Subsidiaries (excluding Foreign Subsidiaries)
     to, enter into any sale and lease-back transaction for the sale and leasing
    back of any property or asset, whether now owned or hereafter acquired, of
  the Company or any Subsidiary (except such transactions (i) entered into
prior to the Closing Date, (ii) for the sale and leasing back of any  
   property or asset by a Subsidiary to the Company or to another Subsidiary
    Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary),
     (iii) involving leases for less than three years or (iv) in which the lease
   for the property or asset is entered into within 180 days after the later
   of the date of acquisition, completion of construction or commencement or
  full operations of such property or asset) unless (a) the Company or any
such Subsidiary would be entitled under the first paragraph of the    
   "Limitation on Liens" covenant described above to create, incur or permit
to exist a Lien on the assets to be leased securing Indebtedness in an
amount at least equal to the Attributable Debt in respect of such     
    transaction without equally and ratably securing the Senior Notes, (b) the
   Company or any Subsidiary would be entitled under the second paragraph of
 the "Limitations on Liens" covenant described above to create, incur or
    permit to exist a Lien on the assets to be leased securing Indebtedness in
an amount at least equal to the Attributable Debt in respect of such  
  transaction without equally and ratably securing the Senior Notes or (c)
   the proceeds of the sale of the assets to be leased are at least equal to
 their fair market value and the proceeds are applied to the purchase or
   acquisition (or in the case of real property, the construction) of assets
or to the repayment of Indebtedness of the Company or any Subsidiary  
    Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary).

MERGER, CONSOLIDATION OR SALE OF ASSETS                                         

 The Indenture provides that the Company may, without the consent of the
holders of any outstanding Senior Notes, consolidate with or sell or lease its  
assets as, or substantially as, an entirety, to, or merge with or into, any     
other entity, provided that (i) the Company shall be the continuing entity, or  
the successor entity formed by or resulting from any such consolidation or      
merger or which shall have received the transfer of such assets is organized    
under the laws of any domestic jurisdiction and expressly assumes the Company's 
obligations to pay principal of (and premium, if any) and interest on all the   
Senior Notes and the due and punctual performance and observance of all the     
covenants and conditions contained in the Indenture; (ii) immediately after     
giving effect to                                                                

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such transaction, no Event of Default under the Indenture, and no event which,  
after notice or the lapse of time, or both, would become such an Event of       
Default shall have occurred and be continuing; and (iii) an officers'           
certificate and legal opinion covering certain of such conditions shall be      
delivered to the Trustee.                                                       

     Upon any consolidation or merger, or any sale or lease of the assets of the
Company as, or substantially as, an entirety in accordance with the provisions  
of the Indenture, the entity formed by such consolidation or into which the     
Company shall have been merged or to which such sale or lease shall have been   
made shall succeed to and be substituted for the Company with the same effect as
if it had been named in the Indenture as a party thereto and thereafter from    
time to time such successor entity may exercise each and every right and power  
of the Company under the Indenture in the name of the Company or in its own     
name; and any act or proceeding by any provision of the Indenture required or   
permitted to be done by the Board of Directors or any officer of the Company may
be done with like force and effect by the like board or officer of any entity   
that shall at the time be the successor of the Company hereunder. In the event  
of the sale by the Company of its assets as, or substantially as, an entirety   
upon the terms and conditions of the Indenture, the Company shall be released   
from all its liabilities and obligations under the Indenture and the Senior     
Notes.                                                                          

DEFAULTS                                                                        

 An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Senior Note when due, that continues for 30 days,    
(ii) a default in the payment of principal of any Senior Note when due at its   
Stated Maturity, upon declaration or otherwise, (iii) the failure by the Company
to comply with its obligations under the covenant described under "-- Merger,   
Consolidation or Sale of Assets", (iv) the failure by the Company or a          
Subsidiary Guarantor to comply for 60 days after notice with any of its         
obligations under the covenants described under "-- Certain Covenants", (v) the 
failure by the Company or any Subsidiary Guarantor to comply for 60 days after  
notice with its other agreements contained in the Indenture (other than those   
referred to in (i), (ii), (iii) or (iv) above), (vi) the failure by the Company,
any Subsidiary Guarantor or any Subsidiary of the Company to pay any            
Indebtedness within any applicable grace period after final maturity or the     
acceleration of any such Indebtedness by the holders thereof because of a       
default if the total amount of such Indebtedness unpaid or accelerated exceeds  
$30 million or its foreign currency equivalent (the "cross acceleration         
provision"), (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or any Significant Subsidiary (the "bankruptcy provisions"), (viii) 
any judgment or decree for the payment of money in excess of $30 million is     
rendered against the Company or any Significant Subsidiary remains outstanding  
for a period of 60 days following such judgment and is not discharged, waived or
stayed within 30 days after notice (the "judgment default provision"), (ix)     
except as permitted by the Indenture, a Subsidiary Guarantee ceases to be in    
full force and effect for 30 days after notice or a Subsidiary Guarantor denies 
or disaffirms its obligations under its Subsidiary Guarantee (the "subsidiary   
guarantee provision") or (x) except as permitted by the Amended Collateral      
Documents, the Credit Agreement and the Indenture or any amendments thereto, any
of the Collateral Documents ceases to be in full force and effect or ceases to  
be effective, in all material respects, to create a Lien on the Collateral in   
favor of the Senior Noteholders for 30 days after notice (the "collateral       
provision").                                                                    

     The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected 
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.       

   However, a default under clauses (iv), (v), (viii), (ix) and (x) will not
constitute an Event of Default until the Trustee or the Holders of 25% in       
aggregate principal amount of the outstanding Senior Notes notify the Company as
provided in the Indenture of the default and the Company does not cure such     
default within the time specified after receipt of such notice.                 

    If an Event of Default occurs and is continuing, the Trustee or the Senior
Noteholders of at least 25% in aggregate principal amount of the outstanding    
Senior Notes by notice to the Company may declare the principal of and accrued  
but unpaid interest on all the Senior Notes to be due and payable. Upon such a  
declaration, such principal and interest will be due and payable immediately. If
an Event of Default relating to certain events of bankruptcy, insolvency or     
reorganization of the Company occurs and is continuing, the principal of and    
accrued interest on all the Senior Notes will ipso facto become immediately due 
and payable without any declaration or other act on the part of the Trustee or  
any Senior Noteholders. Under certain circumstances, the Senior                 

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Noteholders of a majority in aggregate principal amount of the outstanding      
Senior Notes may rescind any such acceleration with respect to the Senior Notes 
and its consequences.                                                           

  Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will 
be under no obligation to exercise any of the rights or powers under the        
Indenture at the request or direction of any of the Holders unless such Holders 
shall have offered to the Trustee reasonable indemnity or security against any  
loss, liability or expense. Except to enforce the right to receive payment of   
principal, premium (if any) or interest when due, no Holder may pursue any      
remedy with respect to the Indenture or the Senior Notes unless (i) such Holder 
shall have previously given the Trustee notice that an Event of Default is      
continuing, (ii) Holders of at least 25% in aggregate principal amount of the   
outstanding Senior Notes shall have requested the Trustee to pursue the remedy, 
(iii) such Holders shall have offered the Trustee security or indemnity         
satisfactory to the Trustee against any loss, liability or expense, (iv) the    
Trustee shall not have complied with such request within 60 days after the      
receipt of the request and the offer of such reasonable security or indemnity   
and (v) the Holders of a majority in principal amount of the outstanding Senior 
Notes shall not have given the Trustee a direction inconsistent with such       
request within such 60-day period. Subject to certain restrictions, the Holders 
of a majority in principal amount of the outstanding Senior Notes are given the 
right to direct the time, method and place of conducting any proceeding for any 
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. The Trustee, however, may refuse to follow any direction that      
conflicts with law or the Indenture or that the Trustee determines is unduly    
prejudicial to the rights of any other Holder or that would involve the Trustee 
in personal liability.                                                          

  The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 30 days after it is known to a Trust officer or written notice of it is  
received by the Trustee. Except in the case of a Default in the payment of      
principal of, premium (if any) or interest on any Senior Note, the Trustee may  
withhold notice if and so long as a committee of its Trust officers in good     
faith determines that withholding notice is not opposed to the interests of the 
Senior Noteholders. In addition, the Company is required to deliver to the      
Trustee, within 120 days after the end of each fiscal year, (i) a certificate   
indicating whether the signers thereof know of any Default that occurred during 
the previous year and (ii) an opinion of counsel either stating that action has 
been taken with respect to any filing, refiling, recording or re-recording with 
respect to the Collateral as is necessary to maintain the Lien on the Collateral
in favor of the Senior Noteholders or that no such action is necessary to       
maintain such Lien. The Company also is required to deliver to the Trustee,     
within 30 days after the occurrence thereof, written notice of any event which  
would constitute certain Defaults, their status and what action the Company is  
taking or proposes to take in respect thereof.                                  

AMENDMENTS AND WAIVERS                                                          

Subject to certain exceptions, the Indenture may be amended with the  
consent of the Holders of a majority in principal amount of the Senior Notes    
then outstanding and any past default or compliance with any provisions may be  
waived with the consent of the Holders of a majority in principal amount of the 
Senior Notes then outstanding. However, without the consent of each Holder of an
outstanding Senior Note affected, no amendment may, among other things, (i)     
reduce the amount of Senior Notes whose Holders must consent to an amendment,   
(ii) reduce the rate of or extend the time for payment of interest on any Senior
Note, (iii) reduce the principal of or extend the Stated Maturity of any Senior 
Note, (iv) reduce the premium payable upon any redemption of any Senior Note or 
change the time at which any Senior Note may be redeemed, (v) make any Senior   
Note payable in money other than that stated in the Senior Note, (vi) impair the
right of any Holder to receive payment of principal of and interest on such     
Holder's Senior Notes on or after the due dates therefor or to institute suit   
for the enforcement of any payment on or with respect to such Holder's Senior   
Notes, (vii) make any changes that would affect the ranking of the Senior Notes 
or, except (a) in accordance with the terms of the Collateral Documents or the  
Indenture, (b) as permitted by the following paragraph or (c) in order to give  
effect to amendments to any of the Amended Collateral Documents, the security   
for the Senior Notes in a manner material and adverse to the Senior Noteholders 
or (viii) make any change in the amendment provisions which require each        
Holder's consent or in the waiver provisions.                                   

   Without the consent of any Holder, the Company, the Subsidiary Guarantors
and the Trustee may amend the Indenture to cure any ambiguity, omission, defect 
or inconsistency whether wholly within the Indenture or as                      
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compared to any of the Amended Collateral Documents, or to make such other      
provisions in regard to matters or questions arising under the Indenture as the 
Board of Directors of the Company may deem necessary or desirable and which     
shall not materially and adversely affect the rights of the Holders, to provide 
for the assumption by a successor corporation of the obligations the Company    
under the Indenture, to provide for uncertificated Senior Notes in addition to  
or in place of certificated Senior Notes (provided that the uncertificated      
Senior Notes are issued in registered form for purposes of Section 163(f) of the
Code, or in a manner such that the uncertificated Senior Notes are as described 
in Section 163(f)(2)(B) of the Code), to add additional Guarantees with respect 
to the Senior Notes, to add additional security for the Senior Notes, to add to 
the covenants of the Company for the benefit of the Senior Noteholders or to    
surrender any right or power conferred upon the Company, to make any change that
does not adversely affect the rights of any Holder in any material respect, to  
comply with, or allow for compliance with, any requirement of the SEC in        
connection with qualifying the Indenture under the TIA or giving effect to the  
security arrangements contemplated by the Indenture, to give effect to the      
provisions of the Amended Collateral Documents and the Indenture, including with
regard to the release of all or a portion of the Collateral in accordance with  
such provisions and to give effect to the release of any Subsidiary Guarantee in
accordance with the terms of the Indenture.                                     

    The consent of the Senior Noteholders is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if   
such consent approves the substance of the proposed amendment.                  

  After an amendment under the Indenture becomes effective, the Company is
required to mail to Senior Noteholders a notice briefly describing such         
amendment. However, the failure to give such notice to all Senior Noteholders,  
or any defect therein, will not impair or affect the validity of the amendment. 

TRANSFER AND EXCHANGE                                                           

 A Senior Noteholder may transfer or exchange Senior Notes in accordance
with the Indenture. Upon any transfer or exchange, the registrar and the Trustee
may require a Senior Noteholder, among other things, to furnish appropriate     
endorsements and transfer documents and the Company may require a Senior        
Noteholder to pay any taxes required by law or permitted by the Indenture,      
including any transfer tax or other similar governmental charge payable in      
connection therewith. The Company is not required to transfer or exchange any   
Senior Note selected for redemption or to transfer or exchange any Senior Note  
for a period of 15 days prior to a selection of Senior Notes to be redeemed. The
Senior Notes will be issued in registered form and the registered holder of a   
Senior Note will be treated as the owner of such Senior Note for all purposes.  

DEFEASANCE                                                                      

GENERAL                                                                     

    The Company at any time may terminate all its obligations under the Senior
Notes and the Indenture ("legal defeasance"), except for certain obligations,   
including those respecting the defeasance trust and obligations to register the 
transfer or exchange of the Senior Notes, to replace mutilated, destroyed, lost 
or stolen Senior Notes and to maintain a registrar and paying agent in respect  
of the Senior Notes. The Company at any time may terminate its obligations under
the covenants described under "Certain Covenants", (other than the covenant     
described under "-- Merger, Consolidation or Sale of Assets") and the operation 
of the cross acceleration provision, the bankruptcy provisions with respect to  
Significant Subsidiaries, the judgment default provision, the subsidiary        
guarantee provision or the collateral provision described under "-- Defaults"   
("covenant defeasance").                                                        

  The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its  
legal defeasance option, payment of the Senior Notes may not be accelerated     
because of an Event of Default with respect thereto. If the Company exercises   
its covenant defeasance option, payment of the Senior Notes may not be          
accelerated because of an Event of Default specified in clause (iv), (v), (vi), 
(vii) (with respect only to Significant Subsidiaries), (viii), (ix) or (x) under
"-- Defaults" above.                                                            

     In order to exercise either defeasance option, the Company must irrevocably
deposit or cause to be deposited in trust (the "defeasance trust") with the     
Trustee money or U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms will
provide cash at                                                                 

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such times and in such amounts as will be sufficient to pay principal and       
interest when due on all the Senior Notes (except lost, stolen or destroyed     
Senior Notes which have been replaced or repaid) to maturity or redemption, as  
the case may be, and must comply with certain other conditions.                 

TAX CONSEQUENCES                                                            

  Under current law such deposit and discharge would, in the case of legal
defeasance, and could, in the case of covenant defeasance, constitute a taxable 
exchange of the related Senior Notes. If the defeasance of such Senior Notes is 
considered to be a taxable exchange, each Holder of such Senior Notes would be  
required to recognize gain or loss equal to the difference between the Holder's 
tax basis in such Senior Notes and the value of the Holder's interest in the    
defeasance trust. In addition, such Holders thereafter might be required to     
include in income a different amount than would be includable in the absence of 
the discharge. Prospective investors are urged to consult their own tax advisers
as to the specific consequences of such a deposit and discharge, including the  
applicability and effect of tax laws other than the federal income tax law.     

CONCERNING THE TRUSTEE                                                          

Bankers Trust Company is the Trustee under the Indenture and has been 
appointed by the Company as Registrar and Paying Agent with regard to the Senior
Notes.                                                                          

     The Indenture contains certain limitations on the rights of the Trustee, if
it is a creditor of the Company, to obtain payment of claims in certain cases,  
or to realize on certain property received in respect of any such claim as      
security or otherwise. The Trustee will be permitted to engage in other         
transactions; provided, however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to      
continue or resign. Bankers Trust Company is also the Administrative Agent under
the Amended Credit Agreement and will act as Collateral Agent on behalf of all  
the secured creditors under the Amended Collateral Documents (including, without
limitations, the Holders of the Senior Notes and the lenders under the Amended  
Credit Agreement).                                                              

 The Holders of a majority in principal amount of the outstanding Senior
Notes have the right to direct the time, method and place of conducting any     
proceeding for exercising any remedy available to the Trustee, subject to       
certain exceptions. The Indenture provides that if an Event of Default occurs   
(and is not cured) the Trustee will be required, in the exercise of its power,  
to use the degree of care of a prudent man in the conduct of his own affairs.   
Subject to such provisions, the Trustee will be under no obligation to exercise 
any of its rights or powers under the Indenture at the request of any Holder of 
Senior Notes, unless such Holder shall have offered to the Trustee security and 
indemnity satisfactory to it against any loss, liability or expense and then    
only to the extent required by the terms of the Indenture.                      

GOVERNING LAW                                                                   

  The Indenture provides that it and the Senior Notes will be governed by,
and construed in accordance with, the laws of the State of New York without     
giving effect to applicable principles of conflicts of law to the extent that   
the application of the law of another jurisdiction would be required thereby.   

CERTAIN DEFINITIONS                                                             

"Attributable Debt" means in connection with a sale and lease-back    
transaction, the lesser of (i) the fair market value of the assets subject to   
such transaction and (ii) the present value (discounted at a rate per annum     
equal to the average interest borne by all outstanding securities issued under  
the Indenture (which may include securities in addition to the Senior Notes)    
determined on a weighted average basis and compounded semiannually) of the      
obligations of the lessee for rental payments during the term of the related    
lease.                                                                          

     "Capital Lease" means any Indebtedness represented by a lease obligation of
a person incurred with respect to real property or equipment acquired or leased 
by such person and used in its business that is required to be recorded as a    
capital lease in accordance with GAAP.                                          

"Capital Stock" of any Person means any and all shares, interests,    
participations, rights to purchase, warrants, options or other equivalents      
(however designated) of corporate stock or other equity of such Person.         

"Code" means the Internal Revenue Code of 1986, as amended.           

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 "Consolidated Net Assets" means as of any particular time the aggregate
amount of assets after deducting therefrom all current liabilities except for   
(i) notes and loans payable, (ii) current maturities of long-term debt and (iii)
current maturities of obligations under capital leases, all as set forth on the 
most recent consolidated balance sheet of the Company and its consolidated      
Subsidiaries and computed in accordance with GAAP.                              

"Credit Agreement" means the Amended and Restated Credit Agreement as 
amended and restated as of December 18, 1996, as amended by the Fifth Amendment 
thereto, dated March 16, 1998, among the Company, Coltec Aerospace Canada       
Limited, a Subsidiary of the Company, Bankers Trust Company, as Administrative  
Agent, Bank of America National Trust and Savings Association, as Documentation 
Agent, The Chase Manhattan Bank, as Syndication Agent, Bank of Montreal, as     
Canadian Paying Agent, and the various lenders party thereto, as such agreement 
may be amended (including any amendment, restatement and successors thereof),   
supplemented, refinanced, renewed, extended, replaced, in whole or in part, or  
otherwise modified from time to time, including any increase in the principal   
amount of the obligations thereunder.                                           

   "Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.                                             

"Exempted Debt" means the sum of the following as of the date of      
determination: (i) Indebtedness of the Company and its Subsidiaries (other than 
Foreign Subsidiaries) incurred after the Closing Date and secured by Liens not  
otherwise permitted by the covenant described under "-- Limitation on Liens"    
above and (ii) Attributable Debt of the Company and its Subsidiaries in respect 
of sale and lease-back transactions entered into after the Closing Date, other  
than sale and lease-back transactions permitted by clauses (a) and (c) of the   
covenant described under the "-- Limitation on Sale and Lease-Back Transactions"
above.                                                                          

"Foreign Subsidiary" means any Subsidiary which is incorporated or    
otherwise organized under the laws of any jurisdiction other than the United    
States of America, any state thereof or the District of Columbia and any        
Subsidiary thereof.                                                             

    "GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the       
American Institute of Certified Public Accountants, (ii) statements and         
pronouncements of the Financial Accounting Standards Board, (iii) such other    
statements by such other entity as approved by a significant segment of the     
accounting profession and (iv) the rules and regulations of the SEC governing   
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange 
Act, including opinions and pronouncements in staff accounting bulletins and    
similar written statements from the accounting staff of the SEC.                

"Guarantee" means a guarantee, direct or indirect, in any manner      
(including, without limitation, letters of credit and reimbursement agreements  
in respect thereof), of all or any part of any Indebtedness; provided, however, 
that the term "Guarantee" shall not include endorsements for collection or      
deposit in the ordinary course of business. The term "Guarantee" used as a verb 
has a corresponding meaning.                                                    

 "Holder" or "Senior Noteholder" means the Person in whose name a Senior
Note is registered on the Registrar's books.                                    

    "Indebtedness" means, with respect to any Person, without duplication, (i)
principal of, and premium, if any, and interest (including interest accruing on 
or after the filing of any petition in bankruptcy or for reorganization relating
to such Person whether or not such claim for post-petition interest is allowed  
in such proceeding) on any indebtedness of such Person (a) for borrowed money   
(whether or not the recourse of the lender is to the whole of the assets, of    
such person or only to a portion thereof), (b) evidenced by notes, debentures or
similar instruments (including purchase money obligations) given in connection  
with the acquisition of any property or assets (other than trade accounts       
payable for inventory or similar property acquired in the ordinary course of    
business), including securities, for the payment of which such Person is liable,
directly or indirectly, or the payment of which is secured by a lien, charge or 
encumbrance on property or assets of such Person, (c) for goods, materials or   
services purchased in the ordinary course of business (other than trade accounts
payable arising in the ordinary course of business which are due less than three
months after the acceptance of such goods, materials or services), (d) with     
respect to letters of credit or bankers acceptances issued for the account of   
such Person or performance, surety or similar bonds, (e) for the payment of     
money relating to a                                                             

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Capital Lease obligation or (f) under interest rate swaps, caps or similar      
agreements and foreign exchange contracts, currency swaps or similar agreements;
(ii) any liability of any other Person of the kind described in the preceding   
clause (i), which such Person has Guaranteed or which is otherwise its legal    
liability; and (iii) any and all deferrals, renewals, extensions and refunding  
of, or amendments, modifications or supplements to, any indebtedness of the kind
described in any of the preceding clauses (i) or (ii).                          

     "Lien" means any lien, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any agreement to give any security interest).           

"Permitted Liens" means (i) Liens on any asset of the Company or any  
Subsidiary created solely to secure obligations incurred to finance the         
refurbishment, improvement or construction of such asset, which obligations are 
incurred no later than 180 days after completion of such refurbishment,         
improvement or construction, and all renewals, extensions, refinancings,        
replacements or refundings of such obligations, or to secure all or part of the 
cost of such refurbishment, improvement or construction; (ii) (a) Liens to      
secure the payment of the purchase price incurred in connection with the        
acquisition (including acquisition through merger or consolidation) of any asset
(including shares of stock), including Capital Lease transactions in connection 
with any such acquisition and (b) Liens existing on any asset at the time of    
acquisition thereof or at the time of acquisition by the Company or any         
Subsidiary of any Person then owning such asset, directly or indirectly, whether
or not such existing Liens were given to secure the payment of the purchase     
price of the property to which they attach; provided that, with respect to      
clause (a), such Liens shall be given within one year after such acquisition and
shall attach solely to the assets acquired or purchased and any improvements    
then or thereafter placed thereon; (iii) Liens in favor of customs and revenue  
authorities arising as a matter of law to secure payment of customs duties in   
connection with the importation of goods; (iv) Liens upon specific items of     
inventory or other goods and proceeds of any Person securing such Person's      
obligations in respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of such inventory
or other goods; (v) Liens securing reimbursement obligations with respect to    
letters of credit that encumber documents and other property relating to such   
letters of credit and the products and proceeds thereof; (vi) Liens encumbering 
customary initial deposits and margin deposits and other Liens, in each case    
securing Indebtedness of the Company or any Subsidiary under interest rate and  
currency hedging instruments and forward contract, option, futures contracts,   
futures options or similar agreements or arrangements designed to protect the   
Company or any Subsidiary from fluctuations in interest rates, currencies or the
price of commodities or any combination of the foregoing; (vii) Liens arising   
out of conditional sale, title retention, consignment or similar arrangements   
for the sale of goods entered into by the Company or any Subsidiary in the      
ordinary course of business; (viii) Liens in favor of the Company or any        
Subsidiary; (ix) Liens for taxes, assessments or governmental charges or levies 
on the assets of the Company or any Subsidiary if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being contested 
in good faith and by appropriate proceedings or Liens for the excess of the     
amount of any past due taxes for which a final assessment has not been received 
over the amount of such taxes as estimated and paid; (x) Liens imposed by law,  
such as carriers', warehousemen's and mechanics' Liens and other similar Liens  
on the assets of the Company or any Subsidiary arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or  
are being contested in good faith and by appropriate proceedings; (xi) Liens on 
the assets of the Company or any Subsidiary incurred in the ordinary course of  
business to secure performance of obligations with respect to statutory or      
regulatory requirements, performance or return-of-money bonds, surety bonds or  
other obligations of a like nature and incurred in a manner consistent with     
industry practice; (xii) Liens on the assets of a Receivables Subsidiary in a   
Qualified Receivables Transaction; (xiii) Liens in respect of any judgment      
rendered which is being contested diligently and in good faith by appropriate   
proceedings by the Company or any of its Subsidiaries and which does not have a 
material adverse effect on the ability of the Company and its Subsidiaries to   
operate the business or operations of the Company or its Subsidiaries taken as a
whole; and (xiv) Liens in favor of the United States or any state or territory  
or possession thereof, or any foreign country, or any department, agency,       
instrumentality or political subdivision of any of such domestic or foreign     
governmental entity, to secure partial, progress, advance or other payments     
pursuant to any contract or statute or to secure any liability incurred for the 
purpose of financing all or part of the purchase price or the cost of           
constructing the asset subject to such Liens.                                   

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    "Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated 
organization or government or any agency or political subdivision thereof.      

"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries 
pursuant to which the Company or any of its Subsidiaries may sell, convey or    
otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by
the Company or a Subsidiary) and (ii) any other Person (in the case of a        
transfer by a Receivables Subsidiary), or may grant a security interest in, any 
accounts receivable (whether now existing or arising in the future) of the      
Company or any of its Subsidiaries, and any assets related thereto including all
collateral securing such accounts receivable, all contracts and all guarantees  
or other obligations in respect of such accounts receivable, proceeds of such   
accounts receivable and other assets which, in each case, are customarily and   
regularly transferred, or in respect of which security interests are customarily
granted, in connection with asset securitization transactions involving accounts
receivable.                                                                     

     "Receivables Subsidiary" means a Subsidiary of the Company which engages in
no activities other than in connection with the financing of accounts receivable
and which is designated by or pursuant to the authority of the Board of         
Directors as a Receivables Subsidiary (a) no portion of the Indebtedness of     
which (i) is guaranteed by the Company or any Subsidiary, (ii) is recourse to or
obligates the Company or any Subsidiary in any manner other than pursuant to    
customary representations, warranties, covenants and indemnities entered into in
connection with a Qualified Receivables Transactions or (iii) subjects any      
assets of the Company or any Subsidiary, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to the              
representations, warranties, covenants and indemnities entered into in the      
ordinary course of business in connection with a Qualified Receivables          
Transaction and other than in respect of the related pledge of the financed     
accounts receivable and (b) with which neither the Company nor any Subsidiary   
has any obligation to maintain or preserve such Subsidiary's financial condition
or cause such Subsidiary to achieve certain levels of operating results.        

    "Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X 
promulgated by the SEC.                                                         

   "Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such    
security is due and payable, including pursuant to any mandatory redemption     
provision (but excluding any provision providing for the repurchase of such     
security at the option of the holder thereof upon the happening of any          
contingency beyond the control of the issuer unless such contingency has        
occurred).                                                                      

   "Subsidiary" means a Person (other than an individual), a majority of the
outstanding voting stock, partnership interests, membership interests or other  
equity interest, as the case may be, of which is owned or controlled, directly  
or indirectly, by the Company or by one or more other Subsidiaries of the       
Company. For the purposes of this definition, "voting stock" means stock having 
voting power for the election of directors, trustees or managers, as the case   
may be, whether at all times or only so long as no senior class of stock has    
such voting power by reason of any contingency.                                 

     "Subsidiary Guarantee" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Senior Notes.                         

     "Subsidiary Guarantor" means each Subsidiary of the Company existing on the
Closing Date and each new Subsidiary created after the Closing Date (in each    
case other than Foreign Subsidiaries), in each case, that Guarantees the        
Company's obligations under the Credit Agreement; provided that, if such        
Subsidiary's Guarantee of the Company's obligations under the Credit Agreement  
is released or ceases to be in effect, such Subsidiary shall no longer be a     
Subsidiary Guarantor.                                                           

"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec.       
77aaa-77bbbb) as in effect on the Closing Date.                                 

 "U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of 
America (including any agency or instrumentality thereof) for the               

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payment of which the full faith and credit of the United States of America is   
pledged and which are not callable or redeemable at the issuer's option.        

BOOK-ENTRY; DELIVERY AND FORM                                                   

  The Exchange Notes will be issued in the form of a Global Exchange Note.
The Global Exchange Note will be deposited with, or on behalf of, the Depository
and registered in the name of the Depository or its nominee. Except as set forth
below, the Global Exchange Note may be transferred, in whole and not in part,   
only to the Depository or another nominee of the Depository. Investors may hold 
their beneficial interests in the Global Exchange Note directly through the     
Depository if they have an account with the Depository or indirectly through    
organizations which have accounts with the Depository.                          

  Exchange Notes that are issued as described below under "-- Certificated
Exchange Notes" will be issued in definitive form. Upon the transfer of an      
Exchange Note in definitive form, such Exchange Note will, unless the Global    
Exchange Note has previously been exchanged for Exchange Notes in definitive    
form, be exchanged for an interest in the Global Exchange Note representing the 
principal amount of Exchange Notes being transferred.                           

The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the     
meaning of the New York Uniform Commercial Code, and a "clearing agency"        
registered pursuant to the provisions of Section 17A of the Exchange Act. The   
Depository was created to hold securities of institutions that have accounts    
with the Depository ("participants") and to facilitate the clearance and        
settlement of securities transactions among its participants in such securities 
through electronic book-entry changes in accounts of the participants, thereby  
eliminating the need for physical movement of securities certificates. The      
Depository's participants include securities brokers and dealers (which may     
include the Initial Purchasers), banks, trust companies, clearing corporations  
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies    
that clear through or maintain a custodial relationship with a participant,     
whether directly or indirectly.                                                 

    Upon the issuance of the Global Exchange Note, the Depository will credit,
on its book-entry registration and transfer system, the principal amount of the 
Exchange Notes represented by such Global Exchange Note to the accounts of      
participants. Ownership of beneficial interests in the Global Exchange Note will
be limited to participants or persons that may hold interests through           
participants. Ownership of beneficial interests in the Global Exchange Note will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depository (with respect to participants'    
interest) and such participants (with respect to the owners of beneficial       
interests in the Global Exchange Note other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical   
delivery of such securities in definitive form. Such limits and laws may impair 
the ability to transfer or pledge beneficial interests in the Global Exchange   
Note.                                                                           

 So long as the Depository, or its nominee, is the registered holder and
owner of the Global Exchange Note, the Depository or such nominee, as the case  
may be, will be considered the sole legal owner and holder of the related       
Exchange Notes for all purposes of such Exchange Notes and the Indenture. Except
as set forth below, owners of beneficial interests in the Global Exchange Note  
will not be entitled to have the Exchange Notes represented by the Global       
Exchange Note registered in their names, will not receive or be entitled to     
receive physical delivery of certificated Exchange Notes in definitive form and 
will not be considered to be the owners or holders of any Exchange Notes under  
the Global Exchange Note. The Company understands that under existing industry  
practice, in the event an owner of a beneficial interest in the Global Exchange 
Note desires to take any action that the Depository, as the holder of the Global
Exchange Note, is entitled to take, the Depository would authorize the          
participants to take such action, and that the participants would authorize     
beneficial owners owning through such participants to take such action or would 
otherwise act upon the instructions of beneficial owners owning through them.   

   Payment of principal of and interest on Exchange Notes represented by the
Global Exchange Note registered in the name of and held by the Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as   
the registered owner and holder of the Global Exchange Note.                    

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     The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Exchange Note, will credit    
participants' accounts with payments in amounts proportionate to their          
respective beneficial interests in the principal amount of the Global Exchange  
Note as shown on the records of the Depository or its nominee. The Company also 
expects that payments by participants to owners of beneficial interests in the  
Global Exchange Note held through such participants will be governed by standing
instructions and customary practices and will be the responsibility of such     
participants. The Company will not have any responsibility or liability for any 
aspect of the records relating to, or payments made on account of, beneficial   
ownership interests in the Global Exchange Note for any Exchange Note or for    
maintaining, supervising or reviewing any records relating to such beneficial   
ownership interests or for any other aspect of the relationship between the     
Depository and its participants or the relationship between such participants   
and the owners of beneficial interests in the Global Exchange Note owning       
through such participants.                                                      

Unless and until it is exchanged in whole or in part for certificated 
Exchange Notes in definitive form, the Global Exchange Note may not be          
transferred except as a whole by the Depository to a nominee of such Depository 
or by a nominee of such Depository to such Depository or another nominee of such
Depository.                                                                     

    Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Note among participants
of the Depository, it is under no obligation to perform or continue to perform  
such procedures, and such procedures may be discontinued at any time. Neither   
the Trustee nor the Company will have any responsibility for the performance by 
the Depository or its participants or indirect participants of their respective 
obligations under the rules and procedures governing their operations.          

CERTIFICATED EXCHANGE NOTES                                                     

     The Exchange Notes represented by the Global Exchange Note are exchangeable
for certificated Exchange Notes in definitive form of like tenor as such        
Exchange Notes in denominations of U.S. $1,000 and integral multiples thereof if
(i) the Depository notifies the Company that it is unwilling or unable to       
continue as Depository of the Global Exchange Note or if at any time the        
Depository ceases to be a clearing agency registered under the Exchange Act and 
a successor Depository is not appointed by the Company within 90 days, (ii) the 
Company in its discretion at any time determines not to have all of the Exchange
Notes represented by the Global Exchange Note or (iii) an Event of Default has  
occurred and is continuing. Any Exchange Note that is exchangeable pursuant to  
the preceding sentence is exchangeable for certificated Exchange Notes issuable 
in authorized denominations and registered in such names as the Depository shall
direct. Subject to the foregoing, the Global Exchange Note is not exchangeable, 
except for a Global Exchange Note of the same aggregate denomination to be      
registered in the name of the Depository or its nominee.                        

REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS                                  

    Holders of Exchange Notes are not entitled to any registration rights with
respect to the Exchange Notes. The Company and the Subsidiary Guarantors have   
agreed pursuant to a registration rights agreement (the "Registration Rights    
Agreement") with the Initial Purchasers, for the benefit of the holders of the  
Senior Notes, that the Company will, at its cost, (i) within 90 days after the  
Issue Date, file a Registration Statement with the SEC with respect to the      
Exchange Offer to exchange the Outstanding Notes for Exchange Notes having terms
substantially identical in all material respects to the Outstanding Notes except
that such notes will not contain terms with respect to transfer restrictions and
(ii) use its reasonable best efforts to cause the Registration Statement to be  
declared effective under the Securities Act within 150 days after the Issue     
Date. Upon the effectiveness of the Registration Statement, the Company will    
offer the Exchange Notes in exchange for surrender of the Outstanding Notes. The
Company will keep the Exchange Offer open for not less than 20 days (or longer  
if required by applicable law) after the date notice of the Registered Exchange 
Offer is mailed to the holders of the Senior Notes. For each Outstanding Note   
surrendered to the Company pursuant to the Exchange Offer, the holder of such   
Outstanding Note will receive an Exchange Note having a principal amount at     
maturity equal to that of the surrendered Outstanding Note at maturity. Interest
on each Exchange Note will accrue from the last interest payment date on which  
interest was paid on the Outstanding Note surrendered in exchange thereof or, if
no interest has been paid on such Outstanding Note, from the date interest      
begins to accrue on such Outstanding Note.                                      

     In the event that applicable interpretations of the staff of the SEC do not
permit the Company to effect the Exchange Offer, or if for any other reason the 
Exchange Offer is not consummated within 180 days of the                        

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Closing Date, or if the Initial Purchasers so request with respect to           
Outstanding Notes not eligible to be exchanged for Exchange Notes in the        
Exchange Offer, or if any holder of Outstanding Notes is not eligible to        
participate in the Exchange Offer or does not receive freely tradeable Exchange 
Notes in the Exchange Offer, the Company, will, at its cost, (a) as promptly as 
practicable, file a shelf registration statement (the "Shelf Registration       
Statement") with the SEC covering resales of the Outstanding Notes or the       
Exchange Notes, as the case may be, (b) use its reasonable best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities  
Act and (c) keep the Shelf Registration Statement effective until the earlier of
(i) the time when the Senior Notes covered by the Shelf Registration Statement  
can be sold pursuant to Rule 144 without any limitations under clauses (c), (e),
(f) and (h) of Rule 144 and (ii) two years from the Issue Date; provided that   
the Company will be permitted to suspend the use of the prospectus which forms a
part of the Shelf Registration Statement for a period not to exceed 45 days in  
any three-month period or three periods not to exceed an aggregate of 90 days in
any 12-month period under certain circumstances relating to pending corporate   
developments, public filings with the Commission and similar events. The Company
will, in the event a Shelf Registration Statement is filed, among other things, 
provide to each holder for whom such Shelf Registration Statement was filed     
copies of the prospectus which is a part of the Shelf Registration Statement,   
notify each such holder when the Shelf Registration Statement has become        
effective and take certain other actions as are required to permit unrestricted 
resales of the Senior Notes. A holder selling such Senior Notes pursuant to the 
Shelf Registration Statement generally would be required to be named as a       
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under  
the Securities Act in connection with such sales and will be bound by the       
provisions of the Registration Rights Agreement which are applicable to such    
holder (including certain indemnification obligations).                         

If (i) within 90 days after the Issue Date, neither the Registration  
Statement nor the Shelf Registration Statement has been filed with the SEC; (ii)
within 180 days after the Issue Date, neither the Exchange Offer is consummated 
nor the Shelf Registration Statement is declared effective; or (iii) after      
either the Registration Statement or the Shelf Registration Statement is        
declared effective, such registration statement thereafter ceases to be         
effective or usable (subject to certain exceptions, including the blackout      
provisions described above) in connection with resales of Outstanding Notes or  
Exchange Notes in accordance with and during the periods specified in the       
Registration Rights Agreement (each such event referred to in clause (i) through
(iii) being herein called a "Registration Default"), additional cash interest   
will accrue on the Outstanding Notes and the Exchange Notes at the rate of 0.50%
per annum from and including the date on which any such Registration Default    
shall occur to but excluding the date on which all Registration Defaults have   
been cured, calculated on the principal amount of the Senior Notes as of the    
date on which such interest is payable. Such interest is payable in addition to 
any other interest payable from time to time with respect to the Senior Notes.  

     If the Company effects the Exchange Offer, it will be entitled to close the
Registered Exchange Offer 20 business days after the commencement thereof       
provided that it has accepted all Senior Notes theretofore validly tendered in  
accordance with the terms of the Exchange Offer.                                

The summary herein of certain provisions of the Registration Rights   
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights     
Agreement, a copy of which is available upon request to the Company.            

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DESCRIPTION OF OTHER INDEBTEDNESS 

The following summaries of certain indebtedness of the Company do not 
purport to be complete and are subject to, and qualified in their entirety by   
reference to, the definitive agreements governing such indebtedness, copies of  
which are available upon request to the Company.                                

THE AMENDED CREDIT AGREEMENT                                                    

GENERAL                                                                     

   The Company and Coltec Aerospace Canada Limited, a Canadian subsidiary of
the Company (the "Canadian Borrower"), are parties to the Amended Credit        
Agreement with various lenders (collectively, the "Lenders"), Bankers Trust     
Company, as Administrative Agent, Bank of America National Trust and Savings    
Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication   
Agent, and Bank of Montreal, as Canadian Paying Agent. Capitalized terms used   
but not defined in this summary have the meanings assigned thereto in the       
Amended Credit Agreement.                                                       

The Amended Credit Agreement provides for revolving borrowings by the 
Company and the Canadian Borrower of up to $900 million, which will be reduced  
by 66 2/3% of the gross proceeds to the Company from the TIDES Offering and the 
Senior Notes Offering (the "Total Commitment") and which expires on December 15,
2001. The Canadian Borrower may borrow up to $80 million under the Amended      
Credit Agreement with the remainder of the Total Commitment available only to   
the Company.                                                                    

The Amended Credit Agreement also provides for the issuance of certain
standby letters of credit and trade letters of credit (collectively, the        
"Letters of Credit") for the account of the Company; provided that the          
outstanding amount of all Letters of Credit does not exceed, (x) when added to  
the outstanding amount of letters of credit not issued under the Amended Credit 
Agreement, $125 million or (y) when added to all loans outstanding under the    
Amended Credit Agreement, the Total Commitment.                                 

GUARANTEES                                                                  

The obligations of the Company under the Amended Credit Agreement are 
guaranteed by each existing domestic subsidiary of the Company and will be      
guaranteed by each subsequently acquired domestic subsidiary (excluding the     
trust that will issue the Convertible Preferred Securities in the TIDES Offering
and certain other subsidiaries) of the Company (the "Credit Agreement Subsidiary
Guarantees"). The obligations of the Canadian Borrower under the Amended Credit 
Agreement are guaranteed by the Company and by each existing Canadian subsidiary
of the Canadian Borrower and will be guaranteed by each subsequently acquired   
subsidiary of the Canadian Borrower.                                            

COLLATERAL                                                                  

   Pledged Securities. Pursuant to a pledge agreement, dated as of March 24,
1992 and as amended and restated as of December 18, 1996 and as further amended 
as of April 16, 1998, made by the Company to Bankers Trust Company, as          
Collateral Agent (the "Company Pledge Agreement"), the obligations of the       
Company under the Amended Credit Agreement and the Senior Notes are secured by  
pledges of all the capital stock of the Company's direct domestic subsidiaries  
and 66% of the capital stock of the Company's direct foreign subsidiaries and   
any promissory notes held by the Company.                                       

   Pursuant to a pledge agreement, dated as of March 24, 1992 and as amended
and restated as of December 18, 1996 and as further amended as of April 16,     
1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral
Agent (the "Subsidiaries Pledge Agreement"), the obligations of each domestic   
subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiary   
Guarantees of the Senior Notes are secured by pledges of all the capital stock  
of such subsidiary's direct domestic subsidiaries and 66% of all the capital    
stock of such subsidiary's direct foreign subsidiaries and any promissory notes 
held by such subsidiary. The securities pledged pursuant to the Company Pledge  
Agreement and the Subsidiaries Pledge Agreement are referred to herein as the   
"Pledged Securities".                                                           

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 Other Security. Pursuant to a security agreement, dated as of March 24,
1992 and as amended and restated as of December 18, 1996 and as further amended 
as of April 16, 1998, made by the Company to Bankers Trust Company, as          
Collateral Agent (the "Company Security Agreement"), the obligations of the     
Company and loans to the Canadian Borrower under the Amended Credit Agreement   
and the Senior Notes are secured by a security interest in substantially all    
inventory, accounts receivable, a cash collateral account, intellectual property
rights, computer programs, contracts, goods, general intangibles, chattel paper,
documents and instruments of the Company and all proceeds of the foregoing.     

     Pursuant to a security agreement, dated as of March 24, 1992 and as amended
and restated as of December 18, 1996 and as further amended as of April 16,     
1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral
Agent (the "Subsidiaries Security Agreement"), the obligations of each domestic 
subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiary   
Guarantees of the Senior Notes are secured by a security interest in            
substantially all inventory, accounts receivable, a cash collateral account,    
intellectual property rights, computer programs, contracts, goods, general      
intangibles, chattel paper, documents and instruments of such subsidiary and all
proceeds of the foregoing.                                                      

Real Property. The obligations of the Company under the Amended Credit
Agreement and the Senior Notes are secured by first mortgages or deeds of trust 
on certain of the manufacturing plants owned by the Company and its             
subsidiaries, including the plants in West Hartford, Connecticut, Euless, Texas,
Beloit, Wisconsin, and Longview, Texas (collectively, the "Mortgages"). See     
"Business -- Properties".                                                       

The Company Pledge Agreement, the Subsidiaries Pledge Agreement, the  
Company Security Agreement, the Subsidiaries Security Agreement and the         
Mortgages are hereinafter referred to as the "Amended Collateral Documents".    

The following is a summary of the material provisions of the Amended  
Collateral Documents pertaining to the Collateral.                              

    Collateral Agent. Bankers Trust Company will be the Collateral Agent under
each of the Amended Collateral Documents. Bankers Trust Company is also the     
Administrative Agent under the Amended Credit Agreement. The Collateral Agent is
not a fiduciary to any of the secured creditors, including, without limitation, 
the holders of the Senior Notes. However, any enforcement of the provisions of  
the Amended Collateral Documents by the Collateral Agent will be made for the   
benefit of all the secured creditors under the Amended Collateral Documents,    
including for the benefit of the holders of the Senior Notes.                   

     Obligations Secured by the Collateral. The obligations which are secured by
the Collateral include (i) payments of principal of and interest on the loans   
under the Amended Credit Agreement, all reimbursement obligations and unpaid    
drawings with respect to letters of credit under the Amended Credit Agreement   
and all other obligations owing to the lenders in connection with the Amended   
Credit Agreement and related documents, (ii) all liabilities in connection with 
interest rate protection and other hedging agreements contemplated by the       
Amended Credit Agreement and (iii) payments of principal of and interest on the 
Senior Notes and the Exchange Notes and all other obligations of the Company    
under the Indenture and the Senior Notes and the Exchange Notes (items (i), (ii)
and (iii) above, together with certain expenses of, and amounts paid by, the    
Collateral Agent or any secured creditor, are hereinafter referred to as the    
"Obligations").                                                                 

    Enforcement of Collateral Provisions. The Amended Collateral Documents may
be enforced only by the Collateral Agent, in each case acting upon instructions 
from the "Required Secured Creditors", which is defined to mean the "Required   
Banks", which, in turn, is defined to mean the lenders holding a majority of the
obligations (or of all the obligations in certain cases) under the Amended      
Credit Agreement. Because the holders of the Senior Notes are not included in   
the definition of "Required Secured Creditors", neither the holders of the      
Senior Notes nor the Trustee under the Indenture relating to the Senior Notes   
will have the ability to enforce the provisions of any of the Amended Collateral
Documents.                                                                      

     Generally, upon an acceleration of the obligations under the Amended Credit
Agreement, an acceleration of indebtedness under third-party debt agreements in 
excess of $10 million, a voluntary, involuntary or court-declared bankruptcy or 
certain other events, in each case as set forth in the Amended Credit Agreement,
or upon an Event of Default under the Indenture, the Required Secured Creditors 
may direct the Collateral Agent to                                              
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enforce the provisions of the Amended Collateral Documents. In such an event,   
the Collateral Agent may exercise any of its rights as a secured creditor under 
the Uniform Commercial Code and the Amended Collateral Documents (such as       
foreclosing upon and selling portions of the Collateral and voting the Pledged  
Securities).                                                                    

     The occurrence of an Event of Default under the Indenture will not give the
holders of the Senior Notes or the Trustee under the Indenture relating to the  
Senior Notes the right at any time to direct the Collateral Agent to exercise   
any of its rights or to enforce any provisions under the Amended Collateral     
Documents.                                                                      

   Notwithstanding the foregoing, in the event that (i) the principal of any
secured Obligations has been accelerated or the final maturity thereof has      
occurred and there exists a payment Event of Default where the aggregate        
principal amount of such Obligations is at least $100 million and where such    
payment Event of Default has continued for 90 days and (ii) the Required Secured
Creditors have not directed the Collateral Agent to enforce the provisions of   
any of the Amended Collateral Documents, then a majority of the "Secured        
Creditors" (defined to mean a majority of all the secured Obligations, including
the Senior Notes) may cause the Collateral Agent to enforce such provisions. The
Required Secured Creditors, however, would continue to have the right to direct 
the manner and method of such enforcement.                                      

Upon the occurrence of an event of default under the Amended Credit   
Agreement, the Administrative Agent may notify the Company and the Canadian     
Borrower of its election to terminate the Amended Credit Agreement and, upon    
such notice, the obligations of the Company and the Canadian Borrower will be   
accelerated and be immediately due and payable except that, upon the occurrence 
of certain bankruptcy-related events of default, such termination and           
acceleration will be deemed to occur immediately without notice. Upon such      
acceleration, in addition to such other rights as are permitted by the Amended  
Credit Agreement or by law, the Collateral Agent has the right to enforce all of
the liens and security interests created pursuant to the Amended Credit         
Agreement and the Amended Collateral Documents.                                 

    Application of Proceeds. All moneys collected by the Collateral Agent upon
any sale or other disposition of the Collateral shall be applied as follows:    

 (i) first, to the payment of all amounts owing to the Collateral Agent;

    (ii) second, to the payment of the "Primary Obligations," which is defined
   to include all of (i) the obligations under the Amended Credit Agreement,
     (ii) the Senior Notes and (iii) the obligations in connection with interest
  rate protection and other hedging agreements contemplated by the Amended
Credit Agreement;                                                     

(iii) third, to the payment of the "Secondary Obligations," which is  
 defined to mean all Obligations other than the Primary Obligations; and

(iv) fourth, to the Company or its subsidiaries, as the case may be.  

 All actions required or permitted to be taken by the Senior Noteholders
will be taken only by the Trustee as directed by the Senior Noteholders and all 
payments required to be made with respect to the Senior Notes will be paid to   
the Trustee on behalf of the Senior Noteholders.                                

    Amendments and Waivers. The Amended Collateral Documents may be amended or
waived by the Required Banks; provided that any change, waiver or modification  
materially adversely affecting the rights and benefits of a single "Class" of   
secured creditors (and not all secured creditors in a like or similar manner)   
will require the written consent of the "Requisite Class Creditors" of such     
Class, which is defined to mean a majority of such affected Class; provided     
further that any Class will not be considered to be affected differently from   
any other Class due to the Obligations of any such other Class being paid,      
repaid, refinanced, renewed or extended and the Collateral being released, in   
whole or in part (whether by action of such other Class or otherwise), as       
security for such Class and such other Class. Each of the lenders under the     
Amended Credit Agreement, the interest rate protection creditors and the holders
of the Senior Notes will constitute a separate Class.                           

    Notwithstanding the foregoing, the Required Banks may at any time agree to
amendments to the Amended Collateral Documents in order to, among other things, 
(i) secure additional extensions of credit or (ii) add                          

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additional Secured Creditors to a specified Class, in each case, without the    
consent of the other Secured Creditors.                                         

 Release of Collateral.  Pursuant to the terms of the Amended Collateral
Documents, any Collateral representing less than all or substantially all of the
Collateral may be released upon the direction of the Required Banks, which in   
this context means Lenders representing holders of a majority of the Obligations
under the Amended Credit Agreement. The approval of all the Lenders under the   
Amended Credit Agreement is required for releases of all or substantially all of
the Collateral, except as set forth in the following paragraph. Upon such       
direction by the applicable Required Banks, the applicable Collateral will be   
released whether or not the Senior Notes remain outstanding and without regard  
to the ratings of the Company's Rated Indebtedness. Notwithstanding the         
foregoing, in the event the Trustee notifies the Collateral Agent in writing    
that the Senior Notes have been accelerated, the Collateral Agent will not      
release any Collateral or terminate any Amended Collateral Documents, except    
with the prior written consent of the holders of the Senior Notes holding a     
majority of the then-outstanding Senior Notes.                                  

     In addition, all Collateral under the Amended Collateral Documents shall be
automatically released and all such Amended Collateral Documents shall be       
terminated and of no further force or effect at such time as (x) no default or  
event of default under the Amended Credit Agreement is in existence and (y) the 
Company has then outstanding Rated Indebtedness which is at such time rated at  
least BBB- by Standard & Poor's and Baa3 by Moody's; provided that the Rated    
Indebtedness described above shall be required to be unsecured or, if secured,  
both Standard & Poor's and Moody's shall have stated to the Company and the     
Administrative Agent in writing that, assuming that neither the Amended Credit  
Agreement nor the Senior Notes were secured, the long-term unsecured Debt       
pursuant to the Amended Credit Agreement and the Senior Notes would be rated at 
least BBB-by Standard & Poor's and Baa3 by Moody's at such time; provided       
further that such release shall not be effected until the tenth Business Day    
after the Company delivers to the Administrative Agent written notice of the    
attainment of such rating and, if required, a copy of the written statements    
specified above. Notwithstanding anything to the contrary contained in the      
immediately preceding sentence or the proviso thereto, if the Company at any    
time requests in writing that the Administrative Agent cause the release of all 
Collateral under all the Amended Collateral Documents and establishes to the    
satisfaction of the Administrative Agent that (x) no default or event of default
under the Amended Credit Agreement is in existence (and no default or event of  
default shall be in existence after the release described below) and (y) at the 
time of the release of all Collateral under all the Amended Collateral Documents
(and after giving effect thereto), the Company's Rated Indebtedness (which shall
be unsecured Debt after the release of Collateral contemplated by this          
paragraph, and shall include the Debt under the Amended Credit Agreement and the
Senior Notes, to the extent then outstanding) shall be rated at least BBB-by    
Standard & Poor's and Baa3 by Moody's (and the Company shall have furnished to  
the Administrative Agent a written statement from each of Standard & Poor's and 
Moody's to the effect that, if neither the Amended Credit Agreement nor the     
Senior Notes were secured, the long term unsecured Debt pursuant to the Amended 
Credit Agreement and the Senior Notes would be rated at least BBB- by Standard &
Poor's and Baa3 by Moody's at such time), then all Collateral under all the     
Amended Collateral Documents shall be released and all such Amended Collateral  
Documents shall be terminated and of no further force or effect.                

Upon the disposition of Holley, Holley was released under the Amended 
Credit Agreement and the Indenture as a Subsidiary Guarantor and its assets and 
its capital stock was released under the Amended Collateral Documents as        
security for borrowings under the Amended Credit Agreement and the Senior Notes.
See "Prospectus Summary -- Recent Development".                                 

  Termination.  Each of the Amended Collateral Documents will terminate on
the date on which all Obligations under the Amended Credit Agreement have been  
paid. In addition, the Amended Collateral Documents may be terminated upon the  
direction of the Required Banks, which in this context means Lenders            
representing all the Obligations under the Amended Credit Agreement. Upon such  
termination of the Amended Collateral Documents, the Collateral will be released
whether or not the Senior Notes remain outstanding.                             

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COVENANTS                                                                   

The Amended Credit Agreement includes certain financial covenants that
require the Company to maintain (i) a ratio of Consolidated Current Assets to   
Consolidated Current Liabilities at all times of greater than 1.25 to 1.0, (ii) 
an Interest Coverage Ratio for any period of four consecutive fiscal quarters of
greater than 3.0 to 1.0, (iii) a Leverage Ratio at all times prior to and       
including June 30, 1998 of less than 4.25 to 1.0, from July 1, 1998 to and      
including December 31, 1999 of less than 3.75 to 1.0, and thereafter of less    
than 3.25 to 1.0. The Company has also agreed that the Company and its          
subsidiaries will not make capital expenditures which in the aggregate exceed   
$90 million for the fiscal year ending December 31, 1997, $75 million for the   
fiscal year ending December 31, 1998, $65 million for each of the fiscal years  
ending December 31, 1999 and December 31, 2000, and $70 million for the fiscal  
year ending December 31, 2001.                                                  

The Amended Credit Agreement also includes covenants that prohibit the
Company and its subsidiaries from, among other things and subject to certain    
exceptions, (i) incurring certain liens on the property and assets of the       
Company and its subsidiaries, (ii) winding up, liquidating or dissolving its    
affairs or entering into any transaction of merger or consolidation, or         
conveying, selling, leasing or otherwise disposing of property or assets, (iii) 
authorizing, declaring or paying any dividends (other than, among other things, 
distributions on the Common Stock or Convertible Preferred Securities) or       
repurchasing Common Stock or Convertible Preferred Securities, except, in any   
fiscal year, subject to certain limitations, the Company may pay dividends or   
repurchase Common Stock or Convertible Preferred Securities in an amount equal  
to the greater of $7.5 million or 30% of Consolidated Net Income for the        
preceding fiscal year, (iv) incurring Debt, other than Debt outstanding under   
the Amended Credit Agreement and certain other existing Debt, accrued expenses, 
the Senior Notes, the TIDES Debentures, Debt incurred to pay all or a portion of
the purchase price of equipment or machinery secured by liens placed upon       
equipment or machinery used in the ordinary course of the business of the       
Company, Debt incurred with respect to certain lease obligations, Debt under    
interest rate protection agreements, certain permitted acquired Debt, Debt of   
foreign subsidiaries of the Company not to exceed $100 million, and other Debt  
not otherwise permitted under the Amended Credit Agreement up to the aggregate  
amount of $100 million, (v) lending money or extending credit or making advances
to any person or purchasing or acquiring any stock, obligations or securities of
any person, (vi) entering into transactions with affiliates, except in the      
ordinary course of business and on terms and conditions substantially as        
favorable to the Company or such subsidiary as would be obtainable in a         
comparable arm's-length transaction with an unaffiliated entity, (vii) prepaying
or redeeming the Senior Notes in an amount greater than $100 million, (viii)    
restricting the ability of its subsidiaries to pay dividends or other           
distributions on its capital stock, make loans or advances to the Company or    
other subsidiaries or transfer assets to the Company, (ix) making certain       
issuances of capital stock or securities convertible into or exercisable for    
capital stock and (x) certain other restrictions.                               

CERTAIN DEFINITIONS                                                         

  "Backstopped Letters of Credit" means certain existing Letters of Credit
described in the Amended Credit Agreement with respect to which standby Letters 
of Credit serve as support for the reimbursement obligations of the Company and 
its subsidiaries to the issuers of such Backstopped Letters of Credit.          

    "Capitalized Lease Obligations" of any person means all rental obligations
which, under generally accepted accounting principles, are or will be required  
to be capitalized on the books of such person, in each case taken at the amount 
thereof accounted for as indebtedness in accordance with such principles.       

    "Consolidated Current Assets" means the consolidated current assets of the
Company and its subsidiaries plus the Total Unutilized Commitment less the      
aggregate amount of Non-Facility Letter of Credit Outstandings at such time.    

"Consolidated Current Liabilities" means the consolidated current     
liabilities of the Company and its subsidiaries, but excluding the current      
portion of any long-term Debt which would otherwise be included therein.        

   "Consolidated EBITDA" means for any period Consolidated EBIT, adjusted by
adding thereto the amount of all amortization of intangibles and depreciation   
that were deducted in arriving at Consolidated EBIT for such period.            

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     "Consolidated EBIT" means for any period the consolidated net income of the
Company and its subsidiaries before interest income, consolidated interest      
expense and provision for taxes and without giving effect to any extraordinary  
gains or gains from sales of assets other than inventory sold in the ordinary   
course of business (determined after taking into account losses from sales of   
such assets).                                                                   

  "Credit Documents" means the Amended Credit Agreement, and all documents
executed in connection therewith, including each of the promissory notes        
required to be executed by the Company, any subsidiary of the Company or the    
Canadian Borrower under the Amended Credit Agreement, the Credit Guarantees and 
each Security Document.                                                         

   "Debt" means, as to any person, without duplication, (i) all indebtedness
(including principal, interest, fees and charges) of such person for borrowed   
money or for the deferred purchase price of property or services (other than    
trade payables incurred in the ordinary course of business), (ii) the maximum   
amount available to be drawn under all letters of credit (excluding Backstopped 
Letters of Credit so long as (x) fully supported by one or more Letters of      
Credit issued under the Amended Credit Agreement and (y) no unreimbursed drawing
has been made under the respective Backstopped Letter of Credit) issued for the 
account of such person and with respect to which such person has a reimbursement
obligation and all unpaid drawings in respect of such letters of credit, (iii)  
all Debt of the types described in clause (i) (other than certain trade         
payables), (ii), (iv), (v), (vi) or (vii) secured by liens on property of such  
person, (iv) all Capitalized Lease Obligations of such person, (v) all          
obligations of such person to pay a specified purchase price for goods or       
services, whether or not delivered or accepted, i.e., take-or-pay and similar   
obligations, (vi) all contingent obligations of such persons and (vii) all      
obligations under any interest rate protection or other hedging agreement or    
under any similar type of agreement entered into with a person not a Lender;    
provided that the aggregate outstanding amount of any Debt described in clause  
(iii) above shall equal the lesser of (x) the aggregate outstanding amount of   
all Debt secured by such lien and (y) the fair market value of all property     
subject to such lien; provided further that on and after the date on which any  
other Debt for borrowed money (the "Defeased Debt") shall have been permanently 
defeased or otherwise satisfied and discharged in the manner provided in the    
documentation governing such Defeased Debt, and so long as the Company and its  
subsidiaries are permanently relieved as a result thereof of all monetary       
obligations, and obligations to comply with covenants, with respect thereto     
(which defeasances, satisfactions and discharges are subject to the limitations 
set forth in the Amended Credit Agreement), such Defeased Debt shall not be     
considered outstanding Debt for purposes of the Amended Credit Agreement.       

  "Interest Coverage Ratio" means for any period the ratio of Consolidated
EBITDA for such period to consolidated interest expense for such period.        

"Letter of Credit Outstandings" means, at any time, the sum of (i) the
aggregated stated amount of all then outstanding Letters of Credit and (ii) the 
aggregate amount of all unpaid drawings at such time.                           

"Leverage Ratio" means, at any date of determination, the ratio of (i)
consolidated indebtedness on such date to (ii) Consolidated EBITDA for the      
period of four consecutive quarters most recently ended on or prior to such     
date, in each case taken as one accounting period.                              

"Moody's" means Moody's Investors Service, Inc.                       

  "Non-Facility Letters of Credit" means each letter of credit (other than
any Letter of Credit issued pursuant to the Amended Credit Agreement) issued for
the account of the Company and its subsidiaries.                                

     "Rated Indebtedness" means long-term unsecured Debt of the Company which is
rated by both Standard & Poor's and Moody's, or if no such Debt of the Company  
shall be rated, Debt under the Amended Credit Agreement or Debt of the Company  
which is equally and ratably secured with Debt under the Amended Credit         
Agreement, to the extent such Debt shall be rated by either Standard & Poor's or
Moody's.                                                                        

    "Security Documents" means each pledge agreement, each security agreement,
each mortgage and each additional security document.                            

  "Standard & Poor's" means Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc.                                                 

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  "Total Unutilized Commitment" means, at any time, an amount equal to the
remainder of (x) the then Total Commitment, less (y) the sum of (I) the         
aggregate principal amount of revolving borrowings then outstanding plus (II)   
the then aggregate amount of Letter of Credit Outstandings.                     

OTHER INDEBTEDNESS                                                              

     As of December 31, 1997, the Company had outstanding $7.5 million of 9 3/4%
senior notes due 1999, $7.4 million of 9 3/4% senior notes due 2000 and $48.8   
million of other indebtedness due between 1998 and 2010. In 1996, the Company   
conducted a tender offer and consent solicitation for the 9 3/4% senior notes   
due 1999 and 9 3/4% senior notes due 2000, pursuant to which all restrictive    
covenants were removed and all notes other than the amounts set forth in the    
preceding sentence were repurchased.                                            

UNITED STATES TAXATION
GENERAL                                                                         

   The following is a general discussion of the material U.S. Federal income
tax consequences of a holder's rights under the Registration Rights Agreement.  
This discussion assumes that a holder of Senior Notes will hold such Senior     
Notes as capital assets within the meaning of Section 1221 of the Internal      
Revenue Code of 1986, as amended (the "Code"). This discussion does not deal    
with all U.S. Federal income tax consequences that may be relevant to particular
investors in light of their personal investment circumstances, including persons
holding Senior Notes as part of a conversion or constructive sale transaction or
as part of a hedge or hedging transaction, or as a position in a straddle for   
tax purposes, nor does it discuss U.S. Federal income tax consequences          
applicable to certain types of investors subject to special treatment under U.S.
Federal income tax laws, including insurance companies, tax-exempt              
organizations, financial institutions or broker-dealers, persons that have a    
functional currency other than the U.S. dollar, investors in pass-through       
entities and foreign persons, including foreign corporations, partnerships and  
individuals. In addition, this discussion does not consider the effect of any   
foreign, state, local, gift, estate or other tax laws that may be applicable to 
a particular investor.                                                          

This discussion is based upon current provisions of the Code, Treasury
regulations promulgated thereunder, administrative rulings and pronouncements of
the Internal Revenue Service ("IRS") and judicial decisions currently in effect,
all of which are subject to change, possibly with retroactive effect. The       
Company has not and will not seek any rulings or opinions from the IRS with     
respect to the matters discussed herein, and as a result, there can be no       
assurance that the IRS will not disagree with or challenge any of the           
conclusions set forth in this discussion.                                       

EXCHANGE OFFER                                                                  

    The Company will be required to pay additional cash interest on the Senior
Notes if it fails to comply with certain of its obligations under the           
Registration Rights Agreement. Such additional interest should be taxable to a  
holder as ordinary interest income at the time it accrues or is received in     
accordance with each such holder's usual method of tax accounting. It is        
possible, however, that the IRS may take a different position, in which case    
holders might be required to include such additional interest in income as it   
accrues or becomes fixed (regardless of their usual method of tax accounting).  

The exchange of Outstanding Notes for Exchange Notes pursuant to the  
Exchange Offer will not constitute a taxable event for U.S. Federal income tax  
purposes. As a result, (i) a holder of Outstanding Notes will not recognize     
taxable gain or loss as a result of the exchange of Outstanding Notes for       
Exchange Notes pursuant to the Exchange Offer, (ii) the holding period of the   
Exchange Notes will include the holding period of the Outstanding Notes         
surrendered in exchange therefor and (iii) a holder's adjusted tax basis in the 
Exchange Notes will be the same as such holder's adjusted tax basis in the      
Outstanding Notes immediately prior to the surrender of such Outstanding Notes  
pursuant to the Exchange Offer.                                                 

UNITED STATES ALIEN HOLDERS OF NOTES                                            

For purposes of this discussion, a "United States Alien Holder" is any
beneficial owner of a Senior Note that is a corporation, individual,            
partnership, estate or trust that is, as to the United States, a foreign        
corporation, a non-resident alien individual, a foreign partnership or a        
nonresident fiduciary of a foreign estate or trust.                             

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    Under present United States Federal income and estate tax law, and subject
to the discussion below concerning backup withholding:                          

     (a) payment of principal and interest on the Senior Notes by the Company or
any paying agent to any United States Alien Holder will not be subject to United
States Federal withholding tax, provided that, in the case of interest, (i) such
Holder does not own, actually or constructively, ten percent or more of the     
total combined voting power of all classes of stock of the Company entitled to  
vote, is not a controlled foreign corporation related, directly or indirectly,  
to the Company through stock ownership, and is not a bank receiving interest    
described in Section 881(c)(3)(A) of the Code and (ii) either (A) the beneficial
owner of the Senior Note certifies to the Company or its agent, under penalties 
of perjury, that it is not a United States holder and provides its name and     
address or (B) a securities clearing organization, bank or other financial      
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution"), and holds the Senior Notes in such     
capacity, certifies to the Company or its agent, under penalties of perjury,    
that such statement has been received from the beneficial owner by it or by a   
Financial Institution between it and the beneficial owner and furnishes the     
Company or its agent with a copy thereof.                                       

  (b) a United States Alien Holder of a Senior Note will not be subject to
United States Federal income tax on gain realized on the sale, exchange or other
disposition of such Senior Note unless (i) subject to certain exceptions, such  
Holder is an individual who is present in the United States for 183 days or more
during the taxable year of disposition and certain other requirements are met;  
(ii) such gain is effectively connected with the conduct by such Holder of a    
trade or business in the United States; or (iii) the United States Alien Holder 
is subject to tax pursuant to the provisions of the Code applicable to certain  
former citizens and residents of the United States; and                         

   (c) a Senior Note or coupon held by an individual who is not a citizen or
resident of the United States at the time of his death will not be subject to   
United States Federal estate tax as a result of such individual's death,        
provided that the individual does not own, actually or constructively, ten      
percent or more of the total combined voting power of all classes of stock of   
the Company entitled to vote and, at the time of the individual's death,        
payments with respect to such Senior Note would not have been effectively       
connected to the conduct by such individual of a trade or business in the United
States.                                                                         

  If a United States Alien Holder is engaged in a trade or business in the
United States and interest paid with respect to the Notes is effectively        
connected with the conduct of such trade or business, the United States Alien   
Holder, although exempt from the withholding tax discussed in clause (a) above, 
will be subject to United States federal income tax on such interest on a net   
income basis in the same manner as if it were a United States person. In        
addition, if such United States Alien Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected       
earnings and profits for the taxable year, subject to adjustments.              

INFORMATION REPORTING AND BACKUP WITHHOLDING                                    

  Annual information reporting will apply to interest income on the Senior
Notes and payments made on, and proceeds from the sale of, the Senior Notes may 
be subject to a backup withholding tax of 31% unless the holder complies with   
certain identification requirements. Any amounts withheld from payment to a     
United States Alien Holder under the backup withholding rules will be allowed as
a credit against such Holder's United States Federal income tax liability and   
may entitle such Holder to a refund, provided that the required information is  
furnished to the United States Internal Revenue Service.                        

     PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF   
THE SENIOR NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN
TAX LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS.                          

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PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Notes for its own account   
pursuant to the Exchange Offer must acknowledge that it will deliver a          
prospectus in connection with any resale of such Exchange Notes. This           
Prospectus, as it may be amended or supplemented from time to time, may be used 
by a broker-dealer in connection with resales of Exchange Notes received in     
exchange for Outstanding Notes where such Outstanding Notes were acquired as a  
result of market-making activities or other trading activities. The Company has 
agreed that, for a period of 180 days after the Expiration Date, it will make   
this prospectus, as amended or supplemented, available to any broker-dealer for 
use in connection with any such resale.                                         

   The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own      
account pursuant to the Exchange Offer may be sold from time to time in one or  
more transactions in the over-the-counter market, in negotiated transactions,   
through the writing of options on the Exchange Notes or a combination of such   
methods of resale, at market prices prevailing at the time of resale, at prices 
related to such prevailing market prices or negotiated prices. Any such resale  
may be made directly to purchasers or to or through brokers or dealers who may  
receive compensation in the form of commissions or concessions from any such    
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer   
that resells Exchange Notes that were received by it for its own account        
pursuant to the Exchange Offer and any broker or dealer that participates in a  
distribution of such Exchange Notes may be deemed to be an "underwriter" within 
the meaning of the Securities Act and any profit on any such resale of Exchange 
Notes and any commission or concessions received by any such persons may be     
deemed to be underwriting compensation under the Securities Act. The Letter of  
Transmittal states that, by acknowledging that it will deliver and delivering a 
prospectus, a broker-dealer will not be deemed to admit that it is an           
"underwriter" within the meaning of the Securities Act.                         

For a period of 180 days after the Expiration Date, the Company will  
promptly send additional copies of this Prospectus and any amendment or         
supplement to this Prospectus to any broker-dealer that requests such documents 
in the Letter of Transmittal. The Company has agreed to pay all expenses        
incident to the Exchange Offer other than commissions or concessions of any     
brokers or dealers and will indemnify the Holders of the Senior Notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.                                                                 

LEGAL MATTERS 

     Certain legal matters with respect to the issuance and sale of the Exchange
Notes offered hereby will be passed upon for the Company by Robert J. Tubbs,    
Executive Vice President, General Counsel and Secretary of the Company.         

INDEPENDENT PUBLIC ACCOUNTANTS

     The consolidated financial statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as stated in    
their report with respect thereto, and is included herein.                      

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
Consolidated Statements of Earnings for the Three Months          
  Ended March 29, 1998 and March 30, 1997 (unaudited).......  F-2 
Consolidated Balance Sheets at March 29, 1998 and December        
  31, 1997 (unaudited)......................................  F-3 
Consolidated Statements of Cash Flows for the Three Months        
  Ended March 29, 1998 and March 30, 1997 (unaudited).......  F-4 
Consolidated Statements of Comprehensive Income for the           
  Three Months Ended March 29, 1998 and March 30, 1997            
  (unaudited)...............................................  F-5 
Notes to Consolidated Financial Statements (unaudited)......  F-6 
Report of Independent Public Accountants....................  F-14
Consolidated Statements of Earnings for Years Ended December      
  31, 1997, 1996 and 1995...................................  F-15
Consolidated Balance Sheets at December 31, 1997 and 1996...  F-16
Consolidated Statements of Cash Flows for the Years Ended         
  December 31, 1997, 1996 and 1995..........................  F-17
Consolidated Statements of Shareholders' Equity for the           
  Years Ended December 31, 1997, 1996 and 1995..............  F-18
Consolidated Statements of Comprehensive Income for the           
  Years Ended December 31, 1997, 1996 and 1995..............  F-19
Notes to Consolidated Financial Statements..................  F-20

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COLTEC INDUSTRIES INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS 

(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                 THREE MONTHS ENDED    
                                                             --------------------------
                                                              MARCH 29,      MARCH 30, 
                                                                1998           1997    
                                                             -----------    -----------
                                                             (IN THOUSANDS, EXCEPT PER 
                                                                    SHARE DATA)        
                                                                                       
Net sales...................................................   $374,441       $309,172 
Cost of sales...............................................    260,148        211,675 
                                                               --------       -------- 
Gross profit................................................    114,293         97,497 
Selling and administrative..................................     60,999         52,569 
                                                               --------       -------- 
Operating income............................................     53,294         44,928 
Interest expense and other, net.............................     15,080         12,364 
                                                               --------       -------- 
Earnings before income taxes................................     38,214         32,564 
Income taxes................................................     12,993         11,072 
                                                               --------       -------- 
Net earnings................................................   $ 25,221       $ 21,492 
                                                               ========       ======== 
Basic earnings per common share.............................   $    .38       $    .32 
                                                               ========       ======== 
Basic weighted-average common shares........................     65,881         66,786 
                                                               ========       ======== 
Diluted earnings per common share...........................   $    .38       $    .32 
                                                               ========       ======== 
Diluted weighted-average common and common equivalent                                  
  shares....................................................     67,137         67,731 
                                                               ========       ======== 

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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COLTEC INDUSTRIES INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                              MARCH 29,     DEC. 31,  
                                                                 1998         1997    
                                                              ----------    --------- 
                                                                  (IN THOUSANDS)      
                                                                                      
ASSETS                                                                                
CURRENT ASSETS:                                                                       
Cash and cash equivalents...................................  $   21,075    $  14,693 
Accounts and notes receivable, net of allowance of $4,319 in                          
  1998 and $2,894 in 1997...................................     151,935      120,311 
Inventories                                                                           
Finished goods..............................................      49,506       53,748 
Work in process and finished parts..........................     179,678      158,937 
Raw materials and supplies..................................      43,978       44,051 
                                                              ----------    --------- 
                                                                 273,162      256,736 
Deferred income taxes.......................................      17,171       15,195 
Other current assets........................................      17,412       20,508 
                                                              ----------    --------- 
     Total current assets...................................     480,755      427,443 
Property, plant and equipment, net..........................     304,271      287,619 
Costs in excess of net assets acquired, net.................     210,528      157,751 
Other assets................................................      80,527       60,221 
                                                              ----------    --------- 
                                                              $1,076,081    $ 933,034 
                                                              ==========    ========= 
LIABILITIES AND SHAREHOLDERS' EQUITY                                                  
CURRENT LIABILITIES:                                                                  
Current portion of long-term debt...........................  $    4,184    $   1,811 
Accounts payable............................................      99,124       93,799 
Accrued expenses............................................     144,012      138,969 
Current portion of liabilities of discontinued operations...       4,999        4,999 
                                                              ----------    --------- 
     Total current liabilities..............................     252,317      239,578 
Long-term debt..............................................     855,854      757,578 
Deferred income taxes.......................................      87,221       79,229 
Other liabilities...........................................      64,260       60,892 
Liabilities of discontinued operations......................     151,657      154,918 
Commitments and contingencies...............................          --           -- 
SHAREHOLDERS' EQUITY:                                                                 
Preferred stock, $.01 par value, 2,500,000 shares                                     
  authorized, shares outstanding -- none....................          --           -- 
Common stock, $.01 par value, 100,000,000 shares authorized,                          
  70,517,363 and 70,501,948 shares issued at March 29, 1998                           
  and December 31, 1997, respectively (excluding 25,000,000                           
  shares held by a wholly owned subsidiary).................         705          705 
Capital surplus.............................................     641,815      642,828 
Retained deficit............................................    (886,808)    (912,029)
Unearned compensation.......................................      (2,699)      (2,721)
Minimum pension liability...................................      (1,646)      (1,646)
Foreign currency translation adjustments....................      (9,150)      (6,745)
                                                              ----------    --------- 
                                                                (257,783)    (279,608)
Less cost of 4,542,709 and 4,666,406 shares of common stock                           
  in treasury at March 29, 1998 and December 31, 1997,                                
  respectively..............................................     (77,445)     (79,553)
                                                              ----------    --------- 
                                                                (335,228)    (359,161)
                                                              ----------    --------- 
                                                              $1,076,081    $ 933,034 
                                                              ==========    ========= 

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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COLTEC INDUSTRIES INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(UNAUDITED) 

                                                                [Download Table]

                                                               THREE MONTHS ENDED  
                                                             ----------------------
                                                             MARCH 29,    MARCH 30,
                                                               1998         1997   
                                                             ---------    ---------
                                                                 (IN THOUSANDS)    
                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES:                                              
Net earnings................................................ $ 25,221     $ 21,492 
Adjustments to reconcile net earnings to cash provided by                          
  operating activities:                                                            
  Depreciation and amortization.............................   12,416        8,511 
  Deferred income taxes.....................................    6,016        5,536 
  Payments of liabilities of discontinued operations........   (3,261)     (10,750)
  Other operating items.....................................   (1,525)     (10,321)
  Changes in assets and liabilities:                                               
     Accounts and notes receivable..........................  (18,969)      (5,040)
     Inventories............................................   (9,184)      (6,339)
     Other current assets...................................    3,748       (3,700)
     Accounts payable.......................................      178       12,995 
     Accrued expenses.......................................     (176)          56 
     Accrued pension liability..............................   (4,359)         288 
                                                             --------     -------- 
  Cash provided by operating activities.....................   10,105       12,728 
                                                             --------     -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                              
Capital expenditures........................................  (15,005)     (13,554)
Acquisition of businesses...................................  (81,312)          -- 
                                                             --------     -------- 
  Cash used in investing activities.........................  (96,317)     (13,554)
                                                             --------     -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                              
Increase in revolving facility, net.........................  110,500       14,000 
Purchase of treasury stock..................................       --      (17,419)
Repayment of long-term debt.................................  (14,035)      (2,971)
Payments for unclaimed stock................................   (3,871)          -- 
                                                             --------     -------- 
  Cash provided by (used in) financing activities...........   92,594       (6,390)
                                                             --------     -------- 
Increase (decrease) in cash and cash equivalents............    6,382       (7,216)
Cash and cash equivalents -- beginning of period............   14,693       15,029 
                                                             --------     -------- 
Cash and cash equivalents -- end of period.................. $ 21,075     $  7,813 
                                                             ========     ======== 
Supplemental cash flow data:                                                       
  Cash paid for interest.................................... $ 12,409     $ 11,024 
  Cash paid (refunded) for income taxes.....................    4,990      (11,140)

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(UNAUDITED) 

                                                                [Download Table]

                                                               THREE MONTHS ENDED  
                                                             ----------------------
                                                             MARCH 29,    MARCH 30,
                                                               1998         1997   
                                                             ---------    ---------
                                                                 (IN THOUSANDS)    
                                                                                   
Net earnings................................................  $25,221      $21,492 
                                                              -------      ------- 
Other comprehensive income/(loss), net of tax:                                     
  Foreign currency translation adjustments..................   (2,405)      (1,100)
  Unearned compensation.....................................       22         (692)
                                                              -------      ------- 
     Other comprehensive income/(loss), net of tax..........   (2,383)      (1,792)
                                                              -------      ------- 
Comprehensive income........................................  $22,838      $19,700 
                                                              =======      ======= 

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

1.   SUMMARY OF ACCOUNTING POLICIES                                             

Financial Information:                                                      
    The unaudited consolidated financial statements included herein reflect in
the opinion of management of Coltec Industries Inc (the Company) all normal     
recurring adjustments necessary to present fairly the consolidated financial    
position and results of operations for the periods indicated. The unaudited     
consolidated financial statements have been prepared in accordance with the     
instructions to Form 10-Q and do not include all of the information and         
footnotes required by generally accepted accounting principles for complete     
financial statements. The Consolidated Balance Sheet as of December 31, 1997 has
been extracted from the audited consolidated financial statements as of that    
date. For further information, refer to the audited consolidated financial      
statements and footnotes of the Company included elsewhere herein.              

2.   ACQUISITIONS                                                               

     On January 30, 1998, the Company acquired certain Marine and Petroleum Mfg.
Inc.'s manufacturing facilities based in Texas for approximately $17,000. The   
plants acquired produce flexible graphite and polytetrafluoroethylene (PTFE)    
fluid sealing products used in the petrochemical industry. Combined annual sales
for these facilities are expected to approximate $18,000. The Company also      
acquired Tex-o-Lon and Repro-Lon for approximately $25,000. These two Texas     
businesses have combined annual sales of $15,000. Tex-o-Lon manufactures,       
machines and distributes PTFE products, primarily for the semiconductor         
industry. Repro-Lon reprocesses PTFE compounds for the chemical and             
semiconductor industries. The acquisitions were accounted for as purchases;     
accordingly, the purchase price, which was financed through available cash      
resources, was allocated to the acquired assets based upon their fair market    
values.                                                                         

   On February 2, 1998, the Company purchased the Sealing Division of Groupe
Carbone Lorraine for $45,600. This division, with facilities in France and South
Carolina, produces high-technology metallic gaskets used in the nuclear,        
petroleum and chemical industries. Sales are expected to approximate $38,000.   
This acquisition was accounted for as a purchase and the purchase price, also   
financed through available cash resources, was allocated to the acquired assets 
based upon their fair market values.                                            

3.   EARNINGS PER SHARE                                                         

  In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share, effective December 15, 1997. The Company's  
reported earnings per common share for the three months ended March 30, 1997    
equaled diluted earnings per share as set forth in SFAS No. 128. As a result,   
the Company's reported earnings per share for three months ended March 30, 1997 
were not restated.                                                              

   Basic earnings per common share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the year.  

   Diluted earnings per common share is computed by using the treasury stock
method to determine shares related to stock options and restricted stock.       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

                                                                [Download Table]

                                                           THREE MONTHS ENDED  
                                                         ----------------------
                                                         MARCH 29,    MARCH 30,
                                                           1998         1997   
                                                         ---------    ---------
                                                             (IN THOUSANDS)    
                                                         ----------------------
                                                                               
Weighted-average common shares.........................   65,881       66,786  
Stock options and restricted stock issued..............    1,256          945  
                                                          ------       ------  
Diluted weighted-average common and common equivalent                          
  shares...............................................   67,137       67,731  
                                                          ======       ======  

4.   COMMITMENTS AND CONTINGENCIES                                              

The Company and certain of its subsidiaries are defendants in various 
lawsuits, including actions involving asbestos-containing products and certain  
environmental proceedings.                                                      

     With respect to asbestos product liability and related litigation costs, as
of March 29, 1998 two subsidiaries of the Company were among a number of        
defendants (typically 15 to 40) in approximately 106,000 actions (including     
approximately 2,400 actions in advanced stages of processing) filed in various  
states by plaintiffs alleging injury or death as a result of exposure to        
asbestos fibers. During the first three months of 1998, two subsidiaries of the 
Company received approximately 11,000 new actions compared to approximately     
7,300 new actions received during the first three months of 1997. Through March 
29, 1998, approximately 214,000 of the approximately 320,000 total actions      
brought have been settled or otherwise disposed of.                             

  The damages claimed for personal injury or death vary from case to case,
and in many cases plaintiffs seek $1,000 or more in compensatory damages and    
$2,000 or more in punitive damages. Although the law in each state differs to   
some extent, it appears, based on advice of counsel, that liability for         
compensatory damages would be shared among all responsible defendants, thus     
limiting the potential monetary impact of such judgments on any individual      
defendant.                                                                      

    Following a decision of the Pennsylvania Supreme Court, in a case in which
neither the Company or any or its subsidiaries were parties, that held insurance
carriers are obligated to cover asbestos-related bodily injury actions if any   
injury or disease process, from first exposure through manifestation, occurred  
during a covered policy period (the "continuous trigger theory of coverage"),   
the Company settled litigation with its primary and most of its first-level     
excess insurance carriers, substantially on the basis of the Court's ruling. The
Company has negotiated a final agreement with most of its excess carriers that  
are in the layers of coverage immediately above its first layer. The Company is 
currently receiving payments pursuant to this agreement. The Company believes   
that, with respect to the remaining carriers, a final agreement can be achieved 
without litigation and on substantially the same basis that it has resolved the 
issues with its other carriers. Settlements are generally made on a group basis 
with payments made to individual claimants over periods of one to four years.   
Payments were made with respect to asbestos liability and related costs         
aggregating $14,901 and $20,191 for the first three months of 1998 and 1997,    
respectively, substantially all of which were covered by insurance. Related to  
payments not covered by insurance, the Company recorded charges to operations   
amounting to $2,000 for the first three months of 1998 and 1997.                

    In accordance with the Company's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or         
settlement, certain outstanding actions have progressed to a stage where the    
Company can reasonably estimate the cost to dispose of these actions. As of     
March 29, 1998, the Company estimates that the aggregate remaining cost of the  
disposition of the settled actions for which payments remain to be made and     
actions in advanced stages of processing, including associated legal costs, is  
approximately $70,636 and the Company expects that this cost will be            
substantially covered by insurance.                                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

     With respect to the 103,600 outstanding actions as of March 29, 1998, which
are in preliminary procedural stages, the Company lacks sufficient information  
upon which judgments can be made as to the validity or ultimate disposition of  
such actions, thereby making it difficult to estimate with reasonable certainty 
the potential liability or costs to the Company. When asbestos actions are      
received, they are typically forwarded to local counsel to ensure that the      
appropriate preliminary procedural response is taken. The complaints typically  
do not contain sufficient information to permit a reasonable evaluation as to   
their merits at the time or receipt, and in jurisdictions encompassing a        
majority of the outstanding actions, the practice has been that little or no    
discovery or other action is taken until several months prior to the date set   
for trial. Accordingly, the Company generally does not have the information     
necessary to analyze the actions in sufficient detail to estimate the ultimate  
liability or costs to the Company, if any, until the actions appear on a trial  
calendar. A determination to seek dismissal, to attempt to settle or proceed to 
trial is typically not made prior to the receipt of such information.           

  It is also difficult to predict the number of asbestos lawsuits that the
Company's subsidiaries will receive in the future. The Company has noted that,  
with respect to recently settled actions in advanced stages of processing, the  
mix of the injuries alleged and the mix of the occupations of the plaintiffs    
have been changing from those traditionally associated with the Company's       
asbestos-related actions. The Company is not able to determine with reasonable  
certainty whether this trend will continue. Based upon the foregoing, and due to
the unique factors inherent in each of the actions, including the nature of the 
disease, the occupation of the plaintiff, the presence or absence of other      
possible causes of a plaintiff's illness, the availability of legal defenses,   
such as the statute of limitations or state of the art, and whether the lawsuit 
is an individual one or part of a group, management is unable to estimate with  
reasonable certainty the cost of disposing of outstanding actions in preliminary
procedural stages or of actions that may be filed in the future. However, the   
Company believes that its subsidiaries are in a favorable position compared to  
many other defendants because, among other things, the asbestos fibers in its   
asbestos-containing products were encapsulated.                                 

Insurance coverage of a small non-operating subsidiary formerly       
distributing asbestos-bearing products is nearly depleted. Considering the      
foregoing, as well as the experience of the Company's subsidiaries and other    
defendants in asbestos litigation, the likely sharing of judgments among        
multiple responsible defendants, and the substantial amount of insurance        
coverage that the Company expects to be available from its solvent carriers, the
Company believes that pending and reasonably anticipated future actions are not 
likely to have a material effect on the Company's consolidated results of       
operations and financial condition. Although the insurance coverage which the   
Company has is substantial, it should be noted that insurance coverage for      
asbestos claims is not available to cover exposures initially occurring on and  
after July 1, 1984. The Company's subsidiaries continue to be named as          
defendants in new cases, some of which allege initial exposure after July 1,    
1984.                                                                           

    In addition to claims for personal injury, the Company's subsidiaries have
been involved in an insignificant number of property damage claims based upon   
asbestos-containing materials found in schools, public facilities and private   
commercial buildings. Based upon proceedings to date, the overwhelming majority 
of these claims have been resolved without a material adverse impact on the     
Company. Likewise, the insignificant number of claims remaining to be resolved  
are not expected to have a material effect on the Company's consolidated results
of operations and financial condition.                                          

The Company has recorded an accrual for its liabilities for           
asbestos-related matters that are deemed probable and can be reasonably         
estimated (settled actions and actions in advanced stages of processing), and   
has separately recorded an asset equal to the amount of such liabilities that is
expected to be recovered by insurance. In addition, the Company has recorded a  
receivable for that portion of payments previously made for asbestos product    
liability actions and related litigation costs that is recoverable from its     
insurance carriers. Liabilities for asbestos-                                   

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COLTEC INDUSTRIES INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

related matters and the receivable from insurance carriers included in the      
Consolidated Balance Sheets are as follows:                                     

                                                                [Download Table]

                                                          MARCH 29,    DEC. 31,
                                                            1998         1997  
                                                          ---------    --------
                                                                               
Accounts and notes receivable...........................   $62,403     $56,039 
Other assets............................................    25,812      16,249 
Accrued expenses........................................    59,173      50,688 
Other liabilities.......................................    11,463       2,682 

  With respect to environmental proceedings, the Company has been notified
that it is among the Potentially Responsible Parties under federal environmental
laws, or similar state laws, relative to the costs of investigating and in some 
cases remediating contamination by hazardous materials at several sites. Such   
laws impose joint and several liability for the costs of investigating and      
remediating properties contaminated by hazardous materials. Liability for these 
costs can be imposed on present and former owners or operators of the properties
or on parties who generated the wastes that contributed to the contamination.   
The Company's policy is to accrue environmental remediation costs when it is    
both probable that a liability has been incurred and the amount can be          
reasonably estimated. The measurement of liability is based on an evaluation of 
currently available facts with respect to each individual situation and takes   
into consideration factors such as existing technology, presently enacted laws  
and regulations and prior experience in remediation of contaminated sites.      
Investigations have been completed for approximately 17 sites and continuing    
investigations are being done at approximately 11 sites. Accruals are provided  
for all sites based on the factors discussed above. As remediation plans are    
written and implemented, estimated costs become more fact-based and less        
judgment-based. As assessments and remediation progress at individual sites,    
these liabilities are reviewed periodically and adjusted to reflect additional  
technical and legal information. While it is often difficult to reasonably      
quantify future environmental-related expenditures, the Company currently       
estimates its future non-capital expenditures related to environmental matters  
to range between $26,000 and $48,000. In connection with these expenditures, the
Company has accrued $31,400 at March 29, 1998, representing management's best   
estimate of probable non-capital environmental expenditures. These non-capital  
expenditures are estimated to be incurred over the next 10 to 20 years. In      
addition, capital expenditures aggregating $5,000 may be required during the    
next two years related to environmental matters. Although the Company is        
pursuing insurance recovery in connection with certain of these matters, no     
receivable has been recorded with respect to any potential recovery of costs in 
connection with any environmental matters.                                      

   As in the case with most other companies, the Company recognizes the need
to ensure its operations will not be adversely impacted by the Year 2000 date   
transition and is faced with the task of addressing related issues. The Company 
is evaluating whether the effect of the Year 2000 transition issues resulting   
from relationships with customers, suppliers and other constituents will have an
impact on the Company's results of operations or financial condition. At March  
29, 1998, the Company estimates that expenditures over the next two years for   
the cost of modifying its existing software for the Year 2000 date transition   
will have an immaterial impact on consolidated operating results.               

5.  SUBSEQUENT EVENTS                                                           

In April 1998, the Company privately placed $300,000 principal amount 
7 1/2% Senior Notes due 2008 (Senior Notes) and $150,000 liquidation value of   
5 1/4% Trust Convertible Preferred Securities. Net proceeds of approximately    
$436,000 from both offerings were used to reduce indebtedness under Coltec's    
credit agreement.                                                               

On May 15, 1998, Coltec completed the previously-announced sale of the
capital stock of its Holley Performance Products subsidiary to Kohlberg & Co.,  
L.L.C., a private merchant banking firm located in Mount                        

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COLTEC INDUSTRIES INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

Kisco, New York, for $100 million in cash. The proceeds of the transaction were 
applied toward reducing debt. In 1997, Holley Performance's revenues were       
approximately $99,000.                                                          

6.  SUPPLEMENTAL GUARANTOR INFORMATION                                          

 Substantially all the Company's subsidiaries incorporated in the United
States (the "Subsidiary Guarantors") have fully and unconditionally guaranteed, 
on a joint and several basis, the Company's obligations to pay principal and    
interest with respect to the Senior Notes. Each Subsidiary Guarantor is wholly  
owned and management has determined that separate financial statements for the  
Subsidiary Guarantors are not material to investors. The subsidiaries of the    
Company that are not Subsidiary Guarantors are referred to in this note as the  
"Non-Guarantor Subsidiaries".                                                   

 The following supplemental consolidating condensed financial statements
present balance sheets as of March 29, 1998 and December 31, 1997 and statements
of earnings and of cash flows for the three months ended March 29, 1998 and     
March 30, 1997. In the consolidating financial statements, Coltec Industries Inc
("Parent") accounts for its investments in wholly-owned subsidiaries using the  
equity method and the Subsidiary Guarantors account for their investments in    
Non-Subsidiary Guarantors using the equity method. Interest expense related to  
the indebtedness under the Company's credit agreement and its three series of   
senior notes is allocated to United States subsidiaries based on net sales.     

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                  THREE MONTHS ENDED MARCH 29, 1998                    
                              -------------------------------------------------------------------------
                                           GUARANTOR      NON-GUARANTOR                                
                               PARENT     SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS    CONSOLIDATED
                              --------    ------------    -------------    ------------    ------------
                                                                                                       
Net sales.................... $115,099      $168,430        $102,468         $(11,556)       $374,441  
Cost of sales................   80,531       115,127          76,046          (11,556)        260,148  
                              --------      --------        --------         --------        --------  
Gross profit.................   34,568        53,303          26,422               --         114,293  
Selling and administrative...   18,502        24,472          18,025               --          60,999  
                              --------      --------        --------         --------        --------  
Operating Income.............   16,066        28,831           8,397               --          53,294  
Equity earnings of                                                                                     
  affiliates.................   20,681         7,014              --          (27,695)             --  
Interest expense and other,                                                                            
  net........................   (8,339)      (17,530)         11,310             (521)        (15,080) 
                              --------      --------        --------         --------        --------  
Earnings before income                                                                                 
  taxes......................   28,408        18,315          19,707          (28,216)         38,214  
Income taxes.................    3,187         2,422           7,384               --          12,993  
                              --------      --------        --------         --------        --------  
Net earnings................. $ 25,221      $ 15,893        $ 12,323         $(28,216)       $ 25,221  
                              ========      ========        ========         ========        ========  

                                                        [Enlarge/Download Table]

                                                 THREE MONTHS ENDED MARCH 30, 1997                     
                             --------------------------------------------------------------------------
                                          GUARANTOR       NON-GUARANTOR                                
                              PARENT     SUBSIDIARIES     SUBSIDIARIES     ELIMINATIONS    CONSOLIDATED
                             --------    ------------     -------------    ------------    ------------
                                                                                                       
Net sales................... $104,543      $134,791          $78,624         $ (8,786)       $309,172  
Cost of sales...............   73,195        89,602           57,664           (8,786)        211,675  
                             --------      --------          -------         --------        --------  
Gross profit................   31,348        45,189           20,960               --          97,497  
Selling and                                                                                            
  administrative............   15,111        29,924            7,534               --          52,569  
                             --------      --------          -------         --------        --------  
Operating Income............   16,237        15,265           13,426               --          44,928  
Equity earnings of                                                                                     
  affiliates................   18,414         3,019               --          (21,433)             --  
Interest expense and other,                                                                            
  net.......................  (12,212)          (51)            (101)              --         (12,364) 
                             --------      --------          -------         --------        --------  
Earnings before income                                                                                 
  taxes.....................   22,439        18,233           13,325          (21,433)         32,564  
Income taxes................      947         5,735            4,390               --          11,072  
                             --------      --------          -------         --------        --------  
Net earnings................ $ 21,492      $ 12,498          $ 8,935         $(21,433)       $ 21,492  
                             ========      ========          =======         ========        ========  

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED BALANCE SHEET 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                 MARCH 29, 1998                            
                                     ----------------------------------------------------------------------
                                                  GUARANTOR     NON-GUARANTOR                              
                                      PARENT     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                     ---------   ------------   -------------   ------------   ------------
                                                                                                           
Cash and cash equivalents........... $   7,187    $   2,555      $   11,333                     $   21,075 
Accounts and notes receivable,                                                                             
  net...............................        --       77,502          74,433                        151,935 
Inventory, net......................   102,426       71,724          99,012                        273,162 
Deferred income taxes...............     9,023        8,065              83                         17,171 
Other current assets................     4,113        8,539           4,760                         17,412 
                                     ---------    ---------      ----------     -----------     ---------- 
     Total current assets...........   122,749      168,385         189,621              --        480,755 
Intercompany, net...................  (611,880)    (312,134)        924,014                             -- 
Investments in affiliates...........   996,828      595,095             867     $(1,592,790)            -- 
Property, plant and equipment.......    94,948      120,312          89,011                        304,271 
Cost in excess of net assets                                                                               
  acquired, net.....................    25,782      137,856          46,890                        210,528 
Other assets........................    42,234        3,574          34,719                         80,527 
                                     ---------    ---------      ----------     -----------     ---------- 
     Total assets................... $ 670,661    $ 713,088      $1,285,122     $(1,592,790)    $1,076,081 
                                     =========    =========      ==========     ===========     ========== 
Total current liabilities........... $  90,380    $  42,586      $  119,351                     $  252,317 
Long term debt......................   760,417        3,139          92,298                        855,854 
Deferred income taxes...............   (30,499)     103,690          14,030                         87,221 
Other liabilities...................    33,934       12,909          17,480     $       (63)        64,260 
Liabilities of discontinued                                                                                
  operations........................   151,657           --              --                        151,657 
Shareholders' equity................  (335,228)     550,764       1,041,963      (1,592,727)      (335,228)
                                     ---------    ---------      ----------     -----------     ---------- 
     Total liabilities and                                                                                 
       shareholders' equity......... $ 670,661    $ 713,088      $1,285,122     $(1,592,790)    $1,076,081 
                                     =========    =========      ==========     ===========     ========== 
                                                               DECEMBER 31, 1997                           
                                     ----------------------------------------------------------------------
                                                  GUARANTOR     NON-GUARANTOR                              
                                      PARENT     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                     ---------   ------------   -------------   ------------   ------------
Cash and cash equivalents........... $   9,912    $     722      $    4,059                     $   14,693 
Accounts and notes receivable,                                                                             
  net...............................        --       60,881          59,430                        120,311 
Inventory, net......................    99,100       71,958          85,678                        256,736 
Deferred income taxes...............     4,535       10,689             (29)                        15,195 
Other current assets................     4,540       10,406           5,562                         20,508 
                                     ---------    ---------      ----------     -----------     ---------- 
     Total current assets...........   118,087      154,656         154,700              --        427,443 
Intercompany, net...................  (741,897)      10,933         730,964                             -- 
Investments in affiliates........... 1,057,890      355,399           2,688     $(1,415,977)            -- 
Property, plant and equipment.......    89,488      118,405          79,726                        287,619 
Cost in excess of net assets                                                                               
  acquired, net.....................    21,820      133,441           2,490                        157,751 
Other assets........................    40,266        3,490          16,465                         60,221 
                                     ---------    ---------      ----------     -----------     ---------- 
     Total assets................... $ 585,654    $ 776,324      $  987,033     $(1,415,977)    $  933,034 
                                     =========    =========      ==========     ===========     ========== 
Total current liabilities........... $  93,669    $  49,494      $   96,415                     $  239,578 
Long term debt......................   689,302        1,611          66,665                        757,578 
Deferred income taxes...............   (32,780)     101,871          10,138                         79,229 
Other liabilities...................    39,706       12,844          10,544     $   ( 2,202)        60,892 
Liabilities of discontinued                                                                                
  operations........................   154,918           --              --                        154,918 
Shareholders' equity................  (359,161)     610,504         803,271      (1,413,775)      (359,161)
                                     ---------    ---------      ----------     -----------     ---------- 
     Total liabilities and                                                                                 
       shareholders' equity......... $ 585,654    $ 776,324      $  987,033     $(1,415,977)    $  933,034 
                                     =========    =========      ==========     ===========     ========== 

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                    THREE MONTHS ENDED MARCH 29, 1998                 
                                    ------------------------------------------------------------------
                                                           NON-GUARANTOR                              
                                     PARENT    GUARANTOR   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                    --------   ---------   -------------   ------------   ------------
                                                                                                      
Cash provided by operating                                                                            
  activities                        $    998   $  1,833      $  7,274              --       $ 10,105  
                                    --------   --------      --------        --------       --------  
Cash flows from investing                                                                             
  activities:                                                                                         
  Capital expenditures.............   (7,699)    (5,120)       (2,186)                       (15,005) 
  Acquisition of business..........  (25,000)   (17,000)      (39,312)                       (81,312) 
  Cash from (to) Parent............  (63,618)    22,120        41,498                             --  
                                    --------   --------      --------        --------       --------  
     Cash used in investing                                                                           
       activities..................  (96,317)        --            --              --        (96,317) 
                                    --------   --------      --------        --------       --------  
Cash flows from financing                                                                             
  activities:                                                                                         
  Repayment of long-term debt......      (85)       (83)      (13,867)                       (14,035) 
  Increase (decrease) in revolving                                                                    
     facility, net.................   70,500                   40,000                        110,500  
  Purchase of treasury stock.......   (3,871)                                                 (3,871) 
  Cash from (to) Parent............   26,050         83       (26,133)                            --  
                                    --------   --------      --------        --------       --------  
     Cash provided by financing                                                                       
       activities..................   92,594         --            --              --         92,594  
                                    --------   --------      --------        --------       --------  
Cash and cash equivalents:                                                                            
  Increase in cash and cash                                                                           
     equivalents...................   (2,725)     1,833         7,274                          6,382  
  Cash and cash equivalents --                                                                        
     beginning of period...........    9,912        722         4,059                         14,693  
                                    --------   --------      --------        --------       --------  
  Cash and cash equivalents -- end                                                                    
     of period..................... $  7,187   $  2,555      $ 11,333              --       $ 21,075  
                                    ========   ========      ========        ========       ========  
                                                    THREE MONTHS ENDED MARCH 30, 1997                 
                                    ------------------------------------------------------------------
                                                           NON-GUARANTOR                              
                                     PARENT    GUARANTOR   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                    --------   ---------   -------------   ------------   ------------
Cash provided by operating                                                                            
  activities....................... $ 17,982   $    116      $ (5,370)             --       $ 12,728  
                                    --------   --------      --------        --------       --------  
Cash flows from investing                                                                             
  activities:                                                                                         
  Capital expenditures.............   (5,853)    (2,234)       (5,467)                       (13,554) 
  Cash from (to) Parent............   (7,701)     2,234         5,467                             --  
                                    --------   --------      --------        --------       --------  
     Cash used in investing                                                                           
       activities..................  (13,554)        --            --              --        (13,554) 
                                    --------   --------      --------        --------       --------  
Cash flows from financing                                                                             
  activities:                                                                                         
  Repayment of long-term debt......   (1,733)                  (1,238)                        (2,971) 
  Increase (decrease) in revolving                                                                    
     facility, net.................   14,000                                                  14,000  
  Purchase of treasury stock.......  (17,419)                                                (17,419) 
  Cash from (to) Parent............   (1,238)                   1,238                                 
                                    --------   --------      --------        --------       --------  
     Cash provided by financing                                                                       
       activities..................   (6,390)        --            --              --         (6,390) 
                                    --------   --------      --------        --------       --------  
Cash and cash equivalents:                                                                            
  Increase in cash and cash                                                                           
     equivalents...................   (1,962)       116        (5,370)                        (7,216) 
  Cash and cash equivalents --                                                                        
     beginning of period...........    5,475        570         8,984                         15,029  
                                    --------   --------      --------        --------       --------  
  Cash and cash equivalents -- end                                                                    
     of period..................... $  3,513   $    686      $  3,614              --       $  7,813  
                                    ========   ========      ========        ========       ========  

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COLTEC INDUSTRIES INC 

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of                                   
Coltec Industries Inc:                                                          

We have audited the accompanying consolidated balance sheets of Coltec
Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the       
related consolidated statements of earnings, shareholders' equity, cash flows   
and comprehensive income for each of the three years in the period ended        
December 31, 1997. These consolidated financial statements are the              
responsibility of the Company's management. Our responsibility is to express an 
opinion on these consolidated financial statements based on our audits.         

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

 In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coltec Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the   
three years in the period ended December 31, 1997, in conformity with generally 
accepted accounting principles.                                                 

ARTHUR ANDERSEN LLP                                                             

Charlotte, North Carolina                                                       
February 2, 1998 (except with respect to information discussed in Note 20, as to
which the                                                                       
date is April 16, 1998)                                               

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COLTEC INDUSTRIES INC 

CONSOLIDATED STATEMENTS OF EARNINGS 

                                                        [Enlarge/Download Table]

                                                                YEARS ENDED DECEMBER 31,       
                                                          ------------------------------------ 
                                                             1997         1996         1995    
                                                          ----------   ----------   ---------- 
                                                            (IN THOUSANDS, EXCEPT PER SHARE    
                                                                         DATA)                 
                                                                                               
Net sales...............................................  $1,314,869   $1,159,691   $1,099,624 
Cost of sales...........................................     898,269      811,123      744,201 
                                                          ----------   ----------   ---------- 
Gross profit............................................     416,600      348,568      355,423 
Selling and administrative..............................     218,808      190,993      186,401 
Special charges.........................................          --           --       27,000 
                                                          ----------   ----------   ---------- 
Operating income........................................     197,792      157,575      142,022 
Interest expense and other, net.........................      54,043       74,894       89,886 
                                                          ----------   ----------   ---------- 
Earnings from continuing operations before income taxes                                        
  and extraordinary item................................     143,749       82,681       52,136 
Income taxes............................................      48,875       28,111       17,615 
                                                          ----------   ----------   ---------- 
Earnings from continuing operations before extraordinary                                       
  item..................................................      94,874       54,570       34,521 
                                                          ----------   ----------   ---------- 
Discontinued operations (net of tax)                                                           
  Income from operations................................          --       19,252       36,639 
  Gain on sale..........................................          --       37,931           -- 
                                                          ----------   ----------   ---------- 
       Total discontinued operations....................          --       57,183       36,639 
                                                          ----------   ----------   ---------- 
Extraordinary item (net of tax).........................          --      (30,614)        (254)
                                                          ----------   ----------   ---------- 
Net earnings............................................  $   94,874   $   81,139   $   70,906 
                                                          ==========   ==========   ========== 
Basic earnings per common share                                                                
  Before extraordinary item.............................  $     1.44   $      .79   $      .49 
                                                          ----------   ----------   ---------- 
  Discontinued operations                                                                      
     Income from operations.............................          --          .28          .53 
     Gain on sale.......................................          --          .55           -- 
                                                          ----------   ----------   ---------- 
       Total discontinued operations....................          --          .83          .53 
                                                          ----------   ----------   ---------- 
  Extraordinary item....................................          --         (.44)          -- 
                                                          ----------   ----------   ---------- 
  Net earnings..........................................  $     1.44   $     1.18   $     1.02 
                                                          ==========   ==========   ========== 
Weighted-average common shares..........................      65,896       69,091       69,839 
                                                          ==========   ==========   ========== 
Diluted earnings per common share                                                              
  Before extraordinary item.............................  $     1.42   $      .79   $      .49 
                                                          ----------   ----------   ---------- 
  Discontinued operations                                                                      
     Income from operations.............................          --          .28          .53 
     Gain on sale.......................................          --          .54           -- 
                                                          ----------   ----------   ---------- 
       Total discontinued operations....................          --          .82          .53 
                                                          ----------   ----------   ---------- 
  Extraordinary item....................................          --         (.44)          -- 
                                                          ----------   ----------   ---------- 
  Net earnings..........................................  $     1.42   $     1.17   $     1.02 
                                                          ==========   ==========   ========== 
Diluted weighted-average common shares..................      66,911       69,376       69,839 
                                                          ==========   ==========   ========== 

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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COLTEC INDUSTRIES INC 

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                    DECEMBER 31,       
                                                              ------------------------ 
                                                                 1997          1996    
                                                              ----------    ---------- 
                                                               (IN THOUSANDS, EXCEPT   
                                                                    SHARE DATA)        
                                                                                       
ASSETS                                                                                 
CURRENT ASSETS                                                                         
Cash and cash equivalents...................................  $   14,693    $   15,029 
Accounts and notes receivable, net of allowance of $2,894 in                           
  1997 and $2,007 in 1996...................................     120,311       190,325 
Inventory, net..............................................     256,736       204,198 
Deferred income taxes.......................................      15,195        10,524 
Other current assets........................................      20,508        22,895 
                                                              ----------    ---------- 
     Total current assets...................................     427,443       442,971 
Property, plant and equipment, net..........................     287,619       214,790 
Costs in excess of net assets acquired, net.................     157,751       132,872 
Other assets................................................      60,221        58,869 
                                                              ----------    ---------- 
                                                              $  933,034    $  849,502 
                                                              ==========    ========== 
LIABILITIES AND SHAREHOLDERS' EQUITY                                                   
CURRENT LIABILITIES                                                                    
Current portion of long-term debt...........................  $    1,811    $    2,528 
Accounts payable............................................      93,799        55,410 
Accrued expenses............................................     138,969       155,229 
Current portion of liabilities of discontinued operations...       4,999        14,229 
                                                              ----------    ---------- 
     Total current liabilities..............................     239,578       227,396 
Long-term debt..............................................     757,578       717,722 
Deferred income taxes.......................................      79,229        50,646 
Other liabilities...........................................      60,892       100,005 
Liabilities of discontinued operations......................     154,918       170,740 
Commitments and contingencies                                                          
SHAREHOLDERS' EQUITY                                                                   
Preferred stock -- $.01 par value, 2,500,000 shares                                    
  authorized, issued and outstanding -- none                                           
Common stock -- $.01 par value, 100,000,000 shares                                     
  authorized, 70,501,948 and 70,398,661 shares issued at                               
  December 31, 1997 and 1996, respectively (excluding                                  
  25,000,000 shares held by a wholly owned subsidiary)......         705           704 
Capital surplus.............................................     642,828       643,221 
Retained deficit............................................    (912,029)   (1,006,903)
Unearned compensation.......................................      (2,721)       (2,136)
Minimum pension liability...................................      (1,646)       (3,200)
Foreign currency translation adjustments....................      (6,745)       (1,151)
                                                              ----------    ---------- 
                                                                (279,608)     (369,465)
Less cost of 4,666,406 and 3,182,822 shares of common stock                            
  in treasury at December 31, 1997 and 1996, respectively...     (79,553)      (47,542)
                                                              ----------    ---------- 
                                                                (359,161)     (417,007)
                                                              ----------    ---------- 
                                                              $  933,034    $  849,502 
                                                              ==========    ========== 

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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COLTEC INDUSTRIES INC 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                             YEARS ENDED DECEMBER 31,       
                                                        ----------------------------------- 
                                                          1997         1996         1995    
                                                        ---------    ---------    --------- 
                                                                  (IN THOUSANDS)            
                                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES                                                        
Net earnings........................................... $  94,874    $  81,139    $  70,906 
Adjustments to reconcile net earnings to cash provided                                      
  by operating activities                                                                   
  Gain on divestitures.................................        --      (66,791)          -- 
  Extraordinary item...................................        --       51,001          390 
  Special charge provision.............................        --           --       27,000 
  Depreciation and amortization........................    38,415       36,014       42,086 
  Deferred income taxes................................    24,791       39,146        5,665 
  Payments of liabilities of discontinued operations...   (25,052)     (19,563)      (2,504)
  Special charge payments..............................   (11,746)      (6,309)      (8,945)
  Foreign currency translation adjustment..............    (5,594)         665       (1,135)
  Other operating items................................    (6,951)      (4,370)      19,791 
  Changes in assets and liabilities, net of effects                                         
     from acquisitions and divestitures:                                                    
     Accounts and notes receivable.....................    (4,263)     (42,602)      (6,632)
     Inventories.......................................   (42,508)       2,704      (32,373)
     Other current assets..............................     3,455         (617)       3,762 
     Accounts payable..................................    35,963          (55)      (4,283)
     Accrued expenses..................................   (18,972)     (21,302)     (21,071)
     Accrued pension liability.........................   (20,993)         443       (1,649)
                                                        ---------    ---------    --------- 
  Cash provided by operating activities................    61,419       49,503       91,008 
                                                        ---------    ---------    --------- 
CASH FLOWS FROM INVESTING ACTIVITIES                                                        
Proceeds from divestitures.............................        --      329,113           -- 
Capital expenditures...................................   (81,218)     (44,550)     (42,496)
Acquisition of businesses..............................   (60,711)          --      (21,750)
Other..................................................        --           --       (2,512)
                                                        ---------    ---------    --------- 
  Cash provided by (used in) investing activities......  (141,929)     284,563      (66,758)
                                                        ---------    ---------    --------- 
CASH FLOWS FROM FINANCING ACTIVITIES                                                        
Proceeds from debt refinancing.........................        --      542,000           -- 
Issuance of long-term debt.............................       813           --       19,070 
Repayment of long-term debt............................    (8,113)    (622,582)     (13,537)
Increase (decrease) in revolving facility, net.........    39,500     (196,000)     (30,000)
Purchase of treasury stock.............................   (42,695)     (46,426)          -- 
Proceeds from sale of accounts receivable..............    82,500           --           -- 
Proceeds from exercise of stock options................     8,169           --           -- 
                                                        ---------    ---------    --------- 
  Cash provided by (used in) financing activities......    80,174     (323,008)     (24,467)
                                                        ---------    ---------    --------- 
Increase (decrease) in cash and cash equivalents.......      (336)      11,058         (217)
Cash and cash equivalents -- beginning of year.........    15,029        3,971        4,188 
                                                        ---------    ---------    --------- 
Cash and cash equivalents -- end of year............... $  14,693    $  15,029    $   3,971 
                                                        =========    =========    ========= 
Supplemental cash flow data:                                                                
  Cash paid for:                                                                            
     Interest.......................................... $  50,207    $  74,870    $  92,292 
     Income taxes......................................    19,327       27,667       41,685 

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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COLTEC INDUSTRIES INC 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

                                                        [Enlarge/Download Table]

                                                                                                     FOREIGN  
                                COMMON STOCK                                             MINIMUM    CURRENCY  
                               ---------------   CAPITAL     RETAINED       UNEARNED     PENSION   TRANSLATION
                               SHARES   AMOUNT   SURPLUS      DEFICIT     COMPENSATION  LIABILITY  ADJUSTMENTS
                               ------   ------   --------   -----------   ------------  ---------  -----------
                                                                (IN THOUSANDS)                                
                                                                                                              
Balance, December 31, 1994...  70,016    $700    $638,407   $(1,158,948)    $(3,480)     $    --     $  (681) 
Net earnings.................                                    70,906                                       
Issuance of restricted stock,                                                                                 
  net........................      61       1       1,006                     1,072                           
Exercise of stock options....                         (30)                                                    
Tax benefit from stock option                                                                                 
  and incentive plan.........                          36                                                     
Foreign currency translation                                                                                  
  adjustments................                                                                         (1,135) 
                               ------    ----    --------   -----------     -------      -------     -------  
Balance, December 31, 1995...  70,077     701     639,419    (1,088,042)     (2,408)          --      (1,816) 
Net earnings.................                                    81,139                                       
Repurchase of common stock...                                                                                 
Issuance of restricted stock,                                                                                 
  net........................     322       3       3,941                       272                           
Exercise of stock options....                                                                                 
Tax benefit from stock option                                                                                 
  and incentive plan.........                        (139)                                                    
Minimum pension liability....                                                             (3,200)             
Foreign currency translation                                                                                  
  adjustments................                                                                            665  
                               ------    ----    --------   -----------     -------      -------     -------  
Balance, December 31, 1996...  70,399     704     643,221    (1,006,903)     (2,136)      (3,200)     (1,151) 
Net earnings.................                                    94,874                                       
Repurchase of common stock...                                                                                 
Issuance of restricted stock,                                                                                 
  net........................     103       1       2,173                      (585)                          
Exercise of stock options....                      (2,566)                                                    
Minimum pension liability....                                                              1,554              
Foreign currency translation                                                                                  
  adjustments................                                                                         (5,594) 
                               ------    ----    --------   -----------     -------      -------     -------  
Balance, December 31, 1997...  70,502    $705    $642,828     $(912,029)    $(2,721)     $(1,646)    $(6,745) 
                               ======    ====    ========   ===========     =======      =======     =======  



                                TREASURY STOCK                                                                
                               -----------------                                                              
                               SHARES    AMOUNT      TOTAL                                                    
                               ------   --------   ---------                                                  
                                                                                                              
Balance, December 31, 1994...     (99)  $ (1,599)  $(525,601)                                                 
Net earnings.................                         70,906                                                  
Issuance of restricted stock,                                                                                 
  net........................     (26)      (422)      1,657                                                  
Exercise of stock options....      25        405         375                                                  
Tax benefit from stock option                                                                                 
  and incentive plan.........                             36                                                  
Foreign currency translation                                                                                  
  adjustments................                         (1,135)                                                 
                               ------   --------   ---------                                                  
Balance, December 31, 1995...    (100)    (1,616)   (453,762)                                                 
Net earnings.................                         81,139                                                  
Repurchase of common stock...  (3,129)   (46,426)    (46,426)                                                 
Issuance of restricted stock,                                                                                 
  net........................     (10)      (142)      4,074                                                  
Exercise of stock options....      56        642         642                                                  
Tax benefit from stock option                                                                                 
  and incentive plan.........                           (139)                                                 
Minimum pension liability....                         (3,200)                                                 
Foreign currency translation                                                                                  
  adjustments................                            665                                                  
                               ------   --------   ---------                                                  
Balance, December 31, 1996...  (3,183)   (47,542)   (417,007)                                                 
Net earnings.................                         94,874                                                  
Repurchase of common stock...  (2,160)   (42,695)    (42,695)                                                 
Issuance of restricted stock,                                                                                 
  net........................      (4)       (51)      1,538                                                  
Exercise of stock options....     681     10,735       8,169                                                  
Minimum pension liability....                          1,554                                                  
Foreign currency translation                                                                                  
  adjustments................                         (5,594)                                                 
                               ------   --------   ---------                                                  
Balance, December 31, 1997...  (4,666)  $(79,553)  $(359,161)                                                 
                               ======   ========   =========                                                  

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

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COLTEC INDUSTRIES INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                               YEARS ENDED DECEMBER 31,    
                                                             ----------------------------- 
                                                              1997       1996       1995   
                                                             -------    -------    ------- 
                                                                    (IN THOUSANDS)         
                                                                                           
Net earnings................................................ $94,874    $81,139    $70,906 
Other comprehensive income/loss, net of tax:                                               
  Foreign currency translation adjustments..................  (5,594)       665     (1,135)
  Unearned compensation.....................................    (585)       272      1,072 
  Minimum pension liability.................................   1,554     (3,200)        -- 
                                                             -------    -------    ------- 
     Other comprehensive income/(loss), net of tax..........  (4,625)    (2,263)       (63)
                                                             -------    -------    ------- 
Comprehensive income........................................ $90,249    $78,876    $70,843 
                                                             =======    =======    ======= 

The accompanying notes to consolidated financial statements are an integral part
of these statements.
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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1.   SUMMARY OF ACCOUNTING POLICIES                                             

Organization:                                                               
    Coltec Industries Inc (the Company) is a diversified manufacturing company
serving the aerospace and general industrial markets primarily in the United    
States, Canada and Europe.                                                      

Basis of Presentation:                                                      
     Investments in which the Company has ownership of 50% or more of the voting
common stock are consolidated in the financial statements. Intercompany accounts
and transactions are eliminated.                                                

     Certain 1996 and 1995 amounts have been reclassified to conform to the 1997
presentation.                                                                   

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

Revenue Recognition:                                                        
Revenue, including revenue under long-term commercial and government  
contracts and programs, is recorded at the time deliveries or customer          
acceptances are made and the Company has the contractual right to bill. The     
Company is involved in long-term government contracts which are accounted for on
a percentage completed basis. However, the Company's long-term contracts        
primarily relate to commercial jet aircraft programs, which are planned,        
committed and facilitized based on long-term delivery forecasts. Cost of sales  
for jet aircraft programs is determined based on estimated average total cost   
and revenue for the respective programs based on shipset quantities representing
what is believed to be conservative customer-produced market projections.       
Estimated program average costs and revenues are reviewed and assessed          
periodically, with changes in estimates recognized as adjustments to current    
operations.                                                                     

   Program commitment quantities generally represent deliveries for the next
three to five years, although initial program quantities for new programs can   
include orders and deliveries up to ten years. As of December 31, 1997 and 1996,
the Company had delivered approximately 34% and 26%, respectively, of the total 
commitment quantities under these programs. The program method of accounting, an
aerospace industry-developed and accepted practice, was adopted by the Company  
in the 1970's.                                                                  

Inventories:                                                                
Inventories, including inventories under long-term commercial and     
government contracts and programs, are valued at the lower of cost or market.   
Cost elements included in inventory are material, labor and factory overhead,   
primarily using standard cost, which approximates actual cost. Cost on          
approximately 50% of the domestic inventory at December 31, 1997 and 1996 was   
determined on the last-in first-out basis. Cost on the remainder of the         
inventory is generally determined on the first-in first-out basis.              

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

Property, Plant and Equipment:                                              
     Property, plant and equipment is carried at cost. Depreciation of plant and
equipment is provided generally by using the straight-line method, based on     
estimated useful lives of the assets. The ranges of estimated useful lives used 
in computing depreciation for financial reporting are as follows:               

                                                                [Download Table]

                                                                YEARS
                                                                -----
                                                                     
Land improvements...........................................     5-40
Buildings and equipment.....................................    10-45
Machinery and equipment.....................................     3-20

    For leasehold improvements, the estimated useful life is the lesser of the
asset life or the lease term.                                                   

    Renewals and betterments are capitalized by additions to the related asset
accounts, while repair and maintenance costs are charged against earnings.      

Costs in Excess of Net Assets Acquired:                                     
It is the Company's policy to amortize the excess costs arising from  
acquisitions on a straight-line basis over periods not to exceed 40 years. As of
December 31, 1997 the remaining weighted average life of the Company's goodwill 
was 26 years. In evaluating the value and future benefits of the excess costs   
arising from acquisitions, the recoverability from operating income is measured.
Under this approach, the carrying value would be reduced if it is probable that 
management's best estimate of future operating income from related operations   
before amortization will be less than the carrying amount of the excess costs   
arising from acquisitions over the remaining amortization period. At December   
31, 1997 and 1996, accumulated amortization related to all completed            
acquisitions was $74,013 and $68,045, respectively.                             

Income Taxes:                                                               
  Income taxes are provided using the liability method. Under this method,
deferred tax assets and liabilities are recognized based on differences between 
the financial statement and tax bases of assets and liabilities using presently 
enacted tax rates.                                                              

Environmental Expenditures:                                                 
Expenditures that relate to an existing condition caused by past      
operations, and which do not contribute to current or future revenue generation,
are accrued when it is probable that an obligation has been incurred and the    
amount can be reasonably estimated. Expenditures incurred for environmental     
compliance with respect to pollution prevention and ongoing monitoring programs 
are expensed as incurred. Expenditures that increase the value of the property  
are capitalized.                                                                

Start-up Costs:                                                             
     Start-up costs related to new operations and new product lines are expensed
as incurred.                                                                    

Legal Costs:                                                                

     Legal costs are expensed as incurred. However, when contingent liability is
recorded, at the time such liability becomes probable and can be reasonably     
estimated, estimated legal costs are included in the liability.                 

Cash and Cash Equivalents:                                                  
    The Company considers all short-term investments purchased with a maturity
of three months or less to be cash equivalents.                                 

Foreign Currency Translation:                                               
 The financial statements of foreign subsidiaries were prepared in their
respective local currencies and were translated into U.S. dollars at year-end   
rates for assets and liabilities and at monthly weighted-average rates for      

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

income and expenses. Translation adjustments are included in shareholders'      
equity in the Consolidated Balance Sheets. Foreign currency transaction gains   
and losses are included in net earnings. For 1997, 1996 and 1995, such gains and
losses were not significant.                                                    

2.   ACQUISITIONS AND DIVESTITURES                                              

  On June 30, 1997, the Company acquired the assets of AMI Industries Inc.
(AMI), a Colarado-based manufacturer of flight attendant and cockpit seats for  
commercial aircraft, for approximately $25,000. The purchase agreement also     
includes contingent payments based on earning levels for the years ended        
December 31, 1997-2000. These contingent payments will be recorded as additional
purchase price and amortized over the remaining life of goodwill. For financial 
statement purposes, the acquisition was accounted for as a purchase and,        
accordingly, AMI's results are included in the Company's consolidated financial 
statements since the date of acquisition. The purchase price, which was financed
through available cash resources, has been allocated to the acquired assets     
based upon their fair market values. The $12,200 excess of the purchase price   
over net assets is being amortized over 25 years. AMI expects annual sales to   
approximate $40,000.                                                            

     On October 7, 1997, the Company acquired the assets of the sheet rubber and
conveyor belt business of Dana Corporation's Boston Weatherhead division for    
$28,000. Annualized sales are expected to approximate $35,000. The acquisition  
was accounted for as a purchase and its results are included in the Company's   
consolidated financial statements since the date of acquisition. The purchase   
price, which was also financed through available cash resources, has been       
allocated to the acquired assets based upon their fair market values. The $6,900
excess of the purchase price over net assets is being amortized over 25 years.  

The impact of these acquisitions was not material in relation to the  
Company's results of operations. Consequently, pro forma information is not     
presented. The Company also had several small acquisitions during 1997, which   
were not material to the Company's financial position or results of operations. 

 In June 1996, the Company sold Holley Automotive, Coltec Automotive and
Performance Friction Products to Borg-Warner Automotive, Inc. for $296,522 in   
cash. In December 1996, Coltec sold Farnam Sealing Systems division to Meillor  
SA for $20,728 in cash and a note receivable for $3,000. The sale of these      
automotive original equipment (OE) components businesses resulted in an         
after-tax gain of $37,931 (net of income taxes of $25,332), net of liabilities  
retained, transaction costs and obligations relating to the sales. The sale of  
the automotive OE components businesses represented a disposal of the Company's 
Automotive Segment. Accordingly, the 1996 and 1995 Consolidated Statements of   
Earnings were restated to reflect the operations of the automotive OE components
businesses as a discontinued operation. Net sales of the discontinued automotive
OE components businesses were $182,599 and $302,260 in 1996 and 1995,           
respectively.                                                                   

    In December 1996, the Company also sold the exhaust systems and components
business of its Stemco division for $11,863 resulting in a pre-tax gain of      
$3,528. Such gain is reflected in the 1996 Consolidated Statement of Earnings in
continuing operations. Net sales of the exhaust systems and components business 
were $18,085 and $20,503 in 1996 and 1995, respectively.                        

3.   EXTRAORDINARY ITEM                                                         

     In 1996, the Company redeemed all of its outstanding 11 1/4% debentures and
substantially all of its outstanding 9 3/4% and 10 1/4% senior notes at         
redemption prices ranging from 105.125% to 106.987% of par. The redemption of   
these notes including consent payments resulted in an extraordinary charge of   
$30,614, net of income taxes of $20,387.                                        

    The Company incurred extraordinary charges of $254, net of income taxes of
$136, in 1995 in connection with early retirement of debt.                      

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

4.   SPECIAL CHARGES                                                            

In the third quarter of 1995, the Company recorded a special charge of
$27,000, primarily in the Aerospace Segment to cover the costs of closing the   
Walbar compressor blade facility in Canada. The facility was closed during 1996.
The charge also covered selected workforce reductions throughout the Company.   
The special charge included costs to cover the cancellation of contractual      
obligations resulting from the decision to close the Walbar facility, asset     
write-downs, severance and employee-related costs and other costs necessary to  
implement the shutdown of the Walbar facility and selected workforce reductions 
throughout the Company.                                                         

   At December 31, 1997 all related costs had been charged and the remaining
accrual was reversed. The activity in the related reserve through December 31,  
1997 was as follows:                                                            

                                                        [Enlarge/Download Table]

                                    CONTRACTUAL    ASSET                                   
                                    OBLIGATIONS  WRITEDOWNS  SEVERANCE   OTHER     TOTAL   
                                    -----------  ----------  ---------  -------   -------- 
                                                                                           
1995 charge........................   $ 9,065     $ 7,845     $ 5,084   $ 5,006   $ 27,000 
1995 activity......................       (65)     (4,549)     (1,778)   (2,553)    (8,945)
                                      -------     -------     -------   -------   -------- 
December 31, 1995..................     9,000       3,296       3,306     2,453     18,055 
1996 activity......................      (961)     (1,875)     (1,876)   (1,597)    (6,309)
                                      -------     -------     -------   -------   -------- 
December 31, 1996..................     8,039       1,421       1,430       856     11,746 
1997 activity......................    (1,200)         --        (517)      (29)    (1,746)
Reversal...........................    (6,839)     (1,421)       (913)     (827)   (10,000)
                                      -------     -------     -------   -------   -------- 
December 31, 1997..................   $    --     $    --     $    --   $    --   $     -- 
                                      =======     =======     =======   =======   ======== 

In the third quarter of 1997, the Company recorded a special charge of
$10,000, to cover the restructuring of its Industrial Segment. This special     
charge included the costs of closing its FMD Electronics operations in Roscoe,  
Illinois and its Ortman Fluid Power operations in Hammond, Indiana. The special 
charge also included the costs to restructure the Company's Industrial Segment  
businesses in Canada and Germany and certain termination costs related to the   
relocation of the Delavan Commercial divisional headquarters to North Carolina. 
The third quarter 1997 charge included costs resulting from cancellation of     
contractual obligations, asset writedowns, severance and employee-related costs 
and other costs to shut down these facilities that will not benefit future      
operations. The related reserve activity for the year ended December 31, 1997   
was as follows:                                                                 

                                                        [Enlarge/Download Table]

                                    CONTRACTUAL    ASSET                                 
                                    OBLIGATIONS  WRITEDOWNS  SEVERANCE   OTHER    TOTAL  
                                    -----------  ----------  ---------  -------  --------
                                                                                         
1997 charge........................   $   641     $ 1,049     $ 5,425   $ 2,885  $ 10,000
1997 activity......................       641       1,049       5,425     2,885    10,000
                                      -------     -------     -------   -------  --------
December 31, 1997..................   $    --     $    --     $    --   $    --  $     --
                                      =======     =======     =======   =======  ========

5.   EARNINGS PER SHARE                                                         

  In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share, effective December 15, 1997. The Company's  
reported earnings per common share for 1996 and 1995 equaled diluted earnings   
per share as set forth in SFAS No. 128. As a result, the Company's reported     
earnings per share for 1996 and 1995 were not restated.                         

   Basic earnings per common share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the year.  
Diluted earnings per common share is computed by using the treasury stock method
to determine shares related to stock options and restricted stock.              

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                              1997      1996      1995 
                                                             ------    ------    ------
                                                                   (IN THOUSANDS)      
                                                                                       
Weighted-average common shares.............................. 65,896    69,091    69,839
Stock options and restricted stock issued...................  1,015       285        --
                                                             ------    ------    ------
Diluted weighted-average common shares...................... 66,911    69,376    69,839
                                                             ======    ======    ======

6.   SALE OF ACCOUNTS RECEIVABLE                                                

   In September 1997, the Company and certain of its subsidiaries sold their
U.S. and Canadian customer trade receivables to CNC Finance LLC (CNC Finance), a
wholly owned bankruptcy remote subsidiary of the Company. CNC Finance entered   
into a three-year agreement to sell without recourse, on a revolving basis, an  
undivided fractional ownership interest in the receivables, based on the level  
of eligible receivables, up to a maximum of $85,000 to a special purpose entity 
of a financial institution. At December 31, 1997, $82,500 of the Company's      
receivables were sold under this agreement and the sale was reflected as a      
reduction of accounts receivable in the 1997 Consolidated Balance Sheet. The    
undivided interests were sold at a discount which was included in Interest      
expense and other, net in the 1997 Consolidated Statement of Earnings.          

7.   INVENTORY                                                                  

Inventories consisted of the following at December 31, 1997 and 1996: 

                                                                [Download Table]

                                                               1997      1996  
                                                             --------  --------
                                                                               
Finished goods.............................................. $ 53,748  $ 48,813
Work in process and finished parts..........................  158,937   122,817
Raw materials and supplies..................................   44,051    32,568
                                                             --------  --------
     Total.................................................. $256,736  $204,198
                                                             ========  ========

At December 31, 1997 and 1996, $54,441 and $45,371, respectively, of  
contract advances were offset against inventories under long-term commercial and
government contracts and programs in the Consolidated Balance Sheets. Losses on 
commercial and government contracts and programs are recognized in full when    
identified.                                                                     

  Included in inventories are deferred production, engineering and tooling
costs related to the Company's various long-term jet aircraft programs, which   
represent total costs incurred since the inception of the programs less the     
costs of units delivered based on the anticipated average costs of producing the
total units provided for under these programs. At December 31, 1997 and 1996,   
inventories included $30,909 and $25,872, respectively, of deferred engineering 
costs; $26,457 and $966, respectively, of deferred production costs; and $15,850
and $14,104, respectively, of deferred tooling costs. Total costs incurred to   
date on long-term jet aircraft programs exceed the total cost of units delivered
and in-process, based on the estimated average cost of all units to be          
delivered, by $73,216 and $40,942 at December 31, 1997 and 1996, respectively,  
and are being amortized over current and future deliveries for the respective   
program quantities. Certain engineering costs included in inventory are directly
reimbursable from customers. At December 31, 1997 and 1996, $10,700 and $6,400, 
respectively, were reimbursable from customers.                                 

 The excess of current cost over last-in, first-out cost at December 31,
1997 and 1996 was $22,022 and $20,152, respectively.                            

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

8.   PROPERTY, PLANT AND EQUIPMENT                                              

  Property, plant and equipment consisted of the following at December 31,
1997 and 1996:                                                                  

                                                                [Download Table]

                                                               1997      1996  
                                                             --------  --------
                                                                               
Land and improvements....................................... $ 14,517  $ 16,182
Buildings and equipment.....................................  135,173   121,515
Machinery and equipment.....................................  486,335   415,749
Leasehold improvements......................................   12,209    11,239
Construction in progress....................................   30,535    23,010
                                                             --------  --------
     Total..................................................  678,769   587,695
Less accumulated depreciation...............................  391,150   372,905
                                                             --------  --------
     Total.................................................. $287,619  $214,790
                                                             ========  ========

9.   ACCRUED LIABILITIES                                                        

 Accrued liabilities consisted of the following at December 31, 1997 and
1996:                                                                           

                                                                [Download Table]

                                                               1997      1996  
                                                             --------  --------
                                                                               
Salaries, wages and employee benefits....................... $ 34,603  $ 37,979
Taxes.......................................................   13,728    18,995
Interest....................................................    7,115     3,032
Asbestos....................................................   50,688    60,659
Other.......................................................   32,835    34,564
                                                             --------  --------
     Total.................................................. $138,969  $155,229
                                                             ========  ========

10. INCOME TAXES                                                                

   Domestic and foreign components of earnings from operations before income
taxes and extraordinary item were as follows for the years ended December 31,   
1997, 1996 and 1995:                                                            

                                                        [Enlarge/Download Table]

                                                            1997      1996      1995  
                                                          --------  --------  --------
                                                                                      
Domestic................................................. $114,517  $ 68,199  $ 25,426
Foreign..................................................   29,232    14,482    26,710
                                                          --------  --------  --------
     Total............................................... $143,749  $ 82,681  $ 52,136
                                                          ========  ========  ========

     Income taxes on earnings from continuing operations were as follows for the
years ended December 31, 1997, 1996 and 1995:                                   

                                                        [Enlarge/Download Table]

                                                            1997      1996       1995  
                                                          --------  --------   --------
                                                                                       
Current                                                                                
  Domestic............................................... $ 18,094  $ (2,912)  $  4,717
  Foreign................................................    6,872    13,634      7,638
                                                          --------  --------   --------
                                                            24,966    10,722     12,355
                                                          --------  --------   --------

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                            1997      1996       1995  
                                                          --------  --------   --------
                                                                                       
Deferred                                                                               
  Domestic...............................................   17,706    24,126      3,836
  Foreign................................................    6,203    (6,737)     1,424
                                                          --------  --------   --------
                                                            23,909    17,389      5,260
                                                          --------  --------   --------
     Total............................................... $ 48,875  $ 28,111   $ 17,615
                                                          ========  ========   ========

  As discussed in note 2 to consolidated financial statements, the Company
sold its original equipment components businesses in 1996 resulting in income   
tax on the gain of the sale of $25,332. As discussed in note 3 to consolidated  
financial statements, the Company incurred extraordinary charges related to     
early retirement of debt resulting in income taxes of $20,387 in 1996 and $136  
in 1995.                                                                        

    Reconciliation of tax at the U.S. statutory income tax rate of 35% for the
years ended December 31, 1997, 1996 and 1995 to income taxes on earnings from   
continuing operations was as follows:                                           

                                                        [Enlarge/Download Table]

                                                              1997      1996      1995   
                                                             -------   -------   ------- 
                                                                                         
Tax at U.S. statutory rate.................................. $50,312   $28,938   $18,248 
  Repatriation of non-U.S. earnings.........................  (1,195)    1,900     2,692 
  Non-U.S. rate differential................................   2,844     1,828      (287)
  Utilization of tax credits................................    (997)   (1,104)     (960)
  Adjustment of reserves....................................  (2,736)   (6,979)   (6,172)
  Other.....................................................     647     3,528     4,094 
                                                             -------   -------   ------- 
  Income taxes.............................................. $48,875   $28,111   $17,615 
                                                             -------   -------   ------- 
Effective tax rate..........................................    34.0%     34.0%     33.8%
                                                             =======   =======   ======= 

The significant components of deferred tax assets and liabilities at  
December 31, 1997 and 1996 were as follows:                                     

                                                        [Enlarge/Download Table]

                                                          1997                     1996          
                                                 -----------------------  -----------------------
                                                 DEFERRED     DEFERRED    DEFERRED     DEFERRED  
                                                   TAX           TAX        TAX           TAX    
                                                  ASSETS     LIABILITIES   ASSETS     LIABILITIES
                                                 --------    -----------  --------    -----------
                                                                                                 
Excess tax over book depreciation............... $    --      $(21,828)   $    --      $(26,754) 
Book/tax differences on contract income.........      --       (24,230)        --       (27,154) 
Employee benefit plans..........................   7,747            --     19,749            --  
Accrued expenses and liabilities................   5,375            --     10,625            --  
Foreign tax credit carryforwards................   3,700            --      6,600            --  
Capital transactions, net.......................      --       (27,901)        --       (28,127) 
Other...........................................      --        (3,194)    11,538            --  
                                                 -------      --------    -------      --------  
                                                  16,822       (77,153)    48,512       (82,035) 
Less valuation allowance........................  (3,700)           --     (6,600)           --  
                                                 -------      --------    -------      --------  
Total........................................... $13,122      $(77,153)   $41,912      $(82,035) 
                                                 =======      ========    =======      ========  

The valuation allowance is attributable to foreign tax credit         
carryforwards, which expire in 1998 through 2002.                               

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

11. LONG-TERM DEBT                                                              

  Long-term debt consisted of the following at December 31, 1997 and 1996:

                                                                [Download Table]

                                                               1997      1996  
                                                             --------  --------
                                                                               
Credit Agreement 6.7%*(a)................................... $697,500  $658,000
9 3/4% senior notes due 1999(b).............................    7,507     7,507
9 3/4% senior notes due 2000(c).............................    7,405     7,405
10 1/4% senior subordinated notes due 2002(d)...............       --     3,909
Other due 1998-2010.........................................   46,977    43,429
                                                             --------  --------
                                                              759,389   720,250
Less current portion........................................    1,811     2,528
                                                             --------  --------
                                                             $757,578  $717,722
                                                             ========  ========

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

*   Indicates average interest rate for 1997 and 1996.                          

(a) In 1996, the reducing revolving credit facility (the Credit Agreement),     
  entered into with a syndicate of banks, was amended to expire December 15,
    2001 with the total commitment increased to $850,000 from $465,000 (see note
3 to consolidated financial statements). The facility will be reduced by
$75,000 on December 15, 1999 and an additional $100,000 on December 15, 
2000. The Credit Agreement provides up to $125,000 for the issuance of  
 letters of credit. At December 31, 1997, $40,089 of letters of credit had
  been issued under the Credit Agreement. Obligations under the facility are
  secured by substantially all of the Company's assets. Borrowings under the
   facility bear interest, at the Company's option, at an annual rate equal to
the base rate or the Eurodollar rate plus 0.875%. The base rate is the  
higher of 0.50% in excess of the Federal Reserve reported certificate of
    deposit rate and the prime lending rate. Letter of credit fees of 0.875% are
  payable on outstanding letters of credit and a commitment fee of 0.375% is
payable on the unutilized facility.                                     

   During 1997, the Company entered into interest rate swaps to reduce (hedge)
  the impact of interest rate changes for variable rate borrowings under its
credit facility. The agreements include an aggregate notional amount of 
$405,000, fixed interest rates ranging from 5.78% to 6.40% and maturity 
dates ranging from April 1998 to October 2002.                          

(b) The 9 3/4% senior notes due 1999 are not redeemable prior to maturity on    
November 1, 1999.                                                       

(c) The 9 3/4% senior notes due 2000 are not redeemable prior to maturity on    
April 1, 2000.                                                          

(d) The 10 1/4% senior subordinated notes were redeemed on April 1, 1997 at     
105.125% of par.                                                        

    Minimum payments on long-term debt due within five years from December 31,
1997 are as follows:                                                            

                                                                [Download Table]
                                                                        
1998........................................................    $  1,811
1999........................................................      23,797
2000........................................................       9,180
2001........................................................     699,831
2002........................................................       1,361
Thereafter..................................................      23,409
                                                                --------
Total.......................................................    $759,389
                                                                ========

12. PENSION PLANS                                                               

The Company and certain of its subsidiaries have in effect, for       
substantially all U.S. employees, pension plans under which funds are deposited 
with trustees. The benefits under these plans are based primarily on years of   
service and either final average salary or fixed amounts for each year of       
service. The Company's policy is to fund amounts which are actuarially          
determined to provide the plans with sufficient assets to meet future benefit   
payment requirements. Plan assets consist principally of publicly traded equity 
and fixed-income securities. Pension coverage for employees of non-U.S.         
subsidiaries is provided in accordance with local requirements and customary    
practices.                                                                      

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

   For certain pension plans, the plan assets exceed the accumulated benefit
obligations (overfunded plans); and in the remainder of the plans, the          
accumulated benefit obligations exceed the plan assets (underfunded plans).     
During 1997, the Company merged several of its underfunded plans with its       
overfunded plans.                                                               

As of December 31, 1997 and 1996, the funded status of the Company's  
pension plans was as follows:                                                   

                                                        [Enlarge/Download Table]

                                                       1997                        1996           
                                            --------------------------  --------------------------
                                            OVER-FUNDED   UNDER-FUNDED  OVER-FUNDED   UNDER-FUNDED
                                               PLANS         PLANS         PLANS         PLANS    
                                            -----------   ------------  -----------   ------------
                                                                                                  
Actuarial present value of benefit                                                                
  obligations:                                                                                    
  Vested benefit obligations...............  $396,189       $ 30,604     $259,200       $119,158  
                                             --------       --------     --------       --------  
  Accumulated benefit obligations..........  $406,385       $ 30,878     $265,396       $124,022  
                                             --------       --------     --------       --------  
  Projected benefit obligations............  $427,737       $ 34,039     $289,973       $127,234  
Plan assets at fair value..................   568,094          1,551      408,979         79,735  
                                             --------       --------     --------       --------  
Funded status..............................   140,357        (32,488)     119,006        (47,499) 
Unrecognized net (gain) loss...............  (120,839)         6,889      (89,702)          (205) 
Unrecognized transition (asset)                                                                   
  obligations..............................    (2,192)         1,525       (1,389)           628  
Unrecognized prior service cost............    15,255          2,571        2,837         15,033  
Minimum liability adjustment...............        --         (7,824)          --        (12,200) 
                                             --------       --------     --------       --------  
(Accrued) prepaid pension cost.............  $ 32,581       $(29,327)    $ 30,752       $(44,243) 
                                             ========       ========     ========       ========  

   Included in the underfunded plans are amounts for unfunded, non-qualified
defined benefit plans.                                                          

    At December 31, 1997 and 1996, the Company recorded a minimum liability of
$7,824 and $12,200, respectively, for underfunded plans with a partial offset to
other assets of $5,292 and $7,300, respectively, and an after-tax charge to     
shareholders' equity of $1,646 and $3,200, respectively.                        

     Assumptions as of December 31 used to develop the net periodic pension cost
for U.S. plans were:                                                            

                                                                [Download Table]

                                                             1997   1996   1995 
                                                             -----  -----  -----
                                                                                
Discount rate for benefit obligations....................... 7.25%  7.75%  7.50%
Expected long-term rate of return on assets................. 9.00%  9.00%  9.00%
Rate of increase in compensation levels..................... 4.75%  5.00%  5.00%

   For non-U.S. plans, which were not material, similar economic assumptions
were used.                                                                      

  The components of net periodic pension cost for the years ended December
31, 1997, 1996 and 1995 were as follows:                                        

                                                        [Enlarge/Download Table]

                                                            1997       1996       1995   
                                                          --------   --------   -------- 
                                                                                         
Service cost............................................. $  8,404   $  9,377   $  7,618 
Interest cost on projected benefit obligations...........   31,996     31,142     30,317 
Actual return on assets..................................  (95,430)   (52,049)   (91,611)
Amortization and deferral, net...........................   47,782     11,443     52,953 
                                                          --------   --------   -------- 
Net periodic pension cost................................ $ (7,248)  $    (87)  $   (723)
                                                          ========   ========   ======== 

 For discontinued operations, the total projected benefit obligations at
December 31, 1997 and 1996 were $203,737 and $214,822, respectively, and are    
fully funded. Interest cost on the projected benefit obligations for            

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

1997, 1996 and 1995 was $16,097, $16,502 and $19,609, respectively, and was     
fully offset by return on assets resulting in no net periodic pension cost.     

13. POSTRETIREMENT BENEFITS                                                     

     The Company provides certain health care and life insurance benefits to its
eligible retired employees, principally in the United States, with some of these
retirees paying a portion of the related costs. The Company's accumulated       
postretirement benefit obligations, none of which are funded, and the accrued   
postretirement benefit cost at December 31, 1997 and 1996 were as follows:      

                                                                [Download Table]

                                                               1997       1996   
                                                             --------   -------- 
                                                                                 
Actuarial present value of accumulated postretirement                            
  benefit obligations:                                                           
  Retirees.................................................. $ 16,980   $ 13,493 
  Fully eligible plan participants..........................    1,925      2,416 
  Other plan participants...................................    3,113      3,053 
                                                             --------   -------- 
  Total.....................................................   22,018     18,962 
Unrecognized transition obligations.........................  (15,330)   (16,614)
Unrecognized net loss.......................................   (4,611)      (561)
Unrecognized prior service cost.............................    1,964      2,495 
                                                             --------   -------- 
Accrued postretirement benefit cost......................... $  4,041   $  4,282 
                                                             ========   ======== 

    The components of postretirement benefit cost for the years ended December
31, 1997, 1996 and 1995 were as follows:                                        

                                                        [Enlarge/Download Table]

                                                            1997       1996       1995   
                                                          --------   --------   -------- 
                                                                                         
Service cost............................................. $    187   $    395   $    198 
Interest cost on accumulated postretirement benefit                                      
  obligations............................................    1,433      1,951      1,927 
Amortization of transition obligations...................    1,022      1,107      1,373 
Amortization and deferral, net...........................     (756)      (124)       (63)
                                                          --------   --------   -------- 
Postretirement benefit cost.............................. $  1,886   $  3,329   $  3,435 
                                                          ========   ========   ======== 

    Discount rates of 7.25% and 7.75% were used in determining the accumulated
postretirement benefit obligations at December 31, 1997 and 1996, respectively. 
The health care cost trend rates used in determining the accumulated            
postretirement benefit obligations at December 31, 1997 were 8.7% in 1998       
gradually declining to 5.0% by 2005. The effect of a 1% increase in the health  
care cost trend rates in each year would increase the total service and interest
cost components of the postretirement benefit cost for 1997 by approximately    
$142 and increase the accumulated postretirement benefit obligations at December
31, 1997 by approximately $1,400.                                               

14. FINANCIAL INSTRUMENTS                                                       

    The following methods and assumptions were used to estimate the fair value
of the Company's financial instruments.                                         

  Cash and cash equivalents, accounts and notes receivable and accounts payable:
     The carrying amount approximates fair value due to the short-term nature of
these items.                                                                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

Long-term receivables and investments:                                      
     The fair value is based on quoted market prices for similar publicly-traded
securities or on the present value of estimated future cash flows.              

Long-term debt:                                                             
     The fair value of variable-rate long-term debt approximates carrying value.

Forward exchange contracts and interest rate hedges:                        
The fair value is based on quoted market prices of similar contracts. 

     The estimated fair value of the Company's financial instruments at December
31, 1997 and 1996 was as follows:                                               

                                                        [Enlarge/Download Table]

                                                       1997                   1996        
                                               --------------------   --------------------
                                               CARRYING      FAIR     CARRYING      FAIR  
                                                VALUE       VALUE      VALUE       VALUE  
                                               --------    --------   --------    --------
                                                                                          
Long-term receivables and investments......... $ 35,017    $ 42,737   $ 32,427    $ 39,817
Long-term debt................................  759,389     760,609    720,250     720,824
Forward exchange contracts....................       --      (8,384)        --          87
Interest rate hedges..........................       --      (3,555)        --          --

The Company utilizes forward exchange contracts to hedge U.S.         
dollar-denominated sales, under long-term contracts, of certain foreign         
subsidiaries. The Company does not engage in speculation. The Company's forward 
exchange contracts do not subject the Company to risk due to exchange rate      
movements because gains and losses on these contracts offset gains and losses on
the sales and related receivables being hedged. At December 31, 1997 and 1996,  
the Company had $162,000 and $216,000, respectively, of forward exchange        
contracts, denominated in Canadian dollars, which had a fair value of $153,616  
and $216,087, respectively. The contracts have varying maturities with none     
exceeding five years. Gains and losses on forward exchange contracts are        
deferred and recognized over the life of the underlying long-term contract being
hedged.                                                                         

     The Company has an outstanding contingent liability for guaranteed debt and
lease payments of $30,772, and for letters of credit $55,969. It was not        
practical to obtain independent estimates of the fair values for the contingent 
liability for guaranteed debt and lease payments and for letters of credit      
without incurring excessive costs. In the opinion of management, non-performance
by the other parties to the contingent liabilities will not have a material     
effect on the Company's results of operations and financial condition.          

15. STOCK OPTION AND INCENTIVE PLANS                                            

   Pursuant to the Company's stock option plans, stock options and shares of
restricted stock have been granted to officers and key employees and stock      
options to directors. Under the stock option plans, 7,468,000 shares of common  
stock may be issued. Stock options outstanding under the stock option plans were
granted at a price equal to 100% of the market price on the date of grant and   
are exercisable in annual installments of 20% or 33%, commencing one year from  
date of grant and expiring ten years from date of grant.                        

     The Company applies Accounting Principles Board Opinion #25, Accounting for
Stock Issued to Employees, in accounting for its stock option plans.            
Accordingly, no compensation expense has been recognized for these plans. Had   
compensation expense for the Company's stock option plans been determined based 
on the fair value at the grant dates for awards under these plans consistent    
with SFAS No. 123, Accounting for Stock-Based Compensation, the Company's pro   
forma net earnings would have been $92,137 for 1997, $79,425 for 1996 and       
$69,487 for 1995 and earnings per share would have been $1.38 in 1997, $1.15 in 
1996 and $1.00 in 1995.                                                         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

    The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average          
assumptions: risk-free interest rate of 6.75% for 1997 and 7.0% for 1996 and    
1995, no dividends paid, expected life of 3.7 years for 1997 and five years for 
1996 and 1995, and volatility of 21% for 1997 and 23% for 1996 and 1995. The    
weighted-average fair value of options granted was $5.75 for 1997, $4.76 for    
1996 and $4.00 for 1995.                                                        

 A summary of the status of the Company's fixed stock option plans as of
December 31, 1997, 1996 and 1995 was follows:                                   

                                                        [Enlarge/Download Table]

                                                                                  WEIGHTED-
                                                          NUMBER       OPTION      AVERAGE 
                                                         OF SHARES  PRICE RANGE   EXERCISE 
                                                          (000S)     PER SHARE      PRICE  
                                                         ---------  ------------  ---------
                                                                                           
December 31, 1994.......................................   2,317    $15.00-21.25      N/A  
Granted.................................................   2,960     10.75-18.08           
Exercised...............................................     (25)          15.00           
Canceled................................................     (64)    15.00-18.25           
                                                          ------    ------------   ------  
December 31, 1995.......................................   5,188     10.75-21.25   $13.16  
Granted.................................................     516     11.00-15.75    13.43  
Exercised...............................................     (56)    10.75-11.63    11.37  
Canceled................................................    (236)    10.75-21.25    12.82  
                                                          ------    ------------   ------  
December 31, 1996.......................................   5,412     10.75-21.25    13.22  
Granted.................................................   1,069     18.88-22.88    21.09  
Exercised...............................................  (1,004)    10.75-18.75    14.64  
Canceled................................................    (217)    10.75-18.75    12.08  
                                                          ------    ------------   ------  
December 31, 1997.......................................   5,260    $10.75-22.88   $14.59  
                                                          ------    ------------   ------  

Stock options exercisable were 2,156,000, 2,103,000 and 1,188,000 at  
December 31, 1997, 1996 and 1995, respectively.                                 

The following summarizes information about the Company's stock options
outstanding as of December 31, 1997:                                            

                                                        [Enlarge/Download Table]

                                                                   OPTIONS OUTSTANDING         
                                                          -------------------------------------
                                                                         WEIGHTED-    WEIGHTED-
                                                            NUMBER        AVERAGE      AVERAGE 
                                                          OUTSTANDING    REMAINING    EXERCISE 
                                                            (000S)         LIFE         PRICE  
                RANGE OF EXERCISE PRICES                  -----------    ---------    ---------
                                                                                               
$10.75 to $15.75.........................................    3,559       7.1 years     $12.05  
$16.25 to $20.13.........................................      744       6.9 years      18.02  
$21.19 to $22.88.........................................      957       9.6 years      21.35  
                                                             -----       ---------     ------  
$10.75 to $22.88.........................................    5,260       7.6 years     $14.59  
                                                             -----       ---------     ------  

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                               OPTIONS EXERCISABLE   
                                                             ------------------------
                                                                            WEIGHTED-
                                                               NUMBER        AVERAGE 
                                                             OUTSTANDING    EXERCISE 
                                                               (000S)         PRICE  
                  RANGE OF EXERCISE PRICES                   -----------    ---------
                                                                                     
$10.75 to $15.75............................................    1,755        $12.79  
$16.25 to $20.13............................................      383         17.91  
$21.19 to $22.88............................................       18         21.25  
                                                                -----        ------  
$10.75 to $22.88............................................    2,156        $13.77  
                                                                -----        ------  

In addition to the granting of stock options, the Company has granted 
shares of restricted stock. Restrictions on certain shares lapse 100% three     
years from the date of grant. Restrictions on the remaining shares lapse in     
annual installments of 33% commencing one year from date of grant. The unearned 
compensation resulting from the grant of restricted shares is reported as a     
reduction to shareholders' equity in the Consolidated Balance Sheets and is     
being charged to earnings over the period the restricted shares vest.           

Shares available for grant at December 31, 1997 under the stock option
plans were 138,569.                                                             

16. COMMITMENTS AND CONTINGENCIES                                               

   The Company and certain of its subsidiaries are liable for lease payments
and are defendants in various lawsuits, including actions involving             
asbestos-containing products and certain environmental proceedings.             

     With respect to asbestos product liability and related litigation costs, as
of December 31, 1997 and 1996, two subsidiaries of the Company were among a     
number of defendants (typically 15 to 40) in approximately 110,000 and 94,700   
actions, respectively (including approximately 2,400 and 5,100 actions,         
respectively, in advanced stages of processing), filed in various states by     
plaintiffs alleging injury or death as a result of exposure to asbestos fibers. 
During 1997, 1996 and 1995, two subsidiaries of the Company received            
approximately 38,200, 39,900 and 44,000 new actions, respectively. Through      
December 31, 1997, approximately 199,000 of the approximately 309,000 total     
actions brought have been settled or otherwise disposed of.                     

     The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1,000 or more in compensatory damages and $2,000 
or more in punitive damages. Although the law in each state differs to some     
extent, it appears, based on advice of counsel, that liability for compensatory 
damages would be shared among all responsible defendants, thus limiting the     
potential monetary impact of such judgments on any individual defendant.        

    Following a decision of the Pennsylvania Supreme Court, in a case in which
neither the Company nor any of its subsidiaries were parties, that held         
insurance carriers are obligated to cover asbestos-related bodily injury actions
if any injury or disease process, from first exposure through manifestation,    
occurred during a covered policy period (the "continuous trigger theory of      
coverage"), the Company settled litigation with its primary and most of its     
first-level excess insurance carriers, substantially on the basis of the Court's
ruling. The Company has negotiated a final agreement with most of its excess    
carriers that are in the layers of coverage immediately above its first layer.  
The Company is currently receiving payments pursuant to this agreement. The     
Company believes that, with respect to the remaining carriers, a final agreement
can be achieved without litigation and on substantially the same basis that it  
has resolved the issues with its other carriers. Settlements are generally made 
on a group basis with payments made to individual claimants over periods of one 
to four years. Payments were made with respect to asbestos liability and related
costs aggregating $59,247 in 1997, $71,354 in 1996 and $56,739 in 1995,         
substantially all of which were covered by insurance. Related to payments not   
covered by insurance, the Company recorded charges to operations amounting to   
$8,000 in 1997, $8,000 in 1996 and $5,000 in 1995.                              
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

    In accordance with the Company's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or         
settlement, certain outstanding actions have progressed to a stage where the    
Company can reasonably estimate the cost to dispose of these actions. As of     
December 31, 1997, the Company estimates that the aggregate remaining cost of   
the disposition of the settled actions for which payments remain to be made and 
actions in advanced stages of processing, including associated legal costs, is  
approximately $47,350, and the Company expects that this cost will be           
substantially covered by insurance.                                             

  With respect to the 107,600 outstanding actions as of December 31, 1997,
which are in preliminary procedural stages, the Company lacks sufficient        
information upon which judgments can be made as to the validity or ultimate     
disposition of such actions, thereby making it difficult to estimate with       
reasonable certainty the potential liability or costs to the Company. When      
asbestos actions are received they are typically forwarded to local counsel to  
ensure that the appropriate preliminary procedural response is taken. The       
complaints typically do not contain sufficient information to permit a          
reasonable evaluation as to their merits at the time of receipt, and in         
jurisdictions encompassing a majority of the outstanding actions, the practice  
has been that little or no discovery or other action is taken until several     
months prior to the date set for trial. Accordingly, the Company generally does 
not have the information necessary to analyze the actions in sufficient detail  
to estimate the ultimate liability or costs to the Company, if any, until the   
actions appear on a trial calendar. A determination to seek dismissal, to       
attempt to settle or to proceed to trial is typically not made prior to the     
receipt of such information.                                                    

  It is also difficult to predict the number of asbestos lawsuits that the
Company's subsidiaries will receive in the future. The Company has noted that,  
with respect to recently settled actions or actions in advanced stages of       
processing, the mix of the injuries alleged and the mix of the occupations of   
the plaintiffs have been changing from those traditionally associated with the  
Company's asbestos-related actions. The Company is not able to determine with   
reasonable certainty whether this trend will continue. Based upon the foregoing,
and due to the unique factors inherent in each of the actions, including the    
nature of the disease, the occupation of the plaintiff, the presence or absence 
of other possible causes of a plaintiff's illness, the availability of legal    
defenses, such as the statute of limitations or state of the art, and whether   
the lawsuit is an individual one or part of a group, management is unable to    
estimate with reasonable certainty the cost of disposing of outstanding actions 
in preliminary procedural stages or of actions that may be filed in the future. 
However, the Company believes that its subsidiaries are in a favorable position 
compared to many other defendants because, among other things, the asbestos     
fibers in its asbestos-containing products were encapsulated. Considering the   
foregoing, as well as the experience of the Company's subsidiaries and other    
defendants in asbestos litigation, the likely sharing of judgments among        
multiple responsible defendants, and the substantial amount of insurance        
coverage that the Company expects to be available from its solvent carriers, the
Company believes that pending and reasonably anticipated future actions are not 
likely to have a material effect on the Company's results of operations and     
financial condition.                                                            

  Although the insurance coverage which the Company has is substantial, it
should be noted that insurance coverage for asbestos claims is not available to 
cover exposures initially occurring on and after July 1, 1984. The Company's    
subsidiaries continue to be named as defendants in new cases, some of which     
allege initial exposure after July 1, 1984.                                     

    In addition to claims for personal injury, the Company's subsidiaries have
been involved in an insignificant number of property damage claims based upon   
asbestos-containing materials found in schools, public facilities and private   
commercial buildings. Based upon proceedings to date, the overwhelming majority 
of these claims have been resolved without a material adverse impact on the     
Company. Likewise, the insignificant number of claims remaining to be resolved  
are not expected to have a material effect on the Company's results of          
operations and financial condition.                                             

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

The Company has recorded an accrual for its liabilities for           
asbestos-related matters that are deemed probable and can be reasonably         
estimated (settled actions and actions in advanced stages of processing), and   
has separately recorded an asset equal to the amount of such liabilities that is
expected to be recovered by insurance. In addition, the Company has recorded a  
receivable for that portion of payments previously made for asbestos product    
liability actions and related litigation costs that is recoverable from its     
insurance carriers. Liabilities for asbestos-related matters and the receivable 
from insurance carriers included in the Consolidated Balance Sheets were as     
follows at December 31, 1997 and 1996:                                          

                                                                [Download Table]

                                                              1997     1996  
                                                             -------  -------
                                                                             
Accounts and notes receivable............................... $56,039  $67,012
Other assets................................................  16,249   18,728
Accrued expenses............................................  50,688   60,659
Other liabilities...........................................   2,682   10,879

  With respect to environmental proceedings, the Company has been notified
that it is among the Potentially Responsible Parties under federal environmental
laws, or similar state laws, relative to the costs of investigating and in some 
cases remediating contamination by hazardous materials at several sites. Such   
laws impose joint and several liability for the costs of investigating and      
remediating properties contaminated by hazardous materials. Liability for these 
costs can be imposed on present and former owners or operators of the properties
or on parties who generated the wastes that contributed to the contamination.   
The Company's policy is to accrue environmental remediation costs when it is    
both probable that a liability has been incurred and the amount can be          
reasonably estimated. The measurement of liability is based on an evaluation of 
currently available facts with respect to each individual situation and takes   
into consideration factors such as existing technology, presently enacted laws  
and regulations and prior experience in remediation of contaminated sites.      
Investigations have been completed for approximately 17 sites and continuing    
investigations are being done at approximately 11 sites. Accruals are provided  
for all sites based on the factors discussed above. As remediation plans are    
written and implemented, estimated costs become more fact-based and less        
judgment-based. As assessments and remediation progress at individual sites,    
these liabilities are reviewed periodically and adjusted to reflect additional  
technical and legal information. While it is often difficult to reasonably      
quantify future environmental-related expenditures, the Company currently       
estimates its future non-capital expenditures related to environmental matters  
to range between $27,000 and $50,000. In connection with these expenditures, the
Company has accrued $31,716 at December 31, 1997 representing management's best 
estimate of probable non-capital environmental expenditures. These non-capital  
expenditures are estimated to be incurred over the next 10 to 20 years. In      
addition, capital expenditures aggregating $5,000 may be required during the    
next two years related to environmental matters. Although the Company is        
pursuing insurance recovery in connection with certain of these matters, no     
receivable has been recorded with respect to any potential recovery of costs in 
connection with any environmental matters.                                      

     Under operating lease commitments, expiring on various dates after December
31, 1997, the Company and certain of its subsidiaries are obligated as of       
December 31, 1997, to pay rentals totaling $30,658 as follows: $5,482 in 1998,  
$4,970 in 1999, $3,573 in 2000, $2,673 in 2001, $1,973 in 2002 and $11,987 in   
later years.                                                                    

At December 31, 1997, the Company had committed to a minimum employer 
contribution of $15,806 to the Company's 401K plans.                            

17. SEGMENT INFORMATION                                                         

  As discussed in note 2 to consolidated financial statements, the Company
divested all of its automotive OE components businesses in 1996. As a result of 
the divestitures, the Company is now reporting the results of its               
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

business units in two operating segments, Aerospace and Industrial. The         
presentation of sales and operating income under "Management's Discussion and   
Analysis of Financial Condition and Results of Operations -- Segment            
Review -- Aerospace" and "-- Segment Review -- Industrial" are an integral part 
of the financial statements. One customer (Boeing) in the Aerospace Segment     
represented approximately 14% and 12% of the Company's 1997 and 1996 total      
sales, respectively.                                                            

    Information on total assets, depreciation of property, plant and equipment
and capital expenditures by industry segment was as follows for the years ended 
December 31, 1997, 1996 and 1995:                                               

                                                        [Enlarge/Download Table]

                                                              1997      1996      1995 
                                                             ------    ------    ------
                                                                   (IN MILLIONS)       
                                                                                       
Total assets:                                                                          
  Aerospace................................................. $437.3    $415.5    $391.3
  Industrial................................................  310.6     287.2     298.3
  Corporate unallocated.....................................  185.1     146.8     134.3
                                                             ------    ------    ------
     Subtotal...............................................  933.0     849.5     823.9
  Discontinued operations...................................   --        --        70.6
                                                             ------    ------    ------
     Total.................................................. $933.0    $849.5    $894.5
                                                             ======    ======    ======
Depreciation of property, plant and equipment:                                         
  Aerospace................................................. $ 13.4    $ 12.2    $ 12.3
  Industrial................................................   14.0      12.9      12.9
  Corporate unallocated.....................................    2.3       1.9       1.6
                                                             ------    ------    ------
     Subtotal...............................................   29.7      27.0      26.8
  Discontinued operations...................................   --         3.5       5.7
                                                             ------    ------    ------
     Total.................................................. $ 29.7    $ 30.5    $ 32.5
                                                             ======    ======    ======
Capital expenditures:                                                                  
  Aerospace................................................. $ 46.9    $ 26.9    $ 17.6
  Industrial................................................   31.4      13.7      13.7
  Corporate unallocated.....................................    2.9       4.0       2.6
                                                             ------    ------    ------
     Subtotal...............................................   81.2      44.6      33.9
  Discontinued operations...................................   --         5.4       8.6
                                                             ------    ------    ------
     Total.................................................. $ 81.2    $ 50.0    $ 42.5
                                                             ======    ======    ======

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COLTEC INDUSTRIES INC 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

Information by geographic segment was as follows for the years ended  
December 31, 1997, 1996 and 1995:                                               

                                                        [Enlarge/Download Table]

                                                                         OPERATING   TOTAL 
                                                              SALES       INCOME     ASSETS
                                                             --------    ---------   ------
                                                                      (IN MILLIONS)        
                                                                                           
1997                                                                                       
Domestic operations......................................... $1,027.2     $198.4     $590.1
Foreign operations..........................................    287.7       39.1      157.8
                                                             --------     ------     ------
Total segments..............................................  1,314.9      237.5      747.9
Corporate unallocated.......................................       --      (39.7)     185.1
                                                             --------     ------     ------
     Total.................................................. $1,314.9     $197.8     $933.0
                                                             ========     ======     ======
1996                                                                                       
Domestic operations......................................... $  888.6     $182.5     $554.2
Foreign operations..........................................    271.1       16.2      148.5
                                                             --------     ------     ------
Total segments..............................................  1,159.7      198.7      702.7
Corporate unallocated.......................................       --      (41.1)     146.8
                                                             --------     ------     ------
     Total.................................................. $1,159.7     $157.6     $849.5
                                                             ========     ======     ======
1995                                                                                       
Domestic operations*........................................ $  854.0     $168.7     $554.8
Foreign operations..........................................    245.6       10.3      205.4
                                                             --------     ------     ------
Total segments..............................................  1,099.6      179.0      760.2
Corporate unallocated.......................................       --      (37.0)     134.3
                                                             --------     ------     ------
     Total.................................................. $1,099.6     $142.0     $894.5
                                                             ========     ======     ======

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

* Includes total assets from discontinued operations.                           

18. SUPPLEMENTARY EARNINGS INFORMATION                                          

The following expenses were included in the Consolidated Statements of
Earnings for the years ended December 31, 1997, 1996 and 1995.                  

                                                        [Enlarge/Download Table]

                                                              1997     1996     1995  
                                                             -------  -------  -------
                                                                                      
Maintenance................................................. $24,000  $22,816  $22,633
Taxes, other than federal income taxes                                                
  Payroll...................................................  30,025   24,633   24,379
  Property..................................................   4,928    4,626    4,226
  State and local...........................................   6,241    5,121    2,601
Rent........................................................   8,950    9,965    8,604
Research and developments costs.............................  46,548   44,125   45,730

19. SUBSEQUENT EVENTS                                                           

    On January 30, 1998, the Company acquired Marine and Petroleum Mfg. Inc.'s
manufacturing facilities based in Texas for approximately $17,000. The plants   
acquired produce flexible graphite and Teflon sealing products used in the      
petrochemical industry. Combined annual sales for these facilities are expected 
to approximate $18,000. The Company also acquired Tex-o-Lon and Repro-Lon for   
approximately $25,000. These                                                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 
(DOLLARS IN THOUSANDS)

two Texas businesses have combined annual sales of $15,000. Tex-o-Lon           
manufactures, machines and distributes Teflon products, primarily for the       
semiconductor industry. Repro-Lon reprocesses Teflon compounds for the chemical 
and semiconductor industries. The acquisitions were accounted for as purchases; 
accordingly, the purchase price, which was financed through available cash      
resources, was allocated to the acquired assets based upon their fair market    
values.                                                                         

   On February 2, 1998, the Company purchased the Sealing Division of Groupe
Carbone Lorraine for $45,600. This division, with facilities in France and South
Carolina, produces high-technology metallic gaskets used in the nuclear,        
petroleum and chemical industries. Sales for 1998 are expected to approximate   
$38,000. This acquisition will be accounted for as a purchase and the purchase  
price, also financed through available cash resources, will be allocated to the 
acquired assets based upon their fair market values.                            

In February 1998, the Company amended its existing credit facility    
increasing the total commitment to $900,000 from $850,000.                      

20. OTHER SUBSEQUENT EVENTS AND SUPPLEMENTAL GUARANTOR INFORMATION              

  In April 1998, the Company privately placed $300,000 principal amount of
7 1/2% Senior Notes due 2008 (Senior Notes) and $150,000 liquidation value of   
5 1/4% Trust Convertible Preferred Securities. Net proceeds of approximately    
$436,000 from both offerings were used to reduce indebtedness under Coltec's    
credit agreement.                                                               

 Substantially all the Company's subsidiaries incorporated in the United
States (the "Subsidiary Guarantors") have fully and unconditionally guaranteed, 
on a joint and several basis, the Company's obligations to pay principal and    
interest with respect to the Senior Notes. Each Subsidiary Guarantor is wholly  
owned and management has determined that separate financial statements for the  
Subsidiary Guarantors are not material to investors. The subsidiaries of the    
Company that are not Subsidiary Guarantors are referred to in this note as the  
"Non-Guarantor Subsidiaries".                                                   

 The following supplemental consolidating condensed financial statements
present balance sheets as of December 31, 1997 and 1996 and statements of       
earnings and of cash flows for the years ended December 31, 1997, 1996 and 1995.
In the consolidating financial statements, Coltec Industries Inc ("Parent")     
accounts for its investments in wholly-owned subsidiaries using the equity      
method and the Subsidiary Guarantors account for their investments in           
Non-Subsidiary Guarantors using the equity method. Interest expense related to  
the indebtedness under the Company's credit agreement and its three series of   
senior notes is allocated to United States subsidiaries based on net sales.     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF EARNINGS 

                                                        [Enlarge/Download Table]

                                                           DECEMBER 31, 1997                          
                                 ---------------------------------------------------------------------
                                             GUARANTOR     NON-GUARANTOR                              
                                  PARENT    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                 --------   ------------   -------------   ------------   ------------
                                                                                                      
Net sales....................... $430,206     $586,901       $340,833        $(43,071)     $1,314,869 
Cost of sales...................  295,466      394,948        250,926         (43,071)        898,269 
                                 --------     --------       --------        --------      ---------- 
Gross profit....................  134,740      191,953         89,907              --         416,600 
Selling and administrative......   49,854      122,251         46,703              --         218,808 
                                 --------     --------       --------        --------      ---------- 
Operating income................   84,886       69,702         43,204              --         197,792 
Equity earnings of                                                                                    
  subsidiaries..................   55,570       22,156             --         (77,726)             -- 
Interest expense and other,                                                                           
  net...........................  (30,505)     (54,975)        31,437              --         (54,043)
                                 --------     --------       --------        --------      ---------- 
Earnings before income taxes....  109,951       36,883         74,641         (77,726)        143,749 
Income taxes....................   15,077        8,630         25,168              --          48,875 
                                 --------     --------       --------        --------      ---------- 
Net earnings.................... $ 94,874     $ 28,253       $ 49,473        $(77,726)     $   94,874 
                                 ========     ========       ========        ========      ========== 

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CONSOLIDATING CONDENSED STATEMENT OF EARNINGS 

                                                        [Enlarge/Download Table]

                                                            DECEMBER 31, 1996                          
                                  ---------------------------------------------------------------------
                                              GUARANTOR     NON-GUARANTOR                              
                                   PARENT    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                  --------   ------------   -------------   ------------   ------------
                                                                                                       
Net sales.......................  $363,743     $530,876       $285,875        $(20,803)     $1,159,691 
Cost of sales...................   253,345      360,074        218,507         (20,803)        811,123 
                                  --------     --------       --------        --------      ---------- 
Gross profit....................   110,398      170,802         67,368              --         348,568 
Selling and administrative......    32,749       82,812         75,432                         190,993 
                                  --------     --------       --------        --------      ---------- 
Operating income................    77,649       87,990         (8,064)             --         157,575 
Equity earnings of                                                                                     
  subsidiaries..................    43,755       12,820             --         (56,575)             -- 
Interest expense and other,                                                                            
  net...........................   (66,891)     (16,676)         8,673                         (74,894)
                                  --------     --------       --------        --------      ---------- 
Earnings from continuing                                                                               
  operations before income taxes                                                                       
  and extraordinary item........    54,513       84,134            609         (56,575)         82,681 
Income taxes....................   (19,309)      24,672         22,748                          28,111 
                                  --------     --------       --------        --------      ---------- 
Earnings from continuing                                                                               
  operations before                                                                                    
  extraordinary item............    73,822       59,462        (22,139)        (56,575)         54,570 
Discontinued operations (net of                                                                        
  tax)..........................    37,931           --         19,252                          57,183 
Extraordinary item (net of                                                                             
  tax)..........................   (30,614)          --             --                         (30,614)
                                  --------     --------       --------        --------      ---------- 
Net earnings....................  $ 81,139     $ 59,462       $ (2,887)       $(56,575)     $   81,139 
                                  ========     ========       ========        ========      ========== 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF EARNINGS 

                                                        [Enlarge/Download Table]

                                                             DECEMBER 31, 1995                          
                                   ---------------------------------------------------------------------
                                               GUARANTOR     NON-GUARANTOR                              
                                    PARENT    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                   --------   ------------   -------------   ------------   ------------
                                                                                                        
Net sales........................  $472,806     $379,419       $253,071        $ (5,672)     $1,099,624 
Cost of sales....................   317,612      242,777        189,484          (5,672)        744,201 
                                   --------     --------       --------        --------      ---------- 
Gross profit.....................   155,194      136,642         63,587              --         355,423 
Selling and administrative.......    89,562       77,614         19,225                         186,401 
Special charges..................    27,000           --             --                          27,000 
                                   --------     --------       --------        --------      ---------- 
Operating income.................    38,632       59,028         44,362              --         142,022 
Equity earnings in                                                                                      
  subsidiaries...................    58,100       12,820             --         (70,920)             -- 
Interest expense and other,                                                                             
  net............................   (79,910)      (9,264)          (712)                        (89,886)
                                   --------     --------       --------        --------      ---------- 
Earnings from continuing                                                                                
  operations before income taxes                                                                        
  and extraordinary item.........    16,822       62,584         43,650         (70,920)         52,136 
Income taxes.....................   (18,850)      21,827         14,638                          17,615 
                                   --------     --------       --------        --------      ---------- 
Earnings from continuing                                                                                
  operations before extraordinary                                                                       
  item...........................    35,672       40,757         29,012         (70,920)         34,521 
Discontinued operations (net of                                                                         
  tax)...........................    35,488        1,151             --                          36,639 
Extraordinary item (net of                                                                              
  tax)...........................      (254)                         --                            (254)
                                   --------     --------       --------        --------      ---------- 
Net earnings.....................  $ 70,906     $ 41,908       $ 29,012        $(70,920)     $   70,906 
                                   ========     ========       ========        ========      ========== 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED BALANCE SHEET

                                                        [Enlarge/Download Table]

                                                           DECEMBER 31, 1997                           
                                -----------------------------------------------------------------------
                                              GUARANTOR     NON-GUARANTOR                              
                                  PARENT     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                ----------   ------------   -------------   ------------   ------------
                                                                                                       
Cash and cash equivalents.....  $    9,912     $    722       $  4,059                       $ 14,693  
Accounts and notes receivable,                                                                         
  net.........................          --       60,881         59,430                        120,311  
Inventory, net................      99,100       71,958         85,678                        256,736  
Deferred income taxes.........       4,535       10,689            (29)                        15,195  
Other current assets..........       4,540       10,406          5,562                         20,508  
                                ----------     --------       --------      -----------      --------  
  Total current assets........     118,087      154,656        154,700               --       427,443  
Intercompany, net.............    (741,897)      10,933        730,964                             --  
Investments in affiliates.....   1,057,890      355,399          2,688      $(1,415,977)           --  
Property, plant and                                                                                    
  equipment...................      89,488      118,405         79,726                        287,619  
Cost in excess of net assets                                                                           
  acquired, net...............      21,820      133,441          2,490                        157,751  
Other assets..................      40,266        3,490         16,465                         60,221  
                                ----------     --------       --------      -----------      --------  
  Total assets................  $  585,654     $776,324       $987,033      $(1,415,977)     $933,034  
                                ==========     ========       ========      ===========      ========  
Total current liabilities.....  $   93,669     $ 49,494       $ 96,415                       $239,578  
Long term debt................     689,302        1,611         66,665                        757,578  
Deferred income taxes.........     (32,780)     101,871         10,138                         79,229  
Other liabilities.............      39,706       12,844         10,544      $    (2,202)       60,892  
Liabilities of discontinued                                                                            
  operations..................     154,918           --             --                        154,918  
Shareholders' equity..........    (359,161)     610,504        803,271       (1,413,775)     (359,161) 
                                ----------     --------       --------      -----------      --------  
  Total liabilities and                                                                                
     shareholders' equity.....  $  585,654     $776,324       $987,033      $(1,415,977)     $933,034  
                                ==========     ========       ========      ===========      ========  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED BALANCE SHEET 

                                                        [Enlarge/Download Table]

                                                           DECEMBER 31, 1996                           
                                 ----------------------------------------------------------------------
                                                                 NON-                                  
                                               GUARANTOR      GUARANTOR                                
                                   PARENT     SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                 ----------   ------------   ------------   ------------   ------------
                                                                                                       
Cash and cash equivalents....... $    5,475     $    570       $  8,984                     $  15,029  
Accounts and notes receivable,                                                                         
  net...........................     38,773       49,556        101,996                       190,325  
Inventory, net..................     77,816       54,269         72,113                       204,198  
Deferred income taxes...........      5,566        8,830         (3,872)                       10,524  
Other current assets............     14,417        5,583          2,895                        22,895  
                                 ----------     --------       --------     -----------     ---------  
  Total current assets..........    142,047      118,808        182,116              --       442,971  
Intercompany, net...............   (955,038)     274,177        680,861                            --  
Investments in affiliates.......  1,159,429       97,481             --     $(1,256,910)           --  
Property, plant and equipment...     72,933       75,166         66,691                       214,790  
Cost in excess of net assets                                                                           
  acquired, net.................     14,728      115,525          2,619                       132,872  
Other assets....................     39,025          954         18,890                        58,869  
                                 ----------     --------       --------     -----------     ---------  
  Total assets.................. $  473,124     $682,111       $951,177     $(1,256,910)    $ 849,502  
                                 ==========     ========       ========     ===========     =========  
Total current liabilities....... $   11,341     $  7,541       $208,514                     $ 227,396  
Long term debt..................    689,116           --         28,606                       717,722  
Deferred income taxes...........    (49,402)      92,120          7,928                        50,646  
Other liabilities...............     68,337        6,989         24,679                       100,005  
Liabilities of discontinued                                                                            
  operations....................    170,740           --             --                       170,740  
Shareholders' equity............   (417,008)     575,461        681,450     $(1,256,910)     (417,007) 
                                 ----------     --------       --------     -----------     ---------  
  Total liabilities and                                                                                
     shareholders' equity....... $  473,124     $682,111       $951,177     $(1,256,910)    $ 849,502  
                                 ==========     ========       ========     ===========     =========  

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COLTEC INDUSTRIES INC 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                     YEAR ENDED DECEMBER 31, 1997                    
                                  -------------------------------------------------------------------
                                                          NON-GUARANTOR                              
                                   PARENT     GUARANTOR   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                  ---------   ---------   -------------   ------------   ------------
                                                                                                     
Cash from operating activities... $  66,192   $    152      $  (4,925)            --      $  61,419  
                                  ---------   --------      ---------       --------      ---------  
Cash flows from investing                                                                            
  activities:                                                                                        
  Capital expenditures...........   (28,720)   (29,542)       (22,956)                      (81,218) 
  Acquisition of businesses......   (32,716)   (27,995)            --                       (60,711) 
  Cash from (to) Parent..........   (80,493)    57,537         22,956                            --  
                                  ---------   --------      ---------       --------      ---------  
     Cash used in investing                                                                          
       activities................  (141,929)        --             --             --       (141,929) 
                                  ---------   --------      ---------       --------      ---------  
Cash flows from financing                                                                            
  activities:                                                                                        
  Issuance of long-term debt.....       813         --             --                           813  
  Repayment of long-term debt....    (4,929)      (133)        (3,051)                       (8,113) 
  Increase (decrease) in                                                                             
     revolving facility, net.....      (500)        --         40,000                        39,500  
  Purchase of treasury stock.....   (42,695)        --             --                       (42,695) 
  Proceeds from sale of accounts                                                                     
     receivable..................        --         --         82,500                        82,500  
  Proceeds from exercise of                                                                          
     stock options...............     8,169         --             --                         8,169  
  Cash from (to) Parent..........   119,316        133       (119,449)                           --  
                                  ---------   --------      ---------       --------      ---------  
     Cash provided by financing                                                                      
       activities................    80,174         --             --             --         80,174  
                                  ---------   --------      ---------       --------      ---------  
Increase (decrease) in cash and                                                                      
  cash equivalents...............     4,437        152         (4,925)                         (336) 
Cash and cash equivalents --                                                                         
  beginning of period............     5,475        570          8,984                        15,029  
                                  ---------   --------      ---------       --------      ---------  
Cash and cash equivalents --                                                                         
  end of period.................. $   9,912   $    722      $   4,059             --      $  14,693  
                                  =========   ========      =========       ========      =========  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                       YEAR ENDED DECEMBER 31, 1996                     
                                  ----------------------------------------------------------------------
                                               GUARANTOR     NON-GUARANTOR                              
                                   PARENT     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                  ---------   ------------   -------------   ------------   ------------
                                                                                                        
Cash from operating                                                                                     
  activities....................  $  43,920     $  (179)       $  5,762              --      $  49,503  
                                  ---------     -------        --------        --------      ---------  
Cash flows from investing                                                                               
  activities:                                                                                           
  Capital expenditures..........    (20,799)     (8,376)        (15,375)                       (44,550) 
  Proceeds from divestitures....    329,113          --              --                        329,113  
  Cash from (to) Parent.........    (23,751)      8,376          15,375                             --  
                                  ---------     -------        --------        --------      ---------  
     Cash provided by investing                                                                         
       activities...............    284,563          --              --              --        284,563  
                                  ---------     -------        --------        --------      ---------  
Cash flows from financing                                                                               
  activities:                                                                                           
  Proceeds from debt                                                                                    
     refinancing................    542,000          --              --                        542,000  
  Repayment of long-term debt...   (622,582)         --              --                       (622,582) 
  Decrease in revolving                                                                                 
     facility, net..............   (196,000)         --              --                       (196,000) 
  Purchase of treasury stock....    (46,426)         --              --                        (46,426) 
                                  ---------     -------        --------        --------      ---------  
     Cash used in financing                                                                             
       activities...............   (323,008)         --              --              --       (323,008) 
                                  ---------     -------        --------        --------      ---------  
Increase (decrease) in cash and                                                                         
  cash equivalents..............      5,475        (179)          5,762                         11,058  
Cash and cash equivalents --                                                                            
  beginning of period...........         --         749           3,222                          3,971  
                                  ---------     -------        --------        --------      ---------  
Cash and cash equivalents -- end                                                                        
  of period.....................  $   5,475     $   570        $  8,984              --      $  15,029  
                                  =========     =======        ========        ========      =========  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                           DECEMBER 31, 1995                          
                                 ---------------------------------------------------------------------
                                             GUARANTOR     NON-GUARANTOR                              
                                  PARENT    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                 --------   ------------   -------------   ------------   ------------
                                                                                                      
Cash from operating                                                                                   
  activities.................... $ 89,825     $  (485)       $  1,668              --       $ 91,008  
                                 --------     -------        --------        --------       --------  
Cash flows from investing                                                                             
  activities:                                                                                         
  Capital expenditures..........  (25,559)     (8,900)         (8,037)                       (42,496) 
  Acquisition of business.......  (21,750)         --              --                        (21,750) 
  Other.........................   (2,512)         --              --                         (2,512) 
  Cash from (to) Parent.........  (16,937)      8,900           8,037                             --  
                                 --------     -------        --------        --------       --------  
     Cash used in investing                                                                           
       activities...............  (66,758)         --              --              --        (66,758) 
                                 --------     -------        --------        --------       --------  
Cash flows from financing                                                                             
  activities:                                                                                         
  Issuance of long-term debt....       --          --          19,070                         19,070  
  Repayment of long-term debt...  (11,084)         --          (2,453)                       (13,537) 
  Decrease in revolving                                                                               
     facility, net..............  (30,000)         --              --                        (30,000) 
  Cash from (to) Parent.........   16,617          --         (16,617)                            --  
                                 --------     -------        --------        --------       --------  
     Cash used in financing                                                                           
       activities...............  (24,467)         --              --              --        (24,467) 
                                 --------     -------        --------        --------       --------  
  Increase (decrease) in cash                                                                         
     and cash equivalents.......   (1,400)       (485)          1,668                           (217) 
  Cash and cash equivalents --                                                                        
     beginning of period........    1,400       1,234           1,554                          4,188  
                                 --------     -------        --------        --------       --------  
  Cash and cash equivalents --                                                                        
     end of period..............       --     $   749        $  3,222              --       $  3,971  
                                 ========     =======        ========        ========       ========  

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY          
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS CONFIDENTIAL    
OFFERING CIRCULAR AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY INITIAL      
PURCHASER. THIS CONFIDENTIAL OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO  
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY  
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN  
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS CONFIDENTIAL OFFERING CIRCULAR  
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY          
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME     
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE SUCH DATE.                                                    

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

TABLE OF CONTENTS 

                                                                [Download Table]

                                        PAGE
                                        ----
                                            
Available Information.................    i 
Incorporation of Certain Documents by       
  Reference...........................    i 
Prospectus Summary....................    1 
Risk Factors..........................   10 
The Exchange Offer....................   14 
Use of Proceeds.......................   21 
Capitalization........................   21 
Selected Consolidated Financial and         
  Other Data..........................   22 
Management's Discussion and Analysis        
  of Financial Condition and Results        
  of Operations.......................   24 
Business..............................   33 
Management............................   46 
Description of the Senior Notes.......   48 
Description of Other Indebtedness.....   63 
United States Taxation................   69 
Plan of Distribution..................   71 
Legal Matters.........................   71 
Independent Public Accountants........   71 
Index to Consolidated Financial             
  Statements..........................  F-1 

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

COLTEC INDUSTRIES INC 

$300,000,000

7 1/2% Series B Senior Notes
Due 2008

PROSPECTUS

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

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PART II 

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS                              

Reference is made to Sections 1741 and 1742 of the 1988 Business      
Corporation Law of the Commonwealth of Pennsylvania, which provide for          
indemnification of directors and officers in certain circumstances. In addition,
Article VIII of the By-laws of Coltec provides that, except as prohibited by    
law, any director, officer or employee of Coltec is entitled to be indemnified  
in any action or proceeding in which he or she may be involved by virtue of     
holding such position.                                                          

In addition, Coltec maintains a directors' and officers' liability    
insurance policy and has entered into indemnification agreements with each of   
its executive officers and directors.                                           

   The indemnification referred to above will not limit the liability of any
director or officer of Coltec for violation of any of the federal securities    
laws.                                                                           

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                             

(a) Exhibits                                                          

                                                                [Download Table]
                                                                      
  +4.1    Indenture dated April 16, 1998, between Coltec and Bankers  
          Trust Company as trustee, relating to the 7 1/2% Senior     
          Secured Notes.                                              
  +4.2    Form of 7 1/2% Series B Senior Secured Notes (included in   
          Exhibit 4.1 above).                                         
  +4.3    Registration Rights Agreement, dated as of April 16, 1998,  
          between Coltec and the Initial Purchasers named therein.    
  +4.4    Fifth Amendment to the Credit Agreement, dated as of March  
          16, 1998 among Coltec, Coltec Aerospace Canada Ltd., the    
          Subsidiary Guarantors named therein, the financial          
          institutions party thereto from time to time, Bank of       
          America National Trust and Savings Association, as          
          Documentation Agent, The Chase Manhattan Bank, as           
          Syndication Agent, Bankers Trust Company, as Administrative 
          Agent, and Bank of Montreal, as Canadian Paying Agent.      
  +4.5    Consent and Agreement, dated as of March 31, 1998, with     
          respect to the Credit Agreement among Coltec, Coltec        
          Aerospace Canada Ltd., the Subsidiary Guarantors named      
          therein, the financial institutions party thereto from time 
          to time, Bank of America National Trust and Savings         
          Association, as Documentation Agent, The Chase Manhattan    
          Bank, as Syndication Agent, Bankers Trust Company, as       
          Administrative Agent, and Bank of Montreal, as Canadian     
          Paying Agent.                                               
  +4.6    Modification to Fifth Amendment to Credit Agreement, dated  
          as of April 20, 1998, among Coltec, Coltec Aerospace Canada 
          Ltd., the Subsidiary Guarantors named therein, the financial
          institutions party thereto from time to time, Bank of       
          America National Trust and Savings Association, as          
          Documentation Agent, The Chase Manhattan Bank, as           
          Syndication Agent, Bankers Trust Company, as Administrative 
          Agent, and Bank of Montreal, as Canadian Paying Agent.      
  +4.7    Amended and Restated Company Pledge Agreement, dated as of  
          March 24, 1998, made by Coltec in favor of Bankers Trust    
          Company as collateral agent.                                
  +4.8    Amended and Restated Company Security Agreement, dated as of
          March 24, 1998, made by Coltec in favor of Bankers Trust    
          Company as collateral agent.                                
  +4.9    Amended and Restated Subsidiary Pledge Agreement, dated     
          March 24, 1998, made by the Subsidiary named therein in     
          favor of Bankers Trust Company as collateral agent.         
  +4.10   Amended and Restated Subsidiary Security Agreement, dated   
          March 24, 1998, made by the Subsidiary named therein in     
          favor of Bankers Trust Company as collateral agent.         

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                                                        [Enlarge/Download Table]
                                                                                                       
 +4.11  Second Amendment to Receivables Transfer and Administration Agreement, dated January 26, 1998, 
        between Coltec and Coltec North Carolina Inc.                                                  
 +5.1   Opinion of Robert J. Tubbs, Executive Vice President, General Counsel and Secretary of Coltec. 
+12.1   Computation of Ratio of Earnings to Fixed Charges and other Ratios.                            
+23.1   Consent of Robert J. Tubbs (included in Item 5.1).                                             
*23.2   Consent of Arthur Andersen LLP.                                                                
+24.1   Power of Attorney (contained on the signature page)                                            
+25.1   Statement of Eligibility under the Trust Indenture Act of 1939 of Bankers Trust Company on Form
        T-1.                                                                                           
+99.1   Form of Letter of Transmittal.                                                                 
+99.2   Form of Notice of Guaranteed Delivery.                                                         
+99.3   Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.      
+99.4   Form of Letter to Clients.                                                                     

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

* Filed herewith.                                                             

+ Previously filed.                                                           

ITEM 22. UNDERTAKINGS                                                           

The undersigned Registrant hereby undertakes:                         

     (a) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement.      

           (i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;                                         

             (ii) to reflect in the prospectus any facts or events arising after
    the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the 
      aggregate, represent a fundamental change in the information set forth
 in the Registration Statement. Notwithstanding the foregoing, any
  increase or decrease in volume of securities offered (if the total
  dollar value of securities offered would not exceed that which was
       registered) and any deviation from the low or high end of the estimated
       maximum offering range may be reflected in the form of prospectus filed
     with the Commission pursuant to Rule 424(b) if, in the aggregate, the
      changes in volume and price represent no more than a 20 percent change
        in the maximum aggregate offering price set forth in the "Calculation of
    Registration Fee" table in the effective Registration Statement; and

            (iii) to include any material information with respect to the plan
      of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration  
Statement.                                                      

    (b) that, for the purpose of determining any liability under the
    Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered 
   therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;                         

          (c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the     
termination of the offering;                                          

 (d) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report 
pursuant report pursuant to section 13(a) or section 15(d) of the     
   Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
   Securities Exchange Act of 1934) that is incorporated by reference in the
   Registration Statement shall be deemed to be a new registration statement
relating to the securities offered                                    

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   therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;                         

        (e) to deliver or cause to be delivered with the prospectus, to each
     person to whom the prospectus is sent or given, the latest annual report to
  security holders that is incorporated by reference in the prospectus and
  furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
 14c-3 under the Securities and Exchange Act of 1934; and, where interim
   financial information required to be presented by Article 3 of Regulation
S-X are not set forth in the prospectus is sent or given, the latest  
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.             

    (f) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and    
     controlling persons of the Registrant pursuant to the foregoing provisions,
  or otherwise, the Registrant has been advised that in the opinion of the
   Securities and Exchange Commission such indemnification is against public
 policy as expressed in the Act and is, therefore, unenforceable. In the
     event that a claim for indemnification against such liabilities (other than
   the payment by the Registrant of expenses incurred or paid by a director,
   officer or controlling person of the Registrant in the successful defense
     of any action, suit or proceeding) is asserted by such director, officer or
    controlling person in connection with the securities being registered, the
   Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate    
 jurisdiction the question whether such indemnification by it is against
 public policy as expressed in the Act and will be governed by the final
adjudication of such issue;                                           

      (g) to respond to requests for information that is incorporated by
    reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
   Form, within one business day of receipt of such request, and to send the
   incorporated documents by first class mail or other equally prompt means.
  This includes information contained in documents filed subsequent to the
     effective date of the Registration Statement through the date of responding
to the request; and                                                   

        (h) to supply by means of a post-effective amendment all information
    concerning a transaction, and the company being acquired involved therein,
     that was not the subject of and included in the Registration Statement when
it became effective.                                                  

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the   
City of Charlotte, State of North Carolina on the 14th day of August, 1998.     

                         COLTEC INDUSTRIES INC

                         by                  *

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

                                 Name: John W. Guffey, Jr.
                                Title:Chairman and Chief
                               Executive Officer

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                  SIGNATURE                                   POSITION                    DATE      
                  ---------                                   --------                    ----      
                                                                                                    
                      *                        Chairman, Chief Executive Officer     August 14, 1998
---------------------------------------------  and Director                                         
             John W. Guffey, Jr.                                                                    

                      *                        President, Chief Operating Officer    August 14, 1998
---------------------------------------------  and Director                                         
               Nishan Teshoian                                                                      

                      *                        Executive Vice President,             August 14, 1998
---------------------------------------------  Chief Financial Officer and Director                 
              David D. Harrison                                                                     

                      *                        Vice President and Controller         August 14, 1998
---------------------------------------------                                                       
                John N. Maier                                                                       

                      *                        Director                              August 14, 1998
---------------------------------------------                                                       
              William H. Grigg                                                                      

                      *                        Director                              August 14, 1998
---------------------------------------------                                                       
                 Joel Moses                                                                         

                      *                        Director                              August 14, 1998
---------------------------------------------                                                       
             Richard A. Stuckey                                                                     

                      *                        Director                              August 14, 1998
---------------------------------------------                                                       
              David I. Margolis                                                                     

                      *                        Director                              August 14, 1998
---------------------------------------------                                                       
              Joseph R. Coppola                                                                     

          *By: /s/ ROBERT J. TUBBS                                                   August 14, 1998
---------------------------------------------                                                       
               Robert J. Tubbs                                                                      
              Attorney-in-Fact                                                                      

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                        AMI INDUSTRIES, INC.

                         by                  *

                                            ------------------------------------
                              Name: John M. Cybulski
                                           Title: Chairman and Chief Executive
                 Officer

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                DATE      
                      ---------                                   --------                ----      
                                                                                                    

                          *                            Chairman and Director         August 14, 1998
-----------------------------------------------------                                               
                  John M. Cybulski                                                                  

                          *                            Vice President and Treasurer  August 14, 1998
-----------------------------------------------------                                               
                   Thomas C. Ekle                                                                   

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary     August 14, 1998
-----------------------------------------------------  and Director                                 
                   Robert J. Tubbs                                                                  

                          *                            Director                      August 14, 1998
-----------------------------------------------------                                               
                  David D. Harrison                                                                 

               *By /s/ ROBERT J. TUBBS                                                              
  -------------------------------------------------                                                 
                   Robert J. Tubbs                                                                  
                  Attorney-in-Fact                                                                  
                                                                                     August 14, 1998

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                     CII HOLDINGS INC.

                                 by        /s/ ROBERT J. TUBBS

                                            ------------------------------------
                             Name: Robert J. Tubbs
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                DATE      
                      ---------                                   --------                ----      
                                                                                                    

                 /s/ ROBERT J. TUBBS                   President and Director        August 14, 1998
-----------------------------------------------------                                               
                   Robert J. Tubbs                                                                  

                          *                            Vice President and Treasurer  August 14, 1998
-----------------------------------------------------                                               
                  David D. Harrison                                                                 

               *By /s/ ROBERT J. TUBBS                                               August 14, 1998
  -------------------------------------------------                                                 
                   Robert J. Tubbs                                                                  
                  Attorney-in-Fact                                                                  

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                     COLTEC CANADA INC

                         by                  *
                                            ------------------------------------
                              Name: John M. Cybulski
                                     Title: Chairman and President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            Chairman, President and        August 14, 1998
-----------------------------------------------------  Director                                      
                   John M Cybulski                                                                   

                          *                            Vice President, Treasurer and  August 14, 1998
-----------------------------------------------------  Director                                      
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

               *By /s/ ROBERT J. TUBBS                                                August 14, 1998
  -------------------------------------------------                                                  
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                                  COLTEC INDUSTRIAL PRODUCTS INC

                         by                  *

                                            ------------------------------------
                                     Name: Klemens B. Schoenfelder
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                     SIGNATURE                                   POSITION                DATE      
                     ---------                                   --------                ----      
                                                                                                   

                         *                           President and Director         August 14, 1998
---------------------------------------------------                                                
              Klemens B. Schoenfelder                                                              

                /s/ ROBERT J. TUBBS                  Vice President, Secretary and  August 14, 1998
---------------------------------------------------  Director                                      
                  Robert J. Tubbs                                                                  

             *By: /s/ ROBERT J. TUBBS                                               August 14, 1998
   ---------------------------------------------                                                   
                  Robert J. Tubbs                                                                  
                 Attorney-in-Fact                                                                  

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                                    COLTEC INTERNATIONAL SERVICES CO

                         by                  *

                                            ------------------------------------
                                 Name: Michael J. Burdulis
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            President                      August 14, 1998
-----------------------------------------------------                                                
                 Michael J. Burdulis                                                                 

                          *                            Vice President and Treasurer   August 14, 1998
-----------------------------------------------------                                                
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

                          *                            Director                       August 14, 1998
-----------------------------------------------------                                                
                 Lawrence H. Polsky                                                                  

              *By: /s/ ROBERT J. TUBBS                                                               
  ------------------------------------------------                                                   
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                             COLTEC NORTH CAROLINA INC

                         by                  *

                                            ------------------------------------
                               Name: David D. Harrison
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                  SIGNATURE                                   POSITION                       DATE     
                  ---------                                   --------                       ----     
                                                                                                      

                      *                        President and Director                  August 14, 1998
---------------------------------------------                                                         
              David D. Harrison                                                                       

                      *                        Vice President and Treasurer            August 14, 1998
---------------------------------------------                                                         
            Thomas B. Jones, Jr.                                                                      

             /s/ ROBERT J. TUBBS               Vice President, Secretary and Director  August 14, 1998
---------------------------------------------                                                         
               Robert J. Tubbs                                                                        

           *By /s/ ROBERT J. TUBBS                                                                    
  -----------------------------------------                                                           
               Robert J. Tubbs                                                                        
              Attorney-in-Fact                                                                        

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                                 COLTEC TECHNICAL SERVICES INC

                                 by        /s/ ROBERT J. TUBBS

                                            ------------------------------------
                             Name: Robert J. Tubbs
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                  POSITION                 DATE      
                      ---------                                  --------                 ----      
                                                                                                    

                 /s/ ROBERT J. TUBBS                   President and Director        August 14, 1998
-----------------------------------------------------                                               
                   Robert J. Tubbs                                                                  

                          *                            Vice President and Treasurer  August 14, 1998
-----------------------------------------------------                                               
                  David D. Harrison                                                                 

*By       /s/ ROBERT J. TUBBS                                                   

--------------------------------                                        
Robert J. Tubbs                         
Attorney-in-Fact                        

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

               DELAVAN INC

                                 by        /s/ ROBERT J. TUBBS

                                            ------------------------------------
                             Name: Robert J. Tubbs
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                  POSITION                  DATE      
                      ---------                                  --------                  ----      
                                                                                                     

                 /s/ ROBERT J. TUBBS                   President, Secretary and       August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

                          *                            Vice President, Treasurer and  August 14, 1998
-----------------------------------------------------  Director                                      
                  David D. Harrison                                                                  

               *By /s/ ROBERT J. TUBBS                                                               
  -------------------------------------------------                                                  
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

               GARLOCK INC

                         by                  *

                                            ------------------------------------
                                 Name: Michael J. Burdulis
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            President                      August 14, 1998
-----------------------------------------------------                                                
                 Michael J. Burdulis                                                                 

                          *                            Vice President, Treasurer and  August 14, 1998
-----------------------------------------------------  Director                                      
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

               *By /s/ ROBERT J. TUBBS                                                               
  -------------------------------------------------                                                  
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                             GARLOCK INTERNATIONAL INC

                         by                  *

                                            ------------------------------------
                                 Name: Michael J. Burdulis
                       Title:President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            President                      August 14, 1998
-----------------------------------------------------                                                
                 Michael J. Burdulis                                                                 

                          *                            Vice President, Treasurer and  August 14, 1998
-----------------------------------------------------  Director                                      
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

               *By /s/ ROBERT J. TUBBS                                                               
  -------------------------------------------------                                                  
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                                GARLOCK OVERSEAS CORPORATION

                         by                  *

                                            ------------------------------------
                                 Name: Michael J. Burdulis
                                    Title:Chairman and President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            President                      August 14, 1998
-----------------------------------------------------                                                
                 Michael J. Burdulis                                                                 

                          *                            Vice President, Treasurer and  August 14, 1998
-----------------------------------------------------  Director                                      
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

               *By /s/ ROBERT J. TUBBS                                                               
  -------------------------------------------------                                                  
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of July, 1998.                                                         

                          HABER TOOL COMPANY INC

                         by                  *

                                            ------------------------------------
                                Name: Richard L. Dashnaw
                       Title:President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            President                      August 14, 1998
-----------------------------------------------------                                                
                 Richard L. Dashnaw                                                                  

                          *                            Vice President, Treasurer and  August 14, 1998
-----------------------------------------------------  Director                                      
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

               *By /s/ ROBERT J. TUBBS                                                               
  -------------------------------------------------                                                  
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                      JAMCO PRODUCTS LLC

                         by                  *

                                            ------------------------------------
                             Name: Thomas C. Johns
                       Title:President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION         DATE      
                      ---------                                   --------         ----      
                                                                                             

                          *                            President and Manager  August 14, 1998
-----------------------------------------------------                                        
                   Thomas C. Johns                                                           

                          *                            Manager                August 14, 1998
-----------------------------------------------------                                        
                  David D. Harrison                                                          

                 /s/ ROBERT J. TUBBS                   Manager                August 14, 1998
-----------------------------------------------------                                        
                   Robert J. Tubbs                                                           

*By       /s/ ROBERT J. TUBBS                                                   

--------------------------------                                        
Robert J. Tubbs                                         
Attorney-in-Fact                                        

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

                           MENASCO AEROSYSTEMS INC

                         by                  *

                                            ------------------------------------
                              Name: John M. Cybulski
                       Title: Chairman

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                  SIGNATURE                                   POSITION                    DATE      
                  ---------                                   --------                    ----      
                                                                                                    

                      *                        Chairman                                             
---------------------------------------------                                                       
              John M. Cybulski                                                       August 14, 1998

                      *                        Vice President, Finance and Director                 
---------------------------------------------                                                       
                John J. Orct                                                         August 14, 1998

                      *                        Vice President and Treasurer                         
---------------------------------------------                                                       
              David D. Harrison                                                      August 14, 1998

           By /s/ ROBERT J. TUBBS                                                                   
  -----------------------------------------                                                         
               Robert J. Tubbs                                                                      
              Attorney-in-Fact                                                                      

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

              STEMCO INC

                         by                  *

                                            ------------------------------------
                               Name: Michael J. Leslie
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

                                                        [Enlarge/Download Table]

                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            President                      August 14, 1998
-----------------------------------------------------                                                
                  Michael J. Leslie                                                                  

                          *                            Vice President, Treasurer and  August 14, 1998
-----------------------------------------------------  Director                                      
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

              *By: /s/ ROBERT J. TUBBS                                                               
  ------------------------------------------------                                                   
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, on the   
14th day of August, 1998.                                                       

              WALBAR INC

                         by                  *

                                            ------------------------------------
                             Name: Peter Challinor
                        Title: President

 Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the       
following persons in the capacities and on the dates indicated.                 

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                      SIGNATURE                                   POSITION                 DATE      
                      ---------                                   --------                 ----      
                                                                                                     

                          *                            President                      August 14, 1998
-----------------------------------------------------                                                
                   Peter Challinor                                                                   

                          *                            Vice President and Treasurer   August 14, 1998
-----------------------------------------------------                                                
                  David D. Harrison                                                                  

                 /s/ ROBERT J. TUBBS                   Vice President, Secretary and  August 14, 1998
-----------------------------------------------------  Director                                      
                   Robert J. Tubbs                                                                   

               *By /s/ ROBERT J. TUBBS                                                               
  -------------------------------------------------                                                  
                   Robert J. Tubbs                                                                   
                  Attorney-in-Fact                                                                   

 II-20

S-4/A
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EXHIBIT INDEX 

ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                            

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EXHIBITS                                                                  PAGE
--------                                                                  ----
                                                                              
     +4.1   Indenture dated April 16, 1998, between Coltec and Bankers        
            Trust Company as trustee, relating to the 7 1/2% Senior           
            Secured Notes.                                                    
     +4.2   Form of 7 1/2% Series B Senior Secured Notes (included in         
            Exhibit 4.1 above).                                               
     +4.3   Registration Rights Agreement, dated as of April 16, 1998,        
            between Coltec and the Initial Purchasers named therein.          
     +4.4   Fifth Amendment to the Credit Agreement, dated as of March        
            16, 1998 among Coltec, Coltec Aerospace Canada Ltd., the          
            Subsidiary Guarantors named therein, the financial                
            institutions party thereto from time to time, Bank of             
            America National Trust and Savings Association, as                
            Documentation Agent, the Chase Manhattan Bank, as                 
            Syndication Agent, Bankers Trust Company, as Administrative       
            Agent, and Bank of Montreal, as Canadian Paying Agent.            
     +4.5   Consent and Agreement, dated as of March 31, 1998, with           
            respect to the Credit Agreement among Coltec, Coltec              
            Aerospace Canada Ltd., the Subsidiary Guarantors named            
            therein, the financial institutions party thereto from time       
            to time, Bank of America National Trust and Savings               
            Association, as Documentation Agent, the Chase Manhattan          
            Bank, as Syndication Agent, Bankers Trust Company, as             
            Administrative Agent, and Bank of Montreal, as Canadian           
            Paying Agent.                                                     
     +4.6   Modification to Fifth Amendment to Credit Agreement, dated        
            as of April 20, 1998, among Coltec, Coltec Aerospace Canada       
            Ltd., the Subsidiary Guarantors named therein, the financial      
            institutions party thereto from time to time, Bank of             
            America National Trust and Savings Association, as                
            Documentation Agent, The Chase Manhattan Bank, as                 
            Syndication Agent, Bankers Trust Company, as Administrative       
            Agent, and Bank of Montreal, as Canadian Paying Agent.            
     +4.7   Amended and Restated Company Pledge Agreement, dated as of        
            March 24, 1998, made by Coltec in favor of Bankers Trust          
            Company as collateral agent.                                      
     +4.8   Amended and Restated Company Security Agreement, dated as of      
            March 24, 1998, made by Coltec in favor of Bankers Trust          
            Company as collateral agent.                                      
     +4.9   Amended and Restated Subsidiary Pledge Agreement, dated           
            March 24, 1998, made by the Subsidiary named therein in           
            favor of Bankers Trust Company as collateral agent.               
     +4.10  Amended and Restated Subsidiary Security Agreement, dated         
            March 24, 1998, made by the Subsidiary named therein in           
            favor of Bankers Trust Company as collateral agent.               
     +4.11  Second Amendment to Receivables Transfer and Administration       
            Agreement, dated January 26, 1998, between Coltec and Coltec      
            North Carolina Inc.                                               
     +5.1   Opinion of Robert J. Tubbs, Executive Vice President,             
            General Counsel and Secretary of Coltec.                          
    +12.1   Computation of Ratio of Earnings to Fixed Charges and other       
            Ratios.                                                           
    +23.1   Consent of Robert J. Tubbs (included in Item 5.1).                
    *23.2   Consent of Arthur Andersen LLP.                                   
    +24.1   Power of Attorney                                                 
    +25.1   Statement of Eligibility under the Trust Indenture Act of         
            1939 of Bankers Trust Company on Form T-1.                        
    +99.1   Form of Letter of Transmittal.                                    

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EXHIBITS                                                                PAGE
--------                                                                ----
                                                                            
    +99.2  Form of Notice of Guaranteed Delivery.                           
    +99.3  Form of Letter to Brokers, Dealers, Commercial Banks, Trust      
           Companies and Other Nominees.                                    
    +99.4  Form of Letter to Clients.                                       

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

* Filed herewith.                                                             

+ Previously filed.                                                           

 II-22

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘S-4/A’ Filing		Date		First		Last			Other Filings
		4/15/08		10		52
		12/31/01		71
		12/15/01		36		102
		12/31/00		71
		12/15/00		36		102
		4/1/00		102
		12/31/99		71
		12/15/99		36		102
		11/1/99		102
		12/31/98		71					10-K,  10-K405,  5
		10/15/98		2		52
		10/13/98		2		52
		9/16/98		2		18
		9/15/98		2
		8/18/98		2		18
Filed on:		8/17/98		1					10-Q,  S-3/A
		8/14/98		125		141
		7/14/98		5		37
		7/1/98		71
		6/30/98		71
		6/28/98		4					10-Q,  NT 10-Q
		5/15/98		4		84			8-K
		4/20/98		122		142
		4/16/98		2		142			8-K
		4/14/98		4					8-K
		4/8/98		4
		3/31/98		25		142
		3/30/98		4		12			8-K
		3/29/98		2		88			10-Q
		3/24/98		122		142
		3/16/98		61		142
		2/2/98		81		112
		1/30/98		81		111
		1/26/98		123		142
		12/31/97		2		118			10-K
		12/15/97		81		98
		10/7/97		97
		6/30/97		97
		4/1/97		102
		3/30/97		12		88			10-Q
		12/31/96		43		119			10-K405
		12/18/96		61		68
		12/31/95		76		112			10-K
		12/31/94		93		106			10-K405
		11/4/94		49
		9/26/94		49
		2/10/94		49					SC 13G
		12/31/93		12		26			10-K
		3/24/92		67		68
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