COLTEC INDUSTRIES INC
S-3/A, 1994-04-27
AIRCRAFT PARTS & AUXILIARY EQUIPMENT, NEC
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<PAGE>
   
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1994
    
   
                                                       REGISTRATION NO. 33-52777
    
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              -------------------

   
                                AMENDMENT NO. 1
    
   
                                       TO
    
                                    FORM S-3

                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                              -------------------
                             COLTEC INDUSTRIES INC
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                          <C>                         <C>
       PENNSYLVANIA                     3714                  13-1846375
      (State or other            (Primary Standard         (I.R.S. Employer
      jurisdiction of                Industrial             Identification
     incorporation or           Classification Code             Number)
       organization)                  Number)
</TABLE>

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

                                430 PARK AVENUE
                            NEW YORK, NEW YORK 10022
                                 (212) 940-0400
         (Address, including zip code, and telephone number, including
            area code, of registrant's principal executive offices)
                              -------------------

                            ANTHONY J. DIBUONO, ESQ.
                             COLTEC INDUSTRIES INC
                                430 PARK AVENUE
                            NEW YORK, NEW YORK 10022
                                 (212) 940-0400
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
                              -------------------

                                   COPIES TO:

<TABLE>
<S>                                 <C>
      John S. Herbert, Esq.               John M. Brandow, Esq.
       Shearman & Sterling                Davis Polk & Wardwell
       599 Lexington Avenue                450 Lexington Avenue
     New York, New York 10022            New York, New York 10017
          (212) 848-4000                      (212) 450-4000
</TABLE>

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

        Approximate date of commencement of proposed sale to the public:
  AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
                              -------------------

    If  the  only securities  being registered  on this  Form are  being offered
pursuant to dividend or interest reinvestment plans, please check the  following
box. / /

    If  any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to  Rule 415 under the Securities Act  of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

   
    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,  AS AMENDED,  OR UNTIL  THE REGISTRATION  STATEMENT
SHALL  BECOME EFFECTIVE ON SUCH DATE AS  THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
    

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                                EXPLANATORY NOTE

    This registration statement contains two forms of prospectus: one (the "U.S.
Prospectus") to be used in connection with a United States and Canadian offering
and one  (the  "International Prospectus")  to  be  used in  connection  with  a
concurrent international offering outside the United States and Canada. The U.S.
Prospectus  and  the International  Prospectus  are identical  except  that they
contain different front  cover pages. The  form of U.S.  Prospectus is  included
herein  and is followed by the front cover  page to be used in the International
Prospectus. The  front  cover page  for  the International  Prospectus  included
herein is labeled "Alternate Page for International Prospectus".
<PAGE>
INFORMATION   CONTAINED  HEREIN  IS  SUBJECT   TO  COMPLETION  OR  AMENDMENT.  A
REGISTRATION STATEMENT  RELATING TO  THESE SECURITIES  HAS BEEN  FILED WITH  THE
SECURITIES  AND EXCHANGE  COMMISSION. THESE SECURITIES  MAY NOT BE  SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR  TO THE TIME THE REGISTRATION STATEMENT  BECOMES
EFFECTIVE.  THIS  PROSPECTUS  SHALL  NOT  CONSTITUTE AN  OFFER  TO  SELL  OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE  SECURITIES
IN  ANY STATE IN WHICH SUCH OFFER,  SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
   
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED APRIL 27, 1994
    
                               23,211,084 SHARES
                             COLTEC INDUSTRIES INC
                                  COMMON STOCK
                               -----------------

   
OF THE 23,211,084 SHARES OF COMMON  STOCK OFFERED HEREBY, 18,611,084 SHARES  ARE
BEING  OFFERED  INITIALLY  IN  THE  UNITED  STATES  AND  CANADA  BY  THE  U.S.
  UNDERWRITERS AND 4,600,000  SHARES ARE BEING  OFFERED INITIALLY OUTSIDE  THE
  UNITED   STATES  AND   CANADA  BY  THE   INTERNATIONAL  UNDERWRITERS.  SEE
    "UNDERWRITERS". ALL THE SHARES OF COMMON STOCK OFFERED HEREBY ARE  BEING
    OFFERED BY THE SELLING STOCKHOLDERS. SEE "SELLING STOCKHOLDERS". COLTEC
     WILL  NOT RECEIVE  ANY PROCEEDS  FROM THE  SALE OF  THE SHARES BEING
       OFFERED HEREBY. THE COMMON STOCK IS  TRADED ON THE NEW YORK  STOCK
       EXCHANGE  AND THE PACIFIC STOCK  EXCHANGE UNDER THE SYMBOL "COT".
        ON APRIL 26, 1994,  THE LAST REPORTED SALE  PRICE OF THE  COMMON
          STOCK ON THE NEW YORK STOCK EXCHANGE WAS $18 7/8 PER SHARE.
    
                            ------------------------

    INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER "CERTAIN
                          SIGNIFICANT CONSIDERATIONS".

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

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.

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

                            PRICE $         A SHARE
                              -------------------

   
<TABLE>
<CAPTION>
                                                                            UNDERWRITING          PROCEEDS
                                                          PRICE TO         DISCOUNTS AND         TO SELLING
                                                           PUBLIC         COMMISSIONS (1)     STOCKHOLDERS (2)
                                                     ------------------  ------------------  ------------------
<S>                                                  <C>                 <C>                 <C>
PER SHARE..........................................          $                   $                   $
TOTAL..............................................          $                   $                   $
<FN>
- ---------
    (1)    COLTEC AND  THE  SELLING STOCKHOLDERS  HAVE  AGREED TO  INDEMNIFY THE
         UNDERWRITERS AGAINST CERTAIN  LIABILITIES, INCLUDING LIABILITIES  UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITERS".
    (2)   COLTEC HAS AGREED  TO PAY, OR REIMBURSE  THE SELLING STOCKHOLDERS FOR,
         CERTAIN EXPENSES OF THE OFFERING, WHICH ARE ESTIMATED AT $800,000.
</TABLE>
    

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

    THE SHARES ARE OFFERED, SUBJECT TO PRIOR  SALE, WHEN, AS AND IF ACCEPTED  BY
THE  UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY DAVIS POLK
& WARDWELL, COUNSEL FOR  THE UNDERWRITERS. IT IS  EXPECTED THAT DELIVERY OF  THE
SHARES WILL BE MADE ON OR ABOUT         , 1994 AT THE OFFICE OF MORGAN STANLEY &
CO.  INCORPORATED,  NEW YORK,  NEW YORK,  AGAINST PAYMENT  THEREFOR IN  NEW YORK
FUNDS.

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

MORGAN STANLEY & CO.
              INCORPORATED

      CS FIRST BOSTON

               DONALDSON, LUFKIN & JENRETTE
                     SECURITIES CORPORATION

                            MERRILL LYNCH & CO.

                              WERTHEIM SCHRODER & CO.
                                                      INCORPORATED

           , 1994
<PAGE>
    NO  PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY  REPRESENTATION NOT CONTAINED IN THIS  PROSPECTUS
AND,  IF GIVEN OR  MADE, SUCH INFORMATION  OR REPRESENTATION MUST  NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY COLTEC,  BY ANY SELLING STOCKHOLDER OR BY  ANY
UNDERWRITER.  THIS  PROSPECTUS  DOES  NOT  CONSTITUTE  AN  OFFER  TO  SELL  OR A
SOLICITATION OF AN OFFER TO BUY ANY  SECURITIES OTHER THAN THE SHARES OF  COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF
AN  OFFER TO  BUY ANY  OF THE  SECURITIES OFFERED  HEREBY TO  ANY PERSON  IN ANY
JURISDICTION IN WHICH IT IS  UNLAWFUL TO MAKE SUCH  AN OFFER OR SOLICITATION  TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS 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.

    No action has  been or  will be  taken in  any jurisdiction  by Coltec,  any
Selling  Stockholder or any  Underwriter that would permit  a public offering of
the Common  Stock  or possession  or  distribution  of this  Prospectus  in  any
jurisdiction where action for that purpose is required, other than in the United
States.  Persons into  whose possession  this Prospectus  comes are  required by
Coltec, the Selling Stockholders and the Underwriters to inform themselves about
and to observe any restrictions as to  the offering of the Common Stock and  the
distribution of this Prospectus.
                             ---------------------

                               TABLE OF CONTENTS
   
<TABLE>
<CAPTION>
                                                   PAGE
                                                 ---------
<S>                                              <C>
Incorporation of Certain Documents by
 Reference.....................................          3
Additional Information.........................          3
Prospectus Summary.............................          4
The Company....................................         10
Certain Significant Considerations.............         11
Price Range of Common Stock and Dividend
 Policy........................................         13
Consolidated Capitalization....................         14
Selected Financial Data........................         15
Management's Discussion and Analysis of
 Financial Condition and Results of
 Operations....................................         16

<CAPTION>
                                                   PAGE
                                                 ---------
<S>                                              <C>
Business.......................................         27
Management.....................................         41
Selling Stockholders...........................         44
Description of Capital Stock...................         45
Description of Certain Indebtedness............         47
Certain United States Federal Tax
 Considerations for Non-U.S. Holders of Common
 Stock.........................................         50
Underwriters...................................         52
Legal Matters..................................         54
Experts........................................         54
Index to Financial Statements..................        F-1
</TABLE>
    

   
    IN  CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE  THOSE WHICH  MIGHT  OTHERWISE PREVAIL  IN  THE OPEN  MARKET.  SUCH
TRANSACTIONS  MAY BE EFFECTED  ON THE NEW  YORK STOCK EXCHANGE  ("NYSE"), ON THE
PACIFIC STOCK EXCHANGE ("PSE") OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
    

                                       2
<PAGE>
   
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
    

   
    The following documents  filed with the  Securities and Exchange  Commission
(the  "Commission")  (File  No. 1-7568)  by  Coltec pursuant  to  the Securities
Exchange Act of 1934, as amended  (the "Exchange Act"), are hereby  incorporated
by reference in this Prospectus:
    

   
        (a)  Annual Report on Form  10-K for the fiscal  year ended December 31,
    1993; and
    

   
        (b) Current Report on Form 8-K dated April 14, 1994.
    

   
    In addition, all documents filed by Coltec pursuant to Section 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 offering (the "Offering") shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such  documents.  Any  statement  contained in  a  document  incorporated  by
reference  herein shall be deemed  to be modified or  superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any  other
subsequently  filed  document which  also  is 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.
    

   
    Copies of all documents which  are incorporated by reference (not  including
the  exhibits  to  such  information,  unless  such  exhibits  are  specifically
incorporated by reference in such  information) will be provided without  charge
to  each  person, including  any beneficial  owner, to  whom this  Prospectus is
delivered, upon written or oral request. Requests should be directed to  Coltec,
Attention: Secretary, 430 Park Avenue, New York, New York 10022; telephone (212)
940-0400.
    

   
                             ADDITIONAL INFORMATION
    

   
    Coltec  has filed with  the Commission a  Registration Statement (which term
shall include any amendments  thereto) on Form S-3  under the Securities Act  of
1933,  as amended (the "Securities Act"), with respect to the securities offered
hereby. This Prospectus does  not contain all the  information set forth in  the
Registration  Statement, certain parts  of which are  omitted in accordance with
the rules and  regulations of the  Commission and to  which reference is  hereby
made.  Statements made in  this Prospectus as  to the contents  of any contract,
agreement or  other document  referred  to are  not necessarily  complete.  With
respect  to each such contract, agreement or  other document filed as an exhibit
to the  Registration Statement,  reference is  made to  the exhibit  for a  more
complete  description of the  matter involved, and each  such statement shall be
deemed qualified in its entirety by such reference.
    

   
    Coltec is subject to the informational requirements of the Exchange Act  and
in accordance therewith files reports and other information with the Commission.
The  Registration Statement and  the exhibits thereto, as  well as 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,
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.  Copies  of  such  material can  be  obtained  from  the  public
reference  section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at  prescribed rates.  Such  reports and  other  information may  also  be
inspected  at the offices of the NYSE, 20 Broad Street, New York, New York 10005
and the PSE, 301 Pine Street, Suite 1104, San Francisco, California 94104.
    

                                       3
<PAGE>
                               PROSPECTUS SUMMARY

    THE  FOLLOWING SUMMARY  IS QUALIFIED  IN ITS  ENTIRETY BY  THE MORE DETAILED
INFORMATION AND FINANCIAL  STATEMENTS AND NOTES  THERETO APPEARING ELSEWHERE  OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, UNLESS
THE  CONTEXT INDICATES OTHERWISE,  "COLTEC" MEANS COLTEC  INDUSTRIES INC AND ITS
SUBSIDIARIES.

                                  THE COMPANY

    Coltec manufactures  and  sells a  diversified  range of  highly  engineered
aerospace,  automotive and  industrial products in  the United States  and, to a
lesser extent, abroad.  Through its  Aerospace/Government segment,  Coltec is  a
leading  manufacturer  of landing  gear systems,  engine fuel  controls, turbine
blades, fuel  injectors,  nozzles  and related  components  for  commercial  and
military  aircraft, and also  produces high-horsepower diesel  engines for naval
ships and diesel, gas and dual-fuel engines for electric power plants.  Coltec's
Automotive  segment manufactures and markets a selected line of high value-added
products,  including   fuel   injection  system   assemblies   and   components,
transmission  controls,  suspension controls,  emission  control air  pumps, oil
pumps  and  seals  for  domestic   original  equipment  manufacturers  and   the
replacement  parts market. Coltec's Industrial segment is a leading manufacturer
of industrial seals, gaskets, packing products and self-lubricating bearings and
also produces  technologically advanced  spray  nozzles for  agricultural,  home
heating  and industrial applications and air compressors for manufacturers. Each
of Coltec's three industry segments contributed approximately one-third of total
sales in 1993.

   
    Coltec's strategy is  to develop and  maintain substantial market  positions
and  attractive margins for its  products through technological innovation, cost
efficiencies, product differentiation  and quality.  Coltec emphasizes  targeted
development  of  highly  engineered,  high  value-added  components  and systems
designed to  meet  specific customer  requirements.  This emphasis  has  enabled
Coltec  to maintain close, interactive relationships with the major aircraft and
domestic automobile manufacturers and  Coltec's principal industrial  customers.
Through  successful introduction of new  products, cost reductions, productivity
improvements and selected divestitures, Coltec has consistently achieved  strong
operating  margins in its businesses. Coltec's  average operating margin for the
period from  1989  to  1993 was  17.3%,  or  17.7% excluding  the  effect  of  a
restructuring   charge  taken  in   the  second  quarter   of  1993  (the  "1993
restructuring charge"). Operating margins were 17.8% in 1992 and 15.9% in  1993,
or  17.7% in  1993 excluding  the effect of  the 1993  restructuring charge. See
"Management's Discussion  and Analysis  of Financial  Condition and  Results  of
Operations -- Industry Segment Information". Coltec's focus on aftermarket sales
(representing  42% of  total sales  from 1989  to 1993)  in all  of its segments
contributes to Coltec's consistently strong operating margins.
    

   
    Coltec's Aerospace/Government segment  has taken an  aggressive approach  in
responding  to  changing  economic  and market  conditions.  With  reductions in
domestic military spending, Coltec  has placed increasing  emphasis on sales  to
commercial    aircraft    and    aircraft    engine    manufacturers.   Coltec's
Aerospace/Government segment increased commercial sales as a percentage of total
sales from 48%  in 1989 to  62% in 1993.  In 1993, Aerospace/Government  segment
sales  declined  13%,  primarily  reflecting  lower  demand  for  new commercial
aircraft resulting from  the excess capacity  of the world  airline fleets.  The
Aerospace/Government  segment's  operating margin  was 15.0%  in 1993,  or 18.9%
excluding the effect  of the  1993 restructuring  charge, compared  to 19.5%  in
1992.   Coltec's  ability  to  maintain  this  operating  margin  for  1993  was
particularly noteworthy in  light of  weak industry conditions.  In addition  to
producing  landing gear for various aircraft manufacturers, including The Boeing
Company ("Boeing")  and  McDonnell Douglas  Corporation  ("McDonnell  Douglas"),
Coltec  has been  awarded contracts  to supply  the main  and nose  landing gear
assemblies for the Boeing  777 aircraft. In 1993,  Coltec delivered on  schedule
the  first three main and nose landing  gear assemblies for Boeing 777 aircraft.
Production rates  and  deliveries  of  Boeing  777  landing  gear  shipsets  are
scheduled  to  accelerate over  the  next several  years.  Coltec has  also been
awarded a contract to supply main landing gear for the Boeing 737-700  aircraft.
Coltec's  Fairbanks Morse Engine Division  ("Fairbanks Morse") recently received
firm orders valued at $40 million for engines that will power the first ship  of
the  Sealift fleet and a U.S. Navy amphibious landing ship. In the first quarter
of 1994, Fairbanks Morse acquired equipment and other assets related to the Alco
engine   business   from   General   Electric   Transportation   Systems    ("GE
Transportation").
    

                                       4
<PAGE>
   
    In  1993, Coltec's Automotive segment recorded strong operating performance,
including a 20% improvement in operating income, 25% excluding the effect of the
1993 restructuring charge, and an 11% increase in sales. The segment's operating
margin  in  1993  increased  to  a  record  23.0%,  23.8%  excluding  the   1993
restructuring charge, from 21.1% in 1992. This reflects higher new car and truck
production,  increased applications for segment  components and the introduction
of new automotive products. In response to automotive technology changes in  the
1980's  that led to the substitution  of fuel injection systems for carburetors,
Coltec has developed a substantially new automotive product line since 1984 that
includes fuel injection components, transmission controls, suspension  controls,
oil  pumps and a new electric emission  control air pump. The Automotive segment
expanded its emission-control air  pump business late in  1993 by acquiring  the
assets  of the  air pump manufacturing  operation of  General Motors Corporation
("General Motors") and  was named the  sole supplier of  these parts to  General
Motors.  The  Automotive segment  is the  sole supplier  of the  aluminum intake
manifold introduced in Chrysler Corporation's  ("Chrysler") 3.5 liter engine  on
its  LH series of vehicles, and Coltec has been selected as the sole supplier of
Chrysler's next-generation induction  module systems for  the 3.5 liter  engine,
which  will incorporate a plastic intake manifold  in 1998. In addition, in 1993
Coltec's  Automotive  segment  supplied  approximately  15%  of  the  oil   pump
requirements  of Ford  Motor Company ("Ford")  in North America.  In early 1994,
Coltec Automotive began supplying mechanical  air pumps to Isuzu Motors  Limited
("Isuzu") in both the United States and Japan.
    

   
    Coltec's  Industrial segment continues to introduce technologically advanced
products and develop more efficient ways of serving customers. In 1993,  Garlock
Mechanical   Packing  introduced  GYLON  style   3540,  a  highly  compressible,
chemically resistant gasket material  that can be  easily installed at  chemical
plants, and, in order to serve end users more quickly, significantly streamlined
two  production areas to reduce production times. The Quincy Compressor Division
broadened its  business  base  by introducing  a  new  vacuum pump  and  an  air
compressor  powered by natural gas. Delavan  Commercial Products is gaining wide
market acceptance  with the  STOP-DRIP valve  which reduces  the pollution  that
occurs  in  oil burners.  Garlock  Bearings is  a  leader in  the  production of
self-lubricating bearings and  has further expanded  into the automotive  market
with  several new  applications for  its products.  Industrial segment operating
income was down 10%, sales were down  2% and the segment's operating margin  was
17.4%   in  1993.  Excluding  the  operating  results  of  the  Central  Moloney
Transformer Division ("Central Moloney"),  which was sold  in January 1994,  and
the  1993 restructuring charge, Industrial segment operating income for 1993 was
down slightly from 1992 results, sales were  up 2% and the operating margin  was
21.7%.
    

   
    In  January 1994,  Coltec refinanced  its bank  credit agreement  (the "1992
Credit Agreement", and,  as refinanced,  the "1994 Credit  Agreement") on  terms
which  offer Coltec greater financial flexibility  and lower borrowing costs. If
this refinancing had  been in place  at the beginning  of 1993, earnings  before
extraordinary  item for 1993 would have increased by $10.1 million, or $0.14 per
common share. Refinancing the 1992 Credit Agreement has also increased  Coltec's
operating  flexibility and requires no scheduled mandatory debt repayments until
January 1997. Since 1989, Coltec has generated $644 million in cash provided  by
operating activities.
    

                                       5
<PAGE>
   
                              RECENT DEVELOPMENTS
    

   
    Coltec  reported earnings before extraordinary item for the first quarter of
1994 of $20.6 million, or $0.30  per common share, compared with $17.5  million,
or  $0.25 per  common share, for  the first  quarter of 1993.  Sales were $331.9
million, compared  with $339.9  million  for the  first  quarter of  last  year.
Operating  income  for the  first  quarter of  1994  was $54.7  million  and the
operating margin was 16.5%. This compared with operating income of $55.0 million
and an operating  margin of 16.2%  in the  first quarter of  1993. Net  interest
expense  declined $5.6 million, or 20%,  primarily reflecting the refinancing of
the 1992 Credit Agreement. First quarter results were adversely impacted by  the
severe weather conditions in January and February.
    

   
    In  the Aerospace/Government segment, operating  income in the first quarter
of 1994 declined 23% on  a 12% sales decrease  from the comparable 1993  period.
Operating  income in the Automotive segment improved 8% on a 14% sales increase,
and operating income in the Industrial segment increased 7% on an 8% decline  in
sales.
    

   
    Excluding  the  operating  results of  Central  Moloney, which  was  sold in
January 1994, Coltec's sales for the first  quarter of 1994 were up slightly  to
$327.0  million  from  $324.2 million  and  operating income  was  $54.6 million
compared with $56.6  million in  the first  quarter of  1993. Excluding  Central
Moloney,  operating  income for  the first  quarter of  1994 for  the Industrial
segment was level and sales were up 2% compared with the first quarter of 1993.
    

   
    Set forth  below  is  certain summary  consolidated  statement  of  earnings
information for the three months ended April 3, 1994, and April 4, 1993.
    

   
<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED
                                          ---------------------------
                                            APRIL 3,       APRIL 4,
                                              1994           1993
                                          ------------   ------------
                                           (IN MILLIONS, EXCEPT PER
                                                  SHARE DATA)
                                                  (UNAUDITED)
<S>                                       <C>            <C>
Net sales...............................     $  331.9       $  339.9
Costs and expenses......................        277.2          284.9
                                                ------         ------
Operating income........................         54.7           55.0
Interest, net...........................         22.5           28.1
                                                ------         ------
Earnings before income taxes and
 extraordinary item.....................         32.2           26.9
Provision for income taxes..............         11.6            9.4
                                                ------         ------
Earnings before extraordinary item......         20.6           17.5
Extraordinary item......................       --                (.3)
                                                ------         ------
Net earnings............................     $   20.6       $   17.2
                                                ------         ------
                                                ------         ------
Earnings per common share:
  Before extraordinary item.............     $     .30      $     .25
  Extraordinary item....................       --             --
                                                ------         ------
  Net earnings..........................     $     .30      $     .25
                                                ------         ------
                                                ------         ------
Weighted average number of common and
 common equivalent shares...............         69.8           69.6
                                                ------         ------
                                                ------         ------
</TABLE>
    

                                       6
<PAGE>
   
    Set forth below is certain financial information by industry segment for the
three months ended April 3, 1994, and April 4, 1993.
    

   
<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED
                                          ---------------------------
                                            APRIL 3,       APRIL 4,
                                              1994           1993
                                          ------------   ------------
                                                 (IN MILLIONS)
                                                  (UNAUDITED)
<S>                                       <C>            <C>
SALES:
  Aerospace/Government..................     $   99.1       $  113.1
  Automotive............................        128.4          113.1
  Industrial............................        104.7          114.0
  Intersegment elimination..............          (.3)           (.3)
                                                ------         ------
    Total...............................     $  331.9       $  339.9
                                                ------         ------
                                                ------         ------
OPERATING INCOME:
  Aerospace/Government..................     $   13.6       $   17.7
  Automotive............................         28.3           26.3
  Industrial............................         22.3           20.8
                                                ------         ------
    Total segments......................         64.2           64.8
  Corporate unallocated.................         (9.5)          (9.8)
                                                ------         ------
  Operating income......................     $   54.7       $   55.0
                                                ------         ------
                                                ------         ------
</TABLE>
    

   
    Operating  results for the Aerospace/Government segment continued to reflect
the weakness in  demand for  commercial aircraft. Shipments  of Menasco  landing
gear  were down reflecting schedule reductions early in 1993. Earnings were down
at Fairbanks Morse on lower shipments of engines and on lower production volume,
resulting from delayed receipt of orders  totalling $40 million for engines  for
the  U.S. Navy  Sealift and  Landing Ship  Dock ("LSD")  programs. Production on
these engines for which  firm orders have  now been received  will begin in  the
second  quarter of  1994. Operating  results at  Chandler Evans  and Walbar were
adversely impacted  due  to  production delays  and  inefficiencies  during  the
consolidation  and relocation of  operations pursuant to  the restructuring plan
announced in 1993. The improved  performance in the Automotive segment  reflects
higher  new  car  and  truck  production,  increased  applications  for  segment
components and the introduction  of new automotive  products. In the  Industrial
segment,  higher  sales  and earnings  were  reported by  Quincy  Compressor and
Garlock Bearings, while Garlock  Mechanical Packing, France Compressor  Products
and  Delavan Commercial  Products reported  lower results.  Order input  in this
segment increased in the first quarter of 1994 over the 1993 fourth quarter.
    

                                       7
<PAGE>
                                  THE OFFERING

<TABLE>
<S>                              <C>
Common Stock Offered:
  U.S. Offering...............   18,611,084 shares
  International Offering......   4,600,000 shares
    Total.....................   23,211,084 shares(a)
Common Stock outstanding......   69,762,203 shares(b)
NYSE and PSE Symbol...........   COT
<FN>
- ---------
(a)  All shares (the "Shares") are being offered by the Selling Stockholders.
(b)  The 69,762,203 shares of  Common Stock, par value  $.01 per share  ("Common
     Stock"),  outstanding is  as of February  25, 1994,  and excludes 2,255,000
     shares of Common Stock  subject to employee stock  options with a  weighted
     average exercise price of $15.54 per share.
</TABLE>

                              SELLING STOCKHOLDERS

    As  of the date of this Prospectus, The Morgan Stanley Leveraged Equity Fund
II, L.P.  ("MSLEF II"),  and Colt  Equity Investors,  L.P. ("Colt  L.P.")  owned
14,898,000  and 1,641,263 shares  of Common Stock,  respectively. Morgan Stanley
Leveraged Equity Fund II, Inc. ("MSLEF II, Inc.") is the sole general partner of
MSLEF II and is a wholly owned subsidiary of Morgan Stanley Group Inc.  ("Morgan
Stanley  Group").  Morgan  Stanley Equity  Investors  Inc. is  the  sole general
partner of Colt L.P. and is a  wholly owned subsidiary of Morgan Stanley  Group.
As  of the  date of  this Prospectus,  Morgan Stanley  Group, First  Plaza Group
Trust, and Leeway  & Co.  owned 2,535,143;  1,695,889; and  1,695,889 shares  of
Common  Stock, respectively. All the  shares of Common Stock  owned by MSLEF II,
Colt L.P., Morgan Stanley Group, First Plaza  Group Trust, and Leeway & Co.  are
being offered in the Offering. In addition, Salvatore J. Cozzolino and Andrew C.
Hilton,  each of  whom retired  as a  Vice Chairman  of Coltec  in January 1994,
owned, as of the date of this  Prospectus, 372,450 and 372,450 shares of  Common
Stock,  respectively, that  are being  offered in  the Offering.  The 23,211,084
shares of Common  Stock being offered  in the Offering  constitute 33.3% of  the
shares  of Common Stock outstanding as of the date of this Prospectus. MSLEF II,
Colt L.P., Morgan  Stanley Group,  First Plaza Group  Trust, Leeway  & Co.,  Mr.
Cozzolino  and  Dr. Hilton  are  herein referred  to  sometimes as  the "Selling
Stockholders". Upon completion of  the Offering, the  three employees of  Morgan
Stanley  & Co.  Incorporated ("Morgan Stanley")  who are  currently Directors of
Coltec intend to resign from the Board of Directors of Coltec. Morgan Stanley, a
subsidiary of Morgan Stanley Group, is one of the lead managers of the Offering.

    As of  the  date  of  this Prospectus,  the  executive  officers  of  Coltec
beneficially  owned an  aggregate of 1,705,892  shares of Common  Stock. None of
such shares  are  being offered  in  the Offering.  See  "Management",  "Selling
Stockholders" and "Underwriters".

                       CERTAIN SIGNIFICANT CONSIDERATIONS

    For  a  discussion  of  certain significant  considerations  that  should be
considered in  evaluating  an  investment  in the  Common  Stock,  see  "Certain
Significant Considerations".

                                       8
<PAGE>
                             SUMMARY FINANCIAL DATA

    The  following summary financial data were  derived from, and should be read
in conjunction with, the financial statements  and related notes of Coltec,  the
selected  financial data and "Management's  Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.

   
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                     ----------------------------------------------------
                                                       1993       1992       1991       1990       1989
                                                     --------   --------   --------   --------   --------
                                                         (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                                                  <C>        <C>        <C>        <C>        <C>
STATEMENT OF EARNINGS DATA:
Sales.............................................   $1,334.8   $1,368.7   $1,373.0   $1,487.2   $1,516.7
                                                     --------   --------   --------   --------   --------
Operating income (a)..............................      211.7      243.1      229.0      268.9      272.8
                                                     --------   --------   --------   --------   --------
Earnings from continuing operations before
 interest,
 income taxes and extraordinary item (b)..........      211.7      243.1      230.4      278.1      278.6
Interest and debt expense, net....................      110.2      135.8      199.9      203.4      211.8
Provision for income taxes........................       36.3       42.6       28.3       33.8       16.8
                                                     --------   --------   --------   --------   --------
Earnings from continuing operations
 before extraordinary item (a)....................       65.2       64.7        2.2       40.9       50.0
Discontinued operations (c).......................         --      --         --          17.7        3.6
Extraordinary item (d)............................      (17.8)    (106.9)        .6       (4.5)      (6.1)
                                                     --------   --------   --------   --------   --------
Net earnings (loss)...............................       47.4      (42.2)       2.8       54.1       47.5
                                                     --------   --------   --------   --------   --------
Earnings (loss) per common share:
  Continuing operations (a).......................        .94       1.11        .09       1.64       2.00
  Discontinued operations.........................      --         --         --           .70        .14
  Extraordinary item..............................       (.26)     (1.83)       .02       (.18)      (.24)
                                                     --------   --------   --------   --------   --------
  Net earnings (loss).............................        .68       (.72)       .11       2.16       1.90
                                                     --------   --------   --------   --------   --------
BALANCE SHEET DATA
 (AT END OF PERIOD):
Working capital...................................      163.1       95.3      168.8      162.9      207.3
Total assets......................................      806.4      828.8      834.2      876.8      952.3
Long-term debt (including current portion)........    1,033.6    1,122.1    1,622.9    1,646.3    1,747.4
Shareholders' equity..............................     (625.5)    (666.6)  (1,194.5)  (1,188.4)  (1,241.3)
OTHER OPERATING DATA:
Operating margin (a)..............................       15.9%      17.8%      16.7%      18.1%      18.0%
Cash provided by operating activities.............      105.2      119.9      149.2      155.5      114.3
Capital expenditures..............................       38.6       25.0       26.2       23.2       28.7
Depreciation of property, plant and equipment.....       33.2       35.3       36.9       36.8       36.7
Order backlog (at end of period)..................      669.7      709.1      808.8      864.2      831.0
Number of employees (at end of period)............     10,000     10,700     11,400     12,400     13,300
<FN>
- ------------
(a)  Operating income for 1993 includes  the 1993 restructuring charge of  $25.2
     million  ($15.3 million  after taxes, or  $0.22 per common  share) taken to
     cover the cost of consolidation and rearrangement of certain  manufacturing
     facilities   and  related  reductions  in  work  force,  primarily  in  the
     Aerospace/Government segment, as well  as at Central  Moloney. If the  1993
     restructuring   charge  was  excluded,   operating  income,  earnings  from
     continuing operations before extraordinary item, earnings per common  share
     from  continuing operations and the operating margin would have been $236.9
     million, $80.5 million,  $1.16, and 17.7%,  respectively, in 1993.  Central
     Moloney was sold in January 1994.
(b)  Earnings  from  continuing  operations before  interest,  income  taxes and
     extraordinary item  include for  1991, 1990  and 1989,  $1.4 million,  $9.2
     million  and $5.8 million,  respectively, of dividend  income from Coltec's
     minority interest  in  Crucible Materials  Corporation.  If such  item  was
     excluded, earnings from continuing operations before interest, income taxes
     and  extraordinary item would have been  $229.0 million, $268.9 million and
     $272.8 million  for the  years  ended December  31,  1991, 1990  and  1989,
     respectively.
(c)  On  March 22, 1990,  Coltec sold substantially  all the assets  of the Colt
     Firearms Division  ("Colt Firearms")  to a  company formed  by a  group  of
     private  investors for total proceeds of $51.6  million and a gain of $17.3
     million.  Coltec  has  accounted  for  the  sales,  expenses,  assets   and
     liabilities of Colt Firearms as a discontinued operation.
(d)  Coltec  recognized  extraordinary items  in each  of  the five  years ended
     December  31,  1993,  in  connection  with  debt  refinancings  and   early
     retirement  of debt, and, in addition, in the year ended December 31, 1992,
     in connection with  the recapitalization  that occurred in  that year  (the
     "1992 Recapitalization").
</TABLE>
    

                                       9
<PAGE>
                                  THE COMPANY

    Coltec  manufactures  and sells  a  diversified range  of  highly engineered
aerospace, automotive and  industrial products in  the United States  and, to  a
lesser  extent, abroad.  Through its  Aerospace/Government segment,  Coltec is a
leading manufacturer  of landing  gear systems,  engine fuel  controls,  turbine
blades,  fuel  injectors,  nozzles  and related  components  for  commercial and
military aircraft, and  also produces high-horsepower  diesel engines for  naval
ships  and diesel, gas and dual-fuel engines for electric power plants. Coltec's
Automotive segment manufactures and markets a selected line of high  value-added
products,   including   fuel   injection  system   assemblies   and  components,
transmission controls,  suspension controls,  emission  control air  pumps,  oil
pumps   and  seals  for  domestic   original  equipment  manufacturers  and  the
replacement parts market. Coltec's Industrial segment is a leading  manufacturer
of industrial seals, gaskets, packing products and self-lubricating bearings and
also  produces  technologically advanced  spray  nozzles for  agricultural, home
heating and industrial applications and air compressors for manufacturers.  Each
of Coltec's three industry segments contributed approximately one-third of total
sales in 1993.

   
    Coltec's  strategy is to  develop and maintain  substantial market positions
and attractive margins for its  products through technological innovation,  cost
efficiencies,  product differentiation  and quality.  Coltec emphasizes targeted
development of  highly  engineered,  high  value-added  components  and  systems
designed  to  meet specific  customer  requirements. This  emphasis  has enabled
Coltec to maintain close, interactive relationships with the major aircraft  and
domestic  automobile manufacturers and  Coltec's principal industrial customers.
Through successful introduction of  new products, cost reductions,  productivity
improvements  and selected divestitures, Coltec has consistently achieved strong
operating margins in its businesses.  Coltec's average operating margin for  the
period  from 1989 to 1993  was 17.3%, or 17.7% excluding  the effect of the 1993
restructuring charge. Operating margins were 17.8% in 1992 and 15.9% in 1993, or
17.7% in  1993  excluding the  effect  of  the 1993  restructuring  charge.  See
"Management's  Discussion  and Analysis  of Financial  Condition and  Results of
Operations -- Industry Segment Information". Coltec's focus on aftermarket sales
(representing 42% of  total sales  from 1989  to 1993)  in all  of its  segments
contributes to Coltec's consistently strong operating margins.
    

   
    Coltec's  Aerospace/Government segment  has taken an  aggressive approach in
responding to  changing  economic  and market  conditions.  With  reductions  in
domestic  military spending, Coltec  has placed increasing  emphasis on sales to
commercial   aircraft    and    aircraft    engine    manufacturers.    Coltec's
Aerospace/Government  segment increased  commercial revenues as  a percentage of
total sales  from 48%  in 1989  to 62%  in 1993.  In 1993,  Aerospace/Government
segment sales declined 13%, primarily reflecting lower demand for new commercial
aircraft  resulting from  the excess capacity  of the world  airline fleets. The
Aerospace/ Government segment's  operating margin  was 15.0% in  1993, or  18.9%
excluding  the effect  of the  1993 restructuring  charge, compared  to 19.5% in
1992.  Coltec's  ability  to  maintain  this  operating  margin  for  1993   was
particularly  noteworthy in  light of weak  industry conditions.  In addition to
producing landing gear for various aircraft manufacturers, including Boeing  and
McDonnell Douglas, Coltec has been awarded contracts to supply the main and nose
landing  gear assemblies for the Boeing  777 aircraft. In 1993, Coltec delivered
on schedule the first three main and nose landing gear assemblies for the Boeing
777 aircraft.  Production  rates  and  deliveries of  Boeing  777  landing  gear
shipsets  are scheduled  to accelerate over  the next several  years. Coltec has
also been awarded a contract to supply main landing gear for the Boeing  737-700
aircraft.  Fairbanks Morse recently  received firm orders  valued at $40 million
for engines that will power the first ship of the Sealift fleet and a U.S.  Navy
amphibious  landing ship. In the first quarter of 1994, Fairbanks Morse acquired
equipment and  other  assets  related  to  the  Alco  engine  business  from  GE
Transportation.
    

   
    In  1993, Coltec's Automotive segment recorded strong operating performance,
including a 20% improvement in operating income, 25% excluding the effect of the
1993 restructuring charge, and an 11% increase in sales. The segment's operating
margin  in  1993  increased  to  a  record  23.0%,  23.8%  excluding  the   1993
restructuring charge, from 21.1% in 1992. This reflects higher new car and truck
production,  increased applications for segment  components and the introduction
of new automotive products. In response to automotive technology changes in  the
1980's  that led to the substitution  of fuel injection systems for carburetors,
Coltec has developed a substantially new automotive product line since 1984 that
includes fuel injection components, transmission controls, suspension  controls,
oil pumps and a new electric emission
    

                                       10
<PAGE>
control  air pump. The Automotive segment expanded its emission-control air pump
business late in  1993 by  acquiring the assets  of the  air pump  manufacturing
operation  of General Motors and  was named the sole  supplier of these parts to
General Motors. The  Automotive segment  is the  sole supplier  of the  aluminum
intake  manifold introduced in Chrysler's  3.5 liter engine on  its LH series of
vehicles, and  Coltec has  been  selected as  the  sole supplier  of  Chrysler's
next-generation  induction module systems  for the 3.5  liter engine, which will
incorporate a plastic  intake manifold in  1998. In addition,  in 1993  Coltec's
Automotive  segment supplied approximately  15% of the  oil pump requirements of
Ford in  North  America.  In  early  1994,  Coltec  Automotive  began  supplying
mechanical air pumps to Isuzu in both the United States and Japan.

   
    Coltec's  Industrial segment continues to introduce technologically advanced
products and develop more efficient ways of serving customers. In 1993,  Garlock
Mechanical   Packing  introduced  GYLON  style   3540,  a  highly  compressible,
chemically resistant gasket material  that can be  easily installed at  chemical
plants, and, in order to serve end users more quickly, significantly streamlined
two  production areas to reduce production times. The Quincy Compressor Division
broadened its  business  base  by introducing  a  new  vacuum pump  and  an  air
compressor  powered by natural gas. Delavan  Commercial Products is gaining wide
market acceptance  with the  STOP-DRIP valve  which reduces  the pollution  that
occurs  in  oil burners.  Garlock  Bearings is  a  leader in  the  production of
self-lubricating bearings and  has further expanded  into the automotive  market
with  several new  applications for  its products.  Industrial segment operating
income was down 10%, sales were down  2% and the segment's operating margin  was
17.4%  in 1993.  Excluding the operating  results of Central  Moloney, which was
sold in  January 1994,  and the  1993 restructuring  charge, Industrial  segment
operating  income for 1993 was down slightly from 1992 results, sales were up 2%
and the operating margin was 21.7%.
    

   
    In January 1994, Coltec refinanced the 1992 Credit Agreement on terms  which
offer  Coltec greater financial  flexibility and lower  borrowing costs. If this
refinancing had  been  in  place  at the  beginning  of  1993,  earnings  before
extraordinary  item for 1993 would have increased by $10.1 million, or $0.14 per
common share. Refinancing the 1992 Credit Agreement has also increased  Coltec's
operating  flexibility and requires no scheduled mandatory debt repayments until
January 1997. Since 1989, Coltec has generated $644 million in cash provided  by
operating activities.
    

   
    Coltec,  through its subsidiaries,  is the successor to  a business that was
incorporated in Pennsylvania in 1911. The  corporate name of Coltec was  changed
from  Colt Industries  Inc on  May 3, 1990.  The principal  executive offices of
Coltec are  located at  430 Park  Avenue, New  York, New  York 10022,  telephone
number (212) 940-4000.
    

                       CERTAIN SIGNIFICANT CONSIDERATIONS

LEVERAGE AND DEBT SERVICE

    As  a result of  a recapitalization of  Coltec completed in  1986 (the "1986
Recapitalization") and  the  acquisition  of  Coltec  by  Coltec  Holdings  Inc.
("Holdings")   in  1988,   Coltec  is   highly  leveraged.   Although  the  1992
Recapitalization  reduced  the  deficit  in  shareholders'  equity  and  reduced
indebtedness   and  interest  expense,  Coltec  continues  to  have  substantial
indebtedness and  negative  shareholders'  equity.  As  of  December  31,  1993,
Coltec's  total indebtedness was $1,033.6 million.  At such date, Coltec's total
assets were $806.4 million and its shareholders' equity was a deficit of  $625.5
million.   Coltec's   negative  shareholders'   equity  is   due  to   the  1986
Recapitalization and the  retirement of  an intercompany note  in the  principal
amount  of $846.3 million distributed by Coltec  to Holdings. For the year ended
December 31, 1993, Coltec's  ratio of earnings  to fixed charges  was 1.9 to  1.
Giving  effect to the  1994 Credit Agreement as  if it had  been entered into on
January 1, 1993 and excluding the  1993 restructuring charge, Coltec's ratio  of
earnings  to fixed charges would have been 2.4  to 1 for the year ended December
31, 1993.

    Although the 1992 Recapitalization  and the refinancing  of the 1992  Credit
Agreement  in  January  1994  have  improved  Coltec's  operating  and financing
flexibility,  Coltec's  remaining  substantial  indebtedness  could  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,

                                       11
<PAGE>
they could pose  significant risks  to the holders  of Common  Stock of  Coltec.
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.

    The  1994  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. The indentures
under  which Coltec's 9-3/4% Senior Notes Due 1999, 9-3/4% Senior Notes Due 2000
and 10-1/4%  Senior Subordinated  Notes  Due 2002  were issued  contain  certain
similar  restrictive  covenants.  These restrictions,  in  combination  with the
leveraged nature of Coltec, could limit  the ability of Coltec to effect  future
financings  or otherwise may restrict  corporate activities. See "Description of
Certain Indebtedness".

    Borrowings under  the 1994  Credit Agreement  bear interest  at  fluctuating
rates.  Increases  in  interest  rates with  respect  to  such  borrowings could
adversely affect Coltec's financial condition. See "Management's Discussion  and
Analysis  of  Financial Condition  and Results  of  Operations --  Liquidity and
Financial Position" and "Description of Certain Indebtedness".

CYCLICAL BUSINESS AND COMPETITION; LITIGATION

    Coltec  operates  in  markets  that  are  cyclical  in  nature  and   highly
competitive,  and Coltec's results of operations  are affected by changes in its
customers' markets, including changes  that affect government defense  contracts
and  commercial aircraft and automobile  production. Currently, defense spending
and commercial  aircraft production  schedules are  at reduced  levels and  have
adversely   affected  sales  in  the  Aerospace/Government  segment.  While  the
Automotive segment is benefiting  from the strength  in the automotive  industry
and  increased applications  for components supplied  by Coltec,  results at the
Industrial segment divisions have been mixed. Many of Coltec's competitors  have
substantially greater financial resources than Coltec.

    From  time  to time  the  business operations  of  Coltec result  in product
liability actions, including asbestos  litigation. See "Management's  Discussion
and  Analysis  of  Financial Condition  and  Results of  Operations  -- Asbestos
Litigation" for recent developments in asbestos litigation involving Coltec.

    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.  See  "Business  --  Contract
Risks".

                                       12
<PAGE>
                PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

    The  Common Stock has traded  on the NYSE and the  PSE since March 25, 1992,
the date of its initial public offering. The following table sets forth the high
and low sales prices (expressed as dollars per common share) of the Common Stock
as reported on the NYSE Composite Tape for the periods indicated.

   
<TABLE>
<CAPTION>
                                                       HIGH         LOW
                                                    ----------   ----------
<S>                                                 <C>          <C>
FISCAL 1992
  First Quarter (beginning March 25)..............   $ 19         $ 17
  Second Quarter..................................     21  3/4      17
  Third Quarter...................................     19  1/4      15  3/8
  Fourth Quarter..................................     19  1/4      14  1/8
FISCAL 1993
  First Quarter...................................     19  1/4      16  1/4
  Second Quarter..................................     17  1/2      14  7/8
  Third Quarter...................................     18           15  1/4
  Fourth Quarter..................................     19  3/8      16
FISCAL 1994
  First Quarter...................................     21  7/8      18  3/4
  Second Quarter (through April 26, 1994).........     20           18  3/4
</TABLE>
    

    At March 15, 1994, there were 568 holders of record of the Common Stock.

    Coltec does not currently intend to pay cash dividends on the Common  Stock.
Coltec  currently intends to retain earnings for support of its working capital,
repayment of  indebtedness, capital  expenditures  and other  general  corporate
purposes.  The 1994  Credit Agreement  and certain  of the  indentures governing
issues of Coltec's  long-term debt limit  the payment of  cash dividends on  the
Common  Stock.  See  "Description  of  Certain  Indebtedness".  Subject  to such
restrictions, any future determination to  pay cash dividends will be  dependent
upon   Coltec's   results  of   operations,  financial   condition,  contractual
restrictions and other factors deemed relevant by the Board of Directors.

                                       13
<PAGE>
                          CONSOLIDATED CAPITALIZATION

    The  following  table  sets  forth  the  consolidated  short-term  debt  and
consolidated  capitalization  of  Coltec as  of  December 31,  1993.  All Shares
offered pursuant to  the Offering are  being sold by  the Selling  Stockholders.
Coltec will not receive any proceeds from the Offering. The table should be read
in  conjunction  with the  consolidated financial  statements and  notes thereto
appearing elsewhere in this Prospectus. See "Selected Financial Data".

<TABLE>
<CAPTION>
                                           DECEMBER 31, 1993
                                           -----------------
                                              (DOLLARS IN
                                               MILLIONS)
<S>                                        <C>
Current maturities of long-term debt....       $    1.5
                                           -----------------
                                           -----------------
Long-term debt (a):
  1992 Credit Agreement (b).............       $  308.6
  9-3/4% Senior Notes Due 1999..........          150.0
  9-3/4% Senior Notes Due 2000..........          200.0
  11-1/4% Debentures Due 1996-2015......           91.6
  10-1/4% Senior Subordinated Notes Due
   2002.................................          250.0
  Other due 1994-2010...................           31.9
                                           -----------------
    Total long-term debt................        1,032.1
                                           -----------------
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,
   69,943,341 shares issued (excluding
   25,000,000 shares held by a wholly
   owned subsidiary)....................             .7
  Capital in excess of par value........          636.8
  Retained earnings (deficit)...........       (1,251.5)
  Unearned compensation -- restricted
   stock awards.........................           (5.5)
  Minimum pension liability.............           (4.2)
  Foreign currency translation
   adjustments..........................            1.1
                                           -----------------
                                                 (622.6)
  Less cost of 179,309 shares of Common
   Stock in treasury....................           (2.9)
                                           -----------------
    Total shareholders' equity..........         (625.5)
                                           -----------------
      Total capitalization..............       $  406.6
                                           -----------------
                                           -----------------
<FN>
- ---------
(a)  See "Description of Certain  Indebtedness" for additional information  with
     respect to certain indebtedness of Coltec.
(b)  In January 1994, the 1992 Credit Agreement was refinanced. See "Description
     of  Certain  Indebtedness"  and  Note  16 of  the  Notes  to  the Financial
     Statements appearing elsewhere in this Prospectus.
</TABLE>

                                       14
<PAGE>
                            SELECTED FINANCIAL DATA

    The following table  sets forth selected  financial data of  Coltec for  the
five  years  ended December  31,  1993. The  selected  financial data,  with the
exception of order backlog  and employee data, were  derived from the  financial
statements  of Coltec, certain  of which statements have  been audited by Arthur
Andersen & Co.,  independent public  accountants, as indicated  in their  report
included elsewhere herein.

   
<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                -------------------------------------------------------------------
                                                   1993          1992          1991          1990          1989
                                                -----------   -----------   -----------   -----------   -----------
                                                           (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                                             <C>           <C>           <C>           <C>           <C>
STATEMENT OF EARNINGS DATA:
Sales........................................   $ 1,334.8     $ 1,368.7     $ 1,373.0     $ 1,487.2     $ 1,516.7
                                                -----------   -----------   -----------   -----------   -----------
Operating income (a).........................       211.7         243.1         229.0         268.9         272.8
                                                -----------   -----------   -----------   -----------   -----------
Earnings from continuing
  operations before interest, income taxes
 and
  extraordinary item (b).....................       211.7         243.1         230.4         278.1         278.6
Interest and debt expense, net...............       110.2         135.8         199.9         203.4         211.8
Provision for income taxes...................        36.3          42.6          28.3          33.8          16.8
                                                -----------   -----------   -----------   -----------   -----------
Earnings from continuing operations before
 extraordinary item (a)......................        65.2          64.7           2.2          40.9          50.0
Discontinued operations (c)..................        --            --            --            17.7           3.6
Extraordinary item (d).......................       (17.8)       (106.9)           .6          (4.5)         (6.1)
                                                -----------   -----------   -----------   -----------   -----------
Net earnings (loss)..........................        47.4         (42.2)          2.8          54.1          47.5
                                                -----------   -----------   -----------   -----------   -----------
Earnings (loss) per common share:
  Continuing operations (a)..................       .94          1.11           .09          1.64          2.00
  Discontinued operations....................        --            --            --           .70           .14
  Extraordinary item.........................      (.26)        (1.83)          .02          (.18)         (.24)
                                                -----------   -----------   -----------   -----------   -----------
  Net earnings (loss)........................       .68          (.72)          .11          2.16          1.90
                                                -----------   -----------   -----------   -----------   -----------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital..............................       163.1          95.3         168.8         162.9         207.3
Total assets.................................       806.4         828.8         834.2         876.8         952.3
Long-term debt (including current portion)...     1,033.6       1,122.1       1,622.9       1,646.3       1,747.4
Shareholders' equity.........................      (625.5)       (666.6)     (1,194.5)     (1,188.4)     (1,241.3)
OTHER OPERATING DATA:
Operating margin (a).........................        15.9%         17.8%         16.7%         18.1%         18.0%
Cash provided by operating activities........       105.2         119.9         149.2         155.5         114.3
Capital expenditures.........................        38.6          25.0          26.2          23.2          28.7
Depreciation of property, plant and
 equipment...................................        33.2          35.3          36.9          36.8          36.7
Order backlog (at end of period).............       669.7         709.1         808.8         864.2         831.0
Number of employees (at end of period).......    10,000        10,700        11,400        12,400        13,300
<FN>
- ------------
(a)  Operating  income for 1993 includes the  1993 restructuring charge of $25.2
     million ($15.3 million  after taxes, or  $0.22 per common  share) taken  to
     cover  the cost of consolidation and rearrangement of certain manufacturing
     facilities  and  related  reductions  in  work  force,  primarily  in   the
     Aerospace/Government  segment, as well  as at Central  Moloney. If the 1993
     restructuring  charge  was  excluded,   operating  income,  earnings   from
     continuing  operations before extraordinary item, earnings per common share
     from continuing operations and the operating margin would have been  $236.9
     million,  $80.5 million, $1.16,  and 17.7%, respectively,  in 1993. Central
     Moloney was sold in January 1994.
(b)  Earnings from  continuing  operations  before interest,  income  taxes  and
     extraordinary  item include  for 1991,  1990 and  1989, $1.4  million, $9.2
     million and $5.8  million, respectively, of  dividend income from  Coltec's
     minority  interest  in Crucible  Materials  Corporation. If  such  item was
     excluded, earnings from continuing operations before interest, income taxes
     and extraordinary item would have  been $229.0 million, $268.9 million  and
     $272.8  million  for the  years  ended December  31,  1991, 1990  and 1989,
     respectively.
(c)  On March  22,  1990, Coltec  sold  substantially  all the  assets  of  Colt
     Firearms  to a  company formed  by a group  of private  investors for total
     proceeds of $51.6 million and a gain of $17.3 million. Coltec has accounted
     for the  sales, expenses,  assets and  liabilities of  Colt Firearms  as  a
     discontinued operation.
(d)  Coltec  recognized  extraordinary items  in each  of  the five  years ended
     December  31,  1993,  in  connection  with  debt  refinancings  and   early
     retirement  of debt, and, in addition, in the year ended December 31, 1992,
     in connection with the 1992 Recapitalization.
</TABLE>
    

                                       15
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

    In  April 1992, Coltec  completed the 1992  Recapitalization, which included
the initial public offering  of its Common Stock,  two long-term debt  offerings
and  the  1992 Credit  Agreement.  The 1992  Recapitalization  reduced aggregate
indebtedness and interest expense, refinanced a substantial portion of remaining
indebtedness on  more  favorable  terms  and  improved  Coltec's  operating  and
financial  flexibility. At the  end of 1993,  Coltec had total  debt of $1,033.6
million compared with $1,622.9 million at the beginning of 1992.

    In January 1994, Coltec refinanced the  1992 Credit Agreement on terms  that
offer  Coltec greater financial  flexibility and lower  borrowing costs. If this
refinancing had  been  in  place  at the  beginning  of  1993,  earnings  before
extraordinary  item for 1993 would have increased by $10.1 million, or $0.14 per
common share.  Refinancing the  1992 Credit  Agreement also  increased  Coltec's
operating  flexibility and requires no scheduled mandatory debt repayments until
January 1997.

   
    Through  successful   introduction  of   new  products,   cost   reductions,
productivity  improvements  and selected  divestitures, Coltec  has consistently
achieved strong operating margins in its businesses. Coltec's average  operating
margin for the period from 1989 to 1993 was 17.3%, or 17.7% excluding the effect
of the 1993 restructuring charge. Operating margins were 17.8% in 1992 and 15.9%
in  1993,  or  17.7% excluding  the  effect  of the  1993  restructuring charge.
Coltec's  ability  to  maintain  this  17.7%  operating  margin  for  1993   was
particularly  noteworthy  as  two  of  Coltec's  major  markets  were  weak. The
recession in the aerospace industry has  been more severe than anticipated,  and
the United States manufacturing sector, which is the primary market for Coltec's
Industrial  segment, remained weak. Despite unfavorable industry conditions, the
operating margins  for the  Aerospace/Government  and Industrial  segments  were
15.0%  and 17.4%, respectively, or 18.9%  and 18.2%, respectively, excluding the
1993 restructuring  charge.  The  Automotive segment  showed  strong  growth  in
operating  margin, to  a record  23.0%, 23.8%  excluding the  1993 restructuring
charge, from the 1992 level of 21.1%.
    

   
    Coltec recorded  the  1993  restructuring charge  of  $25.2  million  ($15.3
million after taxes, or $0.22 per common share) in the second quarter of 1993 to
cover  the  cost of  consolidation  and rearrangement  of  certain manufacturing
facilities and related reductions in work force by approximately 570  employees.
These actions are intended to reduce annual operating costs by approximately $10
million  beginning in 1994 and  thereby improve Coltec's competitiveness. Coltec
believes that the cost  efficiencies gained from  the restructuring will  permit
Coltec  to maintain  or improve  operating margins.  The restructuring  has been
concentrated in the Aerospace/Government segment  and includes the closing of  a
Menasco  landing gear facility and a  Walbar turbine engine components facility,
and reducing  the  manufacturing  area  at Chandler  Evans.  In  the  Automotive
segment,  the restructuring covered the relocation of administrative offices and
the distribution operation of Holley Replacement Parts to one of the  division's
manufacturing  operations. In the Industrial  segment, the restructuring covered
the closing of a  Central Moloney plant. During  1993, significant progress  was
made  toward  achieving  the objectives  of  the restructuring  program  and the
program is  expected to  be completed  in  1994. In  January 1994,  Coltec  sold
Central  Moloney at a price approximating  book value. Coltec believes that this
divestiture will contribute to improved  results in the Industrial segment.  The
1993  operating  margin  for the  Industrial  segment was  17.4%.  Excluding the
operating results  of  Central  Moloney,  the  1993  operating  margin  for  the
Industrial  segment would  have improved to  21.5%, or 21.7%  excluding the 1993
restructuring charge.
    

                                       16
<PAGE>
INDUSTRY SEGMENT INFORMATION

    The following table shows financial information by industry segment for  the
five years ended December 31, 1993.

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                     -----------------------------------------------------------------
                                        1993         1992         1991          1990          1989
                                     ----------   ----------   -----------   -----------   -----------
                                                           (DOLLARS IN MILLIONS)
<S>                                  <C>          <C>          <C>           <C>           <C>
Sales:
  Aerospace/Government.............  $    453.3   $    523.7   $     562.8   $     581.9   $     570.5
  Automotive.......................       445.7        402.6         372.6         436.1         479.3
  Industrial.......................       436.7        443.8         439.3         470.2         468.8
  Intersegment elimination (a).....         (.9)        (1.4)         (1.7)         (1.0)         (1.9)
                                     ----------   ----------   -----------   -----------   -----------
    Total..........................  $  1,334.8   $  1,368.7   $   1,373.0   $   1,487.2   $   1,516.7
                                     ----------   ----------   -----------   -----------   -----------
                                     ----------   ----------   -----------   -----------   -----------
Operating income (b):
  Aerospace/Government.............  $     67.8   $    102.1   $     109.6   $     107.6   $     118.7
  Automotive.......................       102.4         85.1          59.3          93.9          92.6
  Industrial.......................        75.9         84.4          80.2          96.1          86.7
                                     ----------   ----------   -----------   -----------   -----------
    Total segments.................       246.1        271.6         249.1         297.6         298.0
  Corporate unallocated (c)........       (34.4)       (28.5)        (20.1)        (28.7)        (25.2)
                                     ----------   ----------   -----------   -----------   -----------
    Operating income...............  $    211.7   $    243.1   $     229.0   $     268.9   $     272.8
                                     ----------   ----------   -----------   -----------   -----------
                                     ----------   ----------   -----------   -----------   -----------
Operating margin (b):
  Aerospace/Government.............        15.0%        19.5%         19.5%         18.5%         20.8%
  Automotive.......................        23.0         21.1          15.9          21.5          19.3
  Industrial (d)...................        17.4         19.0          18.3          20.4          18.5
                                     ----------   ----------   -----------   -----------   -----------
    Total..........................        15.9%        17.8%         16.7%         18.1%         18.0%
Return on total assets (e):
  Aerospace/Government.............        17.6%        26.3%         26.7%         25.1%         25.6%
  Automotive.......................        82.2         71.8          48.1          66.3          57.2
  Industrial.......................        42.1         45.2          42.2          49.1          41.5
                                     ----------   ----------   -----------   -----------   -----------
    Total..........................        26.3%        29.3%         27.5%         30.7%         28.9%
Backlog (f):
  Aerospace/Government.............  $    524.5   $    576.9   $     697.2   $     738.5   $     696.4
  Automotive.......................        77.6         64.8          47.0          51.5          56.4
  Industrial.......................        67.6         67.4          64.6          74.2          78.2
                                     ----------   ----------   -----------   -----------   -----------
    Total..........................  $    669.7   $    709.1   $     808.8   $     864.2   $     831.0
                                     ----------   ----------   -----------   -----------   -----------
                                     ----------   ----------   -----------   -----------   -----------
<FN>
- ------------
(a)  Reflects  elimination of intercompany sales  between divisions in different
     segments.
(b)  The 1993 restructuring charge of $25.2 million is included in 1993  segment
     operating  income as follows: $17.7  million in Aerospace/ Government, $3.8
     million in Automotive and  $3.7 million in  Industrial. Excluding the  1993
     restructuring  charge, operating income  and the operating  margin for 1993
     would have been  $85.5 million and  18.9% for Aerospace/Government,  $106.2
     million   and  23.8%  for  Automotive  and  $79.6  million  and  18.2%  for
     Industrial.
(c)  Represents corporate selling  and administrative  expense, including  other
     income and expense, that is not allocable to individual industry segments.
(d)  Excluding  Central Moloney, which  was sold in  January 1994, the operating
     margin for the Industrial segment would  have been 21.7% in 1993, 22.4%  in
     1992, 21.7% in 1991, 23.2% in 1990 and 20.0% in 1989.
(e)  Return  on total assets is calculated  for each segment by dividing segment
     operating income by  segment total  assets at  December 31,  and for  total
     Coltec  by  dividing  total  Coltec operating  income  by  total  assets at
     December 31, less assets of discontinued operations.
(f)  Of the $669.7  million backlog  at December  31, 1993,  $255.2 million  was
     scheduled to be shipped after 1994.
</TABLE>

RESULTS OF OPERATIONS
  YEAR ENDED DECEMBER 31, 1993, COMPARED WITH YEAR ENDED DECEMBER 31, 1992

   
    Earnings  before extraordinary  item for 1993  were $65.2  million, equal to
$0.94 per  common share,  or $80.5  million, equal  to $1.16  per common  share,
excluding the 1993 restructuring charge of $25.2 million
    

                                       17
<PAGE>
   
($15.3 million after taxes, or $0.22 per common share) recorded by Coltec in the
second quarter of 1993. This compared with earnings before extraordinary item of
$64.7  million, or  $1.11 per  common share,  in 1992.  In January  1994, Coltec
entered into the 1994 Credit Agreement.  Had this facility been entered into  at
the  beginning of 1993,  earnings before extraordinary item  for 1993 would have
increased by  $10.1 million,  or $0.14  per common  share. Sales  were  $1,334.8
million  in 1993  compared with $1,368.7  million in 1992.  Operating income for
1993 was $211.7 million and the  operating margin was 15.9%. Excluding the  1993
restructuring  charge,  operating income  was $236.9  million and  the operating
margin was  17.7%.  For  1992,  operating income  was  $243.1  million  and  the
operating  margin  was  17.8%.  Although  sales  and  operating  income declined
slightly in 1993, Coltec  was able to maintain  its operating margin,  excluding
the  1993  restructuring  charge, at  about  the  same level  as  in  1992. This
performance was achieved  despite 1993  being a difficult  year for  two of  the
major  markets served by Coltec. The aerospace industry continued to be impacted
by declining orders for  new commercial aircraft and  cuts in defense  spending;
and  the nation's  manufacturing sector, the  primary market  for the Industrial
segment, remained weak.
    

   
    The Aerospace/Government segment reported a 34% decline in operating  income
in  1993 on a 13%  sales decline and an operating  margin of 15.0% compared with
19.5% last  year.  Excluding the  1993  restructuring charge,  operating  income
declined  16% in  1993 and the  segment's operating margin  was 18.9%. Operating
income  for  1993  was   $67.8  million,  $85.5   million  excluding  the   1993
restructuring charge, on sales of $453.3 million, compared with operating income
of  $102.1 million on sales of $523.7  million in the prior year. The Automotive
segment achieved a record 23.0% operating margin in 1993, compared with 21.1% in
1992, a  20% improvement  in operating  income  and an  11% increase  in  sales.
Excluding  the  1993 restructuring  charge,  the Automotive  segment's operating
margin was 23.8% and operating income improved 25%. Operating income was  $102.4
million,  $106.2 million  excluding the 1993  restructuring charge,  on sales of
$445.7 million  compared with  operating income  of $85.1  million on  sales  of
$402.6  million in  1992. This  strong performance  reflects higher  new car and
truck  production,  increased  applications  for  segment  components  and   the
introduction  of new automotive  products. In the  Industrial segment, operating
income and  sales were  down 10%  and 2%,  respectively, and  segment  operating
margin  declined to 17.4%  from 19.0% in 1992.  Excluding the 1993 restructuring
charge, Industrial segment operating income was down 6% and the operating margin
for 1993 was 18.2%.  Segment operating income was  $75.9 million, $79.6  million
excluding the 1993 restructuring charge, and sales were $436.7 million, compared
with  operating income  of $84.4  million and sales  of $443.8  million in 1992.
Record sales and earnings  performances were reported  by the Quincy  Compressor
and  Garlock Bearings Divisions,  while the Central  Moloney, Garlock Mechanical
Packing and France  Compressor Products Divisions  and FMD Electronics  reported
lower  results in  1993. Excluding  Central Moloney,  which was  sold in January
1994, sales were up 2% to $372.5  million compared with $365.3 million in  1992,
operating  income was  $80.3 million,  down 2% from  $81.9 million  in 1992, and
segment operating  margin  for 1993  was  21.5%  compared with  22.4%  in  1992.
Excluding  the  1993 restructuring  charge and  Central Moloney,  1993 operating
income was $80.7 million, down slightly from 1992, and the operating margin  was
21.7%. Following is a discussion of the results of operations for the year ended
December 31, 1993, compared with the year ended December 31, 1992.
    

    SALES.   Sales of $1,334.8  million in 1993 were  2% lower than the $1,368.7
million in 1992. In the Aerospace/Government segment, sales were $453.3  million
compared  with  $523.7 million  last year.  The decline  in Aerospace/Government
segment sales reflects lower demand  for new commercial aircraft resulting  from
the  excess capacity of the world airline  fleets, as well as continued declines
in defense spending. In spite of  the weak economic conditions in the  aerospace
industry,  Coltec began shipping components for new commercial programs in 1993,
including landing gear systems for the  Boeing 777 aircraft and flight  controls
for the Fo-70 aircraft produced by N.V. Fokker ("Fokker"). In 1993, sales to the
military  and other branches of the  United States Government accounted for $173
million, or 38%, of total sales for the Aerospace/ Government segment,  compared
with  $192 million,  or 37%,  in 1992  and $223  million, or  40%, in  1991. For
Coltec, sales to the military and other branches of the United States Government
were $190 million, $210 million and $224 million, or 14%, 15% and 16%, in  1993,
1992  and  1991, respectively.  In 1993,  Menasco Aerosystems  Division reported
lower commercial sales of landing gear systems  for both the Boeing 757 and  767
aircraft  and lower military sales, primarily for spare parts. Menasco Aerospace
Ltd in Canada reported  lower shipments of landing  gear systems for the  Boeing
737 and the McDonnell Douglas MD-80 aircraft and

                                       18
<PAGE>
flight  controls for  the Fokker Fo-100  aircraft. Sales of  overhaul and repair
services  declined  at  Menasco  Overhaul  Division  due  mainly  to   increased
competition  and  the  economic slowdown  in  Europe.  The decline  in  sales at
Fairbanks Morse was due to completion  of certain government programs and  lower
shipments of engines to the commercial sector. Late in 1993, Fairbanks Morse was
awarded  a contract to provide engines for  the U.S. Navy Sealift program. Sales
at Chandler Evans Control Systems Division declined in 1993 on lower demand  for
fuel pumps from both the commercial and military markets. Walbar reported higher
sales  in  1993 on  increased demand  for  repair and  coating services  for gas
turbine engine  components, and  on increased  shipments of  turbine blades  and
vanes for commercial aircraft engines.

   
    For  1993,  Automotive  segment  sales  increased  11%  to  $445.7  million,
reflecting the recovery of the domestic automotive industry that began last year
and continued to accelerate in 1993. Also contributing to the sales  improvement
were  increased applications for segment components  and the introduction of new
automotive products. Higher volume, including increased applications for segment
components, and new product  sales contributed 7% and  4%, respectively, of  the
total  sales  increase.  Sales  were higher  at  Holley  Automotive  Division on
increased demand for manifold assemblies and transmission solenoids, and on  the
introduction  of new  automotive products.  Coltec Automotive  Division reported
increased shipments  of  oil  pumps  into the  European  automotive  market  and
mechanical  emission control  air pumps  for use on  light trucks  and vans. The
sales improvement at  Stemco Truck Products  Division was due  to the  continued
demand  for  wheel lubrication  systems  from original  equipment manufacturers,
reflecting increased truck and trailer production, and to increased  aftermarket
shipments, resulting from gains in market share. Farnam Sealing Systems reported
higher  sales on increased demand from  the original equipment market for engine
and transmission products. Holley Replacement Parts reported lower sales in 1993
reflecting the continuing decline in demand for carburetors in the aftermarket.
    

   
    Sales for the Industrial  segment in 1993 were  $436.7 million, or 2%  lower
than  in 1992. Sales were higher at  Quincy Compressor on increased shipments of
rotary  screw  air   compressors,  strong  demand   for  compressor  parts   and
accessories,  and new  product introductions.  Garlock Bearings  reported higher
sales on  new applications  for DU  bearings and  strong demand  from the  truck
market  for  DX bearings.  Sales  were up  at Sterling  Die  and Haber  Tool due
primarily to  increased  demand  from  the automotive  market,  and  at  Garlock
Plastomer  Products on strong acceptance from the aerospace industry for its new
PTFE insulating tape. At Garlock  Mechanical Packing Division, sales of  KLOZURE
oil  seals and  industrial seals were  higher on increased  demand from original
equipment manufacturers, while sales of gasketing and compressed sheet  products
declined  due to softness in the petrochemical  market. Sales were lower in 1993
at Central  Moloney reflecting  the low  level of  demand for  transformers  and
competitive  pricing  pressures, and  at  Garlock Valves  &  Industrial Plastics
Division due  to  the  slowdown  in the  European  economy.  Delavan  Commercial
Products  Division reported lower sales due  to the foreign exchange translation
impact on  sales of  its U.K.  affiliate and  to lower  demand for  agricultural
nozzles and pumps, resulting from the flooding in the Midwest.
    

    COST  OF SALES.  Cost  of sales decreased 4%  in 1993 reflecting lower sales
volume for  the  Aerospace/ Government  segment  and Central  Moloney,  improved
manufacturing  processes, lower  maintenance cost and  depreciation expense, and
benefits realized from the restructuring program. As a percent of sales, cost of
sales declined to 67.8% from 69.0% in 1992.

   
    SELLING AND  ADMINISTRATIVE EXPENSE.   Selling  and administrative  expense,
including  other income and expense, increased 6% in 1993. This increase results
primarily from a full  year of amortization expense  on restricted stock  awards
granted  in 1992 and from  the inclusion in 1992  of a nonrecurring reduction in
insurance  cost  and  receipt  of  an  $8.7  million  license  fee  by   Menasco
Aerosystems.  The increase in 1993 selling and administrative expense was offset
in part  by  recovery  of  previously incurred  engineering  expense  by  Coltec
Automotive.  As a percent of sales, selling and administrative expense increased
to 14.4% from 13.2% in 1992.
    

    RESTRUCTURING CHARGE.    The  1993 restructuring  charge  of  $25.2  million
recorded  in the  second quarter  of 1993 covers  the cost  of consolidation and
rearrangement of certain manufacturing facilities and related reductions in work
force, primarily  in the  Aerospace/Government segment,  as well  as at  Central
Moloney.

                                       19
<PAGE>
   
Key  elements  of  the  restructuring program  include  closing  a  landing gear
manufacturing facility  and  consolidation of  landing  gear production  at  two
existing  Menasco facilities, closing  a turbine engine  components facility and
consolidating  production  of   these  components  at   three  existing   Walbar
facilities,  and closing  one of two  Central Moloney plants.  At Chandler Evans
Control Systems, the manufacturing area  was reduced; and at Holley  Replacement
Parts, administrative offices and the distribution operation are being relocated
to  one  of the  division's manufacturing  facilities. During  1993, significant
progress was made toward achieving the objectives of the restructuring  program,
and  the program is expected  to be completed in  1994. Substantially all of the
1993 restructuring charge consists  of provisions made  in anticipation of  cash
expenditures to be funded from operations in approximately equal amounts in 1993
and 1994.
    

    INTEREST  AND  DEBT  EXPENSE,  NET.   Net  interest  expense  declined $25.7
million, or 19%, in 1993. Included in 1992 was substantial interest expense that
was reduced significantly by the 1992 Recapitalization.

    PROVISION FOR INCOME  TAXES.   The effective income  tax rate  for 1993  was
35.75%  compared with 39.7%  in 1992. The  lower effective tax  rate for 1993 is
principally due to the disaffiliation of Coltec from Holdings as a result of the
1992 Recapitalization and the  adjustment of reserves,  partially offset by  the
increase in the U.S. statutory rate from 34% to 35%.

    EXTRAORDINARY ITEM.  In 1993, Coltec incurred extraordinary charges of $17.8
million  in connection with debt refinancings  and the early retirement of debt.
This included $14.7 million from a  debt refinancing completed in January  1994.
In  1992, Coltec incurred extraordinary charges  of $105.3 million in connection
with the 1992  Recapitalization and $1.6  million from the  early retirement  of
debt.

  YEAR ENDED DECEMBER 31, 1992, COMPARED WITH YEAR ENDED DECEMBER 31, 1991

    In  1992, earnings  before extraordinary item  were $64.7  million, equal to
$1.11 per common share, compared with  $2.2 million, or $0.09 per common  share,
in  1991. The lower 1991 earnings  reflected substantial interest expense, which
was reduced significantly by the 1992 Recapitalization. Giving pro forma  effect
to  the 1992 Recapitalization as  if it had occurred  on January 1, 1991, Coltec
would have  reported  earnings  before  extraordinary item  for  1992  of  $82.4
million,  or $1.19 per common share, compared with earnings of $56.5 million, or
$0.82 per common  share, in 1991.  Operating income for  1992 increased 6%  over
1991  on a slight decline in sales.  Operating income was $243.1 million in 1992
on sales of $1,368.7 million, compared  with operating income of $229.0  million
on  sales of $1,373.0  million in 1991. Coltec's  operating margin improved from
16.7% in 1991  to 17.8%  in 1992.  The 1992 results  were achieved  in spite  of
continued  reductions in defense spending and the slowdown in certain commercial
programs that unfavorably impacted the Aerospace/Government segment and resulted
in a 12% decline in Coltec's order backlog from the level at year-end 1991. Both
sales and operating income  in the Aerospace/Government  segment declined 7%  in
1992;  however,  the  segment maintained  its  1991 operating  margin  of 19.5%.
Operating income for the Aerospace/Government segment in 1992 was $102.1 million
on sales of $523.7 million, compared with operating income of $109.6 million  on
sales of $562.8 million in 1991. In the Automotive segment, operating income was
up  44% in 1992 on an 8% sales increase and segment operating margin improved to
21.1% from 15.9% in 1991. Segment  operating income was $85.1 million and  sales
were $402.6 million compared with operating income of $59.3 million and sales of
$372.6  million in 1991.  This strong performance by  the Automotive segment was
aided by  increased  new car  and  truck  production, the  introduction  of  new
automotive  products having higher margins  and recovering aftermarket sales. In
the Industrial segment, operating income increased 5% on a slight improvement in
sales and segment operating margin improved to 19.0% from 18.3% in 1991, despite
the lack  of significant  growth during  1992  in many  of the  markets  served.
Operating  income and  sales for the  Industrial segment were  $84.4 million and
$443.8 million, respectively, in 1992.  This compared with operating income  and
sales  of $80.2 million and $439.3 million, respectively, in 1991. The segment's
improved results were paced by the  strong performances of Garlock Bearings  and
Quincy  Compressor. Following is  a discussion of the  results of operations for
the year ended  December 31,  1992, compared with  the year  ended December  31,
1991.

    SALES.   For 1992, sales totaled  $1,368.7 million, which was slightly lower
than the $1,373.0 million reported in 1991. In the Aerospace/Government segment,
sales declined 7% to  $523.7 million compared with  $562.8 million in 1991.  The
sales   decline  was  due  to  continued  reductions  in  defense  spending  and

                                       20
<PAGE>
   
stretch-out of certain commercial programs.  Lower sales at Menasco  Aerosystems
were due primarily to a reduction in military spare parts sales and, to a lesser
extent,  a reduction  in commercial  spare parts  sales. This  sales decline was
offset in  part by  increased shipments  of landing  gear systems  for  Lockheed
Corporation's  ("Lockheed") F-16 and  Boeing's 757 aircraft.  Sales were down at
Menasco Aerospace  reflecting a  program stretch-out  on the  McDonnell  Douglas
MD-80  aircraft and lower spare parts sales.  The weak economic condition of the
airline industry resulted in lower demand for landing gear overhaul services  at
Menasco  Overhaul.  Walbar reported  a decline  in sales  on lower  shipments of
compressor blades  and  vanes  to aircraft  engine  manufacturers  for  military
applications. Chandler Evans Control Systems reported lower sales of spare parts
to  both the military and commercial markets;  however, the division was able to
offset this sales decline  with sales of new  products. Higher sales at  Delavan
Gas  Turbine Products  resulted from  increased overhaul  services and  at Lewis
Engineering from improved pricing.
    

    Sales for the Automotive segment increased 8% to $402.6 million,  reflecting
increased  new  car and  truck production,  the  introduction of  new automotive
products having higher margins and recovering aftermarket sales. Contributing to
the higher sales was the initial production of the LH car models manufactured by
Chrysler which use Holley throttle bodies and other fuel system components.  All
divisions within the Automotive segment reported increased sales in 1992. Higher
sales  at Holley Automotive were due to strong demand for transmission solenoids
and the introduction of new automotive products. At Coltec Automotive, shipments
of both mechanical air pumps and oil pumps were above 1991 levels. In  addition,
tooling  and  prototype  sales were  higher.  In 1992,  Coltec  Automotive began
initial shipments of oil  pumps into the European  automotive market. The  sales
increase  at Holley  Replacement Parts  was due  to improved  pricing and higher
volume for remanufactured and  performance carburetors resulting from  increased
market  penetration. The sales  improvement at Stemco Truck  Products was due to
selected price increases and  to an increase in  shipments of wheel  lubrication
systems to the original equipment market. Farnam Sealing Systems reported higher
sales on the introduction of new engine and transmission products.

    Industrial  segment sales  of $443.8 million  were slightly  higher in 1992.
Sales were  up significantly  at Garlock  Bearings on  increased demand  for  DU
bearings  from the automotive market and new applications for DX bearings. Sales
were higher  at Quincy  Compressor  on increased  demand for  reciprocating  and
rotary  screw air  compressors and from  improved pricing. The  Sterling Die and
Haber Tool operations benefited from  increased sales to the automotive  market.
At  Delavan Commercial Products, sales of fuel spray nozzles were up to the home
heating market, reflecting cooler weather in  the Northeast and higher sales  to
Europe   and  Japan,  and   to  the  industrial   market,  reflecting  increased
pollution-control applications. Sales were down at Central Moloney due to  lower
pricing and reduced volume, attributable to a falloff in demand for transformers
related  to a decline in housing starts.  Due to weak market conditions in 1992,
Garlock Mechanical Packing reported sales declines  in Canada and Mexico and  in
its  hydraulic  components,  compression packing  and  mechanical  seals product
lines. These  declines were  offset in  part by  increased sales  of  industrial
sealing  and gasketing  products, price increases  and new  product sales. Lower
sales were also reported in 1992 by France Compressor Products.

    COST OF SALES.   Cost of  sales decreased  2% in 1992  reflecting the  lower
sales  volume in the Aerospace/ Government segment, reductions in work force and
benefits realized from manufacturing  efficiencies and cost-reduction  programs.
As a percent of sales, cost of sales declined to 69.0% from 70.4% in 1991.

    SELLING  AND ADMINISTRATIVE  EXPENSE.   Selling and  administrative expense,
including  other  income  and  expense,  increased  2%  in  1992.  Selling   and
administrative  expense for 1992 reflected a $3.5 million reduction in insurance
cost compared  with a  $6.5 million  reduction in  1991. These  reductions  were
realized from the sale of stock in a company formed in 1986 to provide insurance
coverage   then  largely   unavailable.  The   increase  in   1992  selling  and
administrative expense  was  offset  in  part by  higher  license  fee  receipts
received  by Menasco  Aerosystems in  1992. As a  percent of  sales, selling and
administrative expense was 13.2% in 1992 compared to 12.9% in 1991.

    INTEREST AND  DEBT  EXPENSE,  NET.   Net  interest  expense  declined  $64.1
million, or 32%, in 1992. Included in 1991 was substantial interest expense that
was reduced significantly by the 1992 Recapitalization.

                                       21
<PAGE>
    PROVISION  FOR INCOME TAXES.  The effective  income tax rates were 39.7% and
92.8% for  1992  and 1991,  respectively.  The  lower effective  rate  for  1992
reflected a lower tax cost to repatriate non-U.S. earnings and no adverse effect
of unutilized operating losses as a result of higher income for 1992.

    EXTRAORDINARY  ITEM.   In  1992,  Coltec incurred  extraordinary  charges of
$105.3 million  in  connection with  the  1992 Recapitalization,  primarily  for
premiums,  expenses  and  write-off  of  deferred  financing  costs  from  early
retirement of debt, and  $1.6 million from the  write-off of deferred  financing
costs from early retirement of debt and from a debt refinancing. In 1991, Coltec
recognized  an extraordinary gain of $.6  million resulting from the purchase of
its debentures.

DISCONTINUED OPERATIONS

    On March  22, 1990,  Coltec sold  substantially all  of the  assets of  Colt
Firearms   to  the  parent   company  of  Colt's   Manufacturing  Company,  Inc.
(collectively with its parent company, "Colt's Manufacturing"), a company formed
by a  group of  private investors,  for cash  and certain  securities of  Colt's
Manufacturing. At December 31, 1993, Coltec's investment in Colt's Manufacturing
was fully reserved.

   
    On  March 18,  1992, Colt's  Manufacturing filed  a petition  for bankruptcy
protection under Chapter 11 of the United States Bankruptcy Code, and on January
19, 1993, the Official Committee of Unsecured Creditors of Colt's  Manufacturing
Company,  Inc. filed  a fraudulent  conveyance action  against Coltec  and other
defendants. Coltec believes that it has adequately provided for any  liabilities
Coltec  may incur with respect to  Colt's Manufacturing and accordingly does not
believe that the Chapter 11 filing, the associated financial condition of Colt's
Manufacturing or the fraudulent conveyance action will have a material effect on
Coltec's results of operations and financial condition.
    

LIQUIDITY AND FINANCIAL POSITION

   
    On April 1, 1992, Coltec completed the 1992 Recapitalization, which included
a public offering of its  Common Stock, two long-term  debt offerings and a  new
bank   financing  arrangement.  The   1992  Recapitalization  reduced  aggregate
indebtedness, refinanced a substantial portion of remaining indebtedness on more
favorable terms and  improved Coltec's operating  and financial flexibility.  On
November  18, 1993,  Holdings became  a wholly owned  subsidiary of  Coltec as a
result of  a  reorganization that  resulted  in  the exchange  by  the  Holdings
shareholders  of their shares of common  stock of Holdings for 24,830,000 shares
of common stock  of Coltec  (the "1993  Holdings Reorganization"),  constituting
35.5%  of the shares of Common Stock outstanding after the exchange. Immediately
before this exchange, Holdings owned 35.7%, or 25,000,000 shares, of the  Common
Stock  of Coltec. The 1993 Holdings Reorganization simplified the equity capital
structures of Coltec and Holdings, and enabled the Holdings stockholders to hold
shares of Coltec Common  Stock directly. The $26.7  million of cash acquired  by
Coltec  in  the  1993  Holdings  Reorganization  was  used  primarily  to retire
outstanding indebtedness of Coltec.
    

   
    Funds from  operations continue  to  be the  main  source of  financing  for
Coltec's  businesses  and  for repaying  its  debt.  In 1993,  cash  provided by
operating activities was $105.2 million compared with $119.9 million in 1992 and
$149.2 million in 1991. The lower cash from operations in 1993 was due primarily
to increased  working  capital  requirements,  resulting  from  the  buildup  of
inventory  for new programs and to meet increased customer requirements and from
payments relating  to  the restructuring  program.  In addition  to  the  $105.2
million  of cash generated in 1993, Coltec received $26.7 million of cash in the
1993 Holdings Reorganization. These  funds were used  to reduce indebtedness  by
$92.1  million and invest $38.6 million in  capital expenditures. As a result of
an agreement with one of its insurance carriers, Coltec began collecting in  the
third  quarter  of  1993 its  receivable  from insurance  carriers  for asbestos
product liability  claims  and related  litigation  costs. Included  in  current
receivables  at December 31, 1993 was $35.8 million due from insurance carriers.
Excluding this amount, receivables  increased 2% to  $125.7 million at  December
31,  1993  and receivable  days outstanding  were  36 compared  with 35  days at
year-end 1992. Inventories of $167.8 million at December 31, 1993, were slightly
higher than at  year-end 1992,  and inventory turnover  was 4.76  times in  1993
compared  with 4.83  times in  1992. Cash and  cash equivalents  at December 31,
1993, were $5.7 million compared with $7.2 million at December 31, 1992. Working
capital at December 31, 1993, was $163.1 million and the current ratio was 1.83.
This  compares   with  working   capital  of   $95.3  million   and  a   current
    

                                       22
<PAGE>
ratio of 1.39 at December 31, 1992. The increase in working capital results from
the  receivable from insurance carriers and  the reduction in current maturities
of long-term debt, reflecting the debt refinancing completed in January 1994.

    At December 31, 1993, total debt was $1,033.6 million compared with $1,122.1
million at December 31, 1992. During 1993, Coltec redeemed $50.0 million of  its
11-1/4% debentures and refinanced $15.1 million of its 9-7/8% industrial revenue
bonds  with like bonds having  interest rates of 6.4%  to 6.55%. The 1994 Credit
Agreement, which  expires  June 30,  1999,  has resulted  in  reducing  Coltec's
mandatory  debt  repayments over  the next  five  years by  approximately $120.0
million and will result in lower interest cost in future years. The 1994  Credit
Agreement also provides up to $100 million for issuance of letters of credit and
will  be reduced by $50.0 million on both  January 11, 1997 and 1998. On January
11, 1994, borrowings of $324.0 million were outstanding and letters of credit of
$43.6 million were issued under the 1994 Credit Agreement leaving $47.4  million
available  for additional borrowings and the  issuance of letters of credit. The
1994 Credit  Agreement was  used to  prepay borrowings  outstanding and  replace
letters  of credit issued under the 1992 Credit Agreement. The remaining balance
of the  1994 Credit  Agreement will  be  used for  working capital  and  general
corporate  purposes. Coltec's  loan agreements contain  various restrictions and
conditions, with  which Coltec  is in  compliance. See  "Description of  Certain
Indebtedness".  Management  believes  that cash  generated  from  operations and
borrowings available under the  1994 Credit Agreement will  be adequate to  meet
Coltec's   operating  needs,  planned  capital  expenditures  and  debt  service
requirements for the next several years.

   
    The negative balance in shareholders'  equity of $625.5 million at  December
31,  1993, compares with a negative balance  of $666.6 million at year-end 1992.
The $41.1 million increase in equity  during 1993 reflects $47.4 million of  net
earnings,  $2.8  million of  amortization  of unearned  compensation  related to
restricted shares and $.2 million of proceeds and tax benefits from the exercise
of stock options and the expiration of restrictions on restricted stock,  offset
by a $4.2 million minimum pension liability, a $3.6 million reduction in foreign
currency  translation  adjustments, and  $1.5  million of  expenses  incurred in
connection with the 1993 Holdings Reorganization.
    

   
    Other assets at December 31, 1993, were $87.9 million, or $41.7 million less
than the balance at year-end 1992. This reduction results from the write-off  of
deferred  financing costs  as a  result of  the refinancing  of the  1992 Credit
Agreement and  from  the  increase  in  amounts  currently  due  from  insurance
carriers.  Other  liabilities  increased  $52.5 million  during  1993  to $132.4
million at  December 31,  1993.  This increase  results  from recognition  of  a
minimum  pension liability, the assumption of liabilities in connection with the
1993 Holdings  Reorganization,  and  a reserve  for  environmental  and  product
liability  claims  established  from  proceeds  to  be  received  from insurance
settlements. The  $46.4 million  in liabilities  of discontinued  operations  at
December 31, 1993, represented reserves to cover postretirement benefits for the
former employees of the discontinued operations and other future estimated costs
of  the dispositions of Crucible Materials  Corporation in 1985, the steelmaking
facility in Midland, Pennsylvania in 1982,  and Colt Firearms in 1990.  Payments
covering  the liabilities of discontinued operations in 1993, 1992 and 1991 were
$4.4 million, $6.2 million and $4.2 million, respectively. Coltec expects future
cash payments will extend  over the remaining lives  of the former employees  of
the discontinued operations.
    

CAPITAL EXPENDITURES

   
    Capital  expenditures were $38.6 million in 1993 compared with $25.0 million
in 1992 and  $26.2 million in  1991, as  Coltec continues to  invest in  capital
improvements  to increase  efficiency, reduce  costs, pursue  new opportunities,
expand production and maintain facilities. The level of capital expenditures has
and will vary from year to year, affected by the timing of capital spending  for
new production equipment for new products, periodic plant and facility expansion
as  well as cost  reduction and labor  efficiency programs. Capital expenditures
during 1993  included construction  of a  manufacturing facility  in  Greenwood,
South  Carolina for Walbar  Metals; consolidation of  landing gear production at
the Ft. Worth, Texas facility  of Menasco Aerosystems, and production  equipment
to    manufacture    a    new    oil    pump    at    Coltec    Automotive.   At
    

                                       23
<PAGE>
   
December 31, 1993, Coltec had $14.9 million of planned capital expenditures that
included $4.7  million for  a new  landing gear  overhaul facility  in  Ontario,
Canada  and  $1.7  million  for  consolidation  of  administrative  offices  and
distribution operations of Holley Replacement Parts at Bowling Green, Kentucky.
    

ENVIRONMENTAL

   
    Coltec and its subsidiaries are subject to numerous federal, state and local
environmental laws, many  of which are  becoming increasingly stringent,  giving
rise  to increased compliance costs. For  example, the Clean Air Amendments will
require abatement of chemical air emissions that were previously unregulated and
will  require  certain  existing,  and  many  newly  constructed  or   modified,
facilities  to obtain  air emission permits  that were  not previously required.
Because many of the regulations under the Clean Air Amendments have not yet been
promulgated, Coltec cannot estimate their impact at this time. Coltec,  however,
believes that it will not be at a competitive disadvantage in complying with the
Clean Air Amendments and that any increase in costs to comply with the Clean Air
Amendments  will not  have a  material effect on  its results  of operations and
financial condition.
    

   
    Many of the  facilities of Coltec  and its subsidiaries  are subject to  the
federal  Resource  Conservation  and  Recovery Act  of  1976  ("RCRA"),  and its
analogous state  statutes. Although  the  costs under  RCRA for  the  treatment,
storage and disposal of hazardous materials generated at Coltec's facilities are
increasing,  Coltec does not believe that such costs will have a material effect
on Coltec's results of operations and financial condition.
    

   
    Coltec has  been  notified that  it  is among  the  Potentially  Responsible
Parties   ("PRPs")  under  the  federal  Comprehensive  Environmental  Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or similar  state
laws,   for  the  costs  of  investigating,   and  in  some  cases  remediating,
contamination by hazardous materials at several sites. CERCLA imposes joint  and
several  liability  for the  costs of  investigating and  remediating properties
contaminated with 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  process  of
investigating  and  remediating  contaminated  properties  can  be  lengthy  and
expensive. The  process  is also  subject  to the  uncertainties  occasioned  by
changing legal requirements, developing technological applications and liability
allocations  among PRPs.  Based on  the progress  to date  in the investigation,
cleanup and allocation of responsibility  for these sites, Coltec has  estimated
that  its costs in connection with all except one of these sites approximate $20
million  at  December  31,  1993,  and  has  accrued  for  this  amount  in  the
Consolidated  Balance Sheet as of December 31, 1993. Although Coltec is pursuing
insurance recovery in connection with certain of these matters, the accrual  has
not  been reduced  for potential  recoveries from  insurance companies  or other
third parties. In addition, Coltec has not recorded a receivable with respect to
any potential recovery  of costs  in connection with  any environmental  matter.
While  progress toward the investigation,  cleanup and responsibility allocation
at the remaining site has  not been sufficient to allow  Coltec at this time  to
determine  the extent of its potential financial responsibility, Coltec does not
believe its costs in connection  with such site will  have a material effect  on
Coltec's results of operations and financial condition.
    

   
    Coltec's  annual expenditures  (including capital  expenditures) relating to
environmental matters over the three years  ended December 31, 1993 ranged  from
$4  million to $6  million, and Coltec expects  such expenditures to approximate
$11 million in 1994 and $8 million in 1995. Capital expenditures in each of 1994
and 1995 are expected to approximate $2 million, and expenditures for  recurring
environmental matters are expected to approximate $2 million in each of 1994 and
1995.  The balance of the  anticipated expenditures in each  year is expected to
cover expenses for  nonrecurring environmental matters.  The estimate of  annual
environmental  expenditures for 1994 and 1995  is based upon the expected timing
of expenditures pursuant  to currently identified  environmental sites.  Because
environmental  laws  are becoming  increasingly stringent,  Coltec is  unable to
estimate future costs to comply with such laws; however, Coltec does not foresee
a continuous upward trend in annual expenditures on environmental matters.
    

                                       24
<PAGE>
ASBESTOS LITIGATION

    With  respect to asbestos product liability and related litigation costs, in
1993 two subsidiaries of Coltec received approximately 27,400 new lawsuits, with
a comparable number of lawsuits received in 1992 and 1991. The subsidiaries made
payments with respect to asbestos liability and related costs aggregating  $38.7
million  in 1993, $39.8 million in 1992 and $48.4 million in 1991, substantially
all of which were covered by insurance.

    As of December 31, 1993, certain actions  had been settled on a group  basis
with  payments to be made  to individual plaintiffs over  periods of one to four
years. In  addition, 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.
Coltec estimates that  the aggregate remaining  cost of the  disposition of  the
foregoing  settled  actions  and  actions  in  advanced  stages  of  processing,
including associated legal  costs, is  approximately $52.6  million and  expects
that this cost will be substantially covered by insurance.

   
    As  of  December 31,  1993,  the two  subsidiaries  were among  a  number of
defendants  in  approximately  68,500  actions,  including  approximately  6,100
actions  in advanced stages of processing as described above. As of December 31,
1992, the number  of outstanding actions  approximated that as  of December  31,
1993.  The remaining 62,400 outstanding actions as  of December 31, 1993, 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
liability  or  costs to  Coltec.  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.
    

   
    It  is  also  difficult to  predict  the  number of  asbestos  lawsuits that
Coltec's subsidiaries will receive  in the future. 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, 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 it is  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 Coltec and  other defendants in  asbestos litigation, the  likely sharing  of
judgments  among multiple responsible defendants,  and the significant amount of
insurance coverage  that  Coltec  expects  to  be  available  from  its  solvent
carriers, Coltec believes that pending and reasonably anticipated future actions
are  not likely to have a material  effect on Coltec's results of operations and
financial  condition.  Although  the  insurance  coverage  that  Coltec  has  is
substantial,  insurance coverage for  asbestos claims is  not available to cover
asbestos exposures initially occurring on and after July 1, 1984.
    

    Effective in the first quarter of  1994, Coltec will adopt the  requirements
of  Financial Accounting Standards  Board Interpretation No.  39, "Offsetting of
Amounts Related to Certain Contracts". In accordance with Interpretation No. 39,
Coltec will record an accrual  for its liabilities for asbestos-related  matters
that  are deemed probable  and can be reasonably  estimated, and will separately
record an asset equal to the

                                       25
<PAGE>
amount of  such liabilities  that  is expected  to  be recovered  by  insurance.
Accordingly,  the liabilities and assets to be recorded in 1994 will relate only
to  settled  actions  and  actions  in  advanced  stages  of  processing,  which
approximated  $52.6 million as of December 31, 1993. Coltec does not expect that
the adoption of Interpretation  No. 39 will have  a material effect on  Coltec's
results of operations and financial condition.

OTHER FINANCIAL INFORMATION

  PRO FORMA RESULTS OF OPERATIONS

    Giving  pro forma effect to the 1992  Recapitalization as if it had occurred
on January 1,  1991, Coltec  would have reported  earnings before  extraordinary
item as follows:

   
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                                   -------------------------
                                                                     1992             1991
                                                                   --------         --------
                                                                   (IN MILLIONS, EXCEPT PER
                                                                          SHARE DATA)
                                                                   -------------------------
<S>                                                                <C>              <C>
Earnings before interest, income taxes and extraordinary item....  $243.1           $230.4
Interest and debt expense, net...................................   116.7            117.6
Provision for income taxes.......................................    44.0             56.3
                                                                   --------         --------
Earnings before extraordinary item...............................  $ 82.4           $ 56.5
                                                                   --------         --------
Earnings per common share
 before extraordinary item(a)....................................  $1.19            $.82
                                                                   --------         --------
<FN>
- ---------
(a)  Pro  forma earnings per  common share before  extraordinary item by quarter
     would have been $0.22, $0.33, $0.29 and $0.35 for the first, second,  third
     and  fourth quarters  of 1992,  respectively; and  $0.15, $0.23,  $0.29 and
     $0.15, for the like quarters of 1991.
</TABLE>
    

   
  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, do  not operate  in
hyperinflationary economies.
    

  IMPACT OF NEW ACCOUNTING STANDARDS

    Coltec   adopted  Financial   Accounting  Standards   No.  106,  "Employers'
Accounting for  Postretirement  Benefits  Other Than  Pensions",  and  No.  109,
"Accounting  for  Income  Taxes",  effective  January  1,  1993;  and  No.  112,
"Employers' Accounting for Postemployment Benefits", effective January 1,  1994.
The  adoption of  these standards  did not  have a  material effect  on Coltec's
results of operations and financial condition.

    Based on  preliminary  analyses, Coltec  does  not expect  that  the  future
adoption of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment  of a Loan", and No. 115, "Accounting for Certain Investments in Debt
and Equity  Securities", will  have a  material effect  on Coltec's  results  of
operations and financial condition.

                                       26
<PAGE>
                                    BUSINESS

GENERAL

    Coltec  manufactures  and sells  a  diversified range  of  highly engineered
aerospace, automotive and  industrial products in  the United States  and, to  a
lesser  extent, abroad.  Through its  Aerospace/Government segment,  Coltec is a
leading manufacturer  of landing  gear systems,  engine fuel  controls,  turbine
blades,  fuel  injectors,  nozzles  and related  components  for  commercial and
military aircraft, and  also produces high-horsepower  diesel engines for  naval
ships  and diesel, gas and dual-fuel engines for electric power plants. Coltec's
Automotive segment manufactures and markets a selected line of high  value-added
products,   including   fuel   injection  system   assemblies   and  components,
transmission controls,  suspension controls,  emission  control air  pumps,  oil
pumps   and  seals  for  domestic   original  equipment  manufacturers  and  the
replacement parts market. Coltec's Industrial segment is a leading  manufacturer
of industrial seals, gaskets, packing products and self-lubricating bearings and
also  produces  technologically advanced  spray  nozzles for  agricultural, home
heating and industrial applications and air compressors for manufacturers.  Each
of Coltec's three industry segments contributed approximately one-third of total
sales in 1993.

   
    Coltec's  strategy is to  develop and maintain  substantial market positions
and attractive margins for its  products through technological innovation,  cost
efficiencies,  product differentiation  and quality.  Coltec emphasizes targeted
development of  highly  engineered,  high  value-added  components  and  systems
designed  to  meet specific  customer  requirements. This  emphasis  has enabled
Coltec to maintain close, interactive relationships with the major aircraft  and
domestic  automobile manufacturers and  Coltec's principal industrial customers.
Through successful introduction of  new products, cost reductions,  productivity
improvements  and selected divestitures, Coltec has consistently achieved strong
operating margins in its businesses.  Coltec's average operating margin for  the
period  from 1989 to 1993  was 17.3%, or 17.7% excluding  the effect of the 1993
restructuring charge. Operating margins were 17.8% in 1992 and 15.9% in 1993, or
17.7% excluding the effect of  the 1993 restructuring charge. See  "Management's
Discussion  and Analysis  of Financial  Condition and  Results of  Operations --
Industry Segment Information". Coltec's focus on aftermarket sales (representing
42% of total  sales from 1989  to 1993) in  all of its  segments contributes  to
Coltec's consistently strong operating margins.
    

   
    Coltec's  Aerospace/Government segment  has taken an  aggressive approach in
responding to  changing  economic  and market  conditions.  With  reductions  in
domestic  military spending, Coltec  has placed increasing  emphasis on sales to
commercial   aircraft    and    aircraft    engine    manufacturers.    Coltec's
Aerospace/Government segment increased commercial sales as a percentage of total
sales  from 48% in  1989 to 62%  in 1993. In  1993, Aerospace/Government segment
sales declined  13%,  primarily  reflecting  lower  demand  for  new  commercial
aircraft  resulting from  the excess capacity  of the world  airline fleets. The
Aerospace/Government segment's  operating margin  was 15.0%  in 1993,  or  18.9%
excluding  the effect  of the  1993 restructuring  charge, compared  to 19.5% in
1992.  Coltec's  ability  to  maintain  this  operating  margin  for  1993   was
particularly  noteworthy in  light of weak  industry conditions.  In addition to
producing landing gear for various aircraft manufacturers, including Boeing  and
McDonnell Douglas, Coltec has been awarded contracts to supply the main and nose
landing  gear for the Boeing 777 aircraft. In 1993, Coltec delivered on schedule
the first  three  main and  nose  landing gear  assemblies  for the  Boeing  777
aircraft.  Production rates and  deliveries of Boeing  777 landing gear shipsets
are scheduled to accelerate  over the next several  years. Coltec has also  been
awarded  a contract to supply main landing gear for the Boeing 737-700 aircraft.
Fairbanks Morse recently received firm orders valued at $40 million for  engines
that  will power the first ship of the  Sealift fleet and a U.S. Navy amphibious
landing ship. In the first quarter  of 1994, Fairbanks Morse acquired  equipment
and other assets related to the Alco engine business from GE Transportation.
    

   
    In  1993, Coltec's Automotive segment recorded strong operating performance,
including a 20% improvement in operating income, 25% excluding the effect of the
1993 restructuring charge, and an 11% increase in sales. The segment's operating
margin  in  1993  increased  to  a  record  23.0%,  23.8%  excluding  the   1993
restructuring charge, from 21.1% in 1992. This reflects higher new car and truck
production,  increased applications for segment  components and the introduction
of new automotive products. In response to automotive technology changes in  the
1980's   that  led   to  the   substitution  of   fuel  injection   systems  for
    

                                       27
<PAGE>
carburetors, Coltec has  developed a substantially  new automotive product  line
since  1984  that  includes fuel  injection  components,  transmission controls,
suspension controls, oil pumps and a new electric emission control air pump. The
Automotive segment expanded its emission-control air pump business late in  1993
by  acquiring  the assets  of the  air pump  manufacturing operation  of General
Motors and was named  the sole supplier  of these parts  to General Motors.  The
Automotive  segment  is  the  sole  supplier  of  the  aluminum  intake manifold
introduced in Chrysler's  3.5 liter  engine on its  LH series  of vehicles,  and
Coltec  has been  selected as  the sole  supplier of  Chrysler's next-generation
induction module systems  for the  3.5 liter  engine, which  will incorporate  a
plastic  intake  manifold  in 1998.  In  addition, in  1993  Coltec's Automotive
segment supplied approximately 15% of the oil pump requirements of Ford in North
America. In early 1994, Coltec  Automotive began supplying mechanical air  pumps
to Isuzu in both the United States and Japan.

   
    Coltec's  Industrial segment continues to introduce technologically advanced
products and develop more efficient ways of serving customers. In 1993,  Garlock
Mechanical   Packing  introduced  GYLON  style   3540,  a  highly  compressible,
chemically resistant gasket material  that can be  easily installed at  chemical
plants, and, in order to serve end users more quickly, significantly streamlined
two  production areas to reduce production times. The Quincy Compressor Division
broadened its  business  base  by introducing  a  new  vacuum pump  and  an  air
compressor  powered by natural gas. Delavan  Commercial Products is gaining wide
market acceptance  with the  STOP-DRIP valve  which reduces  the pollution  that
occurs  in  oil burners.  Garlock  Bearings is  a  leader in  the  production of
self-lubricating bearings and  has further expanded  into the automotive  market
with  several new  applications for  its products.  Industrial segment operating
income was down 10%, sales were down  2% and the segment's operating margin  was
17.4%  in 1993.  Excluding the operating  results of Central  Moloney, which was
sold in  January 1994,  and the  1993 restructuring  charge, Industrial  segment
operating  income for 1993 was down slightly from 1992 results, sales were up 2%
and the operating margin was 21.7%.
    

   
AEROSPACE/GOVERNMENT
    

    Through its Aerospace/Government segment,  Coltec is a leading  manufacturer
of  landing gear systems, engine fuel  controls, turbine blades, fuel injectors,
nozzles and related components  for commercial and  military aircraft, and  also
produces  high-horsepower diesel  engines for  naval ships  and diesel,  gas and
dual-fuel engines for electric power  plants. The divisions, principal  products
and principal markets of the Aerospace/Government segment are as follows:

<TABLE>
<CAPTION>
                DIVISION                             PRINCIPAL PRODUCTS                        PRINCIPAL MARKETS
- ----------------------------------------  ----------------------------------------  ----------------------------------------
<S>                                       <C>                                       <C>
Menasco                                   Aircraft landing gear systems and         Commercial and military aircraft
                                           components, flight control actuation      manufacturers
                                           systems and other aircraft components
Chandler Evans Control Systems            Aircraft fuel pumps and control systems   Aircraft engine manufacturers
Walbar                                    Blades, vanes and discs for jet engines   Aircraft engine manufacturers
Delavan Gas Turbine Products              Fuel injectors, spraybars and other       Aircraft engine manufacturers
                                           components for gas turbine engines
Lewis Engineering                         Cockpit instrumentation and sensors       Commercial and military aircraft
                                                                                     and engine manufacturers
Fairbanks Morse Engine                    Large engines powered by diesel fuel or   U.S. Navy, electric utilities
                                           natural gas
</TABLE>

    With  reductions  in  domestic  military  spending,  Coltec  has  placed  an
increasing emphasis on sales by  its Aerospace/Government segment to  commercial
aircraft  manufacturers.  In  addition  to producing  landing  gear  for various
Boeing, McDonnell Douglas and other aircraft, Coltec has been awarded a contract
to supply main  landing gear for  the Boeing  737-700 aircraft. In  the case  of
Coltec's  successful bid to become  the supplier of landing  gear for the Boeing
777 aircraft,  Coltec  developed  and  delivered  the  first  landing  gear  set

                                       28
<PAGE>
ahead  of schedule in August 1993. Coltec has also been successful in increasing
its penetration of the commercial aircraft engine market, including the commuter
aircraft and  general  aviation  markets, through  its  Chandler  Evans  Control
Systems,  Walbar and  Delavan Gas  Turbine Divisions.  See "Aerospace Controls",
"Aircraft Engine Components" and "Gas Turbine Products" below.

    In most of the divisions in  this segment, Coltec is a leading  manufacturer
in  the markets it services and has focused its efforts on manufacturing quality
products involving a high engineering content or proprietary technology. In many
cases in  which Coltec  developed components  for use  in a  specific  aircraft,
Coltec  has become the primary source for  replacement parts and, in some cases,
service for these products  in the aftermarket. Many  of the programs for  which
Coltec  has been awarded a  contract or for which Coltec  has been selected as a
manufacturer are  subject  to  termination or  modification.  See  "--  Contract
Risks".

  LANDING GEAR SYSTEMS

    Coltec,  through its Menasco Aerosystems  and Menasco Overhaul Divisions and
its Canadian subsidiary,  Menasco Aerospace  Ltd. (collectively  referred to  as
"Menasco"),  designs, manufactures and  markets landing gear  systems, parts and
components for medium-to-heavy commercial aircraft and for military aircraft and
provides spare parts and overhaul services for these products. Menasco is one of
the leading  suppliers  of  landing  gear  for  medium-to-heavy  commercial  and
military  aircraft.  It also  designs and  manufactures aircraft  flight control
actuation systems and is a team leader in a flight control systems research  and
development program directed toward the design, validation and implementation of
advanced  "fly-by-wire/ fly-by-light"  flight control  technology. Landing gear,
including components, parts, and overhaul  services for landing gear,  accounted
for  approximately 87% of Menasco's sales and 11% of Coltec's sales during 1993.
For the years 1993, 1992 and 1991,  commercial sales accounted for 62%, 73%  and
70%, respectively, of Menasco's total sales.

    Menasco  has been awarded contracts to supply the main and nose landing gear
for the  Boeing  777 aircraft.  Delivery  of landing  gear  for the  Boeing  777
aircraft  commenced  in 1993.  Boeing  has announced  that  147 firm  orders and
options for  an additional  108  of its  777 aircraft  have  been placed  as  of
December  31, 1993.  Menasco has  been selected to  replace a  competitor as the
supplier of the main landing gear for  the Fokker Fo-100 aircraft as well as  to
supply  the main landing gear and flight  controls for the Fokker Fo-70. Menasco
has supplied most of the flight controls for the Fo-100 since this aircraft  was
introduced.  Other commercial programs for  which Menasco is currently producing
landing gear and flight controls include the main and nose landing gear for  the
Boeing 757 aircraft, the main landing gear for the Boeing 737 aircraft, the nose
landing  gear  for  the Boeing  767  aircraft,  the main  landing  gear  for the
McDonnell Douglas MD-80/90 aircraft, the flight controls for the Canadair RJ-601
aircraft and the landing  gear components for the  A-320 and A-330/340  aircraft
manufactured by Airbus Industrie ("Airbus").

    Menasco  is  supplying the  main  and nose  landing  gear for  the Taiwanese
Indigenous Defense  Fighter being  built  for the  Taiwanese government  and  is
developing  the main and nose landing gear for the Lockheed/Boeing F-22 Advanced
Tactical Fighter.  Other  military  programs  for  which  Menasco  is  currently
producing  landing gear  and flight controls  include the main  and tail landing
gear for the McDonnell  Douglas AH-64 Apache helicopter,  the nose landing  gear
and  flight controls for the McDonnell Douglas C-17 military transport, the main
and nose landing  gear for  the Lockheed F-16  and the  Lockheed C-130  military
transport.

    Landing  gear and  flight controls  are designed  for specific  aircraft and
produced by a single  manufacturer. Menasco has been  the sole supplier of  this
equipment  for  each program  it has  been  awarded. The  price of  landing gear
constitutes up to approximately 2% of the total cost of an aircraft.

    Menasco joined with  Messier-Bugatti for the  development and production  of
landing  gear for the Boeing 777 and  the Airbus 330/340 aircraft and has agreed
to cooperate on future ventures where appropriate, which may include Airbus  and
McDonnell  Douglas programs, although no major commercial programs are currently
formalized.

                                       29
<PAGE>
    In addition to manufacturing and marketing aircraft landing gear and  flight
controls,  Menasco provides complete overhaul services  on a worldwide basis for
landing gear and actuation systems through its overhaul facilities in the United
States and Canada.

    In  view  of  the  relatively  small  number  of  medium-to-heavy   aircraft
manufactures,  Menasco's commercial sales of landing gear have historically been
concentrated among a limited number  of purchasers, primarily Boeing,  McDonnell
Douglas and Lockheed in the United States and Fokker in Europe.

    The  market for landing gear  is highly competitive, with  a small number of
airframe manufacturers evaluating potential suppliers based on design, price and
record  of  past  performance.  Menasco  has  made  significant  investments  in
long-term  marketing  to promote  working  relationships with  customers  and to
enhance   Menasco's   engineering   department's   understanding   of   customer
requirements.  Menasco believes it is  this engineering expertise, together with
its record of on-time delivery, quality and price, which has made Menasco one of
the leading  producers  of  medium-to-heavy  aircraft  landing  gear  worldwide.
Menasco's  primary domestic competitors are  the Cleveland Pneumatic Division of
The B.F. Goodrich Company and Bendix  Brake and Strut Division of  Allied-Signal
Inc.  ("Allied-Signal"). Foreign  competitors include  Messier-Bugatti, Dowty of
England and  Dowty Canada  Ltd. The  overhaul business  has become  increasingly
competitive. Menasco believes its competitive strengths in the overhaul business
include its name, which carries a reputation for quality and service.

    Raw  materials and  finished products  essential to  Menasco's manufacturing
operations are available in sufficient quantity from various sources.

  AEROSPACE CONTROLS

    Coltec, through  its  Chandler  Evans Control  Systems  Division  ("Chandler
Evans"), manufactures a variety of aircraft engine fuel control systems and fuel
pumps  and engine and  aircraft components for  the aerospace industry. Chandler
Evans' products  are  highly  engineered  and  contain  proprietary  technology.
Principal customers for these products include gas turbine engine manufacturers,
aircraft   manufacturers,  domestic  and   foreign  airlines,  commercial  fleet
operators and  the  military  services.  For the  years  1993,  1992  and  1991,
commercial  sales  accounted for  67%, 71%  and  63%, respectively,  of Chandler
Evans' total sales.

    Chandler Evans produces for  sale to the  commercial aircraft engine  market
the  main fuel pump  for certain models  of the General  Electric CF-6 and CF-34
engines, both  used on  various commercial  aircraft, and  the Textron  Lycoming
LF-507  engine used  on the British  Aerospace BAe 146  aircraft. Chandler Evans
also produces for sale to the military aircraft engine market the main fuel pump
for certain models of the United Technologies F-100 engine used on the McDonnell
Douglas F-15  aircraft, the  main and  afterburner fuel  pumps for  the  General
Electric  F-404 engine used on the McDonnell  Douglas F-18 aircraft and the fuel
control systems  for the  Textron Lycoming  T-53 engine  used on  the Bell  UH-1
Utility  and Cobra  attack helicopters.  The main  and afterburner  pump for the
GE-414 engine is currently in development. Except for the General Electric  CF-6
and  the  United Technologies  F-100 (for  which different  manufacturers supply
components for specific engine versions having different thrust), Chandler Evans
is the sole source of  the pumps and fuel control  systems that it supplies  for
the engine programs described above.

    Chandler  Evans was  selected to  develop and  manufacture a  full authority
digital electronic control  ("FADEC") for  the Allison 250  engine. Delivery  of
this  system  is scheduled  to  begin in  late  1994. Also,  Chandler  Evans has
developed a FADEC for the T800-LHT helicopter engine, a joint venture of Allison
Engine Company  and Allied-Signal  Garrett, which  has commercial  and  military
applications.  Chandler  Evans is  likely  to remain  the  sole source  of these
components for the life of these programs.

    Chandler Evans also supports  its products with  aftermarket sales of  spare
units,  parts and overhaul  service. For the  year 1993, 52%  of Chandler Evans'
revenues were  attributable  to  the aftermarket.  Aftermarket  sales  are  very
significant,   since  proprietary  programs  allow  Chandler  Evans  to  realize
favorable operating margins.

                                       30
<PAGE>
    Chandler  Evans competes with  Argo-Tech Corp. and  the Aviation Division of
Sundstrand Corporation in  fuel pumps and  with the Bendix  Control Division  of
Allied-Signal   and  the  Hamilton  Standard  Division  of  United  Technologies
Corporation in fuel controls. Due  to the highly engineered, proprietary  nature
of  its products, Chandler Evans maintains  a substantial portion of aftermarket
sales,  with  competition  limited  to   a  small  number  of  imitation   parts
manufacturers.

  AIRCRAFT ENGINE COMPONENTS

    Coltec,  through  its Walbar  Inc  subsidiary and  its  Canadian subsidiary,
Walbar Canada  Inc. (together  referred to  as "Walbar"),  manufactures  turbine
components,  compressor  airfoils,  and turbine  and  compressor  rotating parts
primarily for  aircraft  gas  turbine  engines and,  to  a  lesser  extent,  for
land-based,  marine  and  industrial  gas  turbine  applications,  and  performs
services including repairs  and protective coatings  for these products.  Coltec
believes  that Walbar is one of the leading independent manufacturers of blades,
impellers and  rotating components  for jet  engines. Although  Walbar does  not
typically  design the products it  manufactures, its manufacturing processes are
highly sophisticated.

    Walbar manufactures products for commercial  engines, including the Pratt  &
Whitney  100 used  on the deHavilland  Dash 8, Alenia  ATR 40 and  Alenia ATR 72
aircraft, the Pratt & Whitney 200 used on the McDonnell Douglas Helicopter  MDX,
the  Pratt & Whitney  300 used on  the British Aerospace  BAe 1000 aircraft, the
Pratt & Whitney PT6  used on various commercial  and military aircraft, and  the
Garrett  Auxiliary  Power Units  used on  various commercial  aircraft. Walbar's
original equipment and replacement components are  also utilized in a number  of
other commercial aircraft, including the Boeing 727, 737, 747, 757, and 767; the
Airbus  A300, A310  and A320;  and the McDonnell  Douglas DC-8,  DC-9, DC-10 and
MD-80. Walbar's blades,  vanes and  discs are employed  on many  of the  leading
models  of turboprop, business  jet and commuter  aircraft currently in service.
Walbar supplies a number of different compressor and turbine blades for the  new
Allison  3007/2100/T406 engine  family. These  engines are  designed for  use on
several  business  and  regional  commuter  aircraft  and  also  have   military
applications.  Targeting  the  commuter  aircraft  market  is  part  of Walbar's
strategy  of  emphasizing  the  production  of  turbine  engine  components  for
commercial  aircraft applications.  Turbine blades  for Rolls  Royce engines are
produced for commercial  and military  aircraft. For  the years  1993, 1992  and
1991,   commercial  sales  accounted   for  approximately  85%,   74%  and  60%,
respectively, of Walbar's total sales.

    Walbar manufactures  products for  military engines,  including the  General
Electric F-404 used on the McDonnell Douglas F-18 aircraft, the General Electric
F-110 used on the Grumman F-14 aircraft, the McDonnell Douglas F-15 aircraft and
Lockheed  F-16 aircraft, the GE  LM 2500 used on  the U.S. Navy's Spruance class
destroyers, the Textron  Lycoming AGT 1500  used on the  U.S. Army's M-1  Abrams
main  battle tank, the Volvo  RM12 engine for the  SAAB JAS39 aircraft and Turbo
Union RB199 engine for the Panavia Tornado aircraft.

    Walbar's market has  become increasingly competitive  over the past  several
years as airlines have sought to limit parts inventories and defense procurement
has  been reduced. Although  Walbar does not typically  design its own products,
management  believes  that  its   highly  sophisticated  applied   manufacturing
technology,  responsive production capabilities and focus on cost reduction have
made Walbar one of  the leading independent  manufacturers of blades,  impellers
and  rotating components  for jet  engines. Chromalloy  American Corporation and
Howmet Turbine Components Corporation provide competition in all aspects of this
industry. In addition, Walbar's principal customers possess, in varying degrees,
integrated production capacity for producing  and servicing the components  that
Walbar supplies.

  GAS TURBINE PRODUCTS

    Coltec,  through its  Delavan Inc  subsidiary operating  as the  Delavan Gas
Turbine Products  Division  ("Delavan"),  manufactures  highly  engineered  fuel
injectors,  spraybars and other components  for commercial and military aircraft
gas turbine engines.  Coltec believes that  Delavan is the  leading producer  of
these  products for  small-to-medium size  aircraft engines.  These products are
made to design specifications using  sophisticated production processes and  are
marketed  directly to engine manufacturers pursuant to production contracts. The
principal customers  include General  Electric Company,  Allied-Signal  Engines,
Pratt &

                                       31
<PAGE>
Whitney  Canada Inc., Textron  Lycoming and the  Allison Engine Company. Delavan
also supports its products  with aftermarket sales of  spare units and  overhaul
services. For the years 1993, 1992 and 1991, commercial sales accounted for 69%,
58%  and 66%,  respectively, of  Delavan's total  sales. The  market for Delavan
products is considered  highly competitive. Competitive  pressure is focused  on
price  at the manufacturing  level and on  service and price  in the aftermarket
segment. Coltec believes  that Delavan has  achieved its leading  position as  a
supplier  of  fuel injectors,  spraybars and  other  components to  producers of
small-to-medium size  aircraft  engines  due  essentially  to  superior  product
performance,  development support and  a leadership role in  the use of computer
modeling in the design of nozzles. Delavan competes worldwide with Textron  Fuel
Systems Division of Textron Inc. and Parker-Hannifin Corporation.

  AIRCRAFT INSTRUMENTATION

    Coltec,  through  its  Lewis Engineering  Operation,  designs,  develops and
produces electro-mechanical and electronic instrumentation for aircraft cockpits
and temperature sensors  for aircraft  and engine systems.  Lewis competes  with
several manufacturers of aircraft instruments.

  ENGINES

    Coltec,  through Fairbanks Morse, manufactures and markets large, heavy-duty
diesel, gas and dual-fuel  engines and parts for  such engines. Fairbanks  Morse
manufactures   engines   in  conventional   "V"   and  in-line   opposed  piston
configurations which are used as power  drives for compressors, large pumps  and
other  industrial machinery, for marine propulsion and for stationary and marine
power generation. Engines are offered from  4 to 18 cylinders, ranging from  640
to  29,320 horsepower. Such  products are sold in  the domestic market primarily
through regional sales offices and field sales engineers and in foreign  markets
through  the domestic sales network and foreign sales representatives. Parts are
sold primarily through factory and regional sales offices. Approximately 50%  of
Fairbanks  Morse's sales  are for  replacement parts  and service  for Fairbanks
Morse engines.

    Large heavy-duty diesel engines  are sold to the  U.S. Navy and Coast  Guard
and  to electric utilities, municipal power plants, oil and gas producers, firms
engaged in  ship and  tug operations,  offshore drilling  activities and  local,
state and federal governments.

    Under a license agreement with Societe d'Etudes de Machines Thermiques, S.A.
groupe  Alsthom, a French company, Fairbanks  Morse has the right to manufacture
the Colt-Pielstick PC2 and PC4 lines  of large diesel engines, which operate  on
oil fuel (including heavy oil) and, in the case of the PC2, dual-fuel, and range
in size from 4,400 to 29,320 horsepower. Engines manufactured under this license
are  used for  primary power  by electric  utilities, standby  power for nuclear
electric generating plants and ship propulsion.

   
    Over the last several years, Fairbanks Morse has supplied each of the  ships
in  the  U.S.  Navy  LSD  program  with  four  16-cylinder  PC2.5  engines, each
delivering 8,500 horsepower  for main propulsion,  and four 12-cylinder  opposed
piston  engines for  shipboard power generation.  The LSD  ships hold amphibious
craft and troops for close deployment in emergencies. Engines for 11 LSD and LSD
Cargo Variant ships have been delivered and engines for one additional ship  are
scheduled for delivery in 1995. Another major program for Fairbanks Morse is the
TAO  fleet  oiler program.  These  ships are  powered  by two  10-cylinder PC4.2
engines, each delivering 16,290 horsepower. A  total of 15 ships of this  series
have been ordered by the U.S. Navy. Engines for 14 ships have been delivered and
the remaining shipset is in production. Fairbanks Morse has also received a firm
order  to produce four 10-cylinder  PC4.2 engines for the  first new ship in the
nation's Sealift Program with options for an additional five to eight ships. The
four engines for the first  ship are scheduled to be  delivered in 1995. If  the
options  are converted to  firm orders by  the U.S. Navy,  four engines would be
delivered each year beginning in 1996.
    

    Contracts are awarded in the heavy-duty diesel engine market based on  price
and  successful operation in similar  applications. Coltec attributes its strong
position in this  market to  its history as  a supplier  to the U.S.  Navy in  a
variety of propulsion and generator set applications and its ability to meet the
U.S.  Navy's  military  specification  requirements.  Management  believes  that
Fairbanks Morse and  its primary competitor,  the Cooper-Bessemer  Reciprocating
Division   of  Cooper  Industries,  Inc.,  lead   the  field  of  four  domestic
manufacturers serving the market for  heavy-duty diesel engines in power  ranges
from 5,000 to 30,000

                                       32
<PAGE>
horsepower.  Fairbanks  Morse competes  with six  domestic manufacturers  in the
medium speed (1,000  to 5,000  horsepower) engine market,  dominated by  General
Motors  and Caterpillar Inc.,  and with several  foreign manufacturers. Numerous
domestic and foreign manufacturers compete in the under 1,500 horsepower  engine
market.

    In  the first quarter of 1994,  Fairbanks Morse acquired equipment and other
assets related to  the Alco engine  business from GE  Transportation. Under  the
terms  of the agreement,  Fairbanks Morse will manufacture  and sell engines and
aftermarket parts  for Alco  diesel  engines used  in  power plants  and  marine
markets.  GE  Transportation will  retain  the rights  to  sell and  market Alco
engines and aftermarket parts  for its locomotive  markets. Fairbanks Morse  has
been issued a preferred supplier contract to manufacture these engines and parts
for  General  Electric's  locomotive  needs. Fairbanks  Morse  expects  to begin
producing Alco engines and aftermarket parts in April 1994.

AUTOMOTIVE

    Coltec's Automotive segment manufactures and markets a selected line of high
value-added products, including fuel injection system assemblies and components,
transmission controls,  suspension controls,  emission  control air  pumps,  oil
pumps   and  seals  for  domestic   original  equipment  manufacturers  and  the
replacement parts  market.  The  divisions,  principal  products  and  principal
markets of the Automotive segment are as follows:

<TABLE>
<CAPTION>
                DIVISION                             PRINCIPAL PRODUCTS                        PRINCIPAL MARKETS
- ----------------------------------------  ----------------------------------------  ----------------------------------------
<S>                                       <C>                                       <C>
Holley Automotive                         Fuel injection components, transmission   Automotive manufacturers
                                           controls and suspension controls
Coltec Automotive                         Air pumps and oil pumps                   Automotive manufacturers
Holley Replacement Parts                  New and remanufactured replacement and    Automotive manufacturers, wholesale
                                           performance carburetors and electronic    distributors and retailers in
                                           fuel injection components                 replacement markets
Farnam Sealing Systems                    Gaskets and seals                         Automotive industry
Stemco Truck Products                     Oil seals, exhaust systems and            Fleet truck operators and truck parts
                                           hubodometers                              distributors
Performance Friction Products             Synchronizers and clutch plates           Automotive and truck manufacturers
</TABLE>

    Coltec's  principal automotive products have  strong brand name recognition.
Coltec has targeted  the development  of highly engineered  components for  fuel
injection  systems, transmission controls,  suspension controls and  air and oil
pumps. By forming close, interactive relationships with the domestic  automotive
manufacturers, Coltec has taken advantage of a shift by these manufacturers from
internal sourcing to procurement of components from outside suppliers.

  AUTOMOTIVE PRODUCTS

    Coltec,  through its  Holley Automotive  Division, designs  and manufactures
fuel injection components,  electrohydraulic control  devices for  transmissions
and  suspensions, transmission modulators and  other automotive products used in
passenger cars  and  trucks. Holley  has  been recognized  for  its  engineering
excellence  and  has strategically  changed its  structure  and product  line to
accommodate the evolving automotive market. These products are sold directly  to
original equipment manufacturers, Chrysler, Ford and General Motors.

                                       33
<PAGE>
    Holley  currently  produces  all  the multi-point  throttle  bodies  used on
Chrysler imported  3.0 liter  engines and  the Chrysler-manufactured  3.3  liter
engines.  These  six-cylinder engines  propel  the LeBaron  Convertible, Shadow,
Sundance and Acclaim, as well as the Minivan. Holley also is the sole source  of
the upper intake module and throttle body for the Chrysler 3.5 liter engine used
on  the Chrysler LH  mid-size sedans (the Chrysler  Concorde, Dodge Intrepid and
Eagle Vision) and also the Chrysler New Yorker and LHS.

    In  the  non-fuel  area,  significant  business  has  been  established   in
transmission  control  devices.  Holley  supplies high  volumes  of  aneroid and
non-aneroid modulators to  the General  Motors Powertrain  Division. Holley  has
expanded  its design capabilities to  include electronic solenoids for automatic
transmission  control.   Holley's   first   electronic   transmission   solenoid
application  was introduced by  Chrysler in 1989.  Applications were expanded to
Saturn in  1991,  and  to  Ford  and General  Motors  in  1992  with  additional
applications  for Ford for the 1994 model  year. Holley has increased design and
manufacturing capabilities  further  in  development  and  sales  of  suspension
solenoids to a major suspension manufacturer selling to Ford.

    Coltec,  through its Coltec  Automotive Division, produces  a mechanical air
pump that  supplies additional  air to  the exhaust  system which  enhances  the
oxidation  process and  reduces pollutants  emitted into  the atmosphere. Coltec
Automotive is the  sole independent domestic  supplier of automotive  mechanical
air  pumps. Major customers are  Ford and Chrysler and,  with the acquisition of
the assets  of  the  General  Motors air  pump  manufacturing  business,  Coltec
Automotive  will become the  sole source of these  components to General Motors'
North American  operations. Coltec  Automotive has  also developed  an  advanced
electric  air  pump  designed  to  cope  with  increasingly  stringent  emission
standards. In early 1994, Coltec Automotive began supplying mechanical air pumps
to Isuzu for use in  its Rodeo and Trooper sport  utility models and one of  its
truck  models. Coltec expects to  ship approximately 30,000 air  pumps a year to
Isuzu, half for the Japanese market and half for the U.S. market.

    Coltec Automotive has also developed a line  of engine oil pumps for use  in
many  of  Ford's cars  and light  trucks. Applications  have expanded  to Ford's
Modular and Zetec engines.

    Coltec, through  its Holley  Replacement  Parts Division,  manufactures  and
markets  fuel injection components and other  fuel metering devices and controls
such as intake  manifolds, electric  fuel pumps, emission  control devices,  and
engine  and road speed  governors, new and  remanufactured automotive and marine
carburetors, remanufactured automotive air conditioning compressors,  carburetor
parts  and repair kits,  mechanical fuel pumps, valve  covers and related engine
components under the Holley name. Holley carburetors and components are used  in
domestic  and  foreign vehicles  and  marine engines  and  are sold  directly to
original equipment manufacturers, principally Chrysler, Ford, General Motors and
Outboard Marine Corporation, and, through distributors and mass merchandisers to
the parts and replacement market.

    In the domestic market, this segment competes principally with Ford, General
Motors and several  independent manufacturers. To  date, Coltec has  not been  a
significant supplier to foreign vehicle manufacturers.

  TRUCK PRODUCTS AND SEALING SYSTEMS

    Coltec,  through its Stemco Inc subsidiary  operating as the Stemco Products
Division ("Stemco"),  is one  of  the leading  domestic manufacturers  of  wheel
lubrication   systems  for  heavy-duty  trucks.  Stemco  also  produces  mileage
recording devices (hubodometers) and exhaust  systems for the heavy-duty  truck,
medium-duty  truck and school bus markets and manufactures moisture ejectors and
other related products for vehicle and stationary air systems. Approximately 80%
of Stemco's revenues are  derived from replacement  parts. Stemco, thorough  its
Performance  Friction Products  Operation, manufactures a  line of asbestos-free
fluorocarbon friction materials, a line  of carbon-based friction materials  and
synchronizers and clutch plates for transmissions, transfer cases and wet brakes
for    use   in   trucks,   off    highway   equipment   and   passenger   cars.

                                       34
<PAGE>
Coltec, through its  Farnam Sealing Systems  Division, manufactures and  markets
automotive  and industrial gaskets, seals and  other sealing system products for
engines, fuel systems  and transmissions. Stemco's  truck products and  Coltec's
sealing systems include highly engineered proprietary products.

INDUSTRIAL

    In  the  Industrial  segment,  Coltec, through  its  Garlock  Inc subsidiary
("Garlock"), is a  leading manufacturer  of industrial  seals, gaskets,  packing
products  and  self-lubricating bearings  and,  through its  Delavan-Delta, Inc.
subsidiary,  is  a  producer  of  technologically  advanced  spray  nozzles  for
agricultural, home heating and industrial applications. Coltec also produces air
compressors  for manufacturers. The divisions,  principal products and principal
markets of the Industrial segment are as follows:

<TABLE>
<CAPTION>
                DIVISION                             PRINCIPAL PRODUCTS                        PRINCIPAL MARKETS
- ----------------------------------------  ----------------------------------------  ----------------------------------------
<S>                                       <C>                                       <C>
Garlock Mechanical Packing                Seals, gaskets, packings and expansion    Chemical, pulp and paper, utilities and
                                           joints                                    industrial manufacturers
Garlock Valves & Industrial Plastics      Valves, PTFE sheet and tape               Chemical and industrial manufacturers
France Compressor Products                Compressor valves and seals               Compressor manufacturers and users
Garlock Bearings                          Self-lubricating metal-backed bearings    Industrial and automotive manufacturers
                                           and materials
Delavan Commercial Products               Industrial, agricultural and heating      Agricultural operations, oil burner
                                           unit spray nozzles                        manufacturers and replacement market
Ortman Fluid Power                        Hydraulic and pneumatic cylinders         Industrial manufacturers
Haber and Sterling                        Cold-forming dies and thread-rolling      Fastener and automotive manufacturers
                                           dies
FMD Electronics                           Electronic ignition systems and level     Industrial manufacturers
                                           control instruments
Quincy Compressor                         Helical screw and reciprocating air       Manufacturing and oil and gas industries
                                           compressors
</TABLE>

    Coltec's Industrial  segment  manufactures  and  markets  a  wide  range  of
products  for use in various industries.  In this segment, Coltec's strategy has
involved  developing  high   quality  products,  capitalizing   on  brand   name
recognition,   targeting  specific,  well-defined   markets  and  building  good
distribution systems.

    In January 1994, Coltec sold its Central Moloney Transformer Division.

  SEALS, PACKINGS AND GASKETING MATERIAL

    Coltec, under  the Garlock  name, is  a leading  manufacturer of  industrial
seals,  gasketing material and  gasket assemblies and  packing products. Through
its  France  Compressor   Products  Division  of   Garlock  ("France"),   Coltec
manufactures  and markets rod packings, piston  rings, valves and components for
reciprocating  gas  and  air  compressors  used  primarily  in  the  hydrocarbon
processing  industry.  These  products  withstand  high  temperature,  corrosive
environments,  prevent  leakage  and  exclude  contaminants  from  rotating  and
reciprocating machinery and seal joints.

    Manufacturing   processes  involve  plastics,   rubbers,  metals,  textiles,
chemicals, aramid fibers, carbon fibers, or  a combination of the same.  Garlock
has  been a leader in using advancements  in materials technology to develop new
products, including its GYLON line of  products, and in converting to  asbestos-
free  products.  Approximately  95%  of  the  gasketing  and  packing  materials
currently manufactured by

                                       35
<PAGE>
Garlock worldwide are  asbestos-free. Because  the raw  materials for  Garlock's
products  are  widely available,  the  seals, gasketing  materials  and packings
business of Garlock is not dependent on a limited number of suppliers.

    Garlock's seals, gasketing material and packings are marketed through  sales
personnel, sales representatives, agents and distributors to numerous industrial
customers   involved  principally  in  the   petroleum,  steel,  chemical,  food
processing, power generation and pulp and paper industries.

    Most seals, gasketing material and packings wear out during the life of  the
product in which they are incorporated. Accordingly, the service and replacement
market  for these products is significant.  In 1993, the service and replacement
market accounted for approximately  80% of Garlock's  sales of seals,  gasketing
material and packings.

    Manufacturers  in this market compete on  the basis of price and aftermarket
services. Garlock's  extensive  distribution  network,  and  its  leadership  in
product  development,  have  contributed  to the  establishment  of  what Coltec
believes to be its leading position in the market for seals, gasketing  products
and  packings. France believes it is a leading supplier of premium components in
the aftermarket, where it competes primarily  with C. Lee Cook and Cook  Manley,
subsidiaries of Dover Corporation, and Hoerbinger Corporation of America Inc.

  BEARINGS, VALVES, PLASTICS, NOZZLES, CYLINDERS, FORMING TOOLS, IGNITION
SYSTEMS AND LEVEL CONTROLS

    Coltec,  through  Garlock, is  a  leading manufacturer  of  steel-backed and
fiberglass-backed self-lubricating bearings and bearing materials primarily  for
the  automotive,  truck,  agricultural and  construction  markets.  Garlock also
manufactures polytetrafluoroethylene ("PTFE")  lined butterfly  and plug  valves
and components and PTFE tapes.

    Coltec,  through its Delavan-Delta, Inc. subsidiary operating as the Delavan
Commercial  Products  Division,  manufactures  and  markets  spray  nozzles  and
accessories  for the  agricultural, industrial  and home  heating markets. These
products are sold  to original equipment  manufacturers, distributors and  other
end-users throughout the world.

    Coltec,   through  Garlock's  Ortman  Fluid  Power  operation,  manufactures
hydraulic and  pneumatic cylinders  in  bore diameter  sizes  from 1-1/2  to  24
inches.  Coltec, under the Sterling and  Haber names, manufactures and markets a
wide variety of metal cutting and  metal forming tools. Sales of these  products
are  primarily  made directly  to consumers.  Competition  for such  products is
provided by numerous companies.

    Coltec,  through  its  FMD  Electronics  operation,  manufactures  magnetos,
ignition  systems  and level  control instruments.  These  products are  sold to
original equipment manufacturers and through  factory and regional sales  forces
to various accounts for resale.

  AIR COMPRESSORS

    Coltec,  through its Quincy Compressor Division ("Quincy"), manufactures and
markets reciprocating  and  helical  screw air  compressors  and  vacuum  pumps.
Helical  screw air compressors  are manufactured and  sold under a non-exclusive
license  and  technical  assistance   agreement  with  Svenska  Rotor   Maskiner
Aktiebolaget, a Swedish licensor.

    Reciprocating  and  helical  screw  air compressors  have  a  wide  range of
industrial applications, providing  compressed air for  general plant  services,
pneumatic  climate and instrument control,  dry-type sprinkler systems, air loom
weaving, paint spray processes, diesel and gas engine starting,  pressurization,
pneumatic  tools  and other  air-actuated equipment.  Engine-driven skid-mounted
models of helical  screw air compressors  are used in  energy related  services,
such as air-assisted deep-hole drilling, both on offshore drilling platforms and
in tertiary recovery schemes involving on-site combustion approaches. Quincy air
compressors   are  marketed   through  a   well-developed  distribution  network
consisting of  field  sales personnel  and  distributors to  original  equipment
manufacturers  located in major industrial centers throughout the United States,
Canada, Mexico and the Pacific Rim.

                                       36
<PAGE>
    In  the  domestic  market  for  small,  industrial  and  reciprocating   air
compressors,  management believes  that Ingersoll-Rand is  the major competitor,
with Champion Pneumatic Machinery Co.,  Inc. and the Campbell-Hausfeld  division
of  Scott Fetzer as other competitors. In  the domestic market for helical screw
air compressors, management  believes that  Ingersoll-Rand and  Sullair are  the
dominant  competitors, with  Gardner-Denver Division of  Cooper Industries, Inc.
and Atlas Copco Corporation as other competitors.

INTERNATIONAL OPERATIONS

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

    Coltec's  manufacturing and  marketing activities  in Canada  are carried on
through  subsidiaries.  Menasco  Aerospace   Ltd.,  an  indirect  wholly   owned
subsidiary  of  Coltec, manufactures  landing gear  systems and  aircraft flight
controls and provides overhaul service for Canadian and other customers.  Walbar
Canada  Inc.,  a  wholly owned  subsidiary  of Walbar,  manufactures  jet engine
compressor blades, vanes  and turbine  components in Canada.  Garlock of  Canada
Ltd.,  a wholly  owned subsidiary  of Garlock,  manufactures and  markets seals,
gasketing material,  packings and  truck  products. It  also markets  parts  for
Fairbanks Morse diesel engines and accessories as well as other products for use
in Canada and for export to other countries.

    Through  wholly owned  or majority  controlled foreign  subsidiaries, Coltec
operates 15 plants in Canada, Mexico, France, the United Kingdom, Australia  and
Germany.  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 11
of the Notes to Financial Statements appearing elsewhere in this Prospectus.

    Coltec's contracts with foreign nations for delivery of military  equipment,
including  components, are subject to deferral  or cancellation by United States
Government regulation or orders regulating  sales of military equipment  abroad.
Any  such  action on  the  part of  the United  States  Government could  have a
material effect on Coltec's results of operations and financial condition.

SALES TO THE MILITARY AND BY CLASS OF PRODUCTS

    Sales to the military  and other branches of  the United States  Government,
primarily  in the Aerospace/ Government segment, were  14%, 15% and 16% of total
Coltec sales in 1993, 1992 and 1991, respectively. 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 1993, 1992 and 1991,  sales
of  landing gear  systems constituted 11%,  12% and 14%,  respectively, of total
Coltec sales.

BACKLOG

    At December 31, 1993,  Coltec's backlog of firm  unfilled orders was  $669.7
million compared with $709.1 million at December 31, 1992. Of the $669.7 million
backlog  at December 31,  1993, approximately $255.2 million  is scheduled to be
shipped after 1994.

CONTRACT RISKS

    Coltec, through its  various divisions, 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  cancellation.  In  addition,  certain  commerical  aviation contracts
contain   provisions    for    termination   for    convenience    similar    to

                                       37
<PAGE>
those   contained  in  United  States   Government  contracts  described  below.
Longer-term agreements  normally  provide  for  price  adjustments  intended  to
compensate for deferral of delivery depending upon market conditions.

    A  significant 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  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 over-runs. Under United States 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 Government
also regulates  the  methods  under  which costs  are  allocated  to  Government
contracts. With respect to Government contracts that are obtained pursuant to an
open  bid process and therefore result in a firm fixed price, the Government has
no right to renegotiate any  profits earned thereunder. In 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 Government is
current, accurate  and  complete,  the  Government similarly  has  no  right  to
renegotiate  any profits earned thereunder. If  the Government later conducts an
audit of  the  contractor and  determines  that  such data  were  inaccurate  or
incomplete  and  that  the  contractor thereby  made  an  excessive  profit, the
Government may take action to recoup  the amount of such excessive profit,  plus
treble damages, and take other enforcement actions.

    United   States  Government  contracts  are,  by  their  terms,  subject  to
termination by the 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 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 reasonable profit  on its costs incurred.  However, if a contract
termination is for default,  (a) the contractor  is paid such  amount as may  be
agreed upon for completed and partially-completed products and services accepted
by  the Government, (b) the 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 Government in procuring undelivered items from another source.

    In addition  to  the  right  of  the  Government  to  terminate,  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.

    A  substantial portion of Coltec's automotive  products are sold pursuant to
the terms and conditions (including  termination for convenience provisions)  of
the major domestic automotive manufacturers' purchase orders, and deliveries are
subject to periodic authorizations which are based upon the production schedules
of such automotive manufacturers.

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 $22.1  million for 1993, $22.9 million
for 1992 and  $23.8 million  for 1991.  Coltec presently  has approximately  370
employees engaged in research, development and engineering activities.

                                       38
<PAGE>
    Coltec  owns a number of United States  and other patents and trademarks and
has granted licenses under some of such patents and 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, 1993, Coltec had approximately 10,000 employees, of  whom
approximately 4,000 were salaried. Approximately 40% of the hourly employees are
represented  by  unions  for collective  bargaining  purposes.  Union agreements
relate, among other things,  to wages, hours and  conditions of employment,  and
the  wages and benefits furnished are  generally comparable to industry and area
practices.

    Nine collective bargaining  agreements covering  approximately 2,500  hourly
employees which expired in 1993 have been renegotiated. In 1994, four collective
bargaining  agreements covering  approximately 400  hourly employees  are due to
expire. Coltec  considers the  labor  relations of  Coltec to  be  satisfactory,
although Coltec does experience work stoppages from time to time.

    Coltec  is subject to extensive 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
Government contracts. These conditions are  common to the various industries  in
which Coltec participates and entail the risk of financial and other exposure.

PROPERTIES

    Coltec  operates 60 manufacturing plants in 21 states and in Canada, Mexico,
France, the United Kingdom, Australia and Germany. 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 principal manufacturing  plants
that  are  owned  in  fee, all  of  which  (other than  Palmyra,  New  York) are
encumbered pursuant  to the  1994 Credit  Agreement between  Coltec and  certain
banks and related security documents, is set forth below:

<TABLE>
<CAPTION>
                                                                APPROXIMATE
                                                                 NUMBER OF    APPROXIMATE
           SEGMENT                         LOCATION             SQUARE FEET     ACREAGE
- ------------------------------  ------------------------------  -----------   -----------
<S>                             <C>                             <C>           <C>
Aerospace/ Government           West Hartford, Connecticut (a)   1,200,000        111
                                Beloit, Wisconsin                  856,000         73
                                Burbank, California (b)            472,000         19
                                Ft. Worth, Texas                   324,000         43
                                Oakville, Ontario                  213,000         14
                                Mississauga, Ontario               153,000         10
Automotive                      Bowling Green, Kentucky (c)        456,000         60
                                Longview, Texas                    265,000         52
                                Sallisaw, Oklahoma                 220,000         53
Industrial                      Palmyra, New York                  696,000        121
<FN>
- ---------
(a)  Approximately  239,000 square feet are utilized by the Aerospace/Government
     segment with the balance leased, available for lease or available for sale.
(b)  During 1994, the Burbank, California facility will be closed and production
     of landing gear will be consolidated at the Ft. Worth, Texas and  Oakville,
     Ontario facilities.
(c)  Approximately  352,000 square feet  are utilized by  the Automotive segment
     with the balance available for sale.
</TABLE>

                                       39
<PAGE>
    In addition to  the above  facilities, certain  manufacturing activities  of
some  industry segments  are conducted  within leased  premises, the  largest of
which  is  approximately  173,000  square  feet.  The  Automotive  segment   has
significant  manufacturing  facilities  on  leased  premises  in  Water  Valley,
Mississippi (lease expires in 1994) and Longview, Texas (lease expires in 1997).
The Industrial segment has leased facilities located in Quincy, Illinois  (lease
expires  in 1998). 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  currently being utilized  aggregate
approximately  6,500,000  square  feet  of floor  area,  of  which approximately
5,800,000 square feet of area are owned in fee and the balance is leased.

    Coltec leases approximately 39,000 square feet at 430 Park Avenue, New York,
New York, for its  executive offices, and has  renewal options under such  lease
through 2001.

    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.

                                       40
<PAGE>
                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

   
<TABLE>
<CAPTION>
             NAME                AGE                    POSITION
- -------------------------------  ---  ---------------------------------------------
<S>                              <C>  <C>
David I. Margolis..............  64   Chairman of the Board of Directors, Chief
                                       Executive Officer and Director
John W. Guffey, Jr.............  56   President, Chief Operating Officer and
                                       Director
Paul G. Schoen.................  49   Executive Vice President, Finance, Treasurer
                                       and Chief Financial Officer and Director
Anthony J. diBuono.............  63   Executive Vice President, Secretary and
                                       General Counsel
Laurence H. Polsky.............  50   Executive Vice President, Administration
John M. Cybulski...............  57   Senior Vice President, Aerospace
Richard L. Dashnaw.............  57   Senior Vice President, Group Operations
James J. McHugh................  64   Vice President, Labor Relations
J. Bradford Mooney,              63   Director
 Jr.(a)(b).....................
Joel Moses(a)(b)...............  52   Director
Salvatore J. Cozzolino.........  69   Director
Andrew C. Hilton...............  65   Director
Donald P. Brennan(a)...........  53   Director
Frank V. Sica..................  43   Director
Howard I. Hoffen(a)............  30   Director
<FN>
- ---------
(a)  Member of the Stock Option and Compensation Committee.
(b)  Member of the Audit Committee.
</TABLE>
    

    Mr.  Margolis has been Chairman of the  Board, Chief Executive Officer and a
Director of Coltec since  prior to 1989.  He was also  President of Coltec  from
prior  to  1989  until May  1991.  He also  currently  serves as  a  director of
Burlington Industries, Inc.  Mr. Margolis has  been employed by  Coltec for  the
past 31 years.

    Mr.  Guffey has been  President and Chief Operating  Officer of Coltec since
May 1991 and a Director since 1991. From prior to 1989 until May 1991, he served
as Group President  of Coltec and  President of the  Garlock Mechanical  Packing
Division.  Mr. Guffey has been employed continuously by Coltec for the past nine
years and for a total of 15 of the last 21 years, including two years by Garlock
prior to its acquisition by Coltec.

   
    Mr. Schoen has been Executive  Vice President, Finance, Treasurer and  Chief
Financial Officer of Coltec since January 1994. He has been a Director of Coltec
since  April  1994.  From May  1991  until  December 1993,  he  was  Senior Vice
President, Finance, Treasurer and Chief  Financial Officer of Coltec. He  served
as  Senior Vice President and  Controller of Coltec from  January 1991 until May
1991 and as Vice President--Accounting from  prior to 1989 until December  1990.
Mr. Schoen has been employed by Coltec for the past 20 years.
    

    Mr. diBuono has been Executive Vice President, Secretary and General Counsel
of  Coltec since January 1994. From prior to 1989 until December 1993, he served
as Senior Vice President, Secretary and  General Counsel of Coltec. Mr.  diBuono
has been employed by Coltec for the past 25 years.

    Mr. Polsky has been Executive Vice President, Administration of Coltec since
January  1994. From  April 1992  until December 1993,  he served  as Senior Vice
President, Administration of Coltec. He was Vice President, Personnel for Cooper
Industries, Inc., an industrial manufacturing company, from prior to 1989  until
April 1992.

                                       41
<PAGE>
    Mr.  Cybulski has been Senior Vice  President, Aerospace of Coltec since May
1991. He served as Group President of Coltec from March 1989 until May 1991  and
served  as President  of Menasco  Aerospace Ltd.,  a subsidiary  of Coltec, from
prior to 1989 until June 1991. Mr. Cybulski has been employed by Coltec for  the
past 13 years.

    Mr. Dashnaw has been Senior Vice President, Group Operations of Coltec since
January  1994. He served as  Group President of Coltec  from February 1991 until
December 1993 and  has served as  President of Fairbanks  Morse Engine  Division
since  prior to 1989. Mr. Dashnaw has been employed by Coltec for the past seven
years.

    Mr. McHugh has  served as Vice  President, Labor Relations  of Coltec  since
prior to 1989. Mr. McHugh has been employed by Coltec for the past 14 years.

    Mr.  Mooney is a Rear Admiral (retired)  in the U.S. Navy. From January 1989
until March 1992, he served as President and Managing Director of Harbor  Branch
Oceanographic  Institution, Inc.,  a marine  research organization.  He has also
been a  consultant  in  ocean  engineering and  research  management  since  his
retirement from the U.S. Navy in September 1987.

   
    Professor Moses has been Dean of the School of Engineering, and D.C. Jackson
Professor  of Computer  Science and  Engineering, at  Massachusetts Institute of
Technology ("MIT"),  since  January 1991.  He  was  head of  the  Department  of
Electrical  Engineering and  Computer Science  of MIT  from prior  to 1989 until
August 1989.  He was  a Visiting  Professor at  the Harvard  Graduate School  of
Business  Administration  from September  1989  until June  1990.  He is  also a
director of Analog Devices, Inc.
    

   
    Mr. Cozzolino has been a  Director of Coltec since  prior to 1989. From  May
1991 until January 1994, he served as Vice Chairman of the Board of Directors of
Coltec  and from prior to  1989 until May 1991,  he was Executive Vice President
and Treasurer  of Coltec.  Mr. Cozzolino  retired from  his position  as a  Vice
Chairman in January 1994.
    

   
    Dr.  Hilton has been a Director of Coltec since prior to 1989. From May 1991
until January 1994,  he served as  Vice Chairman  of the Board  of Directors  of
Coltec and from prior to 1989 until May 1991, he was an Executive Vice President
of  Coltec. Dr. Hilton retired  from his position as  a Vice Chairman in January
1994.
    

    Mr. Brennan has been a Managing Director of Morgan Stanley since 1984 and is
a member of  its Management Committee.  He is responsible  for Morgan  Stanley's
Merchant Banking Division and is Chairman, President and a director of MSLEF II,
Inc.,  Morgan Stanley Equity Investors Inc.  and Morgan Stanley Capital Partners
III, Inc. Mr. Brennan also serves as a director of Coltec, Agricultural Minerals
and  Chemicals  Inc.,  Agricultural  Minerals  Corporation,  A/S   Bulkhandling,
Beaumont  Methanol Corporation,  Container Corporation  of America,  Fort Howard
Corporation, Hamilton  Services  Limited,  Jefferson  Smurfit  Corporation,  PSF
Finance Holdings Inc., SIBV/MS Holdings, Inc., Shuttleway and Stanklav Holdings,
Inc. Mr. Brennan is Deputy Chairman and a director of Waterford Wedgwood plc and
a director of Waterford Wedgwood U.K. plc.

    Mr.  Sica has been a Managing Director of Morgan Stanley since 1988 and is a
director of MSLEF  II, Inc.,  Morgan Stanley  Equity Investors  Inc. and  Morgan
Stanley  Capital Partners III, Inc. He also  serves as a director of Coltec, ARM
Financial Group, Inc., Consolidated Hydro, Inc., EMMIS Broadcasting Corporation,
Fort Howard Corporation,  Integrity Life Insurance  Company, Interstate  Natural
Gas  Company,  Kohl's Corporation,  National  Integrity Life  Insurance Company,
PageMart, Inc., Southern Pacific  Rail Corporation and Sullivan  Communications,
Inc.

    Mr.  Hoffen has  been a  Vice President of  Morgan Stanley,  MSLEF II, Inc.,
Morgan Stanley Equity Investors  Inc. and Morgan  Stanley Capital Partners  III,
Inc.  since January  1994. From  September 1989  until January  1994, he  was an
Associate of Morgan  Stanley. Mr. Hoffen  also serves as  a director of  Coltec,
Amerin Guaranty Corporation and Interstate Natural Gas Company.

   
    The  Board of Directors intends to nominate Messrs. Margolis, Guffey, Schoen
and Mooney and  Professor Moses  for election as  Directors at  the 1994  Annual
Meeting of Shareholders (the "1994 Annual
    

                                       42
<PAGE>
   
Meeting").  The  Board  also  intends  to  nominate  another  person  having  no
affiliation with Coltec for  election to the Board  at the 1994 Annual  Meeting.
Mr.  Cozzolino and Dr. Hilton will not be nominated for reelection to the Board.
Upon the  completion of  the Offering,  Messrs. Brennan,  Sica and  Hoffen  will
resign from the Board and will not be nominated for reelection to the Board.
    

   
    Following  the completion of  the Offering, and if  the Board's nominees are
elected as  Directors  at  the  1994 Annual  Meeting,  Coltec  anticipates  that
thereafter  the Board will appoint Mr. Mooney and Professor Moses as the members
of the  Audit Committee  and the  Stock Option  and Compensation  Committee.  In
addition,  following the completion of the Offering, and if the Board's nominees
are elected as Directors at the 1994 Annual Meeting, Coltec anticipates that  as
soon   as  practicable  thereafter  an   additional  director  having  no  other
affiliation with Coltec will be appointed to the Board with the result that  the
Board  would  then  be  comprised  of a  majority  of  members  having  no other
affiliation with Coltec.
    

                                       43
<PAGE>
                              SELLING STOCKHOLDERS

    Set forth  below is  certain  information concerning  the ownership,  as  of
February  25, 1994, of the  Common Stock, and as adjusted  to give effect to the
sale of  the Shares  offered hereby,  by  each Selling  Stockholder and  by  all
directors and executive officers of Coltec as a group.

   
<TABLE>
<CAPTION>
                                              SHARES OWNED                       SHARES OWNED
                                           BEFORE THE OFFERING                AFTER THE OFFERING
                                          ---------------------    SHARES    --------------------
                                          NUMBER OF                BEING     NUMBER OF
                  NAME                      SHARES     PERCENT    OFFERED     SHARES     PERCENT
- ----------------------------------------  ----------  ---------  ----------  ---------  ---------
<S>                                       <C>         <C>        <C>         <C>        <C>
The Morgan Stanley Leveraged
 Equity Fund II, L.P.(a)
 1251 Avenue of the Americas,
 New York, NY 10020                       14,898,000      21.4 % 14,898,000     --         --
Colt Equity Investors, L.P.(b)
 1251 Avenue of the Americas,
 New York, NY 10020                        1,641,263       2.4    1,641,263     --         --
Morgan Stanley Group Inc.
 1251 Avenue of the Americas,
 New York, NY 10020                        2,535,143       3.6    2,535,143     --         --
Mellon Bank, N.A., as trustee for
 First Plaza Group Trust
 One Mellon Bank Center,
 Pittsburgh, PA 15258                      1,695,889       2.4    1,695,889     --         --
Leeway & Co.
 c/o State Street Bank and Trust Company
 Master Trust Division
 One Enterprise Drive,
 North Quincy, MA 02171                    1,695,889       2.4    1,695,889     --         --
Salvatore J. Cozzolino                       465,916(c)        *    372,450     93,466(c)    *
Andrew C. Hilton                             465,916(d)        *    372,450     93,466(d)    *
All directors and executive officers as
 a group (13 persons)                      1,706,092(e)      2.4     --      1,706,092(e)      2.4
<FN>
- ---------
*     Represents less than 1% of class.
(a)   MSLEF  II, Inc. is  the sole general partner  of MSLEF II  and is a wholly
      owned subsidiary of Morgan Stanley Group.
(b)   Morgan Stanley Equity Investors Inc. is  the sole general partner of  Colt
      Equity  Investors, L.P. and is a wholly owned subsidiary of Morgan Stanley
      Group.
(c)   Includes options to  purchase 66,000  shares of  Common Stock  exercisable
      within  60  days. Mr.  Cozzolino, a  Director of  Coltec, retired  as Vice
      Chairman in January 1994.
(d)   Includes options to  purchase 66,000  shares of  Common Stock  exercisable
      within 60 days. Dr. Hilton, a Director of Coltec, retired as Vice Chairman
      in January 1994.
(e)   Excludes any shares of Common Stock beneficially owned by Mr. Cozzolino or
      Dr.  Hilton. Includes options  to purchase 384,000  shares of Common Stock
      exercisable within 60 days and 23,626  shares held by the trustee for  the
      Coltec Retirement Savings Plan for Salaried Employees.
</TABLE>
    

                                       44
<PAGE>
                          DESCRIPTION OF CAPITAL STOCK

    Coltec's  authorized capital stock consists of  100 million shares of Common
Stock, par value $.01 per share, and 2.5 million shares of preferred stock,  par
value  $.01 per share ("Preferred Stock").  The following summary description of
the capital stock of Coltec does not purport to be complete and is qualified  in
its entirety by reference to Coltec's Restated Articles of Incorporation, a copy
of  which is  filed as an  exhibit to  the Registration Statement  of which this
Prospectus  is  a  part,  and   Pennsylvania  corporate  law.  See   "Additional
Information".

COMMON STOCK

    Subject  to the prior rights of any  series of Preferred Stock that may from
time to time be authorized and outstanding, holders of Common Stock are entitled
to receive dividends  out of funds  legally available therefor  when, as and  if
declared  by the Board  of Directors and to  receive pro rata  the net assets of
Coltec legally  available  for  distribution upon  liquidation  or  dissolution.
Holders  of Common Stock are entitled to one vote for each share of Common Stock
held on each matter submitted to a vote of shareholders, including the  election
of  directors.  All  outstanding  shares  of Common  Stock  are  fully  paid and
nonassessable.

PREFERRED STOCK

    The Board of Directors has the authority to issue the Preferred Stock in one
or more classes or series and to fix the voting powers, preferences and relative
participating, optional or  other special  rights, without any  further vote  or
action  by the  shareholders. The  ability of  the Board  of Directors  to issue
Preferred  Stock,  while  providing  flexibility  in  connection  with  possible
acquisitions  and other corporate  purposes, could have the  effect of making it
more difficult for a third  party to acquire, or  of discouraging a third  party
from acquiring, a majority of the outstanding voting stock of Coltec. Coltec has
no current plans to issue any of the Preferred Stock.

CERTAIN PROVISIONS OF THE RESTATED ARTICLES OF INCORPORATION AND BY-LAWS

    The  Restated Articles of Incorporation provide  that any action required or
permitted to be taken by the shareholders  of Coltec may be effected only at  an
annual or special meeting of shareholders, and prohibits shareholders' action by
written  consent in  lieu of  a meeting.  Coltec's By-laws  provide that special
meetings of shareholders may be called only by the chairman or by a majority  of
the  members of the Board of Directors. Shareholders are not permitted to call a
special meeting or to require that the Board of Directors call a special meeting
of shareholders.

    Coltec's By-laws establish an advance  notice procedure for the  nomination,
other  than by  or at  the direction of  the Board  of Directors  or a committee
thereof,  of  candidates  for  election  as  directors  as  well  as  for  other
shareholder  proposals  to be  considered at  shareholders' meetings.  Notice of
shareholder proposals and director nominations  must be timely given in  writing
to  the Secretary of Coltec prior to the  meeting at which the matters are to be
acted upon  or directors  are to  be elected.  The notice  must contain  certain
information specified in Coltec's By-laws.

LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION

    The  Restated  Articles  of  Incorporation  provide  for  indemnification of
officers and directors of  Coltec to the extent  permitted by Pennsylvania  law,
which  generally  permits  indemnification  for  actions  taken  by  officers or
directors as representatives of Coltec in good faith and in a manner  reasonably
believed  to be in or not opposed to Coltec's best interests, subject to certain
limitations.

    In accordance with Pennsylvania law, the Restated Articles of  Incorporation
and  Coltec's By-laws contain  provisions eliminating the  personal liability of
directors to Coltec and  its shareholders for monetary  damages for breaches  of
their  fiduciary duties,  except for  breach of  a director's  duty to  act with
statutorily defined due care  and for a  breach which constitutes  self-dealing,
willful  misconduct or  recklessness. The applicable  provisions of Pennsylvania
law pertain only to breaches  of duty by directors as  directors and not in  any
other corporate capacity, including as officers. As a result of the inclusion of
such  provisions, shareholders may be unable to recover monetary damages against
directors for  actions  taken  by  them which  constitute  negligence  or  gross
negligence  or which are in violation of their fiduciary duties, although it may
be possible

                                       45
<PAGE>
to obtain injunctive or other equitable relief with respect to such actions.  If
equitable  remedies  are  found  not  to be  available  to  shareholders  in any
particular case,  shareholders may  not have  any effective  remedy against  the
challenged conduct.

STATUTORY PROVISIONS

    On  April 27, 1990,  the Pennsylvania Business Corporation  Law of 1988 (the
"BCL") was amended, among other things, to protect public companies from hostile
takeover attempts. Set  forth below  is a summary  of significant  anti-takeover
provisions  of the BCL. Such  provisions may delay, defer  or prevent a takeover
attempt that  a  shareholder might  consider  to be  in  its best  interest.  As
indicated, and as permitted by the BCL, Coltec has elected not to be governed by
certain anti-takeover provisions.

    STATUTORY PROVISIONS APPLICABLE TO COLTEC

    BUSINESS  COMBINATIONS  (SUBCHAPTER 25-F).    A public  corporation  may not
engage in  any  business combination  with  a  20% shareholder  for  five  years
following the 20% acquisition unless: (a) the combination or the purchase of the
control  shares was approved by the board  of directors before the date that the
shareholder became  an  interested  shareholder or  (b)(i)  the  combination  is
approved  by  the holders  of a  majority of  the shares  not controlled  by the
interested shareholder at  a special  meeting held  not less  than three  months
after  the shareholder acquired an 80% voting stake, and the aggregate amount of
the offer meets certain fair  price criteria or (ii)  by unanimous vote. If  the
combination  was  not  previously approved,  the  20% shareholder  may  effect a
combination after the five-year period only if the shareholder receives approval
from a majority of the shares not owned by the acquiror or the aggregate  amount
of the offer meets certain fair price criteria.

    FIDUCIARY  OBLIGATIONS OF DIRECTORS (SECTIONS 1715  ET AL.).  In discharging
their  duties,  directors  may,  in  considering  the  best  interests  of   the
corporation,  consider (a)  the effects  of any  action upon  any or  all groups
affected by such action, including shareholders, employees, suppliers, customers
and creditors of the  corporation, and communities in  which the corporation  is
located,  (b)  the  short-term  and  long-term  interests  of  the  corporation,
including the  possibility  that these  interests  may  be best  served  by  the
corporation's  continued  independence, (c)  the  resources, intent  and conduct
(past, stated and potential)  of any person seeking  to acquire control and  (d)
all  other pertinent factors. Directors need not treat any corporate interest or
interests of any particular group  affected by such action (e.g.,  shareholders)
as the dominant or controlling interest or factor.

    STATUTORY PROVISIONS INAPPLICABLE TO COLTEC

    CONTROL  TRANSACTIONS (SUBCHAPTER 25-E).  Any person who acquires the direct
or indirect power to control the vote of at least 20% of the outstanding  voting
interests  in a public corporation is required  to pay any other shareholder who
exercises his rights  under the BCL  an amount equal  to the fair  value of  the
voting  shares  held by  such  shareholder as  of  the date  of  the transaction
pursuant to which control of at least 20% voting interest was obtained.

    CONTROL SHARE ACQUISITION (SUBCHAPTER  25-G).  Subject  to safe harbors  for
certain  acquiring persons, shareholder approval is required before a person who
acquires (or seeks to acquire) ownership  or voting power over "control  shares"
of  a public corporation may vote the control shares. Control shares are defined
in terms  of  crossing any  one  of  three specified  thresholds  of  percentage
ownership  of voting power (20%, 33 1/3% or 50%). The public corporation has the
right to  redeem the  control  shares (at  their market  price  at the  time  of
redemption)  if  the acquiror  fails  to obtain  the  approval of  the remaining
shareholders or fails to complete the control transaction.

    DISGORGEMENT OF  PROFITS (SUBCHAPTER  25-H).   Subject to  safe harbors  for
certain  acquiring persons, disgorgement  to the public  corporation is mandated
for profits realized  by a  person or  group that  (a) acquires  stock from  the
public corporation itself or from the shareholders within two years before or 18
months  after the person  or group attempts to  acquire 20% or  more of a public
corporation's voting power, or publicly discloses that it is seeking to  acquire
control of the public corporation and (b) then sells that stock within 18 months
after such an attempt or disclosure.

                                       46
<PAGE>
    SEVERANCE  PAY  (SUBCHAPTER  25-I).   Severance  payments  must  be  made to
employees of public  corporations who are  terminated within 24  months after  a
control share acquisition approved by shareholders.

    LABOR  CONTRACTS (SUBCHAPTER 25-J).   Labor contracts  are preserved after a
control share acquisition approved by shareholders.

                      DESCRIPTION OF CERTAIN INDEBTEDNESS

    The following summary of agreements governing the 1994 Credit Agreement  and
certain  other outstanding long-term indebtedness of  Coltec does not purport to
be complete  and  is qualified  in  its entirety  by  reference to  the  various
agreements,  copies of which  have been filed, or  incorporated by reference, as
exhibits to  Coltec's Annual  Report of  Form  10-K for  the fiscal  year  ended
December  31,  1993,  which is  incorporated  by reference  in  this Prospectus.
Capitalized terms used but not defined herein have the meanings assigned to them
in the various agreements described.

1994 CREDIT AGREEMENT

    Coltec has entered into the 1994 Credit Agreement among Coltec, the  various
financial  institutions named therein (the  "Lenders"), Credit Lyonnais New York
Branch, the Bank of  Montreal, The Industrial Bank  of Japan, Limited, New  York
Branch  and The Bank of Nova Scotia,  as Co-Agents thereunder, and Bankers Trust
Company, as Administrative Agent thereunder, pursuant to which the Lenders  have
agreed,  subject  to  certain  conditions,  to provide  up  to  $415  million of
financing to  Coltec  under  a  revolving loan  facility  (the  "Revolving  Loan
Facility") from time to time until June 30, 1999. The 1994 Credit Agreement also
provides  for the issuance of letters of credit  in an aggregate amount of up to
$100 million under the Revolving Loan  Facility; provided that at no time  shall
the aggregate principal amount of loans outstanding, together with the aggregate
face  amount  of letters  of credit  issued, under  the Revolving  Loan Facility
exceed $415 million.

    PREPAYMENTS AND COMMITMENT REDUCTIONS

    The Revolving Loan  Facility is subject  to mandatory commitment  reductions
and  corresponding prepayments of  $50 million on  each of January  11, 1997 and
January 11, 1998. In addition, the 1994 Credit Agreement requires certain  other
mandatory  commitment  reductions  and corresponding  prepayments  from  the net
proceeds of certain  sales of  assets and certain  issuances of  debt or  equity
securities.  The 1994  Credit Agreement  also permits  voluntary prepayments and
commitment reductions of the Revolving Loan Facility from time to time.

    INTEREST

    Loans under the 1994 Credit Agreement bear interest at an annual rate  equal
to,  at  Coltec's option,  (a) the  Base Rate  (as described  below) or  (b) the
Eurodollar Rate (as described  below) plus 1.00%;  PROVIDED that the  Eurodollar
Rate  may be  reduced from time  to time  based on the  achievement of specified
ratios of Coltec's  EBIDTA to Interest  Expense (as defined  in the 1994  Credit
Agreement)  and of certain ratings  of Coltec's long-term unsecured indebtedness
by Standard & Poor's Rating Group  and Moody's Investors Service, Inc.  Interest
on Base Rate Loans is payable quarterly and interest on Eurodollar Rate Loans is
payable  at the  end of the  relevant interest  period (but not  less often than
quarterly). The default rate of interest for all Loans is equal to the higher of
(a) the Base  Rate applicable to  such Loans plus  2.25% per annum  and (b)  the
Eurodollar  Rate applicable to such Loans plus  2.00% per annum. The "Base Rate"
is the  higher of  (a) 1/2  of  1% in  excess of  the Federal  Reserve  reported
certificate  of  deposit  rate  and  (b) the  rate  that  Bankers  Trust Company
announces as  its prime  lending  rate, as  in effect  from  time to  time.  The
"Eurodollar  Rate"  is the  average of  the  quotations for  one, two,  three or
six-month London Interbank Offered Rate offered to first class banks in the  New
York  interbank  Eurodollar  market  by  Bankers  Trust  Company,  adjusted  for
statutory reserves at all times.

    GUARANTEES

    Amounts owed under or in respect of the 1994 Credit Agreement by Coltec  are
guaranteed  by each of the material domestic subsidiaries of Coltec, whether now
existing or hereafter acquired or organized.

                                       47
<PAGE>
    SECURITY

    All the obligations of Coltec under the 1994 Credit Agreement and the  other
loan  documents  and under  the interest  rate  protection agreements  of Coltec
maintained with a Lender, and all the obligations of the subsidiaries of  Coltec
guaranteeing  the obligations of  Coltec thereunder, are secured  by (a) all the
common stock of each  current or future material  domestic subsidiary of  Coltec
and  66% of  the common  stock of  any current  or future  foreign subsidiary of
Coltec that  is  owned  by Coltec  or  any  of its  domestic  subsidiaries;  (b)
substantially  all the  inventory, machinery and  equipment, patents, trademarks
and other personal property  of Coltec and  its material domestic  subsidiaries;
and  (c)  certain real  estate  and fixtures  thereon  owned by  Coltec  and its
material domestic subsidiaries.

    COVENANTS

    The 1994 Credit  Agreement contains certain  customary covenants,  including
restrictive covenants that, subject to certain exceptions, impose limitations on
the ability of Coltec and its subsidiaries to, among other things: (a) create or
incur  additional indebtedness  or contingent  obligations; (b)  create or incur
additional liens;  (c) merge  with other  entities; (d)  dispose of  a  material
portion  of their assets or acquire all  or substantially all of the business or
assets of other entities;  (e) invest in  or make loans  to other entities;  (f)
enter  into  certain real  property leases,  operating leases  or sale-leaseback
transactions; (g)  pay dividends  and redeem  or repurchase  capital stock;  (h)
engage  in certain transactions with affiliates;  (i) pay, prepay, repurchase or
retire outstanding indebtedness; and (j) amend the terms of certain indebtedness
and other  material agreements.  The 1994  Credit Agreement  also restricts  the
maximum  amount  of capital  expenditures that  may  be made  by Coltec  and its
subsidiaries in  any  fiscal year  as  follows: 1994--$50  million;  1995--  $55
million;  1996--$60  million;  1997--$65 million  and  1998  and thereafter--$70
million; PROVIDED that Coltec and its subsidiaries may use up to $25 million  of
any amount permitted to be made and remaining unutilized from any fiscal year in
the  immediately succeeding fiscal year. In  addition, the 1994 Credit Agreement
includes financial  covenants  requiring  Coltec  to maintain  (a)  a  ratio  of
Consolidated  Current Assets to Consolidated  Current Liabilities (in each case,
as defined in the 1994 Credit Agreement) of at least 1.25 to 1 at all times  and
(b) an Interest Coverage Ratio (as defined in the 1994 Credit Agreement) for any
four  fiscal quarter period ending on or prior  to December 31, 1994 of at least
2.25 to 1 and for any four  fiscal quarter period ending thereafter of at  least
2.50 to 1.

    EVENTS OF DEFAULT

    The  1994 Credit Agreement  contains customary events  of default, including
but not limited to: (a) nonpayment of principal, interest, fees or other amounts
when due;  (b) violation  of covenants;  (c) failure  of any  representation  or
warranty  to be true in  all material respects when  made; (d) cross-default and
cross-acceleration; (e)  bankruptcy  events;  (f)  material  judgments  rendered
against  Coltec;  (g)  violation  of certain  ERISA  provisions;  (h)  change of
control; and (i) invalidity  of any loan document  or security interest  created
thereunder.

9 3/4% SENIOR NOTES DUE 1999 AND 9 3/4% SENIOR NOTES DUE 2000

    The  9 3/4% Senior Notes Due 1999  (the "Senior Notes Due 1999") were issued
under an Indenture  dated as of  October 26,  1992 (the "Senior  Notes Due  1999
Indenture"),  between Coltec  and United  States Trust  Company of  New York, as
Trustee. The Senior Notes Due 1999  are unsecured senior obligations of  Coltec,
mature  on November 1, 1999, and bear interest  at the rate of 9 3/4% per annum,
payable semiannually on May  1 and November  1 of each year.  The 9 3/4%  Senior
Notes  Due 2000  (the "Senior  Notes Due 2000")  were issued  under an Indenture
dated as  of April  1, 1992  (the "Senior  Notes Due  2000 Indenture"),  between
Coltec and United States Trust Company of New York, as Trustee. The Senior Notes
Due  2000 are unsecured senior  obligations of Coltec, mature  on April 1, 2000,
and bear interest at the rate of 9 3/4% per annum, payable semiannually on April
1 and October 1 of each year. Neither  the Senior Notes Due 1999 nor the  Senior
Notes Due 2000 are redeemable prior to maturity.

    The  Senior Notes Due 1999 Indenture and the Senior Notes Due 2000 Indenture
each contain covenants that (a) limit, under certain circumstances, the  ability
of  Coltec and certain of its  subsidiaries to incur additional indebtedness and
contingent obligations, enter into  sale-leaseback transactions or grant  liens;
(b)  limit the ability  of Coltec and  certain of its  subsidiaries to redeem or
reacquire, prior to any

                                       48
<PAGE>
scheduled maturity, repayment or sinking fund payment any indebtedness of Coltec
that ranks PARI PASSU with or is  subordinate in right of payment to the  Senior
Notes  Due 1999 or Senior Notes Due 2000, as the case may be, which is scheduled
to mature on or after the maturity date  of the Senior Notes Due 1999 or  Senior
Notes Due 2000, as the case may be, or pay dividends or make other distributions
on  account of, or reacquire, any shares of  any class of its capital stock; (c)
limit  the  investments  which  may  be  made  by  Coltec  and  certain  of  its
subsidiaries;  (d) limit the ability of  certain subsidiaries of Coltec to issue
capital stock in  certain circumstances;  (e) limit  the ability  of Coltec  and
certain  of its subsidiaries to engage  in transactions with certain of Coltec's
affiliates; (f) limit the ability of Coltec to merge, consolidate or sell all or
substantially all  its  assets; (g)  prohibit,  subject to  certain  exceptions,
Coltec  or certain of its subsidiaries from  creating or permitting to exist any
consensual encumbrance or restriction on the ability of such subsidiaries to pay
dividends, repay  certain indebtedness  owed to  Coltec or  any such  subsidiary
thereof  or transfer assets  to Coltec or  certain of its  subsidiaries; and (h)
require that the proceeds of certain sales of assets be used to make an offer to
repurchase the Senior Notes Due 1999 or  Senior Notes Due 2000, as the case  may
be.

11 1/4% DEBENTURES DUE 1996-2015

    The 11 1/4% Debentures due 1996-2015 (the "Debentures") were issued under an
Indenture  dated as of December 1, 1985 between  Coltec and the Bank of New York
(as successor to Mellon Bank, N.A.), as trustee (the "1985 Indenture").

    The Debentures are redeemable at Coltec's option, in whole or in part,  from
time  to time at redemption prices determined  by year of redemption. Coltec may
not, however, effect the optional redemption prior to December 1, 1995, directly
or indirectly,  from or  in  anticipation of  borrowed  funds having  an  annual
interest cost of less than 11 1/4%.

    The  1985  Indenture contains,  among  others, covenants  that  restrict the
incurrence of secured debt and sale-leaseback transactions by Coltec and certain
of  its  subsidiaries.  In  connection   with  the  consummation  of  the   1992
Recapitalization,   Coltec's  obligations  under  the  1985  Indenture  and  the
Debentures were secured, and any other indebtedness that Coltec may incur  under
the  1985  Indenture  will be  secured,  by  certain assets  of  Coltec  and its
subsidiaries equally and  ratably, as  and to the  extent required  by the  1985
Indenture, with Coltec's obligations under the 1994 Credit Agreement.

10 1/4% SENIOR SUBORDINATED NOTES DUE 2002

    The  10 1/4% Senior  Subordinated Notes Due  2002 (the "Subordinated Notes")
were issued under an Indenture dated as of April 1, 1992 (the "Subordinated Note
Indenture"), between Coltec and Norwest Bank Minnesota, National Association, as
Trustee. The Subordinated Notes are unsecured senior subordinated obligations of
Coltec, mature on April 1,  2002, and bear interest at  the rate of 10 1/4%  per
annum,  payable  semiannually  on  April  1 and  October  1  of  each  year. The
Subordinated Notes are redeemable, in whole  or in part, at Coltec's option,  at
any time on or after April 1, 1997, at specified redemption prices (expressed in
percentages  of  principal  amount),  together  with  accrued  interest  to  the
redemption date,  starting at  105.125% of  the principal  amount and  declining
thereafter.

    The  Subordinated Note  Indenture contains  covenants that  (a) limit, under
certain circumstances, the ability of Coltec and certain of its subsidiaries  to
incur  additional indebtedness  and contingent  obligations or  grant liens; (b)
limit the  ability  of Coltec  and  certain of  its  subsidiaries to  redeem  or
reacquire,  prior to any scheduled maturity,  repayment or sinking fund payment,
any indebtedness of Coltec that ranks PARI PASSU with or is subordinate in right
of payment to the Subordinated Notes, which  is scheduled to mature on or  after
the  maturity date  of the  Subordinated Notes, or  pay dividends  or make other
distributions on  account of,  or reacquire,  any  shares of  any class  of  its
capital stock; (c) limit the investments which may be made by Coltec and certain
of  its subsidiaries;  (d) prohibit the  issuance by Coltec  of any indebtedness
that is by its terms  senior in right of payment  to the Subordinated Notes  and
subordinate  to  any  "senior indebtedness"  (as  such  term is  defined  in the
Subordinated Note Indenture)  of Coltec;  (e) limit  the ability  of Coltec  and
certain  of its subsidiaries to engage  in transactions with certain of Coltec's
affiliates; (f) limit the ability of Coltec to merge, consolidate or sell all or
substantially all  its  assets; (g)  prohibit,  subject to  certain  exceptions,
Coltec  or certain of its subsidiaries from  creating or permitting to exist any
consensual encumbrance or

                                       49
<PAGE>
restriction on the ability of such subsidiaries to pay dividends, repay  certain
indebtedness owed to Coltec or any such subsidiary thereof or transfer assets to
Coltec  or certain  of its  subsidiaries; and (h)  require that  the proceeds of
certain sales of assets be used to make an offer to repurchase the  Subordinated
Notes.

    The  Subordinated Notes are  subordinate in right of  payment to all "senior
indebtedness" of  Coltec, as  such  term is  defined  in the  Subordinated  Note
Indenture.  As defined in the Subordinated Note Indenture, "senior indebtedness"
includes, among other things, indebtedness under the 1994 Credit Agreement,  the
Senior Notes Due 1999, the Senior Notes Due 2000 and the Debentures.

                CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
                      FOR NON-U.S. HOLDERS OF COMMON STOCK

    The  following discussion concerns the material United States federal income
and estate tax  consequences of the  ownership and disposition  of Common  Stock
applicable  to Non-U.S.  Holders of such  Common Stock. In  general, a "Non-U.S.
Holder" is any person holding Common Stock other than (a) a citizen or  resident
of  the United States, (b) a corporation  or partnership created or organized in
the United States or under the laws of the United States or of any State, or (c)
an estate or trust whose income is includible in gross income for United  States
federal income tax purposes regardless of its source. The discussion is based on
current  provisions of the Code, and administrative and judicial interpretations
of the Code as of the  date hereof, all of which  are subject to change, and  is
for general information only. The discussion does not address aspects of federal
taxation  other than income and estate taxation and does not address all aspects
of federal income  and estate  taxation. The  discussion does  not consider  any
specific  facts or circumstances that may apply to a particular Non-U.S. Holder.
Accordingly, prospective  investors  are urged  to  consult their  tax  advisors
regarding  the United States federal, state, local and non-U.S. income and other
tax consequences of holding and disposing of shares of Common Stock.

DIVIDENDS

    In general, dividends paid  to a Non-U.S. Holder  will be subject to  United
States  withholding  tax at  a  30% rate  (or any  lower  rate prescribed  by an
applicable tax treaty) unless the dividends are (a) effectively connected with a
trade or business carried  on by the Non-U.S.  Holder within the United  States,
and  (b) if  a tax  treaty applies,  attributable to  a United  States permanent
establishment maintained by the Non-U.S. Holder. Dividends effectively connected
with such  a  trade or  business  and, if  applicable,  attributable to  such  a
permanent  establishment, will generally  not be subject  to withholding (if the
Non-U.S. Holder files  certain forms with  the payor of  the dividend) and  will
generally  be subject  to United  States federal  income tax  at the  same rates
applicable to  U.S.  Holders. In  the  case of  a  Non-U.S. Holder  which  is  a
corporation, such effectively connected income also may be subject to the branch
profits  tax  (which  is  generally  imposed on  a  foreign  corporation  on the
repatriation from  the  United  States of  effectively  connected  earnings  and
profits)  but only, if a  tax treaty applies, if  such earnings and profits also
are  attributable  to   a  U.S.  permanent   establishment.  To  determine   the
applicability  of  a  tax treaty  providing  for  a lower  rate  of withholding,
dividends paid to  an address in  a foreign country  are presumed under  current
Treasury regulations to be paid to a resident of that country. Proposed Treasury
regulations,  if finally adopted, would require Non-U.S. Holders to file certain
forms to obtain the benefit of any  applicable tax treaty providing for a  lower
rate of withholding tax on dividends. Such forms would contain the holder's name
and  address and an official statement by the competent authority in the foreign
country (as designated in the applicable  tax treaty) attesting to the  holder's
status as a resident thereof.

SALE OF COMMON STOCK

    Generally,  a Non-U.S. Holder  will not be subject  to United States federal
income tax on  any gain realized  upon the disposition  of such Holder's  Common
Stock  unless  (a)  Coltec  is  or  has  been  a  "U.S.  real  property  holding
corporation" for federal income tax purposes (which Coltec does not believe that
it has been or is likely to become)  and, in the event that the Common Stock  is
"regularly  traded" for  such purposes,  the Non-U.S.  Holder held,  directly or
indirectly at  any  time during  the  five-year period  ending  on the  date  of
disposition,  more than  5% of  the Common  Stock; (b)  the gain  is effectively
connected with a trade or business carried on by the Non-U.S. Holder within  the
United States and, if a tax treaty applies, attributable

                                       50
<PAGE>
to  a permanent  establishment maintained by  the Non-U.S. Holder  in the United
States; (c) the  Common Stock  is disposed  of by a  Non-U.S. Holder  who is  an
individual,  who holds the Common Stock as a capital asset and who is present in
the United States for 183  days or more in the  taxable year of the  disposition
and  certain  other requirements  are  met; or  (d)  the Non-U.S.  Holder  is an
individual who is  subject to tax  pursuant to  the provisions of  U.S. tax  law
applicable to certain United States expatriates.

ESTATE TAX

    Common Stock owned or treated as owned by an individual who is not a citizen
or  resident (as defined for  United States federal estate  tax purposes) of the
United States at the time of death will be includible in the individual's  gross
estate  for United States federal estate  tax purposes, unless an applicable tax
treaty provides otherwise, and  may be subject to  United States federal  estate
tax.

BACKUP WITHHOLDING AND INFORMATION REPORTING

    Coltec  must report  annually to  the Internal  Revenue Service  and to each
Non-U.S. Holder  the amount  of dividends  paid to,  and the  tax withheld  with
respect  to, each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced by an applicable tax treaty. Copies of  these
information  returns  also  may be  made  available  under the  provisions  of a
specific treaty or agreement to the tax authorities in the country in which  the
Non-U.S.  Holder resides. United States  backup withholding tax (which generally
is a withholding tax imposed at the  rate of 31% on certain payments to  persons
that   fail  to  furnish  the  information  required  under  the  United  States
information reporting  requirements) will  generally  not apply  under  existing
Treasury  regulations to dividends paid on Common  Stock to a Non-U.S. Holder at
an address  outside the  United States.  This exemption  may be  affected, on  a
prospective  basis, if  the Treasury  regulations are  revised to  eliminate the
foreign address method for determining the applicability of the 30%  withholding
tax or any lower treaty rate as discussed above.

    The  payment of  the proceeds  from the  disposition of  Common Stock  to or
through the United  States office  of a broker  will be  subject to  information
reporting and backup withholding unless the owner certifies, among other things,
its  status  as a  Non-U.S. Holder  or otherwise  establishes an  exemption. The
payment of the proceeds  from the disposition  of Common Stock  to or through  a
non-U.S.  office of a non-U.S. broker will  not be subject to backup withholding
and generally will not be subject  to information reporting. Under the  existing
Treasury  regulations, unless the  broker has documentary  evidence in its files
that the  owner  is a  Non-U.S.  Holder,  information reporting  will  apply  to
dispositions  through (a) a non-U.S. office of a U.S. broker, and (b) a non-U.S.
office of a non-U.S.  broker that is either  a "controlled foreign  corporation"
for  United States federal income tax purposes or  a person 50% or more of whose
gross income from all  sources for a certain  three-year period was  effectively
connected with a United States trade or business. Any amounts withheld under the
backup  withholding rules from a  payment to a Non-U.S.  Holder will be refunded
(or credited  against the  Non-U.S. Holder's  United States  federal income  tax
liability,  if any), provided that the  required information is furnished to the
Internal Revenue Service.

                                       51
<PAGE>
                                  UNDERWRITERS

    Under  the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof, the U.S.  Underwriters named below have severally  agreed
to purchase, and the Selling Stockholders have severally agreed to sell to them,
and  the  International  Underwriters  named  below  have  severally  agreed  to
purchase, and the Selling  Stockholders have severally agreed  to sell to  them,
the  respective number of shares of Common Stock set forth opposite the names of
such Underwriters below:

<TABLE>
<CAPTION>
                                                                   NUMBER
NAME                                                             OF SHARES
- ------------------------------------------------------------  ----------------
<S>                                                           <C>
U.S. Underwriters:
  Morgan Stanley & Co. Incorporated.........................
  CS First Boston Corporation...............................
  Donaldson, Lufkin & Jenrette Securities Corporation.......
  Merrill Lynch, Pierce, Fenner & Smith
            Incorporated....................................
  Wertheim Schroder & Co. Incorporated......................
                                                              ----------------
    Subtotal................................................        18,611,084
                                                              ----------------
International Underwriters:
  Morgan Stanley & Co. International Limited................
  CS First Boston Limited...................................
  Donaldson, Lufkin & Jenrette Securities Corporation.......
  Merrill Lynch International Limited.......................
  Wertheim Schroder International Limited...................
                                                              ----------------
    Subtotal................................................         4,600,000
                                                              ----------------
      Total.................................................        23,211,084
                                                              ----------------
                                                              ----------------
</TABLE>

    The U.S. Underwriters  and the International  Underwriters are  collectively
referred  to as the "Underwriters". The Underwriting Agreement provides that the
obligations of the several  Underwriters to pay for  and accept delivery of  the
shares  of Common Stock  offered hereby are  subject to the  approval of certain
legal matters by their counsel and to certain other conditions. The Underwriters
are obligated to take and pay for all the shares of Common Stock offered  hereby
if any such shares are taken.

    Pursuant  to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and  agreed that, with certain exceptions,  (a)
it  is not  purchasing any  U.S. Shares  (as defined  below) for  the account of
anyone other than a United States or Canadian Person (as defined below) and  (b)
it  has not offered or sold, and will not offer or sell, directly or indirectly,
any U.S. Shares or distribute any prospectus relating to the U.S. Shares outside
the United States or Canada or to anyone other than a United States or  Canadian
Person.  Pursuant to the Agreement  Between U.S. and International Underwriters,
each International Underwriter  has represented  and agreed  that, with  certain
exceptions, (a) it is not purchasing any International Shares (as defined below)
for  the account  of any  United States or  Canadian Person  and (b)  it has not
offered or  sold,  and will  not  offer or  sell,  directly or  indirectly,  any
International  Shares or distribute any prospectus relating to the International
Shares within the United States  or Canada or to  any United States or  Canadian
Person.  The foregoing limitations do not apply to stabilization transactions or
to  certain  transactions   specified  in   the  Agreement   Between  U.S.   and
International  Underwriters.  With  respect  to  Donaldson,  Lufkin  &  Jenrette
Securities Corporation, the foregoing representations and agreements (a) made by
it in its capacity  as a U.S.  Underwriter will apply only  to shares of  Common
Stock  purchased by it in its capacity as  a U.S. Underwriter, (b) made by it in
its capacity as an International Underwriter will apply only to shares of Common
Stock purchased by it  in its capacity as  an International Underwriter and  (c)
will not restrict its ability to distribute this Prospectus in its capacity as a
U.S. Underwriter or as an International

                                       52
<PAGE>
Underwriter.  As  used  herein, "United  States  or Canadian  Person"  means any
national or  resident  of the  United  States  or Canada,  or  any  corporation,
pension,  profit-sharing or other trust or other entity organized under the laws
of the United States  or Canada or of  any political subdivision thereof  (other
than  a branch located outside the United States and Canada of any United States
or Canadian Person)  and includes any  United States or  Canadian branch of  any
person  who is otherwise not  a United States or  Canadian Person. All shares of
Common Stock to  be purchased  by the  U.S. Underwriters  and the  International
Underwriters  are referred  to herein as  the U.S. Shares  and the International
Shares, respectively.

    Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of  any
number  of shares of Common  Stock to be purchased  pursuant to the Underwriting
Agreement as may  be mutually agreed.  The per  share price of  any shares  sold
shall  be the  Price to  Public set forth  on the  cover page  hereof, in United
States dollars, less  an amount not  greater than  the per share  amount of  the
concession to dealers set forth below.

    Pursuant  to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or  sell, any shares  of Common Stock,  directly or indirectly,  in
Canada  in contravention  of the  securities laws of  Canada or  any province or
territory thereof and has represented that  any offer of Common Stock in  Canada
will  be  made only  pursuant to  an exemption  from the  requirement to  file a
prospectus in the province or territory of  Canada in which such offer is  made.
Each  U.S. Underwriter has  further agreed to  send to any  dealer who purchases
from it  any shares  of Common  Stock a  notice stating  in substance  that,  by
purchasing  such Common Stock, such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
Common Stock in Canada or to, or for  the benefit of, any resident of Canada  in
contravention  of the  securities laws  of Canada  or any  province or territory
thereof and that any offer of Common Stock in Canada will be made only  pursuant
to  an exemption from  the requirement to  file a prospectus  in the province of
Canada in which such  offer is made,  and that such dealer  will deliver to  any
other dealer to whom it sells any of such Common Stock a notice to the foregoing
effect.

    Pursuant  to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (a) it has not offered
or sold and  will not offer  or sell any  shares of Common  Stock in the  United
Kingdom  by means  of any  document (other  than in  circumstances which  do not
constitute an offer to the public within the meaning of the Companies Act 1985);
(b) it  has complied  and will  comply  with all  applicable provisions  of  the
Financial  Services Act 1986 with respect to  anything done by it in relation to
the shares of Common  Stock offered hereby in,  from or otherwise involving  the
United  Kingdom; and (c) it has only issued  or passed on and will only issue or
pass on in the  United Kingdom any  document which consists of,  or is part  of,
listing  particulars, supplementary  listing particulars  or any  other document
required or permitted  to be published  by listing  rules under Part  IV of  the
Financial  Services Act 1986, to any person  of a kind described in Article 9(3)
of the Financial Services Act 1986 (Investment Advertisements)(Exemptions) Order
1988, or to any person to whom the document may otherwise lawfully be issued  or
passed on.

    The  Underwriters propose to offer part of  the Common Stock directly to the
public at the Price  to Public set forth  on the cover page  hereof and part  to
certain  dealers at a price which represents a concession not in excess of $
per share under the public offering price. The Underwriters may allow, and  such
dealers  may reallow, a concession not  in excess of $     per share on sales to
other Underwriters or to certain dealers.

    Coltec has agreed that, without the prior written consent of Morgan Stanley,
it will not offer, sell, contract to sell or otherwise dispose of any shares  of
Common  Stock or any securities convertible  into or exercisable or exchangeable
for Common Stock  for a  period of  90 days after  the date  hereof, other  than
Common  Stock or any securities convertible  into or exercisable or exchangeable
for Common Stock and issued pursuant  to employee benefit plans of Coltec  which
are  in existence  on the date  hereof. In addition,  holders of       shares of
Common Stock, including all executive officers and directors, have agreed  (with

                                       53
<PAGE>
certain  limited exceptions) not  to offer, sell, contract  to sell or otherwise
dispose of such  shares of Common  Stock or any  securities convertible into  or
exercisable  or exchangeable for Common Stock for  a period of 90 days after the
date hereof without the prior written consent of Morgan Stanley.

    In the  Underwriting Agreement,  Coltec and  the Selling  Stockholders  have
agreed to indemnify the several Underwriters, and Coltec has agreed to indemnify
the  Selling  Stockholders, against  certain liabilities,  including liabilities
under the Securities Act.

    The provisions of Schedule E ("Schedule  E") to the by-laws of the  National
Association  of Securities  Dealers, Inc.  (the "NASD")  apply to  the Offering.
Pursuant to  the  provisions  of  Schedule  E,  NASD  members  may  not  execute
transactions  in the  Common Stock in  discretionary accounts  without the prior
written approval of the customer.

                                 LEGAL MATTERS

    Certain legal matters with respect to  the Common Stock offered hereby  will
be  passed upon for Coltec  by Shearman & Sterling, New  York, New York and Reed
Smith Shaw &  McClay, Pittsburgh,  Pennsylvania. Certain legal  matters will  be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.

                                    EXPERTS

   
    The   financial  statements  and  schedules  included  and  incorporated  by
reference in  this Prospectus  and elsewhere  in the  Registration Statement  of
which  this Prospectus  is a part  have been  audited by Arthur  Andersen & Co.,
independent public  accountants,  as indicated  in  their reports  with  respect
thereto,  and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
    

                                       54
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

   
<TABLE>
<CAPTION>
                                                         PAGE
                                                         ----
<S>                                                      <C>
Consolidated Balance Sheet.............................  F-2
Consolidated Statement Of Earnings.....................  F-4
Consolidated Statement Of Cash Flows...................  F-5
Consolidated Statement Of Shareholders' Equity.........  F-6
Notes To Financial Statements..........................  F-7
Report Of Independent Public Accountants...............  F-26
</TABLE>
    

                                      F-1
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                                     ASSETS

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                           --------------------
                                                             1993        1992
                                                           --------    --------
                                                              (IN THOUSANDS)
<S>                                                        <C>         <C>
Current assets
  Cash and cash equivalents (Notes 1 and 7)............    $  5,749    $  7,155
  Accounts and notes receivable (Notes 7 and 15)
    Trade..............................................     124,640     123,331
    Other..............................................      41,051       4,959
                                                           --------    --------
                                                            165,691     128,290
    Less allowance for doubtful accounts...............       4,170       4,614
                                                           --------    --------
                                                            161,521     123,676
  Inventories (Note 1)
    Finished goods.....................................      39,206      42,044
    Work in process and finished parts.................     103,166     102,787
    Raw materials and supplies.........................      25,405      22,075
                                                           --------    --------
                                                            167,777     166,906
  Deferred income taxes (Note 5).......................      17,036      33,080
  Other current assets.................................       8,587       7,710
                                                           --------    --------
    Total current assets...............................     360,670     338,527
Property, plant and equipment, at cost (Note 1)
  Land and improvements................................      18,202      18,637
  Buildings and equipment..............................     130,085     132,013
  Machinery and equipment..............................     479,220     462,992
  Leasehold improvements...............................       8,445       8,491
  Construction in progress.............................      21,285      17,988
                                                           --------    --------
                                                            657,237     640,121
  Less accumulated depreciation and amortization.......     431,908     413,312
                                                           --------    --------
                                                            225,329     226,809
Costs in excess of net assets acquired, net of
 amortization (Note 1).................................     132,550     133,883
Other assets (Notes 6, 7 and 15).......................      87,863     129,557
                                                           --------    --------
                                                           $806,412    $828,776
                                                           --------    --------
                                                           --------    --------
</TABLE>

  The accompanying notes to financial statements are an integral part of this
                                   statement.

                                      F-2
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                           ---------------------------
                                                              1993            1992
                                                           -----------     -----------
<S>                                                        <C>             <C>
                                                              (IN THOUSANDS, EXCEPT
                                                                   SHARE DATA)
Current liabilities
  Current maturities of long-term debt (Notes 6, 7 and
   16).................................................    $     1,543     $    48,645
  Accounts payable.....................................         64,791          59,287
  Accrued expenses
    Salaries, wages and employee benefits..............         40,946          49,661
    Taxes..............................................         30,103          30,876
    Interest...........................................         23,887          20,626
    Other..............................................         32,272          29,100
                                                           -----------     -----------
                                                               127,208         130,263
  Current portion of liabilities of discontinued
   operations..........................................          4,000           5,046
                                                           -----------     -----------
      Total current liabilities........................        197,542         243,241
Long-term debt (Notes 6, 7 and 16).....................      1,032,089       1,073,450
Deferred income taxes (Note 5).........................         27,543          53,116
Other liabilities......................................        132,367          79,854
Liabilities of discontinued operations.................         42,361          45,759
Commitments and contingencies (Note 15)
Shareholders' equity (Notes 1, 8, 9 and 13)
  Preferred stock
   $.01 par value, 2,500,000 shares authorized, shares
   outstanding -- none.................................        --              --
  Common stock
   $.01 par value, 100,000,000 shares authorized,
   69,943,341 and 69,853,464 shares issued at December
   31, 1993 and 1992, respectively (excluding
   25,000,000 shares held by a wholly-owned subsidiary
   at December 31, 1993)...............................            699             699
  Capital in excess of par value.......................        636,846         634,088
  Retained earnings (deficit)..........................     (1,251,465)     (1,298,899)
  Unearned compensation -- restricted stock awards.....         (5,552)         (7,221)
  Minimum pension liability............................         (4,205)        --
  Foreign currency translation adjustments.............          1,077           4,689
                                                           -----------     -----------
                                                              (622,600)       (666,644)
  Less cost of 179,309 shares of common stock in
   treasury at December 31, 1993.......................         (2,890)        --
                                                           -----------     -----------
                                                              (625,490)       (666,644)
                                                           -----------     -----------
                                                           $   806,412     $   828,776
                                                           -----------     -----------
                                                           -----------     -----------
</TABLE>

  The accompanying notes to financial statements are an integral part of this
                                   statement.

                                      F-3
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                             ----------------------------------
                                                                                1993        1992        1991
                                                                             ----------  ----------  ----------
                                                                              (IN THOUSANDS, EXCEPT PER SHARE
                                                                             DATA)
<S>                                                                          <C>         <C>         <C>
Net sales..................................................................  $1,334,829  $1,368,703  $1,372,979
                                                                             ----------  ----------  ----------
Costs and expenses
  Cost of sales............................................................     905,464     944,405     966,791
  Selling and administrative...............................................     192,437     181,176     177,168
  Restructuring charge (Note 3)............................................      25,219      --          --
                                                                             ----------  ----------  ----------
    Total costs and expenses...............................................   1,123,120   1,125,581   1,143,959
                                                                             ----------  ----------  ----------
Operating income...........................................................     211,709     243,122     229,020
Dividend income............................................................      --          --           1,431
                                                                             ----------  ----------  ----------
Earnings before interest, income taxes and extraordinary item..............     211,709     243,122     230,451
Interest and debt expense, net.............................................     110,190     135,862     199,942
                                                                             ----------  ----------  ----------
Earnings before income taxes and extraordinary item........................     101,519     107,260      30,509
Provision for income taxes (Note 5)........................................      36,293      42,577      28,300
                                                                             ----------  ----------  ----------
Earnings before extraordinary item.........................................      65,226      64,683       2,209
Extraordinary item (Note 4)................................................     (17,792)   (106,930)        591
                                                                             ----------  ----------  ----------
Net earnings (loss)........................................................  $   47,434  $  (42,247) $    2,800
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
Earnings (loss) per common share (Note 1)
  Before extraordinary item................................................  $      .94  $     1.11  $      .09
  Extraordinary item.......................................................        (.26)      (1.83)        .02
                                                                             ----------  ----------  ----------
  Net earnings (loss)......................................................  $      .68  $     (.72) $      .11
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
Weighted average number of common and common equivalent shares.............      69,591      58,413      25,000
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
</TABLE>

  The accompanying notes to financial statements are an integral part of this
                                   statement.

                                      F-4
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                             -----------------------------------
                                                                                1993        1992         1991
                                                                             ----------   ---------   ----------
                                                                                       (IN THOUSANDS)
<S>                                                                          <C>          <C>         <C>
Cash flows from operating activities
  Net earnings (loss)......................................................  $   47,434   $ (42,247)  $    2,800
  Adjustments to reconcile net earnings (loss) to cash
    Extraordinary item.....................................................      17,792     106,930         (591)
    Restructuring charge...................................................      25,219      --           --
    Depreciation and amortization..........................................      49,092      49,129       44,916
    Noncash interest expense, net..........................................      --          25,180       92,991
    Deferred income taxes..................................................     (10,766)    (17,829)      22,607
    Receivable from insurance carriers.....................................       3,056     (15,660)      (2,816)
    Payment of liabilities of discontinued operations......................      (4,444)     (6,166)      (4,152)
    Other operating items..................................................     (11,809)      2,032      (13,702)
                                                                             ----------   ---------   ----------
                                                                                115,574     101,369      142,053
                                                                             ----------   ---------   ----------
Changes in assets and liabilities
  Accounts and notes receivable............................................      (2,007)     (7,896)      13,158
  Inventories..............................................................      (2,871)     15,261       25,099
  Deferred income taxes....................................................       3,501        (216)      (6,658)
  Other current assets.....................................................        (877)        738        1,235
  Accounts payable.........................................................       4,067      (4,819)      (4,587)
  Accrued expenses.........................................................     (12,169)     15,450      (21,060)
                                                                             ----------   ---------   ----------
    Changes in assets and liabilities......................................     (10,356)     18,518        7,187
                                                                             ----------   ---------   ----------
    Cash provided by operating activities..................................     105,218     119,887      149,240
                                                                             ----------   ---------   ----------
Cash flows from investing activities
  Cash received in Holdings reorganization.................................      26,749      --           --
  Proceeds from sale of an investment......................................      --           3,733       12,035
  Capital expenditures.....................................................     (38,587)    (24,997)     (26,239)
  Other -- net.............................................................       1,948      (3,503)       1,547
                                                                             ----------   ---------   ----------
    Cash used in investing activities......................................      (9,890)    (24,767)     (12,657)
                                                                             ----------   ---------   ----------
Cash flows from financing activities
  Proceeds from issuance of long-term debt.................................      46,069     150,000        5,557
  Retirement of long-term debt.............................................    (138,179)   (242,192)    (117,659)
  Net proceeds from issuance of common stock in recapitalization...........      --         625,575       --
  Net retirement of long-term debt in recapitalization.....................      --        (433,836)      --
  Payment of premiums, fees and expenses in recapitalization and debt
   refinancing.............................................................      --        (153,061)      --
  Distribution to Holdings pursuant to preferred stock redemption and tax
   sharing procedure.......................................................      (4,624)    (48,585)     (14,000)
                                                                             ----------   ---------   ----------
    Cash used in financing activities......................................     (96,734)   (102,099)    (126,102)
                                                                             ----------   ---------   ----------
Cash and cash equivalents
  Increase (decrease)......................................................      (1,406)     (6,979)      10,481
  At beginning of period...................................................       7,155      14,134        3,653
                                                                             ----------   ---------   ----------
  At end of period.........................................................  $    5,749   $   7,155   $   14,134
                                                                             ----------   ---------   ----------
                                                                             ----------   ---------   ----------
</TABLE>

  The accompanying notes to financial statements are an integral part of this
                                   statement.

                                      F-5
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                         THREE YEARS ENDED DECEMBER 31, 1993
                  -----------------------------------------------------------------------------------------------------------------
                                                                 UNEARNED                FOREIGN
                     COMMON STOCK     CAPITAL IN   RETAINED    COMPENSATION-  MINIMUM    CURRENCY     TREASURY STOCK
                  ------------------  EXCESS OF    EARNINGS     RESTRICTED    PENSION   TRANSLATION ------------------
                    SHARES   AMOUNT   PAR VALUE    (DEFICIT)   STOCK AWARDS   LIABILITY ADJUSTMENTS  SHARES    AMOUNT      TOTAL
                  ---------- -------  ----------  -----------  -------------  --------  ----------  ---------  -------  -----------
<S>               <C>        <C>      <C>         <C>          <C>            <C>       <C>         <C>        <C>      <C>
                                                          (IN THOUSANDS, EXCEPT SHARE DATA)
Balance, January
 1, 1991......... 25,000,000   $250    $ --       $(1,201,630)   $  --        $ --        $13,019      --      $ --     $(1,188,361)
Net earnings.....                                       2,800                                                                 2,800
Distribution to
 Holdings
 pursuant to tax
 sharing
 procedure.......                                     (14,000)                                                              (14,000)
Proceeds from
 Holdings applied
 to purchase of
 Holdings senior
 discount
 debentures......                                       4,763                                                                 4,763
Foreign currency
 translation
 adjustments.....                                                                            271                                271
                  ---------- -------  ----------  -----------  -------------  --------  ----------  ---------  -------  -----------
Balance, December
 31, 1991........ 25,000,000    250      --        (1,208,067)      --          --        13,290       --        --      (1,194,527)
Net loss.........                                     (42,247)                                                              (42,247)
Issuance of stock
 in
 recapitalization... 44,275,000    443   625,132                                                                            625,575
Distribution to
 Holdings
 pursuant to
 preferred stock
 redemption and
 tax sharing
 procedure.......                                     (48,585)                                                              (48,585)
Issuance of
 restricted
 stock, net......    578,464      6       8,956                      (7,221)                                                  1,741
Foreign currency
 translation
 adjustments.....                                                                         (8,601)                            (8,601)
                  ---------- -------  ----------  -----------  -------------  --------  ----------  ---------  -------  -----------
Balance, December
 31, 1992........ 69,853,464    699     634,088    (1,298,899)       (7,221)    --         4,689       --        --        (666,644)
Net earnings.....                                      47,434                                                                47,434
Issuance of
 restricted
 stock, net......     89,877   --         1,389                       1,669                           (14,309)   (229)        2,829
Exercise of stock
 options.........                            (4)                                                        5,000      79            75
Tax benefit from
 stock option and
 incentive
 plan............                           133                                                                                 133
Stock exchange in
 the Holdings
reorganization...                         1,240                                                      (170,000) (2,740)       (1,500)
Minimum pension
 liability.......                                                              (4,205)                                       (4,205)
Foreign currency
 translation
 adjustments.....                                                                         (3,612)                            (3,612)
                  ---------- -------  ----------  -----------  -------------  --------  ----------  ---------  -------  -----------
Balance, December
 31, 1993........ 69,943,341   $699    $636,846   $(1,251,465)   $   (5,552)  $(4,205)    $1,077     (179,309) $(2,890) $  (625,490)
                  ---------- -------  ----------  -----------  -------------  --------  ----------  ---------  -------  -----------
                  ---------- -------  ----------  -----------  -------------  --------  ----------  ---------  -------  -----------
</TABLE>

  The accompanying notes to financial statements are an integral part of this
                                   statement.

                                      F-6
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

1.  SUMMARY OF ACCOUNTING POLICIES

    PRINCIPLES  OF CONSOLIDATION:   Investments  in which  Coltec Industries Inc
("Coltec") has  ownership  of  50%  or  more of  the  voting  common  stock  are
consolidated in the financial statements. Intercompany accounts and transactions
are eliminated.

    CONSOLIDATED   STATEMENT  OF  CASH  FLOWS:    Cash  equivalents  consist  of
short-term, highly liquid investments with  original maturities of three  months
or less. The effect of changes in foreign exchange rates on cash balances is not
significant.

    Interest  paid and federal and state income  taxes paid and refunded were as
follows:

<TABLE>
<CAPTION>
                                                              1993        1992        1991
                                                           ----------  ----------  ----------
                                                                     (IN THOUSANDS)
<S>                                                        <C>         <C>         <C>
Interest paid............................................  $  105,713  $  107,236  $  105,377
Income taxes --
  Paid...................................................      31,873      40,767      30,327
  Refunded...............................................       3,913       4,417       4,470
</TABLE>

    FOREIGN  CURRENCY  TRANSLATION:     The  financial  statements  of   foreign
subsidiaries  were  prepared  in  their  respective  local  currencies  and  are
translated into U.S. dollars at year-end rates for assets and liabilities and at
monthly weighted average rates for income and expenses. Translation  adjustments
are  included in  shareholders' equity.  Foreign currency  transaction gains and
losses are included in  net earnings. For  1993, 1992 and  1991, such gains  and
losses were not significant.

    INVENTORIES:   Inventories, including inventories under long-term commercial
and government  contracts and  programs, are  valued  at the  lower of  cost  or
market,  less reserves of  $18,086,000 and $16,789,000 at  December 31, 1993 and
1992,  respectively,   for  potential   losses  from   excess  and   slow-moving
inventories.  At  December  31,  1993  and  1992,  $45,150,000  and $64,464,000,
respectively, of contract  advances have been  offset against inventories  under
long-term  commercial and government contracts  and programs in the Consolidated
Balance Sheet. Losses on  commercial and government  contracts and programs  are
recognized  in full when identified.  At December 31, 1993  and 1992, an accrual
for loss contracts  and programs  was not  required. Cost  elements included  in
inventory  are material,  labor and  factory overhead,  primarily using standard
cost, which approximates actual cost. Cost on approximately 53% of the  domestic
inventory  at December 31, 1993 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. The  excess of  current cost  over last-in,  first-out cost at
December 31,  1993  and  1992 was  approximately  $21,800,000  and  $24,500,000,
respectively.

    PROPERTY  AND  DEPRECIATION:   Depreciation  and amortization  of  plant and
equipment are provided  generally by  using the straight-line  method, based  on
estimated useful lives of the assets. For U.S. federal income tax purposes, most
assets are depreciated using allowable accelerated methods.

    The  ranges of  estimated useful  lives used  in computing  depreciation and
amortization for financial reporting were as follows:

<TABLE>
<CAPTION>
                                                                                YEARS
                                                                              ---------
<S>                                                                           <C>
Land improvements...........................................................       5-40
Buildings and equipment.....................................................      10-45
Machinery and equipment.....................................................       3-20
</TABLE>

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

    Interest  cost  incurred  during the  period  of construction  of  plant and
installation of equipment is capitalized as part  of the cost of such plant  and
equipment.

                                      F-7
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1.  SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
    Renewals  and betterments are capitalized by  additions to the related asset
accounts, while  repair  and maintenance  costs  are charged  against  earnings.
Coltec  generally  records  retirements  by removing  the  cost  and accumulated
depreciation from the asset and reserve accounts.

    At December 31,  1993 and  1992, Coltec  had the  following assets  recorded
under capital leases:

<TABLE>
<CAPTION>
                                                                         1993       1992
                                                                       ---------  ---------
                                                                          (IN THOUSANDS)
<S>                                                                    <C>        <C>
Land and improvements................................................  $     285  $     294
Buildings and equipment..............................................      7,867      8,583
Machinery and equipment..............................................     11,059     11,023
Leasehold improvements...............................................      1,003      1,028
                                                                       ---------  ---------
                                                                          20,214     20,928
Less -- Accumulated depreciation and amortization....................     15,548     15,062
                                                                       ---------  ---------
                                                                       $   4,666  $   5,866
                                                                       ---------  ---------
                                                                       ---------  ---------
</TABLE>

    ENVIRONMENTAL  EXPENDITURES:  Expenditures  for environmental activities are
expensed  or  capitalized  in  accordance  with  generally  accepted  accounting
principles.  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.

    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 Coltec has the contractual right to bill.

   
    COSTS  IN EXCESS OF NET ASSETS ACQUIRED:   It is Coltec's policy to amortize
the excess costs arising from acquisitions on a straight-line basis over periods
not to exceed 40 years. Excess costs arising from all completed acquisitions are
being amortized on a straight-line basis over a 40 year period. At December  31,
1993  and  1992,  accumulated  amortization  was  $52,063,000  and  $47,036,000,
respectively. 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.
    

    SHAREHOLDERS' EQUITY  AND EARNINGS  PER  SHARE:   In November  1991,  Coltec
increased  the  amount  of authorized  common  stock to  100,000,000  shares and
decreased the par value of the preferred stock and the common stock to $.01  per
share.  In January  1992, Coltec effected  a 250,000  for 1 split  of its common
stock.  Reference  is  made   to  Note  2  for   information  relating  to   the
Recapitalization.

    In November 1993, all the shareholders of Coltec Holdings Inc. ("Holdings"),
the  former parent company of Coltec, exchanged  their shares of common stock of
Holdings for 35.5% or 24,830,000 shares of common stock of Coltec. Reference  is
made to Note 13 for information relating to the Holdings Reorganization.

                                      F-8
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1.  SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
    Earnings  per common share are computed by dividing earnings by the weighted
average number of common  and common equivalent  shares outstanding during  each
period.  Common equivalent shares  are shares issuable on  the exercise of stock
options and  shares of  restricted stock,  net of  shares assumed  to have  been
purchased  using the treasury  stock method. All applicable  share and per share
data has been adjusted for the 250,000 for 1 split.

   
    IMPACT OF NEW  ACCOUNTING STANDARDS:   Coltec  adopted Financial  Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions",  and No.  109, "Accounting  for Income  Taxes", effective  January 1,
1993;  and  No.  112,  "Employers'  Accounting  for  Postemployment   Benefits",
effective  January  1, 1994.  The adoption  of  these standards  did not  have a
material effect on Coltec's results of operations and financial condition.
    

   
    Based on  preliminary  analyses, Coltec  does  not expect  that  the  future
adoption of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment  of a Loan", and No. 115, "Accounting for Certain Investments in Debt
and Equity  Securities", will  have a  material effect  on Coltec's  results  of
operations and financial condition.
    

2.  RECAPITALIZATION
    On April 1, 1992, Coltec completed a plan of recapitalization which included
its  initial public offering of 44,275,000 shares of Coltec common stock for net
proceeds of  $625,575,000 (the  "Equity Offering")  and the  public offering  of
$200,000,000  aggregate principal amount of its 9 3/4% senior notes due 2000 and
of $250,000,000 aggregate principal  amount of its  10 1/4% senior  subordinated
notes  due 2002 (the  "Note Offerings"). Coltec's  recapitalization consisted of
(i) the Equity Offering, the  net proceeds of which were  used to redeem all  of
the  outstanding  $355,493,000  aggregate  principal amount  of  12  1/2% senior
subordinated debentures due 1997-2001 at  106.25% of principal amount,  together
with  accrued  interest  to  the  date of  redemption  (the  "12  1/2% Debenture
Redemption") and to  repay the outstanding  $225,000,000 indebtedness under  the
Letter  of  Credit and  Revolving Credit  Facility  Agreement (the  "1989 Credit
Agreement"), (ii) bank borrowings under a Term and Working Capital Facility (the
"1992 Credit Agreement")  of which  $429,772,000 was initially  drawn down,  and
(iii)  the Note Offerings. Proceeds from the  1992 Credit Agreement and the Note
Offerings were  used  (a) to  retire  a dividend  note  payable from  Coltec  to
Holdings, the proceeds of which were used by Holdings to effect its tender offer
for  the outstanding Holdings 14 3/4%  senior discount debentures (the "Holdings
Debentures") ($881,000,000 aggregate principal amount and $733,115,000  accreted
value)  (the  "Debt Tender  Offer"), the  related  consent solicitation  and the
redemption of the Holdings preferred  stock (the "Preferred Stock  Redemption"),
(b)  to  repay  the remaining  indebtedness  outstanding under  the  1989 Credit
Agreement not repaid from  the proceeds of  the Equity Offering  and (c) to  pay
fees   and  expenses  in   connection  with  the   foregoing  transactions  (the
"Recapitalization").

    In connection  with  the  Recapitalization,  Coltec  incurred  extraordinary
charges  in the second  quarter 1992 of  $105,347,000, net of  a $28,000,000 tax
benefit. The  extraordinary  charges  were primarily  payment  of  premiums  and
expenses,  and  write-off  of  deferred  financing  costs  resulting  from early
retirement of debt.

    Pursuant to the Recapitalization, the consolidated statement of earnings for
the year ended  December 31, 1991  and for  the first quarter  1992 reflect  the
interest and finance cost related to the outstanding Holdings Debentures because
the  net proceeds of the Note Offerings  and the 1992 Credit Agreement were used
to repay such indebtedness.

                                      F-9
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3.  RESTRUCTURING CHARGE
    Coltec recorded  a restructuring  charge of  $25,219,000 ($15,300,000  after
taxes, or $.22 per common share) in the second quarter 1993 to cover the cost of
consolidation  and rearrangement of certain manufacturing facilities and related
reductions in work  force, primarily  in the Aerospace/  Government segment,  as
well as at Central Moloney Transformer Division.

4.  EXTRAORDINARY ITEM
    In  1993, Coltec  incurred extraordinary  charges of  $17,792,000, net  of a
$9,581,000 tax  benefit, in  connection  with debt  refinancings and  the  early
retirement of debt, including $14,675,000, net of a $7,902,000 tax benefit, from
a  debt refinancing completed in January 1994.  Reference is made to Note 16 for
information on the refinancing.

    In 1992, Coltec  incurred extraordinary  charges of $105,347,000,  net of  a
$28,000,000   tax  benefit,   in  connection   with  the   Recapitalization  and
extraordinary  charges  of  $1,583,000,  net  of  a  $816,000  tax  benefit,  in
connection  with a debt  refinancing and early retirement  of debt. Reference is
made to  Note  2  for  information on  the  Recapitalization.  In  1991,  Coltec
recognized  an  extraordinary gain  of $591,000,  net of  taxes of  $305,000, in
connection with the early retirement of debt.

5.  INCOME TAXES
    Effective January 1, 1993, Coltec adopted Statement of Financial  Accounting
Standards  No.  109,  "Accounting for  Income  Taxes", which  requires  that the
deferred tax  provision be  determined under  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.

    The  significant  components  of  deferred  tax  assets  and  liabilities at
December 31, 1993 and 1992 were as follows:

<TABLE>
<CAPTION>
                                                                             1993                    1992
                                                                    ----------------------  ----------------------
                                                                     DEFERRED    DEFERRED    DEFERRED    DEFERRED
                                                                       TAX         TAX         TAX         TAX
                                                                      ASSETS    LIABILITIES   ASSETS    LIABILITIES
                                                                    ----------  ----------  ----------  ----------
                                                                                    (IN THOUSANDS)
<S>                                                                 <C>         <C>         <C>         <C>
Excess tax over book depreciation.................................  $       --  $  (32,049) $       --  $  (34,001)
Recognition of income on contracts reported on different methods
 for tax and financial reporting..................................          --     (30,068)         --     (31,256)
Employee benefit plans............................................      31,057          --      29,408          --
Administrative and general expenses period costed for tax
 purposes.........................................................          --      (8,357)         --     (10,454)
Foreign tax credit carryforwards..................................      29,000          --      19,000          --
Other.............................................................      28,910          --      26,267          --
                                                                    ----------  ----------  ----------  ----------
                                                                        88,967     (70,474)     74,675     (75,711)
Less -- Valuation allowance.......................................     (29,000)         --     (19,000)         --
                                                                    ----------  ----------  ----------  ----------
Total deferred taxes..............................................  $   59,967  $  (70,474) $   55,675  $  (75,711)
                                                                    ----------  ----------  ----------  ----------
                                                                    ----------  ----------  ----------  ----------
</TABLE>

    The valuation allowance is attributable to foreign tax credit  carryforwards
which expire in the years 1994 through 1998.

                                      F-10
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.  INCOME TAXES (CONTINUED)
    Domestic  and  foreign  components  of  earnings  before  income  taxes  and
extraordinary item were as follows:

<TABLE>
<CAPTION>
                                                              1993        1992        1991
                                                           ----------  ----------  -----------
                                                                     (IN THOUSANDS)
<S>                                                        <C>         <C>         <C>
Domestic.................................................  $   71,126  $   67,217  $   (11,758)
Foreign..................................................      30,393      40,043       42,267
                                                           ----------  ----------  -----------
Total....................................................  $  101,519  $  107,260  $    30,509
                                                           ----------  ----------  -----------
                                                           ----------  ----------  -----------
</TABLE>

    Provision for income taxes was as follows:

<TABLE>
<CAPTION>
                                                                1993        1992       1991
                                                             ----------  ----------  ---------
                                                                      (IN THOUSANDS)
<S>                                                          <C>         <C>         <C>
Current --
  Domestic.................................................  $   36,254  $   43,026  $  (5,575)
  Foreign..................................................       9,568      17,596     17,926
                                                             ----------  ----------  ---------
                                                                 45,822      60,622     12,351
Deferred --
  Domestic.................................................     (11,553)    (14,527)    16,187
  Foreign..................................................       2,024      (3,518)      (238)
                                                             ----------  ----------  ---------
                                                                 (9,529)    (18,045)    15,949
                                                             ----------  ----------  ---------
    Total..................................................  $   36,293  $   42,577  $  28,300
                                                             ----------  ----------  ---------
                                                             ----------  ----------  ---------
</TABLE>

    Reconciliation of tax at the U.S. statutory income tax rate, 35% in 1993 and
34% in 1992 and 1991, to the provision for income taxes was as follows:

<TABLE>
<CAPTION>
                                                                                     1993       1992       1991
                                                                                   ---------  ---------  ---------
                                                                                           (IN THOUSANDS)
<S>                                                                                <C>        <C>        <C>
Tax at U.S. statutory rate.......................................................  $  35,532  $  36,468  $  10,373
Tax cost (benefit) --
  Repatriation of non-U.S. earnings..............................................      3,201      4,600      8,662
  Non-U.S. rate differential.....................................................        954      1,708      3,317
  Adjustment of reserves.........................................................     (6,692)    (2,636)    (1,663)
  Unutilized operating losses....................................................         --         --      5,245
  Other (not individually significant)...........................................      3,298      2,437      2,366
                                                                                   ---------  ---------  ---------
Provision for income taxes.......................................................  $  36,293  $  42,577  $  28,300
                                                                                   ---------  ---------  ---------
Effective tax rate...............................................................      35.75%      39.7%      92.8%
                                                                                   ---------  ---------  ---------
                                                                                   ---------  ---------  ---------
</TABLE>

    The provisions, prior  to the  disaffiliation noted  below, were  determined
pursuant to the tax sharing procedure between Coltec and Holdings and would have
been the same if determined by Coltec on a separate group basis.

    Holdings,  subsequent to its disaffiliation from Coltec, realized during the
fourth quarter  1992 the  benefit of  unutilized operating  losses for  1991  by
filing a refund claim based on the carryback of such losses.

    As  a consequence of the  Recapitalization, Coltec became disaffiliated from
Holdings. For 1991 and the first quarter of  1992, Coltec and all of its 80%  or
greater  owned U.S. subsidiaries ("Coltec  Separate Group") joined with Holdings
in the filing of consolidated U.S.  federal income tax returns with Holdings  as
the  parent company. For the  nine month period ended  December 31, 1992, Coltec
Separate Group filed a consolidated

                                      F-11
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.  INCOME TAXES (CONTINUED)
U.S. federal income  tax return with  Coltec as the  parent company. During  the
periods  of affiliation  with Holdings,  Coltec's portion  of the  resulting tax
liability for each of the periods was  the lesser of (i) Coltec's tax  liability
determined  on a Coltec Separate Group basis,  or (ii) Coltec's ratable share of
Holdings' consolidated tax  liability, including,  pursuant to  the tax  sharing
procedure  between Coltec and Holdings, part of the determined tax benefits from
Holdings' losses. Upon  consummation of  the Recapitalization,  the tax  sharing
procedure   was  terminated  and   Coltec  and  Holdings   entered  into  a  Tax
Disaffiliation Agreement. On November 18,  1993, Holdings became a  wholly-owned
subsidiary  of Coltec. Reference is made to  Note 13 for information relating to
the Holdings Reorganization.

    The excess of Coltec's U.S. federal income tax liability, for each period of
affiliation with  Holdings,  determined  in  accordance  with  the  tax  sharing
procedure,  over  its  U.S. federal  income  tax  liability if  determined  on a
separate group basis was paid to Holdings  and is included as a distribution  to
Holdings in the Consolidated Statement of Shareholders' Equity.

6.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                     1993          1992
                                                                 ------------  ------------
                                                                       (IN THOUSANDS)
<S>                                                              <C>           <C>
1992 Credit Agreement -- 7.5%*.................................  $    308,618  $    350,922
9 3/4% senior notes due 1999...................................       150,000       150,000
9 3/4% senior notes due 2000...................................       200,000       200,000
11 1/4% debentures due 1996-2015...............................        91,625       141,625
10 1/4% senior subordinated notes due 2002.....................       250,000       250,000
Other due 1994-2010............................................        33,389        29,548
                                                                 ------------  ------------
                                                                    1,033,632     1,122,095
Less -- Amounts due within one year............................         1,543        48,645
                                                                 ------------  ------------
                                                                 $  1,032,089  $  1,073,450
                                                                 ------------  ------------
                                                                 ------------  ------------
<FN>
- ---------
*Indicates average interest rate for 1993.
(a)  In  connection  with the  Recapitalization,  Coltec entered  into  the 1992
     Credit Agreement with various banks. The 1992 Credit Agreement consisted of
     a $404,772,000  term  loan  facility  and  a  $160,000,000  revolving  loan
     facility.  In addition,  up to  $85,000,000 of  letters of  credit could be
     issued under or outside  the facility. At  December 31, 1993,  $259,618,000
     and  $49,000,000 of  borrowings were  outstanding under  the term  loan and
     revolving loan  facilities, respectively;  and  $43,608,000 of  letters  of
     credit   had  been  issued.  In  January  1994,  Coltec  completed  a  bank
     refinancing that resulted in  the repayment of  the 1992 Credit  Agreement.
     Reference is made to Note 16 for information on the refinancing.
     Interest  on borrowings  under the 1992  Credit Agreement  was computed, at
     Coltec's option, at an annual rate equal to (i) the base rate plus 1.5%  or
     (ii)  the Eurodollar rate plus  2.75%. The base rate  was the higher of (x)
     1/2 of 1% in excess of the Federal Reserve reported certificate of  deposit
     rate and (y) the prime lending rate, as in effect from time to time. Letter
     of  credit fees of 3%  were payable on outstanding  letters of credit and a
     commitment fee of 1/2  of 1% was payable  on the unutilized revolving  loan
     facility.
     The  1992 Credit  Agreement contained  various restrictions  and conditions
     including a fixed charge coverage ratio, current ratio, leverage ratio  and
     cash flow coverage ratio. In addition, the 1992 Credit Agreement limited or
     restricted  purchases  of  Coltec's  common  stock,  payment  of dividends,
     capital
</TABLE>

                                      F-12
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6.  LONG-TERM DEBT (CONTINUED)
<TABLE>
<S>  <C>
     expenditures, the  incurrence of  additional indebtedness,  mergers,  asset
     acquisitions  and dispositions,  investments, prepayment of  other debt and
     transactions  with  affiliates.  At  December  31,  1993,  Coltec  was   in
     compliance with the above covenants.
(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 were  issued  in connection  with  the
     Recapitalization and are not redeemable prior to maturity on April 1, 2000.
(d)  The  10 1/4% senior  subordinated notes were issued  in connection with the
     Recapitalization and are  redeemable at the  option of Coltec  on or  after
     April  1, 1997  at 105.125% of  par, declining to  100% of par  on or after
     April 1, 1999.
(e)  Coltec has purchased in the open market and redeemed $58,375,000  principal
     amount  of its  11 1/4%  debentures. The  remaining 11  1/4% debentures are
     redeemable at the option of Coltec at 106.750% of par, declining to 100% of
     par on or after December 1, 2005. Mandatory annual sinking fund payments of
     $7,125,000 beginning December 1, 1996 are  calculated to retire 90% of  the
     debentures  prior to maturity. Coltec,  at its option, may  redeem up to an
     additional $14,250,000 annually, beginning December 1, 1996 through 2014.
(f)  At December 31, 1993 and 1992, $1,550,000 and $9,550,000, respectively,  of
     defeased  notes have  been offset against  trustee funds  included in other
     assets in  the  Consolidated  Balance Sheet.  The  defeased  notes  include
     $1,550,000  at both December 31, 1993 and 1992 of 9 7/8% industrial revenue
     bonds issued in 1980 and $8,000,000 at  December 31, 1992 of 9 3/4%  senior
     promissory notes issued in 1976.
(g)  The amounts payable under capital lease obligations as of December 31, 1993
     were as follows:
</TABLE>

<TABLE>
<CAPTION>
                                                                                (IN THOUSANDS)
<S>                                                                             <C>
1994..........................................................................    $    1,333
1995..........................................................................         1,333
1996..........................................................................         1,333
1997..........................................................................         1,333
1998..........................................................................         1,288
Remainder.....................................................................        28,397
                                                                                     -------
Total minimum lease payments..................................................        35,017
Less -- Amount representing interest..........................................        17,399
                                                                                     -------
Total minimum lease payments at present value, included in
 long-term debt...............................................................    $   17,618
                                                                                     -------
                                                                                     -------
<FN>
(h)  Minimum  payments on long-term debt,  after reflecting the bank refinancing
     completed in January, 1994,  due within five years  from December 31,  1993
     are as follows:
</TABLE>

<TABLE>
<CAPTION>
                                                                                (IN THOUSANDS)
<S>                                                                             <C>
1994..........................................................................    $    1,543
1995..........................................................................           941
1996..........................................................................           522
1997..........................................................................        50,750
1998..........................................................................        50,814
</TABLE>

7.  FINANCIAL INSTRUMENTS
    The  following methods and assumptions were  used to estimate the fair value
of Coltec's financial instruments:

                                      F-13
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7.  FINANCIAL INSTRUMENTS (CONTINUED)
    Cash and cash equivalents: The carrying amount of cash and cash  equivalents
approximates fair value due to the short-term maturity of the investments.

    Accounts  and notes receivable,  other: The carrying  amount of accounts and
notes receivable, other approximates fair value due to the short-term nature  of
the receivables.

    Long-term  receivables and investments: The  fair value of certain long-term
receivables and  investments  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 Coltec's publicly traded long-term debt is
based on the  quoted market  prices for such  debt and  for non-publicly  traded
long-term  debt, on quoted  market prices for similar  publicly traded debt. The
fair value of interest rate swap  agreements is based on quotes from  commercial
banks.

    The  estimated fair value of Coltec's  financial instruments at December 31,
1993 and 1992 is as follows:

<TABLE>
<CAPTION>
                                                               1993                      1992
                                                    --------------------------  ----------------------
                                                      CARRYING                   CARRYING
                                                       VALUE       FAIR VALUE     VALUE     FAIR VALUE
                                                    ------------  ------------  ----------  ----------
                                                                      (IN THOUSANDS)
<S>                                                 <C>           <C>           <C>         <C>
Cash and cash equivalents.........................  $      5,749  $      5,749  $    7,155  $    7,155
Accounts and notes receivable, other..............        41,051        41,051       4,959       4,959
Long-term receivables and investments --
  Practical to estimate fair value................        38,041        38,041      17,479      17,466
  Not practical to estimate fair value............        21,759       --           63,928      --
Long-term debt....................................     1,033,632     1,082,164   1,122,095   1,153,820
</TABLE>

    It was not practicable to obtain independent estimates of the fair value  of
Coltec's  minority  interest,  consisting  principally  of  preferred  stock, in
Crucible Materials Corporation ("Crucible"), a  private corporation in 1993  and
1992,  or  of  the  receivable  from  insurance  carriers  for  asbestos product
liability  claims  and  related  litigation  costs  in  1992  without  incurring
excessive costs. The $21,759,000 carrying value of the investment in Crucible at
December  31,  1993  and 1992,  and  the $42,169,000  receivable  from insurance
carriers at December 31, 1992 are  included in other assets in the  Consolidated
Balance  Sheet. Reference  is made  to Note 15  for information  relating to the
receivable from insurance carriers.

    It is Coltec's policy to enter into forward exchange contracts to hedge U.S.
dollar  denominated  sales,  under  long-term  contracts,  of  certain   foreign
subsidiaries.  Coltec does not engage  in speculation. Coltec's foreign exchange
contracts do not subject Coltec to  risk due to exchange rate movements  because
gains  and losses on  these contracts offset  losses and gains  on the sales and
related receivables  being hedged.  At December  31, 1993  and 1992  Coltec  had
$251,610,000  and  $298,990,000,  respectively, of  forward  exchange contracts,
denominated in Canadian  dollars, which  had a  fair value  of $240,131,000  and
$283,240,000, respectively, based on quotes from commercial banks. The contracts
have varying maturities with none exceeding five years.

   
    As  of  December  31,  1993,  Coltec  has  outstanding  interest  rate  swap
agreements with major financial institutions  having a total notional  principal
amount  of $150,000,000, an average fixed interest  rate of 6.34% and an average
remaining life of 1 1/4 years, the  fair values of which are $4,522,000 and  are
included  with long-term debt in the  above table. Interest rate swap agreements
effectively hedge interest rate exposures and,  as such, the differential to  be
paid  or  received  is accrued  and  recognized  in interest  expense  as market
interest rates change. If an agreement  is terminated prior to maturity,  Coltec
recognizes a gain or loss upon termination. Coltec has an outstanding contingent
liability  for guaranteed debt and lease payments of $27,140,000, and letters of
credit, other than with respect to  guaranteed debt, of $40,733,000. It was  not
practical  to obtain independent estimates of the fair values for the contingent
liability for guaranteed debt
    

                                      F-14
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7.  FINANCIAL INSTRUMENTS (CONTINUED)
   
and lease payments and for letters of credit without incurring excessive  costs.
In  the  opinion  of management,  nonperformance  by  the other  parties  to the
interest rate swap  agreements and the  contingent liabilities will  not have  a
material effect on Coltec's results of operations and financial condition.
    

8.  STOCK OPTION AND INCENTIVE PLAN
    On  March 19, 1992, Coltec adopted the  1992 Stock Option and Incentive Plan
(the "Option Plan").  The Option  Plan provides  for the  granting of  incentive
stock  rights, stock  options, stock  appreciation rights,  restricted stock and
dividend equivalents to officers  and key employees. The  number of shares  that
may  be issued under the  Option Plan may not  exceed 3,000,000 shares of common
stock. Stock options outstanding under the  Option Plan 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%, commencing one year from date of grant.

    Information on stock options for the two years ended December 31, 1993 is as
follows:

<TABLE>
<CAPTION>
                                                   OPTION PRICE
                                                    RANGE PER
                                       NUMBER OF      SHARE
                                        SHARES         130D *ONEXT=    D
                                       ---------
<S>                                    <C>         <C>
Outstanding January 1, 1992.........      --            --
Granted.............................   2,015,000   $15.00-18.25
Exercised...........................      --            --
Canceled............................      --            --
                                       ---------   ------------
Outstanding December 31, 1992.......   2,015,000    15.00-18.25
Granted.............................     290,000    16.38-18.75
Exercised...........................      (5,000)         15.00
Canceled............................     (40,000)         15.00
                                       ---------   ------------
Outstanding December 31, 1993.......   2,260,000    15.00-18.75
                                       ---------   ------------
Exercisable December 31:
  1992..............................      --            --
  1993..............................     398,000    15.00-18.25
                                       ---------   ------------
                                       ---------   ------------
</TABLE>

    In addition to the granting of  stock options, Coltec has granted shares  of
restricted  stock under the Option Plan. Restrictions on certain shares lapse in
annual installments  of 33  1/3% commencing  one and  three years  from date  of
grant. Restrictions on the remaining shares lapse 100% three years from the 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  Sheet and is being  charged to earnings over  the period the restricted
shares vest.

    Information on restricted stock for the two years ended December 31, 1993 is
as follows:

<TABLE>
<CAPTION>
                                                                         NUMBER OF SHARES
                                                                       --------------------
                                                                         1993       1992
                                                                       ---------  ---------
<S>                                                                    <C>        <C>
Outstanding January 1................................................    578,464     --
Granted..............................................................     89,877    578,464
Restrictions expired.................................................    (99,772)    --
Forfeited............................................................    (14,309)    --
                                                                       ---------  ---------
Outstanding December 31..............................................    554,260    578,464
                                                                       ---------  ---------
                                                                       ---------  ---------
</TABLE>

    Shares available for grant  at December 31, 1993  and 1992 under the  Option
Plan were 66,659 and 406,536, respectively.

                                      F-15
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9.  PENSION AND RETIREMENT PLANS
    Coltec 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. Coltec's funding
policy is consistent with  the funding requirements  of the Employee  Retirement
Income  Security  Act  ("ERISA")  of  1974,  as  amended.  Plan  assets  consist
principally of publicly traded equity and fixed-income securities.

    Pension coverage for employees of the non-U.S. subsidiaries is provided,  to
the  extent deemed appropriate,  through separate plans.  Obligations under such
plans are  systematically provided  for by  depositing funds  with trustees,  or
through book reserves.

    In  a number of  the 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").

    As of December 31, 1993 and 1992,  the status of Coltec's pension plans  was
as follows:

<TABLE>
<CAPTION>
                                                             1993                       1992*
                                                   -------------------------  -------------------------
                                                   OVERFUNDED   UNDERFUNDED   OVERFUNDED   UNDERFUNDED
                                                      PLANS        PLANS         PLANS        PLANS
                                                   -----------  ------------  -----------  ------------
                                                                      (IN THOUSANDS)
<S>                                                <C>          <C>           <C>          <C>
Actuarial present value of projected benefit
 obligation, based on employment service to date
 and current salary levels:
  Vested employees...............................   $ 246,597    $  115,724    $ 229,120    $  103,126
  Nonvested employees............................       7,040         6,447        6,718         5,781
                                                   -----------  ------------  -----------  ------------
  Accumulated benefit obligation.................     253,637       122,171      235,838       108,907
  Additional amounts related to projected salary
   increases.....................................      21,060           436       22,982         3,162
                                                   -----------  ------------  -----------  ------------
  Total projected benefit obligation.............     274,697       122,607      258,820       112,069
                                                   -----------  ------------  -----------  ------------
Assets available for benefits:...................
  Funded assets..................................     305,411        82,421      293,921        82,839
  Accrued pension expense, per books.............       1,069        40,614        4,542        27,549
                                                   -----------  ------------  -----------  ------------
  Total assets...................................     306,480       123,035      298,463       110,388
                                                   -----------  ------------  -----------  ------------
Assets in excess of (less than) projected benefit
 obligation......................................   $  31,783    $      428    $  39,643    $   (1,681)
                                                   -----------  ------------  -----------  ------------
Consisting of:
  Unamortized net asset existing at date of
   adoption of FAS No. 87........................   $   2,492    $   19,098    $   1,526    $   10,508
  Unrecognized net gain (loss)...................      34,589       (11,813)      43,613        (6,244)
  Unrecognized prior service cost................      (5,298)       (6,857)      (5,496)       (5,945)
                                                   -----------  ------------  -----------  ------------
                                                    $  31,783    $      428    $  39,643    $   (1,681)
                                                   -----------  ------------  -----------  ------------
                                                   -----------  ------------  -----------  ------------
<FN>
- ---------
*Restated to reflect funding classification as of December 31, 1993.
</TABLE>

    For U.S. plans, discount rates of 7.5% and 8.0% were used as of December 31,
1993 and 1992, respectively, for the valuation of the actuarial present value of
benefit obligations.

    In  accordance with  the requirements  of Statement  of Financial Accounting
Standards No.  87,  "Employers'  Accounting for  Pensions",  Coltec  recorded  a
minimum pension liability for underfunded plans. The

                                      F-16
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9.  PENSION AND RETIREMENT PLANS (CONTINUED)
minimum  liability is equal to the  excess of the accumulated benefit obligation
over plan assets.  A corresponding amount  is recorded as  either an  intangible
asset  or a reduction of  shareholders' equity. As of  December 31, 1993, Coltec
recorded  a  $13,571,000   additional  minimum  liability   included  in   other
liabilities  in the  Consolidated Balance  Sheet, a  $7,102,000 intangible asset
included in other  assets in the  Consolidated Balance Sheet,  and a  $4,205,000
charge to shareholders' equity, net of a $2,264,000 tax benefit.

    Assumptions  as of January 1  used to develop the  net periodic pension cost
for U.S. plans were:

<TABLE>
<CAPTION>
                                                                                    1993         1992         1991
                                                                                 -----------  -----------  -----------
<S>                                                                              <C>          <C>          <C>
Discount rate for benefit obligations..........................................        8.0%         8.0%         8.5%
Expected long-term rate of return on assets....................................        8.5%         8.5%         8.5%
Rate of increase in compensation levels........................................        5.0%         6.0%         6.0%
</TABLE>

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

    The components of net periodic pension cost were as follows:

<TABLE>
<CAPTION>
                                                                         1993        1992        1991
                                                                      ----------  ----------  ----------
                                                                                (IN THOUSANDS)
<S>                                                                   <C>         <C>         <C>
Service cost -- benefits earned.....................................  $    9,423  $    9,947  $    9,087
Interest cost on projected benefit obligation.......................      28,496      27,993      26,511
Actual return on assets.............................................      (7,770)       (233)    (32,541)
Amortization and deferral, net......................................     (30,968)    (38,394)     (1,282)
                                                                      ----------  ----------  ----------
Net periodic pension cost (credit)..................................  $     (819) $     (687) $    1,775
                                                                      ----------  ----------  ----------
                                                                      ----------  ----------  ----------
</TABLE>

    For  discontinued operations, Coltec's total projected benefit obligation at
December 31, 1993 and 1992 was $263,751,000 and $263,660,000, respectively,  and
is  fully funded.  Interest accrued  for 1993,  1992 and  1991 on  the projected
benefit obligation was $20,450,000, $21,555,000, and $24,200,000,  respectively,
and was fully offset by return on assets resulting in no net periodic cost.

10. OTHER POSTRETIREMENT BENEFITS
    Coltec  provides health  care and  life insurance  benefits to  its eligible
retired employees, principally in the United States. Effective January 1,  1993,
Coltec  adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other  Than Pensions", ("FAS 106")  using
the  delayed recognition transition option  whereby the transition obligation is
being amortized on a  straight-line basis over 20  years. FAS 106 requires  that
the  cost of postretirement  benefits be recognized  in the financial statements
during  the  years  the  employees  provide  services.  Prior  to  1993,  Coltec
recognized the cost of postretirement benefits by expensing the premiums, net of
retiree contributions.

                                      F-17
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. OTHER POSTRETIREMENT BENEFITS (CONTINUED)
    Coltec's  accumulated postretirement  benefit obligation,  none of  which is
funded, and the postretirement benefit cost  liability at December 31, 1993  and
January 1, 1993 were as follows:

   
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,  JANUARY 1,
                                                                        1993         1993
                                                                    ------------  -----------
                                                                         (IN THOUSANDS)
<S>                                                                 <C>           <C>
Actuarial present value of projected accumulated postretirement
 benefit obligation
  Retirees........................................................   $   17,511    $  16,390
  Fully eligible active participants..............................        4,613        3,987
  Other active participants.......................................        3,441        3,546
                                                                    ------------  -----------
  Total...........................................................       25,565       23,923
Unamortized transition obligation.................................      (22,727)     (23,923)
Unrecognized net loss.............................................       (1,482)      --
                                                                    ------------  -----------
Postretirement benefit cost liability.............................   $    1,356    $  --
                                                                    ------------  -----------
                                                                    ------------  -----------
</TABLE>
    

    The  components of postretirement  benefit cost for  the year ended December
31, 1993 were as follows:

<TABLE>
<CAPTION>
                                                                                (IN THOUSANDS)
<S>                                                                             <C>
Service cost -- benefits earned...............................................     $     249
Interest cost on accumulated postretirement benefit obligation................         1,838
Amortization of transition obligation.........................................         1,196
                                                                                      ------
Postretirement benefit cost...................................................     $   3,283
                                                                                      ------
                                                                                      ------
</TABLE>

    Discount rates of  7.5% and 8.0%  were used in  determining the  accumulated
postretirement  benefit obligation  at December  31, 1993  and January  1, 1993,
respectively.  The  health  care  cost  trend  rates  used  in  determining  the
accumulated postretirement benefit obligation at December 31, 1993 were 13.1% in
1994  gradually declining to  5.0% in 2005. The  effect of a  1% increase in the
health care cost trend rates in each year would be to increase the total service
and interest cost  components of  the postretirement  benefit cost  for 1993  by
$234,000  and to increase  the accumulated postretirement  benefit obligation at
December 31, 1993 by $1,800,000.

11. SEGMENT INFORMATION
    Coltec's  financial  results  are  reported  in  three  industry   segments:
Aerospace/Government, Automotive, and Industrial.

   
    Information  on sales and operating income by industry segment for the years
1993, 1992 and 1991 included on page 17 in Management's Discussion and  Analysis
of  Financial  Condition and  Results of  Operations  is incorporated  herein by
reference.
    

                                      F-18
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. SEGMENT INFORMATION (CONTINUED)
    Information on total assets; depreciation of property, plant and  equipment;
and  capital expenditures by industry segment for the three years ended December
31, 1993 is as follows:

<TABLE>
<CAPTION>
                                                                               1993       1992       1991
                                                                             ---------  ---------  ---------
                                                                                      (IN MILLIONS)
<S>                                                                          <C>        <C>        <C>
Total assets:
  Aerospace/Government.....................................................  $   386.2  $   388.7  $   410.0
  Automotive...............................................................      124.6      118.6      123.3
  Industrial...............................................................      180.1      186.7      189.8
  Corporate unallocated....................................................      115.5      134.8      111.1
                                                                             ---------  ---------  ---------
    Total..................................................................  $   806.4  $   828.8  $   834.2
                                                                             ---------  ---------  ---------
                                                                             ---------  ---------  ---------
Depreciation of property, plant and equipment:
  Aerospace/Government.....................................................  $    16.1  $    17.3  $    18.4
  Automotive...............................................................        7.4        7.9        8.7
  Industrial...............................................................        9.5        9.9        9.6
  Corporate unallocated....................................................         .2         .2         .2
                                                                             ---------  ---------  ---------
    Total..................................................................  $    33.2  $    35.3  $    36.9
                                                                             ---------  ---------  ---------
                                                                             ---------  ---------  ---------
Capital expenditures:
  Aerospace/Government.....................................................  $    21.8  $    13.3  $    14.2
  Automotive...............................................................        9.6        6.5        5.7
  Industrial...............................................................        7.2        5.2        6.3
                                                                             ---------  ---------  ---------
    Total..................................................................  $    38.6  $    25.0  $    26.2
                                                                             ---------  ---------  ---------
                                                                             ---------  ---------  ---------
</TABLE>

                                      F-19
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. SEGMENT INFORMATION (CONTINUED)
    Information by geographic  segment for  the three years  ended December  31,
1993 is as follows:

<TABLE>
<CAPTION>
                                                                                    OPERATING     TOTAL
                                                                          SALES      INCOME      ASSETS
                                                                        ---------  -----------  ---------
                                                                                  (IN MILLIONS)
<S>                                                                     <C>        <C>          <C>
1993
  Domestic operations.................................................  $ 1,155.4   $    215.9  $   619.4
  Foreign operations..................................................      206.7         30.2      207.6
  Intersegment elimination............................................      (27.3)     --          (136.1)
                                                                        ---------  -----------  ---------
    Total segments....................................................    1,334.8        246.1      690.9
  Corporate unallocated...............................................     --            (34.4)     115.5
                                                                        ---------  -----------  ---------
    Total.............................................................  $ 1,334.8   $    211.7  $   806.4
                                                                        ---------  -----------  ---------
                                                                        ---------  -----------  ---------
1992
  Domestic operations.................................................  $ 1,160.8   $    228.3  $   623.7
  Foreign operations..................................................      232.8         43.3      217.4
  Intersegment elimination............................................      (24.9)     --          (147.1)
                                                                        ---------  -----------  ---------
    Total segments....................................................    1,368.7        271.6      694.0
  Corporate unallocated...............................................     --            (28.5)     134.8
                                                                        ---------  -----------  ---------
    Total.............................................................  $ 1,368.7   $    243.1  $   828.8
                                                                        ---------  -----------  ---------
                                                                        ---------  -----------  ---------
1991
  Domestic operations.................................................  $ 1,132.9   $    204.3  $   632.2
  Foreign operations..................................................      264.3         44.8      224.0
  Intersegment elimination............................................      (24.2)        --       (133.1)
                                                                        ---------  -----------  ---------
    Total segments....................................................    1,373.0        249.1      723.1
  Corporate unallocated...............................................     --            (20.1)     111.1
                                                                        ---------  -----------  ---------
    Total.............................................................  $ 1,373.0   $    229.0  $   834.2
                                                                        ---------  -----------  ---------
                                                                        ---------  -----------  ---------
</TABLE>

12. SUPPLEMENTARY EARNINGS INFORMATION
    The  following costs and expenses are included in the Consolidated Statement
of Earnings:

<TABLE>
<CAPTION>
                                                                           1993       1992       1991
                                                                         ---------  ---------  ---------
                                                                                 (IN THOUSANDS)
<S>                                                                      <C>        <C>        <C>
Maintenance............................................................  $  25,363  $  27,444  $  28,651
                                                                         ---------  ---------  ---------
Taxes, other than federal income taxes:
  Payroll..............................................................     28,700     28,764     28,725
                                                                         ---------  ---------  ---------
  Property.............................................................      4,764      4,793      4,745
                                                                         ---------  ---------  ---------
  State and local......................................................      4,785      5,195      4,427
                                                                         ---------  ---------  ---------
Rent...................................................................     12,235     12,849     12,803
                                                                         ---------  ---------  ---------
Research and development costs.........................................     22,079     22,947     23,773
                                                                         ---------  ---------  ---------
                                                                         ---------  ---------  ---------
</TABLE>

13. RELATED PARTY TRANSACTIONS
   
    On November 18, 1993, Holdings became a wholly owned subsidiary of Coltec as
a result of the exchange by all of the Holdings shareholders of their shares  of
common  stock of  Holdings for  35.5% or  24,830,000 shares  of common  stock of
Coltec (the  "Holdings Reorganization")  in  a transaction  accounted for  as  a
purchase.  The net assets  acquired consisted primarily  of 25,000,000 shares of
common stock of
    

                                      F-20
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

13. RELATED PARTY TRANSACTIONS (CONTINUED)
   
Coltec and $26.7  million of  cash. Immediately before  this exchange,  Holdings
owned  35.7%  or 25,000,000  shares of  common stock  of Coltec.  The 25,000,000
shares of common stock of Coltec  which Holdings owned before this exchange  and
continues  to own  after the exchange  are reported in  the Consolidated Balance
Sheet as a reduction of the  total common shares issued. Expenses of  $1,500,000
incurred  in connection with this exchange were  charged to capital in excess of
par value. As  a result  of the  exchange, Morgan  Stanley Group  Inc. became  a
direct  shareholder of  Coltec. In  connection with  an industrial  revenue bond
refinancing in 1993, Morgan  Stanley & Co. Incorporated  ("MS & Co."), a  wholly
owned subsidiary of Morgan Stanley Group Inc., received a fee of $309,000.
    

    During  1992, in connection  with the Recapitalization, MS  & Co. received a
portion of the total underwriting  commission of $36,527,000 in connection  with
the  Equity Offering,  an underwriting  commission of  $11,250,000 in connection
with the Note Offerings, and  fees of $1,049,000 as  one of the dealer  managers
for  the  Debt Tender  Offer. In  addition,  MS &  Co. received  an underwriting
commission of $2,625,000 in  connection with the offering  of the 9 3/4%  senior
notes due 1999.

    During  the two years ended December 31, 1992, MS & Co. acted as a dealer in
the placement  of a  portion of  Coltec's commercial  paper and  as one  of  the
brokers in the purchase of Coltec's debentures.

                                      F-21
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

14. QUARTERLY SALES AND EARNINGS (UNAUDITED)
    The  following table sets  forth quarterly sales,  gross profit and earnings
for the three years ended December 31, 1993.

<TABLE>
<CAPTION>
                                                                                      QUARTER
                                                                   ----------------------------------------------
                                                                      1ST         2ND         3RD         4TH
                                                                   ----------  ----------  ----------  ----------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                <C>         <C>         <C>         <C>
1993
Net sales........................................................  $  339,934  $  334,591  $  316,077  $  344,227
                                                                   ----------  ----------  ----------  ----------
Gross profit.....................................................     107,903     107,729     104,585     109,148
                                                                   ----------  ----------  ----------  ----------
Operating income.................................................      54,967      37,040      56,800      62,902
                                                                   ----------  ----------  ----------  ----------
Earnings before extraordinary item...............................      17,490       6,013      18,490      23,233
Extraordinary item...............................................        (264)       (375)       (378)    (16,775)
                                                                   ----------  ----------  ----------  ----------
Net earnings.....................................................      17,226       5,638      18,112       6,458
                                                                   ----------  ----------  ----------  ----------
Earnings (loss) per common share
  Before extraordinary item......................................         .25         .09         .27         .33
  Extraordinary item.............................................          --        (.01)       (.01)       (.24)
                                                                   ----------  ----------  ----------  ----------
  Net earnings...................................................         .25         .08         .26         .09
                                                                   ----------  ----------  ----------  ----------
1992
Net sales........................................................  $  337,557  $  359,973  $  330,640  $  340,533
                                                                   ----------  ----------  ----------  ----------
Gross profit.....................................................      98,867     109,122     106,447     109,862
                                                                   ----------  ----------  ----------  ----------
Operating income.................................................      52,293      65,480      59,537      65,812
                                                                   ----------  ----------  ----------  ----------
Earnings (loss) before extraordinary item........................      (2,713)     23,280      19,905      24,211
Extraordinary item...............................................          --    (105,347)         --      (1,583)
                                                                   ----------  ----------  ----------  ----------
Net earnings (loss)..............................................      (2,713)    (82,067)     19,905      22,628
                                                                   ----------  ----------  ----------  ----------
Earnings (loss) per common share
  Before extraordinary item......................................        (.11)        .33         .29         .35
  Extraordinary item.............................................          --       (1.51)         --        (.02)
                                                                   ----------  ----------  ----------  ----------
  Net earnings (loss)............................................        (.11)      (1.18)        .29         .33
                                                                   ----------  ----------  ----------  ----------
1991
Net sales........................................................  $  337,087  $  357,297  $  338,205  $  340,390
                                                                   ----------  ----------  ----------  ----------
Gross profit.....................................................      95,362     107,176     102,951     100,699
                                                                   ----------  ----------  ----------  ----------
Operating income.................................................      48,934      58,988      64,098      57,000
                                                                   ----------  ----------  ----------  ----------
Earnings (loss) before extraordinary item........................      (2,263)      2,554       5,831      (3,913)
Extraordinary item...............................................         591          --          --          --
                                                                   ----------  ----------  ----------  ----------
Net earnings (loss)..............................................      (1,672)      2,554       5,831      (3,913)
                                                                   ----------  ----------  ----------  ----------
Earnings (loss) per common share
  Before extraordinary item......................................        (.09)        .10         .23        (.16)
  Extraordinary item.............................................         .02          --          --          --
                                                                   ----------  ----------  ----------  ----------
  Net earnings (loss)............................................        (.07)        .10         .23        (.16)
                                                                   ----------  ----------  ----------  ----------
                                                                   ----------  ----------  ----------  ----------
</TABLE>

    Reference  is  made  to  Note  3  for  restructuring  charge,  Note  4   for
extraordinary item and Note 1 for earnings per share. Earnings (loss) per common
share  for the year ended  December 31, 1992 does not  equal the sum of earnings
(loss) per common share for each of the four quarters of 1992 due to the  Equity
Offering.

                                      F-22
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

15. COMMITMENTS AND CONTINGENCIES
   
    Coltec and certain of its subsidiaries are liable for lease payments and are
defendants  in various lawsuits, including actions involving asbestos-containing
products, certain environmental proceedings and a fraudulent conveyance  action.
With respect to asbestos product liability and related litigation costs, in 1993
two  subsidiaries of Coltec  received approximately 27,400  new lawsuits, with a
comparable number of lawsuits received in  1992 and 1991. The subsidiaries  made
payments  with  respect  to  asbestos liability  and  related  costs aggregating
$38,677,000 in 1993, $39,810,000 in 1992 and $48,442,000 in 1991,  substantially
all of which were covered by insurance.
    

    In  May 1993, in a case in which  neither Coltec nor any of its subsidiaries
were parties, the Supreme  Court of Pennsylvania  confirmed that the  continuous
trigger  theory  of  coverage  was  applicable  to  relevant  insurance policies
governed by Pennsylvania law and held that the insured could trigger any  policy
during  the  applicable  policy  period in  full  without  allocating  among all
policies providing coverage and without allocating to the insured responsibility
for policy  periods in  which there  was insufficient  coverage. Following  such
decision, agreement was reached by Coltec with certain of its insurers regarding
the  balance of Coltec's primary and most of its first-layer excess coverage and
payments are being made in accordance with the agreement.

    Based on the favorable resolution of the primary and most of the first-layer
excess coverage,  Coltec  anticipates  that the  continuous  trigger  theory  of
coverage  should apply to  the balance of  Coltec's excess insurance. Therefore,
Coltec believes that it is likely to have coverage for a substantial portion  of
foreseeable  future  asbestos-related  actions  and  litigation  costs,  and has
reflected payments  made  for asbestos  product  liability actions  and  related
litigation  costs,  net  of  recoveries,  as  a  receivable  from  its insurance
carriers. At December 31, 1993, and 1992, the receivable balance was $59,535,000
and  $42,169,000,  respectively,  and  is  included  in  other  assets  in   the
Consolidated Balance Sheet, except for the current portion at December 31, 1993,
$35,838,000, which is in accounts and notes receivable, other.

    As  of December 31, 1993, certain actions  had been settled on a group basis
with payments to be made  to individual plaintiffs over  periods of one to  four
years.  In addition,  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.
Coltec  estimates that  the aggregate remaining  cost of the  disposition of the
foregoing  settled  actions  and  actions  in  advanced  stages  of  processing,
including  associated legal costs, is approximately $52,600,000 and expects that
this cost will be substantially covered by insurance.

    As of  December  31, 1993,  the  two subsidiaries  were  among a  number  of
defendants  in  approximately  68,500  actions,  including  approximately  6,100
actions in advanced stages of processing as described above. As of December  31,
1992,  the number  of outstanding actions  approximated that as  of December 31,
1993. The remaining 62,400  outstanding actions as of  December 31, 1993 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
liability or  costs to  Coltec.  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.

                                      F-23
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
   
    It is  also  difficult to  predict  the  number of  asbestos  lawsuits  that
Coltec's  subsidiaries will receive  in the future. 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
are 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, 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 it  is
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 Coltec and
other  defendants in asbestos litigation, the  likely sharing of judgments among
multiple  responsible  defendants,  and  the  significant  amount  of  insurance
coverage  that Coltec expects to be  available from its solvent carriers, Coltec
believes that pending and reasonably  anticipated future actions are not  likely
to  have  a material  effect  on Coltec's  results  of operations  and financial
condition. Although  the  insurance coverage  that  Coltec has  is  substantial,
insurance  coverage  for asbestos  claims is  not  available to  cover exposures
initially occurring on and after July 1, 1984.
    

    Effective in the first quarter of  1994, Coltec will adopt the  requirements
of  Financial Accounting Standards  Board Interpretation No.  39, "Offsetting of
Amounts Related to Certain Contracts." In accordance with Interpretation No. 39,
Coltec will record an accrual  for its liabilities for asbestos-related  matters
that  are deemed probable  and can be reasonably  estimated, and will separately
record an asset equal to the amount  of such liabilities that is expected to  be
recovered  by insurance. Accordingly, the liabilities  and assets to be recorded
in 1994 will relate only  to settled actions and  actions in advanced stages  of
processing  which approximated $52,600,000 as of  December 31, 1993. Coltec does
not expect  that the  adoption of  Interpretation No.  39 will  have a  material
effect on Coltec's results of operations and financial condition.

   
    Coltec  has  been  notified that  it  is among  the  Potentially Responsible
Parties  ("PRPs")  under  the  federal  Comprehensive  Environmental   Response,
Compensation  and Liability Act of 1980, as amended ("CERCLA"), or similar state
laws,  for  the  costs  of   investigating,  and  in  some  cases   remediating,
contamination  by hazardous materials at several sites. CERCLA imposes joint and
several liability  for the  costs of  investigating and  remediating  properties
contaminated  with 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  process of
investigating  and  remediating  contaminated  properties  can  be  lengthy  and
expensive.  The  process  is also  subject  to the  uncertainties  occasioned by
changing legal requirements, developing technological applications and liability
allocations among PRPs.  Based on  the progress  to date  in the  investigation,
cleanup  and allocation of responsibility for  these sites, Coltec has estimated
that its costs  in connection with  all except one  of these sites  approximates
$20,000,000  at  December 31,  1993,  and has  accrued  for this  amount  in the
Consolidated Balance Sheet as of December 31, 1993. Although Coltec is  pursuing
insurance  recovery in connection with certain of these matters, the accrual has
not been  reduced for  potential recoveries  from insurance  companies or  other
third parties. In addition, Coltec has not recorded a receivable with respect to
any  potential recovery  of costs in  connection with  any environmental matter.
While progress toward the  investigation, cleanup and responsibility  allocation
at  the remaining site has  not been sufficient to allow  Coltec at this time to
determine the extent of its potential financial responsibility, Coltec does  not
believe  its costs in connection  with such site will  have a material effect on
Coltec's results of operations and financial condition.
    

                                      F-24
<PAGE>
                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
   
    On March  22, 1990,  Coltec sold  substantially all  of the  assets of  Colt
Firearms   to  the  parent   company  of  Colt's   Manufacturing  Company,  Inc.
(collectively with its parent company, "Colt's Manufacturing"), a company formed
by a  group of  private investors,  for cash  and certain  securities of  Colt's
Manufacturing. At December 31, 1993, Coltec's investment in Colt's Manufacturing
was fully reserved.
    

   
    On  March 18,  1992, Colt's  Manufacturing filed  a petition  for bankruptcy
protection under Chapter 11 of the United States Bankruptcy Code, and on January
19, 1993, the Official Committee of Unsecured Creditors of Colt's  Manufacturing
Company,  Inc. filed  a fraudulent  conveyance action  against Coltec  and other
defendants. Coltec believes that it has adequately provided for any  liabilities
Coltec  may incur with respect to  Colt's Manufacturing and accordingly does not
believe that the Chapter 11 filing, the associated financial condition of Colt's
Manufacturing or the fraudulent conveyance action will have a material effect on
Coltec's results of operations and financial condition.
    

    Under operating lease commitments, expiring on various dates after  December
31,  1994, Coltec and certain  of its subsidiaries are  obligated as of December
31, 1993 to  pay rentals totaling  $28,283,000 as follows:  $6,104,000 in  1994,
$5,021,000  in 1995, $4,085,000 in 1996, $3,042,000 in 1997, $2,796,000 in 1998,
and $7,235,000 in  later years.  These rent  payments are  before reduction  for
related sublease rental income of $1,375,000.

16. SUBSEQUENT EVENT
    On  January 11, 1994, Coltec entered  into a $415,000,000 reducing revolving
credit facility (the "1994 Credit Agreement"), with a syndicate of banks,  which
expires  June 30, 1999.  The facility also  provides up to  $100,000,000 for the
issuance of letters of  credit and will be  reduced $50,000,000 on both  January
11,  1997 and 1998. Obligations under  the facility are secured by substantially
all of Coltec's assets. Borrowings under the facility bear interest, at Coltec's
option, at an annual rate equal to (i) the base rate or (ii) the Eurodollar rate
plus 1%. The base rate is the higher of  (x) 1/2 of 1% in excess of the  Federal
Reserve reported certificate of deposit rate, and (y) the prime lending rate, as
in  effect  from time  to  time. Letter  of  credit fees  of  1% are  payable on
outstanding letters of credit and  a commitment fee of 3/8  of 1% is payable  on
the unutilized facility.

    The   facility  contains  various  restrictions  and  conditions.  The  most
restrictive of these require  that the fixed charge  coverage ratio be at  least
2.25  to 1  for any  period of  four consecutive  quarters to  and including the
fourth quarter of 1994 and thereafter 2.5  to 1. The ratio of current assets  to
current liabilities must be at least 1.25 to 1. In addition, the facility limits
or  restricts purchases of Coltec's common  stock, payment of dividends, capital
expenditures, indebtedness, liens, mergers, asset acquisitions and dispositions,
investments, prepayment of certain debt and transactions with affiliates.

    Upon completion  of  the refinancing  on  January 11,  1994,  borrowings  of
$324,000,000  were outstanding and letters of  credit of $43,608,000 were issued
under the 1994 Credit  Agreement. The 1994 Credit  Agreement was used to  prepay
indebtedness  outstanding and  replace letters of  credit issued  under the 1992
Credit Agreement. The remaining balance of the facility will be used for working
capital and general corporate  purposes. In December,  1993, Coltec recorded  an
extraordinary  charge  of  $14,675,000,  net of  a  $7,902,000  tax  benefit, in
connection with the early retirement of the 1992 Credit Agreement.

                                      F-25
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

    We  have  audited  the  accompanying consolidated  balance  sheet  of Coltec
Industries Inc (a Pennsylvania corporation) and subsidiaries as of December  31,
1993   and  1992,   and  the   related  consolidated   statements  of  earnings,
shareholders' equity and cash flows  for each of the  three years in the  period
ended  December 31, 1993.  These financial statements  are the responsibility of
the company's management. Our responsibility is  to express an opinion on  these
financial statements based on our audits.

    We  conducted  our audits  in  accordance with  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 financial statements  referred to above present fairly,
in all material respects,  the financial position of  Coltec Industries Inc  and
subsidiaries  as  of  December 31,  1993  and  1992, and  the  results  of their
operations and their cash flows for each of the three years in the period  ended
December 31, 1993, in conformity with generally accepted acccounting principles.

Arthur Andersen & Co.
New York, N.Y.
January 24, 1994

                                      F-26
<PAGE>
                         COLTEC I N D U S T R I E S INC
<PAGE>
INFORMATION   CONTAINED  HEREIN  IS  SUBJECT   TO  COMPLETION  OR  AMENDMENT.  A
REGISTRATION STATEMENT  RELATING TO  THESE SECURITIES  HAS BEEN  FILED WITH  THE
SECURITIES  AND EXCHANGE  COMMISSION. THESE SECURITIES  MAY NOT BE  SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR  TO THE TIME THE REGISTRATION STATEMENT  BECOMES
EFFECTIVE.  THIS  PROSPECTUS  SHALL  NOT  CONSTITUTE AN  OFFER  TO  SELL  OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE  SECURITIES
IN  ANY STATE IN WHICH SUCH OFFER,  SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
   
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED APRIL 27, 1994
    
                               23,211,084 SHARES
                             COLTEC INDUSTRIES INC
                                  COMMON STOCK
                             ---------------------

   
OF THE 23,211,084 SHARES OF COMMON  STOCK OFFERED HEREBY, 18,611,084 SHARES  ARE
BEING  OFFERED  INITIALLY  IN  THE  UNITED  STATES  AND  CANADA  BY  THE  U.S.
  UNDERWRITERS AND 4,600,000  SHARES ARE BEING  OFFERED INITIALLY OUTSIDE  THE
  UNITED   STATES  AND   CANADA  BY  THE   INTERNATIONAL  UNDERWRITERS.  SEE
    "UNDERWRITERS". ALL THE SHARES OF COMMON STOCK OFFERED HEREBY ARE  BEING
    OFFERED BY THE SELLING STOCKHOLDERS. SEE "SELLING STOCKHOLDERS". COLTEC
     WILL  NOT RECEIVE  ANY PROCEEDS  FROM THE  SALE OF  THE SHARES BEING
       OFFERED HEREBY. THE COMMON STOCK IS  TRADED ON THE NEW YORK  STOCK
       EXCHANGE  AND THE PACIFIC STOCK  EXCHANGE UNDER THE SYMBOL "COT".
        ON APRIL 26, 1994,  THE LAST REPORTED SALE  PRICE OF THE  COMMON
          STOCK ON THE NEW YORK STOCK EXCHANGE WAS $18 7/8 PER SHARE.
    
                         ------------------------------

    INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER "CERTAIN
                          SIGNIFICANT CONSIDERATIONS".

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

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.

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

                            PRICE $         A SHARE
                            ------------------------

   
<TABLE>
<CAPTION>
                                                                            UNDERWRITING          PROCEEDS
                                                          PRICE TO         DISCOUNTS AND         TO SELLING
                                                           PUBLIC         COMMISSIONS (1)     STOCKHOLDERS (2)
                                                     ------------------  ------------------  ------------------
<S>                                                  <C>                 <C>                 <C>
PER SHARE..........................................          $                   $                   $
TOTAL..............................................          $                   $                   $
     <FN>
     (1)  COLTEC  AND  THE SELLING  STOCKHOLDERS  HAVE AGREED  TO  INDEMNIFY THE
          UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES  UNDER
          THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITERS".
     (2)  COLTEC  HAS AGREED TO PAY, OR  REIMBURSE THE SELLING STOCKHOLDERS FOR,
          CERTAIN EXPENSES OF THE OFFERING, WHICH ARE ESTIMATED AT $800,000.
</TABLE>
    

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

    THE SHARES ARE OFFERED, SUBJECT TO PRIOR  SALE, WHEN, AS AND IF ACCEPTED  BY
THE  UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY DAVIS POLK
& WARDWELL, COUNSEL FOR  THE UNDERWRITERS. IT IS  EXPECTED THAT DELIVERY OF  THE
SHARES WILL BE MADE ON OR ABOUT         , 1994 AT THE OFFICE OF MORGAN STANLEY &
CO.  INCORPORATED,  NEW YORK,  NEW YORK,  AGAINST PAYMENT  THEREFOR IN  NEW YORK
FUNDS.
                            ------------------------

MORGAN STANLEY & CO.
              INTERNATIONAL

  CS FIRST BOSTON

         DONALDSON, LUFKIN & JENRETTE
               SECURITIES  CORPORATION

                     MERRILL LYNCH INTERNATIONAL LIMITED

                       WERTHEIM SCHRODER
                                       INTERNATIONAL

           , 1994
<PAGE>
                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

    Set  forth  below  is  an  estimate of  the  fees  and  expenses  payable in
connection with  the  Offering, none  of  which will  be  borne by  the  Selling
Stockholders:

   
<TABLE>
<S>                                                         <C>
SEC Registration fee......................................  $ 168,582
NASD fee..................................................     30,500
Printing expenses.........................................    150,000
Legal fees and expenses...................................    300,000
Accounting fees and expenses..............................    125,000
Blue Sky fees and expenses................................     20,000
Miscellaneous.............................................      5,918
                                                            ---------
  Total...................................................  $ 800,000
                                                            ---------
                                                            ---------
</TABLE>
    

   
ITEM 15.  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.

    Reference is also made to Section IX of the Underwriting Agreement contained
in Exhibit 1.1  hereto, indemnifying  directors and officers  of Coltec  against
certain liabilities.

    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.

ITEM 16.  EXHIBITS

   
<TABLE>
<CAPTION>
  EXHIBIT
    NO.                                    DESCRIPTION
- -----------  -----------------------------------------------------------------------
<S>          <C>
 ***1.1      Form of Underwriting Agreement.
   4.1       Amended and Restated Articles of Incorporation of Coltec (incorporated
             by reference to Exhibit 3.1 to the Registration Statement on Form S-1
             of the Registrant, Registration
             No. 33-44846, filed on January 7, 1992).
   4.2       By-laws of Coltec (incorporated by reference to Exhibit 3.2 to the
             Registration Statement on Form S-1 of the Registrant,
             Registration No. 33-44846, filed on January 7, 1992).
  *5.1       Opinion of Reed Smith Shaw & McClay regarding the legality of the
             securities being registered.
**12.1       Computation of Ratio of Earnings to Fixed Charges.
 *23.1       Consent of Arthur Andersen & Co.
 *23.2       Consent of Reed Smith Shaw & McClay (included in their opinion filed as
             Exhibit 5).
**24         Power of attorney (included on the signature pages to the Registration
             Statement).
<FN>
- ---------
  *Filed herewith.
 **Previously filed.
***To be filed by amendment.
</TABLE>
    

                                      II-1
<PAGE>
ITEM 17.  UNDERTAKINGS

    A.  Insofar as indemnification for liabilities arising under the  Securities
Act  of 1933 may be permitted to  directors, officers or persons controlling 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.

    B.  The Registrant hereby undertakes that:

        (1) For purposes of determining  any liability under the Securities  Act
    of  1933, each filing of the  Registrant's annual 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 therein,
    and the offering of such securities at  that time shall be deemed to be  the
    initial bona fide offering thereof.

        (2)  For purposes of determining any  liability under the Securities Act
    of 1933, the information omitted from  the form of prospectus filed as  part
    of this registration statement in reliance upon Rule 430A and contained in a
    form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
    or  497(h)  under the  Securities Act  shall be  deemed to  be part  of this
    registration statement as of the time it was declared effective.

        (3) For the purposes of  determining any liability under the  Securities
    Act  of  1933,  each  post-effective  amendment  that  contains  a  form  of
    prospectus 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.

                                      II-2
<PAGE>
                                   SIGNATURES

   
    Pursuant  to the requirements of the  Securities Act of 1933, the Registrant
certifies that it has  reasonable grounds to  believe that it  meets all of  the
requirements  for filing on Form  S-3 and has duly  caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,  thereunto
duly  authorized in The City of New York, State  of New York, on the 27th day of
April, 1994.
    

                                          COLTEC INDUSTRIES INC

                                          By: ______/s/_Anthony J. diBuono______
                                                    Anthony J. diBuono
                                                Executive Vice President,
                                              General Counsel and Secretary

                                      II-3
<PAGE>
   
    PURSUANT TO THE REQUIREMENTS OF THE  SECURITIES ACT OF 1933, THIS  AMENDMENT
TO  THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
    

   
<TABLE>
<CAPTION>
                      SIGNATURE                                          TITLE                         DATE
- ------------------------------------------------------  ---------------------------------------  ----------------
<S>                                                     <C>                                      <C>
                                     *                  Director, Chairman of the Board
     -------------------------------------------         and Chief Executive Officer              April 27, 1994
                  David I. Margolis                      (Principal Executive Officer)
                                                        Director, Executive Vice President,
                        /s/ Paul G. Schoen               Finance, Treasurer and
     -------------------------------------------         Chief Financial Officer                  April 27, 1994
                    Paul G. Schoen                       (Principal Financial and Accounting
                                                         Officer)
                                     *
     -------------------------------------------        Director                                  April 27, 1994
                 John W. Guffey, Jr.
                                     *
     -------------------------------------------        Director                                  April 27, 1994
               J. Bradford Mooney, Jr.
                                     *
     -------------------------------------------        Director                                  April 27, 1994
                      Joel Moses
                                     *
     -------------------------------------------        Director                                  April 27, 1994
                   Andrew C. Hilton
                                     *
     -------------------------------------------        Director                                  April 27, 1994
                Salvatore J. Cozzolino
                                     *
     -------------------------------------------        Director                                  April 27, 1994
                  Donald P. Brennan
                                     *
     -------------------------------------------        Director                                  April 27, 1994
                    Frank V. Sica
                                     *
     -------------------------------------------        Director                                  April 27, 1994
                   Howard I. Hoffen
*By:            /s/ Paul G. Schoen
    -------------------------------------------         Attorney-in-Fact
    Paul G. Schoen
</TABLE>
    

                                      II-4

<PAGE>

                                  [Letterhead]


                                        April 26, 1994

Coltec Industries Inc
430 Park Avenue
New York, New York  10022

Gentlemen:

          We have acted as special Pennsylvania counsel to Coltec Industries
Inc, a Pennsylvania corporation (the "Company"), in connection with the public
offering by certain institutions and individuals (the "Selling Stockholders") of
up to 23,211,084 shares of the Company's Common Stock, par value $.01 per share
(the "Shares"), pursuant to an underwriting agreement (the "Underwriting
Agreement") to be entered into among the Company, the Selling Stockholders and
the U.S. Underwriters and the International Underwriters referred to in the
Registration Statement (as defined below).  This opinion is furnished in
connection with the filing by the Company of Amendment No. 1 to Registration
Statement No. 33-52777 on Form S-3 under the Securities Act of 1933, as amended
(the "Registration Statement"), with respect to the Shares.

          In connection with the opinion expressed below we have examined the
originals or copies otherwise identified to our satisfaction of such public and
corporate certificates, documents and records, and have examined such questions
of law as, in our judgment, are necessary or appropriate to render the opinions
expressed herein.  In our examination of the documents referred to in the
preceding sentence, we have assumed the authenticity of all such documents
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons, the authority of persons (other than officers of
the Company) signing in a representative capacity and the conformity to the
originals of such documents submitted to us as copies.

          Based upon and subject to the foregoing, we are of the opinion that
the Shares have been duly authorized and are validly issued, fully paid and non-
assessable.

<PAGE>

Coltec Industries Inc                  -2-                        April 26, 1994

          We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus contained as part of the Registration Statement.


                                        Very truly yours,

                                        /s/ Reed Smith Shaw & McClay


NJS:EAB,JR.

<PAGE>
                                                                    EXHIBIT 23.1

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Coltec Industries Inc:

    As   independent  public   accountants,  we   hereby  consent   to  (1)  the
incorporation by reference in this  registration statement of our reports  dated
January  24, 1994 included and incorporated  by reference into Coltec Industries
Inc's Form 10-K for  the year ended December  31, 1993, and (2)  the use of  our
report  and to all  references to our  Firm included in  or made a  part of this
registration statement.

Arthur Andersen & Co.
New York, N.Y.
April 26, 1994


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