SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 23, 1996
VARITY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-5190
22-3091314
- ---------------------------- -----------
- -------------------
(State or other jurisdiction (Commission (IRS
Employer
of incorporation) File Number)
Identification No.)
672 Delaware Avenue, Buffalo, New York 14209
- -----------------------------------------------------------------
- ----------
(Address of principal executive officer) (Zip Code)
Registrant's telephone number: (716) 888-8000
This document consists of 3 pages
<PAGE>
Item 5. Other Events
In July 1989, a predecessor of Fruehauf Trailer Cor-
poration ("FTC") acquired the trailer operations of
Fruehauf Corporation and in that connection assumed
certain liabilities. FTC is obligated to indemnify
Varity Corporation's (the "Company") subsidiary, K-H
Corporation, in respect of such liabilities. FTC has
advised the Company that, due to its financial diffi-
culties, it may not be able to continue to comply
with these indemnity obligations. If FTC does not do
so, then K-H Corporation may be liable with respect
to certain of such liabilities which arose out of
operations prior to the 1989 sale, including those in
respect of products manufactured or sold, environmen-
tal liabilities, worker's compensation and retiree
welfare benefits. The Company intends vigorously to
defend its position with respect to FTC and all other
third parties. However, during the 1995 and 1995
financial years K-H Corporation advanced an aggregate
of approximately $700,000 to resolve certain liabili-
ties assumed by FTC. In addition, during the 1996
financial year, in response to a continuing deterio-
ration in FTC's financial position, K-H Corporation
has advanced $6.5 million to FTC to assist it in
meeting its working capital needs, and has agreed to
advance an additional $3.5 million to FTC to be used
to satisfy liabilities assumed by FTC selected by K-H
Corporation. Other than the $700,000 referred to
above, these advances are secured by various assets
of FTC but are subordinated at varying levels of pri-
ority to FTC's obligations to certain other credi-
tors. K-H Corporation may elect to advance addi-
tional amounts to satisfy liabilities assumed by FTC.
The amount and timing of the Company's exposure with
respect to FTC cannot be determined at this time.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
VARITY CORPORATION
(Registrant)
By: /s/ Mark J. MacGuidwin
- -----------------------------
Mark J. MacGuidwin
Vice President,
Controller (Principal
Accounting Officer)
Date: July 23, 1996
