SEQUA CORP /DE/, 424B5, 1999-07-28

SEQUA CORP /DE/
424B5, 1999-07-28
AIRCRAFT ENGINES & ENGINE PARTS

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<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
PROSPECTUS SUPPLEMENT Registration No. 333-66035
(TO PROSPECTUS DATED JANUARY 22, 1999)

$500,000,000

[SEQUA LOGO] SEQUA CORPORATION
9% SENIOR NOTES DUE 2009

We are offering the Notes at a total purchase price of $496,525,000, or 99.305%
of the principal amount of the Notes. We will receive $488,400,000 of the
proceeds, or 97.680% of the principal amount of the Notes, from the sale of the
Notes, after paying the underwriters' discounts and commissions of $8,125,000,
or 1.625% of the principal amount of the Notes, and before paying expenses
estimated at $500,000. Set forth below is a summary of the terms of the Notes
offered by this prospectus supplement and the accompanying prospectus. For more
detail, see "Description of Notes."

- - INTEREST
The Notes have a fixed annual rate of 9% which will be paid every six months
on February 1 and August 1, beginning February 1, 2000.

- - MATURITY
The Notes will mature on August 1, 2009.

- - RANKING
The Notes are our unsecured senior debt and will rank equally with all of our
other unsecured and unsubordinated debt. Because we are a holding company, the
Notes will be effectively subordinated to the claims of creditors of our
subsidiaries with respect to their assets.

- - REDEMPTION
We may, at our option, redeem the Notes at any time at the prices described
on page S-38 of this prospectus supplement.

S MANDATORY OFFER TO REPURCHASE
If we sell all or substantially all of our assets or we experience specific
kinds of changes of control, we must offer to repurchase all of the Notes.

- - NO SINKING FUND
The Notes will not be subject to any sinking fund.

THIS INVESTMENT INVOLVES RISKS. SEE THE "RISK FACTORS" SECTION BEGINNING ON PAGE
1 OF THE ACCOMPANYING PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The underwriters expect to deliver the Notes in book-entry form only through the
facilities of The Depository Trust Company against payment in New York, New
York, on or about July 29, 1999.
------------------------
Joint Lead Managers
BEAR, STEARNS & CO. INC. CHASE SECURITIES INC.
Book-running Manager

Co-Managers
BNY CAPITAL MARKETS, INC. DEUTSCHE BANC ALEX. BROWN WASSERSTEIN PERELLA
SECURITIES, INC.
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JULY 26, 1999.
<PAGE> 2

FORWARD-LOOKING STATEMENTS

This document includes forward-looking statements made under the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations, estimates and
projections that are subject to risks and uncertainties, including, but not
limited to: political, currency, regulatory, competitive and technological
developments. Such risks, uncertainties and other factors are discussed under
the caption "Risk Factors" in the accompanying prospectus. Consequently, actual
results could differ materially from these forward-looking statements. We do not
undertake, and specifically disclaim any obligation, to update any
forward-looking statements, which speak only as of the date made.

S-i
<PAGE> 3

PROSPECTUS SUPPLEMENT SUMMARY

The following summary contains basic information about this offering. It
likely does not contain all the information that is important to you in making a
decision to invest in our company. For a more complete understanding of this
offering, we encourage you to read this entire document and other documents to
which we refer. Unless the context otherwise requires, all references to
"Sequa," "we," "us," or "our" include Sequa Corporation and its subsidiaries.

THE COMPANY

WHO WE ARE

We are a diversified industrial company that produces a broad range of
products through units in five business segments: Aerospace, Propulsion, Metal
Coating, Specialty Chemicals, and Other Products. We maintain leading market
positions in a majority of our markets and believe we have achieved significant
technological advantages with respect to many of our products and services. We
also have achieved a significant degree of geographic diversity and in 1998
derived 47% of our revenue from outside the United States. We seek to improve
profitability and expand our market positions by developing new products and
services and through strategic acquisitions and divestitures. For the twelve
months ended March 31, 1999, we had revenue of $1.8 billion and operating income
plus depreciation and amortization ("EBITDA") of $188.9 million.

OUR BUSINESS SEGMENTS

Aerospace. Our Aerospace segment consists solely of our largest operating
unit, Chromalloy Gas Turbine, which, for the twelve months ended March 31, 1999,
had revenue of $775.1 million or 44% of total revenue and EBITDA of $101.1
million or 46% of total EBITDA before corporate expenses. Gas Turbine repairs
and manufactures components for jet aircraft engines. A major independent
supplier in the repair market, Gas Turbine provides domestic and international
airlines with technologically advanced repairs and coatings for turbine airfoils
and other critical engine components. The unit also supplies components to the
manufacturers of jet engines and serves both the general aviation and military
markets. Gas Turbine's largest customers include GE Engine Services, Northwest
Airlines, Rolls Royce, the U.S. Air Force and Pratt & Whitney.

Propulsion. Our Propulsion segment consists solely of ARC Propulsion,
which, for the twelve months ended March 31, 1999, had revenue of $263.9 million
or 15% of total revenue and EBITDA of $29.1 million or 13% of total EBITDA
before corporate expenses. ARC Propulsion is a leading developer and
manufacturer of advanced rocket propulsion systems, gas generators and auxiliary
rocket motors, and engages in research and development relating to new rocket
propellants and advanced engineered materials. For the military contract market,
ARC Propulsion produces propulsion systems primarily for tactical weapons. ARC
Propulsion currently provides propulsion systems for several high profile
projects, including the Army Extended Range Multiple Launch Rocket System,
Extended Range Army Tactical Rocket System, Javelin, Stinger, Tomahawk, Standard
Missile, Sidewinder, and Trident. For space applications, ARC Propulsion
produces small liquid fuel rocket engines designed to provide attitude and orbit
control for a number of satellite systems worldwide.

ARC Propulsion has grown primarily through the introduction of products for
the automotive market using technologies that were originally developed for
military applications. ARC Propulsion pioneered the development of hybrid
inflators for automotive airbags and energetic materials for airbag deployment.
In early 1998, ARC Propulsion moved to further its role in the automotive market
through the purchase of the remaining share of an existing 50%-owned joint
venture that produces airbag inflators for a cash purchase price of
approximately $22.7 million. In addition, we assumed $25.0 million of the joint
venture's debt and repaid it in 1998. As a result of this transaction, ARC
Propulsion now supplies airbag inflators directly to its customers. ARC
Propulsion's products in this market are currently sold principally to Breed
Technologies Inc., which makes modules for use in vehicles manufactured by
several leading automotive companies,
S-1
<PAGE> 4

including DaimlerChrysler, Opel, and Fiat. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk/Concentration
of Business."

Metal Coating. Our Metal Coating segment consists solely of Precoat
Metals, which, for the twelve months ended March 31, 1999, had revenue of $194.2
million or 11% of total revenue and EBITDA of $24.6 million or 11% of total
EBITDA before corporate expenses. Precoat Metals is a leader in the application
of protective and decorative coatings to continuous steel and aluminum coil.
Precoat Metals' principal market is the building products industry, where coated
steel is used for the construction of pre-engineered building systems, and as
components in the industrial, commercial, agricultural and residential sectors.
Precoat Metals also serves the container industry, where the unit has
established a position in the application of coatings to steel and aluminum
stock used to fabricate metal cans and can lids. In addition, the unit has
established a presence in other product markets, including heating, ventilating
and air conditioning units, truck trailer panels and office equipment. Precoat
Metals' customers are a diverse group, including building products manufacturers
and other companies that utilize coated metal in the manufacture of products
such as metal casings and truck panels. These customers generally direct the
purchase of our metal coating services through their principal steel suppliers
such as National Steel Corporation and Bethlehem Corporation. Precoat Metals
also pre-coats aluminum for Aluminum Corporation of America.

Specialty Chemicals. Our Specialty Chemicals segment consists solely of
Warwick International, which, for the twelve months ended March 31, 1999, had
revenue of $158.2 million or 9% of total revenue and EBITDA of $32.3 million or
15% of total EBITDA before corporate expenses. Warwick International is a
leading producer and supplier of TAED, a bleach activator for powdered laundry
and dishwasher detergent products. TAED is used in oxygen-based bleaching
systems to increase the cleaning power of detergent at low wash temperatures.
These bleaching systems are used primarily in international markets, principally
in Europe. In addition, the unit is selling TAED products for industrial
markets, such as textile bleaching and pulp and paper processing. The unit also
continues to expand its network of European chemical distributors that supplies
specialty products for use in plastics, resins, paints and cosmetics. Warwick
International's largest customers include Procter & Gamble, Unilever and Henkel.

Other Products. This segment consists of four ongoing businesses: MEGTEC
Systems, Sequa Can Machinery, Casco Products and the Men's Apparel unit. For the
twelve months ended March 31, 1999, this segment reported revenue of $378.3
million or 21% of total revenue and EBITDA of $33.3 million or 15% of total
EBITDA before corporate expenses.

- MEGTEC Systems. MEGTEC Systems was formed in 1997 following the
acquisition of TEC Systems (a producer of air flotation dryers for paper
and printing uses and emission control systems for industrial
applications) and its integration with our existing MEG operation (a
supplier of equipment for the web offset printing industry, including
pasters and splicers, web guides, infeeds, chill stands, and related
equipment for high-speed web presses). The unit's largest customers
include MAN Roland, KBA, Quad, 3M and Goss. By combining MEG with TEC
Systems, we have achieved significant cost savings and operational
improvements.

- Sequa Can Machinery. Sequa Can Machinery designs and manufactures
equipment for the two-piece can industry, including high-speed equipment
to coat and decorate, and to form the cup and body of, two-piece cans.
With the largest installed base of equipment in the industry, Sequa Can
Machinery also supplies upgrade kits and spare parts and maintains an
extensive support service program. The unit's product development team
continually seeks to improve the technology of its products to achieve
higher speeds without compromising quality. The unit's largest customers
include American National Can, Ball Corporation and Crown, Cork & Seal.

- Casco Products. Casco Products is the world's leading supplier of
automotive cigarette lighters and power outlets. Casco Products also
offers a growing line of automotive accessories, led by a series of
electronic devices to monitor automotive fluid levels such as engine oil,
engine coolant and brake, transmission and power steering fluids. The
unit's largest customers include General Motors, Ford Motor Company,
DaimlerChrysler and Fiat.

S-2
<PAGE> 5

- Men's Apparel. The Men's Apparel unit is the largest domestic designer
and manufacturer of men's formalwear, with products marketed under the
After Six(R), Oscar de la Renta(R) and Raffinati(R) labels, all three of
which are registered trademarks.

COMPETITIVE STRENGTHS

Market Share Leader. We maintain leading positions in a majority of our
markets, a strategy that we believe results in meaningful competitive advantages
and greater profitability. For example, Gas Turbine and Precoat Metals are among
the largest independent suppliers of their products and services; Sequa Can
Machinery is the largest supplier of its products; Warwick International is a
leading supplier of TAED; Casco Products is the leading supplier of automotive
cigarette lighters and power outlets; and the Men's Apparel unit is the largest
domestic designer and manufacturer of men's formalwear. For the twelve months
ended March 31, 1999, these units contributed 74% of our revenues.

Diversified Source of Revenues and Cash Flow. Our operations span many
different business segments, ranging from heavy industrial services and products
to specialty chemicals and apparel. Our concentration in commercial aerospace is
balanced by our meaningful participation in seven other end markets, which on a
combined basis contributed 56% of our consolidated revenue for the twelve months
ended March 31, 1999. We are also well diversified geographically, with
international sales representing 47% of our consolidated revenue for the year
ended December 31, 1998. This diversity enables us to mitigate the effects of a
downturn in any specific business segment or geographic region and allows for
more consistent profitability and growth in a variety of economic conditions.

Technological Innovation. We have a firm commitment to research and
development and as a result have developed proprietary technologies in our
various business segments that provide competitive barriers against new market
entrants. For example, our Gas Turbine unit has developed proprietary coatings
which enable jet engines to operate at higher temperatures, thereby achieving
significantly improved fuel efficiency, and is continually developing
proprietary repair processes including those for previously unsalvageable parts.
Our commitment to technology also is reflected in the adaptation of military
aerospace propulsion technology to commercial usage in vehicle airbag
deployment, including, most recently, "smart" airbag applications. We also excel
in advancing manufacturing technology. For example, we have developed can making
equipment that is among the fastest in the industry, including cuppers that
punch up to 4,000 cups per minute; bodymakers that complete the forming of 450
cans per minute; and coaters and decorators that process more than 2,000 cans
per minute.

Strong Aftermarket Presence. Several of our businesses have a significant
presence in the retrofit, repair and replacement markets. As a result, these
businesses typically experience less cyclicality during economic downturns
because their customers generally increase repair and upgrade activity instead
of purchasing new equipment. In addition, the safety and regulatory requirements
of the commercial and military aerospace sectors generate regular repair
activity. Our Gas Turbine unit is a major independent participant in the repair
market for aircraft engine components. In addition, our Sequa Can Machinery and
MEGTEC Systems units benefit from a large base of installed equipment that
generates a significant and consistent demand for related replacement parts,
efficiency-enhancing upgrade kits and repair services. For the twelve months
ended March 31, 1999, aftermarket sales accounted for approximately 30% of our
consolidated revenue.

Well-Developed Acquisition and Divestiture Program. We are continuously
assessing the market position and profitability of our various operations, and
have made acquisitions and divestitures to strengthen or exit certain businesses
based on these assessments. In evaluating transactions, we seek to capitalize on
the strengths of our existing businesses while taking a disciplined approach to
valuation.

Experienced Management Team. Our senior management team has been in place
for more than a decade and has developed a strong infrastructure of operating
managers, personnel and systems to ensure continued stability of management and
future growth.

S-3
<PAGE> 6

BUSINESS STRATEGY

Our strategy is to maintain the leading positions of our existing
businesses through the introduction of new and innovative products and the
development of new applications for our existing products. As part of this
strategy, we intend to continue our commitment to technological leadership
through disciplined research and development expenditures while streamlining our
operating structure through selected divestitures. In addition, we may acquire
complementary businesses where we identify opportunities to increase operating
efficiencies and market share.

RECENT DEVELOPMENTS

On October 28, 1998, we sold our domestic specialty chemicals division,
Sequa Chemicals, to GenCorp Inc. for net cash proceeds of $107.3 million. From
January 1, 1998 through the date of disposition, this business had revenue of
$74.0 million and EBITDA of $6.7 million. As a result of the transaction, we
recorded a pre-tax gain of $49.9 million.

On February 8, 1999, we completed the purchase of Thermo Fibertek Inc.'s
Thermo Wisconsin unit for approximately $13.0 million. These operations will be
a part of our MEGTEC Systems unit and had 1998 sales of approximately $19
million. Thermo Wisconsin supplies the U.S. printing and process industries with
continuous process dryers, air pollution control equipment, web and air handling
systems and other specialty products.

On June 17, 1999, we completed the purchase of Schoeller & Co., GmbH for
approximately $9.5 million, net of cash acquired. This operation will be part of
our Casco Products unit and had 1998 sales of approximately $20 million.
Schoeller & Co., GmbH is a Germany-based supplier of automotive cigarette
lighters, power outlets and other automotive products.
------------------------

We were incorporated in Delaware in 1929. Our principal executive offices
are located at 200 Park Avenue, New York, New York 10166, and our telephone
number is (212) 986-5500.

S-4
<PAGE> 7

THE OFFERING

NOTES OFFERED................. We are offering a total of $500,000,000 in
principal amount of 9% Senior Notes due 2009.

ISSUE PRICE................... We are offering the Notes at a purchase price
equal to 99.305% of par.

MATURITY DATE................. The Notes will mature on August 1, 2009.

INTEREST...................... We will pay interest on the Notes at an annual
rate of 9%. We will pay the interest due on the
Notes every six months on February 1 and August
1. We will make the first payment on February
1, 2000.

RANKING....................... The Notes are our unsecured senior debt:

- The Notes will rank equally with all of our
other unsecured and unsubordinated debt.

- The Notes will rank ahead of all of our
existing and future debt that expressly
provide that they are subordinated to the
Notes.

- Because we are a holding company, the Notes
will be effectively subordinated to the
claims of creditors of our subsidiaries with
respect to their assets.

As of March 31, 1999, on a pro forma basis
after giving effect to this offering and the
application of the proceeds, there would be
approximately:

- $496.5 million of Notes sold in this offering
(net of original issue discount);

- $68.1 million of outstanding debt ranking
equally with the Notes; and

- $349.6 million of outstanding liabilities
(primarily trade payables, accrued expenses
and taxes payable) of our subsidiaries
effectively ranking ahead of the Notes, of
which $12.7 million is secured debt.

OPTIONAL REDEMPTION........... We may redeem some or all of the Notes at any
time at a redemption price equal to the greater
of:

- 100% of the principal amount of the Notes to
be redeemed; and

- the sum of the Remaining Scheduled Payments
discounted to the date of redemption, on a
semiannual basis, at the Treasury Rate plus
50 basis points;

plus, in either case, accrued and unpaid
interest to the date of redemption.

Please refer to "Description of
Notes -- Optional Redemption" for the
definitions of "Remaining Scheduled Payments"
and "Treasury Rate."

CERTAIN COVENANTS............. We will issue the Notes under an indenture with
Harris Trust Company of New York (formerly
known as Bank of Montreal Trust Company), as
trustee. The indenture will, among other
things, restrict our ability to:

- borrow money that is secured by our assets;

- enter into a transaction where we sell an
asset and lease it back; and

- sell assets, consolidate with and merge into
other companies.

S-5
<PAGE> 8

CHANGE OF CONTROL............. Under the indenture, in the event of a Change
of Control, we are required to commence, within
30 days after the date on which the Change of
Control occurred, an offer to all holders to
purchase all outstanding Notes, at a purchase
price equal to 101% of the aggregate principal
amount of the Notes plus accrued and unpaid
interest to the Change of Control Payment Date.

Please refer to "Description of Notes -- Change
of Control" for the definitions of "Change of
Control" and "Change of Control Payment Date."

USE OF PROCEEDS............... We intend to use the net proceeds of this
offering to repay at maturity all of our 9 5/8%
Senior Notes due 1999 and to redeem all of our
8 3/4% Senior Notes due 2001 and our 9 3/8%
Senior Subordinated Notes due 2003. The
remainder of the net proceeds will be used to
pay expenses in connection with this offering
and for general corporate purposes. Pending
such uses, the net proceeds of this offering
will be invested in short-term interest-bearing
instruments.

RISK FACTORS

You should carefully consider all the information in this prospectus
supplement and the accompanying prospectus. In particular, you should evaluate
the specific risk factors set forth under "Risk Factors," beginning on page 1 of
the accompanying prospectus, and the considerations set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Risk/Concentration of Business" included in this prospectus
supplement for a discussion of risks of, and considerations regarding, investing
in the Notes.

S-6
<PAGE> 9

SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA

<TABLE>
<CAPTION>
TWELVE
THREE MONTHS MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31, ENDED
-------------------------------------------------------------- ------------------- MARCH 31,
1994 1995 1996 1997 1998 1998 1999 1999
---------- ---------- ---------- ---------- ---------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales........................ $1,419,550 $1,414,139 $1,459,029 $1,595,125 $1,802,393 $439,853 $407,266 $1,769,806
Cost of sales................ 1,164,739 1,129,955 1,160,192 1,285,829 1,444,914 352,839 327,679 1,419,754
Selling, general and
administrative(1).......... 215,058 216,257 233,679 224,589 252,016 62,247 59,296 249,065
Operating income............. 39,753 67,927 65,158 84,707 105,463 24,767 20,291 100,987
Interest expense............. (59,114) (53,302) (51,794) (50,298) (51,776) (12,688) (11,915) (51,003)
Interest income.............. 2,819 3,870 4,271 6,052 5,868 1,218 1,376 6,026
Gain on sale of businesses... -- -- -- -- 56,542 -- -- 56,542
Equity in income (loss) of
unconsolidated joint
ventures................... (2,154) (1,774) 4,038 223 (4,876) (323) (622) (5175)
Other, net................... (9,199) 10,758 4,283 1,143 (3,224) 144 1,656 (1,712)
---------- ---------- ---------- ---------- ---------- -------- -------- ----------
Income (loss) before income
taxes...................... (27,895) 27,479 25,956 41,827 107,997 13,118 10,786 105,665
Income tax benefit
(provision)................ 3,200 (18,700) (16,400) (22,200) (44,100) (8,300) (4,800) (40,600)
---------- ---------- ---------- ---------- ---------- -------- -------- ----------
Income (loss) before
extraordinary item......... $ (24,695) $ 8,779 $ 9,556 $ 19,627 $ 63,897 $ 4,818 $ 5,986 $ 65,065
========== ========== ========== ========== ========== ======== ======== ==========

OTHER DATA:
Depreciation and
amortization............... $ 103,974 $ 96,485 $ 91,587 $ 85,815 $ 89,321 $ 21,725 $ 21,499 $ 89,095
Capital expenditures......... 59,241 56,899 50,228 68,960 103,524 17,948 20,679 106,255
EBITDA(2).................... 141,338 162,267 154,600 169,141 193,564 46,187 41,485 188,862
Adjusted EBITDA(3)........... 141,338 162,267 187,640 179,048 199,038 47,241 41,785 193,582
Ratio of earnings to fixed
charges(4)................. N/A(5) 1.5x 1.4x 1.7x 2.9x 1.9x 1.8x 2.9x

RATIOS, AS ADJUSTED(6):
Ratio of Adjusted EBITDA to
interest expense, net(7)... 3.8x 3.8x
Ratio of net debt to Adjusted
EBITDA(8).................. 2.3x 2.4x
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------
AS
ACTUAL ADJUSTED(6)
---------- -----------
SELECTED BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 71,426 $ 112,629
Working capital (excluding cash and cash equivalents)....... 290,684 304,353
Total assets................................................ 1,580,100 1,626,351
Total debt (including current maturities)................... 503,286 577,344
Shareholders' equity........................................ 656,037 646,847
</TABLE>

- ---------------
(1) Includes litigation expenses of $33.0 million in 1996, $9.9 million in 1997
and $5.5 million in 1998, each incurred in connection with the Pratt &
Whitney litigation. Pratt & Whitney litigation expenses included in selling,
general and administrative were $1.1 million in the first quarter of 1998
and $0.3 million in the first quarter of 1999. See "Business -- Legal
Proceedings."

(2) EBITDA consists of operating income plus depreciation and amortization
charged to operating income. EBITDA is used by certain investors as an
indicator of a company's historic ability to service debt. However, EBITDA
is not intended to represent cash flows for the period, nor has it been
presented as an alternative to either (i) operating income (as determined by
generally accepted accounting principles ("GAAP")), as an indicator of
operating performance or (ii) cash flows from operating, investing and

S-7
<PAGE> 10

financial activities (as determined by GAAP) and is thus susceptible to
varying calculations. EBITDA as presented may not be comparable to other
similarly titled measures of other companies.

(3) Adjusted EBITDA represents EBITDA excluding litigation expenses incurred in
connection with the Pratt & Whitney litigation.

(4) For purposes of calculating this ratio, "earnings" consist of the pre-tax
income of majority-owned subsidiaries and equity in the pre-tax income
(loss) of 50%-owned joint ventures before fixed charges and after adjustment
for minority interest in the losses of majority-owned subsidiaries. "Fixed
charges" consist of interest expense, amortization of capitalized debt
issuance costs and the interest portion of rental obligations on capitalized
and non-capitalized leases.

(5) Our earnings were inadequate to cover fixed charges by $25.5 million.

(6) As adjusted to give effect to the application of the net proceeds from the
offering to repay at maturity our 9 5/8% Senior Notes due 1999 and to redeem
all of our 8 3/4% Senior Notes due 2001 and our 9 3/8% Senior Subordinated
Notes due 2003 as if the transactions took place as of, or on the first day
of, the period presented.

(7) Represents Adjusted EBITDA divided by interest expense, as adjusted for the
offering, net of interest income for the period presented.

(8) Represents total debt less cash and cash equivalents, divided by Adjusted
EBITDA for the period presented.

S-8
<PAGE> 11

USE OF PROCEEDS

The net proceeds of this offering are estimated to be $488.4 million,
before paying expenses estimated at $500,000. We intend to use a portion of the
net proceeds:

(1) to repay at maturity approximately $138.5 million aggregate
principal amount of our 9 5/8% Senior Notes due 1999 at a price equal to
100% of their principal amount, plus accrued interest to October 15, 1999,
the maturity date of those notes;

(2) to redeem approximately $109.9 million aggregate principal amount
of our 8 3/4% Senior Notes due 2001, plus accrued interest to the date of
redemption and the applicable redemption premium; and

(3) to redeem approximately $174.0 million aggregate principal amount
of our 9 3/8% Senior Subordinated Notes due 2003, plus accrued interest to
the date of redemption and the applicable redemption premium.

The remainder of the net proceeds will be used to pay expenses in
connection with this offering and for general corporate purposes. Pending these
uses, the net proceeds of this offering will be invested in short-term
interest-bearing instruments.

S-9
<PAGE> 12

CAPITALIZATION

The following table sets forth as of March 31, 1999 our (1) cash and actual
capitalization and (2) cash and capitalization as adjusted assuming the
consummation of this offering and the application of the net proceeds on that
date. You should read this table along with our Consolidated Financial
Statements and related notes incorporated by reference in this prospectus
supplement.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 71,426 $ 112,629
========== ==========
Long-term debt (including current maturities):
Revolving credit agreement(1)............................. $ -- $ --
9 5/8% Senior Notes due 1999.............................. 138,519 --
8 3/4% Senior Notes due 2001.............................. 109,948 --
9% Senior Notes due 2009.................................. -- 496,525(2)
9 3/8% Senior Subordinated Notes due 2003................. 174,000 --
Medium-term notes due 2001................................ 66,425 66,425
Capital lease obligations due through 2000................ 6,433 6,433
Other..................................................... 7,961 7,961
---------- ----------
Total long-term debt................................... 503,286 577,344
---------- ----------
Shareholders' equity:
Preferred stock -- $1 par value, 797,000 shares of $5
cumulative convertible stock issued.................... 797 797
Class A common stock -- no par value, 7,275,000 shares
issued................................................. 7,275 7,275
Class B common stock -- no par value, 3,727,000 shares
issued................................................. 3,727 3,727
Capital in excess of par value............................ 288,423 288,423
Accumulated other comprehensive loss...................... (14,360) (14,360)
Retained earnings......................................... 450,139 440,949
---------- ----------
736,001 726,811
Less: cost of treasury stock.............................. 79,964 79,964
---------- ----------
Total shareholders' equity............................. 656,037 646,847
---------- ----------
Total capitalization.............................. $1,159,323 $1,224,191
========== ==========
</TABLE>

- ---------------
(1) We have $150,000,000 available under our revolving credit agreement as of
June 30, 1999. The revolving credit agreement extends through October 10,
2002.

(2) Net of $3,475,000 of original issue discount.

S-10
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of and for each of
the five years ended December 31, 1998 are derived from our audited Consolidated
Financial Statements and the related notes which have been audited by Arthur
Andersen LLP, independent public accountants. The selected consolidated
financial data as of March 31, 1999 and for the three months ended March 31,
1998 and March 31, 1999 have been derived from our unaudited consolidated
financial statements which, in the opinion of management, contain all
adjustments necessary to present fairly our financial position and results of
operations at such dates and for such periods. Results for the three months
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the entire fiscal year. You should read this information along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus supplement and our
Consolidated Financial Statements and related notes incorporated by reference in
this prospectus supplement.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales....................... $1,419,550 $1,414,139 $1,459,029 $1,595,125 $1,802,393 $439,853 $407,266
Cost of sales............... 1,164,739 1,129,955 1,160,192 1,285,829 1,444,914 352,839 327,679
Selling, general and
administrative(1)......... 215,058 216,257 233,679 224,589 252,016 62,247 59,296
Operating income............ 39,753 67,927 65,158 84,707 105,463 24,767 20,291
Interest expense............ (59,114) (53,302) (51,794) (50,298) (51,776) (12,688) (11,915)
Interest income............. 2,819 3,870 4,271 6,052 5,868 1,218 1,376
Gain on sale of
businesses................ -- -- -- -- 56,542 -- --
Equity in income (loss) of
unconsolidated joint
ventures.................. (2,154) (1,774) 4,038 223 (4,876) (323) (622)
Other, net.................. (9,199) 10,758 4,283 1,143 (3,224) 144 1,656
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before income
taxes..................... (27,895) 27,479 25,956 41,827 107,997 13,118 10,786
Income tax benefit
(provision)............... 3,200 (18,700) (16,400) (22,200) (44,100) (8,300) (4,800)
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before
extraordinary item........ $ (24,695) $ 8,779 $ 9,556 $ 19,627 $ 63,897 $ 4,818 $ 5,986
========== ========== ========== ========== ========== ======== ========
OTHER DATA:
Depreciation and
amortization.............. $ 103,974 $ 96,485 $ 91,587 $ 85,815 $ 89,321 $ 21,725 $ 21,499
Capital expenditures........ 59,241 56,899 50,228 68,960 103,524 17,948 20,679
EBITDA(2)................... 141,338 162,267 154,600 169,141 193,564 46,187 41,485
Adjusted EBITDA(3).......... 141,338 162,267 187,640 179,048 199,038 47,241 41,785
Ratio of earnings to fixed
charges(4)................ N/A(5) 1.5x 1.4x 1.7x 2.9x 1.9x 1.8x
</TABLE>

S-11
<PAGE> 14

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------ MARCH 31,
1994 1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents...... $ 18,655 $ 62,667 $ 92,079 $ 93,743 $ 84,889 $ 71,426
Working capital (excluding cash
and cash equivalents)........ 264,330 233,891 217,352 235,372 293,040 290,684
Total assets................... 1,648,248 1,621,978 1,548,162 1,591,675 1,624,147 1,580,100
Total debt (including current
maturities).................. 601,805 579,561 534,727 533,245 509,344 503,286
Shareholders' equity........... 566,491 576,595 590,776 594,394 665,452 656,037
</TABLE>

(2) EBITDA consists of operating income plus depreciation and amortization
charged to operating income. EBITDA is used by certain investors as an
indicator of a company's historic ability to service debt. However, EBITDA
is not intended to represent cash flows for the period, nor has it been
presented as an alternative to either (i) operating income (as determined by
GAAP), as an indicator of operating performance or (ii) cash flows from
operating, investing and financial activities (as determined by GAAP) and is
thus susceptible to varying calculations. EBITDA as presented may not be
comparable to other similarly titled measures of other companies.

(3) Adjusted EBITDA represents EBITDA excluding litigation expenses incurred in
connection with the Pratt & Whitney litigation.

(4) For purposes of calculating this ratio, "earnings" consist of the pre-tax
income of majority-owned subsidiaries and equity in the pre-tax income
(loss) of 50%-owned joint ventures before fixed charges and after adjustment
for minority interest in the losses of majority-owned subsidiaries. "Fixed
charges" consists of interest expense, amortization of capitalized debt
issuance costs and the interest portion of rental obligations on capitalized
and non-capitalized leases.

(5) Our earnings were inadequate to cover fixed charges by $25.5 million.

S-12
<PAGE> 15

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

The following discussion and analysis of our consolidated results of
operations and financial condition should be read along with our Consolidated
Financial Statements and related notes incorporated by reference in this
prospectus supplement and the "Selected Consolidated Financial Data" included
elsewhere in this prospectus supplement.

SUMMARY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- --------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue:
Aerospace..................... $ 643,195 $ 727,346 $ 782,339 $194,952 $187,707
Propulsion.................... 150,423 177,653 268,615 65,373 60,648
Metal Coating................. 182,118 200,037 193,652 43,697 44,282
Specialty Chemicals........... 143,993 132,828 155,301 35,554 38,492
Other Products................ 339,300 357,261 402,486 100,277 76,137
---------- ---------- ---------- -------- --------
Total................. $1,459,029 $1,595,125 $1,802,393 $439,853 $407,266
========== ========== ========== ======== ========
Operating Income:
Aerospace(1).................. $ 4,843 $ 50,341 $ 65,154 $ 16,439 $ 14,659
Propulsion.................... 10,815 11,389 13,415 5,282 (45)
Metal Coating................. 20,393 20,334 14,859 1,153 2,985
Specialty Chemicals........... 29,764 18,662 22,565 4,075 4,840
Other Products................ 26,782 13,387 22,103 5,430 4,922
Corporate..................... (27,439) (29,406) (32,633) (7,612) (7,070)
---------- ---------- ---------- -------- --------
Total................. $ 65,158 $ 84,707 $ 105,463 $ 24,767 $ 20,291
========== ========== ========== ======== ========
EBITDA:
Aerospace(1).................. $ 50,341 $ 90,220 $ 103,136 $ 26,159 $ 24,157
Propulsion.................... 25,828 25,561 33,561 9,763 5,306
Metal Coating................. 28,079 27,745 22,778 3,058 4,904
Specialty Chemicals........... 38,978 28,503 31,679 6,255 6,826
Other Products................ 38,386 26,018 34,521 8,438 7,231
Corporate..................... (27,012) (28,906) (32,111) (7,486) (6,939)
---------- ---------- ---------- -------- --------
Total................. $ 154,600 $ 169,141 $ 193,564 $ 46,187 $ 41,485
========== ========== ========== ======== ========
</TABLE>

Three Months Ended March 31, 1999 as Compared to Three Months Ended March 31,
1998

Sales

Sales of our Aerospace segment declined 4% in the first quarter of 1999.
After excluding sales of $4.9 million from our U.K. unit sold in mid-1998, sales
were down 1%. Sales to original equipment manufacturers ("OEMs") declined
primarily due to delivery schedule stretch outs and the effects of continuing
industry consolidation. Management anticipates that the OEM sector will continue
to report lower year-to-year sales

S-13
<PAGE> 16

comparisons for at least the next several quarters. Repair sales were on a par
with the first quarter of 1998, as improvements in the commercial aviation
market were largely offset by lower sales to the domestic defense market.

Sales of our Propulsion segment declined 7% in the first quarter of 1999 as
a small advance in our automotive airbag inflator product line was more than
offset by declines in both the solid and liquid propellant rocket motor product
lines. Sales of airbag inflators increased, reflecting one extra month's sales
in the 1999 quarter from a former joint venture that was consolidated at the end
of January 1998. The increase was partially offset by the absence of component
sales to the now consolidated operation, lower pricing, a shift to lower priced
advanced products, and reduced energetics sales to our Italian equity affiliate,
BAG SpA. The decline of both solid and liquid rocket motor sales was primarily
related to revenue timing issues.

Sales of our Metal Coating segment increased 1% in the first quarter of
1999. Sales to the building products and container markets were on a par with
prior year levels, while sales to other manufactured products markets increased.
Sales to the building products market reflect the fact that the unit replaced
virtually all the sales lost in mid-1998 when a major customer acquired coating
capacity and brought the major portion of its work in-house. On a pro forma
basis, excluding 1998 sales to this major customer, building products sales
increased 10% in the first quarter of 1999.

Sales of our Specialty Chemicals segment advanced 8% in the first quarter
of 1999, due primarily to the inclusion of an extra month's sales from the
Italian specialty chemicals distribution unit acquired in late January 1998.
Each of our other distribution units also recorded sales advances, while sales
of TAED-based products were on a par with the 1998 level.

Sales of our Other Products segment declined 24%, due primarily to the
absence of $21.7 million of sales of our Sequa Chemicals unit, which we divested
in the fourth quarter of 1998. On a pro forma basis, excluding the Sequa
Chemicals sales from the 1998 quarter, segment sales declined only 3%. A sharp
decline in sales at the Sequa Can Machinery unit was largely offset by advances
at our MEGTEC Systems and Men's Apparel units. Sequa Can Machinery sales
declined 39%, as the economic problems in the unit's key export markets, Asia
and South America, continued to have an unfavorable effect. Management currently
anticipates sustained market weakness and unfavorable sales comparisons at this
unit for the remainder of 1999. Sales of the MEGTEC Systems unit advanced 14%,
driven by higher shipments of equipment to the graphic arts and emission control
markets. Sales of our Casco Products unit were on a par with the 1998 quarter,
and sales of the Men's Apparel unit advanced due to strength in the After Six(R)
line of formalwear.

Operating Income

Operating income in our Aerospace segment declined 11% in the first quarter
of 1999. After excluding the contribution from the U.K. unit sold in mid-1998,
operating income was only 8% lower. The decrease reflects a volume-related
decline at units primarily serving the OEM market, higher administrative costs,
and start up costs related to a recently consolidated joint venture. These
factors were partially offset by lower legal expenses related to the ongoing
litigation with the Pratt & Whitney division of United Technologies Corporation
("United Technologies") (expense of $0.3 million in the first quarter of 1999
versus $1.1 million in the comparable quarter of 1998). Our units primarily
engaged in aftermarket repair work reported profits comparable to the first
quarter of 1998.

Our Propulsion segment recorded a small loss in the first quarter of 1999,
whereas, in the same quarter of 1998, this operation recorded a profit of $5.3
million. Each of the major product lines recorded lower results, with the
largest decline at the airbag inflator operation, which incurred a loss in the
1999 quarter. The loss at the airbag inflator unit resulted from lower pricing,
higher production costs and a shift to lower margin products. The unit is
introducing programs to lower the cost of its airbag inflators. Solid propulsion
results declined primarily due to lower profits on the current year's portion of
a strategic missile program, as compared to the profits on the wind-down of an
earlier phase of this program in last year's first quarter. The liquid
propulsion product line operated at a break even level in 1999, due primarily to
lower sales to commercial satellite customers and to the costs of integrating
the Royal Ordnance liquid rocket motor business acquired in late 1998.
S-14
<PAGE> 17

Although still constrained by pricing pressures in steel-related markets,
operating income in our Metal Coating segment increased in the first quarter of
1999 when compared with the first quarter of 1998. This improvement was derived
primarily from ongoing cost reduction programs and quality improvement
initiatives.

Operating income in our Specialty Chemicals segment increased 19% in the
first quarter of 1999. The segment benefited from: aggressive cost reduction
efforts; a favorable pension comparison of the unit's overfunded pension plan;
an extra month's profit from the Italian unit acquired in early 1998; and lower
foreign exchange losses on forward contracts.

Operating income in our Other Products segment declined $0.5 million in the
first quarter of 1999. The comparable 1998 quarter included a $2.0 million
severance provision at the MEGTEC Systems unit's French operation, and $1.4
million of profit from the Sequa Chemicals unit, which we divested in the fourth
quarter of 1998. On a pro forma basis, excluding these factors, operating income
was $1.1 million lower than in the 1998 period, primarily due to a drop at our
Sequa Can Machinery unit on significantly lower sales. Management expects
results for this unit to remain soft until economic improvement in international
markets takes hold. Reported results at the MEGTEC Systems unit improved in the
first quarter of 1999, due to the absence of the $2.0 million severance
provision in the first quarter of 1998. After excluding the effect of the
severance provision on MEGTEC Systems' results for the 1998 quarter, this unit
operated at a break-even level in both the 1999 and 1998 quarters. Operating
income at the automotive products unit declined 14%, primarily due to an
unfavorable sales mix shift and continued pricing pressures. Profits at our
Men's Apparel unit increased primarily due to higher sales.

Equity in Income (Loss) of Unconsolidated Joint Ventures

During 1998, we had investments in two unconsolidated joint venture
partnerships formed to develop, produce and market hybrid inflators for
automotive airbags: Bendix Atlantic Inflator Company ("BAICO"), a 50/50 joint
venture with AlliedSignal; and BAG SpA, an Italian joint venture with Breed
Technologies Inc. ("Breed") and a subsidiary of Fiat Avio, with each participant
owning a one-third interest in the venture. Breed is the largest customer of
BAICO and BAG SpA. In late January 1998, we increased our ownership in BAICO to
100% with the purchase of AlliedSignal's share of the joint venture.

In April 1999, we increased our ownership in BAG SpA to 50% with the
purchase of half of Fiat Avio's interest for approximately $2.6 million, of
which approximately $0.4 million was paid on the purchase date, approximately
$1.1 million was paid on July 1, 1999 and approximately $1.1 million is payable
on October 1, 1999. The carrying value of our 50% equity interest in BAG SpA at
June 30, 1999 was $3.3 million (excluding the July 1, 1999 payment). In
addition, we have issued letters of credit to guarantee approximately 50% of BAG
SpA's outstanding bank debt, which was approximately $12.8 million at June 30,
1999.

Our share of the losses of the unconsolidated airbag businesses was equity
losses of $0.6 million during the first quarters of both 1999 and 1998. We have
other ownership interests in joint ventures, one of the largest of which is a
50/50 partnership with United Technologies Corporation in Advanced Coatings
Technologies ("ACT"), a joint venture which owns and operates an electron beam
ceramic coater for the application of Pratt & Whitney coatings to jet engine
parts. Our equity share of the earnings of ACT was income of $0.3 million during
the first quarter of 1999 and $0.5 million during the first quarter of 1998.

Other, Net

During the first quarter of 1999, Other, net included $1.6 million of
income related to the collection of a note receivable written off more than 10
years ago, a $0.7 million gain on the sale of an office building, discount
expense of $0.5 million related to the sale of accounts receivable and charges
of $0.3 million for the amortization of capitalized debt issuance costs. During
the first quarter of 1998, Other, net included $0.7 million of income on the
cash surrender value of corporate-owned life insurance and charges of $0.3
million for the amortization of capitalized debt issuance costs.

S-15
<PAGE> 18

Income Tax Provision

At the end of each quarter, we estimate the effective tax rate expected to
be applicable for the full fiscal year. The effective tax rates for the first
quarters of 1999 and 1998 were based on estimated annual pre-tax earnings
excluding our gain on the sale of Sequa Chemicals recorded in the fourth quarter
of 1998. The effective tax rates reflect nondeductible goodwill amortization,
the effect of a provision for state income and franchise taxes and the
establishment of a valuation allowance in 1998 to eliminate the tax benefit for
losses of one of our French subsidiaries. The French subsidiary returned to
profitability in 1999, and the resulting benefit from the use of the net
operating loss carry-forward combined with the absence of a valuation allowance
was the primary reason for the significant reduction in our 1999 effective tax
rate. The estimated annual effective tax rates were then applied to interim
pre-tax earnings.

Year Ended December 31, 1998 as Compared to Year Ended December 31, 1997

Sales

Our Aerospace segment, which consists of Chromalloy Gas Turbine, posted a
sales increase of 8% in 1998, as sales to both the engine component repair
aftermarket and to the OEM market moved higher. The increase reflects strong
demand from the international airline industry, tempered by the ongoing effect
of intense competition from the jet engine manufacturers for aftermarket repair.

In February 1999, the U.S. Air Force awarded a seven-year aircraft engine
maintenance contract valued at $10.1 billion to a consortium that includes our
Gas Turbine unit. This award, which is related to the privatization of
facilities at Kelly Air Force Base in San Antonio, Texas, ensures Gas Turbine's
existing business providing repairs for the T-39 and F-100 military engines.
Moreover, the contract offers significant new business potential, particularly
in the later years of the contract, which has eight one-year award term options.
Also in February, the unit was awarded a seven-year repair service and inventory
management contract with a major airline. This award continues current repair
work with the customer and should begin to add to repair revenues in the second
half of 1999.

Sales of our Propulsion segment, which consists of ARC Propulsion,
increased 51% in 1998, due entirely to the inclusion of airbag inflator sales
following our January 1998 purchase of a 50% interest in BAICO, a domestic
airbag inflator joint venture that was not previously owned by us. Until January
28, 1998, ARC Propulsion consolidated only the sales of energetic materials and
other components provided to the joint venture. Since January 28, 1998, sales of
inflators and inflator components by BAICO -- which has been combined with a
portion of the propulsion operations in Camden, Arkansas and renamed Atlantic
Research Automotive Products -- have been reported on a consolidated basis.
Military sales of solid propellant rocket motors for tactical and strategic
weapons increased 3% in 1998, while sales of liquid propellant rocket motors
used primarily for satellite station keeping declined 42%, primarily due to
reduced demand from commercial customers and lower funding on a U.S. Government
contract. In late 1998, ARC Propulsion acquired the liquid propellant rocket
motor product line of Royal Ordnance, a United Kingdom-based company. This newly
acquired operation, which broadens ARC Propulsion's product offerings and
customer base, is expected to add sales of approximately $5.0 million in 1999.

Sales of our Metal Coating segment declined 3%, as declines in the large
building products line and the smaller container coating product line more than
offset an increase in other manufactured products. In building products, the
decline was due entirely to reduced demand from two major customers. Both
customers brought work in-house that was previously handled by Precoat
Metals -- one due to the late-1997 settlement of a strike, and the other due to
the acquisition of coating capacity in the second quarter of 1998. The latter
will continue to have an unfavorable effect on Precoat Metals' sales comparisons
in the first half of 1999. Excluding the impact of the lower sales from these
two customers, sales for both the building products line and the entire segment
would have advanced in 1998.

Sales of our Specialty Chemicals segment advanced 17% in 1998 due primarily
to our early 1998 acquisition of an Italian specialty chemicals distribution
business and to the strong performance of existing

S-16
<PAGE> 19

specialty chemical distribution units. Sales of the detergent additive TAED to
the international market recorded a small decline, as higher volumes were offset
by continued unfavorable currency movements.

Sales of our Other Products segment increased 13% in 1998. On a pro forma
basis -- excluding the results of the domestic chemicals and Northern Can
Systems ("NCS") units, which we sold in 1998 and 1997, respectively -- the sales
of ongoing businesses in the segment increased 36% in 1998. The advance was
driven primarily by a $79.2 million increase at the MEGTEC Systems unit,
following our acquisition of TEC Systems in the third quarter of 1997 and its
integration with our existing MEG operation. The increase reflects overall
strength in our combined unit's graphic arts product line; strong performance of
our European emission control business; and the addition of a zero-speed paster
product line acquired in 1998. In 1999, sales of this unit will benefit from our
February 1999 acquisition of Thermo Wisconsin which supplies the U.S. printing
and processing industries with products complementary to our MEGTEC Systems
product lines. Thermo Wisconsin posted 1998 sales of approximately $19 million.
Sales of our Sequa Can Machinery unit increased 6% in 1998, primarily due to
higher sales to the domestic food can market. Based on this unit's year-end
backlog, and in view of continuing economic uncertainties in Asia and South
America, management currently anticipates a substantial decline in sales in the
first half of 1999. Sales of our Casco Products unit declined 1%, as increased
European volume and sales from a Brazilian operation added in the second quarter
of 1998 largely offset a decline in domestic volume.

Sales of our Men's Apparel unit increased 13% in 1998, with the improvement
derived largely from sales of tuxedos under the After Six(R) label which we
acquired in 1997. With a year-end backlog slightly above the comparable 1997
level, this unit is expected to continue to generate strong sales in the first
half of 1999.

For the ten months before its October 28, 1998 disposition, our Sequa
Chemicals unit recorded $74.0 million in sales; 1997 sales were $82.3 million.
Our Northern Can Systems unit had sales of $32.9 million prior to its
disposition in late 1997.

Operating Income

Operating income in our Aerospace segment increased 29% in 1998, with units
operating in both the repair and OEM markets registering advances. Our units
that operate primarily in the repair market benefited from increased volume,
programs to reduce manufacturing costs, and controls over operating expenses.
Our group of units that operate primarily in the OEM arena benefited from
increased sales, tighter controls on operating expenses, improved labor
efficiencies and better performance at the castings unit. The segment also
benefited from a lower level of legal expenses related to ongoing litigation
with the Pratt & Whitney division of United Technologies (expense of $5.5
million in 1998 versus $9.9 million in 1997). The positive movement in
litigation expense was partially offset by the absence in 1998 of $2.7 million
in operating income derived from the settlement of a dispute with the Egyptian
government in 1997.

Operating income advanced 18% in our Propulsion segment, with our
automotive airbag operation and solid propellant rocket motor product lines
moving higher and our liquid rocket motor business declining. The benefits of
$96.5 million of sales added in automotive airbags were largely offset by
several factors, including a $10.0 million increase in research and development
costs and costs related to the start-up of new products and new production
lines.

Operating income of our Metal Coating segment declined 27% in 1998,
primarily due to lower sales, an unfavorable sales mix shift, lower margins
brought about by increased manufacturing, scrap and claims costs, and a weak
market for non-prime metal.

Profits in our Specialty Chemicals segment increased 21% in 1998,
reflecting a favorable pension comparison of the unit's overfunded plan; the
additional profits from our newly acquired Italian specialty chemicals
distribution business; and improvements at our other European specialty
chemicals distribution units and in our TAED product line. The improvements in
our TAED product line reflect the benefits of aggressive cost reduction efforts
which more than offset the currency related effect on pricing.

Operating income in our Other Products segment advanced 65% in 1998. On a
pro forma basis -- excluding the results of operations divested in 1998 and
1997 -- segment operating income more than
S-17
<PAGE> 20

quadrupled, rising to $19.0 million in 1998. The advance was driven by the
significant turnaround at MEGTEC Systems. This unit, which had incurred a
significant loss in 1997, posted a profit in 1998 -- a swing of $15.0 million
for the year. This improvement was derived from higher sales; the realization of
acquisition synergies; lower warranty and bad debt costs; and the absence of
significant one-time charges incurred to effect the combination of MEG and TEC
Systems. Importantly, the improvement was after a $2.0 million severance
provision recorded by the unit in the first quarter of 1998. Profits at our
Sequa Can Machinery operation increased 27%, due to reduced warranty expense and
cost reduction measures instituted in late 1997, and to the benefits of higher
sales. These favorable factors were partially offset by losses and shutdown
costs at a Texas facility. Management currently anticipates that this unit will
record significantly lower profits in the first half of 1999 due to the expected
drop in sales. Our Casco Products unit recorded an 11% decline in operating
income, primarily due to start-up costs at new facilities in Kentucky and
Brazil; and to lower-margins resulting from continued pressure on prices; and to
the impact of the General Motors strike. Our Men's Apparel unit recorded a 7%
increase in operating income in 1998 due to increased sales. Profits of our
Sequa Chemicals unit -- which was sold in October 1998 -- totaled $3.1 million
in the first ten months of the year (after a $3.0 million provision to remediate
ground water pollution) and $8.0 million for the full year 1997. NCS recorded
operating income of $1.8 million prior to its disposal in 1997.

Interest Expense

The increase in interest expense of approximately $1.5 million was due to
an increase in average borrowings outstanding under our revolving credit
agreement.

Equity in Income (Loss) of Unconsolidated Joint Ventures

During 1998 and 1997, we had investments in two unconsolidated joint
venture partnerships which were formed to develop, produce and market hybrid
inflators for automotive airbags: BAICO, a 50/50 joint venture formed with
AlliedSignal; and BAG SpA, an Italian company formed with AlliedSignal and a
subsidiary of Fiat Avio, with each participant owning a one-third interest in
the venture. In the fourth quarter of 1997, AlliedSignal sold its automotive
safety restraints business and its one-third interest in BAG SpA to Breed.
Following these transactions, Breed became the largest customer of BAICO and BAG
SpA. In late January 1998, we increased our ownership in BAICO to 100% with the
purchase of AlliedSignal's share of the joint venture.

Our share of the losses of the unconsolidated airbag businesses was an
equity loss of $3.7 million in 1998, which included one month of BAICO's
results, and an equity loss of $1.8 million in 1997.

The carrying value of our one-third equity interest in BAG SpA at December
31, 1998 was $0.9 million. In addition, we have guaranteed, with letters of
credit, $7.4 million of BAG SpA's $24.0 million of debt at December 31, 1998.

In the fourth quarter of 1998, we booked a permanent impairment write-down
of $2.1 million related to our investment in a joint venture to produce advanced
titanium matrix composite fibers. This write-down was triggered by our partner's
decision to withdraw from the business, which had the effect of dramatically
reducing the demand for the fibers produced by the joint venture, and resulted
in future cash flow projections which required the write-down in accordance with
Statement of Financial Accounting Standards No. 121. Total equity losses in this
joint venture, including the impairment write-down, were $2.8 million in 1998
and $0.2 million in 1997.

We have other ownership interests in joint ventures, one of the largest of
which is a 50/50 partnership with United Technologies in ACT, a joint venture
which owns and operates an electron beam ceramic coater for the application of
Pratt & Whitney coatings to jet engine parts. Our equity share of the earnings
of ACT was income of $1.8 million in 1998 and $2.3 million in 1997.

S-18
<PAGE> 21

Other, Net

In 1998, Other, net included a $2.0 million provision related to the
potential loss of funds advanced to a vendor engaged to implement a freight
consolidation program; $1.2 million in charges for the amortization of
capitalized debt issuance costs; $1.0 million of income on the cash surrender
value of corporate-owned life insurance; and letters of credit and commitment
fees of $0.9 million.

In 1997, Other, net included gains on our sale of assets of $2.5 million;
letters of credit and commitment fees of $1.6 million; $1.4 million in charges
for our amortization of capitalized debt issuance costs; and $1.3 million of
income on our cash surrender value of corporate-owned life insurance.

Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996

Sales

Our sales for 1997 were 9% higher than a year earlier, with all segments
except Specialty Chemicals registering advances.

Sales in our Aerospace segment were ahead 13% in 1997, as sales to both the
repair market and the OEMs moved higher, a reflection of the strong demand
generated by the international airline industry. Competition from the engine
manufacturers for aftermarket repair business remained intense.

In our Propulsion segment, sales advanced 18% in 1997, with increases in
each of the three main product areas: solid rocket motors, automotive airbag
components and liquid rocket motors.

Sales of our Metal Coating segment advanced 10% in 1997, with increases in
each of its three product areas: building products, containers and manufactured
products.

Sales of our Specialty Chemicals segment declined 8% in 1997. Local
currency sales for this overseas unit declined 12%, primarily because of the
continued strengthening of the British pound sterling against other European
currencies. The reported U.S. dollar sales decline was tempered by a 5% average
increase in the dollar value of the pound sterling in the same period.

Sales of our Other Products segment advanced 5% in 1997. Late in the third
quarter of 1997, we acquired the TEC Systems unit of W.R. Grace, combined it
with MEG, and named the combined operation MEGTEC Systems. The TEC Systems
acquisition bolstered the auxiliary press equipment product line, increased
technical expertise, enabled us to reduce the combined cost structure and
significantly expanded product offerings beyond MEG's traditional graphic arts
market. This unit registered a 10% decline in 1997, as the sales generated by
TEC Systems in the final four months of the year did not fully offset the
substantial decline in MEG sales for the year. Sales of Sequa Can Machinery unit
declined 22% in 1997, reflecting a cyclical downturn in the worldwide container
industry. Despite the sharp drop in the number of can line installations in
1997, the unit improved its already strong market position, particularly in can
forming equipment. Our Casco Products unit recorded a 6% increase in sales,
primarily due to strong demand in the domestic market for cigarette lighters and
power outlets. In 1997, this segment benefited from inclusion of sales from the
Men's Apparel unit which was recontinued in January 1997. At our Sequa Chemicals
unit, sales advanced 11% in 1997, due largely to the May 1997 acquisition of
Sedgefield Specialties, a supplier to the textile market. Sales of our can lid
unit advanced 26%, primarily a reflection of a 53% gain in export sales. On
December 17, 1997, we divested the can lid business.

Operating Income

Our operating income increased 30% in 1997, due primarily to improvement in
the Aerospace segment.

Our Aerospace segment achieved substantially higher results in 1997. In
addition to the improved operating performance of our Gas Turbine units serving
both OEM and repair markets, results for 1997 benefited from two factors:
substantially lower costs in connection with litigation involving the Pratt &
Whitney division of United Technologies ($9.9 million in 1997 versus $33.0
million in 1996) and our favorable settlement of a dispute with the Egyptian
government, which added $2.7 million to operating income. Year-to-

S-19
<PAGE> 22

year comparisons were also affected by the 1996 reversal of $8.2 million of
workers' compensation insurance reserves, which were actuarially determined to
be in excess of requirements. The Gas Turbine units serving the OEMs operated at
a profit in 1997 versus a loss in 1996, as sales rose substantially in response
to overall vigor in the marketplace and the strong position held by Gas Turbine.
In addition, 1997 results for these units benefited from the late 1996 disposal
of an under-performing unit. Improvement at the Gas Turbine repair units
primarily reflected the higher sales to an expanding commercial aviation market.

Our Propulsion segment recorded a 5% profit advance, primarily a reflection
of higher sales, tempered by the impact of start-up costs on several new
programs related to automotive airbag inflators, and cost increases on certain
government programs.

Our operating income in our Metal Coating segment was on a par with the
prior year, as the benefits of increased sales were offset by lower operating
margins.

Our operating income in our Specialty Chemicals segment declined 37%. The
unit's profit decline was attributable to the strength of the British pound
sterling against other European currencies, a situation that began in the fourth
quarter of 1996.

Profits in our Other Products segment declined 50%. The loss at our new
MEGTEC Systems unit was double the loss reported in 1996, due entirely to
increased losses at MEG. The increased MEG loss was primarily due to: sharply
lower sales to the graphic arts market, increased warranty costs, increased bad
debt provisions, and significant one-time costs incurred to effect the
combination of MEG and TEC Systems. The sharp decline in profits at our Sequa
Can Machinery unit was primarily related to the significant cyclical downturn in
sales. Profits of our Casco Products unit declined as the benefits of increased
sales were more than offset by lower margins. The 1997 results of this segment
benefited from the inclusion of the profits from our Men's Apparel unit which
was recontinued in January 1997. At our Sequa Chemicals unit, profits registered
a small decline as the benefits of higher sales and the 1997 change to the FIFO
method of inventory valuation, which primarily benefited this unit, cushioned
the impact of the 1996 one-time favorable effect of a legal settlement and lower
margins. The can lid unit, which reported a 77% increase in operating income,
primarily benefited from a 26% increase in sales.

Interest Expense

The decrease in interest expense of approximately $1.5 million in 1997 was
due to a decrease in our average borrowings attributable to scheduled principal
payments and early retirement of debt in the third quarter of 1996.

Equity in Income (Loss) of Unconsolidated Joint Ventures

Our share of the earnings or losses of the unconsolidated airbag businesses
was an equity loss of $1.8 million in 1997 and equity income of $1.4 million in
1996. Our equity share of the earnings of ACT, an engine parts coating joint
venture, was income of $2.3 million in 1997 and $3.2 million in 1996.

Other, Net

In 1997, Other, net included gains on the sale of assets of $2.5 million;
letters of credit and commitment fees of $1.6 million; $1.4 million in charges
for the amortization of capitalized debt issuance costs; and $1.3 million of
income on the cash surrender value of corporate-owned life insurance.

In 1996, Other, net included gains on the sale of assets of $8.3 million;
letters of credit and commitment fees of $2.0 million; and $2.1 million in
charges for the amortization of capitalized debt issuance costs.

RISK/CONCENTRATION OF BUSINESS

We are engaged in the automotive airbag inflator business through both the
Atlantic Research Automotive Products unit ("ARAP") in the Propulsion segment
and its equity investment in BAG SpA, an Italian joint venture. Breed is the
major customer of ARAP, accounting for 26% of the Propulsion segment's 1998
annual sales and 32% of the Propulsion segment's sales in the first half of
1999. Breed is also the sole
S-20
<PAGE> 23

customer of, and one-third equity partner in, BAG SpA (Breed's equity increased
to 50% in April 1999). BAG SpA, which purchases inflator components from ARAP,
accounted for 10% of the Propulsion segment's 1998 annual sales and 7% of the
Propulsion segment's sales in the first half of 1999. See the "Equity in Income
(Loss) of Unconsolidated Joint Ventures" section above for further information
on BAG SpA.

In Breed's Form 10-Q for the quarter ended March 31, 1999, filed with the
Securities and Exchange Commission, Breed disclosed it would have been in
violation of certain financial covenants in the loan agreement relating to its
credit facility as of March 31, 1999 and Breed obtained a waiver of those
covenants from the lenders that was effective through June 29, 1999. On June 30,
1999, Breed announced that it had obtained a waiver of certain of the financial
covenants related to its credit facility through October 12, 1999. The terms of
the waiver impose certain obligations upon Breed during the waiver period which,
if not complied with, could result in termination of the waiver and a default
under the credit facility. For more detailed information on Breed's financial
issues, the reader is encouraged to review Breed's recent filings with the
Securities and Exchange Commission. If Breed is unable to meet its financial
obligations, it could have a serious impact on future sales and operating
results of ARAP and BAG SpA.

At June 30, 1999, ARAP had trade accounts receivable of $14.0 million due
from Breed (of which $8.6 million was current, $4.6 million was past due 30 days
or less, and the remaining $0.8 million (certain of which was in dispute) was
more than 30 days past due) and $14.2 million due from BAG SpA (of which $2.9
million was current, $4.8 million was past due 60 days or less, and the
remaining $6.5 million was more than 60 days past due). BAG SpA had trade
accounts receivable of $19.4 million due from Breed, which was current except
for $4.1 million which was paid in early July, and an additional $1.2 million of
net non-trade receivables due from Breed. At June 30, 1999, neither ARAP nor BAG
SpA had any significant reserves related to the Breed accounts receivable.
Management continues to monitor this situation closely.

DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS

We are exposed to market risk from changes in foreign currency exchange
rates which impact our earnings, cash flows and financial condition. We manage
our exposure to this market risk through our regular operating and financial
activities and, when appropriate, through the use of derivative financial
instruments. We have well-established policies and procedures governing the use
of derivative financial instruments as risk management tools and do not buy,
hold or sell derivative financial instruments for trading purposes. Our primary
foreign currency exposures relate to British pounds, French francs, German marks
and Italian lira. To mitigate the short-term effect of changes in currency
exchange rates, we utilize forward foreign exchange contracts and foreign
currency options to hedge certain existing assets and liabilities, firm
commitments and anticipated transactions denominated in currencies other than
the functional currency.

As of December 31, 1998, a hypothetical 10% uniform decrease in all foreign
currency exchange rates relative to the U.S. dollar would decrease the fair
value of our financial instruments by approximately $10.8 million. This
sensitivity analysis relates only to our exchange rate sensitive financial
instruments, which include cash and debt amounts denominated in foreign
currencies and all open foreign forward exchange contracts at December 31, 1998.
The effect of the hypothetical change in exchange rates ignores the effect this
movement may have on the value of our net assets, other than financial
instruments, denominated in foreign currencies and does not consider the effect
this movement may have on anticipated foreign currency cash flows.

At December 31, 1998, substantially all of our debt was at fixed rates and
we currently do not hold interest rate derivative contracts. Accordingly, a
change in market interest rates would not impact our interest expense, but would
affect the fair value of our debt. Generally, the fair market value of
fixed-rate debt will increase as interest rates fall, and decrease as interest
rates rise. The estimated fair value of our total debt at December 31, 1998 was
approximately $521 million. A hypothetical 1% interest rate increase at December
31, 1998 would decrease the fair value of our total debt by approximately $12.4
million. A hypothetical 1% decrease in interest rates at December 31, 1998 would
increase the fair value of our total debt by approximately $12.8 million. The
fair value of our total debt at December 31, 1998 was primarily based upon
quoted market prices of our publicly traded securities. The estimated changes in
fair values of our debt are

S-21
<PAGE> 24

based upon changes in the present value of future cash flows as impacted by the
hypothetical changes in market interest rates.

YEAR 2000 COMPUTER ISSUE

Certain of our computer systems process transactions based on storing two
digits for the year of a transaction rather than the full four digits. Such
systems may not be programmed to consider the start of a new century and will
encounter significant processing difficulties in the year 2000, unless they are
fixed or replaced.

Many of our operating units utilize purchased software, and related
software maintenance agreements provide for upgrades which have addressed, or
will address, the Y2K issue. Our estimate to become Y2K compliant includes the
entire cost of new software, including software purchased primarily for reasons
other than to address the Y2K issue. The costs of data processing personnel on
staff are not included in the estimate, but outside consultants are included. As
of March 31, 1999, we estimate that the total cost of hardware, software,
training, testing and other costs related to Y2K issues will be approximately
$26.5 million. As of March 31, 1999, $13.7 million of these costs has been
incurred, with $9.0 million capitalized and the balance of approximately $4.7
million expensed. We anticipate that approximately two thirds of the $12.8
million of estimated future costs will be capitalized. Future costs will be
funded from our sources of funds, as discussed in "-- Liquidity and Capital
Resources" below.

We are a decentralized organization. Consequently, compliance with the Y2K
issue is the responsibility of individual operating units. Corporate systems are
the responsibility of the individual staff departments. Our senior management is
monitoring the progress of the various units and corporate departments.

In evaluating our progress related to Y2K issues, the following five major
areas have been reviewed in detail:

- Application systems. Broadly used business applications which are
supported by internal management information systems ("MIS") employees.

- Technical infrastructure. MIS-supported hardware and software, including
standard commercial packages on local PCs.

- Facilities & equipment. Manufacturing equipment and building equipment,
such as HVAC and telephones, plus any other logic-based equipment.

- Third-party relationships. Entire supply chain, including suppliers,
customers, financial institutions and necessary regulatory agencies.

- End-user computing. End-user developed coding (for example, in tools
such as Microsoft Access and Microsoft Excel) plus items purchased by end
users outside of the MIS support structure. This area was found to have
no critical applications; therefore, no further reporting will be done on
it.

Each unit's progress in the four critical major areas is categorized in one
of four life cycles defined below:

- Inventory & assessment (I&A). Awareness of problem, detailed inventory
creation, evaluation of the Y2K status of each item, and remediation
plan.

- Renovation/replacement (R). Any repair efforts.

- Testing & implementation program (T&I). Technical and Y2K acceptance
testing plus reintroduction into the production environment.

- Production support (PS). Ongoing execution of the item after repair.

Following is the assessment of each operating unit and the corporate
departments reviewed for each of the four critical major areas at March 31,
1999. While the Y2K remediation efforts are ongoing, the assessments provide a
snapshot at a given point in time; they will be updated in each of our future
filings. In all tables in this Y2K section, the X in the status column means
that this was the life cycle stage primarily being

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<PAGE> 25

worked on at the time of the review. In the case of Gas Turbine, the figures in
the status columns represent the number of units that are doing work in each of
the life cycle stages. Blank spaces to the left of each X signify that these
life cycle stages were complete at the time of the review. Blank spaces to the
right of the X signify that while work may have started on these stages, the
unit was still most heavily involved in the column marked with the X at the time
of the review.

<TABLE>
<CAPTION>
STATUS
------------------------
I&A R T&I PS
APPLICATIONS SYSTEMS --- --- --- ---
<S> <C> <C> <C> <C>
Gas Turbine................................................. 1 18 2 2
Atlantic Research........................................... X
Precoat Metals.............................................. X
Warwick International....................................... X
MEGTEC Systems.............................................. X
Sequa Can Machinery......................................... X
Casco Products.............................................. X
Men's Apparel............................................... X
Corporate................................................... X
</TABLE>

Many of our operating units and corporate departments utilize purchased
software. Significant progress in the application systems area is expected to
continue as software upgrades that address the Y2K issue are received from
vendors under ongoing maintenance agreements.

<TABLE>
<CAPTION>
STATUS
------------------------
I&A R T&I PS
TECHNICAL INFRASTRUCTURE --- --- --- ---
<S> <C> <C> <C> <C>
Gas Turbine................................................. 2 14 5 2
Atlantic Research........................................... X
Precoat Metals.............................................. X
Warwick International....................................... X
MEGTEC Systems.............................................. X
Sequa Can Machinery......................................... X
Casco Products.............................................. X
Men's Apparel............................................... X
Corporate................................................... X
</TABLE>

We have a variety of technical infrastructures at our units and are working
with the vendors of these systems to repair or replace system hardware and
software to ensure Y2K compliance. Based upon the results of a review performed
by an international consulting firm in 1998, we do not believe this to be an
area of high risk.

<TABLE>
<CAPTION>
STATUS
------------------------
I&A R T&I PS
FACILITIES AND EQUIPMENT --- --- --- ---
<S> <C> <C> <C> <C>
Gas Turbine................................................. 2 14 4 3
Atlantic Research........................................... X
Precoat Metals.............................................. X
Warwick International....................................... X
MEGTEC Systems.............................................. X
Sequa Can Machinery......................................... X
Casco Products.............................................. X
Men's Apparel............................................... X
Corporate................................................... X
</TABLE>

S-23
<PAGE> 26

<TABLE>
<CAPTION>
STATUS
----------
I&A R
THIRD-PARTY RELATIONSHIPS --- ---
<S> <C> <C> <C> <C>
Gas Turbine................................................. 7 16
Atlantic Research........................................... X
Precoat Metals.............................................. X
Warwick International....................................... X
MEGTEC Systems.............................................. X
Sequa Can Machinery......................................... X
Casco Products.............................................. X
Men's Apparel............................................... X
Corporate................................................... X
</TABLE>

Our individual operating units have, for the most part, not yet developed
contingency plans to handle any disruption that may result from the Y2K issue.
The need for and extent of such plans is being evaluated by each of the units,
and plans will be developed to the extent needed based on various factors,
including: the unit's ongoing progress; the extent of significant identified
problems or unknowns; overall evaluation of risk, etc. There can be no guarantee
that our effort to be Y2K compliant will prevent a material adverse impact on
our results of operations, financial condition or cash flows. If we and/or third
parties upon which we rely are not fully Y2K compliant, the possible
consequences could include: temporary plant closings; delays in the delivery of
finished products; delays in the receipt of key purchased materials and
services; invoice and collection errors; and customer and vendor relations
problems, etc. These consequences could possibly have a material adverse impact
on our results of operations, financial condition and cash flows if we are
unable to conduct our business in the ordinary course. We believe that our
readiness program will reduce the likelihood, severity and duration of any
possible disruptions.

We expect that our Y2K compliance program will be largely completed before
December 31, 1999. Individual units and corporate departments have started to
complete portions of their work.

EURO CONVERSION

On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency (euro). The transition period for the
introduction of the euro will extend to January 1, 2002. We, in conjunction with
our Y2K efforts, have begun to identify euro conversion compliance issues and
work on remediation of anticipated problems.

Based on our evaluation, we believe that the introduction of the euro,
including the total costs for the conversion, will not have a material adverse
impact on our financial position, results of operations or cash flows. However,
uncertainty exists as to the effects the euro will have on the marketplace, and
there is no guarantee that all problems will be foreseen and corrected or that
third parties will address the conversion successfully.

ENVIRONMENTAL MATTERS

Our environmental department, under our senior management's direction,
manages all activities related to our involvement in environmental clean-up.
This department establishes the projected range of expenditures for individual
sites with respect to which we may be considered a potentially responsible party
under applicable federal or state law. These projected expenditures, which are
reviewed periodically, include: remedial investigation and feasibility studies;
outside legal, consulting and remediation project management fees; the projected
cost of remediation activities; and site closure and post-remediation monitoring
costs. The assessments take into account known conditions, probable conditions,
regulatory requirements, past expenditures, and other potentially responsible
parties and their probable level of involvement. Outside legal, technical and
scientific consulting services are used to support management's assessments of
costs at significant individual sites.

S-24
<PAGE> 27

It is our policy to accrue environmental remediation costs for identified
sites when it is probable that a liability has been incurred and the amount of
loss can be reasonably estimated. At March 31, 1999, the potential exposure for
such costs is estimated to range from $16 million to $32 million. At March 31,
1999, our balance sheet includes accruals for remediation costs of $24.4
million. These accruals are at undiscounted amounts and are included in accrued
expenses and other noncurrent liabilities. Actual costs to be incurred at
identified sites in future periods may vary from the estimates, given inherent
uncertainties in evaluating environmental exposures.

With respect to all known environmental liabilities, it is currently
estimated that our cash expenditures for remediation of previously contaminated
sites will be in the range of $6 million to $10 million during 1999 and between
$4 million and $8 million during 2000. Actual expenditures for the first three
months of 1999 were approximately $1.1 million.

BACKLOG

Our businesses for which backlogs are significant are the Turbine Airfoils,
Caval Tool, Turbocombuster Technology and Casting units of the Aerospace
segment; the Propulsion segment; and the Sequa Can Machinery, MEGTEC Systems and
Men's Apparel units of the Other Products segment. The aggregate dollar amount
of backlog in these units at March 31, 1999 was $285.4 million ($305.4 million
at December 31, 1998). The decline from year end is primarily attributable to an
18% backlog reduction at the Gas Turbine OEM units. Sales of the Men's Apparel
unit are seasonal, with stronger sales in the first six months of the year;
accordingly, this unit's backlog is normally higher at December 31 than at any
other time of the year.

SEASONAL FACTORS

With the exception of our Men's Apparel business, which generally has
stronger sales in the first six months of the year, our business is not
considered seasonal to any significant extent.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used for operating activities was $17.5 million in the first
quarter of 1999, compared with $3.0 million used for operating activities in the
first quarter of 1998. The primary reasons for the increase in cash used for
operating activities were a decrease in pre-tax income and an increase in
foreign and state income taxes paid during the 1999 period. Net cash used for
investing activities increased to $31.6 million in the first quarter of 1999
from $13.9 million in the first quarter of 1998. The major factors in the 1999
increase were the absence of proceeds from the sale of short-term investments,
lower proceeds from the sale of property, plant and equipment and higher capital
expenditures during the 1999 quarter. These increases in cash used for investing
activities were partially offset by a $17.1 million decrease in cash used to
purchase businesses during the 1999 quarter. Cash provided by financing
activities in the first quarter of 1999 was $39.0 million compared to cash used
for financing activities of $22.0 million in the first quarter of 1998. The
$61.0 million increase was attributable to $45.0 million of proceeds from the
sale of accounts receivable and reduced debt payments during the first quarter
of 1999.

Net cash provided by our operating activities was $47.4 million in 1998,
compared with $100.6 million in 1997 and $105.8 million in 1996. The major
reasons for our 1998 decline were the higher levels of working capital
requirements at existing businesses, and the $24.0 million deposit paid to the
IRS related to a tax dispute involving the 1989 restructuring of two
subsidiaries. Net cash used for investing activities was $6.5 million in 1998,
compared with $94.6 million in 1997 and $34.0 million in 1996. The major factors
in the 1998 decline were the significantly higher level of proceeds from
businesses and other assets sold, partially offset by the $34.6 million increase
in capital expenditures. The major differences in 1997 were the $36.1 million
spent on acquisitions, a $25.0 million participation in loans made by a group of
banks for the benefit of one of our joint ventures, and the higher level of
capital expenditures, partially offset by higher proceeds from the sale of
businesses and fixed assets. Net cash used for financing activities increased
$51.1 million in 1998, primarily due to the higher level of debt repayment. Net
cash used for financing activities was $0.9 million in 1997, compared with $47.5
million in 1996, and primarily reflects a lower level of debt repayment in 1997.

S-25
<PAGE> 28

Our capital expenditures amounted to $20.7 million during the first quarter
of 1999 and $103.5 million during 1998, with spending concentrated in the
Aerospace, Propulsion and Metal Coating segments. These funds were primarily
used to upgrade existing facilities and equipment and to expand capacity. We
currently anticipate that total capital expenditures in 1999 will be
approximately $125 million and will be concentrated in the same segments.

In November 1998, we entered into a five-year Receivables Purchase
Agreement to sell up to $90 million of our trade receivables without recourse
through a bank sponsored facility. At March 31, 1999, $45.0 million of
receivables were sold under this agreement.

We have an issue with the IRS involving the 1989 restructuring of two
subsidiaries. While we believe our tax position in this matter is appropriate,
we have taken the conservative position of providing reserves to cover an
adverse outcome. At March 31, 1999, the net amount involved was approximately
$59 million, composed of the potential liability associated with the
restructuring and related tax issues; interest expense, net of tax benefit, from
the date of the resulting tax refund; and deferred tax assets for portions of
tax loss and credit carryforwards which could be utilized in a settlement. We
have had preliminary settlement discussions with the IRS, and on October 1,
1998, we made a deposit of $24 million with the IRS against the expected
liability for additional tax and interest that may be assessed against us
related to certain of these tax matters. The deposit stops the running of
interest with respect to the amounts deposited. Discussions have continued and
we believe there is a possibility for final resolution of this matter by the end
of 1999, and that, in the event of an unfavorable resolution we will have
sufficient resources available to make any additional negotiated or adjudicated
payment.

We currently anticipate that cash flow from operations, proceeds from the
divestiture of assets, the $150.0 million of credit available at June 30, 1999
under the revolving credit agreement, the $26.5 million of available financing
under the Receivables Purchase Agreement at June 30, 1999, proceeds from the
issuance of the Notes in this offering (after application of the proceeds to
repay indebtedness, as described in "Use of Proceeds") and the $71.4 million of
cash and cash equivalents on hand at March 31, 1999 will be sufficient to fund
our operations, niche acquisitions, and airline spare parts inventory purchases
for at least the next two years.

OTHER INFORMATION

Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued in June 1998. This
statement requires companies to record derivatives on the balance sheet as
assets and liabilities, measured at fair value. Depending on the use of a
derivative and whether it has been designated and qualifies as a hedge, gains or
losses resulting from changes in the values of those derivatives would be
recognized currently in earnings or reported as a component of other
comprehensive income. This statement is not expected to have a material impact
on our consolidated financial statements. The effective date for this statement
was recently delayed by one year to fiscal years beginning after June 15, 2000,
with earlier adoption encouraged. We will adopt this accounting standard as
required by January 1, 2001.

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<PAGE> 29

BUSINESS

GENERAL

We are a diversified industrial company that produces a broad range of
products through operating units in five business segments: Aerospace,
Propulsion, Metal Coating, Specialty Chemicals, and Other Products.

The following table summarizes the percentage of revenue and EBITDA (before
corporate expenses) by segment:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ --------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue:
Aerospace....................................... 44% 46% 43% 44% 46%
Propulsion...................................... 10 11 15 15 15
Metal Coating................................... 13 13 11 10 11
Specialty Chemicals............................. 10 8 9 8 9
Other Products.................................. 23 22 22 23 19
--- --- --- --- ---
Total................................... 100% 100% 100% 100% 100%
=== === === === ===
EBITDA:
Aerospace....................................... 28% 46% 46% 49% 50%
Propulsion...................................... 14 13 15 18 11
Metal Coating................................... 16 14 10 6 10
Specialty Chemicals............................. 21 14 14 11 14
Other Products.................................. 21 13 15 16 15
--- --- --- --- ---
Total................................... 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>

Aerospace

Our Aerospace segment consists solely of our largest operating unit,
Chromalloy Gas Turbine. Gas Turbine repairs and manufactures components for jet
aircraft engines. A major independent supplier in the repair market, Gas Turbine
provides domestic and international airlines with technologically advanced
repairs and coatings for turbine airfoils and other critical engine components.
The unit also supplies components to the manufacturers of jet engines and serves
both the general aviation and military markets.

Gas Turbine has built on its metallurgical process technologies to develop
procedures that permit the repair and reuse of turbine engine components.
Management believes Gas Turbine has played a key role in the development of the
repair market for certain jet engine parts. Over the years, Gas Turbine has
continued to invest in research and development projects that have led to
ceramic coatings, vacuum plasma coatings, advanced laser drilling and welding,
and diffused precious metal/aluminide coatings. Gas Turbine has introduced a
series of innovative and in some cases proprietary processes that allow engines
to perform at improved efficiency levels, at higher operating temperatures and
under severe environmental conditions.

We have been engaged over the past four years in litigation which focuses
on the ability of our Gas Turbine unit to make authorized repairs to Pratt &
Whitney parts. Between court decisions and the parties' negotiations, most of
the outstanding issues have been resolved, although some remain pending. See
"-- Legal Proceedings."

Propulsion

Our Propulsion segment consists solely of ARC Propulsion, a supplier of
solid rocket fuel propulsion since 1949. ARC Propulsion is a leading developer
and manufacturer of advanced rocket propulsion systems, gas

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<PAGE> 30

generators and auxiliary rocket motors, and engages in research and development
relating to new rocket propellants and advanced engineered materials. For the
military contract market, ARC Propulsion produces propulsion systems primarily
for tactical weapons. For space applications, ARC Propulsion produces small
liquid fuel rocket engines designed to provide attitude and orbit control for a
number of satellite systems worldwide.

ARC Propulsion has grown primarily through the introduction of products for
the automotive market using technologies that were originally developed for
military applications. ARC Propulsion pioneered the development of hybrid
inflators for automotive airbags and energetic materials for airbag deployment.
In early 1998, ARC Propulsion moved to further its role in the automotive market
through the purchase of the remaining share of an existing 50%-owned joint
venture that produces airbag inflators for a cash purchase price of
approximately $22.7 million. In addition, we assumed $25.0 million of the joint
venture's debt and repaid it in 1998. As a result of this transaction, ARC
Propulsion now supplies airbag inflators directly to its customers. ARC
Propulsion's products in this market are currently sold principally to Breed,
which makes modules for use in vehicles manufactured by several leading
automotive companies, including DaimlerChrysler, Opel, and Fiat. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Risk/Concentration of Business."

Metal Coating

Our Metal Coating segment consists solely of Precoat Metals, which is a
leader in the application of protective and decorative coatings to continuous
steel and aluminum coil. Precoat Metals' principal market is the building
products industry, where coated steel is used for the construction of
pre-engineered building systems, and as components in the industrial,
commercial, agricultural and residential sectors. Precoat Metals also serves the
container industry, where the unit has established a position in the application
of coatings to steel and aluminum stock used to fabricate metal cans and can
lids. In addition, the unit has established a presence in other product markets,
including heating, ventilating and air conditioning units, truck trailer panels
and office equipment.

Specialty Chemicals

Our Specialty Chemicals segment consists solely of Warwick International,
which is a leading producer and supplier of TAED, a bleach activator for
powdered laundry and dishwasher detergent products. TAED is used in oxygen-based
bleaching systems to increase the cleaning power of detergent at low wash
temperatures. These bleaching systems are used primarily in international
markets, principally in Europe. In addition, the unit is selling TAED products
for industrial markets, such as textile bleaching and pulp and paper processing.
The unit also continues to expand its network of European chemical distributors
that supplies specialty products for use in plastics, resins, paints and
cosmetics.

Other Products

This segment consists of four ongoing businesses: MEGTEC Systems, Sequa Can
Machinery, Casco Products, and the Men's Apparel unit. This segment also
includes two operations which were divested prior to December 31, 1998: Sequa
Chemicals and Northern Can Systems.

MEGTEC Systems. MEGTEC Systems was formed in 1997 following the
acquisition of TEC Systems (a producer of air flotation dryers for paper and
printing uses and emission control systems for industrial applications) and its
integration with our existing MEG operation (a supplier of equipment for the web
offset printing industry, including pasters and splicers, web guides, infeeds,
chill stands, and related equipment for high-speed web presses).

Sequa Can Machinery. Sequa Can Machinery designs and manufacturers
equipment for the two-piece can industry, including high-speed equipment to coat
and decorate, and to form the cup and body of, two-piece cans. With the largest
installed base of equipment in the industry, Sequa Can Machinery also supplies
upgrade kits and spare parts and maintains an extensive support service program.
The unit's product development team continually seeks to improve the technology
of its products to achieve higher speeds
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<PAGE> 31

without compromising quality. For example, we have developed can making
equipment that is among the fastest in the industry, including cuppers that
punch up to 4,000 cups per minute; bodymakers that complete the forming of 450
cans per minute; and coaters and decorators that process more than 2,000 cans
per minute.

Casco Products. Casco Products, which has been serving the automotive
market since 1921, is the world's leading supplier of automotive cigarette
lighters and power outlets. Casco Products also offers a growing line of
automotive accessories, led by a series of electronic devices to monitor
automotive fluid levels such as engine oil, engine coolant and brake,
transmission and power steering fluids.

Men's Apparel. The Men's Apparel unit is the largest domestic designer and
manufacturer of men's formalwear, with products marketed under the After Six(R),
Oscar de la Renta(R) and Raffinati(R) labels, all three of which are registered
trademarks.

Sequa Chemicals. Sequa Chemicals, which was sold in October 1998,
manufactured performance-enhancing chemicals for the paper, textile, and other
industries.

Northern Can Systems. Northern Can Systems, which was sold in December
1997, supplied the domestic and international food processing market with
easy-open lids for cans.

MARKETS AND METHODS OF DISTRIBUTION

The Aerospace segment markets its gas turbine engine component
manufacturing and repair services primarily to the major airlines of the world,
to the manufacturers of commercial jet engines, and to the military. Gas
Turbine's products and services are marketed directly and through sales
representatives working on a commission basis. A portion of the sales of Gas
Turbine's operations is made pursuant to contracts with various agencies of the
United States Government, particularly the Department of the Air Force, with
which Gas Turbine has had a long-term relationship.

The Propulsion segment markets its rocket propulsion systems generally on a
subcontract basis under various defense programs of the United States
Government. In addition, the Propulsion segment markets its automotive airbag
components to 15 automotive customers in the U.S. and overseas.

The Metal Coating segment sells its coating services to regional steel and
aluminum producers, building products manufacturers, can makers, and
manufacturers of other diverse products.

The Specialty Chemicals segment sells TAED-based detergent chemicals
directly to major producers of household and industrial cleaning products.
Specialty products for use in plastics, resins, paints, and cosmetics are sold
through a network of wholly owned European chemical distributors.

Businesses in the Other Products segment serve distinct markets and have
individual methods of distribution. MEGTEC Systems sells auxiliary press
equipment directly to international web printing customers and markets emission
control equipment and industrial drying systems directly to customers in the
coating, converting and metal finishing industries. Sequa Can Machinery sells
its can forming and decorating equipment directly to the international container
manufacturing industry. Casco Products sells cigarette lighters, power outlets,
and various electronic monitoring devices directly to the automotive industry.
The Men's Apparel unit sells its formalwear to rental and retail customers,
primarily through independent sales representatives.

COMPETITION

There is significant competition in the industries in which we operate,
and, in several cases, the competition consists of larger companies having
substantially greater resources than we possess.

We believe that we are currently the world's largest manufacturer of
two-piece can decorating and can forming equipment; the world's largest supplier
of automotive cigarette lighters and power outlets; and the largest supplier of
men's formalwear in the United States.

Through our Gas Turbine operations, we are a leader in the development and
use of advanced metallurgical and other processes to manufacture, repair and
coat blades, vanes and other components of gas
S-29
<PAGE> 32

turbine engines used for commercial and military jet aircraft. Gas Turbine's
divisions compete for turbine engine repair business with a number of other
companies, including aircraft engine OEMs. Such OEMs generally have obligations
(contractual and otherwise) to approve vendors to manufacture components for
their engines and/or perform repair services on their engines and components.
Gas Turbine has a number of such approvals, including licensing agreements,
which allow it to manufacture and repair certain components of aircraft engines.
The loss of approval by one of the major OEMs to manufacture or repair
components for such OEM's engines could have an adverse effect on Gas Turbine,
although management believes it has certain actions available to it to mitigate
any adverse effect.

Our rocket propulsion systems business competes with several other
companies for defense business. In some cases, these competitors are larger than
we are and have substantially greater resources. Government contracts in this
area are generally awarded on the basis of proven engineering capability and
price. Our ability to compete is enhanced by the U.S. Government's need for
alternative sources of supply under these contracts. The liquid propulsion unit
operates primarily in the commercial satellite market and competes on the
technical capabilities of its products, and price.

ARC Automotive Products is a Tier II automotive supplier that supplies
airbag inflators to Tier I airbag module (airbag, inflator and related sensors)
suppliers, many of whom have their own inflator capabilities. The unit competes
on product capabilities, energetic expertise, quality and price. The unit has a
long term supply agreement with its major customer, Breed.

Our Precoat Metals operation is the leading independent domestic coil
coater of steel for metal building panels. Precoat competes in all its markets
based on price, quality, customer services and technical capabilities.

Our Specialty Chemicals segment competes in each of its markets with a
number of other manufacturers, some of which are larger and have greater
resources than we have. This segment competes in the detergent additive market
with its TAED products based on breadth of product offerings and performance
characteristics, quality, and price. In the European chemical distribution
market it competes primarily on the technical expertise of its sales force, and
the breadth of its product offerings.

MEGTEC Systems is a major international supplier of auxiliary press
equipment, air flotation dryers and emission control equipment. This unit has
several major competitors (including certain press manufacturers in the graphic
arts market) in each of its main product areas. It competes on the basis of
price, quality and technical capabilities. Our two-piece can decorating and can
forming operations are world leaders in their markets. Sequa Can Machinery has
one or two major competitors in each major product area, and the unit competes
on the basis of price, quality, technical capabilities and equipment speed.

Our automotive products manufacturer is the world's leading producer of
cigarette lighters for both the original equipment market and the auto
aftermarket. The Men's Apparel unit is the leading domestic producer of men's
formalwear and competes on the basis of design, quality of manufacturing and
price.

MAJOR CUSTOMERS

No single customer accounted for more than 10% of consolidated sales during
the past three years. However, one customer accounted for approximately a
quarter of the Propulsion segment's 1998 sales. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk/Concentration
of Business." In the Specialty Chemicals segment, one customer accounted for
approximately 33% of the segment's 1998 sales, and the top three customers
accounted for approximately 56% of the segment's 1998 sales. All of these
customers are well known international consumer products companies that Warwick
International has been doing business with for many years.

RAW MATERIALS

Our various businesses use a wide variety of raw materials and supplies.
Generally, these have been available in sufficient quantities to meet
requirements, although occasional shortages have occurred.

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<PAGE> 33

PATENTS AND TRADEMARKS

We own and are licensed to manufacture and sell under a number of patents,
including patents relating to our metallurgical processes. These patents and
licenses were secured over a period of years and expire at various times. We
have also created and acquired a number of trade names and trademarks. While we
believe our patents, patent licenses, trade names and trademarks are valuable,
we do not consider our business as a whole to be materially dependent upon any
particular patent, license, trade name, trademark or any related group thereof.
We regard our technical and managerial knowledge and experience as more
important to our business.

RESEARCH AND DEVELOPMENT

Research and development costs, charged to expense as incurred, amounted to
approximately $21.4 million in 1998, $13.3 million in 1997 and $12.9 million in
1996. The increase during 1998 primarily resulted from research and development
related to new automotive airbag inflator products.

ENVIRONMENTAL MATTERS

We have been notified that we have been named as a potentially responsible
party under Federal and State Superfund laws and/or have been named as a
defendant in suits by private parties (or governmental suits including private
parties as codefendants) with respect to sites currently or previously owned or
operated by us or to which we may have sent hazardous wastes. We are not aware
of other such lawsuits or notices contemplated or planned by any private parties
or environmental enforcement agencies. The aggregate liability with respect to
these matters, net of liabilities already accrued in the Consolidated Balance
Sheet, will not, in the opinion of management, have a material adverse effect on
our results of operations or financial position. These environmental matters
include the following:

A number of claims have been filed in connection with alleged groundwater
contamination in the vicinity of a predecessor corporation site which operated
during the 1960s and early 1970s in Dublin, Pennsylvania. In October 1987, a
class action was filed by residents of Dublin against us and two other
defendants. The Borough of Dublin also filed suit seeking remediation of alleged
contamination of the Borough's water supply and damages in an unspecified
amount. A settlement was reached in the class action in which we paid $1.8
million in 1997. The Borough action was settled in 1998 when we agreed to
transfer to the Borough the water treatment system it constructed and $2.0
million was paid to the Borough.

The Pennsylvania Department of Environmental Protection entered into a
Consent Decree with us in 1990 providing for the performance of a remedial
investigation and feasibility study with respect to the same alleged groundwater
contamination in Dublin. The U.S. Environmental Protection Agency also placed
the site on the Superfund List in 1990 and, in conjunction therewith, entered
into a Consent Agreement with us on December 31, 1990. The investigation for the
final remedy is still in progress.

The State of Florida issued an Administrative Order requiring
TurboCombustor Technology, Inc., a subsidiary of Gas Turbine, to investigate and
to take appropriate corrective action in connection with alleged groundwater
contamination in Stuart, Florida. The contamination is alleged to have arisen
from a 1985 fire which occurred at TurboCombustor's former facility in Stuart.
The City of Stuart has subsequently constructed and is operating a groundwater
remediation system. We negotiated a conditional settlement with the City of
Stuart in October 1994 whereby we would contribute our ratable share of the
capital and operating costs for the groundwater treatment system. We estimate
the amount to be paid in settlement plus additional groundwater sampling and
analysis will be approximately $2 million to be paid over a 10-year period
beginning when the Order is unconditionally entered.

In September 1993, fourteen homeowners residing in West Nyack, New York
served a complaint on Gas Turbine and others alleging, among other things, that
contamination from a former Gas Turbine site caused the plaintiffs' alleged
property damage. Gas Turbine believes it has strong defenses under New York law
to the plaintiffs' complaint. Gas Turbine entered into a Consent Order with the
New York Department of Environmental Conservation on February 14, 1994, to
undertake the remedial investigation and feasibility

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<PAGE> 34

study relating to the alleged contamination in the vicinity of the former Gas
Turbine site. This study was submitted to the Department for its review in 1998.

It is our policy to accrue environmental remediation costs for identified
sites when it is probable that a liability has been incurred and the amount of
loss can be reasonably estimated. At December 31, 1998, the potential exposure
for such future costs was estimated to range from $17 million to $33 million,
and our balance sheet as of that date includes accruals for remediation costs of
$25.4 million. These accruals are at undiscounted amounts and are included in
accrued expenses and other noncurrent liabilities. Actual costs to be incurred
at identified sites in future periods may vary from the estimates, given
inherent uncertainties in evaluating environmental exposures.

With respect to all known environmental liabilities, our actual cash
expenditures for remediation of previously contaminated sites were $8.2 million
in 1998, $9.7 million in 1997 and $10.0 million in 1996. We anticipate that
remedial cash expenditures will be between $6 million and $10 million during
1999 and between $4 million and $8 million during 2000. Our capital expenditures
for projects to eliminate, control or dispose of pollutants were $2.3 million,
$4.6 million and $1.7 million in 1998, 1997 and 1996, respectively. We
anticipate annual environmental-related capital programs to be approximately $6
million during 1999 and 2000. Our operating expenses to eliminate, control and
dispose of pollutants have averaged approximately $11 million per year during
the last three years. We anticipate that environmental operating expenses will
be approximately $11 million per year during 1999 and 2000.

LEGAL PROCEEDINGS

We are involved in a number of claims, lawsuits and proceedings which arose
in the ordinary course of our business. Other litigation is pending against us
involving allegations that are not routine and include, in certain cases,
compensatory and punitive damage claims.

In July 1995, United Technologies, through its Pratt & Whitney division,
commenced an action against Gas Turbine in the United States District Court for
the District of Delaware. The complaint sought unspecified monetary damages and
injunctive relief based on alleged breaches of certain license agreements,
alleged infringement of patents and misuse of Pratt & Whitney intellectual
property. Gas Turbine denied United Technologies' claims and counterclaimed
seeking monetary, declaratory and injunctive relief based on United
Technologies' breaches of license agreements, failure to return royalty
overpayments, patent invalidity, and patent misuse. In August 1998, the Court
issued a Memorandum Opinion and Order relating to Gas Turbine's claim under the
parties' 1985 Repair Agreement. The Court identified contract breaches by United
Technologies and granted Gas Turbine all the relief it had requested. United
Technologies has filed a Notice of Appeal to the United States Court of Appeals
for the Federal Circuit, which appeal is fully briefed and pending. In
connection with another claim brought by Gas Turbine under the parties' 1995
Repair Agreement, a trial on monetary damages and other remedies being sought by
Gas Turbine remains to be scheduled. In February 1999, Gas Turbine moved for
summary judgment with regard to the damages and remedies being sought on that
claim. All of the remaining claims in this matter have been dismissed by the
court or resolved by the parties, except for one of Gas Turbine's claims under a
ceramic coatings agreement for which a trial was held in July 1998 and for which
a decision is pending and for the issues to be scheduled for trial as discussed
above.

In August 1995, Gas Turbine filed suit against United Technologies in the
131st District Court of Bexar County, Texas seeking damages and injunctive
relief for violations by United Technologies of the Texas Free Enterprise and
Antitrust Act. United Technologies filed counterclaims against Gas Turbine for
alleged breach of contract and unfair competition. The only remaining issue in
this case is Gas Turbine's appeal of the trial court's denial of injunctive
relief. In October 1998, the United States Court of Appeals for the Fourth
Circuit issued its decision refusing to overturn the trial court's denial of Gas
Turbine's request for injunctive relief. Gas Turbine has filed a motion for
reconsideration, which motion is pending.

The ultimate legal and financial liability in respect to all claims,
lawsuits and proceedings referred to above cannot be estimated with any
certainty. However, in the opinion of management, based on its examination of
these matters, its experience to date and discussions with counsel, the ultimate
outcome of
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<PAGE> 35

these matters will not have a material adverse effect on our business, financial
condition or results of operations.

EMPLOYMENT

At December 31, 1998, we employed approximately 11,050 persons of whom
approximately 2,800 were covered by union contracts.

The approximate number of employees attributable to each reportable
business segment as of December 31, 1998 was:

<TABLE>
<CAPTION>
APPROXIMATE
SEGMENT NUMBER OF EMPLOYEES
- ------- -------------------
<S> <C>
Aerospace......................................... 6,750
Propulsion........................................ 1,100
Metal Coating..................................... 700
Specialty Chemicals............................... 400
Other Products.................................... 2,000
Corporate......................................... 100
------
Total............................................. 11,050
======
</TABLE>

We consider our relations with employees to be generally satisfactory. We
maintain a number of employee benefit programs, including life, medical and
dental insurance, pension and 401(k) plans.

FOREIGN OPERATIONS

Our consolidated foreign operations include Gas Turbine's operations in
England, France, Israel, Mexico, Netherlands and Thailand within the Aerospace
Segment; ARC Propulsion's liquid rocket motor business in England within the
Propulsion segment; detergent chemicals operations in Wales and chemical
distribution operations in France, Italy, Spain and Portugal within the
Specialty Chemicals segment; the auxiliary press equipment suppliers in France,
Germany, Singapore, Sweden and the United Kingdom, and the automotive products
operations in Italy and Brazil in the Other Products segment.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers, their ages and their positions, as of
March 31, 1999, are set forth below:

<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Norman E. Alexander............ 84 Chairman of the Board, Chief Executive Officer and
Director
John J. Quicke................. 49 President, Chief Operating Officer and Director
Stuart Z. Krinsly.............. 81 Senior Executive Vice President, General Counsel and
Director
Gerald S. Gutterman(1)......... 70 Executive Vice President -- Finance and Administration
Martin Weinstein............... 63 Senior Vice President, Gas Turbine Operations
Leon D. Black.................. 47 Director
Alvin Dworman.................. 73 Director
David S. Gottesman............. 72 Director
Donald D. Kummerfeld........... 64 Director
Richard S. LeFrak.............. 53 Director
Michael I. Sovern.............. 67 Director
Fred R. Sullivan............... 84 Director
Gerald Tsai, Jr. .............. 70 Director
</TABLE>

- ---------------
(1) Mr. Gutterman retired as Executive Vice President -- Finance and
Administration effective May 31, 1999, but he continues to advise us as to
financial matters pursuant to a two-year consulting agreement.

NORMAN E. ALEXANDER has served as the Chairman of the Board and Chief
Executive Officer of our company since 1975. Mr. Alexander served as President
from 1982 to 1983 and from 1957 to 1975. He has been a director of our company
since 1957 and is a member of our Executive Committee. Mr. Alexander also is a
director and Chairman of the Board of Chock Full O'Nuts Corporation and a
director of Richton International Corporation.

JOHN J. QUICKE has served as the President and Chief Operating Officer of
our company since March 1993. Mr. Quicke served as Senior Executive Vice
President, Operations, of our company from June 1992 to March 1993. From
February 1991 to June 1992, he served as Vice President, Financial Services,
and, from 1987 to 1991, he served as Vice President, Financial Projects. Mr.
Quicke held various offices and positions in Chromalloy American Corporation
(which became our subsidiary in 1986) from 1979 to 1987. Mr. Quicke has been a
director of our company since 1993 and is a member of our Executive Committee.

STUART Z. KRINSLY has served as Senior Executive Vice President and General
Counsel of our company since 1982. From 1965 to 1982, he served as an officer
and General Counsel of our company. Mr. Krinsly has been a director of our
company since 1957 and is a member of our Executive Committee. Mr. Krinsly also
is a director of Chock Full O'Nuts Corporation.

GERALD S. GUTTERMAN has served as Executive Vice President of Finance and
Administration of our company since 1982. Mr. Gutterman joined our company in
1965 as Director of Finance. In 1978 he was named Senior Vice
President -- Finance, and served in that capacity until assuming his present
position. Mr. Gutterman has served as our Chief Financial Officer since 1975.

MARTIN WEINSTEIN has served as Senior Vice President of our company since
1988. Mr. Weinstein has been Chairman and Chief Executive Officer of Chromalloy
Gas Turbine since its formation in 1987. Previously, he was with Chromalloy
American Corporation from 1968 until we acquired it in 1986.

LEON D. BLACK is a Principal and Founding Partner of Apollo Management,
L.P. (since 1995), Apollo Advisors, L.P. (since 1990) and related entities
(private investment firms). Mr. Black has been director of our

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<PAGE> 37

company since December 1997. Mr. Black also is a director of Converse, Inc.,
Samsonite Corporation, Telemundo Group, Inc. and Vail Resorts, Inc.

ALVIN DWORMAN is Chairman of ADCO Group (since 1981) and is Chairman of Lee
National Corp. (since the late 1960s), each of which is a financial services,
merchant banking and real estate company. Mr. Dworman has been a director of our
company since 1987 and is a member of the Audit Committee.

DAVID S. GOTTESMAN is Managing Partner of First Manhattan Co. (since 1964),
an investment management company. Mr. Gottesman has been a director of our
company since 1982 and is Chairman of the Nominating Committee.

DONALD D. KUMMERFELD is President of Magazine Publishers of America (since
1967), a publishing trade organization, and is Chairman of Kummerfeld Associates
(since 1985), an investment banking and financial advisory firm. From 1978 to
1985, he was President and Chief Operating Officer of News America Publishing,
Inc. Mr. Kummerfeld has been a director of our company since 1983 and is a
member of the Compensation Committee.

RICHARD S. LEFRAK is President of LeFrak Organization, Inc. (since 1975), a
diversified, privately held company active in major residential and commercial
real estate development projects, oil and gas exploration, finance and
entertainment production. Mr. LeFrak has been a director of our company since
1986 and is a member of the Nominating Committee.

MICHAEL I. SOVERN is Chancellor Kent Professor of Law and President
Emeritus of Columbia University (since 1983). From 1980 to 1983, he served as
President of Columbia University. Mr. Sovern served as advisor to our Board of
Directors from 1990 to 1996. Mr. Sovern has been a director of our company since
1996 and is a member of the Nominating Committee. Mr. Sovern also is a director
of AT&T, Warner-Lambert and the Shubert Organization.

FRED R. SULLIVAN is Chairman of the Board and Chief Executive Officer of
Richton International Corporation (since 1989), a diversified service company.
From 1987 to 1991, he served as Chairman of the Board and President of Interim
Systems Corporation, a temporary personnel and health care service company. From
1971 to 1988, Mr. Sullivan served as Chairman of the Board and President of
Kidde, Inc., a multi-market manufacturing and service company. Mr. Sullivan has
been a director of our company since 1962 and is a member of the Audit
Committee.

GERALD TSAI, JR. served as Chairman, President and Chief Executive Officer
of Delta Life Corporation, an insurance company, from 1993 to 1997. From 1988 to
1991, he was Chairman of the Executive Committee of the Board of Directors of
Primerica Corporation, a diversified financial services company. From 1987 to
1988, Mr. Tsai was Chairman and Chief Executive Officer of Primerica, and from
1982 to 1987 he held several other offices in that organization. Mr. Tsai has
been a director of our company since 1976, is a member of the Compensation
Committee and is Chairman of the Audit Committee. Mr. Tsai also is a director of
the Meditrust Companies, Palm Beach National Bank and Trust Company, Rite Aid
Corporation, Proffitt's Inc., Triarc Companies, Inc., United Rentals' Inc. and
Zenith National Insurance Corp. He also is a Trustee of each of Boston
University and New York University Medical Center.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

In December 1993 we issued $125,000,000 aggregate principal amount of
8 3/4% Senior Notes due 2001 and $175,000,000 aggregate principal amount of
9 3/8% Senior Subordinated Notes due 2003 in an offering registered under the
Securities Act. The respective indentures governing those notes contain
covenants that, among other things, limit our ability and the ability of our
subsidiaries to:

- - incur indebtedness

- - make asset sales

- - make investments, loans and advances

- - pay dividends and make certain other payments

- - create liens

- - engage in certain transactions with affiliates

- - conduct sale and leaseback transactions

- - engage in certain mergers or consolidations or in the sale of all or
substantially all of our assets

In the event and for so long as we are not in default pursuant to the terms of
their respective indentures and are rated at least BBB- by Standard & Poor's
Ratings Services and Baa3 by Moody's Investors Service, Inc., we would not be
required to comply with certain of these covenants. Our 8 3/4% Senior Notes due
2001 are rated BB by S&P and Ba2 by Moody's. Our 9 3/8% Senior Subordinated
Notes due 2003 are rated B+ by S&P and B1 by Moody's.

We intend to use a portion of the net proceeds received from this offering to
redeem our 8 3/4% Senior Notes due 2001 and our 9 3/8% Senior Subordinated Notes
due 2003. For more details, see "Use of Proceeds."

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<PAGE> 39

DESCRIPTION OF NOTES

The following discussion of the terms of the Notes and the indenture
supplements the general terms and provisions of the debt securities contained in
the accompanying prospectus under the heading "Description of Debt Securities"
and identifies any general terms and provisions described in the accompanying
prospectus that will not apply to the Notes.

You can find the definitions of certain capitalized terms used in this
section under "Description of Debt Securities" in the accompanying prospectus.
For purposes of this section, references to the "Company," "we," "us" and "our"
include only Sequa Corporation and not its Subsidiaries. We will issue the Notes
under an indenture, dated as of July 29, 1999, between us and Harris Trust
Company of New York (formerly known as Bank of Montreal Trust Company), as
Trustee.

The terms of the Notes include those stated in the indenture and those made
part of the indenture by reference to the Trust Indenture Act of 1939, as
amended. A copy of a form of indenture has been filed as an exhibit to the
Registration Statement. See "Incorporation of Certain Documents by Reference" in
the accompanying prospectus.

The following description along with the description in the accompanying
prospectus is a summary of the material provisions of the indenture. It does not
restate the indenture in its entirety. We urge you to read the indenture because
it, and not these descriptions, defines your rights as a holder of the Notes (a
"Holder").

BRIEF DESCRIPTION OF THE NOTES

The Notes are:

- our general unsecured obligations;

- ranked equally with all our existing and future unsecured and
unsubordinated debt; and

- senior to all our existing and future debt which by its terms is made
subordinate to the Notes.

The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples of $1,000.

Assuming we had completed the offering and applied the proceeds as
intended, as of March 31, 1999, on a pro forma basis, there would have been
approximately:

- $496.5 million of Notes sold in this offering (net of original issue
discount);

- $68.1 million of outstanding debt ranking equally with the Notes; and

- $349.6 million of outstanding liabilities (primarily trade payables,
accrued expenses and taxes payable) of our subsidiaries effectively
ranking ahead of the Notes, of which $12.7 million is secured debt.

The indenture will permit us to incur additional unsecured and unsubordinated
debt. However, our incurrence of secured debt will be limited by the
restrictions described under the subheading "-- Certain Covenants -- Limitation
on Liens" below.

Most of our operations are conducted through our subsidiaries. Accordingly,
we are dependent upon the distribution of the earnings of our current and any
future subsidiaries, whether in the form of dividends, advances or payments on
account of intercompany obligations, to service our debt obligations, including
the Notes. In addition, the claims of the Holders of Notes are subject to the
prior payment of all liabilities (whether or not for borrowed money) and to any
preferred stock interest of our subsidiaries.

PRINCIPAL, MATURITY AND INTEREST

Notes in the aggregate principal amount of $500 million will be issued in
the offering and will mature on August 1, 2009.

Interest on the Notes will accrue at the rate of 9% per annum and will be
paid every six months each February 1 and August 1, beginning on February 1,
2000, to the persons who are registered Holders at the close of business on the
January 15 and July 15 immediately before the applicable interest payment date.

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Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from and including July
29, 1999. Interest will be computed on the basis of a 360-day year composed of
twelve 30-day months. The Notes will not be entitled to the benefit of any
mandatory sinking fund.

METHODS OF RECEIVING PAYMENTS ON THE NOTES

We will maintain an office or agency where Notes may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
where Notes may be presented for payment ("Paying Agent"). We will make all
principal, premium and interest payments on the Notes at the office or agency of
the Paying Agent and Registrar within the City of New York unless we elect to
make interest payments by check mailed to the Holders at their addresses set
forth in the register of the Notes kept by the Registrar.

PAYING AGENT AND REGISTRAR FOR THE NOTES

The Trustee will initially act as Paying Agent and Registrar.

TRANSFER AND EXCHANGE

The Notes may be transferred, or exchanged for an equal aggregate principal
amount of Notes of other authorized denominations as may be requested, upon
surrender of the Notes to the Registrar and upon fulfillment of all other
requirements of the Registrar.

OPTIONAL REDEMPTION

We may at our option redeem all or part of the Notes on at least 30 days,
but not more than 60 days, prior notice mailed to the registered address of each
Holder of Notes. The redemption price will equal the greater of:

(1) 100% of the principal amount of the Notes to be redeemed; and

(2) the sum of the present values of the Remaining Scheduled Payments
discounted to the date of redemption, on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months), at the Treasury Rate plus
50 basis points;

plus accrued and unpaid interest thereon to the date of redemption.

"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption date if such Note were
not redeemed. However, if such redemption date is not an interest payment date
with respect to such Note, the amount of the next succeeding scheduled interest
payment thereon will be reduced by the amount of interest accrued thereon to
such redemption date.

"Treasury Rate" means an annual rate equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such redemption date. The semiannual
equivalent yield to maturity will be computed as of the second business day
immediately preceding such redemption date.

"Comparable Treasury Issue" means the fixed rate United States Treasury
security selected by an Independent Investment Banker as having a maturity most
comparable to the remaining term of the Notes (and which is not callable prior
to maturity) to be redeemed that would be utilized, at the time of selection and
in accordance with customary financial practices, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
Notes to be redeemed.

"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Company.

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"Reference Treasury Dealer" means each of Bear, Stearns & Co. Inc. and
Chase Securities Inc. and their respective successors. If any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company will appoint in its place another
nationally recognized investment banking firm that is a Primary Treasury Dealer.

"Comparable Treasury Price" means:

(1) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) on the third business day preceding such redemption date, as set
forth in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities"; or

(2) if such release (or any successor release) is not published or
does not contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest or lowest of such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.

"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m., New York
City time, on the third business day preceding such redemption date.

On and after the redemption date, interest will cease to accrue on the
Notes or any portion of the Notes called for redemption. On or before the
redemption date, we will deposit with a paying agent (or the Trustee) money
sufficient to pay the redemption price of and accrued interest on the Notes to
be redeemed on such date. If less than all of the Notes, are to be redeemed, the
Trustee will select the Notes to be redeemed by a method determined by the
Trustee to be fair and appropriate.

CHANGE OF CONTROL

In the event of a Change of Control, we will be required to commence a
Change of Control Offer to purchase all outstanding Notes at a purchase price
equal to 101% of the aggregate principal amount of the Notes plus accrued and
unpaid interest, if any, to the date of purchase (the "Change of Control
Price"). Within 30 days following the date upon which the Change of Control
occurred, we must send, by first class mail, a notice to each Holder of the
Notes, with a copy to the Trustee, stating:

(1) that an offer to purchase the Notes is being made pursuant to the
covenant entitled "Change of Control" (the "Change of Control Offer") and
that all Notes tendered will be accepted for payment;

(2) the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 40 days from the date such notice is
mailed other than as may be required by law (the "Change of Control Payment
Date");

(3) that any Note not tendered will continue to accrue interest;

(4) that, unless we default in the payment of the Change of Control
Price, all Notes accepted for payment pursuant to the Change of Control
Offer will cease to accrue interest after the Change of Control Payment
Date;

(5) that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the applicable Paying Agent at the address specified in
the notice no later than the close of business on the business day
immediately prior to the Change of Control Payment Date;

(6) that Holders will be entitled to withdraw their election if the
applicable Paying Agent receives, not later than the close of business on
the business day two business days immediately prior to the
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Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have such Notes purchased; and

(7) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple of $1,000.

On the Change of Control Payment Date, we will:

(1) accept for payment Notes or portions of Notes tendered pursuant to
the Change of Control Offer;

(2) deposit in immediately available funds with the applicable Paying
Agent an amount equal to the Change of Control Price in respect of all
Notes or portions of Notes so tendered; and

(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the principal
amount of the Notes or portions of Notes tendered to us.

The Paying Agent will promptly mail to each Holder of Notes so accepted the
Change of Control Price for such Notes and return any Notes which were tendered
but for which a withdrawal election was received by the Paying Agent before the
Change of Control Payment Date, and the Trustee will promptly authenticate and
mail to each Holder a new Note equal in principal amount to any unpurchased
portion of such Notes surrendered, if any; provided, however, that each such new
Note shall be in a principal amount of $1,000 or an integral multiple of $1,000.

Other agreements governing our Indebtedness, including the revolving credit
agreement, include a covenant requiring us to repurchase the Indebtedness
incurred pursuant to those agreements in the event we experience a change of
control. In addition, those agreements may contain a provision to the effect
that any change of control would constitute an event of default under the
agreement. Therefore, the occurrence of a Change of Control could give rise to
an obligation on our part to repay concurrently Indebtedness outstanding under
the revolving credit agreement and other debt instruments (unless the obligation
is waived by the lenders under the revolving credit agreement or the other debt
instruments). Accordingly, our obligation to offer to repurchase the Notes may
be of limited value if we cannot obtain sufficient funding to repay all
Indebtedness then becoming due.

We will comply with the requirements of Section 14(e) and Rule 14e-1 under
the Exchange Act and any other securities laws and regulations under those laws
to the extent those laws and regulations are applicable to the repurchase of the
Notes in connection with a Change of Control. If the provisions of any those
laws or rules conflict with the provisions of the indenture and the securities
resolution establishing the Notes relating to a Change of Control Offer, we will
be required to comply with the provisions of those laws or rules and will be
deemed not to have breached our obligations relating to the Change of Control
Offer by virtue of such compliance.

During any period in which (1) no Default or Event of Default has occurred
and is continuing and (2) both Moody's and S&P assign to the Notes an Investment
Grade Rating (the "Suspension Period"), we will not be subject to the provisions
of this "-- Change of Control" covenant; provided, however, that if subsequently
both Moody's and S&P withdraw their ratings of the Notes, or downgrade the
ratings assigned to the Notes to below an Investment Grade Rating, upon such
withdrawal or downgrading the Suspension Period shall terminate and we will be
again subject to the provisions of this "-- Change of Control" covenant;
provided, further, however, that if a Change of Control occurs during a
Suspension Period and such Suspension Period is terminated as provided above,
such Change of Control shall be deemed to have occurred immediately after such
termination.

"Affiliated Person" of any specified person means any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified person.

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"Capital Stock" means (1) with respect to any person formed as a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, including, without
limitation, common stock and preferred stock of such person and (2) with respect
to any person formed other than as a corporation, any and all partnership or
other equity interests of such other person.

"Change of Control" means the occurrence of any of the following:

(1) the sale, lease, exchange or other transfer, in one or a series of
related transactions, of all or substantially all of the Company's assets to any
person or group (as such term is used in Section 13(d) of the Exchange Act);

(2) the adoption of a plan by the stockholders of the Company relating to
the liquidation or dissolution of the Company;

(3) except as provided below, the acquisition of beneficial ownership by
any person or group, together with any Affiliated Persons thereof (collectively,
the "Interested Stockholders"), of a direct or indirect interest in more than
35% (or, in the case of Gabelli, 49%) of the voting power of the then
outstanding Capital Stock of the Company entitled to vote generally in the
election of the Board; or

(4) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (together with any new directors
whose election or appointment by the Board or whose nomination for election or
appointment by the stockholders of the Company was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board then in office;

provided, however, that for the purposes of the foregoing clauses (1) and (3),
the terms "person" or "group" shall not be deemed to include Norman E. Alexander
("Alexander"), his spouse, any descendant of Alexander or the spouse of any such
descendant, the estate of Alexander, or any trust or other similar arrangement
for the benefit of Alexander or his spouse, any descendent of Alexander or the
spouse of any such descendant or the estate of Alexander or any corporation or
other person controlled solely by one or more of Alexander or his spouse, any
descendant of Alexander or the spouse of any such descendant or the estate of
Alexander through the ownership of a majority of the outstanding voting Capital
Stock of such corporation or other person (collectively, the "Alexander
Stockholders"); and provided, further, that there shall not be a "Change of
Control" pursuant to clause (3) above so long as the Alexander Stockholders
beneficially own a greater percentage of the voting power of the then
outstanding Capital Stock of the Company than the Interested Stockholders.

"control" means (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any person, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ability to exercise voting power, by contract or otherwise.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Gabelli" means any person controlled by, or which is an Affiliated Person
of, Mario Gabelli.

"Investment Grade Rating" means (1) with respect to S&P, any of the
categories from and including AAA to and including BBB- (or equivalent successor
categories) and (2) with respect to Moody's, any of the categories from and
including Aaa to and including Baa3 (or equivalent successor categories).

"Moody's" means Moody's Investors Service, Inc. and any successor thereto
which is a nationally recognized statistical rating organization.

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

"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and any successor thereto which is a nationally
recognized statistical rating organization.

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CERTAIN COVENANTS

The indenture and the securities resolution establishing the Notes will
contain, among others, the following covenants:

Limitation on Liens. The indenture and the securities resolution
establishing the Notes restrict our ability and the ability of our Restricted
Subsidiaries to create or assume, any notes, bonds, debentures or other similar
evidences of Indebtedness secured by any mortgage, pledge, security interest or
lien (any such mortgage, pledge, security interest or lien being referred to
herein as a "Lien" or "Liens") of or upon certain assets. If a Lien is created
or assumed by us or any Restricted Subsidiary of or upon any Principal Property
owned by us or by any Restricted Subsidiary or on shares of capital stock or
evidence of Indebtedness of any Restricted Subsidiary, then as long as such
Indebtedness is secured by the Lien, we will cause all Notes (together with, at
our election, any other Indebtedness) to be secured by such a Lien equally and
ratably with (or prior to) any and all other Indebtedness thereby secured.

The foregoing will not apply to any of the following:

(1) Liens on any Principal Property, shares of capital stock or
Indebtedness of any corporation existing at the time such corporation
becomes a Subsidiary;

(2) Liens on any Principal Property, shares of capital stock or
Indebtedness acquired, constructed or improved by us or any Restricted
Subsidiary after the date of the indenture which are created or assumed
prior to or at the time of such acquisition, construction or improvement or
within 365 days after the acquisition, completion of construction or
improvement or commencement of commercial operation of such property, to
secure or provide for the payment of all or any part of the purchase price
or the cost of such construction or improvement thereof;

(3) Liens on any Principal Property, shares of capital stock or
Indebtedness existing at the time of acquisition thereof (including
acquisition through merger or consolidation);

(4) Liens on any Principal Property or shares of capital stock or
Indebtedness acquired from a corporation which is merged with or into us or
a Restricted Subsidiary;

(5) Liens on any Principal Property, shares of capital stock or
Indebtedness to secure Indebtedness to us or to a Restricted Subsidiary;

(6) Liens on any Principal Property, shares of capital stock or
Indebtedness in favor of the United States of America or any state thereof
or The Commonwealth of Puerto Rico, or any department, agency or
instrumentality or political subdivision of the United States of America or
any state thereof or The Commonwealth of Puerto Rico, to secure partial,
progress, advance or other payments, or to secure any Indebtedness incurred
for the purpose of financing all or any part of the cost of acquiring,
constructing or improving any Principal Property, shares of capital stock
or Indebtedness subject to such Liens (including Liens incurred in
connection with pollution control, industrial revenue, Title XI maritime
financings or similar financings), or other Liens in connection with the
issuance of tax-exempt industrial revenue bonds;

(7) Liens existing as of the date of original issuance of the Notes;

(8) Liens for taxes, assessments or other government charges, the
validity of which is being contested in good faith by appropriate
proceedings and materialmen's, mechanics' and other like Liens or deposits
to obtain the release of such Liens;

(9) Liens created or deposits made to secure the payment of workers'
compensation claims or the performance of, or in connection with, tenders,
bids, leases, public or statutory obligations, surety and appeal bonds,
contracts, performance and return-of-money bonds or to secure (or in lieu
of) surety or appeal bonds and Liens made in the ordinary course of
business for similar purposes; and

(10) any extension, renewal or replacement of any Liens referred to in
the foregoing clauses (1) to (9), inclusive. However, such extension,
renewal or replacement shall be limited to the property, shares

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of capital stock or Indebtedness which secured the Lien so extended,
renewed or replaced (plus improvements on such property).

We or any Restricted Subsidiary may create or assume Liens in addition to
those permitted above, and renew, extend or create such Liens, provided, that at
the time of such creation, assumption, renewal or replacement, and after giving
effect to such creation, assumption, renewal or replacement, the aggregate
amount of all Indebtedness so secured by a Lien (without regard to Indebtedness
permitted in clauses (1) through (10) above), plus all Attributable Debt of us
and our Restricted Subsidiaries in respect of Sale and Leaseback Transactions
which would not be permitted by either clause (1) or (2) of the first paragraph
under the "Limitation on Sale and Leaseback Transaction" covenant does not
exceed 20% of Consolidated Assets.

"Indebtedness" means, without duplication:

(1) all obligations in respect of borrowed money or for the deferred
purchase or acquisition price of property (including all types of real,
personal, tangible, intangible or mixed property) or services (excluding
trade accounts payable, deferred taxes and accrued liabilities which arise
in the ordinary course of business) which are, in accordance with GAAP,
includible as a liability on a balance sheet consolidated for financial
reporting purposes in accordance with GAAP;

(2) all amounts representing the capitalization of rental obligations
in accordance with GAAP; and

(3) all Contingent Obligations with respect to the foregoing.

For purposes of clause (3) above, "Contingent Obligation" means, as to any
person, any obligation of such person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such person,
whether or not contingent:

(a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor;

(b) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor;

(c) to purchase property, securities or services primarily for the
purpose of assuring the beneficiary of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation;
or

(d) otherwise to assure or hold harmless the beneficiary of such
primary obligation against loss in respect thereof;

provided, however, that the term "Contingent Obligation" shall not include the
endorsement of instruments for deposit or collection in the ordinary course of
business. The term "Contingent Obligation" shall also include the liability of a
general partner in respect of the primary obligations of a partnership in which
it is a general partner. The amount of any Contingent Obligation of a person
shall be deemed to be an amount equal to the principal amount of the primary
obligation in respect to which such Contingent Obligation is made.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.

"Restricted Subsidiary" means any of our consolidated Subsidiaries that own
any Principal Property.

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"Subsidiary" of any person means:

(1) a corporation more than 50% of the outstanding voting stock of
which is owned, directly or indirectly, by such person or by one or more
other Subsidiaries of such person or by such person and one or more
Subsidiaries thereof; or

(2) any other person (other than a corporation) in which such person,
or one or more Subsidiaries of such person or such person and one or more
Subsidiaries thereof, directly or indirectly, has at least a majority
ownership and power to direct the policy, management and affairs thereof.

"Principal Property" means the principal manufacturing facilities owned by
us or a Restricted Subsidiary located in the United States, except such as the
Board, in its good faith opinion, reasonably determines is not significant to
the business, financial condition and earnings of us and our consolidated
Subsidiaries taken as a whole, as evidenced by a Board resolution, and except
for:

(1) any and all personal property, including, without limitation, (A)
motor vehicles and other rolling stock, and (B) office furnishings and
equipment and information and electronic data processing equipment;

(2) any property financed through obligations issued by a state,
territory or possession of the United States, or any political subdivision
or instrumentality of the foregoing; or

(3) any real property held for development or sale.

"Board" means our Board of Directors or any authorized committee of the
Board.

"Attributable Debt," when used in connection with a Sale and Leaseback
Transaction, shall mean, as of any particular time, the lesser of:

(1) the fair market value, as determined in good faith by the Board
and evidenced by a Board resolution set forth in an Officers' Certificate
delivered to the Trustee, of the property subject to such arrangement; and

(2) the then present value (computed by discounting the rate of
interest implicit in such Sale and Leaseback Transaction, determined in
accordance with GAAP) of the obligation of a lessee for net rental payments
during the remaining term of any lease in respect of such property
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended). The term "net rental payments" under
any lease for any period means the sum of the rental payments required to
be paid in such period by the lessee thereunder, not including, however,
any amounts required to be paid by such lessee (whether or not designated
as rental or additional rental) on account of maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges required to
be paid by such lessee thereunder or any amounts required to be paid by
such lessee thereunder contingent upon the amount of sales, maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges.

"Officer" means the Chairman, any Vice-Chairman, the President, any
Executive or Senior Vice President, any Vice-President, the Treasurer or any
Assistant Treasurer, the Secretary or any Assistant Secretary of Sequa
Corporation.

"Officers' Certificate" means a certificate signed by two of our Officers,
and delivered to the Trustee.

"Consolidated Assets" means our assets, determined in accordance with GAAP
and consolidated for financial reporting purposes in accordance with GAAP, such
assets to be valued at book value.

Limitation on Sale and Leaseback Transactions. We will not, and will not
permit any Restricted Subsidiary to, lease any Principal Property owned by us or
such Restricted Subsidiary (except for leases for a term of not more than three
years), which has been or is to be sold or transferred by us or such Restricted
Subsidiary on the security of such Principal Property (a "Sale and Leaseback
Transaction"), unless either:

(a) we or such Restricted Subsidiary would be entitled pursuant to the
"Limitation on Liens" covenant described above to incur Indebtedness
secured by a Lien on the Principal Property to be leased

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back equal in amount to the Attributable Debt with respect to such Sale and
Leaseback Transaction without equally and ratably securing the Notes; or

(b) we apply an amount equal to the greater of the net proceeds or the
fair market value, as determined in good faith by the Board and evidenced
by a Board resolution set forth in an Officers' Certificate delivered to
the Trustee, of the property so sold to the purchase of Principal Property
or to the retirement (other than any mandatory retirement), within 365 days
of the effective date of any such Sale and Leaseback Transaction, of Notes
or other Funded Indebtedness. Any such retirement of Notes will be made in
accordance with the indenture. The amount to be applied to such retirement
of Notes or other Funded Indebtedness will be reduced by an amount equal to
the sum of:

(1) an amount equal to the principal amount of any Notes delivered
within 365 days after the effective date of such Sale and Leaseback
Transaction to the Trustee for retirement and cancellation, plus

(2) the principal amount of other Funded Indebtedness voluntarily
retired by us within such 365-day period,

excluding, in each case, retirements pursuant to mandatory sinking fund or
prepayment provisions, if any, and payments at maturity.

We or any Restricted Subsidiary may enter into Sale and Leaseback
Transactions in addition to any permitted by the immediately preceding paragraph
and without any obligation to retire any Notes or other Funded Indebtedness if
at the time of entering into such Sale and Leaseback Transaction and after
giving effect to such Sale and Leaseback Transaction, Attributable Debt
resulting from such Sale and Leaseback Transaction, plus the aggregate amount of
all Indebtedness secured by a Lien (not including Indebtedness excluded as
provided in clauses (1) through (5) under the "Limitation on Liens" covenant
above), does not exceed 20% of Consolidated Assets.

"Funded Indebtedness" means all Indebtedness of us and our Restricted
Subsidiaries maturing by its terms more than one year after, or which is
renewable or extendable at our option for a period ending more than one year
after, the date as of which Funded Indebtedness is being determined.

Merger, Consolidation and Sale of Assets. We will not consolidate with or
merge into, or transfer all or substantially all of our assets to, any person in
any transaction in which we are not the survivor, unless:

(1) the person is organized under the laws of the United States or a
State thereof or is organized under the laws of a foreign jurisdiction and
consents to the jurisdiction of the courts of the United States or a State
thereof;

(2) the person assumes by supplemental indenture all of our
obligations under the indenture and the Notes; and

(3) immediately after the transaction no Default exists.

The successor will be substituted for us, and thereafter all of our obligations
under the indenture and the Notes will terminate.

EVENTS OF DEFAULT

An "Event of Default" with respect to the Notes will occur if:

(1) we default in any payment of interest on any of the Notes when the
same becomes due and payable and the Default continues for a period of 60
days;

(2) we default in the payment of the principal and premium, if any, of
any of the Notes when the same becomes due and payable at maturity or upon
redemption, acceleration or otherwise and the Default continues for five or
more days;

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(3) we default in the payment or satisfaction of any sinking fund
obligation with respect to any of the Notes as required by the securities
resolution establishing the Notes and the Default continues for a period of
60 days;

(4) we default in the performance of any of our other agreements
applicable to the Notes and the Default continues for 90 days after the
notice specified below;

(5) pursuant to or within the meaning of any Bankruptcy Law:

(a) we commence a voluntary case;

(b) we consent to the entry of an order for relief against us in an
involuntary case;

(d) we make a general assignment for the benefit of our creditors;
or

(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:

(a) is for relief against us in an involuntary case;

(b) appoints a Custodian for us or for all or substantially all of
our property; or

The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or a similar official under any Bankruptcy Law.

"Default" means any event which is, or after notice or passage of time
would be, an Event of Default. A Default under subparagraph (4) above is not an
Event of Default until the Trustee or the Holders of at least 33 1/3% in
principal amount of the Notes notify us of the Default, and we do not cure the
Default within the time specified after receipt of the notice. The Trustee may
require indemnity satisfactory to it before it enforces the indenture or the
Notes. Subject to certain limitations, Holders of a majority in principal amount
of the Notes may direct the Trustee in its exercise of any trust or power with
respect to the Notes. Except in the case of Default in payment on the Notes, the
Trustee may withhold from Holders of the Notes notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest. We are required to furnish the Trustee
annually a brief certificate as to our compliance with all conditions and
covenants under the indenture.

The failure to redeem any of the Notes subject to a conditional redemption
is not an Event of Default if any event on which the redemption is so
conditioned does not occur and is not waived before the scheduled redemption
date.

The indenture does not have a cross-default provision. Thus, a default by
us on any other debt, including any other series of debt securities, would not
constitute an Event of Default with respect to the Notes.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

The Notes may be defeased in accordance with their terms and as set forth
below. We at any time may terminate as to the Notes all of our obligations
(except for certain obligations, including obligations with respect to
defeasance trust and obligations to register the transfer or exchange of a Note,
to replace destroyed, lost or stolen Notes and to maintain paying agencies in
respect of the Notes) with respect to the Notes and the indenture ("legal
defeasance"). We at any time may terminate as our obligations with respect to
the Notes under any restrictive covenants which are applicable to the Notes
("covenant defeasance").

We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, the Notes may not be accelerated because of an

S-46
<PAGE> 49

Event of Default. If we exercise our covenant defeasance option, the Notes may
not be accelerated by reference to any restrictive covenants which are
applicable to the Notes.

To exercise either defeasance option as to the Notes, we must:

(1) irrevocably deposit in trust (the "defeasance trust") with the
Trustee or another trustee money or U.S. Government Obligations, deliver a
certificate from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and interest when
due on the deposited U.S. Government Obligations, without reinvestment,
plus any deposited money without investment will provide cash at the times
and in the amounts as will be sufficient to pay the principal and interest
when due on all the Notes to maturity or redemption, as the case may be;
and

(2) comply with certain other conditions.

In particular, we must obtain an opinion of tax counsel that the defeasance
will not result in recognition of any gain or loss to holders for Federal income
tax purpose. "U.S. Government Obligations" means direct obligations of the
United States or an instrumentality of the United States, the payment of which
is unconditionally guaranteed by the United States, which, in either case, have
the full faith and credit of the United States of America pledged for payment
and which are not callable at the issuer's option, or certificates representing
an ownership interest in those obligations.

MODIFICATION OF THE INDENTURE AND THE NOTES; WAIVERS

The indenture and the Notes may be amended, and any default may be waived
as follows:

- The Notes and the indenture may be amended with the consent of the
Holders of a majority in principal amount of the debt securities of all
series affected voting as one class.

- A Default on the Notes may be waived with the consent of the Holders of a
majority in principal amount of the Notes.

However, without the consent of each Holder affected, no amendment or
waiver may:

(1) reduce the amount of the Notes whose Holders must consent to an
amendment or waiver;

(2) reduce the interest on or change the time for payment of interest
on any of the Notes;

(3) change the fixed maturity of any of the Notes;

(4) reduce the principal of the Notes;

(5) change the currency in which the principal or interest is payable;
or

(6) waive any Default in payment of interest on or principal of the
Notes.

Without the consent of any Holder, the indenture or the Notes may be
amended:

(1) to cure any ambiguity, omission, defect or inconsistency;

(2) to provide for assumption of Company obligations to Holders in the
event of a merger or consolidation requiring the assumption;

(3) to provide that specific provisions of the indenture shall not
apply to debt securities not previously issued;

(4) to create a series and establish its terms;

(5) to provide for a separate trustee for one or more series; or

(6) to make any change that does not materially adversely affect the
rights of any Holder.

GOVERNING LAW

The laws of the State of New York will govern the indenture and the Notes,
unless federal law governs.
S-47
<PAGE> 50

UNDERWRITING

We and the Underwriters named below have entered into an underwriting
agreement (the "Underwriting Agreement") with respect to the Notes. Subject to
certain conditions, each Underwriter has severally agreed to purchase the total
principal amount of Notes shown opposite its name in the following table:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- ----------- ----------------
<S> <C>
Bear, Stearns & Co. Inc. ................................... $268,000,000
Chase Securities Inc. ...................................... 175,000,000
BNY Capital Markets, Inc. .................................. 25,000,000
Wasserstein Perella Securities, Inc. ....................... 22,000,000
Deutsche Bank Securities Inc. .............................. 10,000,000
------------
Total............................................. $500,000,000
============
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Notes if any are purchased.

Notes sold by the Underwriters to the public will initially be offered at
the initial public offering of 99.305% of the principal amount of the Notes. If
all the Notes are not sold at the initial offering price, the Underwriters may
change the offering price and the other selling terms. The Underwriting
Agreement provides that we will pay as Underwriters' compensation 1.625% of the
principal amount of the Notes, or $8,125,000. The expenses of the offering of
the Notes are estimated to be $500,000.

The Underwriters and their affiliates engage at various times in general
financing and banking transactions with, or provide financial advisory services
to, us and our affiliates. The Chase Manhattan Bank, an affiliate of Chase
Securities Inc., is administrative agent and a lender under, and The Bank of New
York, an affiliate of BNY Capital Markets, Inc., and Bankers Trust Company, an
affiliate of Deutsche Bank Securities Inc., are lenders under, our $150.0
million revolving credit facility.

The Notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the Notes on any national securities
exchange or quotation system. However, the Underwriters have advised us that the
Underwriters intend to make a market in the Notes but are not obligated to do so
and may discontinue market making at any time without notice. There are no
guarantees regarding the liquidity of the trading market for the Notes.

In connection with this offering, the Underwriters may purchase and sell
the Notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater total
principal amount of Notes than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the Notes
while this offering is in progress.

The Underwriters may also impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because they have repurchased Notes sold by or for the
account of that particular Underwriter in stabilizing or short covering
transactions.

These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Notes. As a result, the price of the Notes may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the Underwriters at any
time. These transactions may be effected in the over-the-counter market or
otherwise.

We have agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, and to
contribute to payments in respect of those liabilities.

S-48
<PAGE> 51

LEGAL MATTERS

Certain legal matters with respect to the validity of the issuance of the
Notes will be passed upon for us by Cahill Gordon & Reindel, a partnership
including a professional corporation, New York, New York. Certain legal matters
in connection with the Notes offered hereby will be passed upon for the
Underwriters by Cadwalader, Wickersham & Taft, New York, New York.

EXPERTS

The financial statements incorporated by reference in this prospectus
supplement have been audited by Arthur Andersen LLP, 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
accounting and auditing in giving said reports.

S-49
<PAGE> 52

PROSPECTUS

SEQUA CORPORATION

$500,000,000

DEBT SECURITIES

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

At various times we may offer debt securities in one or more series worth
up to $500,000,000 aggregate principal amount. We will provide the specific
terms of each series in supplements to this prospectus. You should read this
prospectus and any supplement carefully before you invest.

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

This investment involves risks. See the Risk Factors section beginning on page
1.

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.

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

THIS PROSPECTUS IS DATED JANUARY 22, 1999.
<PAGE> 53

RISK FACTORS

Before you invest in the debt securities, you should consider carefully the
following factors, in addition to the other information contained in this
prospectus.

OUR SIGNIFICANT LEVEL OF INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL
HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE DEBT SECURITIES.

We now have, and when debt securities are issued will continue to have, a
significant amount of indebtedness. Our level of indebtedness could adversely
affect our ability to:

- generate sufficient cash to service the debt securities;

- generate sufficient cash to service our other debt obligations; and

- obtain additional financing in the future.

If our available cash is no longer sufficient to fund our expenditures and debt
service obligations, including the debt securities, we may need to raise
additional funds by:

- selling equity securities;

- refinancing all or a part of our indebtedness; or

- selling some of our assets.

We cannot assure you that any of these alternate sources of funds would be
available in amounts sufficient for us to meet our obligations. Moreover, even
if we could meet our obligations, our leveraged capital structure could limit
our ability to:

- finance capital expenditures;

- compete effectively;

- expand our business; or

- operate successfully under adverse economic conditions.

The chart below indicates important financial statistics as of September 30,
1998:

<TABLE>
<S> <C>
Total consolidated indebtedness....................... $510.7 million
Total shareholders' equity............................ $632.7 million
Debt to equity ratio.................................. .81x
</TABLE>

WE MAY HAVE THE ABILITY TO BORROW ADDITIONAL FUNDS THE REPAYMENT OF WHICH MAY
INCREASE THE RISKS THAT WE ALREADY FACE.

Agreements governing the debt securities and our other indebtedness may
permit us and our subsidiaries to incur additional indebtedness, including
secured indebtedness. If new indebtedness is added to our and our subsidiaries'
current debt levels, the related risks that we and they now face could increase.

IF WE FAIL TO COMPLY WITH RESTRICTIONS FOUND IN AGREEMENTS GOVERNING OUR OTHER
INDEBTEDNESS, THEN WE MAY BE FORCED TO REPAY OUR OTHER INDEDEBTEDNESS ON AN
ACCELERATED BASIS. ACCELERATION OF OUR OTHER INDEBTEDNESS COULD ADVERSELY IMPACT
OUR ABILITY TO REPAY THE DEBT SECURITIES.

Agreements governing our other indebtedness may impose restrictions on our
operations and activities and require us to comply with financial covenants,
including the maintenance of financial ratios. Currently, we are in compliance
with these restrictive covenants and financial ratios. However, if we fail to
comply with any of these restrictions or covenants, an event of default may
arise under the applicable instrument. The event of default would permit
acceleration of the indebtedness under the applicable instrument. Moreover, this
could result in acceleration of indebtedness under other instruments which
contain cross-acceleration or cross-
<PAGE> 54

default provisions. If our other indebtedness is accelerated, we may not have
sufficient cash to service the debt securities or to conduct business as usual.

WE MAY BE UNABLE TO REPAY THE DEBT SECURITIES IF WE DO NOT RECEIVE DISTRIBUTIONS
OR BORROWINGS FROM OUR SUBSIDIARIES. MOREOVER, THE DEBT SECURITIES ARE JUNIOR TO
ALL OUR SUBSIDIARIES' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE
BORROWINGS.

We are both an operating company and a holding company. Our ability to meet
our financial obligations will largely depend upon distributions and/or
borrowings from our subsidiaries, where some of our more significant operations
are conducted. We may not receive dividends or other loans and advances from our
subsidiaries as a result of statutory or contractual restrictions that may
include requirements to maintain minimum levels of working capital and other
assets.

The debt securities will effectively be junior to all liabilities of our
subsidiaries. In the event of a bankruptcy, liquidation or dissolution of a
subsidiary and following the payment of these liabilities, the subsidiary may
not have sufficient assets remaining to make payments to us as a shareholder or
otherwise. As of September 30, 1998, our subsidiaries had $388.7 million of
outstanding liabilities (primarily trade payables, accrued expenses and taxes
payable). Unless otherwise stated in a prospectus supplement with respect to a
series of debt securities, the indenture governing the debt securities will
permit our subsidiaries to incur additional indebtedness, including secured
indebtedness under certain circumstances.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN ANY OR ALL OF THE FOUR INDUSTRY
SEGMENTS IN WHICH WE OPERATE.

We encounter substantial competition in each of our product areas. If we
are unable to respond successfully to changing competitive conditions, the
demand for our products could be adversely affected. We believe that the
principal competitive factors in each of our segments are product quality and
conformity to customer specifications, design and engineering capabilities,
product development, timeliness of delivery and price. Our competitors may
develop products that are superior to our products or may adapt more quickly
than we do to new technologies or evolving customer requirements. In addition,
certain of our competitors have greater financial and other resources than we
possess.

OUR LARGEST OPERATING UNIT PREDOMINANTLY SELLS TO THE COMMERCIAL AVIATION
SECTOR. IF SALES TO THE COMMERCIAL AVIATION SECTOR DECLINE, OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS MAY BE MATERIALLY ADVERSELY AFFECTED.

Chromalloy Gas Turbine is the largest of our operating units and its sales
represent, in the aggregate, approximately 44% of our total revenue. Moreover,
approximately 80% of Gas Turbine's sales are to the commercial aviation sector,
including sales to original equipment manufacturers and after-market sales. If
we lose one or more customers in the commercial aviation sector, or if there is
a significant reduction in sales to them, our financial condition and results of
operations may be materially adversely affected. We cannot assure you that we
will be able to retain these customers or that we will continue to sell to them
in the future at current levels. Sales to these customers are affected by their
specific business requirements and by conditions in the airline industry
generally. In addition, the airline industry as a whole may be affected by
regulatory changes and/or economic downturns. We cannot predict when, or if,
these or other events will occur or what impact, if any, they would have on our
operations, earnings and revenues or on the operations of our customers.

IF WE FAIL TO COMPLY WITH ENVIRONMENTAL LAWS AND REGULATIONS, THEN WE MAY INCUR
COSTS WHICH HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION.

We are subject to federal, state and local environmental laws and
regulations. We cannot assure you that compliance with environmental laws or
remedial obligations thereunder will not have a material adverse effect on our
results of operations or financial condition in the future. Moreover, we cannot
predict future changes to environmental laws and regulations or interpretations
or enforcement thereof.

2
<PAGE> 55

We have incurred, and expect to continue to incur, costs arising from
compliance with environmental laws and remedial obligations. These laws relate
to, among other things, the discharge of contaminants into water and air and
onto land and the disposal of waste. We believe that the ultimate resolution of
known environmental matters, net of liabilities already accrued on our balance
sheet, will not have a material adverse effect on our results of operations or
financial condition. However, we cannot predict the potential existence of
currently unknown environmental issues.

ONE PERSON OWNS AND CONTROLS A SUBSTANTIAL AMOUNT OF OUR STOCK AND MAY,
THEREFORE, INFLUENCE OUR AFFAIRS.

Norman E. Alexander, our Chairman of the Board of Directors and Chief
Executive Officer, effectively can direct our policies and the election of
directors. Mr. Alexander beneficially owns an aggregate of approximately 38% of
all classes of our stock. Moreover, he controls approximately 53% of the voting
power thereof. As a result of this control, Mr. Alexander can effectively
influence any merger or sale of all or substantially all of our assets or the
initiation of a "going private" transaction. Mr. Alexander also could
effectively prevent or cause a "change of control" of our company. The interests
of Mr. Alexander may be different than those of the holders of the debt
securities.

OUR FAILURE, OR THE FAILURE OF BUSINESSES ON WHICH WE RELY, TO BE YEAR 2000
COMPLIANT COULD NEGATIVELY IMPACT OUR OPERATIONS.

The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. If we and/or third parties on which we
rely do not successfully update our programs to avoid this issue, we could
experience system failures or miscalculations. As a result we could experience
disruptions in our ability to engage in normal business activities. The possible
consequences could include, among other things:

- - temporary plant closings

- - delays in the receipt of key purchased materials and services

- - customer and vendor relations problems

- - delays in the delivery of finished products

- - invoice and collection errors

The occurrence of any or all of these consequences could have a material
adverse impact on our results of operations, financial condition and cash flows.

YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE DEBT
SECURITIES.

The debt securities are new securities for which there currently is no
market. We cannot assure you as to the development or liquidity of any market
for the debt securities.

3
<PAGE> 56

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by us with the Securities and Exchange
Commission are incorporated herein by reference as of their respective dates of
filing and shall be deemed to be a part hereof:

1. Our Annual Report on Form 10-K (File No. 1-804) for the year ended
December 31, 1997.

2. Our Current Reports on Form 8-K (File No. 1-804) filed September 10,
1998 and November 6, 1998.

3. Our Quarterly Reports on Form 10-Q (File No. 1-804) for the quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998.

4. Our Proxy Statement on Schedule 14A (File No. 1-804) filed March 30,
1998.

All documents filed by us pursuant to Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934, as amended, subsequent to the date of
this prospectus and before the termination of this offering shall be deemed to
be incorporated by reference and a part of this prospectus from the date those
documents are filed.

For purposes of this prospectus, any statement in a document incorporated
or deemed incorporated by reference is modified or superseded to the extent that
a statement in this prospectus, or in any subsequently filed document which is
or is deemed to be incorporated by reference, modifies or supersedes it. Any
statement so modified or superseded is not, except as so modified or superseded,
to constitute a part of this prospectus.

We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, on the written or
oral request of each person, a copy of any or all documents referred to above
which have been or may be incorporated by reference in this prospectus (not
including exhibits to the incorporated information that are not specifically
incorporated by reference into the information). Requests for the copies should
be directed to us at the following address: Sequa Corporation, 200 Park Avenue,
New York, New York 10166, Attention: Treasurer (212) 986-5500.

4
<PAGE> 57

OUR COMPANY

We are a diversified industrial corporation that produces a broad range of
products through operating units in four industry segments: Aerospace, Machinery
and Metal Coatings, Specialty Chemicals, and Other Products.

AEROSPACE

The Aerospace segment includes two operating units: Chromalloy Gas Turbine
and ARC Propulsion.

Chromalloy Gas Turbine, the largest of our operating units, repairs and
manufactures components for jet aircraft engines. Gas Turbine provides domestic
and international airlines with technologically advanced repairs and coatings
for turbine airfoils and other critical engine components. The unit also
supplies components to the manufacturers of jet engines and serves both the
general aviation and military markets.

ARC Propulsion, a supplier of solid rocket fuel propulsion systems since
1949, is a leading developer and manufacturer of advanced rocket propulsion
systems, gas generators and auxiliary rockets. For the military contract market,
ARC Propulsion produces propulsion systems for tactical weapons. For space
applications, ARC Propulsion produces small liquid fueled rocket engines
designed to provide attitude and orbit control for a number of satellite systems
worldwide. ARC Propulsion's commercial market presence derives from its
pioneering development of hybrid inflator systems for automotive airbags and
production of energetic materials for airbag deployment. In early 1998, ARC
Propulsion moved to further its role in the automotive market through the
purchase of its partner's share of a venture that produces airbag inflators.

MACHINERY AND METAL COATINGS

Our Machinery and Metal Coatings segment is composed of Precoat Metals,
Sequa Can Machinery and MEGTEC Systems.

Precoat Metals, the largest individual unit of the segment, is a leader in
the application of protective and decorative coatings to continuous steel and
aluminum coil. Precoat Metals' principal market is the building products
industry, where coated steel is used for the construction of pre-engineered
building systems, and as components in the industrial, commercial, agricultural
and residential sectors. Precoat Metals also serves the container industry and
has established a presence in other product markets, including heating,
ventilating and air conditioning units, truck trailer panels and office
equipment.

Sequa Can Machinery designs and manufactures equipment for the two-piece
can industry. At a facility on the East Coast, Sequa Can Machinery manufactures
high-speed equipment to coat and decorate two-piece beverage cans, and at its
West Coast plant, Sequa Can Machinery produces equipment used to form the cup
and body of two-piece metal cans.

MEGTEC Systems, which was formed in 1997, supplies equipment for the web
offset printing industry, including pasters and splicers, web guides, infeeds,
chill stands and related equipment for high-speed web presses. MEGTEC's products
also include air flotation dryers for paper and printing uses and emission
control systems for industrial applications.

SPECIALTY CHEMICALS

Warwick International, the operation that makes up our Specialty Chemicals
segment, serves a variety of markets with performance-enhancing additives for a
broad range of end products. Warwick International is a leading producer and
supplier of TAED, a bleach activator for powdered laundry detergent products.
The unit also markets and distributes diverse chemical products including
plastics, resins, paints and cosmetics.

OTHER PRODUCTS

The Other Products segment includes three primary businesses: Casco
Products, the men's apparel unit and Northern Can Systems. Casco Products, which
has been serving the automotive products market since 1921, is the world's
leading supplier of automotive cigarette lighters and also offers a growing line
of
5
<PAGE> 58

automotive accessories. The men's apparel unit designs and manufactures men's
formalwear and accessories marketed under the labels Raffinati, Oscar de la
Renta and After Six. Northern Can Systems, which was sold in December 1997,
supplied the domestic and international food processing market with easy-open
lids for cans.

AVAILABLE INFORMATION

We are subject to the informational requirements of the 1934 Act and in
accordance therewith we file reports and other information with the Commission.
Reports, proxy and information statements, and other information filed by us,
can be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of
its Regional Offices at Seven World Trade Center, 13th Floor, New York, N.Y.
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661. Copies of these materials can be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 and by accessing the Commission's Web site, http://www.sec.gov. The
public may obtain information on the operation of the Public Reference Room by
calling the Commission at (800) SEC-0330. Certain of our securities are listed
on the New York Stock Exchange, and reports, proxy statements and other
information concerning us can be inspected at the offices of the Exchange, 20
Broad Street, New York, N.Y. 10005.

Our principal executive offices are located at 200 Park Avenue, New York,
New York 10166 (telephone (212) 986-5500).

USE OF PROCEEDS

We will combine the net proceeds from the sale of the debt securities with
our general funds to repay indebtedness and for general corporate purposes. We
will provide information concerning the use of proceeds from the sale of each
series of the debt securities in the prospectus supplement relating to each
respective series.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our ratio of earnings to fixed charges for
each year in the five-year period ended December 31 and for the nine month
period ended September 30, 1998.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------- NINE MONTHS ENDED
1993 1994 1995 1996 1997 SEPTEMBER 30, 1998
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges: N/A N/A 1.5x 1.4x 1.7x 2.1x
</TABLE>

We have computed the ratio of earnings to fixed charges by dividing
earnings by fixed charges. Earnings consist of income (loss) before income
taxes, extraordinary items and fixed charges and after adjustments for minority
interests in the earnings and losses of majority-owned subsidiaries and after
adjustments for equity in the earnings and losses of less than fifty percent
owned joint ventures. Fixed charges consist of interest expense on all
indebtedness, amortization of debt issuance costs, the portion of rental expense
representative of interest and preference stock dividend requirements of a
majority-owned subsidiary. Our earnings were inadequate to cover fixed charges
by $64.8 million in 1993 and $25.5 million in 1994.

6
<PAGE> 59

DESCRIPTION OF DEBT SECURITIES

We will issue debt securities in one or more series under an indenture
between our company and Bank of Montreal Trust Company, as Trustee, the form of
which we have filed as an exhibit to the Registration Statement. The following
summaries of certain provisions of the indenture are not complete and are
qualified in their entirety by express reference to the indenture and the
securities resolutions or the indentures supplemental thereto (copies of which
have been or will be filed with the Commission). Capitalized terms used in this
section without definition have the meanings given to them in the indenture.

GENERAL

The indenture does not limit the amount of debt securities that can be
issued thereunder and provides that the debt securities may be issued from time
to time in one or more series pursuant to the terms of one or more securities
resolutions or supplemental indentures. As of the date of this prospectus, there
were no debt securities outstanding under the indenture. The debt securities
will be unsecured and will rank on a parity with all of our other unsecured and
unsubordinated debt. The debt securities will be senior to all of our existing
and future indebtedness which by its terms is made subordinate to the debt
securities. Although the indenture provides for the possible issuance of debt
securities in other forms or currencies, the only debt securities covered by
this prospectus will be debt securities denominated in U.S. dollars in
registered form without coupons.

TERMS

We will determine the terms of the debt securities at the time or times of
sale. We will provide the specific terms of each series in supplements to this
prospectus. Reference is made to the prospectus supplement for the following
terms, if applicable, of the debt securities offered thereby:

- - designation, aggregate principal amount, currency or composite currency and
denominations

- - terms of any redemption at the option of Holders

- - price and, if an index formula or other method is used, the method for
determining amounts of principal or interest

- - maturity date and other dates, if any, on which principal will be payable

- - interest rate (which may be fixed or variable), if any

- - date or dates from which interest will accrue and on which interest will be
payable, and the record dates for the payment of interest

- - manner of paying principal and interest

- - place or places where principal and interest will be payable

- - terms of any mandatory or optional redemption by us including any sinking fund

- - terms of any conversion or exchange right

- - tax indemnity provisions

- - if the debt securities provide that payments of principal or interest may be
made in a currency other than that in which debt securities are denominated,
the manner for determining the payments

- - portion of principal payable upon acceleration of a Discounted Debt Security
(as defined below)

- - whether and upon what terms debt securities may be defeased

- - any events of default or restrictive covenants in addition to or in lieu of
those set forth in the indenture

- - provisions for electronic issuance of debt securities or for debt securities
in uncertificated form

- - any additional provisions or other special terms not inconsistent with the
provisions of the indenture, including any terms that may be required or
advisable under United States or other applicable laws or regulations, or
advisable in connection with the marketing of the debt securities. (Section
2.01)

We may issue debt securities of any series as registered debt securities,
bearer debt securities or uncertificated debt securities, and in denominations
as specified in the terms of the series. (Section 2.01)

7
<PAGE> 60

In connection with its original issuance, no bearer debt security will be
offered, sold or delivered to any location in the United States, and a bearer
debt security in definitive form may be delivered in connection with its
original issuance only upon presentation of a certificate in a form prescribed
by us to comply with United States laws and regulations. (Section 2.04)

Registration of transfer of registered debt securities may be requested
upon surrender thereof at any agency of ours maintained for that purpose and
upon fulfillment of all other requirements of the agent. (Sections 2.03 and
2.07)

Under the indenture we may issue debt securities as Discounted Debt
Securities to be offered and sold at a substantial discount from the principal
amount thereof. Special United States federal income tax and other
considerations applicable thereto will be described in the prospectus supplement
relating to the Discounted Debt Securities. "Discounted Debt Security" means a
debt security where the amount of principal due upon acceleration is less than
the stated principal amount. (Section 2.10)

CERTAIN COVENANTS

The debt securities will not be secured by any properties or assets and
will represent senior unsecured debt of our company.

Any restrictive covenants which may apply to a particular series of debt
securities will be described in the prospectus supplement relating to that
series.

The indenture does not limit our ability to enter into sale and leaseback
transactions. In addition, the indenture does not limit the ability of our
subsidiaries to issue debt, and the debt securities will be effectively
subordinated to all existing and future indebtedness and other liabilities and
commitments of our subsidiaries.

Unless otherwise indicated in a prospectus supplement, these covenants, if
applicable, do not afford holders of the debt securities protection in the event
of a highly leveraged or other transaction involving us that may adversely
affect holders of the debt securities.

SUCCESSOR OBLIGOR

Unless otherwise specified in the securities resolution establishing a
series of debt securities, we shall not consolidate with or merge into, or
transfer all or substantially all of our assets to, any person in any
transaction in which we are not the survivor, unless:

(1) the person is organized under the laws of the United States or a State
thereof or is organized under the laws of a foreign jurisdiction and
consents to the jurisdiction of the courts of the United States or a
State thereof;

(2) the person assumes by supplemental indenture all of our obligations
under the indenture, the debt securities and any coupons; and

(3) immediately after the transaction no Default (as defined) exists. The
successor shall be substituted for us, and thereafter all of our
obligations under the indenture, the debt securities and any coupons
shall terminate. (Section 5.01)

EXCHANGE OF DEBT SECURITIES

Registered debt securities may be exchanged for an equal aggregate
principal amount of registered debt securities of the same series and date of
maturity in the authorized denominations as may be requested upon surrender of
the registered debt securities at an agency of ours maintained for that purpose
and upon fulfillment of all other requirements of the agent. (Section 2.07)

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<PAGE> 61

DEFAULT AND REMEDIES

Unless the securities resolution establishing the series otherwise provides
(in which event the prospectus supplement will so state), an "Event of Default"
with respect to a series of debt securities will occur if:

(1) we default in any payment of interest on any debt securities of the
series when the same becomes due and payable and the Default continues
for a period of 60 days;

(2) we default in the payment of the principal and premium, if any, of any
debt securities of the series when the same becomes due and payable at
maturity or upon redemption, acceleration or otherwise and the default
shall continue for five or more days;

(3) we default in the payment or satisfaction of any sinking fund
obligation with respect to any debt securities of a series as required
by the securities resolution establishing the series and the Default
continues for a period of 60 days;

(4) we default in the performance of any of its other agreements applicable
to the series and the Default continues for 90 days after the notice
specified below;

(5) pursuant to or within the meaning of any Bankruptcy Law:

(a) we commence a voluntary case,

(b) we consent to the entry of an order for relief against us in an
involuntary case,

(d) we make a general assignment for the benefit of our creditors;

(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

(a) is for relief against us in an involuntary case,

(b) appoints a Custodian for us or for all or substantially all of our
property, or

(7) there occurs any other Event of Default provided for in the series.
(Section 6.01)

"Default" means any event which is, or after notice or passage of time
would be, an Event of Default. A Default under subparagraph (4) above is not an
Event of Default until the Trustee or the Holders of at least 33 1/3% in
principal amount of the series notify us of the Default and we do not cure the
Default within the time specified after receipt of the notice. (Section 6.01)
The Trustee may require indemnity satisfactory to it before it enforces the
indenture or the debt securities of the series. (Section 7.01) Subject to
certain limitations, Holders of a majority in principal amount of the debt
securities of the series may direct the Trustee in its exercise of any trust or
power with respect to the series. (Section 6.05) Except in the case of Default
in payment on a series, the Trustee may withhold from Securityholders of the
series notice of any continuing Default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interest. (Section 7.04) We are required to furnish the Trustee annually a brief
certificate as to our compliance with all conditions and covenants under the
indenture. (Section 4.04)

The failure to redeem any debt securities subject to a Conditional
Redemption (as defined) is not an Event of Default if any event on which the
redemption is so conditioned does not occur and is not waived before the
scheduled redemption date. (Section 6.01)

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<PAGE> 62

The indenture does not have a cross-default provision. Thus, a default by
us on any other debt, including any other series of debt securities, would not
constitute an Event of Default.

AMENDMENTS AND WAIVERS

The indenture and the debt securities or any coupons of the series may be
amended, and any default may be waived as follows: Unless the securities
resolution otherwise provides (in which event the prospectus supplement will so
state), the debt securities and the indenture may be amended with the consent of
the Holders of a majority in principal amount of the debt securities of all
series affected voting as one class. (Section 9.02) Unless the securities
resolution otherwise provides (in which event the prospectus supplement will so
state), a Default on a particular series may be waived with the consent of the
Holders of a majority in principal amount of the debt securities of the series.
(Section 6.04)

However, without the consent of each Holder affected, no amendment or waiver
may:

(1) reduce the amount of debt securities whose Holders must consent to an
amendment or waiver;

(2) reduce the interest on or change the time for payment of interest on
any debt security;

(3) change the fixed maturity of any debt security;

(4) reduce the principal of any non-Discounted Debt Security or reduce the
amount of the principal of any Discounted Debt Security that would be
due on acceleration thereof;

(5) change the currency in which the principal or interest on a debt
security is payable;

(6) make any change that materially adversely affects the right to convert
any debt security; or

(7) waive any Default in payment of interest on or principal of a debt
security. (Sections 6.04 and 9.02)

Without the consent of any Holder, the indenture or the debt securities may be
amended:

(1) to cure any ambiguity, omission, defect or inconsistency;

(2) to provide for assumption of Company obligations to Holders in the
event of a merger or consolidation requiring the assumption;

(3) to provide that specific provisions of the indenture shall not apply to
a series of debt securities not previously issued;

(4) to create a series and establish its terms;

(5) to provide for a separate trustee for one or more series; or

(6) to make any change that does not materially adversely affect the rights
of any Holder. (Section 9.01)

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Debt securities of a series may be defeased in accordance with their terms
and, unless the securities resolution establishing the terms of the series
otherwise provides, as set forth below. We at any time may terminate as to a
series all of our obligations (except for certain obligations, including
obligations with respect to the defeasance trust and obligations to register the
transfer or exchange of a debt security, to replace destroyed, lost or stolen
debt securities and coupons and to maintain paying agencies in respect of the
debt securities) with respect to the debt securities of the series and any
related coupons and the indenture ("legal defeasance"). We at any time may
terminate as to a series our obligations with respect to the debt securities and
coupons of the series under any restrictive covenants which may be applicable to
a particular series ("covenant defeasance").

We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, a series may not be accelerated because of an

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<PAGE> 63

Event of Default. If we exercise our covenant defeasance option, a series may
not be accelerated by reference to any restrictive covenants which may be
applicable to that series. (Section 8.01)

To exercise either defeasance option as to a series, we must:

(1) irrevocably deposit in trust (the "defeasance trust") with the Trustee
or another trustee money or U.S. Government Obligations, deliver a
certificate from a nationally recognized firm of independent
accountants expressing their opinion that the payments of principal and
interest when due on the deposited U.S. Government Obligations, without
reinvestment, plus any deposited money without investment will provide
cash at the times and in the amounts as will be sufficient to pay the
principal and interest when due on all debt securities of that series
to maturity or redemption, as the case may be, and

(2) comply with certain other conditions.

In particular, we must obtain an opinion of tax counsel that the defeasance
will not result in recognition of any gain or loss to holders for Federal income
tax purposes. "U.S. Government Obligations" means direct obligations of the
United States or an instrumentality of the United States, the payment of which
is unconditionally guaranteed by the United States, which, in either case, have
the full faith and credit of the United States of America pledged for payment
and which are not callable at the issuer's option, or certificates representing
an ownership interest in those obligations. (Section 8.02)

REGARDING THE TRUSTEE

Bank of Montreal Trust Company will act as Trustee for debt securities
issued under the indenture and, unless otherwise indicated in a prospectus
supplement, the Trustee will also act as Registrar and Paying Agent with respect
to the debt securities. (Section 2.03) The Trustee is a member of the syndicate
of lenders with respect to our credit facility.

BOOK-ENTRY

DTC will act as securities depository for the debt securities. The debt
securities will be issued only as fully registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One or more fully registered
global certificates will be issued for the debt securities representing the
aggregate principal amount of the debt securities and will be deposited with
DTC.

DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 1934 Act, as
amended, DTC holds securities that its participants (the "Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly (the "Indirect Participants," and
together with the Direct Participants, the "Participants"). The rules applicable
to DTC and its Participants are on file with the SEC.

Purchases of the debt securities within the DTC system must be made by or
through Direct Participants which will receive a credit for the debt securities
on DTC's records. The ownership interest of each actual purchaser of each debt
security (a "Beneficial Owner") will in turn be recorded on the Direct and
Indirect Participants' respective records. Beneficial Owners will not receive
written confirmation from DTC of their

11
<PAGE> 64

purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interest in the debt
securities will be effected by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interest in debt securities except in the event
that use of the book-entry system for the debt securities is discontinued.

The deposit of the debt securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the debt securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts the debt
securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.

Conveyance of notices and other direct communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.

Redemption notices shall be sent to Cede & Co. If less than all of the debt
securities of an issue are being redeemed, DTC's practice will determine by lot
the amount of the interest of each Direct Participant in the series to be
redeemed.

Neither DTC nor Cede & Co. will consent or vote with respect to the debt
Securities. Under its usual procedures, DTC mails an omnibus proxy (an "Omnibus
Proxy") to the Participants as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the debt securities are credited on the record
date (identified in a listing attached to the Omnibus Proxy).

Principal, premium, if any, and interest on the debt securities will be
paid to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payment
on the payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street-name," and will be the responsibility of the Participant and not of DTC,
the underwriters, or us, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal, premium, if any, and
interest to DTC is the responsibility of us or the Trustee. Disbursement of
these payments to Direct Participants is the responsibility of DTC, and
disbursement of these payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with
respect to the debt securities at any time by giving reasonable notice to us.
Under those circumstances and in the event that a successor securities
depository is not obtained, certificates for the debt securities are required to
be printed and delivered. In addition, we may decide to discontinue use of the
system of book-entry transfers through DTC (or any successor securities
depository). In that event, certificates for the debt securities will be printed
and delivered.

We will not have any responsibility or obligation to Participants or to the
persons for whom they act as nominees with respect to the accuracy of the
records of DTC, its nominees or any Direct or Indirect Participant with respect
to any ownership interest in the debt securities, or with respect to payments or
providing of notice to the Direct Participants, the Indirect Participants or the
Beneficial Owners.

So long as Cede & Co. is the registered owner of the debt securities, as
nominee of DTC, references herein to holders of the debt securities shall mean
Cede & Co. or DTC and shall not mean the Beneficial Owners of the debt
securities.

The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC.

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<PAGE> 65

PLAN OF DISTRIBUTION

The Company may sell debt securities through underwriters or dealers,
directly to one or more purchasers or through agents.

The applicable prospectus supplement will set forth the terms of the
offering of any debt securities, including:

- - the names of any underwriters or agents

- - the proceeds to the Company from the sale

- - any other items constituting underwriters' compensation

- - any discounts or concessions allowed or reallowed or paid to dealers

- - the purchase price of the debt securities

- - any underwriting discounts

- - any initial public offering price

- - any securities exchanges on which the debt securities may be listed

If underwriters are used in the sale, debt securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Those debt
securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable prospectus supplement, the
obligations of the underwriters to purchase those debt securities will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all of those debt securities if any of them are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time. Only underwriters
named in a prospectus supplement are deemed to be underwriters in connection
with the debt securities offered thereby.

We may sell debt securities directly or through agents designated by us
from time to time. Any agent involved in the offer or sale of debt securities
will be named, and any commissions payable by us to the agent will be set forth
in the applicable prospectus supplement. Unless otherwise indicated in the
applicable prospectus supplement, the agent will act on a best efforts basis for
the period of its appointment.

If so indicated in a prospectus supplement with respect to debt securities,
we will authorize agents, underwriters or dealers to solicit offers by certain
institutions to purchase debt securities from us at the public offering price
set forth in the prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on the date or dates stated in the prospectus
supplement. Each contract will be for an amount not less than, and the aggregate
principal amount of the debt securities sold pursuant to the contracts shall be
not less nor more than, the respective amounts stated in the prospectus
supplement. Institutions with whom the contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions, but will in all cases be subject to our approval. The contracts
will not be subject to any conditions except:

(1) the purchase by an institution of the debt securities covered by its
contract shall not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which the institution is
subject, and

(2) if the debt securities are being sold to underwriters, we shall have
sold to the underwriters the total principal amount of the debt
securities less the principal amount thereof covered by the contracts.

The underwriters will not have any responsibility in respect of the
validity or performance of the contracts.

If dealers are utilized in the sale of any debt securities, we will sell
those debt securities to the dealers, as principal. Any dealer may then resell
those debt securities to the public at varying prices to be determined by the
dealer at the time of resale. The name of any dealer and the terms of the
transaction will be set forth in the prospectus supplement with respect to the
debt securities being offered thereby.

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<PAGE> 66

It has not been determined whether any series of debt securities will be
listed on a securities exchange. Underwriters will not be obligated to make a
market in any series of debt securities. We cannot predict the level of trading
activity in, or the liquidity of, any series of debt securities.

Any underwriters, dealers or agents participating in the distribution of
debt securities may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of debt securities may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933. Agents and underwriters may be entitled under agreements entered into with
us to indemnification by us against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
that the agents or underwriters may be required to make in respect thereof.
Agents and underwriters may be customers of, engaged in transactions with, or
perform services for, us or our affiliates in the ordinary course of business.

LEGAL MATTERS

Certain legal matters with respect to the validity of the issuance of the
debt securities will be passed upon for us by Cahill Gordon & Reindel, a
partnership including a professional corporation, New York, New York.

EXPERTS

Our financial statements incorporated by reference in this prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, 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.

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<PAGE> 67

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We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus supplement
and the accompanying prospectus. You must not rely on any unauthorized
information. This prospectus supplement and the accompanying prospectus is not
an offer to sell or buy any securities in any jurisdiction where it is unlawful.
The information in this prospectus supplement is current as of July 26, 1999 and
the information in the accompanying prospectus is current as of January 22,
1999.

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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements........ S-i
Prospectus Supplement Summary..... S-1
Use of Proceeds................... S-9
Capitalization.................... S-10
Selected Consolidated Financial
Data............................ S-11
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... S-13
Business.......................... S-27
Management........................ S-34
Description of Certain
Indebtedness.................... S-36
Description of Notes.............. S-37
Underwriting...................... S-48
Legal Matters..................... S-49
Experts........................... S-49
PROSPECTUS
Risk Factors...................... 1
Incorporation of Certain Documents
by Reference.................... 4
Our Company....................... 5
Use of Proceeds................... 6
Ratio of Earnings to Fixed
Charges......................... 6
Description of Debt Securities.... 7
Book-Entry........................ 11
Plan of Distribution.............. 13
Legal Matters..................... 14
Experts........................... 14
</TABLE>

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$500,000,000
[SEQUA LOGO]

SEQUA CORPORATION

9% SENIOR NOTES DUE 2009

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PROSPECTUS SUPPLEMENT
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Joint Lead Managers
BEAR, STEARNS & CO. INC.
Book-running Manager

CHASE SECURITIES INC.

Co-Managers
BNY CAPITAL MARKETS, INC.
DEUTSCHE BANC ALEX. BROWN
WASSERSTEIN PERELLA SECURITIES, INC.
JULY 26, 1999

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