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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                   FORM 10-K
 
/X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
 
                                       OR
 
/ /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
 
       FOR THE TRANSITION PERIOD FROM _______________ TO _______________
 
                         COMMISSION FILE NUMBER 1-7568
 
                            ------------------------
 
                             COLTEC INDUSTRIES INC
            (Exact name of registration as specified in its charter)
 
               PENNSYLVANIA                              13-1846375
         (State of Incorporation)                     (I.R.S. Employer
                                                    Identification No.)
 
            3 COLISEUM CENTRE
          2550 WEST TYVOLA ROAD
              CHARLOTTE, NC                                28217
          (Address of principal                          (Zip Code)
            executive offices)
 
       Registrant's telephone number, including area code: (704) 423-7000
                            ------------------------
 
          Securities registered pursuant to Section 12(b) of the Act:
 
                                          NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS             ON WHICH REGISTERED
---------------------------------------  --------------------------
Common Stock, par value $.01 per share   New York Stock Exchange
                                         Pacific Exchange

 
        Securities registered pursuant to Section 12(g) of the Act: None
                            ------------------------

 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
                            ------------------------
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by referenced in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
 
     On March 10, 1998, there were outstanding 65,943,010 shares of the
registrant's Common Stock, par value $.01 per share. On March 10, 1998, the
aggregate market value of the registrant's voting stock (based on a closing
price of $25.50 per share) held by non-affiliates was $1,661,859,939. For
purposes of the foregoing calculation, all directors and officers of the
registrant have been deemed to be affiliates, but the registrant disclaims that
any of such directors or officers is an affiliate.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the registrant's 1997 Annual Report to its shareholders are
incorporated by reference into Part I (Item 1), Part II (Items 6, 7 and 8) and
Part IV (Item 14) hereof. Portions of the registrant's Proxy Statement for its
1998 Annual Meeting of Shareholders are incorporated by reference into Part III
(Items 10, 11 and 12) hereof.
 
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<PAGE>

     Statements in this Annual Report on Form 10-K that reflect projections or
expectations of future financial or economic performance of the Registrant, and
statements of the Registrant's plans and objectives for future operations,
including those in the 'Business' and 'Legal Proceedings' sections or relating
to future capital expenditures or estimated costs to resolve and the
corresponding effect on the Registrant of certain litigation and environmental
matters, are 'forward looking' statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. No assurance can be given that actual results
or events will not differ materially from those projected, estimated, assumed or
anticipated in any such forward looking statements. Important factors that could
result in such differences in addition to other factors noted with such forward
looking statements, include: general economic conditions in the Registrant's
markets, including inflation, recession, interest rates and other economic
factors; casualty to or other disruption of the Registrant's facilities and
operations; and other factors that generally affect the business of aerospace
and industrial companies.

<PAGE>


                                     PART 1
 
ITEM 1.  BUSINESS.
 
     Coltec Industries Inc and its consolidated subsidiaries (together referred
to as 'Coltec') manufacture and sell a diversified range of highly-engineered
aerospace and industrial products in the United States and, to a lesser extent,
abroad. Coltec's operations are conducted through two principal segments: its
Aerospace and Industrial Segments. Set forth below is a description of the
business conducted by the respective divisions within Coltec's two industry
segments. The tabular five-year presentation of financial information in respect
of each industry segment under the caption 'Industry Segment Information' of
Coltec's 1997 Annual Report to its shareholders and the information in note 17
of the Notes to Consolidated Financial Statements of Coltec's 1997 Annual Report
to its shareholders are incorporated herein by reference.
 
AEROSPACE
 
     Through its Aerospace Segment, Coltec is a leading manufacturer of landing
gear systems, engine fuel controls, flight attendant and cockpit seats, turbine
blades, fuel injectors, nozzles and related components for commercial and
military aircraft. The operating units and principal products, markets and
competitors of the Aerospace Segment are as follows:
 
<TABLE>
<CAPTION>
      OPERATING UNITS            PRINCIPAL PRODUCTS            PRINCIPAL MARKETS          PRINCIPAL COMPETITORS
---------------------------  ---------------------------  ---------------------------  ---------------------------
<S>                          <C>                          <C>                          <C>
Menasco                      Aircraft landing gear and    Commercial and military      B.F. Goodrich,
                               flight control actuators,    aircraft manufacturers,      Messier-Dowty
                               landing gear parts,          airlines, U.S. Government
                               repairs and overhaul

Walbar                       Aircraft and industrial gas  Aircraft and stationary gas  Chromalloy, Howmet
                               turbine engine and           turbine engine
                               services, turbocharger       manufacturers, diesel
                               rotating assemblies          engine manufacturers

Chandler Evans Control       Aircraft fuel pump and       Aircraft engine              Argotech, Hamilton
                               control systems              manufacturers, U.S.          Standard, Sunstrand,
                                                            Government and               AlliedSignal Controls and
                                                            aftermarket                  Accessories

Delavan Gas Turbine          Aircraft engine fuel         Aircraft engine              Parker-Hannifin, Textron
  Products                     nozzles, valves and          manufacturers, U.S.
                               afterburner spray bars       Government and
                                                            aftermarket

Lewis Engineering            Aircraft instrumentation,    Commercial and military      Ametek, Rogerson, Rosemont,
                               temperature sensors, and     aircraft, engine             Norwich Aerospace
                               level control products       manufacturers and process
                               and electrical harnasses     industries


AMI Industries, Inc.         Aircraft flight attendant    Commercial aircraft          IPECO, Sicma
                               and cockpit seats            manufacturers and
                                                            airlines
</TABLE>
 
     Menasco is one of the leading suppliers of landing gear systems for
medium-to-heavy commercial and military aircraft. The design, manufacture and
test of aircraft landing gear and components, and related overhaul and repair
comprise 90% of Menasco's sales volume. Landing gear and precision components
are highly engineered and manufactured to customer specifications and sold to
aircraft
 
                                       1

<PAGE>

manufacturers, aircraft operators and to the United States Government ('U.S.
Government'), both as original equipment and as spare parts for existing
aircraft.
 
     Menasco's historical concentration of landing gear sales among a limited
number of companies reflects the relatively small number of medium and heavy
aircraft manufacturers. Landing gear systems generally account for up to 2% of
the total cost of an aircraft. Menasco also provides spare parts for landing
gear and landing gear overhaul services. Aftermarket business represented 22% of
Menasco's total sales in 1997.
 
     The remaining 10% of Menasco's sales are primarily flight control
actuators. Menasco produces large hydraulic and mechanical actuators and has the
capability to produce shock mitigation equipment for both military and
commercial applications.
 
     Walbar is an original equipment manufacturer and coating and repair service
center for aircraft and industrial gas turbine engine components. Its product
base ranges from complex precision machined turbine parts to high-technology
protective coatings. The primary machined products are turbine blades, vanes and
other related turbine airfoil components. Walbar also manufactures disks,
integrally bladed rotors and complex impellers, as well as complete rotating
assemblies for flight and auxiliary power engines and locomotive turbochargers.
Following the reduction in U.S. Government appropriation for military aircraft 
engines, Walbar has successfully increased its focus on non-aerospace 
applications, and now enjoys significant market share in the locomotive
turbocharger market and the gas turbine power generation market.
 
     Chandler Evans Control Systems Division ('CECO') produces gas turbine
engine fuel controls and pumps, and pneumatic and hydraulic components for use
on aircraft and helicopter engines and aircraft systems. CECO has carved a niche
market in the area of small engine fuel pumps and controls for both commercial
and military applications. CECO also supplies small turbine engines with Full
Authority Digital Electronic Control ('FADEC') systems. Computerized electronics
in a FADEC system make aircraft safer and less expensive to operate. In 1997, a
CECO FADEC was successfully operated in the first flight test of the U.S. Army's
Boeing/Sikorsky Rah-66 Comanche helicopter.

 
     CECO continues to supply the military market with fuel pump technology. Its
combination main and afterburner centrifugal fuel pump for the Boeing F/A-18 E/F
fighter was successfully flight tested in 1997. Additionally in 1997, CECO's
latest metering fuel pump, the Variable Displacement Vane Pump, was selected as
a fueldraulic pump to be used for multinational advanced vectoring exhaust
nozzle applications.
 
     During 1997, CECO's aftermarket sector contributed 49% of its revenues
compared to 42% in 1996. This was due in part, to increased Company focus on
this market coupled with the recovery in the worldwide airline and general
aviation market, and also an increase in U.S. Government contracts.
 
     Delavan Gas Turbine Products Division ('Delavan') is a custom designer and
manufacturer of fuel injectors, flow control valves, fuel manifolds, afterburner
spray bars and other accessories for commercial and military gas turbine
engines. Product applications in the aerospace industry include products for 
engines powering large commercial and regional airliners, business aircraft,
military and commercial helicopters, military fighters and transports and
auxiliary power units. In the industrial sector, Delavan fuel injectors and
valves are utilized in large land-based gas turbines found in electrical power
generation plants and natural gas pipeline installations.
 
     Lewis Engineering designs, develops and produces electromechanical and
electronic instrumentation for aircraft cockpits, landing gear electrical
harnesses and temperature sensors for aircraft and engine systems. These
products are used in commercial transport, general aviation and military
markets.
 
     AMI Industries, Inc. ('AMI'), a Colorado-based company, was acquired in the
third quarter of 1997. AMI is a leading designer and manufacturer of flight
attendant and cockpit seats and is recognized for supplying high comfort cabin
attendant seats. 
 
                                       2


<PAGE>


     One customer (Boeing) in the Aerospace Segment represented approximately
14% of Coltec's 1997 total sales.
 
INDUSTRIAL
 
     In the Industrial Segment, Coltec is a leading manufacturer of industrial
seals, gaskets, packing products, self-lubricating bearings and oil seals and
hubodometers for trucks and trailers. The Industrial Segment also produces spray
nozzles for agricultural, home heating and industrial applications, as well as
high-horsepower diesel engines for naval ships and diesel, gas and dual-fuel
engines for electric power plants. Coltec also produces air compressors and 
automotive products. The operating units and principal products, markets and
competitors of the Industrial Segment are as follows:
 

<TABLE>
<CAPTION>
      OPERATING UNITS            PRINCIPAL PRODUCTS            PRINCIPAL MARKETS          PRINCIPAL COMPETITORS
---------------------------  ---------------------------  ---------------------------  ---------------------------
<S>                          <C>                          <C>                          <C>
Garlock Sealing              Seals, gaskets, packings     Chemical, pulp and paper,    Applied Industrial
  Technologies                 and expansion joints,        refining, utilities,         Technologies, CR
                               butterfly valves, PTFE       industrial and               Industries, A.W.
                               sheet and film, OEM parts    electronics                  Chesterton, Richard
                               and gaskets                                               Klinger, AMRI, Durco,
                                                                                         Neotecha, Dewal, W. Gore,
                                                                                         Durametallic, John Crane
Quincy Compressor            Air compressors and vacuum   Manufacturing, climate       Gardner-Denver, Sullair,
                               pumps                        control, oil and gas         Ingersoll-Rand, Champion
                                                            industries

Garlock Bearings             Self-lubricated bearings     Automotive and equipment     Kolbenschmidt, Rexnord
                                                            manufacturers

Fairbanks Morse Engine       Diesel, gas and dual-fuel    U.S. Navy, marine,           Caterpillar, Cooper
                               engines                      locomotive and stationary    Industries, General
                                                            power markets                Motors

Holley Performance Products  New, replacement,            Automotive manufacturers,    Edelbrock, Echlin, Standard
                               remanufactured and           wholesale distributors,      Motor Products, Federal-
                               performance carburetors,     retailers in replacement     Mogul, Tommco, Champion
                               E.F.I. components,           markets and stationary       Parts Rebuilders, MSD
                               ignition systems,            gas engine users
                               induction components,
                               resale of special
                               performance automotive
                               chemicals

Stemco                       Heavy duty wheel-end         Fleet truck operators,       CR Industries, Federal
                               systems, oil seals,          truck parts distributors     Mogul, Nelson, Donaldson
                               hubcaps and hubodometers,    and vehicle assemblers
                               hubnuts

Delavan Spray Technologies   Spray nozzles, accessories,  Home heating, industrial     Spraying Systems, Danfoss
                               pumps and systems            and agriculture
</TABLE>
 
                                       3

<PAGE>

<TABLE>
<CAPTION>
      OPERATING UNITS            PRINCIPAL PRODUCTS            PRINCIPAL MARKETS          PRINCIPAL COMPETITORS
---------------------------  ---------------------------  ---------------------------  ---------------------------
<S>                          <C>                          <C>                          <C>
France Compressor Products   Compressor valves and seals  Compressor manufacturers     Hoerbiger, C. Lee Cook
                                                            and end users


Haber Tool                   Cold-forming dies            Fastener and automotive      Form Flow
                                                            manufacturers

Danti Tool                   Details, jigs, fixtures,     Machinery builders,          Uclid, Burdette
                               precision machining          automotive parts
                                                            manufacturers, other
                                                            production facilities

Sterling Die                 Thread-rolling dies          Fastener manufacturers       Reed Rico

Ortman Fluid Power           Hydraulic and pneumatic      Fluid power market           Parker-Hannifin, Miller
                               cylinders                                                 Fluid Power

Plastomer Products           PTFE tape                    Industrial manufacturers     Fluoroglas, W. Gore

Garlock Rubber Technologies  Sheet Rubber Products        Steel mills, chemical        B.F. Goodrich
                                                            processing, refineries
                                                            and paper mills

Coltec Specialty Products*   Engineered polytetraflu-     Semiconductor, petro-        Furon, EGC
                               oroethylene (PTFE)           chemical refining plants
                               products

Cefilac*                     Seals, gaskets and packing   Chemical, power,             John Crane, Laddy
                               metal-o-rings and spiral     petro-chemical refining
                               wound gaskets                plants

Helicoflex*                  Metal-o-rings, spring        Power generation,            Advanced Products
                               loaded seals                 petro-chemical refining
                                                            plants
</TABLE>
 
* Purchased in early 1998.
 
     The more significant operating units in the Industrial Segment are
discussed below.
 
     Garlock Sealing Technologies Division ('Garlock') produces and markets
fluid sealing devices that prevent leakage and exclude contaminants from
rotating and reciprocating machinery. Garlock produces seal joints for high
temperatures and corrosive environment applications.
 
     The newest Garlock products are positioned to meet current emission
standards for valves, pumps and flanges. To assist customers in complying with
more stringent global regulations for fugitive volatile organic compound
emissions, Garlock has developed a variety of products using traditional and
newly developed materials. Garlock products include compression packings,
gaskets and gasketing materials, hydraulic seals, oil seals, mechanical seals,
elastomeric expansion joints, industrial textiles, metallic gaskets and other
specialized industrial products.
 
     Sophisticated Garlock products protect equipment in industry applications
where performance is vital to safety and environmental concerns. These
applications include natural resource recovery, petroleum refining, chemicals,

primary metals, food and pharmaceuticals, power generation, mining, pulp and
paper, water and waste treatment, construction and transportation.
 
     In October 1997, Coltec acquired the assets of the sheet rubber and
conveyor belt business of Dana Corporation's Boston Weatherhead Division. This
division, now known as Garlock Rubber Technologies, manufactures high-quality
rubber sheet products used for gasketing and other
 
                                       4
<PAGE>

applications in steel mills, chemical processing, refineries and paper
production, including conveyor belts.
 
     The single common characteristic of Garlock's products is that they are
consumable. Although the products are also purchased for use in original
equipment, in 1997 the maintenance and replacement aftermarket accounted for
approximately 80% of Garlock's total sales.
 
     Quincy Compressor Division ('Quincy') is a manufacturer of a wide range of
helical screw and reciprocating air compressors and vacuum pumps. Quincy
products vary in size from one-third to 350 horsepower and are used in a variety
of industrial applications, including industrial base load, pneumatic
temperature and instrument control, diesel and gas engine starting, paint
spraying and emergency standby service. Much of Quincy's business is in the
highly competitive industrial and climate control compressor markets.
 
     Garlock Bearings is a leading specialist in the field of self-lubricating
bearings, which consist of either steel or reinforced epoxy composite backings
with non-metallic bearing surfaces of polytetrafluoroethylene ('PTFE') fibers or
a mixture that includes PTFE. PTFE provides maintenance-free performance and
reduced friction. Garlock Bearings' products typically perform as sleeve
bearings or thrust washers under conditions of no lubrication, minimal
lubrication or pre-lubrication.
 
     Garlock Bearings has a major share of the self-lubricating bearing market
in North America. In 1997 approximately 80% of sales were to original equipment
manufacturers, with major competition coming from companies in Japan and
Germany.
 
     Fairbanks Morse Engine Division ('Fairbanks Morse') offers a broad range of
heavy-duty diesel engines. The division has the capacity to provide diesel
engines from 640 to 29,320 horsepower. In addition, Fairbanks Morse manufactures
dual-fuel, gas and diesel engines ranging in size from four to 18 cylinders.
Engines are offered in both conventional 'V' and in-line, four-cycle versions as
well as in-line, two-cycle opposed-piston configurations. They are used for
marine propulsion and marine power generation and in pump, compressor and
electrical power generation applications.
 
     In September 1997, Fairbanks Morse acquired the assets related to the Alco
locomotive business from General Electric Company. The assets pertain to the
manufacture and sale of Alco locomotive engines, turbochargers and Alco
locomotive chassis components. Fairbanks Morse can now sell FM/ALCO(Registered)
locomotive products throughout the world except in India where General Electric

has retained rights to manufacture and sell such products.
 
     Holley Performance Products Division ('Holley') markets a diversified line
of new and remanufactured replacement and performance carburetors, ignition
systems, fuel pumps, fuel injection systems, emission-control components, intake
manifolds and performance engine systems and accessories to the independent
automotive aftermarket. In addition to these products, the division manufactures
and sells replacement carburetors to Chrysler, Ford and General Motors.
 
     Holley's aftermarket products are offered in a number of lines, each
designed for a specific segment of the market. The largest business segment is
performance products, which in 1997 accounted for approximately 50% of Holley's
total sales. The performance line of carburetors is designed for car enthusiasts
and racers. Other product lines consist of remanufactured carburetors and fuel
injection components, new replacement carburetors for U.S. passenger cars and
trucks, and fuel injection systems and service components, throttle body units
and a complete line of components for service.
 
     Stemco Division is a developer and producer of unitized hub systems, hub
oil seals, hubcaps, axle nuts and distance-measuring devices for medium and
heavy-duty trucks.
 
     Delavan Spray Technologies Division (formerly Delavan Commercial Products
Division) is a designer and producer of atomizers for combustion and industrial
applications and atomizers, pumps and accessories for agricultural, industrial
and oil burner metering applications.
 
     In September 1997, Coltec acquired DM & T, Inc., which makes many of the
tooling products utilized by Haber Tool's existing customer base.
 
                                       5
<PAGE>
SUBSEQUENT ACQUISITIONS
 
     In January 1998, Coltec purchased Tex-o-Lon and Repro-Lon and certain
assets of Marine & Petroleum Mfg., Inc., Texas-based businesses. These
acquisitions were combined into one division, Coltec Specialty Products. Coltec
Specialty Products manufactures PTFE fluid sealing products for the
semiconductor industry and reprocesses PTFE compounds for the chemical and
semiconductor industry.
 
     In February 1998, Coltec purchased the Sealing Division of Groupe Carbone
Lorraine which will be segregated into two divisions. Cefilac, based in Saint
Etienne and Montbrison, France, produces seals, gaskets and packings,
metal-o-rings and spiral-wound gaskets used in the chemical, power and refining
industries. Helicoflex, based in Columbia, South Carolina, produces
metal-o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing
products are specifically designed for equipment and processes exposed to high
temperatures, cryogenic temperatures, high pressures, vacuum conditions,
radioactive environments or corrosive applications. 

     See Note 19 of the notes to the Consolidated Financial Statements 
included in Coltec's 1997 Annual Report to its Shareholders.
 
INTERNATIONAL OPERATIONS

 
     Coltec's international operations, mainly in Canada and France, are
conducted through foreign-based manufacturing or sales subsidiaries, or both,
and by export sales of domestic divisions to unrelated foreign customers. Export
sales of diesel engines are made either directly or through foreign
representatives. Compressors are sold through foreign distributors. Certain
products of the Industrial Segment are sold in foreign countries through
salesmen and sales representatives or sales agents.
 
     Coltec's Canadian operations include the manufacture of landing gear
systems and aircraft flight controls, the provision of overhaul services for
these systems and controls for Canadian and other customers and the manufacture
of turbine components and turbine and compressor rotating parts primarily for
aircraft gas turbine engines. The Canadian operations also manufacture and
market seals, gasketing material, packings and truck products, and market parts
for Fairbanks Morse diesel engines and accessories and other products for use in
Canada and other countries.
 
     Coltec operates 18 plants in Canada, Mexico, France, the United Kingdom,
Australia, Germany and Poland. In addition, Coltec occupies leased office and
warehouse space in various foreign countries.
 
     Devaluations or fluctuations relative to the United States dollar in the
exchange rates of the currency of any country where Coltec has foreign
operations could adversely affect the profitability of such operations in the
future.
 
     For financial information on operations by geographic segments, see note 17
of the Notes to Consolidated Financial Statements of Coltec's 1997 Annual Report
to its shareholders incorporated herein by reference.
 
     Coltec's contracts with foreign nations for delivery of military equipment,
including components, are subject to deferral or cancellation by U.S. Government
regulation or orders regulating sales of military equipment abroad. Any such
action on the part of the U.S. Government could have an adverse effect on
Coltec.
 
SALES BY CLASS OF PRODUCTS
 
     During the last three fiscal years, landing gear systems was the only class
of similar products that accounted for at least 10% of total Coltec sales. In
1997, 1996 and 1995, sales of landing gear systems constituted 18%, 15% and 14%,
respectively, of Coltec's total sales.
 
                                       6

<PAGE>

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

CONTRACT RISKS
 
     Coltec, through its various operating units, primarily Menasco, Chandler
Evans, Walbar and Delavan Gas Turbine Products, produces products for
manufacturers of commercial aircraft pursuant to contracts that generally call
for deliveries at predetermined prices over varying periods of time and that
provide for termination payments intended to compensate for certain costs
incurred in the event of cancellation. In addition, certain commercial aviation
contracts contain provisions for termination for convenience similar to those
contained in U.S. Government contracts described below. Longer-term agreements
normally provide for price adjustments intended to compensate for deferral of
delivery depending upon market conditions.
 
     A portion of the business of Coltec's Menasco, Chandler Evans, Walbar and
Delavan Gas Turbine Products divisions has been as a subcontractor and as a
prime contractor in supplying products in connection with military programs.
Substantially all of Coltec's U.S. Government contracts are firm fixed-price
contracts. Under firm fixed-price contracts, Coltec agrees to perform certain
work for a fixed price and, accordingly, realizes all the benefit or detriment
occasioned by decreased or increased costs of performing the contracts. From
time to time, Coltec accepts fixed-price contracts for products that have not
been previously developed. In such cases, Coltec is subject to the risk of
delays and cost overruns. Under U.S. Government regulations, certain costs,
including certain financing costs, portions of research and development costs,
and certain marketing expenses related to the preparation of competitive bids
and proposals, are not allowable. The U.S. Government also regulates the methods
under which costs are allocated to U.S. Government contracts. With respect to
U.S. Government contracts that are obtained pursuant to an open bid process and
therefore result in a firm fixed price, the U.S. Government has no right to
renegotiate any profits earned thereunder. In U.S. Government contracts where
the price is negotiated at a fixed price rather than on a cost-plus basis, as
long as the financial and pricing information supplied to the U.S. Government is
current, accurate and complete, the U.S. Government similarly has no right to
renegotiate any profits earned thereunder. If the U.S. Government later conducts
an audit of the contractor and determines that such data were inaccurate or
incomplete and that the contractor thereby made an excessive profit, the U.S.
Government may take action to recoup the amount of such excessive profit, plus
treble damages, and take other enforcement actions.
 
     U.S. Government contracts are, by their terms, subject to termination by
the U.S. Government either for its convenience or for default of the contractor.
Fixed-price type contracts provide for payment upon termination for items
delivered to and accepted by the U.S. Government, and, if the termination is for
convenience, for payment of the contractor's costs incurred plus the costs of
settling and paying claims by terminated subcontractors, other settlement
expenses, and a reasonable profit on its costs incurred. However, if a contract
termination is for default by the contractor (a) the contractor is paid such
amount as may be agreed upon for completed and partially-completed products and
services accepted by the U.S. Government, (b) the U.S. Government is not liable
for the contractor's costs with respect to unaccepted items, and is entitled to
repayment of advance payments and progress payments, if any, related to the
terminated portions of the contracts, and (c) the contractor may be liable for
excess costs incurred by the U.S. Government in procuring undelivered items from
another source.

 
     In addition to the right of the U.S. Government to terminate, U.S.
Government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress usually appropriates funds on a
fiscal-year basis even though contract performance may take many years.
Consequently, at the outset of a major program, the contract is usually
partially funded, and additional monies are normally committed to the contract
by the procuring agency only as appropriations are made by Congress for future
fiscal years.
 
                                       7

<PAGE>

CAPITAL EXPENDITURES
 
     Capital expenditures were $81.2 million in 1997 compared to $44.6 million
in 1996 and $42.5 million in 1995, as Coltec continued to invest in capital
improvements to increase efficiency, reduce costs, pursue new opportunities,
expand product capacity and improve facilities. The level of capital
expenditures has and will vary from year to year, affected by the timing of
capital spending for production equipment for new products, periodic plant and
facility expansion as well as cost reduction and labor efficiency programs.
Capital expenditures during 1997 included amounts for the construction and
equipment purchases for significant production expansions at Menasco's original
equipment facilities. Coltec estimates capital expenditures for 1998 to
approximate $60.0 million, including amounts for equipment purchases related to
capacity expansions and upgrades.
 
RESEARCH AND PATENTS
 
     Most divisions of Coltec maintain staffs of manufacturing and product
engineers whose activities are directed at improving the products and processes
of Coltec's operations. Manufactured and development products are subject to
extensive tests at various divisional plants. Total research and development
cost, including product development, was $46.5 million for 1997, $44.1 million
for 1996 and $45.1 million for 1995.
 
     Coltec owns a number of United States and other patents and trademarks and
has granted licenses under some of such trademarks. Management does not consider
the business of Coltec as a whole to be materially dependent upon any patent,
patent right or trademark.
 
EMPLOYEE RELATIONS
 
     As of December 31, 1997, Coltec had approximately 9,100 employees, of whom
approximately 3,700 were salaried. Approximately 41% of the hourly employees are
represented by unions for collective bargaining purposes. Union agreements
relate, among other things, to wages, hours and conditions of employment, and
the wages and benefits furnished are generally comparable to industry and area
practices.
 
     In 1997, three collective bargaining agreements covering approximately 350
hourly employees were renegotiated. Coltec considers the labor relations of

Coltec to be satisfactory, although it has experienced work stoppages from time
to time in the past. One collective bargaining agreement covering approximately
200 employees was due to expire in 1998 and has been renegotiated for a five-
year term.
 
     Coltec is subject to extensive U.S. Government regulations with respect to
many aspects of its employee relations, including increasingly important
occupational health and safety and equal employment opportunity matters. Failure
to comply with certain of these requirements could result in ineligibility to
receive U.S. Government contracts. These conditions are common to the various
industries in which Coltec participates and entail risks of financial and other
exposure.
 
     For litigation relating to labor and other matters, see Item 3. 'Legal
Proceedings.--Other Litigation.'
 
ENVIRONMENTAL MATTERS
 
     Coltec's operations are subject to extensive Environmental Laws. Coltec
takes a proactive approach in addressing the applicability of all Environmental
Laws as they relate to its manufacturing operations and in proposing and
implementing any remedial plans that may be necessary. Coltec believes it is
either in material compliance with all currently applicable regulations or is
operating in accordance with the appropriate variances and compliance schedules
or similar arrangements. Coltec has identified certain situations that will
require future capital and non-capital expenditures to maintain or improve
compliance with current Environmental Laws. The majority of the identified
situations relate to remediation projects at former operating sites which have
been sold or closed and primarily deal with soil and groundwater remediation.
 
     Coltec has been notified that it is among potentially responsible parties
under the Environmental Laws, for the costs of investigating and, in some cases
remediating contamination by hazardous
 
                                       8

<PAGE>

materials at approximately 28 sites. Such laws can impose joint and several
liability for the costs of investigating and remediating properties contaminated
by hazardous materials. Liability for these costs can be imposed on present and
former owners or operators of the properties or on parties who generated the
wastes that contributed to the contamination.
 
     Coltec's policy is to accrue environmental remediation costs when it is
both probable that a liability has been incurred and the amount can be
reasonably estimated. The measurement of liability is based on an evaluation of
currently available facts with respect to each individual situation and takes
into consideration factors such as existing technology, presently enacted laws
and regulations and prior experience in remediation of contaminated sites. As
assessments and remediation progress at individual sites, these liabilities are
reviewed periodically and adjusted to reflect additional technical and legal
information. Coltec currently estimates that its future non-capital expenditures
related to environmental matters will range between $27.0 million and $50.0

million, representing management's best estimate of probable non-capital
expenditures. At December 31, 1997, Coltec had accrued $31.7 million for
expenditures which will be incurred over the next 10 to 20 years. In addition,
capital expenditures aggregating $5.0 million related to environmental matters,
may be required during the next two  years. Although Coltec is pursuing
insurance recovery in connection with certain of the underlying matters, no
receivable has been recorded with respect to any potential recovery of costs in
connection with any environmental matter. During 1997, costs associated with
environmental remediation and ongoing assessment were not significant. Subject
to the imprecision in estimating future environmental costs, Coltec believes
that compliance with current Environmental Laws will not require significant
capital expenditures or have a material adverse effect on its consolidated
financial results of operations or financial position.
 
     Actual costs to be incurred for identified situations in future periods may
vary from estimates, given inherent uncertainties in evaluating environmental
exposures due to unknown conditions, changing government regulations and legal
standards regarding liability and evolving related technologies. Subject to the
imprecision in estimating future environmental costs, Coltec believes that
compliance with current Environmental Laws, will not require significant capital
expenditures or have a material adverse effect on its consolidated results of
operations or financial position.
 
ITEM 2. PROPERTIES.
 
     Coltec operates 62 manufacturing plants in 22 states in the U.S. and in 
Canada, Mexico, France, the United Kingdom, Australia, Germany and Poland. In
addition, Coltec has other facilities throughout the United States and in
various foreign countries, which include sales offices, repair and service
shops, light manufacturing and assembly facilities, administrative offices and
warehouses.
 
     Certain information with respect to Coltec's significant manufacturing
plants that are owned in fee, all of which (other than the Palmyra, New York and
Ontario facilities) are encumbered pursuant to a certain credit agreement
between Coltec and certain banks and related security documents, is set forth
below:
 
<TABLE>
<CAPTION>
                                                                                   APPROXIMATE
                                                                                    NUMBER OF     APPROXIMATE
SEGMENT                                                     LOCATION               SQUARE FEET      ACREAGE
----------------------------------------------   ------------------------------    -----------    -----------
<S>                                              <C>                               <C>            <C>
Aerospace.....................................   West Hartford, Connecticut (a)      538,000           71
                                                 Euless, Texas                       442,000           42
                                                 Oakville, Ontario                   280,000           14
                                                 Mississauga, Ontario                141,000            7

Industrial....................................   Palmyra, New York                   677,000          137
                                                 Beloit, Wisconsin                   856,000           73
                                                 Bowling Green, Kentucky             376,000           46
                                                 Longview, Texas                     265,000           52

</TABLE>
------------------
(a) Approximately 239,000 square feet are utilized by the Aerospace Segment with
the balance leased to third parties.
 
     In addition to the owned facilities, certain manufacturing activities of
some industry segments are conducted within leased premises, the largest of
which is in the Industrial Segment, located in Quincy, Illinois, and covers
approximately 173,000 square feet. Some of these leases provide for options to
purchase or to renew the lease with respect to the leased premises.
 
                                       9
<PAGE>
     Coltec's total manufacturing facilities presently being utilized aggregate
approximately 4,902,000 square feet of floor area of which approximately
4,230,000 square feet of area are owned in fee and the balance is leased from
third parties.
 
     Coltec leases approximately 35,000 square feet at 3 Coliseum Centre, 2550
West Tyvola Road, Charlotte, North Carolina, for its executive offices, and has
renewal options under such lease through 2011.
 
     In the opinion of management, Coltec's principal properties, whether owned
or leased, are suitable and adequate for the purposes for which they are used
and are suitably maintained for such purposes. See Item 1.
'Business.--Environmental Matters' for a description of proceedings under
applicable environmental laws regarding certain of Coltec's properties.
 
ITEM 3. LEGAL PROCEEDINGS.
 
ASBESTOS LITIGATION
 
     As of December 31, 1997 and 1996, two subsidiaries of Coltec were among a
number of defendants (typically 15 to 40) in approximately 110,000 and 94,700
actions, respectively (including approximately 2,400 and 5,100 actions,
respectively, in advanced stages of processing), filed in various states by
plaintiffs alleging injury or death as a result of exposure to asbestos fibers.
During 1997, 1996 and 1995, these two subsidiaries of Coltec were named
defendants in approximately 38,200, 39,900 and 44,000 new actions, respectively.
Through December 31, 1997, approximately 199,000 of the approximately 309,000
total actions brought have been settled or otherwise disposed of.
 
     The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1 million or more in compensatory damages and $2
million or more in punitive damages. Although the law in each state differs to
some extent, it appears, based on advice of counsel, that liability for
compensatory damages would be shared among all responsible defendants, thus
limiting the potential monetary impact of such judgments on any individual
defendant.
 
     Following a decision of the Pennsylvania Supreme Court, in a case in which
neither Coltec nor any of its subsidiaries were parties, that held insurance
carriers are obligated to cover asbestos-related bodily injury actions if any
injury or disease process, from first exposure through manifestation, occurred

during a covered policy period (the 'continuous trigger theory of coverage'),
Coltec settled litigation with its primary and most of its first-level excess
insurance carriers, substantially on the basis of the Court's ruling. Coltec has
negotiated a final agreement with most of its excess carriers that are in the
layers of coverage immediately above its first layer. Coltec is currently
receiving payments pursuant to this agreement. Coltec believes that, with
respect to the remaining carriers, a final agreement can be achieved without
litigation and on substantially the same basis that it has resolved the issues
with its other carriers. Settlements are generally made on a group basis with
payments made to individual claimants over periods of one to four years.
Payments were made by Coltec with respect to asbestos liability and related
costs aggregating $59.2 million in 1997, $71.3 million in 1996 and $56.7 million
in 1995, substantially all of which were covered by insurance. Related to
payments not covered by insurance, Coltec recorded charges to operations
amounting to $8.0 million in 1997, $8.0 million in 1996 and $5.0 million in
1995.
 
     In accordance with Coltec's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or
settlement, certain outstanding actions have progressed to a stage where Coltec
can reasonably estimate the cost to dispose of these actions. As of December 31,
1997, Coltec estimates that the aggregate remaining cost of the disposition of
the settled actions for which payments remain to be made and actions in advanced
stages of processing, including associated legal costs, is approximately $47.3
million, and Coltec expects that this cost will be substantially covered by
insurance.
 
     With respect to the 107,600 outstanding actions as of December 31, 1997
which are in preliminary procedural stages, Coltec lacks sufficient information
upon which judgments can be made as to the validity or ultimate disposition of
such actions, thereby making it difficult to estimate with reasonable certainty
the potential liability or costs to Coltec. When asbestos actions are received
they are typically
 
                                       10

<PAGE>
forwarded to local counsel to ensure that the appropriate preliminary procedural
response is taken. The complaints typically do not contain sufficient
information to permit a reasonable evaluation as to their merits at the time of
receipt, and in jurisdictions encompassing a majority of the outstanding
actions, the practice has been that little or no discovery or other action is
taken until several months prior to the date set for trial. Accordingly, Coltec
generally does not have the information necessary to analyze the actions in
sufficient detail to estimate the ultimate liability or costs to Coltec, if any,
until the actions appear on a trial calendar. A determination to seek dismissal,
to attempt to settle or to proceed to trial is typically not made prior to the
receipt of such information.
 
     It is also difficult to predict the number of asbestos lawsuits that
Coltec's subsidiaries will receive in the future. Coltec has noted that, with
respect to recently settled actions or actions in advanced stages of processing,
the mix of the injuries alleged and the mix of the occupations of the plaintiffs
have been changing from those traditionally associated with Coltec's

asbestos-related actions. Coltec is not able to determine with reasonable
certainty whether this trend will continue. Based upon the foregoing, and due to
the unique factors inherent in each of the actions, including the nature of the
disease, the occupation of the plaintiff, the presence or absence of other
possible causes of a plaintiff's illness, the availability of legal defenses,
such as the statute of limitations or state of the art, and whether the lawsuit
is an individual one or part of a group, management is unable to estimate with
reasonable certainty the cost of disposing of outstanding actions in preliminary
procedural stages or of actions that may be filed in the future. However, Coltec
believes that its subsidiaries are in a favorable position compared to many
other defendants because, among other things, the asbestos fibers in its
asbestos-containing products were encapsulated. 

     Insurance coverage of a small non-operating subsidiary formerly 
distributing asbestos-bearing products is nearly depleted. Considering the
foregoing, as well as the experience of Coltec's subsidiaries and other
defendants, and given the substantial amount of other insurance coverage that
Coltec expects to be available from its solvent carriers to cover the majority
of its exposure, Coltec believes that pending and reasonably anticipated future
actions are not likely to have a materially adverse effect on Coltec's results
of operations and financial condition. Although the insurance coverage which
Coltec has is substantial, it should be noted that insurance coverage for
asbestos claims is not available to cover exposures initially occurring on and
after July 1, 1984. Coltec's subsidiaries continue to be named as defendants in
new cases, some of which allege initial exposure after July 1, 1984.
 
     In addition to claims for personal injury, Coltec's subsidiaries have been
involved in an insignificant number of property damage claims based upon
asbestos-containing materials found in schools, public facilities and private
commercial buildings. Based upon the proceedings to date, the overwhelming
majority of these claims have been resolved without a material adverse impact on
Coltec. Likewise, the insignificant number of claims remaining to be resolved
are not expected to have a materially adverse effect on Coltec's results of
operations and financial condition.
 
     Coltec has recorded an accrual for its liabilities for asbestos-related
matters that are deemed probable and can be reasonably estimated (settled
actions and actions in advanced states of processing), and has separately
recorded an asset equal to the amount of such liabilities that is expected to be
recovered by insurance. In addition, Coltec has recorded a receivable for that
portion of payments previously made for asbestos product liability actions and
related litigation costs that is recoverable from its insurance carriers.
Liabilities for asbestos-related matters and the receivable from insurance
carriers included in the Consolidated Balance Sheets were as follows at December
31, 1997 and 1996 (in thousands):
 
                                                             1997       1996
                                                            -------    -------
Accounts and notes receivable............................   $56,039    $67,012
Other assets.............................................    16,249     18,728
Accrued expenses.........................................    50,688     60,659
Other liabilities........................................     2,682     10,879
 
                                       11


<PAGE>

OTHER LITIGATION
 
     In September 1983, the local employees' union at Menasco Canada Ltee. (now
Coltec Aerospace Canada Ltd.) ('Menasco Canada'), a federation of trade unions
and several member-employees filed a complaint in the Province of Quebec
Superior Court against Menasco Canada, alleging, among other things, an illegal
lock-out, failure to negotiate in good faith, interference with the affairs of
the union and various violations of local law. The plaintiffs are collectively
seeking approximately Cdn. $14.0 million in damages, and Menasco Canada has
filed a cross-claim for Cdn. $21.0 million and has closed its operations in
Quebec Province. Coltec does not believe that this action will have a material
effect on Coltec's consolidated results of operations and financial condition.
 
     On September 24, 1986, approximately 150 former salaried employees of
Crucible Inc (a former subsidiary of Coltec) commenced an action claiming
benefits under a corporate employment policy that had been established in 1962
and was terminated in 1972 by the corporation's Board of Directors. (George W.
Henglein, et al. v. Colt Industries Operating Corporation Informal Plan for
Plant Shutdown Benefits for Salaried Employees, et al., U.S. District Court for
the Western District of Pennsylvania, 86-cv-2021). Plaintiffs alleged that the
policy continued after the Board of Directors' action by reason of the Company's
failure to notify them of elimination of the employment policy. As a result of
that failure to notify, the policy was converted into a welfare or pension
benefit plan upon the passage of the Employee Retirement Income Security Act in
1974. Based upon the occurrence of this conversion, the plaintiffs were entitled
to benefits in 1982 when the Midland operations closed. Following a non-jury
trial in the U.S. District Court for the Western District of Pennsylvania,
defendant's motion to dismiss was granted and the plaintiffs appealed. The Court
of Appeals for the Third Circuit remanded the case to the District Court
directing it to make specific findings of fact and conclusions of law and also
found for the defendant on the jurisdiction of the District Court. The defendant
again moved for dismissal and again defendant's motion to dismiss was granted by
the District Court. This second decision of the District Court was appealed to
the Third Circuit Court of Appeals and the case was again remanded to the
District Court for additional findings as to the application of the law. On
February 10, 1994, the District Court for the third time dismissed the
plaintiffs' complaint and the plaintiffs appealed to the Third Circuit Court of
Appeals. On September 26, 1994, the Third Circuit Court of Appeals for the third
time remanded the case to the District Court. The Circuit Court held the record
established by plaintiffs in the District Court was insufficient so as to allow
the Court the ability to apply the appropriate legal standard. On November 4,
1994 the Court of Appeals for the Third Circuit denied the defendant's request
for a rehearing. The defendant petitioned the U.S. Supreme Court for a writ of
Certiorari; its petition was denied in 1995. The defendant again moved for
dismissal before the District Court based upon the holding of the Circuit Court
that plaintiffs had failed to establish their case at trial. The District Court
denied the motion and sua sponte ordered a new trial de novo. A trial was held
during July 1996 with both parties introducing evidence. A decision was rendered
in 1997 finding the existence of an informal plan. The District Court remanded
to the Plan Administrator the duties of calculating the benefits due to those
plaintiffs entitled. The District Court held that all but six of the named

plaintiffs' claims were time barred. Both the defendant and plaintiffs filed
timely notices of appeal. Notwithstanding its filing of a notice of appeal,
defendant has claimed and so notified the Circuit Court that it was of the
opinion that the District Court's order was not final and thus not now
appealable. As of December 1997, plaintiffs have concurred in defendant's
position. Coltec does not believe that this action will have a material effect
on Coltec's consolidated results of operations and financial condition.
 
     In addition to the litigation described above, there are various pending
legal proceedings involving Coltec which are routine in nature and incidental to
the business of Coltec. Coltec does not believe that these proceedings will have
a material effect on Coltec's consolidated results of operations and financial
condition.
 
     The U.S. Government conducts investigations into procurement of defense
contracts as a part of a continuing process. Under current federal law, if such
investigations establish the existence of improper activities, among other 
matters, debarment or suspension of a company from participating in the
procurement of defense contracts could result. These conditions are common to
the aerospace and government industries in which Coltec participates and entail
the risk of financial and other exposure. See Item 1.
 
                                       12

<PAGE>

'Business--Contract Risks.' Coltec is not aware of any such investigation, nor
is Coltec aware of any facts which, if known to investigators, might prompt any
investigation.
 
PRODUCT LIABILITY INSURANCE
 
     Coltec has product liability insurance coverage for liabilities arising
from aircraft products which management believes to be adequate. In addition,
with respect to other products (exclusive of liability for exposure to asbestos
products), Coltec has product liability insurance in amounts exceeding $2.5
million per occurrence, which management believes to be adequate.
 
     Coltec is self-insured (for claims arising after July 1984) with respect to
liability for exposure to asbestos products since third party insurance became
unavailable in July 1984.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     Not applicable.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     Coltec's common stock (symbol COT) is listed on the New York Stock Exchange
and the Pacific Exchange. The high and low prices of the stock for each quarter
during 1997 and 1996 were as follows:
 

                                                  1997               1996
                                             --------------      ------------
                                              HIGH     LOW       HIGH    LOW
                                              ----     ---       ----    ---
First quarter............................    20 7/8    18 1/8    14 1/4  10 7/8
Second quarter...........................    23        18 3/8    14 3/8  12 1/8
Third quarter............................    23 15/16  19 1/2    16 1/8  12 7/8
Fourth quarter...........................    23 15/16  20        19 1/4  15 1/2
 
     At December 31, 1997, there were 505 shareholders of record. No dividends
were paid in 1997 or 1996, and no dividends are expected to be paid in 1998.
 
ITEM 6. SELECTED FINANCIAL DATA.
 
     The five year tabular presentation, and notes thereto, under the caption
'Selected Consolidated Financial Data' in Coltec's 1997 Annual Report to its
shareholders is incorporated herein by reference.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.
 
     The information under the caption 'Management's Discussion and Analysis' in
Coltec's 1997 Annual Report to its shareholders is incorporated herein by
reference.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
     The information under the caption 'Quarterly Financial Data' in Coltec's
1997 Annual Report to its shareholders and the Consolidated Statements of
Earnings, the Consolidated Balance Sheets, the Consolidated Statements of Cash
Flows, the Consolidated Statements of Shareholders' Equity, the Notes to
Consolidated Financial Statements, the Report of Management and the Report of
Independent Public Accountants in Coltec's 1997 Annual Report to its
shareholders are incorporated herein by reference.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
     None.
 
                                       13

<PAGE>

                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
     The information under the captions 'Election of Directors' and 'Executive
and Senior Officers of Coltec' in Coltec's Proxy Statement for its 1998 Annual
Meeting of Shareholders is herein incorporated by reference.
 
ITEM 11. EXECUTIVE COMPENSATION.
 

     The text and tabular information under the caption 'Executive Compensation
and Other Information' in Coltec's Proxy Statement for its 1998 Annual Meeting
of Shareholders is herein incorporated by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
     The information under the captions 'Security Ownership of Certain
Beneficial Owners' and 'Security Ownership of Management' in Coltec's Proxy
Statement for its 1998 Annual Meeting of Shareholders is herein incorporated by
reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     None.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
 
     (a) The following documents are filed as part of this report:
 
          (1) Consolidated Financial Statements (incorporated by reference from
     the 1997 Annual Report to Shareholders): Consolidated Statements of
     Earnings for the Three Years ended December 31, 1997; Consolidated Balance
     Sheets at December 31, 1997 and 1996; Consolidated Statements of Cash Flows
     for the Three Years ended December 31, 1997; Consolidated Statements of
     Shareholders' Equity for the Three Years ended December 31, 1997; Notes to
     Consolidated Financial Statements; Report of Management; and Report of
     Independent Public Accountants.
 
          (2) Consolidated Financial Statement Schedules listed in the Index to
     Consolidated Financial Statement Schedules on page S-1 hereof.
 
          (3) The exhibits required by Item 601 of Regulation S-K as listed in
     the accompanying exhibit index commencing on page I-1 hereof.
 
     (b) During the quarter ending December 31, 1997, Coltec filed no reports on
Form 8-K.
 
     (c) Exhibits 3.2, 4.22, 4.23, 4.24, 4.25, 4.26, 4.27, 4.28, 4.29, 10.2,
10.3, 10.4, 10.5, 10.6, 10.7, 10.8, 10.20, 10.22, 10.23, 10.25, 10.26, 12.1,
13.1, 21.1, 23.1 and 27.1, are filed herewith. All other exhibits listed on the
attached Index to Exhibits have been filed previously.
 
                                       14

<PAGE>

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 

                                          Coltec Industries Inc
 
Date: March 20, 1998
 
                                          By:      /s/ DAVID D. HARRISON
                                              ----------------------------------
                                                     DAVID D. HARRISON
                                                Executive Vice President and
                                                  Chief Financial Officer
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities noted on March 20, 1998.
 
<TABLE>
<CAPTION>
                    NAME AND TITLE                                          NAME AND TITLE
                    --------------                                          --------------
<S>                                                     <C>

                /s/ JOSEPH R. COPPOLA                                   /s/ DAVID I. MARGOLIS
------------------------------------------------------  ------------------------------------------------------
                  Joseph R. Coppola                                       David I. Margolis
                       Director                                                Director
 
                 /s/ WILLIAM H. GRIGG                                  /s/ JOHN W. GUFFEY, JR.
------------------------------------------------------  ------------------------------------------------------
                   William H. Grigg                                      John W. Guffey, Jr.
                       Director                                  Director, Chairman of the Board and
                                                                       Chief Executive Officer
 
                /s/ DAVID D. HARRISON                                       /s/ JOEL MOSES
------------------------------------------------------  ------------------------------------------------------
                  David D. Harrison                                           Joel Moses
          Director, Executive Vice President                                   Director
             and Chief Financial Officer
     (Principal Financial and Accounting Officer)
 
                /s/ RICHARD A. STUCKEY                                   /s/ NISHAN TESHOIAN
------------------------------------------------------  ------------------------------------------------------
                  Richard A. Stuckey                                       Nishan Teshoian
                       Director                                     Director, President and Chief
                                                                          Operating Officer
</TABLE>
 
                                       15

<PAGE>

              INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
 
<TABLE>
<CAPTION>
                                                                                                            PAGE

CONSOLIDATED FINANCIAL STATEMENT SCHEDULES                                                                 NUMBER
------------------------------------------                                                                 ------
<S>                                                                                                        <C>
II--Valuation and Qualifying Accounts for the three years ended December 31, 1997.......................     S-3
</TABLE>
 
                                      S-1

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Board of Directors and Shareholders of Coltec Industries Inc:
 
     We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Coltec Industries Inc and
subsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 2, 1998. Our audits
were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to financial
statement schedules is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
 
ARTHUR ANDERSEN LLP
Charlotte, North Carolina
February 2, 1998
 
                                      S-2

<PAGE>

                     COLTEC INDUSTRIES INC AND SUBSIDIARIES
                 SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                  COLUMN A                       COLUMN B              COLUMN C             COLUMN D      COLUMN E
                  --------                       --------              --------             --------      --------
                                                                      ADDITIONS                           
                                                               ------------------------                 
                                                BALANCE AT     CHARGED TO    CHARGED TO                  BALANCE OF
                                               BEGINNING OF     COST AND       OTHER                       END OF
DESCRIPTION                                       PERIOD        EXPENSES      ACCOUNTS     DEDUCTIONS      PERIOD
-----------                                    ------------    ----------    ----------    ----------    ----------
<S>                                            <C>             <C>           <C>           <C>           <C>
1997
  Valuation account deducted from

     assets--Allowance for doubtful
     accounts...............................      $2,007        $  1,222        $ --         $  335        $2,894
                                                  ======        ========        ====         ======        ======
1996
  Valuation account deducted from
     assets--Allowance for doubtful
     accounts...............................      $4,174        $  1,517        $ --         $3,684        $2,007
                                                  ======        ========        ====         ======        ======
1995
  Valuation account deducted from
     assets--Allowance for doubtful
     accounts...............................      $4,124        $    327        $ --         $  277        $4,174
                                                  ======        ========        ====         ======        ======
</TABLE>
 
------------------
Note:
 
(1) Deductions are for the purposes for which the valuation accounts were
    created.
 
                                      S-3

<PAGE>

                               INDEX TO EXHIBITS
 
<TABLE>
<S>       <C>
 3.1      Amended and Restated Articles of Incorporation of Coltec, filed as Exhibit 3.1 to Coltec's
          Registration Statement on Form S-2 (No. 33-44846) and incorporated herein by reference.

 3.2      Amended and Restated By-Laws of Coltec.

 4.1      Credit Agreement, dated as of March 24, 1992 (the 'Credit Agreement') among Coltec and the financial
          institutions party thereto, Bankers Trust Company, Manufacturers Hanover Trust Company, Barclays Bank
          PLC, New York Branch and Credit Lyonnais New York Branch, as Agents, and Bankers Trust Company, as
          Administrative Agent, filed as Exhibit 4.13 to Coltec Holdings Inc.'s Annual Report on Form 10-K for
          the year ended December 31, 1991 and incorporated herein by reference.

 4.2      First Amendment, dated as of April 1, 1992, to the Credit Agreement, dated as of March 24, 1992, filed
          as Exhibit 3 to Coltec's Current Report on Form 8-K, dated April 1, 1992 and incorporated herein by
          reference.

 4.3      Second Amendment, dated as of April 8, 1992, to the Credit Agreement, filed as Exhibit 4.7 to Coltec's
          Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.

 4.4      Third Amendment and Waiver, dated as of September 3, 1992, to the Credit Agreement, filed as Exhibit
          4.8 to Coltec's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated
          herein by reference.

 4.5      Fourth Amendment and Consent, dated as of September 25, 1992, to the Credit Agreement, filed as
          Exhibit 4.9 to Coltec's Annual Report on Form 10-K for the year ended December 31, 1993 and
          incorporated herein by reference.


 4.6      Fifth Amendment, dated as of May 26, 1993, to the Credit Agreement, filed as Exhibit 4.10 to Coltec's
          Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.

 4.7      Sixth Waiver, dated as of August 3, 1993, to the Credit Agreement, filed as Exhibit 4.11 to Coltec's
          Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.

 4.8      Seventh Consent, dated as of October 27, 1993, to the Credit Agreement, filed as Exhibit 4.12 to
          Coltec's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by
          reference.

 4.9      Eighth Waiver, dated as of December 23, 1993, to the Credit Agreement, filed as Exhibit 4.13 to
          Coltec's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by
          reference.

 4.10     Credit Agreement among Coltec, Various Banks, The Co-Agents and Bankers Trust Company, as
          Administrative Agent dated as of March 24, 1992 and Amended and Restated as of January 11, 1994 (the
          'Amended Credit Agreement'), filed as Exhibit 4.14 to Coltec's Annual Report on Form 10-K for the year
          ended December 31, 1993 and incorporated herein by reference.

 4.11     First Waiver, dated as of December 15, 1994, to the Amended Credit Agreement, filed as Exhibit 4.15 to
          Coltec's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by
          reference.

 4.12     First Amendment, dated as of October 11, 1995, to the Amended Credit Agreement, filed as Exhibit 4.1
          to Coltec's Current Report on Form 8-K, dated July 1, 1996 and incorporated herein by reference.

 4.13     Second Waiver, dated as of June 5, 1995, to the Amended Credit Agreement, filed as Exhibit 4.16 to
          Coltec's Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by
          reference.
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 4.14     Second Amendment, dated as of November 17, 1995, to the Amended Credit Agreement, filed as Exhibit
          4.17 to Coltec's Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated
          herein by reference.

 4.15     Third Amendment, dated as of May 14, 1996, to the Amended Credit Agreement, filed as Exhibit 4.2 to
          Coltec's Current Report on Form 8-K, dated July 1, 1996 and incorporated herein by reference.
 
 4.16     Fourth Amendment, dated as of June 6, 1996, to the Amended Credit Agreement, filed as Exhibit 4.3 to
          Coltec's Current Report on Form 8-K, dated July 1, 1996 and incorporated herein by reference.
 
 4.17     Form of Indenture, dated as of October 26, 1992, between Coltec and United States Trust Company of New
          York, as Trustee, relating to Coltec's 9-3/4% Senior Notes Due 1999 (including the form of 9-3/4%
          Senior Note Due 1999), filed as Exhibit 4.1 to Coltec's Registration Statement on Form S-3 (No.
          33-52414) and incorporated herein by reference.
 
 4.18     Indenture, dated as of April 1, 1992, between Coltec and United States Trust Company of New York, as
          Trustee, relating to Coltec's 9-3/4% Senior Notes Due 2000 (including the form of 9-3/4% Senior Note

          Due 2000), filed as Exhibit 4 to Coltec's Current Report on Form 8-K, dated April 1, 1992 and
          incorporated herein by reference.
 
 4.19     Credit Agreement among Coltec, Various Banks, Bankers Trust Company, as Administrative Agent, and Bank
          of America Illinois, as Documentation Agent, and The Chase Manhattan Bank, as Syndication Agent, dated
          as of March 24, 1992 and Amended and Restated as of January 11, 1994 and further Amended and Restated
          as of December 18, 1996, filed as Exhibit 4.20 to Coltec's Annual Report on Form 10-K for the year
          ended December 31, 1996 and incorporated herein by reference.
 
 4.20     First Amendment to Credit Agreement dated as of August 22, 1997 between Coltec and Bankers Trust
          Company as Administrative Agent, Bank of America Illinois, as Documentation Agent and Chase Manhattan
          Bank, as Syndication Agent, filed as an Exhibit to Coltec's Form 10-Q for the Quarter Ended September
          28, 1997 and incorporated herein by reference.
 
 4.21     Second Amendment to Credit Agreement dated October 14, 1997 between Coltec and Various Banks, Bankers
          Trust Company as Administrative Agent, Bank of America Illinois, as Documentation Agent and Chase
          Manhattan Bank, as Syndication Agent, filed as an Exhibit to Coltec's Form 10-Q for the Quarter Ended
          September 28, 1997 and incorporated herein by reference.
 
 4.22     Third Amendment to Credit Agreement dated December 18, 1997 between Coltec, Coltec Aerospace Canada
          Ltd., and Various Banks, Bank of America National Trust and Savings Association (as successor by
          merger to Bank of America Illinois), The Chase Manhattan Bank, as Syndication Agent, Bankers Trust
          Company, as Administrative Agent and Bank of Montreal, as Canadian Paying Agent.
 
 4.23     Fourth Amendment to Credit Agreement dated January 26, 1998 between Coltec and Various Banks, Bankers
          Trust Company as Administrative Agent, Bank of America Illinois, as Documentation Agent and Chase
          Manhattan Bank, as Syndication Agent.
 
 4.24     Receivables Purchase Agreement dated September 19, 1997 between Coltec, CNC Finance LLC and Credit
          Lyonnais, Atlantic Asset Securitization Corp., The Industrial Bank of Japan, Limited, Lloyds Bank PLC,
          The Sumitomo Bank, Limited.
 
 4.25     Receivables Transfer and Administration Agreement dated as of September 19, 1997 among Coltec, certain
          subsidiaries and affiliates of Coltec and Coltec North Carolina Inc.
 
 4.26     Receivables Transfer and Administration Agreement dated as of September 19, 1997 among Coltec, certain
          Canadian subsidiaries and affiliates of Coltec and Coltec North Carolina Inc.
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 4.27     Receivables Purchase and Contribution Agreement dated as of September 19, 1997 between Coltec North
          Carolina Inc and CNC Finance LLC.
 
 4.28     First Amendment to Receivables Transfer and Administration Agreement dated as of December 15, 1997
          among Coltec and Coltec North Carolina.
 
 4.29     First Amendment to Receivables Purchase and Contribution Agreement dated as of December 15, 1997 among
          Coltec, Coltec North Carolina Inc and CNC Finance LLC.
 
          Pursuant to paragraph (4)(iii) of Item 601(b) of Regulation S-K, there are omitted certain agreements,

          which the registrant hereby agrees to furnish to the Commission upon request.
 
10.1      Form of Family Protection Agreement used in connection with Coltec's Family Protection Program, filed
          as Exhibit 3.5.1 to Coltec's Registration Statement on Form 8-B, filed with the Securities and
          Exchange Commission on June 25, 1976 and incorporated herein by reference.
 
10.2      Form of Split Dollar Insurance Agreement dated May 8, 1997 between Coltec and certain executive
          officers.
 
10.3      Benefits Equalization Plan of Coltec effective January 1, 1976 and Amended and Restated as of January
          1, 1989.

10.4      First Restated Employment Agreement between Coltec and John W. Guffey, Jr., dated December 18, 1997.
 
10.5      First Restated Employment Agreement between Coltec and Laurence H. Polsky, dated December 18, 1997.
 
10.6      Second Restated Employment Agreement between Coltec and Robert J. Tubbs, dated December 18, 1997.
 
10.7      Form of First Restated Employment Agreement between Coltec and David D. Harrison, dated December 18,
          1997.
 
10.8      Amended and Restated Employment Agreement between Coltec and Michael J. Burdulis, dated December 18,
          1997.
 
10.9      The Incentive Plan for Certain Employees of Coltec and Subsidiaries (the 'Incentive Plan'), filed as
          Exhibit 10.22 to Coltec's Registration Statement on Form S-2 (No. 33-44846) and incorporated herein by
          reference.
 
10.10     Amendments to the Incentive Plan, filed as Exhibit 10.13 to Coltec's Annual Report on Form 10-K for
          the year ended December 31, 1993 and incorporated herein by reference.
 
10.11     Coltec's 1992 Stock Option and Incentive Plan, filed as Exhibit 10.24 to Coltec's Annual Report on
          Form 10-K for the year ended December 31, 1991 and incorporated herein by reference.
 
10.12     Amendment No. 1 to the Coltec 1992 Stock Option and Incentive Plan, filed as Exhibit 10.15 to Coltec's
          Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.
 
10.13     1994 Long-Term Incentive Plan of Coltec, filed as Exhibit 10.16 to Coltec's Annual Report on Form 10-K
          for the year ended December 31, 1993 and incorporated herein by reference.
 
10.14     Resolutions of the Board of Directors of Coltec on July 13, 1995 amending Section 6(a) of the 1994
          Long-Term Incentive Plan, filed as Exhibit 10.17 to Coltec's Annual Report on Form 10-K for the year
          ended December 31, 1995 and incorporated herein by reference.
 
10.15     Annual Incentive Plan For Certain Employees of Coltec Industries Inc and Its Subsidiaries, filed as
          Exhibit 10.17 to Coltec's Annual Report on Form 10-K for the year ended December 31, 1993 and
          incorporated herein by reference.
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10.16     1994 Stock Option Plan for Outside Directors, filed as Exhibit 10.18 to Coltec's Annual Report on Form

          10-K for the year ended December 31, 1993 and incorporated herein by reference.

10.17     Deferred Compensation Plan For Non-Employee Directors, filed as Exhibit 10.20 to Coltec's Annual
          Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference.

10.18     Resolution of the Board of Directors of Coltec on May 30, 1995 establishing a Change-In-Control
          arrangement for non-employee directors, filed as Exhibit 10.21 to Coltec's Annual Report on Form 10-K
          for the year ended December 31, 1995 and incorporated herein by reference.

10.19     1997 Restricted Stock Plan for Outside Directors filed as Exhibit A to Coltec's 1997 Proxy Statement
          and incorporated herein by reference.

10.20     Amendment No. 1 to the 1997 Restricted Stock Plan for Outside Directors.

10.21     Second Amendment dated July 10, 1997 to the 1992 Stock Option and Incentive Plan, filed as an Exhibit
          to Coltec's Form 10-Q for the Quarter Ended September 28, 1997 and incorporated herein by reference.

10.22     Amendment No. 3 to Coltec's 1992 Stock Option and Incentive Plan.

10.23     Form of Employment Agreement between Coltec and Nishan Teshoian, dated January 1, 1998.

10.24     First Amendment dated July 10, 1997 to the 1994 Stock Option Plan for Outside Directors, filed as an
          Exhibit to Coltec's Form 10-Q for the Quarter Ended September 28, 1997 and incorporated herein by
          reference.

10.25     Second Amendment to 1994 Stock Option Plan for Outside Directors.

10.26     Amendment No. 3 to the 1994 Stock Option Plan for Outside Directors.

12.1      Computation of Ratio of Earnings to Fixed Charges.

13.1      Portions of Coltec's 1997 Annual Report to Shareholders.

21.1      List of Subsidiaries of Coltec.

23.1      Consent of Arthur Andersen LLP.

27.1      Consolidated Financial Data Schedule.
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