SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


(Mark One)

[X]  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES  AND
     EXCHANGE ACT OF 1934

                 For the quarterly period ended January 31, 1998

                                       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 0-18198

                              DeVlieg-Bullard, Inc.
             (Exact name of registrant as specified in its charter)

                Delaware                                         62-1270573
    (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                         Identification No.)

     One Gorham Island, Westport, CT                               06880
(Address of principal executive offices)                         (Zip Code)

                                  203-221-8201
              (Registrant's telephone number, including area code)

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

The  number  of  shares  of  common  stock  outstanding  as of March 1, 1998 was
12,309,900.


<PAGE>


                         PART I - FINANCIAL INFORMATION
                          Item 1. Financial Statements

                              DeVlieg-Bullard, Inc.
                                 Balance Sheets
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                            January 31,   July 31,
                                                               1998        1997
                                                            ---------    ---------
ASSETS                                                     (unaudited)
<S>                                                         <C>          <C>      
Current assets:
     Cash and cash equivalents                              $     471    $     637
     Accounts receivable, net                                  24,726       25,798
     Inventories, net                                          38,703       38,195
     Other current assets                                       1,824        1,519
                                                            ---------    ---------
         Total current assets                                  65,724       66,149

Property, plant and equipment, net                             12,599       12,657
Engineering drawings                                           17,184       18,039
Goodwill                                                       11,884       11,948
Other assets                                                   12,326       12,651
                                                            ---------    ---------
         Total assets                                       $ 119,717    $ 121,444
                                                            =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
     Accounts payable                                       $  12,378    $   9,751
     Accrued expenses and other current liabilities             6,873       11,969
     Revolving credit agreement                                27,417       22,525
     Current portion of long-term debt                          2,857        3,631
                                                            ---------    ---------
         Total current liabilities                             49,525       47,876

Long-term debt (related party $4,227)                          13,558       14,179
Postretirement benefit obligation                              20,954       21,999
Other noncurrent liabilities                                   11,898       11,677
                                                            ---------    ---------
         Total liabilities                                     95,935       95,731

Stockholders' equity:
     Common stock, $0.01 par value; authorized
         30,000 shares; issued and outstanding
         12,297,900 and 12,275,400 shares                         123          123
     Additional paid-in capital                                34,151       34,096
     Excess purchase price over net assets acquired from
         related parties                                      (16,242)     (16,242)
     Retained earnings                                          5,884        7,844
     Cumulative translation adjustment                           (134)        (108)
                                                            ---------    ---------
         Total stockholders' equity                            23,782       25,713
                                                            ---------    ---------
         Total liabilities and stockholders' equity         $ 119,717    $ 121,444
                                                            =========    =========
</TABLE>


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


                                       2
<PAGE>


                              DeVlieg-Bullard, Inc.
                             Statement of Operations
                (unaudited - in thousands, except per share data)

<TABLE>
<CAPTION>
                                                      Three Months Ended      Six Months Ended
                                                          January 31,            January 31,
                                                       1998        1997       1998        1997
                                                     --------    --------   --------    --------
<S>                                                  <C>         <C>        <C>         <C>     
Net sales                                            $ 28,008    $ 31,363   $ 54,491    $ 63,497
Cost of sales                                          23,255      23,455     41,750      47,254
                                                     --------    --------   --------    --------
     Gross profit                                       4,753       7,908     12,741      16,243

Operating expenses:
     Engineering                                          509         395      1,005         786
     Selling                                            2,927       2,680      5,671       5,349
     General and administrative                         3,607       2,207      6,575       4,965
                                                     --------    --------   --------    --------
         Total E S G & A expenses                       7,043       5,282     13,251      11,100
     Anticipated loss on disposal                         250        --          250        --
     Other expense/(income), net                           (7)         52        (18)         98
                                                     --------    --------   --------    --------
Total operating expenses                                7,286       5,334     13,483      11,198
                                                     --------    --------   --------    --------

Operating (loss)/income                                (2,533)      2,574       (742)      5,045

Interest expense (including related party interest
     of $185, $171, $370 and $341)                      1,317       1,274      2,637       2,491
                                                     --------    --------   --------    --------

(Loss)/income before income taxes                      (3,850)      1,300     (3,379)      2,554

(Benefit)/provision for income taxes                   (1,618)        546     (1,419)      1,071
                                                     --------    --------   --------    --------

Net (loss)/income                                    $ (2,232)   $    754   $ (1,960)   $  1,483
                                                     ========    ========   ========    ========

Income per common share:
     Basic                                           $  (0.16)   $   0.05   $  (0.14)   $   0.11
                                                     ========    ========   ========    ========

     Diluted                                         $  (0.16)   $   0.05   $  (0.14)   $   0.10
                                                     ========    ========   ========    ========

Average number of shares outstanding:
     Basic                                             14,065      14,032     14,062      14,031
                                                     ========    ========   ========    ========

     Diluted                                           14,065      15,120     14,062      15,058
                                                     ========    ========   ========    ========
</TABLE>


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


                                       3
<PAGE>

                              DeVlieg-Bullard, Inc.
                            Statements of Cash Flows
                           (unaudited - in thousands)
<TABLE>
<CAPTION>
                                                                        Six Months Ended
                                                                           January 31,
Cash flows from operating activities:                                   1998        1997
                                                                      --------    --------
<S>                                                                   <C>         <C>     
Net income                                                            $ (1,960)   $  1,483
Adjustments to reconcile net income to net cash
     provided by operating activities:
         Depreciation and amortization                                   2,595       2,525
         Provision for losses on accounts receivable                       134         (46)
         Loss on disposal of assets held for sale                          250        --
Changes in assets and liabilities, net of effects from acquisitions
     Decrease/(increase) in accounts receivable                            938      (6,365)
     (Increase)/decrease in inventories                                   (508)      4,223
     Increase in other current assets                                     (305)       (187)
     Increase in accounts payable                                        2,627         487
     (Decrease)/increase in accrued expenses and
         other current liabilities                                      (5,096)        543
     Other, net                                                           (800)       (289)
                                                                      --------    --------
     Net cash provided by operating activities                          (2,125)      2,374

Cash flows from investing activities:
     Purchase of business                                                 --          (763)
     Capital expenditures                                                 (810)       (714)
                                                                      --------    --------
     Net cash used for investing activities                               (810)     (1,477)

Cash flows from financing activities:
     Borrowings under revolving credit agreement                        60,307      62,026
     Repayments under revolving credit agreement                       (55,415)    (60,801)
     Payments of long-term debt                                         (2,152)     (1,858)
     Debt issuance costs                                                  --          (129)
     Proceeds from exercise of stock options                                55        --
                                                                      --------    --------
     Net cash provided by (used for) financing activities                2,795        (762)

Effect of exchange rate changes on cash                                    (26)         58
                                                                      --------    --------

Net increase in cash and cash equivalents                                 (166)        193
Cash and cash equivalents at beginning of period                           637         768
                                                                      --------    --------
Cash and cash equivalents at end of period                            $    471    $    961
                                                                      ========    ========

Supplemental disclosure of cash flow information:

Cash paid during the period for:
     Interest                                                         $  2,305    $  2,027
     Income taxes, net of refunds                                          254         118
</TABLE>

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


                                       4
<PAGE>

Supplemental disclosure of cash flow information (continued):

During the six months ended January 31, 1997, the Company issued debt consisting
of a $2,600  Seller's  note and an increase in term debt of $3,500 in connection
with acquisitions.

During the six months ended January 31, 1998 and 1997, the Company  entered into
capital  leases for computer  equipment  totaling  $475 and $192,  respectively,
which were financed by capital lease obligations.


                                       5
<PAGE>

                              DeVlieg-Bullard, Inc.
                          Notes to Financial Statements

NOTE 1: Basis of Presentation

Pursuant to the rules and regulations of the Securities and Exchange  Commission
for  Form  10-Q,  the  financial  statements,  footnote  disclosures  and  other
information  normally  included in financial  statements  prepared in accordance
with generally accepted accounting principles have been condensed. The financial
statements  contained  in this  report  are  unaudited  but,  in the  opinion of
DeVlieg-Bullard,  Inc. (the "Company"),  reflect all adjustments,  consisting of
only normal  recurring  adjustments,  necessary to fairly  present the financial
position as of January 31, 1998 and the results of operations and cash flows for
the interim  periods of the fiscal year ending July 31, 1998 ("fiscal 1998") and
the fiscal  year ended July 31,  1997  ("fiscal  1997")  presented  herein.  The
results of operations for any interim period are not  necessarily  indicative of
results for the full year. These financial statements,  footnote disclosures and
other  information  should be read in conjunction with the financial  statements
and the notes thereto  included in the Company's  annual report on Form 10-K for
the year ended July 31,  1997.  Certain  amounts  in the fiscal  1997  financial
statements have been reclassified to conform to the fiscal 1998 presentation.

The financial  statements  include all accounts of the Company after elimination
of all significant  interdivision  transactions  and balances.  Amounts in these
notes, except per share data, are expressed in thousands.

NOTE 2: Inventories
                                              January 31,               July 31,
Inventories consisted of:                            1998                   1997
                                                  -------                -------
                                              (unaudited)
Raw materials                                     $ 1,464                $ 1,448
Work-in-process                                    11,799                 11,452
Finished goods                                     25,440                 25,295
                                                  -------                -------
                                                  $38,703                $38,195
                                                  =======                =======

Valuation  reserves for obsolete,  excess and slow-moving  inventory  aggregated
$10,684  and  $10,504  at  January  31,  1998 and July 31,  1997,  respectively.
Inventories  valued  using LIFO were $12,834 and $12,819 at January 31, 1998 and
July  31,  1997,   respectively.   There  was  no  LIFO  reserve  against  those
inventories.  The financial  accounting  basis for the  inventories  of acquired
companies  exceeds  the tax basis by $12,224 at  January  31,  1998 and July 31,
1997.

NOTE 3: Earnings per Share

Effective with the quarter ended January 31, 1998, the Company adopted Statement
of Financial  Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"). In
accordance  with the  provisions  of SFAS  128,  all  prior  periods  have  been
restated.  The  diluted  earnings  per share  under  SFAS 128 is not  materially
different  from the  earnings  per share the  Company  previously  reported.  In
accordance  with the provisions of SFAS 128, the number of basic shares includes
the average of shares  outstanding and the stock purchase  warrants that are not
contingently  issuable  (the  Class A and Class B  Warrants).  The  contingently
issuable stock purchase warrants and stock options are included in the number of
shares to be used in the diluted earnings per share calculation.  Loss per share
is  computed  by  dividing  net loss by the number of basic  shares  outstanding
during the  period.  Stock  options and  contingently  issuable  stock  purchase
warrants are not included in this calculation, as they would be antidilutive.

                                       6
<PAGE>


NOTE 4: Long-Term Debt

On March 11,  1998,  the  Company  amended its credit  facility  with its senior
lender to increase the term loan by $2,500.  The new term loan was  consolidated
with the  existing  term loans for an  aggregate  new term loan of  $7,600.  The
proceeds  from  the  new  term  loan  will be used  to  repay a  portion  of the
outstanding  revolving  credit  agreement.  Payments  on the term  loan are $200
monthly, starting March 31, 1998.


                                       7
<PAGE>


                              DeVlieg-Bullard, Inc.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Results of Operations

Summarized  below is a discussion  of the results of  operations of the Company,
including its Machine Tool,  Tooling  Systems and Industrial  operating  groups.
Amounts, except per share data, are expressed in thousands.

Three months ended  January 31, 1998  compared to three months ended January 31,
1997.

Net sales for the second quarter of fiscal 1998 were $28,008 compared to $31,363
for the second  quarter of fiscal  1997,  a decrease  of $3,355,  or 10.7%.  The
decrease in net sales was primarily new and rebuilt machines in the Machine Tool
Group.  As more fully  discussed  as part of the  Machine  Tool  Group  business
segment below, the decline in sales in the second quarter of fiscal 1998 was the
result of inadequate inventory levels to support the Company during a transition
to  outsourcing a major  portion of machine  and/or  aftermarket  parts that had
previously been produced  internally.  The inadequate levels of inventory led to
disruptions  in  production  and meeting  shipping  schedules  of  machines  and
aftermarket sales during the quarter.  The Industrial  Group's net sales for the
second  quarter were even with the prior year,  while  second  quarter net sales
were 6.1% lower for the  Tooling  Systems  Group and 15.9% lower for the Machine
Tool Group.

Gross profit for the second quarter of fiscal 1997 was $4,753 compared to $7,908
for the second  quarter of fiscal  1997,  a decrease  of $3,155,  or 39.9%.  The
Tooling  Systems Group and the  Industrial  Group were  basically  even with the
prior year, while the Machine Tool Group was down 62.3% from the prior year as a
result of the production and shipping  problems in the new and rebuilt  machines
business of the Machine Tool Group.

E S G & A expenses were $7,043,  or 25.1% of net sales, and $5,342,  or 17.0% of
net sales,  in the second quarter of fiscal 1998 and fiscal 1997,  respectively.
The increase in operating expenses is primarily an increase in the international
sales effort and  computer  costs  related to upgrading  systems and making them
year 2000  compliant,  as well as increases in  personnel  costs  related to the
fiscal  1997  acquisition  and  temporary  help  related  to the  transition  to
outsourcing  the  Machine  Tool Group  parts  production.  The  increase  in the
operating  expenses as a percent to sales is the result of a decline in sales as
discussed above, as well as the increase in expenses.

Interest  expense was $1,317 in the second  quarter of fiscal  1998  compared to
$1,274 in fiscal 1997's second  quarter.  The increase in interest  expense is a
result of increased debt.

An income tax benefit of $1,618 was  recorded  for the second  quarter of fiscal
1998  compared to tax expense of $546 for the same period last year,  reflecting
the loss in fiscal 1998.

Operating Results by Business Segment

Machine  Tool Group.  On August 1, 1997,  the Machine Tool Group  implemented  a
change to outsourcing a major portion of National  Acme's parts,  which had been
produced  internally  prior to August 1, 1997. The outsourced  parts are used in
the manufacture of new Acme-Gridley machines and are also sold separately in the
aftermarket.  As a  result  of  planning  difficulties  encountered  during  the
changeover to outsourcing,  including delays in vendor parts  deliveries,  which
resulted  in  inadequate  inventory  levels to support  the  Company  during the
transition,  the Machine Tool Group encountered  disruptions in production which
extended  through the second  quarter.  Due to this  inadequate  supply of parts
needed for new machine production and


                                       8
<PAGE>

aftermarket  sales,  fiscal 1998 second  quarter sales were  $16,243,  or $3,063
lower than the  $19,306  reported  in the  second  quarter  of fiscal  1997.  An
operating  loss of $1,649 was  recorded  for the second  quarter of fiscal  1998
compared to operating  income of $2,423 in the second quarter of the prior year.
This  is the  result  of the  reduction  in  sales  volume,  as  well  as  lower
productivity levels due to the difficulties  mentioned above. Operating expenses
for the second  quarter  were  higher  than the first  quarter as a result of an
increase in computer  costs  related to  upgrading  systems and making them year
2000 compliant, as well as increases in temporary help related to the transition
to outsourcing the parts production.  In addition,  during the second quarter of
fiscal 1998, the Machine Tool Group incurred a $250 charge for the write-down of
property and plant that was being held for sale to the current market value.

The  operational  problems  discussed  above have been  addressed and aggressive
action  has been taken to  correct  the  problems,  including  replacing  senior
management  of the  Machine  Tool  Group who were  responsible  for the  initial
planning  errors,  scheduling a portion of the parts  production  at the Tooling
Systems Group and adding key people to our engineering  and purchasing  staff to
quickly bring this transition to a close.

Tooling  Systems  Group sales were $5,028 in the second  quarter of fiscal 1998,
compared to $5,352 in the second  quarter of the prior year, a decrease of $324,
or 6.1%.  The decline from the prior year is  primarily  one large order for HSK
Tools that was not repeated during fiscal 1998.  Operating income for the second
quarter of fiscal  1998 was $75,  compared  with $179 the second  quarter of the
prior year. The reduction in operating income is due to the volume changes.

Industrial  Group  sales  were  $6,737 in the  second  quarter  of fiscal  1998,
compared to $6,705 in the second  quarter of the prior year, an increase of $32.
Operating  income was $268 for the second  quarter of fiscal  1998,  compared to
$367 in the same  period a year ago.  The  decline  in  operating  income is the
result of higher  operating  expenses  primarily  related  to  computer  systems
investment to deal with the year 2000 problem.

New Accounting Pronouncements

During the second  quarter of fiscal  1998,  the Company  adopted  Statement  of
Financial  Accounting  Standards No. 128, "Earnings Per Share" ("SFAS 128"). The
diluted  earnings  per  share  calculation  under  SFAS  128 is  not  materially
different  from the earnings per share the Company had previously  reported.  In
accordance with SFAS 128, prior periods have been restated.

Six months ended January 31, 1998 compared to six months ended January 31, 1997.

Net sales for the first six  months  of fiscal  1998 were  $54,491  compared  to
$63,497 for the first six months of fiscal 1997, a decrease of $9,006, or 14.2%.
The  decrease in net sales was  primarily  new and rebuilt  machines and related
aftermarket  sales in the Machine Tool Group. As more fully discussed as part of
the Machine Tool Group business segment below, the decline in sales in the first
six  months of fiscal  1998 was the  result of  inadequate  inventory  levels to
support  the Company  during a  transition  to  outsourcing  a major  portion of
machine and/or  aftermarket parts that had previously been produced  internally.
The inadequate  levels of inventory led to disruptions in production and meeting
shipping  schedules of machines and  aftermarket  parts during the first half of
the year.  Net sales for the first six  months of fiscal  1998  compared  to the
prior year were 6.5%  higher for the  Industrial  Group and 23.9%  lower for the
Machine  Tool  Group,  while the Tooling  Systems  Group was even with the prior
year.

Gross  profit for the first six months of fiscal  1997 was  $12,741  compared to
$16,243 for the first six months of fiscal 1997, a decrease of $3,502, or 21.6%.
Gross profit for the Tooling  Systems Group


                                       9
<PAGE>

increased  26.6% and the Industrial  Group  increased 20.7% over the prior year,
while the  Machine  Tool Group was down 41.9% from the prior year as a result of
the production and shipping problems.

E S G & A expenses were $13,251, or 24.3% of net sales, and $11,221, or 17.7% of
net sales, in the first six months of fiscal 1998 and fiscal 1997, respectively.
The increase in  operating  expenses is  primarily  an increase  computer  costs
related to  upgrading  systems and making them year 2000  compliant,  as well as
increases in temporary help related to the transition to outsourcing the Machine
Tool Group parts production. The increase in the operating expenses as a percent
to sales is the result of a decline in sales as discussed  above, as well as the
increase in expenses.

Interest  expense was $2,637 in the first six months of fiscal 1998  compared to
$2,491 in the same period in fiscal 1997. The increase in interest  expense is a
result of increased debt.

An income tax benefit of $1,419 was  recorded for the first six months of fiscal
1998 compared to tax expense of $1,071 for the same period last year, reflecting
the loss in fiscal 1998.

Operating Results by Business Segment

Machine  Tool Group.  On August 1, 1997,  the Machine Tool Group  implemented  a
change to outsourcing a major portion of National  Acme's parts,  which had been
produced  internally  prior to August 1, 1997. The outsourced  parts are used in
the manufacture of new Acme-Gridley machines and are also sold separately in the
aftermarket.  As a  result  of  planning  difficulties  encountered  during  the
changeover to  outsourcing,  which  resulted in inadequate  inventory  levels to
support the Company during the  transition,  the Machine Tool Group  encountered
disruptions in production  during the period.  Due to this inadequate  supply of
parts needed for new machine production and aftermarket sales, fiscal 1998 first
six months sales were $31,336,  or $9,841 lower than the $41,177 reported in the
first six  months of fiscal  1997.  Operating  income was a loss of $235 for the
first six months of fiscal 1998  compared to  operating  income of $5,352 in the
first six months of the prior year. This is the result of the reduction in sales
volume, as well as lower productivity  levels due to the difficulties  mentioned
above. Operating expenses for the six months ended January 1998 were higher than
the  fiscal  1997 first six months as a result of an  increase  in the  computer
costs related to upgrading systems and making them year 2000 compliant,  as well
as increases in temporary  help related to the  transition  to  outsourcing  the
parts production.  In addition,  during the first six months of fiscal 1998, the
Machine  Tool Group  incurred a $250 charge for the  write-down  of property and
plant that was being held for sale to the current market value.

These  problems  have been  addressed  and  aggressive  action has been taken to
correct the problems,  including replacing senior management of the Machine Tool
Group who were responsible for the initial planning errors, scheduling a portion
of the parts  production  at the Tooling  Systems Group and adding key people to
our  engineering  and  purchasing  staff to quickly  bring this  transition to a
close.

Tooling Systems Group sales were $10,350 in the first six months of fiscal 1998,
compared  to $10,297 in the first six months of the prior  year,  an increase of
$53. Operating income for the first six months of fiscal 1998 was $888, compared
with $394 the first six months of the prior  year.  The  increase  in  operating
income is due to productivity  improvements and reductions in benefit costs from
changes in the postretirement medical program.

Industrial  Group  sales were  $12,805  in the first six months of fiscal  1998,
compared  to $12,023 in the first six months of the prior  year,  an increase of
$782,  or 6.5%.  Operating  income  was $668 for the first six  months of fiscal
1998,  compared to $447 in the same period a year ago. The increase in operating
income is the result of increased  volume and improved  productivity,  offset by
increased operating expenses related to computer systems.


                                       10
<PAGE>

Liquidity and Capital Resources

Cash Flows

Historically,   the  Company's  continuing  operations  have  been  financed  by
internally  generated  funds.  Acquisitions  have been funded with  increases in
indebtedness,  while funds from  divestitures have generally been used to reduce
indebtedness.

Net cash used by  operating  activities  was  $2,125  for the six  months  ended
January 31,  1998,  compared to net cash  provided by  operating  activities  of
$2,374 for the first six months of fiscal 1997.

Cash used for capital expenditures was $810 and $714 for the first six months of
fiscal  1998 and 1997,  respectively.  The  Company  currently  has no  material
commitments  for  specific  capital  expenditures.  Cash of $763  was  used  for
acquisitions during January 1997. The balance of the purchase price ($6,100) was
financed through an increase in debt.

Financing and Investing

The balance  outstanding  under the  Company's  revolving  credit  agreement was
$27,417 at January 31,  1998,  compared to $22,525 at July 31,  1997.  Long-term
debt, including current maturities,  at January 31, 1998, was $16,415,  compared
to  $17,810  at July 31,  1997,  a  decrease  of  $1,395.  The  Company's  total
indebtedness  was $43,832  and  $40,335 at January  31, 1998 and July 31,  1997,
respectively,  an increase of $3,497.  The  increase in debt was used to finance
working  capital  needs,  particularly  those of the  Machine  Tool Group as the
Company works through the current  difficulties,  as discussed  above.  Cash and
equivalents  at January 31, 1998 were $471, a decrease of $166  compared to July
31, 1997. Net cash provided by financing activities was $2,795 in the first half
of fiscal  1998  compared  to a use of $762 in the first six months of the prior
year.

The senior credit  facility  aggregating  $40,000 is comprised of $5,086 in term
loans and a revolving  credit  agreement,  which  provides for  borrowings up to
$30,000.  Interest on the  outstanding  borrowings  under the  revolving  credit
agreement  is  payable  monthly in arrears at 1% above the prime rate or, at the
Company's  option, at alternative rates based on LIBOR. The effective rate based
on LIBOR was 8.59% at January 31, 1998.  The amount the Company may borrow under
the revolving  credit agreement is based upon a formula related to the Company's
eligible accounts receivable and inventories,  reduced by outstanding letters of
credit.  On March 11, 1998,  the Company  increased  the existing  term loans by
$2,500 and  consolidated  all term loans together for a new term loan of $7,600.
The  proceeds  from the new term  loan  will be used to repay a  portion  of the
outstanding  revolving credit agreement.  Payments on the new term loan are $200
monthly,  starting March 31, 1998. Unused  borrowings  available at February 28,
1998, after the effects of the new term loan, were approximately $3,500.

Interest  on the term loans is payable  monthly at 1.25% above prime rate or, at
the Company's  option,  at alternative  rates based on LIBOR. The effective rate
based on LIBOR was 8.84% at January 31, 1998.

Pursuant to the  subordinated  debt facility,  the Company  issued  Subordinated
Debentures  in May 1994 in the  principal  amount of  $12,000.  Of this  amount,
$4,000 was replaced by Junior Subordinated Debentures.  Interest payments on the
Subordinated  Debentures  of 11.5% per annum are  payable  quarterly  in arrears
commencing July 1, 1994. The Subordinated  Debentures  provide for the repayment
of principal of $2,000 in fiscal 1999 and fiscal 2000 and $4,000 in fiscal 2001.
Interest on the Junior  Subordinated  Debentures  accrues at 14.5%, and the cash
interest of 11% per annum is payable quarterly in arrears  commencing January 1,
1996. The Junior Subordinated  Debentures provide for the repayment 


                                       11
<PAGE>

of principal of $4,000 and unpaid interest in June 2001 or thirty days after the
payment of the Subordinated Debentures.

The Company  expects to continue  to provide  liquidity  and finance its ongoing
operational needs primarily through internally generated funds.

Outlook

As more fully described above in Operating Results by Business Segment under the
heading Machine Tool Group,  difficulties  encountered  during the changeover to
outsourcing  on August 1, 1997,  caused fiscal 1998 second quarter and first six
months net sales and net  earnings per share to be  significantly  lower than in
the  comparable  periods  in fiscal  1997.  The  difficulties  encountered  were
primarily the result of inadequate  levels of parts  inventory  needed for first
and second quarter new machine  production and  aftermarket  sales. As discussed
above, the Company has taken steps to address the problems, and expects improved
results in the third and fourth quarters of fiscal 1998. It is anticipated  that
full year fiscal 1998 net sales and earnings will be  significantly  below those
reported in fiscal 1997.

The Company  plans to continue  expanding  product and service  offerings,  both
internally  and through  strategic  acquisitions,  and to identify and implement
additional cost savings measures.

A number of factors may affect future results,  liquidity and capital resources;
actual results may differ  materially  from those  reflected by  forward-looking
statements  made by the Company.  These  factors are  discussed in the Company's
Annual Report on Form 10-K for the year ended July 31, 1997.



                                       12
<PAGE>

PART II - Other Information

Item 4: Submission of Matters to a Vote of Security Holders

The annual meeting of stockholders of DeVlieg-Bullard, Inc. was held on December
10, 1997, at which meeting the stockholders elected all directors to hold office
until the next annual  meeting and until their  successors  are duly elected and
qualified.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

10.1    Third Amendment to Amended and Restated Financing and Security Agreement
        dated   December  29,  1997  among   DeVlieg-Bullard,   Inc.,   the  CIT
        Group/Business Credit, Inc. and BNY Financial Corporation.

10.2    Fourth  Amendment  to  Amended  and  Restated   Financing  and  Security
        Agreement  dated March 11,  1998 among  DeVlieg-Bullard,  Inc.,  the CIT
        Group/Business Credit, Inc. and BNY Financial Corporation.

10.3    Amended and Restated Term Loan  Promissory  Note dated March 11, 1998 in
        the principal amount of $4,750,000 between the DeVlieg-Bullard, Inc. and
        BNY Financial Corporation.

10.4    Amended and Restated Term Loan  Promissory  Note dated March 11, 1998 in
        the principal amount of $2,850,000 between the DeVlieg-Bullard, Inc. and
        BNY Financial Corporation.

10.5    Fourth  Amendment  to  Investment  Agreement  dated  September  17, 1997
        DeVlieg-Bullard,  Inc.,  Banc  One  Capital  Partners  Corporation,  PNC
        Capital Corp., Charles E. Bradley and John G. Poole.

10.6    Fifth  Amendment  to  Investment  Agreement  dated  March 11, 1998 among
        DeVlieg-Bullard,  Inc.,  Banc  One  Capital  Partners  Corporation,  PNC
        Capital Corp., Charles E. Bradley and John G. Poole.

10.7    Amendment to  Intercreditor  Agreement  dated March 11, 1998 between the
        CIT Group/Business Credit, Inc., Charles E. Bradley, John G. Poole, Banc
        One Capital Partners Corporation, and PNC Capital Corp.

11      Computation of Earnings per Share

27      Financial Data Schedules (SEC use only)

(b)  Reports on Form 8-K

During the quarter ended January 31, 1998,  the Company did not file any reports
on Form 8-K.



                                       13
<PAGE>


                                   SIGNATURES





Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                             DeVlieg-Bullard, Inc.
                                             --------------------------------
                                             (Registrant)





Date: March 17, 1997                          By: /s/ W.O. Thomas
                                                  ---------------------------
                                                      William O. Thomas
                                                      President and Chief
                                                      Executive Officer
                                                      (Acting Principal 
                                                      Accounting Officer)



                                       14