[Page 13 of Annual Report]

                                Five-Year Summary

   <TABLE>
   <CAPTION>
                                              At and for the years ended December 31

                                  1995 (c)(d)      1994 (e)      1993 (e)(f)      1992         1991 (g)

                                          (In thousands, except share and per share data)
   OPERATIONS DATA (a) 

   <S>                             <C>           <C>            <C>            <C>           <C> 
   Net sales                         $730,552      $619,471       $517,462       $622,934      $326,609
   Net income                           6,455        47,880         43,706         35,532        22,002
   Net income available to common
    shareholders                        6,455        47,880         43,706         32,896        21,044
   Net income per common share            .19          1.40           1.31           1.16           .95
   Cash dividends per common
    share                                 .12           .12            .12            .11           .08
   Average number of common
    shares outstanding             34,398,025    34,284,095     33,415,429     28,343,827    22,175,462

   BALANCE SHEET DATA 
   Total assets                      $817,591      $687,226       $614,016       $627,485      $560,167
   Long-term debt                     100,000             -              -         68,215        50,583
   Shareholders' equity               492,541       485,298        436,010        325,924       272,195
   Ratio of long-term debt to
    long-term capital (b)              16.9%             0%             0%          17.3%         15.7%

   <FN>
   (a)  See Note 1, "Summary of Significant Accounting Policies," in the
        Notes to Consolidated Financial Statements.

   (b)  Long-term capital consists of long-term debt and common shareholders'
        equity.

   (c)  On April 24, 1995, the Company acquired Fadal Engineering Company,
        Inc. (Fadal). The operations of  Fadal have been included in the
        Company's financial statements since the acquisition date.  See
        Management's Discussion and Analysis and Note 3 in the Notes to
        Consolidated Financial Statements.

   (d)  Reflects a charge to pretax income of $30.3 million from the adoption
        of Statement of Financial Accounting Standards No. 121, "Accounting
        for the Impairment of Long-Lived Assets and for Long-Lived Assets to
        Be Disposed Of,"  (SFAS No. 121) and from a severance charge relating
        to the Company's German subsidiary.  See Note 2 in the Notes to
        Consolidated Financial Statements.

   (e)  Reflects cash received on certain fully-reserved Russian contracts
        and other credits.  See Note 2 in the Notes to Consolidated Financial
        Statements.

   (f)  Reflects the prospective adoption of Statement of Financial
        Accounting Standards No. 109, "Accounting for  Income Taxes."

   (g)  On October 31, 1991, the Company acquired Cross & Trecker Corporation
        (Cross & Trecker). The operations of Cross & Trecker have been
        included in the Company's financial statements since the acquisition
        date.
   </TABLE>
[Pages 14-18 of the Annual Report]

                  Management's Discussion and Analysis

   Introduction

   The following discussion and analysis should be read in conjunction with
   the Consolidated Financial Statements and notes thereto included elsewhere
   in this Annual Report. In reviewing the Company's financial statements and
   management's discussion and analysis, the following matters should be
   considered:

   -    The Company is organized into four major operating groups: Automation
        Technology, Integrated Automation, Automation Measurement and Control
        and European Operations. The Automation Technology group is
        responsible for the manufacture of cellular and smart manufacturing
        systems, automated standalone machine tools and machining centers,
        tooling and fixtures and remanufacturing. The Integrated Automation
        group produces assembly automation products and systems and flexible
        transfer lines. Programmable industrial computers, servo systems,
        controls and measurement products are produced by the Automation
        Measurement and Control group. The European Operations group offers
        most of the Company's product lines through its sales, engineering,
        manufacturing and service facilities in England and Germany.

   -    A majority of the Company's products are sold pursuant to long-term
        contracts. Profits on long-term contracts are recognized using the
        percentage-of-completion method. The percentage-of-completion is
        measured principally by the percentage of costs incurred to date
        versus the estimated total costs for each contract. Significant
        adjustments are sometimes required to reflect experience and other
        factors. Such adjustments are recorded as changes in estimates as
        part of the percentage-of-completion accounting in the period of
        change. Revenues recognized on the percentage-of-completion method,
        but not yet billed to customers, are reflected in accounts
        receivable. The Company does not normally receive the bulk of
        payments for products sold under long-term contracts until the
        product is shipped.

   -    The Company acquired Fadal Engineering Co., Inc. (Fadal), a designer
        and manufacturer of computer numerically controlled vertical
        machining centers on April 24, 1995. The operations of the acquired
        company have been included  in the Company's financial statements
        since the acquisition date. The Fadal operations are a component of
        the Automation Technology group. 

   Results of Operations

   1995 Compared to 1994

   The following tables set forth the Company's bookings by operating group
   for the period indicated and consolidated backlog at period-end on a
   quarterly basis for 1995 and 1994.

                               April 2    July 2      Oct. 1     Dec. 31
                                             (In thousands)
   1995:
   Operating group:
   Automation Technology       $41,523    $76,765     $83,534    $75,782
   Integrated Automation        91,420     64,884      39,091    (17,956)
   European Operations           8,680     27,459      24,470     79,699
   Automation Measurement
     and Control                17,741     19,364      14,698     16,436
                               -------    -------     -------    -------
   Consolidated bookings      $159,364   $188,472    $161,793   $153,961
                               =======    =======     =======    =======
   Consolidated backlog       $430,121   $478,324    $442,507   $388,156
                              ========   ========    ========   ========


                               April 3     July 3      Oct. 2     Dec. 31
                                             (In thousands)
   1994:
   Operating group:
   Automation Technology       $32,034     $31,724     $28,973     $40,116
   Integrated Automation       117,610     113,870      94,705      91,226
   European Operations           6,138       5,771      12,141       8,759
   Automation Measurement
    and Control                 13,647      17,831      16,964      17,948
                                ------      ------     -------     -------
   Consolidated bookings      $169,429    $169,196    $152,783    $158,049
                               =======     =======     =======     =======

   Consolidated backlog       $431,448    $460,370    $449,969    $422,172
                               =======     =======     =======     =======


   Bookings for 1995 of $663.6 million represented a 2.2% increase from 1994
   bookings of $649.5 million. Automation Technology bookings of $277.6
   million for 1995 increased 109.0% from 1994 bookings of $132.9 million
   primarily as a result of the acquisition of Fadal in April 1995 and the
   demand for the new RAM machining centers, which were introduced in the
   second half of 1994.  Integrated Automation bookings for 1995 totaled
   $177.4 million, a 57.5% decrease from unusually large 1994 bookings of
   $417.4 million.  Customer revision to the scope of two orders received
   earlier in 1995 resulted in contract reductions which exceeded new
   bookings by $18 million in the fourth quarter of 1995.  For the Integrated
   Automation group, the Company believes that orders will approach their
   historic average in 1996.  However, because automotive orders are driven
   by multi-year capital investment programs with purchases in large lump sum
   increments, quarterly order patterns have been and will continue to be
   subject to volatility. European Operations' bookings increased 327.7% to
   $140.3 million in 1995, from $32.8 million in 1994. The increase in 1995
   was due to significant orders received from European automotive companies
   primarily in the United Kingdom. The Company continues to monitor the
   unfavorable economic conditions (especially in the automotive sector) and
   increased competitive pressures relative to the Company's German
   operation. In late 1995, the Company took steps to improve the competitive
   position of its German operation by initiating a reduction in work force
   as discussed below. Automation Measurement and Control bookings of $68.3
   million for 1995 increased 2.8% over 1994 bookings of $66.4 million.

   Company backlog at December 31, 1995, was $388.2 million, a decrease of
   $34.0 million or 8.1% from $422.2 million at 1994 year-end. The decrease
   in backlog resulted from decreased booking activity in the domestic
   automotive sector.

   Consolidated sales of $730.6 million for 1995 compared to $619.5 million
   in the prior year. The increase in year-to-year net sales was primarily
   attributable to the addition of Fadal in April 1995. Automation Technology
   net sales of $293.9 million in 1995 represented an increase of 80.4% from
   $162.9 million in net sales in 1994.  Integrated Automation net sales of
   $277.6 million in 1995 increased 3.7% from $267.8 million in the prior
   year.  The significantly lower orders received at Integrated Automation in
   1995 will result in lower sales for this group in 1996.  European
   Operations net sales of $87.9 million in 1995 decreased 30.6% from $126.6
   million in 1994. The decrease in net sales related mainly to significantly
   lower orders received by the European Operations group in 1994. Given the
   level of 1995 bookings, European sales are expected to increase during
   1996. The net sales of  Automation Measurement and Control increased 14.4%
   from $62.2 million in 1994 to $71.2 million in 1995.

   Net income for 1995 of $6.5 million decreased 86.5% from 1994 net income
   of $47.9 million. Pre-tax income in 1995 was $28.1 million, a 63.8%
   decrease from 1994 pre-tax income of $77.6 million. As described in
   further detail in Note 2 in the Notes to Consolidated Financial
   Statements, 1994 and 1995 pre-tax earnings were impacted by the following
   other charges or credits:

        1995

        The Company recorded a pre-tax charge of $6.3 million related to a
        formal plan to improve the operations of its German subsidiary, which
        includes planned terminations.  In connection with the formal plan,
        the Company evaluated the fair value of its long-term assets at its
        German facility in accordance with SFAS No. 121 and recorded a 
        write-down of $20.5 million.  In addition, in accordance with the
        adoption of SFAS No. 121, the Company determined that the long-term
        assets associated with a plant in its Automation Measurement and
        Control group were impaired (as indicated by the relatively poor
        performance of that entity since its 1991 acquisition) and wrote
        those assets down by $3.5 million.  In both cases, the write-down of
        the assets (which included allocated goodwill) was based on those
        assets' estimated fair values, which were determined using forecasted
        cash flow estimates discounted at rates commensurate with the
        Company's cost of capital.  The separate $30.3 million operating
        expense item in the Company's 1995 statement of income consists of
        the above-described charges.  

        1994

        During the fourth quarter of 1994, certain conditions were satisfied
        which allowed for a credit guarantee with respect to a contract with
        a customer in the former Soviet Union to be activated.  This contract
        along with another contract (the "Russian Contracts") were entered
        into by Cross & Trecker before its acquisition by the Company in
        1991.  As a result of the satisfaction of certain conditions, the
        Company received a net payment of $32.3 million, which represented
        the remaining balance owed under the contract and covered by the
        guarantee. The receipt of this payment resulted in a $22.1 million
        increase to pre-tax income recorded in the fourth quarter of 1994.
        The income recorded was net of various costs expected to be incurred
        in connection with shipment and installation of the equipment covered
        under the contract. For the second Russian contract, no payments have
        been received and no credit guarantee has been issued.  Cost incurred
        or committed to be incurred with respect to this contract were fully
        reserved. 

   Other items of note concerning the comparison of 1995 compared to 1994
   results of operations are highlighted below:

   The consolidated gross margin percentage (before depreciation and
   amortization) increased from 20.7% in 1994 to 21.3% in 1995.  Gross
   margins for both 1994 and 1995 were adversely impacted by competitive
   pricing pressures, excess program costs on certain contracts, and
   increased product development spending related to the introduction of RAM
   machining centers.  These factors largely offset an improvement in the
   gross profit percentage resulting from the inclusion of Fadal.  The
   Company currently expects that the consolidated gross margin percentage
   will improve in 1996 but will continue to be impacted by competitive and
   economic factors. 

   Selling, general and administrative expenses (before depreciation and
   amortization) decreased as a percentage of net sales from 9.5% in 1994 to
   9.2% in 1995.  The percentage decrease is primarily attributable to the
   favorable settlement associated with the successful defense of a patent
   infringement case and the effect of a significant increase in sales volume
   as a result of the acquisition of  Fadal.

   Net interest expense increased from $1.0 million of net interest income in
   1994 to net interest expense of $9.5 million in 1995.  The increase in the
   net interest expense is attributable to the borrowings used to finance the
   purchase of Fadal.

   The provision for income taxes of $21.6 million for 1995 decreased from
   $29.7 million in 1994. The Company's effective tax rate for 1995 was 77.0%
   as compared to 38.3% for the prior year.  The increase in the 1995
   effective tax rate is principally due to the write-off of $11.3 million of
   non-deductible costs in excess of net acquired assets and  $17.8 million
   of foreign net operating losses for which no tax benefits were recorded.
   See Note 8 in the Notes to Consolidated Financial Statements.

   1994 Compared to 1993

   The following table sets forth the Company's bookings by operating group
   in the period and consolidated backlog at period-end on a quarterly basis
   for 1994 and 1993.

                                 April 3     July 3     Oct. 2    Dec. 31
                                               (In thousands)
   1994:
   Operating group:
   Automation Technology        $ 32,034    $31,724     $28,973   $40,116
   Integrated Automation         117,610    113,870      94,705   91,226 
   European Operations             6,138      5,771      12,141     8,759
   Automation Measurement
    and Control                   13,647     17,831      16,964    17,948
                                 -------     ------     -------   -------
   Consolidated bookings        $169,429   $169,196    $152,783  $158,049
                                 =======    =======     =======   =======
   Consolidated backlog         $431,448   $460,370    $449,969  $422,172
                                 =======    =======     =======   =======


                                 April 4     July 4     Oct. 3     Dec. 31
                                               (In thousands)
   1993:
   Operating group:
   Automation Technology          $36,987    $31,716    $36,561    $39,857
   Integrated Automation           26,612     59,723     39,837     79,270
   European Operations             52,367     28,543     55,404      8,433
   Automation Measurement 
    and Control                    13,328     11,954     13,818     14,511
                                  -------    -------     ------     ------
   Consolidated bookings         $129,294   $131,936   $145,620   $142,071
                                  =======    =======    =======    =======

   Consolidated backlog          $349,070   $342,605   $367,857   $382,694
                                  =======    =======    =======    =======



   Bookings for 1994 of $649.5 million represented an 18.3% increase from
   1993 bookings of $548.9 million. Automation Technology bookings of $132.8
   million for 1994 declined 8.5% from 1993 bookings of $145.1 million. This
   decline mainly reflected continued weakness in the demand for large
   machine tools and flexible manufacturing systems by industries other than
   those related to the automotive sector. Integrated Automation bookings for
   1994 totaled $417.4 million, a 103.2% increase from 1993 bookings of
   $205.4 million.  The increase in bookings was attributable to significant
   order placement by the domestic automotive industry.  European Operations'
   bookings decreased 77.3% to $32.8 million in 1994, from $144.7 million in
   1993.  The decrease in 1994 was due to unfavorable economic conditions
   (especially in the automotive sector) and increased competitive pressures
   in the Company's European market.  In addition, bookings in 1993 were
   favorably impacted by significant orders received from European automotive
   companies and a Korean automotive company.  Automation Measurement and
   Control bookings of $66.4 million for 1994 increased 23.8% over 1993
   bookings of $53.6 million due mainly to large orders received from the
   automotive and mining industries.

   Company backlog at December 31, 1994, was $422.2 million, an increase of
   $39.5 million or 10.3% from $382.7 million at 1993 year-end. The increase
   in backlog resulted from increased booking activity noted above, which was
   concentrated mainly in the domestic automotive sector.

   Consolidated net sales of $619.5 million for 1994 compared to $517.5
   million in the prior year. The increase in year-to-year net sales was
   primarily attributable to the Integrated Automation and European
   Operations groups.  Automation Technology net sales of $162.9 million in
   1994 represented a decrease of 3.4% from $168.7 million in net sales in
   1993. Integrated Automation net sales of $267.8 million in 1994 increased
   37.3% from $195.0 million in the prior year. The increase in Integrated
   Automation sales is the result of improvements in domestic automotive
   bookings which started in the fourth quarter of 1993 and continued into
   1994. European Operations net sales of $126.6 million in 1994 increased
   29.9% from $97.4 million in 1993. The increase in net sales related mainly
   to significant orders received by the European Operations group in the
   third quarter of 1993.  Automation Measurement and Control net sales
   increased 10.4% from $56.3 million in 1993 to $62.2 million in 1994. 

   Net income for 1994 of $47.9 million increased 9.6% from 1993 net income
   available to common shareholders of $43.7 million. Pre-tax income in 1994
   was $77.6 million, a 10.5% increase from 1993 pre-tax income of $70.0
   million. As described in further detail in Note 2 in the Notes to
   Consolidated Financial Statements, 1993 and 1994  pre-tax  earnings were
   impacted by certain nonrecurring items. These items resulted in a net
   decrease in 1993 cost of sales and selling, general and administrative
   expenses of $6.0 million and $8.7 million, respectively. The effect of
   actions related to the Russian Contracts on 1994 net income is described
   above. 

   The consolidated gross margin percentage (before depreciation and
   amortization) decreased from 29.2% in 1993 to 20.7% in 1994. The
   consolidated gross margin percentage for 1993 before the impact of the
   nonrecurring items noted above was 28.0%. Gross margins for 1994 were
   adversely impacted by competitive pricing pressures, cost overruns on
   contracts booked in prior periods, and increased product development
   spending. 

   Selling, general and administrative expenses (before depreciation and
   amortization) decreased as a percentage of sales to 9.5% in 1994 from
   11.9% in 1993. Selling, general and administrative expenses as a
   percentage of sales for 1993 before the impact of the nonrecurring items
   mentioned above was 13.6%. The percentage decrease was primarily
   attributable to improved engineering efficiencies, continued cost
   reduction measures and the effect of a significant increase in sales
   volume.

   Net interest income of $1.0 million in 1994 consisted mainly of income on
   short-term investments offset in part by the amortization of capitalized
   loan fees. Significant factors contributing to the decrease in net
   interest expense from $2.9 million in 1993 to net interest income of $1.0
   million in 1994 included: (1) the conversion into common stock in March
   1993 of substantially all of the Company's 10% convertible subordinated
   debentures (see Note 5 in the Notes to Consolidated Financial Statements
   for details); and (2) the repayment of all then remaining outstanding debt
   in the second quarter of 1993.

   Other income of $.8 million for 1994 was primarily made up of royalty
   income and gains on sale of fixed assets, offset by a net loss on foreign
   currency transactions.

   The provision for income taxes of $29.7 million for 1994 increased from
   $26.3 million in 1993. Included as a component of income tax expense for
   1993 was the benefit arising from the increase in the net deferred income
   tax asset of approximately $1.0 million resulting from the 1% increase in
   the top U.S. corporate tax rate enacted in August 1993. The Company's
   effective tax rate for 1994 amounted to 38.3% as compared to 39.1% for the
   prior year (excluding the rate change benefit). The decrease in the
   effective tax rate from 1993 to 1994 was primarily due to a change in the
   mix of income between various tax jurisdictions.

   Liquidity and Capital Resources at December 31, 1995

   On December 31, 1995, the Company had $14.2 million of cash and cash
   equivalents on hand, which was a decrease of $9.9 million from the balance
   on hand at the beginning of the year. For the year ended December 31,
   1995, operating activities provided $52.3 million of cash.  Operating
   assets and liabilities provided net cash flow of $1.1 million, due
   primarily to lower accounts receivable offset by a net decrease in
   accounts payable and accrued expenses (excluding the effects of the Fadal
   acquisition).  The $30.8 million in cash provided from the reduction in
   accounts receivable balances was due primarily to a decrease in unbilled
   receivables on the Company's long-term contracts offset by a decrease in
   related customer deposits.  It should be noted that the acquisition of
   Fadal resulted in the total accounts  receivable balance increasing in
   1995 versus 1994.  The $6.5 million net cash used relating to the higher
   inventory balance was largely attributable to the increase in RAM
   production.  The acquisition of Fadal accounted for the remainder of the
   increase in inventory in 1995 versus 1994.  There was a $31.9 million
   decrease in accounts payable and accrued expenses at December 31, 1995 as
   compared with December 31, 1994.  

   Increased material purchases in late 1994 resulted in an unusually high
   accounts payable balance at December 31, 1994. 

   Investing activities in 1995 used $194.3 million, which included $179.6
   million for the acquisition of Fadal and $16.1 million in capital
   expenditures. The Fadal acquisition resulted in an increase to intangible
   assets of approximately $123 million.  Net proceeds from the sale of fixed
   assets and assets held for sale generated $1.5 million of cash in 1995. 

   Financing activities in 1995 provided cash of $131.5 million consisting
   mainly of the issuance of debt securities of $100 million and draws on
   lines of credit, net of repayments, of $36.8 million, offset in part by
   dividend payments of $4.1 million.

   The Company's available borrowing capacity at December 31, 1995, amounted
   to $124.4 million under a domestic credit agreement and $30.2 million
   under foreign lines of credit. The Company had debt outstanding of $136.8
   million at December 31, 1995.

   Capital expenditures were $16.1 million, $16.7 million and $18.8 million
   in 1995, 1994 and 1993, respectively. The Company expects commitments for
   capital projects carried over from 1995, along with new projects proposed
   for 1996, to result in capital expenditures of approximately $21 million
   in 1996. The main focus of 1996 capital expenditures will be productivity
   enhancement.

   In addition, the Company expended $60.4 million, $67.4 million and $57.4
   million in 1995, 1994 and 1993, respectively, on research, product
   development and customer-sponsored engineering programs. Spending for such
   activities is expected to remain steady at approximately $65 million in
   1996 as a result of consistent sales volume and comparable product
   development activities.

   The Company believes its cash flows from operations and funds available
   under domestic and foreign credit agreements will be adequate to finance
   capital expenditures and working capital requirements for the foreseeable
   future.

   The Company is involved in environmental matters concerning facilities and
   sites owned or formerly owned by the Company, its subsidiaries or alleged
   predecessors. As described in Note 6 in the Notes to Consolidated
   Financial Statements, those matters include an environmental remediation
   at the Company's former West Allis, Wisconsin, property and a criminal
   complaint and civil lawsuits concerning its Menominee, Michigan facility.

   In connection with these sites, the Company has incurred various 
   expenditures to date on both investigative activities and remediation
   efforts. Estimated future clean-up and other costs associated with these
   environmental contingencies have been accrued on the Company's balance
   sheet in instances where losses have been determined to be probable and
   reasonably estimable. Management believes that future costs in excess of
   the amounts accrued on all presently known and quantifiable environmental
   contingencies will not be material to the Company's financial position or
   results of operations. As referenced in Note 6 in the Notes to
   Consolidated Financial Statements, information currently available to the
   Company does not allow it to reasonably estimate the damages, penalties
   and/or remediation costs, if any, that may be incurred with respect to the
   Menominee, Michigan facility. Recurring costs incurred by the Company and
   associated with managing hazardous substances and pollution at on-going
   operations generally are not significant.

   The Company is also involved in other litigation and proceedings,
   including product liability claims. As discussed in Note 6 in the Notes to
   Consolidated Financial Statements, management believes that future costs
   in excess of the amounts accrued for all existing litigation will not be
   material to the Company's financial position or results of operations.

   Market Prices and Dividends

   The Company's common stock is traded on The Nasdaq Stock Market under the
   symbol GIDL. The following table sets forth information as to the high and
   low last sales prices per share of common stock as quoted on Nasdaq and
   the cash dividends declared per share for the periods indicated. 

                                      Sales Price
                                    Low        High       Dividends
   1995:
   First quarter                  $ 14-5/8    $ 17-1/4       $.03
   Second quarter                   15-1/8      18-7/8        .03
   Third quarter                       16       18-1/2        .03
   Fourth quarter                   14-7/8      17-3/8        .03

   1994:
   First quarter                 $     25    $    28         $.03
   Second quarter                   14-7/8      27-1/4        .03
   Third quarter                    15-5/8      20-3/8        .03
   Fourth quarter                   13-7/8      17-5/8        .03


   As of February 15, 1996, there were approximately 2,352 record holders of
   the Company's common stock.

   The Board of Directors of the Company intends to consider the payment of
   cash dividends on the common stock on a quarterly basis, but the
   declaration of future dividends will necessarily be dependent upon
   business conditions, the earnings and financial position of the Company
   and such other matters as the Board of Directors deems relevant. For
   information on restrictions on the payment of cash dividends on the common
   stock, see Note 5 in the Notes to Consolidated Financial Statements.

   <PAGE>
[Pages 19-34 of the Annual Report]

                        Consolidated Statements of Income

                                            Years Ended December 31,
  
                                         1995           1994        1993

                                         (In thousands, except share and
                                                  per share data)


   Net sales                           $730,552       $619,471    $517,462
   Costs and expenses:
     Cost of sales (Note 2)             575,234       49 1,397     366,444
     Selling, general and
      administrative
      expenses (Note 2)                  67,556         58,977      61,474
     Depreciation and amortization       19,308         15,399      14,768 
   Other charges (credits) (Note 2)      30,280        (22,128)          -
                                        -------        -------     -------
   Total operating expenses             692,378        543,645     442,686
                                        -------        -------     -------
   Operating income                      38,174         75,826     74, 776

   Interest expense (income), net         9,501         (1,025)      2,898
   Other expense (income)                   610           (755)      1,851
                                         ------         ------     -------
   Income before provision for income
    taxes                                28,063         77,606      70,027
   Provision for income taxes (Note
    8)                                   21,608         29,726      26,321
                                        -------        -------     -------
   Net income                         $   6,455      $  47,880   $  43,706
                                       ========       ========     =======
   Net income per common share            $0.19          $1.40       $1.31
                                          =====          =====        ====

   Cash dividends per common share        $0.12          $0.12       $0.12
                                           ====           ====        ====
   Average number of common shares                            
    outstanding                      34,398,025     34,284,095  33,415,429
                                    ===========     ==========  ==========


   See accompanying notes.

   <PAGE>
                      Consolidated Statements of Cash Flows

                                          Years Ended December 31,
                                         1995      1994        1993

                                              (In thousands)

   Operating activities
   Net income                           $6,455    $47,880      $43,706
   Adjustments to reconcile net
    income to net cash provided by
    (used in) operating activities:
      Depreciation and amortization     19,308     15,399       14,768
      Impairment and severance charge   30,280          -            -
      Deferred income taxes              3,948     20,996       14,608
      Long-term employee benefits and
       other long-term liabilities      (4,105)    (4,696)         462
      Changes in operating assets and
       liabilities:
         Accounts receivable            30,816    (91,621)      74,148
         Inventories                    (6,546)   (16,719)      (3,340)
         Other current assets            8,780     (6,928)       1,707
         Accounts payable and accrued
          liabilities                  (31,920)    20,267      (67,275)
      Foreign currency transaction
        (gains) losses                     179        669       2, 270
      Other                             (4,922)       291        3,077
                                        ------    -------       ------
   Net cash provided by (used in)
    operating activities                52,273    (14,462)      84,131
   Investing activities
   Acquisition of business (Note 3)   (179,579)         -            -
   Additions to property, plant and
    equipment                          (16,097)   (16,747)     (18,849)
   Proceeds from sale of assets          1,546      5,875       10,015
   Other                                  (140)    (1,759)         229
                                      --------    -------      -------
   Net cash used in investing
    activities                        (194,270)   (12,631)      (8,605)
   Financing activities
   Proceeds from draws on lines of
    credit                             382,931     49,000        9,462
   Repayments under lines of credit
    and notes payable                 (346,168)   (49,000)     (27,813)
   Proceeds from sale of debt
    securities                         100,000          -            -
   Payments for debt issue costs        (1,182)         -            -
   Repayments of long-term
    borrowings                               -          -      (11,000)
   Proceeds from additional stock
    issuance                                 -        487        3,354
   Payments on debenture redemptions
    and expenses on conversions              -          -         (224)
   Cash dividends                       (4,129)    (4,115)      (4,072)
                                       -------    -------      -------
   Net cash provided by (used in)
    financing activities               131,452     (3,628)     (30,293)

   Effect of exchange rate changes
    on cash                                689        916          143
                                       -------    -------      -------
   Net (decrease) increase in cash
    and cash equivalents                (9,856)   (29,805)      45,376
   Cash and cash equivalents at
    beginning of year                   24,072     53,877        8,501
                                       -------    -------      -------
   Cash and cash equivalents at end
    of year                            $14,216   $ 24,072      $53,877
                                        ======    =======       ======
   Supplemental disclosure of cash
    flow information - 
      Cash paid during the year for:
        Interest                      $  7,648  $     848     $  1,709
                                       =======    =======      =======
        Income taxes, net of refunds
         received                      $11,334    $12,073      $10,016
                                       =======    =======      =======

   See accompanying notes.

   <PAGE>

                           Consolidated Balance Sheets

                                                     December 31,
                                                   1995         1994
                                               (In thousands, except
                                                     share data)
   Assets
   Current assets:
     Cash and cash equivalents                   $14,216    $  24,072
     Accounts receivable, net of allowance
      for doubtful accounts (Notes 1 and 4)      350,593      343,881
     Inventories (Notes 1 and 4)                 102,281       74,823
     Deferred income taxes (Note 8)                4,776        9,455
     Other current assets                          5,921       10,923
                                                 -------      -------
   Total current assets                          477,787      463,154
   Fixed assets, net (Notes 1 and 4)             111,382      107,164
   Intangible assets (Notes 1 and 4)             192,522       84,997
   Deferred income taxes (Note 8)                 19,700       18,968
   Other assets                                   16,200       12,943
                                                 -------      -------
   Total assets                                 $817,591     $687,226
                                                 =======      =======

   Liabilities and shareholders' equity
   Current liabilities:
     Notes payable (Note 5)                      $36,763     $    -
     Accounts payable                             67,676       76,562
     Accrued expenses and other
      liabilities (Note 4)                        77,888       78,912
                                                 -------     --------
   Total current liabilities                     182,327      155,474

   Long-term debt (Note 5)                       100,000          -
   Long-term employee benefits and other
    long-term liabilities (Notes 4 and 7)         42,723       46,454
                                                 -------      -------
   Total liabilities                             325,050      201,928

   Commitments and contingencies (Note 6)

   Shareholders' equity (Notes 5 and 9):
     Class A preferred stock                        -            -
     Common stock, 34,422,043 and 34,294,404
      shares issued and outstanding at December
      31, 1995 and 1994, respectively              3,442        3,429
     Capital in excess of par                    326,608      325,063
     Retained earnings                           160,783      158,457
     Cumulative translation adjustment             4,223          174
     Unamortized compensation expense             (2,515)      (1,825)
                                                 -------      -------
   Total shareholders' equity                    492,541      485,298
                                                 -------      -------
   Total liabilities and shareholders' equity   $817,591     $687,226
                                                 =======     ========

   See accompanying notes.

   <PAGE>

           Consolidated Statements of Changes in Shareholders' Equity

                  Years Ended December 31, 1995, 1994 and 1993


                                                    Common Stock 
                                                 Shares        Amount
                                             (In thousands, except share
                                                        amounts)

 Balance, December 31, 1992                    30,365,197       $3,037
   Net issuance of shares under restricted
    stock awards and stock option plans           352,780           35
   Tax benefit related to exercise of stock
    options                                             -            -
   Conversion of convertible debentures to
    common stock, net of expense (Note 5)       3,538,133          354
   Effect of income tax accounting change
    (Note 8)                                            -            -
   Net income                                           -            -
   Amortization of compensation expense                 -            -
   Cash dividends                                       -            -
   Translation adjustment                               -            -
   Other                                           (2,042)          (1)
                                              -----------      -------
 Balance, December 31, 1993                    34,254,068        3,425
   Net issuance of shares under restricted
    stock awards and stock option plans            40,370            4
   Tax benefit related to exercise of stock
    options and vesting of restricted stock             -            -
   Net income                                           -            -
   Amortization of compensation expense                 -            -
   Cash dividends                                       -            -
   Translation adjustment                               -            -
   Other                                              (34)           -
                                                ---------     --------
 Balance, December 31, 1994                    34,294,404        3,429
   Net issuance of shares under restricted
    stock awards and stock option plans           127,639           13
   Tax benefit related to exercise of stock
    options and vesting of restricted stock             -            -
   Net income                                           -            -
   Amortization of compensation expense                 -            -
   Cash dividends                                       -            -
   Translation adjustment                               -            -
                                                  -------      -------
 Balance, December 31, 1995                    34,422,043       $3,442
                                               ==========        =====
   <PAGE>
                                 Cumulative     Unamortized        Total
      Capital in    Retained    Translation     Compensation   Shareholders'
    Excess of Par   Earnings     Adjustment       Expense         Equity

       $251,601    $  75,058        $(1,807)        $(1,965)      $325,924

          4,427            -              -          (1,701)         2,761
          1,775            -              -               -          1,775
         58,258            -              -               -         58,612
          7,626            -              -               -          7,626
              -       43,706              -               -         43,706
              -            -              -           1,324          1,324
              -       (4,072)             -               -         (4,072)
              -            -         (1,637)              -         (1,637)
             (8)           -              -               -             (9)
        -------      -------        -------         -------        -------
        323,679      114,692         (3,444)         (2,342)       436,010

            530            -              -            (852)          (318)
            854            -              -               -            854
              -       47,880              -               -         47,880
              -            -              -           1,369          1,369
              -       (4,115)             -               -         (4,115)
              -            -          3,618               -          3,618
              -            -              -               -              -
        -------      -------        -------        --------        -------
        325,063      158,457            174          (1,825)       485,298
          1,351            -              -          (2,098)          (734)
            194            -              -               -           1 94
              -        6,455              -               -          6,455
              -                           -           1,408          1,408
              -       (4,129)             -               -         (4,129)
              -            -          4,049               -          4,049
        -------      -------       --------         -------       --------
       $326,608     $160,783         $4,223         $(2,515)      $492,541
       ========      =======          =====          ======        =======

   See accompanying notes.
   <PAGE>

                   Notes to Consolidated Financial Statements

                                December 31, 1995


   1. Summary of Significant Accounting Policies

   Principles of Consolidation

   The consolidated financial statements include the accounts of Giddings &
   Lewis, Inc. and all of its wholly owned subsidiaries (collectively, the
   Company). All significant intercompany accounts and transactions have been
   eliminated in consolidation.

   Cash and Cash Equivalents

   The Company considers all highly liquid investments with a maturity of
   three months or less at date of purchase to be cash equivalents.

   Revenue Recognition and Receivables

   Revenue is reported on the percentage-of-completion (POC) method of
   accounting for all long-term contracts and the completed contract method
   for other products. Progress on POC contracts is measured by costs
   incurred to date compared with an estimate of total costs at the project's
   completion. Provision is made for the entire amount of expected losses, if
   any, in the period in which such losses are first determinable. Revenue on
   completed contract sales is recognized upon shipment to the customer.

   The Company's POC calculations are made using management's best estimates
   based on existing information with respect to contracts in progress.  The
   nature of the Company's contracts, however, are such that significant
   subsequent changes in estimates are possible.  The effects of such changes
   are recognized in the period that they occur. 

   Customers are billed according to the terms of the contract. Unbilled
   receivables include amounts recognized as revenue under the POC basis but
   not billed to the customer. Retainers are billed upon shipment and are due
   upon customer acceptance. Substantially all receivables, including
   retainers, are collectible within one year.
    
   Included in accounts receivable are unbilled receivables of $202,672,000
   and $249,357,000 at December 31, 1995 and 1994, respectively. At December
   31, 1995 and 1994, there were $51,692,000 and $23,019,000, respectively,
   of retainers included in accounts receivable.

   The Company is subject to certain credit risks, including a concentration
   of accounts receivable balances with its worldwide automotive and related
   customers, which totaled approximately $237,000,000 and $271,000,000 at
   December 31, 1995 and 1994, respectively.

   Inventories

   Inventories are stated at the lower of cost or net realizable value. Cost
   is determined by the first-in, first-out (FIFO), last-in, first-out (LIFO)
   or average methods. Approximately $9,116,000 and $10,156,000 of the
   inventories at December 31, 1995 and 1994, respectively, are valued on the
   LIFO basis. If the FIFO inventory method, which approximates replacement
   cost, had been used for these inventories, they would have been $481,000
   and $388,000 greater at December 31, 1995 and 1994, respectively. The FIFO
   and average costing methods produce materially consistent results. 

   Fixed Assets

   Property, plant and equipment are carried at cost. Depreciation of plant
   and equipment is determined on the straight-line basis over the estimated
   useful lives of the assets, which range from 3 to 20 years.

   Intangible Assets

   Intangible assets include trade name, distributor network, and other
   intangible assets identified in connection with purchase business
   combinations, along with the residual component of the excess purchase
   price that is referred to as "costs in excess of net acquired assets." 
   Allocation of costs to identified intangible assets was made primarily
   using outside valuations. 

   Costs in excess of net acquired assets represent the excess purchase price
   recorded in (a) the 1995 acquisition of Fadal Engineering Co., Inc.
   (Fadal) (see Note 3), and (b) the 1991 acquisition of Cross & Trecker
   Corporation (Cross & Trecker). The Company is amortizing costs in excess
   of net acquired assets using the straight-line method over periods from 25
   to 40 years.  Accumulated amortization was $14,704,000 and $8,869,000 at
   December 31, 1995 and 1994, respectively. Costs in excess of net acquired
   assets related  to the Cross & Trecker acquisition are also reduced for
   the initial recognition of acquired tax loss carryforwards and temporary
   deductible differences (see Note 8). 

   Other intangible assets are amortized on the straight-line basis over
   periods ranging from 13 to 30 years. 

   The Company assesses long-lived assets for impairment under FASB Statement
   of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
   Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
   Of."  Under those rules, costs in excess of net acquired assets associated
   with long-lived assets acquired in purchase business combinations are
   included in impairment evaluations when events or circumstances exist that
   indicate the carrying amount of those assets may not be recoverable. 

   Research, Development and Custom Engineering

   Research and development expense pertaining to new products or significant
   improvement to existing products was $3,183,000, $3,857,000 and $4,064,000
   for the years ended December 31, 1995, 1994 and 1993, respectively. The
   total expenditure for research, development and custom engineering was
   $60,395,000, $67,398,000 and $57,413,000, respectively, for the periods
   noted above.

   Use of Estimates

   The preparation of financial statements in conformity with generally
   accepted accounting principles requires management to make estimates and
   assumptions that affect the amounts reported in the financial statements
   and accompanying notes. Actual results could differ from those estimates. 

   Foreign Currency Translation and Transactions

   Assets and liabilities of the Company's foreign subsidiaries are
   translated into U.S. dollars using current exchange rates, and statement
   of income items are translated using average exchange rates for the year.
   For the years ended December 31, 1995, 1994 and 1993, losses on foreign
   currency transactions amounted to $1,217,000, $669,000 and $2,270,000,
   respectively, and are included in other expense/income in the accompanying
   consolidated statements of income. 

   The Company enters into forward foreign exchange contracts mainly to fix
   the price of certain loans to, and receivables from, its foreign
   subsidiaries denominated in European currencies.  The Company also enters
   into forward foreign exchange contracts to fix the price of certain
   contracts of its foreign subsidiaries denominated in currencies other than
   the subsidiaries' local currency. The primary purpose of the Company's
   foreign currency activities is to protect the Company from the risk that
   the eventual dollar cash flows resulting from the repayment of such loans
   and the collection of the accounts receivable will be adversely affected
   by changes in exchange rates.  At December 31, 1995, the Company had
   forward exchange contracts that require it to convert these foreign
   currencies, at various rates and dates through April 1997 into
   approximately $21.2 million, DM 5.0 million, and [L]20.3 million. At
   December 31, 1994, the Company had forward exchange contracts that
   required it to convert foreign currencies, at various rates and dates
   through December 1995, into approximately $50.0 million, DM 3.0 million,
   and [L]1.4 million.

   The Company is exposed to credit loss in the event of nonperformance by
   counterparties on the foreign exchange contracts; however, the Company
   does not anticipate nonperformance by any of these counterparties. The
   amount of such exposure is generally any unrealized gains in such
   contracts.

   Net Income Per Common Share

   Net income per common share in 1995, 1994 and 1993 was computed by
   dividing net income by the weighted average number of common shares
   outstanding during the respective periods. Stock options were not
   materially dilutive for these years. 

   Stock Awards

   The Company accounts for employee stock awards (e.g., restricted stock and
   stock options) in accordance with APB Opinion No. 25 (APB 25), "Accounting
   for Stock Issued to Employees."  Under APB 25, the total compensation
   expense recognized is equal to the difference between the award's exercise
   price and the underlying stock's market price (referred to as "intrinsic
   value") at the measurement date, which is the first date that both the
   exercise price and number of shares to be issued is known. 

   SFAS No. 123, "Accounting for Stock-Based Compensation," is effective
   January 1, 1996. As is permitted under SFAS No. 123, the Company has
   tentatively decided to continue accounting for employee stock compensation
   under the APB 25 rules, but will disclose pro forma results using the new
   standard's alternative accounting treatment, which calculates the total
   compensation expense to be recognized as the fair value of the award at
   the date of grant for effectively all awards. 

   Nature of Operations

   The Company's operations are conducted in one business segment: the
   design, production and integration of smart manufacturing systems,
   flexible transfer lines, automated assembly systems, high-precision
   automated machine tools, coordinate measuring machines, industrial control
   systems and other related products and services. Organizationally, the
   Company is comprised of four major operating groups:  Automation
   Technology, Integrated Automation, Automation Measurement and Control, and
   European Operations. The Company's products are sold throughout the world
   primarily to manufacturers in the automotive, construction, aerospace,
   defense, appliance, energy and electronics industries.  The Company's
   subsidiaries in England, Canada and Germany account for a significant part
   of the Company's sales outside of the U.S. (refer to Note 11 for
   information about foreign operations and export sales).  

   A substantial amount of the Company's flexible transfer lines and
   automated assembly systems are sold to large manufacturers in the
   automotive industry.  In that regard, approximately 23.2% and 6.3% of  the
   Company's 1995 sales were to two such automotive industry customers. 
   Approximately 15.9% and 14.2% of the Company's 1994 sales were to two
   different automotive industry customers, respectively. In 1993,
   approximately 29.7% of the Company's sales were derived from a single
   automotive industry customer. 

   2. Other Charges (Credits)

   1995

   The separate $30.3 million operating expense item in the Company's 1995
   statement of income consists of the charges listed below. While these
   charges are based on available information and management's best estimate
   at this time, it is impossible to predict the ultimate costs to be
   incurred in this regard. 

   In the fourth quarter of 1995, the Company entered into a formal plan to
   improve the operations of its German subsidiary, which includes the
   planned termination of 145 employees at that location. As a result of its
   decision, the Company recorded a pre-tax charge of $6.3 million relating
   to the planned terminations.  Through December 31, 1995, no termination
   benefit payments have been made. 

   In conjunction with the above plan, the Company evaluated the ongoing
   value of the property, plant and equipment, and related intangible assets,
   associated with its German subsidiary in accordance with SFAS No. 121. 
   Based on this evaluation, the Company determined that assets were impaired
   and wrote them down by $20.5 million to their estimated fair value. The
   fair value estimate was based on estimated future cash flows of the
   subsidiary discounted at an interest rate commensurate with the risk
   involved.

   Also during the fourth quarter of 1995, in connection with the adoption of
   SFAS No. 121, the Company determined that the long-term and intangible
   assets associated with a plant in its Automation Measurement and Control
   group were impaired. That impairment evaluation was triggered by the
   relatively poor operating performance of that entity since its 1991
   acquisition.  Such assets were written down $3.5 million to their
   estimated fair value, which was determined using a discounted future cash
   flow estimate. 

   1994

   In connection with the 1991 Cross & Trecker acquisition, the Company wrote
   off the uncollected receivables and reserved for the costs committed to be
   incurred with respect to two Russian contracts entered into by Cross &
   Trecker prior to the acquisition. The Russian contracts totaled
   approximately $48.2 million. 

   During the fourth quarter of 1994, the necessary conditions were met such
   that a credit guarantee was activated in connection with one of the
   Russian contracts referred to above. As a result, the Company received a
   net payment of $32.3 million, which represented the remaining balance owed
   under the contract and covered by the guarantee. The receipt resulted in a
   $22.1 million increase to pre-tax income recorded in the fourth quarter of
   1994. The income recorded was net of various costs expected to be incurred
   in connection with shipment and installation.  For the other Russian
   contract, no payments have been received and no credit guarantee has been
   issued through 1995.

   1993

   In connection with the allocation of the purchase price for the Cross &
   Trecker acquisition, certain liabilities were established relating to
   probable facility closings both in the U.S. and abroad. As a result of
   changing economic conditions, changes in senior management, and other 
   factors, in 1993 the Company decided not to shut down two of the plants
   scheduled for closing. Accordingly, the related accruals were no longer
   deemed necessary. In addition, during 1993 there were favorable developments
   pertaining to certain Russian contracts, including the receipt of certain
   down payments, (see discussion under the 1994 section of this note) that
   had been fully reserved. The net effect of these and other changes in
   estimates with respect to certain liabilities established in connection
   with the Cross & Trecker acquisition was a 1993 fourth quarter increase
   to pre-tax income of approximately $23 million as shown below.

   The Company also recognized a pre-tax restructuring charge in the fourth
   quarter of 1993 of approximately $8.3 million related to the closing of
   two facilities. The restructuring charge consists primarily of inventory
   and fixed asset write-downs to net realizable value, termination benefits
   and estimated future facility carrying costs through the expected dates of
   disposal.  The facilities were subsequently sold in October 1994 and March
   1995.  As of December 31, 1995, there were no significant remaining
   expenditures relating to these formerly-owned facilities. 

   The impact of these items on 1993's results of operations is summarized
   below:

                              Purchase Price
                                Accounting    Restructuring        Net
                                 Reserves        Charges         Benefit

                                            (In thousands)

   Cost of sales                  $11,593         $(5,625)     $  5,968
   Selling, general and    
    administrative expenses        11,410          (2,643)        8,767
                                   ------          ------       -------
   Total                          $23,003         $(8,268)      $14,735
                                   ======          ======       =======

   3.  Acquisition of Fadal

   On April 24, 1995, the Company acquired for cash all of the issued and
   outstanding shares of capital stock of Fadal, and the land and building
   used by Fadal in the operation of its business. Fadal is principally
   involved in the design, manufacture and sale of computer numerically
   controlled vertical machining centers. The acquisition was financed with
   amounts borrowed under existing and new credit facilities. 

   The Fadal acquisition was accounted for using the purchase method of
   accounting and, accordingly, the operations of Fadal are included in the
   Company's consolidated statement of income since the April 24, 1995
   acquisition date. The total purchase price was approximately $180 million
   and included $123 million allocated to intangible assets, which includes
   the residual component of costs in excess of net acquired assets that is
   being amortized over 25 years. 

   Pro forma unaudited results of operations for the years ended December 31,
   1995 and 1994, assuming consummation of the Fadal purchase as of January
   1, 1994, are as follows: 

                                          1995         1994
                                           (In thousands)

    Net sales                            $783,546   $757,299
    Net income                              9,784     55,920
    Net income per common share              0.28       1.63

   4. Additional Balance Sheet and Cash Flow Information

                                             1995           1994
                                                (In thousands)
   Receivables -
     Allowance for doubtful accounts    $    1,836     $     922
                                         =========       =======
   Inventories:
     Raw materials                      $   52,694     $  37,166
     Work-in-process                        38,038        27,568
     Finished goods                         11,549        10,089
                                          --------      --------
                                        $  102,281    $   74,823
                                           =======      ========
   Fixed assets:
     Land                               $    9,504    $    7,826
     Buildings                              64,557        66,462 
     Machinery and equipment               141,973       137,681
                                           -------      --------
                                           216,034       211,969
     Less accumulated depreciation        (104,652)     (104,805)
                                           -------       -------
                                         $ 111,382     $ 107,164
                                          ========      ========

   Intangible assets:

     Trade name                            $19,544     $     -
     Distributor network                    22,214           -
     Costs in excess of net acquired
        assets                             149,180        84,997
     Other                                   1,584           -
                                           -------       -------
                                          $192,522       $84,997
                                           =======       =======

   Accrued expenses and other
    liabilities:
     Payroll and related expenses          $16,163       $13,640
     Installation and warranty accruals     17,218        19,165
     Restructuring costs                     6,313         2,936
     Self-insurance reserves                 4,156         6,067
     Other current liabilities              34,038        37,104
                                           -------       -------
                                           $77,888       $78,912
                                           =======        ======
   Long-term employee benefits and other
    long-term liabilities:
     Postretirement health care
        obligations                       $13,224        $13,764
     Pension and retirement plan
        obligations                        18,765         18,917
     Environmental liabilities              9,993         13,773
     Other                                    741           -
                                          -------       --------
                                          $42,723        $46,454
                                           ======         ======


   A significant non-cash transaction during 1995 was as follows:

   -  In the purchase of Fadal, the purchase price was allocated as follows
      (in thousands):

   Purchase price                                  $179,579
   Estimated fair value of tangible
       assets acquired                              (68,536)
   Estimated fair value of liabilities assumed       12,370
                                                     ------
   Excess purchase price allocated to intangible
     assets                                        $123,413
                                                   ========

   A significant non-cash transaction during 1994 was as follows:

   -  Decrease in intangible assets of $4 million, due to the recognition of
      certain acquired foreign net operating loss carryforwards. 


   Significant non-cash transactions during 1993 were as follows:

   -  Conversion of 10% Convertible Subordinated Debentures due 2015
      (Debentures), $58.6 million of principal and accrued interest (net of
      tax), to common stock. 

   -  Effect of adopting Statement of Financial Accounting Standards No.
      109, "Accounting for Income Taxes" (SFAS No. 109) (see Note 8).

   -  Net decrease in intangible assets of $16.6 million due to the utili-
      zation or initial benefit recognition of acquired tax loss
      carryforwards (see Note 8).

   5. Financing Arrangements and Long-Term Debt

   Notes payable under revolving credit facilities and long-term debt
   consisted of the following at December 31: 


                                            1995         1994
                                               (In thousands)



    Borrowings under 1992 Credit                 
     Facility                           $  36,763   $    -
    7.5% unsecured notes maturing in                
     2005                                 100,000        -
                                           ------     ------
    Total debt                            136,763        -
    Less current maturities                36,763        -
                                          -------    -------
    Long-term debt                    $   100,000  $     -
                                         ========    =======

   The Company has a multicurrency credit agreement with a syndicate of
   financial institutions for an unsecured $175 million revolving credit
   facility (1992 Credit Agreement). The 1992 Credit Agreement matures in
   December 1997. At December 31, 1995, outstanding borrowings and letters of
   credit under the 1992 Credit Agreement totaled $36.8 million and $13.8
   million, respectively. Letters of credit reduce the amount available for
   additional borrowings under the agreement. At December 31, 1994, there
   were no borrowings under the Credit Agreement; however, outstanding
   letters of credit totaled $21.8 million.  The 1992 Credit Agreement
   carries an interest rate equal to a Base Rate, as defined, or LIBOR plus a
   spread.  At December 31, 1995, the weighted average interest rate on
   outstanding borrowings under the 1992 Credit Agreement was 6.82%. The
   Company is required to pay certain fees and expenses from time to time,
   including agent fees and commitment fees of .125% of the unused portion
   available under the Credit Agreement.

   The 1992 Credit Agreement contains various covenants and restrictions,
   including customary financial covenants, additional debt limitations and
   restrictions on payment of dividends. The dividend restrictions prohibit
   the Company from paying cash dividends on its common stock in excess of
   40% of the Company's consolidated net earnings after tax in any fiscal
   quarter, less amounts paid to redeem capital stock in such quarter. This
   limitation is subject to certain carryforward provisions.

   At December 31, 1995, the Company had foreign lines of credit that
   approximated $72 million, with no borrowings outstanding. Borrowings under
   the foreign lines of credit bear interest at an average rate of 4.5%.
   Outstanding foreign letters of credit at December 31, 1995 and 1994,
   approximated $41.8 million and $38.0 million, respectively, and reduce the
   amounts available under the foreign lines of credit.

   In connection with the April 1995 Fadal acquisition, the Company entered
   into an additional $100 million one-year revolving credit facility with a
   bank (1995 Credit Agreement). Amounts borrowed under the 1995 Credit
   Agreement to finance the acquisition were subsequently repaid or
   refinanced in 1995. 

   During 1995, the Company filed a shelf registration with the Securities
   and Exchange Commission enabling the Company to issue to the public up to
   $250 million in unsecured debt securities. On October 2, 1995, $100
   million of such securities were issued in a public offering at an interest
   rate of 7.5%.  The proceeds from the offering were used to repay amounts
   borrowed under the 1992 and 1995 Credit Agreements in connection with the
   Fadal acquisition. The notes issued in 1995 mature in the year 2005. 

   In 1993, the Company called for the redemption of $57 million of its
   convertible debentures. In connection therewith, substantially all holders
   of the debentures elected conversion into common stock instead of
   redemption. The $58.6 million of principal and accrued interest (net of
   tax) relating to debentures converted into shares of common stock during
   the first quarter of 1993 is reflected as an increase in shareholders'
   equity.

   Interest expense for the years ended December 31, 1995, 1994 and 1993, was
   $10,548,000, $1,970,000 and $4,147,000, respectively.

   6. Commitments and Contingencies

   The Company has operating leases and service contracts covering primarily
   office space and data processing equipment. Future minimum lease payments
   under these commitments at December 31, 1995, were as follows (in
   thousands):

   1996                           $2,513
   1997                            1,647
   1998                              477
   1999                              151
   2000                               73
   Thereafter                         82
                                  ------
                                  $4,943
                                  ======

   Total expense for all operating leases for the years ended December 31,
   1995, 1994 and 1993, was $3,431,000, $3,645,000 and $3,983,000,
   respectively.

   The Company is involved in various environmental matters, including
   matters in which the Company and certain of its subsidiaries or alleged
   predecessors have been named as potentially responsible parties under the
   Comprehensive Environmental Response Compensation and Liability Act
   (CERCLA). These matters include a soil and water contamination matter at
   its former West Allis, Wisconsin, facility. In 1992, the Company was
   notified by the Wisconsin Department of Natural Resources (WDNR) of
   contamination at the West Allis site. In 1994, the Company sold most of
   the site, including the manufacturing facility. The Company has made
   substantial progress on the implementation of a WDNR approved clean-up
   plan on the portion of the site that was not sold. 

   The Company has established accruals ($10.0 million and $13.8 million at
   December 31, 1995 and 1994, respectively) for all environmental
   contingencies of which management is currently aware in accordance with
   generally accepted accounting principles. In establishing these accruals,
   management considered: (a) reports of environmental consultants retained
   by the Company; (b) the costs incurred to date by the Company at sites
   where clean-up is presently ongoing and the estimated costs to complete
   the necessary remediation work remaining at such sites; (c) the financial
   solvency, where appropriate, of other parties that have been responsible
   for effecting remediation at specified sites; and (d) the experience of
   other parties who have been involved in the remediation of comparable
   sites. The accruals recorded by the Company with respect to environmental
   matters have not been reduced by potential insurance or other recoveries
   and are not discounted. Although the Company has and will continue to
   pursue such claims against insurance carriers or other responsible
   parties, future potential recoveries remain uncertain and, therefore, were
   not recorded as a reduction to the estimated gross environmental
   liabilities. Based on the foregoing and given current information,
   management believes that future costs in excess of the amounts accrued on
   all presently known and quantifiable environmental contingencies will not
   be material to the Company's financial position or results of operations.

   In another matter, a Michigan Department of Natural Resources' (now known
   as the "Department of Environmental Quality"-MDEQ) investigation into
   alleged environmental violations at the Company's Menominee, Michigan,
   facility has resulted in the issuance of a criminal complaint against the
   Company and two of its employees. The complaint generally is focused on
   alleged releases of hazardous substances and the alleged illegal treatment
   and disposal of hazardous wastes. Two civil lawsuits are also pending
   which allege improper disposal and emissions at this facility. The Company
   is vigorously defending itself against all charges and allegations.
   Information presently available to the Company does not enable it to
   reasonably estimate potential civil or criminal penalties, or remediation
   costs, if any, related to this matter.

   The Company is also involved in other litigation and proceedings,
   including product liability claims. In the case of product liability, the
   Company is partially self-insured and has accrued for all claim exposure
   for which a loss is probable and reasonably estimable. Based on current
   information, management believes that future costs in excess of the
   amounts accrued for all existing litigation will not be material to the
   Company's financial position or results of operations.

   7. Employee Benefit Plans

   Domestic Defined Benefit Plans

   The Company has defined benefit plans that cover substantially all U.S.
   employees. Benefits for salaried employees generally are based on earnings
   and years of service while hourly employee benefits generally are a fixed
   amount for each year of service. The Company annually contributes to the
   defined benefit plans amounts which are actuarially determined to provide
   the plans with sufficient assets to meet future benefit payment
   requirements. Plan assets are invested primarily in listed stocks, money
   market instruments, fixed income securities and U.S. corporate bonds.

   Net periodic pension expense for the Company's domestic defined benefit
   retirement plans includes the following components:

                                              1995     1994      1993
                                                   (In thousands)

   Service cost                             $ 3,411  $ 3,436   $ 2,907
   Interest cost                              7,988    7,047     6,900
   Actual (return)/loss on assets           (16,615)     744    (8,115)
   Net amortization and deferral             10,174   (7,097)    2,030
                                             ------    -----    ------
   Net periodic pension expense             $ 4,958  $ 4,130   $ 3,722
                                             ======   ======    ======

   The following table presents a reconciliation of the funded status of the
   Company's domestic defined benefit plans at December 31:


                                               1995     1994

                                                (In thousands)
 Actuarial present value of benefit
  obligations:
   Vested benefits                           $ 98,419  $ 76,463
   Nonvested benefits                           6,963     5,843
                                              -------   -------
   Accumulated benefit obligation             105,382    82,306

   Effect of assumed increases in
     compensation levels                       16,152    15,541
                                              -------   -------
   Projected benefit obligation               121,534    97,847
   Plan assets at fair value                   94,983    78,090
                                              -------   -------
   Projected benefit obligation in
    excess of plan assets                     (26,551)  (19,757)
   Unrecognized net loss                        7,504     1,318
   Unreco gnized prior service cost             1,230     1,099
                                             --------   -------
   Accrued pension cost                      $(17,817) $(17,340)
                                             ========  ========


   The assumptions used in determining pension expense (for the following
   year) and funded status information shown above were as follows:

                                           1995     1994    1993

   Discount rate                            7.5%    8.25%    7.5%
   Rate of salary progression               4.5%    5.0%     5.0%
   Long-term rate of return on assets       8.5%    8.0%     8.0%

   The change in the discount rate and rate of salary progression assumptions
   at December 31, 1995 increased the projected benefit obligation by
   $13,054,000. The change in the discount rate assumption at December 31,
   1994, decreased the projected benefit obligation by $10,377,000.

   Foreign Defined Benefit Plans

   Benefits of the defined benefit plans for the Company's foreign employees
   are based on years of service and the employees' compensation during
   employment. Substantially all of the plan assets are held in commingled
   trust accounts. The Company's foreign funding policy is to contribute
   annually the minimum amount required to comply with local statutory
   requirements.

   Net periodic pension income for the Company's foreign defined benefit
   plans includes the following components:

                                           1995     1994      1993
                                             (In thousands)

   Service cost                           $ 884    $  729  $ 1,036
   Interest cost                          2,026     1,595    1,720
   Actual (return)/loss on assets        (4,800)    1,650   (6,710)
   Net amortization and deferral          1,253    (5,333)   3,453
                                         ------   -------   ------
   Net periodic pension income            $(637)  $(1,359) $  (501)
                                          =====   =======   ======

   During 1995 and 1994, settlements relating to the Company's foreign plans
   resulted in gains of approximately $400,000 and $500,000, respectively.

   The following table presents a reconciliation of the funded status of the
   Company's foreign defined benefit plans at December 31:

                                                1995        1994
                                                  (In thousands)
 Actuarial present value of benefit
  obligations:
   Accumulated benefit obligation--all
    vested                                    $24,686      $19,514
   Effect of assumed increases in
    compensation levels                         3,727        2,817
                                              -------      -------
   Projected benefit obligation                28,413       22,331
 Plan assets at fair value                     36,020       30,782
                                               ------       ------
 Plan assets in excess of projected
    benefit obligation                          7,607        8,451
 Unrecognized net loss                          1,362          440
 Unrecognized net transition asset             (5,198)      (5,805)
 Unrecognized prior service cost                1,078        1,169
                                               ------      -------
 Prepaid pension cost                        $  4,849     $  4,255
                                               ======      =======

   The assumptions used in determining foreign pension expense (for the
   following year) and funded status information shown above were as follows:

                                                1995   1994   1993

   Discount rate                                8.0%   9.0%   8.0%
   Rate of salary progression                   5.0%   5.0%   5.0%
   Long-term rate of return on assets           9.5%   9.0%   9.0%

   The change in the above assumptions increased the projected benefit
   obligation by approximately $3,415,000 at December 31, 1995 and decreased
   the projected benefit obligation by approximately $3,287,000 at December
   31,1994.

   Defined Contribution Plans

   The Company also has certain defined contribution plans that cover
   substantially all full-time employees. Contributions to the plans are
   based on a percentage of employee earnings. Costs of these plans charged
   to operations were $2,108,000, $2,024,000 and $1,745,000 in 1995, 1994 and
   1993, respectively.

   Other Postretirement Benefit Plans

   The Company provides health care benefits, and certain life insurance
   benefits, to certain retired employees who retired prior to June 1, 1992.
   The types of benefits, retiree contributions, and eligibility for benefits
   varied among the various divisions and are unfunded. The Company's
   contribution level is frozen such that all health care cost increases are
   borne by retirees. Benefits for plan participants age 65 and older are
   integrated with Medicare under all plans.  The Company funds costs as
   incurred under the plans.

   The following sets forth the plans' status reconciled with the amounts
   recognized in the Company's balance sheet as of December 31:

                                                   1995    1994
                                                   (In thousands)
   Accumulated postretirement benefit
    obligation:
     Current retirees                           $(11,857) $(11,985)
   Unrecognized net gain                          (1,367)   (1,779) 
                                                 -------   -------
   Accrued long-term employee benefit           $(13,224) $(13,764)
                                                 =======   =======


   The periodic postretirement benefit cost included in the statement of
   income is as follows:

                                        1995         1994     1993

                                  (In thousands)


   Service cost                       $    -      $    -     $     3
   Interest                              924         934       1,220
   Amortization                          (74)        (68)          -
                                       -----       -----      ------
   Total                                $850        $866      $1,223
                                        ====        ====      ======

   Due to the nature of the plans, a one percent change in the healthcare
   trend rate assumption does not have any material impact on the Company's
   obligation. Similarly, the healthcare cost trend rate is not a factor in
   computing the benefit obligation. A discount rate of 7.5% and 8.25% was
   used to present value all future health care and life insurance
   liabilities at December 31, 1995 and 1994, respectively. 

   8. Income Taxes

   Effective January 1, 1993, the Company prospectively adopted SFAS No. 109,
   "Accounting for Income Taxes." The effect of adopting SFAS No. 109 was a
   $7.6 million credit recorded directly to Capital in Excess of Par.  Under
   SFAS No. 109's liability method, deferred tax assets and liabilities are
   determined based on differences between financial reporting and tax bases
   of assets and liabilities, and are measured using enacted tax rates and
   laws that will be in effect when the differences are expected to reverse. 

   At December 31, 1995, the Company had U.S. federal net operating loss
   carryforwards totaling approximately $26 million and various state net
   operating loss carryforwards. The federal carryforwards expire in 2003
   through 2005, while the state carryforwards expire in 1996 through 2011.
   The Company also had foreign tax loss carryforwards totaling approximately
   $42 million at December 31, 1995, that can be carried forward
   indefinitely. The U.S. federal amount and $21.5 million of the foreign
   amount represent acquired net operating loss carryforwards resulting from
   the Cross & Trecker acquisition. The tax benefit of these loss
   carryforwards has been, or will be in the case of certain foreign loss
   carryforwards, recorded as a reduction to goodwill (i.e., reduce
   intangible assets) when initially recognized. 

   At December 31, 1993, the valuation allowance relating to the U.S. federal
   loss carryforward was eliminated.  The benefit relating to those remaining
   carryforwards (approximately $13 million), the benefit of the loss
   carryforward used in 1993 (approximately $3.6 million-U.S.; $1.7 million-
   foreign), and other adjustments were recognized as reductions to goodwill. 
   These items constitute the $18 million decrease in the deferred tax asset
   valuation allowance from January 1, 1993 to December 31, 1993. 
   The decrease in the valuation allowance during 1994 primarily reflects the
   recognition of approximately $4 million in certain acquired foreign net
   operating loss carryforwards as a reduction to goodwill.  The increase in
   the valuation  allowance during 1995 relates to newly generated foreign
   deferred tax assets, the benefit of which can not be recognized under SFAS
   No. 109's "more likely than not" provisions. 

   Gross deferred tax assets for all remaining net operating loss
   carryforwards, together with various deductible temporary differences
   related to certain of the Company's foreign subsidiaries, continue to be
   fully offset by a valuation allowance based on management's judgment with
   respect to the realizability of those items.

   Significant components of the Company's deferred tax assets and
   liabilities as of December 31, 1995 and 1994, are as follows:

                                                  1995        1994
                                                   (In thousands)

 Deferred tax liabilities:
   Tax over book depreciation                  $   8,005     $14,618
   LIFO book/tax difference relating to
    acquisition                                    2,193       2,225
   Percentage of completion accounting             2,436       2,654
   Other, net                                      9,039       5,598
                                                  ------      ------
 Total deferred tax liabilities                   21,673      25,095

 Gross deferred tax assets:
   Environmental accruals                          3,874       5,226
   Pension, other postretirement, and other
    longer term employee benefit obligations       7,885      10,526
   Other accrued expenses not currently
    deductible and other                          19,579      21,445
   Net operating loss carryforwards               31,298      24,418
                                                  ------      ------
 Total gross deferred tax assets                  62,636      61,615
                                              
 Valuation allowance for deferred tax assets     (16,487)     (8,097)
                                                 -------      ------
 Deferred tax assets, net of valuation
   allowance                                      46,149      53,518
                                                 -------      ------
 Net deferred tax asset                         $ 24,476     $28,423
                                                 =======     =======

   The net current and noncurrent components of deferred taxes recognized in
   the December 31, 1995 and 1994, balance sheets are as follows:

                                      1995    1994
                                     (In thousands)

   Net current asset               $  4,776   $  9,455
   Net noncurrent asset              19,700     18,968
                                     ------     ------
                                    $24,476     28,423
                                     ======    =======


   Details of income before provision for income taxes are as follows:


                      1995         1994       1993
                             (In thousands)


   Domestic        $ 57,446      $77,525     $58,280
   Foreign          (29,383)          81      11,747
                    -------      -------     -------
                   $ 28,063      $77,606     $70,027
                    =======       ======      ======


   Details of the provision for income taxes for the years ended December 31,
   1995, 1994 and 1993, are as follows:

                                1995        1994         1993
                                       (In thousands)

 Current:
   Federal                   $ 13,963    $  4,650      $  3,129
   State                        1,460       1,627           830
   Foreign                        702       1,599           286 
                               ------      ------         -----
                               16,125       7,876         4,245
 Deferred:
   Federal                      6,606     19,90 8         9,643
   State                          867       2,655         1,815
   Foreign                     (3,525)     (1,567)        3,150 
                               ------      ------        ------
                                3,948      20,996        14,608
 Effect of using acquired
    loss carryforwards (1)        887           -        5 ,343

 Tax benefit related to
    exercise of options and
    other items charged to
    equity                        648         854         2,125
                              -------      ------        ------
                              $21,608     $29,726       $26,321
                               ======      ======        ======


   (1) Reduction in current provision (not previously recognized) and
   credited to goodwill.


   The differences between the provision for income taxes and income taxes
   computed using the U.S. federal income tax rate (35%) for the years ended
   December 31, 1995, 1994 and 1993, are as follows:


                                          1995      1994       1993
                                              (In thousands) 

   Provision at statutory rates         $ 9,822    $27,162    $24,509
   State taxes, net of federal benefit    1,513      2,783      1,719
   Foreign loss for which no tax
    benefit recorded                      6,215          -          -
   Write-off of costs in excess of net
    acquired assets                       3,957          -          -
   Amortization of costs in excess of 
    net acquired assets                     631        668        823
   Effect of different foreign tax
    rates                                  (946)      (513)     1,029
   Effect on deferred taxes of change
    in U.S. federal tax rate                  -          -     (1,366)
   Addition (reduction) to tax
    reserves                                114       (520)      (820)
   Other                                    302        146        427
                                         ------     ------     ------
   Actual provision for income taxes    $21,608    $29,726    $26,321
                                        =======    =======     ======


   Undistributed earnings of the Company's foreign subsidiaries, which are
   not significant at December 31, 1995, are considered to be permanently
   invested. Therefore, no deferred taxes (including withholding taxes
   payable) have been provided for the remittance of those earnings.

   9. Capital Stock

   The Company's capital structure consists of the following at December 31:


                                                        1995        1994
                                                (In thousands, except share
                                                            amounts)
    Class A preferred stock, $.10 par value,
     authorized 3,000,000 shares; 350,000 shares
     designated as Series A and 700,000 shares
     designated as Series B; none issued and
     outstanding                                   $       -    $      -

    Common stock, $.10 par value, authorized
     70,000,000 shares; 34,422,043 and 34,294,404
     shares issued and outstanding at December 31,
     1995 and 1994, respectively                        3,442       3,429



   On August 23, 1995, the Board of Directors of the Company declared a
   rights dividend of one preferred share purchase right (Right) for each
   share of common stock outstanding on September 8, 1995, and provided that
   one Right would be issued with each share of common stock thereafter
   issued. Each Right entitles the registered holder to purchase from the
   Company, upon the occurrence of certain events, one one-hundredth of a
   share of Class A preferred stock, Series B at an initial exercise price of
   $60 per one one-hundredth of a share or, upon the occurrence of certain
   events, common stock or other property having a value of twice the
   exercise price.  The redemption price for the Rights is $.01 per Right. 
   Simultaneous with this rights dividend, the Company redeemed outstanding
   rights from a 1990 rights dividend for $172,000. 

   1989 Restricted Stock Plan

   Under the Company's 1989 restricted stock plan, the Company may grant to
   key employees the right to purchase up to an aggregate of 500,000 shares
   of common stock (the restricted shares) at $.10 per restricted share, with
   such shares not vesting for a period, as determined by the Compensation
   Committee of the Board of Directors, of up to ten years from the effective
   date of the award (the restricted period). During the restricted period,
   the restricted shares may not be sold, transferred or otherwise alienated
   by the recipient. The restricted shares currently outstanding have a
   restricted period from one to five years from the effective date of the
   award.

   1989 Stock Option Plan

   The Company's 1989 stock option plan authorizes the granting of incentive
   and nonqualified stock options to key employees for up to an aggregate of
   1,500,000 shares of common stock. Stock options granted under the 1989
   stock option plan will have an exercise price of not less than 90% of the
   fair market value of the common stock on the date of grant. Options
   granted will vest and become exercisable in accordance with the terms and
   conditions established by the Compensation Committee of the Board of
   Directors and set forth in the applicable option agreement, except that no
   options may be exercised later than ten years after the date of its grant.

   1991 Independent Director Stock-Based Incentive Plan

   During 1991, the Company adopted a stock based incentive plan for members
   of the Board of Directors who are not employees of the Company. Under the
   1991 plan, on each date on which a non-employee director is elected or re-
   elected to serve on the Board of Directors (as the case may be), such non-
   employee director automatically receives options to purchase 1,000 shares
   of the Company's common stock. The plan authorizes the granting of
   nonqualified stock options to non-employee directors for up to an
   aggregate of 50,000 shares of common stock. Stock options granted under
   the 1991 plan have an exercise price equal to the closing price of a share
   of common stock at the date of grant and become exercisable (subject to
   immediate vesting in certain cases) upon expiration of the non-employee
   director's term as a  director.

   1993 Stock and Incentive Plan

   In 1993, the Company adopted the 1993 stock and incentive plan. The 1993
   plan authorizes the granting to key employees of (a) stock options (either
   incentive stock options or nonqualified options), (b) stock appreciation
   rights, (c) restricted stock, and (d) performance shares and performance
   units. In addition, under the 1993 plan, non-employee directors receive
   annual restricted stock grants based on an established formula. In total,
   the 1993 plan allows for the granting of awards relating to 2,000,000
   shares of common stock.

   Options granted under the 1993 plan shall have exercise prices no less
   than 90% (100% in the case of incentive stock options) of the fair market
   value of a share of common stock at the date of grant. The term of the
   option is to be determined at the time of the grant but in no event can
   exceed ten years. Restricted stock issued under the 1993 plan may contain
   restrictions similar to those described above for the 1989 restricted
   stock plan, as well as other terms, including vesting based on the
   achievement of specified performance criteria. Subject to the terms of the
   1993 plan, awards of stock appreciation rights and performance shares and
   performance units may have such terms as are specified by the Compensation
   Committee of the Board of Directors.

   A summary of restricted stock activity, including shares issued to non-
   employee directors, is as follows:

                                               Number of Shares
                                           1995        1994      1993
 Restricted stock:
   Outstanding at beginning of year      208,315     385,515    385,200
   Granted                               129,556      58,840    113,142
   Canceled                              (15,000)    (29,298)  (112,827)
   Vested                                (72,000)   (206,742)         -
                                         -------    --------   --------
   Outstanding at end of year            250,871     208,315    385,515
                                         =======    ========    =======


   A summary of option activity under the above-described stock option and
   incentive plans is as follows:


                                              Number of Shares
                                         1995       1994         1993
 Options:
   Outstanding at beginning of year
    at $7.00 to $28.00                 697,676    584,370    1,162,778
   Granted at $9.625 to $28.00         272,600    229,750       70,000
   Canceled                            (88,264)   (67,656)    (295,943)
   Exercised at $7.00 to $19.875       (42,000)   (48,788)    (352,465)
                                       -------    -------      -------
   Outstanding at end of year at
    $7.00 to $28.00                    840,012    697,676      584,370
                                       =======    =======      =======

   All options granted through December 31, 1995, are nonqualified stock
   options. There were 315,381, 209,299 and 17,143 options exercisable at
   December 31, 1995, 1994 and 1993, respectively.

   A total of approximately 2,794,000 shares of the Company's authorized but
   unissued common stock are reserved for potential future issuance under the
   Company's various stock option and incentive plans.

   10. Fair Values of Financial Instruments

   The following methods and assumptions were used by the Company in
   estimating its fair value disclosures for financial instruments:

   Cash and Cash Equivalents

   The carrying amount reported in the balance sheet for cash and cash
   equivalents approximates fair value.

   Notes Payable and Long-Term Debt

   The carrying amounts of the Company's borrowings under the 1992 Credit
   Agreement approximate fair value. The fair value of the Company's 7.5%
   unsecured notes was estimated based on the quoted market price of those
   securities. 

   Foreign Currency Exchange Contracts

   The fair values of the Company's forward foreign currency exchange
   contracts are estimated based on quoted market prices of comparable
   contracts.

   The carrying amounts and fair values (i.e., unrealized gains/(losses) in
   the case of forward exchange contracts) of the Company's financial
   instruments at December 31 are as follows:

                                   1995                     1994

                           Carrying   Estimated     Carrying    Estimated
                            Amount    Fair Value     Amount     Fair Value
                                           (In thousands)

   Cash and cash
    equivalents          $  14,216    $  14,216      $24,072       $24,072
   Notes payable           (36,763)     (36,763)        -            -
   Long -term debt        (100,000)    (104,400)        -             -
   Foreign currency
    exchange contracts           -          (73)        -          (759)


   11. Foreign Operations

   Information relating to the Company's foreign operations, consisting
   principally of operations in the United Kingdom and continental Europe, at
   December 31, 1995, 1994 and 1993, and for each of the three years then
   ended is as follows:


                                          Sales                  Operating
                  Assets    Gross   Intergeographic(1)    Net     Income
                                      (In thousands)

   1995         $139,813  $122,032         $16,803    $105,229       $(660)
                 =======   =======         =======     =======     =======
       
   1994        $185, 382  $148,625         $20,493    $128,132    $  1,832
                ========   =======         =======    ========     =======

   1993         $145,040  $104,471        $  6,282     $98,189     $11,837
                ========   =======         =======     =======     =======


   (1) Represents sales from the Company's foreign subsidiaries to the
       Company in the United States, which are at prices approximating those
       charged to unaffiliated customers.

   In 1995, 1994 and 1993, the foreign subsidiaries had sales to unaffiliated
   U.S. customers of $8,715,000, $1,640,000 and $107,000, respectively.

   Export sales to unaffiliated customers were $59,775,000, $23,647,000 and
   $17,519,000 in 1995, 1994 and 1993, respectively.

   <PAGE>
                     Quarterly Financial Data (Unaudited)

   1995
                                           Quarter Ended
                            April 2    July 2    October 1   December 31(1)
                               (In thousands, except per share amounts)


   Net sales                $154,576   $171,125     $195,921      $208,930
   Gross profit (before
    depreciation and
    amortization)            $31,714    $37,790      $42,258       $43,556
   Net income (loss)          $7,096     $9,319       $8,543      $(18,503)
   Net income (loss) per
    common share                $.21       $.27         $.25         $(.54)


   (1) Includes a $30.3 million impairment and severance pre-tax charge--see
       Note 2


   1994
                                            Quarter Ended
                             April 3    July 3     October 2    December 31(2)
                                (In thousands, except per share amounts)

   Net sales                $123,030   $144,805     $166,100      $185,536
   Gross profit (before
    depreciation and
    amortization)            $28,191    $30,937      $34,624       $34,322
   Net income                 $6,870     $7,230       $9,809       $23,971
   Net income per common
    share:                      $.20       $.21         $.29          $.70


   (2) Includes $22.1 million of pre-tax income related to receipt on Russian
       contract (see Note 2).

<PAGE>
                Report of Ernst & Young LLP, Independent Auditors


   The Board of Directors and Shareholders
   Giddings & Lewis, Inc.

   We have audited the accompanying consolidated balance sheets of Giddings &
   Lewis, Inc. as of December 31, 1995 and 1994, and the related consolidated
   statements of income, changes in shareholders' equity and cash flows for
   each of the three years in the period ended December 31, 1995. These
   financial statements are the responsibility of the Company's management.
   Our responsibility is to express an opinion on these financial statements
   based on our audits.

   We conducted our audits in accordance with generally accepted auditing
   standards. Those standards require that we plan and perform the audit to
   obtain reasonable assurance about whether the financial statements are
   free of material misstatement. An audit includes examining, on a test
   basis, evidence supporting the amounts and disclosures in the financial
   statements. An audit also includes assessing the accounting principles
   used and significant estimates made by management, as well as evaluating
   the overall financial statement presentation. We believe that our audits
   provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly,
   in all material respects, the consolidated financial position of Giddings
   & Lewis, Inc. at December 31, 1995 and 1994, and the consolidated results
   of its operations and its cash flows for each of the three years in the
   period ended December 31, 1995, in conformity with generally accepted
   accounting principles.

   As discussed in Note 2 in the notes to the consolidated financial
   statements, effective December 31, 1995, the Company changed its method of
   accounting for the impairment of long-lived assets and related goodwill. 


   ERNST & YOUNG LLP


   Milwaukee, Wisconsin
   January 26, 1996