<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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

For the quarter ended June 30, 1999
                      -------------
                                       or

             ( ) TRANSITION REPORT PURSUANT OT SECTION 13 OR 15 (d) OF
                       THE SECRUITIES EXCHANGE ACT OF 1934

For the transition period from           to
                               ---------    ---------

Commission File No. 1 - 1997
                    --------

                        THE MONARCH MACHINE TOOL COMPANY
                        --------------------------------
             (Exact name of registrant as specified in its charter)

              Ohio                                              34-43407810
---------------------------------                            -------------------
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                    2600 Kettering Tower, Dayton, Ohio 45423
                    ----------------------------------------
               (Address of principal executive offices, zip code)

                                 (937) 910-9300
                                 --------------
               (Registrant's telephone number including area code)

                                      N. A.
 -------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No
                                       ---    ---


The number of common shares outstanding as of July 29, 1999 was 4,282,817.


<PAGE>   2


               THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES

                               INDEX TO FORM 10-Q



                                                                           PAGE
                                                                          NUMBER
                                                                          ------


PART 1.  FINANCIAL INFORMATION:

         ITEM 1. - Condensed Financial Statements:

           Balance Sheets - June 30, 1999 and December 31, 1998             2


           Statements of Operations and Comprehensive Income -
           Quarter and Two Quarters ended June 30, 1999 and 1998            3


           Statements of Cash Flow - Two Quarters                           4
           ended June 30, 1999 and 1998

           Notes to Condensed Financial Statements                          5-8


         ITEM 2. - Management's Discussion and Analysis
                   of Financial Condition and Results of
                   Operations                                               9-11

         ITEM 3. - Quantitative and Qualitative Disclosure
                   About Market Risk (inapplicable)                         11


PART II. OTHER INFORMATION:

         ITEM 1.  Legal Proceedings                                         12

         ITEM 2.  Changes in Securities                                     12

         ITEM 3   Inapplicable                                              12

         ITEM 4.  Submission of Matters to a vote of
                  Security Holders                                          12

         ITEM 5.  Inapplicable                                              12

         ITEM 6.  Exhibits and Reports on Form 8-K                          13


                                       1


<PAGE>   3



PART 1 - FINANCIAL INFORMATION

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                            CONDENSED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                   June 30              December 31
                                                                    1999                   1998
                                                                 -----------            -----------
                                                                 (Unaudited)

<S>                                                              <C>                    <C>
CURRENT ASSETS:
    Cash                                                         $    8,804             $  1,733
    Accounts receivable                                              27,970               23,893
    Costs and estimated earnings in excess of
        billings on uncompleted contracts                             6,642                3,275
    Refundable income taxes                                           1,541
    Inventories                                                      20,038               10,486
    Prepaid and other expenses                                        1,754                  667
    Deferred income taxes                                             3,465                1,874
                                                                 -----------            -----------

         Current assets                                              70,214               41,928


PROPERTY, PLANT & EQUIPMENT - NET                                    32,623               11,070
INVESTMENT IN JOINT VENTURES                                          1,541
PREPAID PENSION COSTS                                                19,714               19,051
DEFERRED INCOME TAXES                                                 1,160                1,631
GOODWILL                                                             67,437               10,099
OTHER ASSETS                                                          7,636                4,678
                                                                 -----------            -----------
                                                                 $  200,325             $ 88,457
                                                                 ===========            ===========


                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
CURRENT LIABILITIES:
    Short-term borrowings                                        $                      $    500
    Current portion of long-term debt                                 4,200
    Accounts payable                                                 16,332                8,930
    Accrued liabilities                                              19,071               12,153
    Billings in excess of costs and estimated
        current earnings on uncompleted contracts                    11,958                5,517
                                                                 -----------            -----------
         Current liabilities                                         51,561               27,100

POSTRETIREMENT BENEFITS                                               3,784                1,450
LONG-TERM DEBT                                                       97,349               16,497
OTHER LONG-TERM LIABILITIES                                             714                  756

SHAREHOLDERS' EQUITY:
    Preferred stock                                                      14                   14
    Common stock                                                      9,495                5,815
    Unearned compensation, restricted stock                             (51)                 (37)
    Retained earnings                                                37,859               37,042
    Accumulated other comprehensive income                             (400)                (180)
                                                                 -----------            -----------
                                                                     46,917               42,654
                                                                 -----------            -----------

                                                                 $  200,325             $ 88,457
                                                                 ==========             ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       2


<PAGE>   4




                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
           CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                    (In thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                            Two Quarters Ended June 30          Quarter Ended June 30
                                            --------------------------          ---------------------
                                              1999              1998             1999           1998
                                            -------            -------          -------        -------
<S>                                         <C>                <C>              <C>            <C>
Net sales                                   $48,633            $42,259          $25,604        $19,194

Operating costs and expenses:
    Cost of sales                            38,142             33,853           19,832         14,918
    Selling, general and administrative       9,376              6,497            4,692          3,303
                                            -------            -------          -------        -------

Operating income                              1,115              1,909            1,080            973

Other income (expense):
    Interest expense, net                      (630)              (180)            (301)           (91)
    Interest income                              80                113               42             56
    Other income (expense)                    1,327               (115)             154            (46)
                                            -------            -------          -------        -------

Income  before income taxes                   1,892              1,727              975            892

Income tax provision                            681                565              352            310
                                            -------            -------          -------        -------

Net income                                    1,211              1,162              623            582

Other comprehensive income,
    net of tax - foreign
    currency translation
    adjustments                                (145)                52              (86)            36
                                            -------            -------          -------        -------

Comprehensive income                        $ 1,066            $ 1,214          $   537        $   618
                                            =======            =======          =======        =======

Average common shares outstanding:
    Basic                                     3,781              3,769            3,787          3,769
                                            =======            =======          =======        =======

    Diluted                                   3,794              3,769            3,809          3,769
                                            =======            =======          =======        =======

Net income per common share,
    basic and diluted                       $   .32            $   .31          $   .16        $   .15
                                            =======            =======          =======        =======

Dividends per share:
     Preferred                              $   .90            $   .90          $   .45        $   .45
     Common                                 $   .10            $   .10          $   .05        $   .05


</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                        3
<PAGE>   5


                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               Two Quarters Ended June 30
                                                                               --------------------------
                                                                                 1999              1998
                                                                               --------          --------
<S>                                                                            <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                                 $  1,211          $  1,162
    Adjustments to reconcile net income to net
        cash provided by (used in)
        operating activities:
            Depreciation and amortization                                         1,162               478
            Pension income                                                         (645)           (1,646)
            Deferred tax provision (benefit)                                        681               599
            Gain on sale of assets                                                  (24)

    Changes in operating assets and liabilities
        excluding effect of acquisition in 1999:
             Accounts receivable                                                  3,415             1,841
             Inventories                                                         (1,103)              374
             Other assets                                                          (457)
             Cost and estimated earnings in excess of
                billings on uncompleted contracts                                (1,355)
             Billings in excess of costs and estimated earnings
                on uncompleted contracts                                         (1,382)           (1,660)
             Accounts payable                                                    (1,479)           (3,385)
             Accrued liabilities                                                  1,223            (3,078)
                                                                               --------          --------
    Net cash provided by (used in) operating activities                           1,247            (5,315)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                         (1,012)             (806)
    Acquisition of business, net of cash acquired                               (73,402)
    Proceeds from sale of fixed assets                                               36
    (Increase) decrease in other assets                                            (645)              443
                                                                               --------          --------
    Net cash provided by (used in) investing activities                         (75,023)             (363)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Dividends paid                                                                 (391)             (390)
    Stock activity                                                                   64
    Debt acquisition costs                                                       (2,275)
    Repayments of short-term borrowings                                            (500)
    Proceeds from long-term borrowings                                          101,709             4,960
    Repayments of long-term borrowings                                          (17,545)           (3,000)
                                                                               --------          --------
    Net cash provided by (used in) financing activities                          81,062             1,570

EFFECT OF EXCHANGE RATES ON CASH                                                   (215)              (28)
                                                                               --------          --------
INCREASE (DECREASE) IN CASH                                                       7,071            (4,136)
CASH - BEGINNING OF PERIOD                                                        1,733             5,022
                                                                               --------          --------
CASH - END OF PERIOD                                                           $  8,804          $    866
                                                                               ========          ========

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements


                                        4


<PAGE>   6


                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                    TWO QUARTERS ENDED JUNE 30, 1999 AND 1998
         (all amounts in thousands except shares and per share amounts)


1.       FINANCIAL STATEMENTS
         --------------------

         The balance sheet at December 31, 1998 presents condensed financial
         information taken from the audited financial statements. The interim
         financial statements are unaudited. In the first quarter of 1999 the
         Company recorded an accrual for $350 as the estimated cost to settle
         litigation and has also recognized $1,100 of other income as a result
         of the reduction of amounts previously accrued for an environmental
         liability. In the opinion of management, all other adjustments, which
         consist of normal recurring adjustments necessary to present fairly the
         financial position and results of operations for the interim periods
         presented, have been made. The results shown for the first two quarters
         of 1999 are not necessarily indicative of the results that may be
         expected for the entire year.

         Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles have been condensed or omitted. It is suggested
         that these financial statements be read in conjunction with the
         financial statements and notes thereto included in the Company's
         December 31, 1998 annual report to shareholders.

2.       EARNINGS PER SHARE
         ------------------

         Basic earnings per common share is computed by dividing net income
         (loss), after adjustment for the preferred stock dividend requirement,
         by the weighted average number of common shares outstanding during the
         period. Diluted earnings per share is computed by adding the dilutive
         effect of common stock equivalents, such as the convertible preferred
         shares and any stock options outstanding, to the weighted average
         number of common shares outstanding.


3.       INVENTORIES
         -----------

         The Company's inventories consist of the following balances:

                                                June 30       December 31
                                                 1999            1998
                                               -------          --------
         Finished goods                        $ 2,858          $  1,285
         Work-in process and parts              14,850            12,967
         Raw materials                           6,826               739
         Less LIFO reserve                      (4,496)           (4,505)
                                               -------          --------
         Net inventories                       $20,038          $ 10,486
                                               =======          ========

4.       LONG-TERM DEBT
         --------------

         The Company has an outstanding credit facility consisting of a term
         loan facility in an aggregate principal amount of $70,000 and a
         revolving credit facility, which provides for loans and letters of
         credit of up to $30,000. The term loan facility consists of two
         tranches in principal amounts of $50,000 (the "Term A Loan") and
         $20,000 (the "Term B Loan"). The Term A Loan and the revolving credit
         facility mature on June 30, 2006 and the Term B Loan matures on
         December 31, 2006. Principal payments of the Term A Loan are required
         on a quarterly basis beginning September 30, 1999. The amount of the
         payment increases each year from a $1,000 quarterly payment during the
         first four quarters to a $2,500 quarterly payment during the last four
         quarters of the payment term.


                                       5


<PAGE>   7


                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                      TWO QUARTERS ENDED JUNE 30, 1999 AND
       1998 (all amounts in thousands except shares and per share amounts)



         Principal payments of the Term B Loan are in quarterly installments of
         $50 from September 30, 1999 through June 30, 2005 and in installments
         of $9,300 on each of September 30, 2006 and December 31, 2006. The
         Company is required to use the net proceeds received from any asset
         sales and from the termination of two of its pension plans to repay the
         amounts outstanding under these two Term Loans in reverse order of
         payment due date. The weighted average interest rate of these loans was
         8.40% at June 30, 1999. On June 30, 1999 the Company had $10,930
         available under the above lines.

         Debt acquisition costs of $2,275 were paid relating to obtaining the
         new credit facility and these costs will be amortized over seven years.

         The agreement for this credit facility contains certain covenants,
         including a maximum senior leverage ratio, minimum interest coverage
         ratios, minimum fixed charge coverage, minimum consolidated net worth
         and a limitation on the amount of dividends and capital expenditures.
         Substantially all the assets of the Company are pledged under the above
         credit facility.

         The Company also has outstanding subordinated notes consisting of
         $15,000 in 12% Senior Subordinated Notes due December 31, 2007 and $840
         in 8% Junior Subordinated Notes due June 30, 2002. The Company has also
         issued warrants to purchase 100,000 common shares in conjunction with
         the Senior Subordinated Notes, at a warrant exercise price of $7.75 per
         share, subject to adjustment. The Warrants are not exercisable before
         June 30, 2000 and expire on June 30, 2009. In addition, the 12%
         Subordinated Note contains provisions that would increase the interest
         rate and require the issuance of additional warrants if the Note is not
         repaid by June 30, 2000. The fair value of the warrants issued was
         estimated at $291 using the Black-Scholes Model and was recorded as a
         discount to the $15,000 Senior Subordinated Note which will be
         amortized over the term of the note.


5.       SEGMENTS
         --------

         The Company operates in two primary reportable segments, coil
         processing and machining centers. Business segment information is as
         follows (in thousands):


                                                Two Quarters Ended June 30
                                                --------------------------
                                                  1999              1998
                                                --------          --------

         Sales:
              Coil Processing                   $ 42,036          $ 25,526
              Machining Centers                    8,387            16,724
              Segment eliminations                (1,790)                9
                                                --------          --------
              Total                             $ 48,633          $ 42,259
                                                ========          ========
         Operating Earnings:
              Coil Processing                   $  3,550          $  2,308
              Machining Centers                     (567)              707
              Corporate and eliminating           (1,868)           (1,106)
                                                --------          --------
              Total                             $  1,115          $  1,909
                                                ========          ========


                                        6



<PAGE>   8




                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                      TWO QUARTERS ENDED JUNE 30, 1999 AND
       1998 (all amounts in thousands except shares and per share amounts)


         Included in the coil processing segment results for the two quarters
         ended June 30, 1999 were sales of $10,295 and operating earnings of
         $396 from GFG Corporation which was acquired by the Company on December
         31, 1998.


6.       ACQUISITIONS
         ------------

         On June 30, 1999, the Company acquired Precision Industrial Corp. and
         Subsidiaries (parent of Herr-Voss) ("Precision"). The acquisition has
         been accounted for under the purchase method and, accordingly, the
         assets and liabilities of Precision have been included in the
         consolidated balance sheet at June 30, 1999.

         The purchase price paid by the Company for all of the outstanding
         capital stock of Precision consisted of $39,295 cash paid to seller,
         $25,340 of cash used to pay seller bank debt and accrued interest, a
         $15,000 seller subordinated note, an $840 Junior Subordinated Note
         assumed by Precision and 500,000 shares of the Company's Common Stock
         (valued at $6.59 a share). The aggregate purchase price was $82,930.
         Fees and expenses paid in connection with the purchase totaled
         approximately $832 and are being amortized over 25 years using the
         straight-line method.

         The excess purchase price over the fair value of identifiable net
         assets acquired has been allocated to goodwill. Goodwill of $57,733
         recorded in the transaction will be amortized over 25 years using the
         straight-line method. The purchase price allocation has been completed
         on a preliminary basis, subject to adjustments should new or additional
         facts become known.

         The following unaudited proforma information presents a summary of
         consolidated results of operations of the Company as if the acquisition
         of Precision had occurred at the beginning of each period presented.

<TABLE>
<CAPTION>
                                                            Two Quarters Ended June 30
                                                            ---------------------------
                                                             1999                1998
                                                             ----                ----
                                                                   (Unaudited)
<S>                                                         <C>                 <C>
         Net sales                                          $93,158             $81,882
         Earnings before taxes                              $ 2,248             $ 1,257
         Income taxes                                       $   947             $   773
         Net income                                         $ 1,024             $   484
         Earnings per share (basic and diluted)             $   .24             $   .11
</TABLE>

         These unaudited proforma results have been prepared for comparative
         purposes only and include certain adjustments such as elimination of
         Precision management costs not expected to be incurred after the
         acquisition, additional depreciation as a result of the step-up in the
         basis of fixed assets, additional amortization expense as a result of
         goodwill and an increase in interest expense as a result of
         acquisition debt. They do not purport to be indicative of the results
         of operations which would have resulted had the combination occurred
         at the beginning of each period presented or of future results of
         operations of the combined entities. The disproportionate tax provision
         results from the nondeductibility of goodwill.

7.       ENVIRONMENTAL LIABILITY
         -----------------------

         As discussed in the Company's 1998 10K filing, in 1998, a Consent
         Decree was entered into among the EPA, several other potentially
         responsible parties ("PRP's") and a group of ten other companies
         ("Defendants") related to the costs of remediation of the Rosen Site, a
         former scrap yard in Cortland, New York. During April 1999, the Consent
         Decree was approved by the Department of Justice and in June 1999
         formally approved by the U.S. District Court in New York. Based on the
         fact that this Consent Decree substantially reduced the Company's
         future liability for this matter, the accrual recorded at December 31,
         1998 was reduced by $1,100. The reduction in the accrual is recorded in
         other income, net. The Company believes that the remaining amount
         accrued of $200, is adequate to cover its share of costs which may be
         incurred in this matter.


                                        7



<PAGE>   9


                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                    TWO QUARTERS ENDED JUNE 30, 1999 AND 1998


         RESULTS OF OPERATIONS
         ---------------------

         Net earnings for the two quarters and quarter ended June 30, 1999 were
         $1,211,000 or $.32 per share and $623,000 or $.16 per share,
         respectively, compared to $1,162,000 or $.31 per share and $582,000 or
         $.15 per share, respectively, for the same periods in 1998. During the
         first quarter of 1999, the Company recorded $1.1 million of other
         income as a result of a reversal of a previous accrual for an
         environmental liability. The Company also recorded $350,000 of expense
         related to settlement of litigation at its coil processing segment.
         Excluding the aforementioned items, the 1999 net earnings were affected
         by higher depreciation as a result of fixed asset additions, including
         the new ERP system, higher interest expense due to increased borrowing
         related to the GFG acquisition, and lower pension income in 1999 due to
         the Company's 1998 decision to terminate two of its pension plans and
         related changes in projected investment returns and the cost of
         replacement plans. A discussion of results of operations on a segment
         basis follows.



         Coil Processing
         ---------------

         Sales increased to $42.0 million and $22.6 million in the two quarters
         and second quarter of 1999, respectively, compared to $25.5 million and
         $11.8 million for the same periods in 1998. Sales of $8.6 million in
         1999 from GFG, which was acquired on December 31, 1998, comprised a
         large portion of the change, along with an increase in overall sales
         volume. Cost of sales as a percentage of sales was 78.8% and 78.6% in
         the two quarters and second quarter of 1999 compared to 78.1% and 74.7%
         in the respective 1998 periods. The lower cost of sales percentage in
         the second quarter of 1998 is due to better margins realized on
         contracts which were completed during that period.

         Operating earnings improved to $3.6 million and $2.4 million in the two
         quarters and second quarter of 1999, respectively, compared to $2.3
         million and $1.4 million in the same periods of 1998. This improvement
         in the operating earnings is related to the increase in sales, although
         at slightly lower margins compared to 1998, and the addition of GFG
         which has historically been profitable. This segment was negatively
         impacted by the recording of $350,000 in expense related to settlement
         of litigation in the first quarter of 1999.

         Orders received during the first two quarters of 1999 totaled $29.1
         million, including $16.5 million by GFG, compared to $22.1 million for
         the same period in 1998. Backlog at June 30, 1999 was $32.8 million,
         including $13.8 million for GFG, compared to $25.9 million at June 30,
         1998.


         Machining Centers
         -----------------

         Sales declined to $8.4 million and $3.7 million in the first two
         quarters and second quarter of 1999, respectively, compared to $16.7
         million and $7.4 million in the same periods of 1998, as a slow-down in
         domestic capital goods orders and continued selling pressures from
         foreign, particularly Asian, competitors negatively affected sales
         volume and selling prices for this segment. Cost of sales as a
         percentage of sales was 82.0% and 76.6% in the two quarters and second
         quarter of 1999, respectively, compared to 83.8% and 82.8% in the same
         periods of 1998. This improvement in the cost of sales percentage in a
         declining market is a result of management's steps to control
         manufacturing costs and to reduce labor force in late 1998 and early
         1999 in response to the lower sales volume.


                                       8


<PAGE>   10


                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                    TWO QUARTERS ENDED JUNE 30, 1999 AND 1998



         As a result of the lower sales volume, this segment reported an
         operating loss of $567,000 and $225,000 in the first two quarters and
         second quarter of 1999, respectively, compared to operating earnings of
         $707,000 and $245,000 for the same periods in 1998.

         Orders received during the first two quarters of 1999 totaled $8.5
         million compared to $15.9 million during the same period last year. The
         reduction in the level of orders booked was primarily due to foreign
         competition and lower demand for this segments' products. Backlog at
         the end of the second quarter of this year was $4.7 million compared to
         $8.1 million at June 30, 1998.



                                       9
<PAGE>   11

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                    TWO QUARTERS ENDED JUNE 30, 1999 AND 1998



         LIQUIDITY AND CAPITAL RESOURCES
         -------------------------------

         During the first two quarters of 1999, exclusive of the Precision
         acquisition, the Company's operating activities provided $1.2 million.
         Cash was used to reduce accounts payable ($1.5 million) and increase
         inventories ($1.1 million). In addition, costs incurred on contracts in
         process exceeded advance payments from customers and required $2.7
         million in cash. Decreases in accounts receivable provided $3.4 million
         and increases in accrued liabilities provided $1.2 million. The cash
         provided from operations was used for capital expenditures, other
         assets and to pay dividends.

         The Company borrowed $101.2 million and repaid $17.5 million of
         long-term debt on June 30, 1999, with the cash used primarily to
         conclude the purchase of Precision Industrial Corporation and for
         repayment of the Company's previous lender. The purchase price paid by
         the Company for the outstanding capital stock of Precision consisted of
         $39.3 million cash paid to seller, $25.3 million of cash used to pay
         seller bank debt and accrued interest, a $15 million seller
         subordinated note, and 500,000 shares of Stock (valued at $6.59 a
         share). The aggregate purchase price was $82.9 million. Fees and
         expenses paid in connection with the purchase totaled approximately
         $832,000.

         At June 30, 1999, the Company had borrowed $16 million under its $30
         million revolving credit facility and utilized $3.1 million of the
         facility for letters of credit. The remaining amount of $10.9 million
         is available for general corporate purposes.


         At an August 1999 meeting, the Board of Directors of the Company
         decided to discontinue paying a dividend to the common shareholders of
         the Company. A dividend had been paid at the rate of $.05 per share per
         quarter. By discontinuing those dividend payments, the Company's cash
         flow will benefit by $850,000 per year. Payment of the dividend to the
         Company's preferred shareholders, at an annual cash requirement of
         $26,000, will be continued.


         YEAR 2000
         ---------

         Year 2000 issues arise because of the inability of many existing
         computer systems and software, which utilize a two-digit conversion for
         recording years, to properly recognize and process information relating
         to Year 2000. In early 1998, the Company began a Company-wide program
         to replace its internal information processing systems for reasons
         unrelated to Year 2000 issues. It expects to complete this program
         during the third quarter of 1999, which should result in its internal
         information processing systems being Year 2000 compliant. The cost to
         the Company to fully implement this new system is estimated at
         approximately $2.5 million. Through June, 1999, the Company has spent
         $2.4 million on this project. Funds for this program are expected to be
         available to the Company from its internal operations and, if
         necessary, from its line of credit. GFG Corporation, acquired by the
         Company in late 1998, and Precision Industrial Corporation, acquired on
         June 30, 1999 are also in the process of replacing their information
         processing systems. These processes began in 1998 and are expected to
         be substantially completed during the third quarter of 1999. The
         Company estimates the remaining cost of these processes to be
         approximately $200,000. As part of a comprehensive Year 2000 compliance
         project, the Company is also assessing other key aspects of its
         operating and administrative processes which, if they would become
         inoperable due to Year 2000 issues, would have a material impact on the
         Company's ability to continue its normal operations. This program
         includes a plan to identify the extent to which key vendors and
         consultants are addressing this same issue and an assessment of the
         Company's products. The Company will

                                       10
<PAGE>   12

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                    TWO QUARTERS ENDED JUNE 30, 1999 AND 1998



         monitor and evaluate the progress of its vendors and consultants on
         this matter. The Company is also reviewing its non-information
         technology systems to determine the extent of any changes that may be
         necessary and presently believes that there will be minimal changes
         necessary for compliance. Although the Company cannot assess the result
         of this evaluation until it has obtained further information, based
         upon the work it has performed to date, it is not presently aware of
         any Year 2000 issues which would have a disruptive impact on its
         operations or a material adverse impact upon its financial condition or
         results of operation.

         The Company believes it is diligently addressing Year 2000 issues and
         that it will satisfactorily resolve any significant Year 2000 problems.
         The Company anticipates completing its Year 2000 projects during 1999,
         with major completion milestones completed in the second quarter and
         targeted for the third quarter. In the event the Company falls short of
         these milestones, additional internal resources will be focused on
         completing these projects or implementing contingency plans.


         INTEREST RATE RISK
         ------------------

         A change in interest rates could have an impact on the Company's
         financial results, as the Company is presently paying a variable
         interest rate on the majority of its outstanding debt. The risk to the
         Company has increased as a result of the higher level of indebtedness
         the Company is carrying as a result of the financing required to
         acquire Precision Industrial Corporation. In conjunction with its
         lenders, the Company is evaluating the cost and benefits of instituting
         an interest rate protection arrangement to address the risk in this
         area.


         FORWARD LOOKING STATEMENTS
         --------------------------

         In addition to historical information, this document contains various
         forward-looking statements, which are subject to risks, and
         uncertainties that could cause actual results to differ materially from
         these statements. These risks include, but are not limited to, changes
         in economic conditions, interest rates, price and product offering
         competition from domestic and foreign entities, customer purchasing
         patterns, labor costs, product liability issues and other legal claims,
         governmental regulatory issues and Year 2000 readiness issues. Words
         identifying forward-looking statements include "plan", "believe",
         "expect", "anticipate", "project", "intend", "estimate" and other
         expressions which are predictions or indications of future events or
         trends which do not relate to historical matters.

         Readers are cautioned not to place undue reliance on these
         forward-looking statements, which speak only as of the date the
         statement is made. The Company undertakes no obligation to publicly
         update or revise any forward-looking statements, whether as a result of
         new information, future events or otherwise. Readers are urged to
         carefully review and consider the various disclosures made by the
         Company in this document and other reports filed with the Securities
         and Exchange Commission that attempt to advise interested parties of
         the risks and factors that may affect the Company's business.


                                       11
<PAGE>   13



PART II - OTHER INFORMATION



Item 1 - Legal Proceedings

         As discussed in the Company's 1998 10K filing, in 1998, a Consent
         Decree was entered into among the EPA, several other potentially
         responsible parties ("PRP's") and a group of ten other companies
         ("Defendants") related to the costs of remediation of the Rosen Site, a
         former scrap yard in Cortland, New York. During April 1999, the Consent
         Decree was approved by the Department of Justice and in June 1999 was
         approved by the U.S. District Court in New York. Based on the fact that
         this Consent Decree substantially reduced the Company's future
         liability for this matter, the accrual recorded at December 31, 1998
         was reduced by $1,100,000. The reduction in the accrual is recorded in
         other income, net. The Company believes that the remaining amount
         accrued of $200,000, is adequate to cover its share of costs, which may
         be incurred in this matter.


Item 2 - Changes in Securities

         (a)  Inapplicable

         (b)   Inapplicable

         (c)  On June 30, 1999 the Company issued 500,000 shares of stock to the
              shareholders of Precision Industrial Corporation in conjunction
              with an acquisition. The shares were issued in reliance on the
              exemption from registration under the Securities Act of 1933
              contained at Section 4 (2) of such Act.


Item 3 - Inapplicable

Item 4 - Submission of Matters to a vote of Security Holders.
         (a.)    The Company's Annual Shareholders meeting was held on
                 May 5, 1999.
         (b.)    The following Directors were elected to serve a three year
                 term:

<TABLE>
<CAPTION>
                                    Votes for    Votes Against    Abstain
                                    ---------    -------------    -------
<S>                              <C>             <C>              <C>
         John A. Bertrand           2,861,290       20,339           0
         William R. Graber          2,861,556       20,073           0
         Waldemar M. Goulet         2,861,556       20,073           0
</TABLE>

         The following continued as Directors:

         Richard E. Clemens
         Gerald L. Connelly
         Joseph M. Rigot
         William A. Enouen
         David E. Lundeen

         (c.)    The following summarizes the voting for the Company's
                 Long-Term Incentive Stock Plan:

<TABLE>
<CAPTION>
                                    Votes for        Votes Against             Abstain
                                    ---------        -------------             -------
<S>                                 <C>                 <C>                     <C>
                                    2,740,936           120,716                 19,997
</TABLE>


Item 5 - Inapplicable

                                       12
<PAGE>   14



PART II - OTHER INFORMATION


Item 6 - Exhibits and Reports on Form 8-K

          (a)  Exhibit 23 - Consent of Independent Public Accountants
              Exhibit 27 - Financial Data Schedule

          (b) On July 15, 1999 the Company filed an 8-K in conjunction with its
              acquisition of Precision Industrial Corporation, in which it
              provided financial statements and exhibits and proforma financial
              information related to its acquisition of Precision Industrial
              Corporation.








                                      13
<PAGE>   15



                                    SIGNATURE



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






                                   THE MONARCH MACHINE TOOL COMPANY
                                   (Registrant)



 DATE:       August 16, 1999       By  s/Karl A. Frydryk
     ---------------------------       -----------------
                                       Karl A. Frydryk
                                       Vice President & Chief Financial Officer
                                       (principal financial officer)







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