FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


               QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended September 30, 1999

Commission File No. 1-5562

                              KOLLMORGEN CORPORATION
             (Exact name of registrant as specified in its charter)

          New York                                        04-2151861
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                      Identification No.)


1601 Trapelo Road, Waltham, Massachusetts                   02451
(Address of principal executive offices)                 (Zip Code)


Registrant's telephone number, including area code:   (781)  890-5655


        ----------------------------------------------
(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 _____


        Indicate  the  number  of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

          Class                           Outstanding at November 12, 1999
Common Stock, $2.50 par value                    10,307,929 shares





<PAGE>2

                   KOLLMORGEN CORPORATION AND SUBSIDIARIES


                                                     INDEX



                                    Page No.


PART I - Financial Information

        Unaudited Consolidated Statements of                              3
               Operations for the Three Months and Nine
               Months Ended September 30, 1999 and 1998

        Unaudited Consolidated Balance Sheets                             4
               as of September 30, 1999 and
               December 31, 1998

        Unaudited Consolidated Statements of Cash Flows                   5
               for the Nine Months Ended September 30, 1999
               and 1998

        Notes to Unaudited Consolidated Financial Statements              6

        Management's Discussion and Analysis of Financial                 9
               Condition and Results of Operations



PART II - Other Information




<PAGE>3

<TABLE>
                             PART I - FINANCIAL INFORMATION

                       KOLLMORGEN CORPORATION AND SUBSIDIARIES
                        Consolidated Statements of Operations
                    (Dollars in thousands, except Share and per share amounts)
                                     (Unaudited)
<CAPTION>
                                                  For the                       For the
                                              Three Months Ended           Nine Months Ended
                                                September 30,                September 30,
                                              --------------------        -------------------
                                              1999          1998          1999           1998
                                              ---------   --------        --------     --------
<S>                                           <C>         <C>             <C>          <C>
Net sales                                     $62,974     $61,891         $182,367     $179,024
Cost of sales                                  44,405      42,410          129,282      123,464
                                              ---------   --------        --------     --------
Gross profit                                   18,569      19,481           53,085       55,560

Selling and marketing expenses                  6,504       5,694           19,026       17,390
General and administrative expenses             7,997       6,203           21,201       17,558
Research and development expenses               3,041       2,609            9,528        8,539
Restructuring charge                                -           -            3,065            -
Impairment of goodwill and assets
        held for sale                               -           -                -        2,733
Tender offer costs                                  -           -                -        1,273
                                              ---------   --------        ---------     -------
Income from operations                          1,027       4,975              265        8,067

Other income (expense):
       Interest expense                        (1,042)       (888)          (2,956)      (2,574)
       Interest income                             23          70              144          720
       Intellectual property license,
            net of expenses                         -           -                -       21,217
       Other, net                               1,386         372            2,285        7,842)
                                              --------    --------        ---------    ---------
Income (loss) before income taxes
  and minority interest                         1,394       4,529             (262)      19,588
(Provision) benefit for income taxes             (488)     (1,400)              92       (8,539)
                                              --------    --------        ---------    ---------
Income (loss) before minority interest            906       3,129             (170)      11,049
Minority interest                                   6         (11)             200          (92)
                                              --------    --------        ---------    ---------
Net income                                    $   912      $3,118              $30      $10,957
                                              ========    ========        =========    =========
Earnings per common share:
        Basic                                   $0.09       $0.31            $0.00        $1.09
        Diluted                                 $0.09       $0.30            $0.00        $1.04
                                              ========    ========        =========    =========

Number of shares used in calculating Earnings per common share:
        Basic                              10,288,974    10,094,692     10,219,144   10,068,581
        Diluted                            10,468,515    10,488,452     10,461,134   10,519,120
                                           ==========    ==========     ==========   ==========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>


<PAGE>4


<TABLE>
                              KOLLMORGEN CORPORATION AND SUBSIDIARIES
                                      Consolidated Balance Sheets
                                            (In thousands)
                                                (Unaudited)
<CAPTION>
                                                    ASSETS
                                                                                            September 30,              December 31,
                                                                                                    1999                       1998
                                                                                            ------------               ------------
<S>                                                                                          <C>                          <C>
Current assets:
        Cash and cash equivalents                                                            $  6,598                     $ 13,086
        Accounts receivable (net of reserve of
          $502 in 1999 and $581 in 1998)                                                       52,085                       48,927
        Recoverable amounts on long-term contracts                                              6,211                        2,597
        Inventories                                                                            33,906                       27,838
        Prepaid expenses and other current assets                                               3,767                        1,885
                                                                                             ---------                    ---------
Total current assets                                                                          102,567                       94,333

Property, plant and equipment, net                                                             32,377                       30,809
Intangible assets, net                                                                         41,073                       20,420
Deferred income taxes                                                                           9,376                        9,448
Other assets                                                                                   14,651                       13,623
                                                                                              --------                    ---------
Total assets                                                                                 $200,044                     $168,633
                                                                                             =========                    =========
                                LIABILITIES and SHAREHOLDERS' EQUITY

Current liabilities:
        Accounts payable                                                                     $ 17,745                     $ 14,336
        Income taxes payable                                                                    3,722                        6,733
        Accrued liabilities                                                                    34,170                       28,110
        Line of credit and notes payable                                                       19,712                        9,270
        Current portion of long-term debt                                                       2,350                        2,419
                                                                                             ---------                    ---------
Total current liabilities                                                                      77,699                       60,868

Long-term debt                                                                                 50,938                       36,120
Other liabilities                                                                              13,945                       14,943
Minority interest                                                                                   -                          175

Shareholders' equity:
        Common stock                                                                           26,950                       26,932
        Additional paid-in capital                                                             13,413                       12,882
        Retained earnings                                                                      22,191                       22,772
        Accumulated other comprehensive loss                                                     (884)                        (270)
        Less: common stock in treasury, at cost                                                (4,208)                      (5,789)
                                                                                             ---------                    ---------
Total shareholders' equity                                                                     57,462                       56,527
                                                                                             ---------                    ---------
Total liabilities and shareholders' equity                                                   $200,044                     $168,633
                                                                                             =========                    =========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>


<PAGE>5
<TABLE>
                              KOLLMORGEN CORPORATION AND SUBSIDIARIES
                               Consolidated Statements of Cash Flows
                               (In thousands)
                                 (Unaudited)
<CAPTION>
                                                                                                          For the
                                                                                                   Nine Months Ended
                                                                                                       September 30,
                                                                                                  ------------------
                                                                                                    1999                   1998
                                                                                                 ---------              ---------
<S>                                                                                              <C>                    <C>
Cash flows from operating activities:
Net income                                                                                       $     30               $ 10,957
Adjustments to reconcile income to
  net cash provided by (used in) operating activities:
      Depreciation                                                                                  4,660                  3,892
      Amortization                                                                                  1,451                  1,282
      Restructuring charge                                                                          3,065                      -
      Impaired asset charge                                                                             -                  2,733
      (Gain) loss on sale of assets                                                                  (267)                    25
      Deferred income taxes                                                                             -                 (3,572)
      Minority interest and other non-cash expenses                                                   (55)                   111
Changes in operating assets and liabilities
      Accounts receivable                                                                           6,647                 (5,497)
      Recoverable amounts on long-term contracts                                                   (3,614)                  (186)
      Inventories                                                                                  (3,499)                (3,083)
      Prepaid expenses                                                                               (534)                   445
      Accounts payable and accrued liabilities                                                     (6,888)                 2,671
      Other                                                                                          (695)                   901
                                                                                                 ---------              ---------
        Net cash provided by operating activities                                                     301                 10,679
                                                                                                 ---------              ---------
Cash flows from investing activities:
      Capital expenditures                                                                         (5,543)                (6,327)
      Proceeds from sale of assets                                                                  2,137                    250
      Acquisitions and equity investments, net                                                    (18,497)               (10,250)
      Other                                                                                          (199)                  (558)
                                                                                                 ---------              ---------
        Net cash used in investing activities                                                     (22,102)               (16,885)
                                                                                                 ---------              ---------
Cash flows from financing activities:
      Borrowings under credit lines, net                                                            2,673                  3,145
      Proceeds from common stock issued from treasury                                                 982                     (5)
      Borrowings (repayments) of long-term debt, net                                               12,886                    (32)
      Dividends paid                                                                                 (611)                  (602)
                                                                                                 ---------              ---------
        Net cash provided by financing activities                                                  15,930                  2,506
                                                                                                 ---------              ---------
      Effect of exchange rate changes on cash                                                        (617)                  (241)
                                                                                                 ---------              ---------
      Net decrease in cash and cash equivalents                                                    (6,488)                (3,941)
      Cash and cash equivalents at beginning of period                                             13,086                 14,854
                                                                                                 ---------              ---------
      Cash and cash equivalents at end of period                                                 $  6,598               $ 10,913
                                                                                                 =========              =========

<FN>
See accompanying notes to unaudited consolidated financial statements.
</FN>
</TABLE>

<PAGE>6

                          KOLLMORGEN CORPORATION AND SUBSIDIARIES

             Notes to Unaudited Consolidated Financial Statements
                   (In thousands, except per share amounts)


1.      The accompanying unaudited consolidated financial statements include the
        accounts of Kollmorgen Corporation and its subsidiaries (the "Company").

2.      In the opinion of management, the unaudited consolidated financial
        statements included herein contain all adjustments, consisting only of
        normal recurring adjustments, necessary to present fairly the Company's
        financial condition at September 30, 1999, the results of operations
        for the three month and nine month periods ended September 30, 1999 and
        1998, and the cash flows for the nine month periods ended September 30,
        1999 and 1998.  The balance sheet as of December 31, 1998 was derived
        from the audited financial statements as of December 31, 1998.  The
        results of operations for interim periods are not necessarily indicative
        of the results to be expected for the full year.  See Management's
        Discussion and Analysis of Financial Condition and Results of Operations
        for additional information.  These interim financial statements should
        be read in conjunction with the Company's Annual Report on Form 10-K
        for the year ended December 31, 1998.

3.      Inventories consist of the following:


                                          September 30,       December 31,
                                             1999                  1998
                                          ------------        -----------
                Raw materials             $12,499               $12,187
                Work in process            15,973                 8,073
                Finished goods              5,434                 7,578
                                          ---------             ---------
                                          $33,906               $27,838
                                          =========             =========

4.      The Company's comprehensive earnings (loss) were  as follows:
                                   For the                  For the
                                 Three Months Ended     Nine Months Ended
                                     September 30,         September 30,
                                 ------------------      ---------------
                                   1999      1998          1999     1998
                                 -------   -------      -------  -------
        Net income               $   912  $ 3,118       $   30   $10,957
        Foreign currency
      translation adjustment, net    519      367         (399)      243
                                 -------   -------      -------  -------
                                 $ 1,431  $ 3,485       $ (369)  $11,200
                                 =======   =======      =======  =======

5. The following table includes certain financial  information  relating to each
of the Company's segments:
<TABLE>

                                          Industrial         Aerospace
                                              and               and           Corporate,
                                          Commercial          Defense          Interest       Special
                                             Group             Group          And Other        Items        Total
<S>                                       <C>                <C>              <C>             <C>           <C>

Three months ended:
September 30,1999:
Sales                                     $ 33,993           $ 28,981                -              -       $ 62,974
Profit (loss) before tax                     1,688              1,955           (2,249)             -          1,394
September 30,1998:
Sales                                       37,326             24,565                -              -         61,891
Profit (loss) before tax                     2,892              2,984           (1,347)             -          4,529

Nine months ended:
September 30,1999:
Sales                                       98,822             83,545                -              -        182,367
Profit (loss) before tax                     1,993              8,046           (7,236)        (3,065)          (262)
September 30,1998
Sales                                      102,408             76,616                -              -        179,024
Profit (loss) before tax                     6,294              8,787           (4,279)         8,786         19,588
</TABLE>


<PAGE>7



6.      In June 1998, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standard No. 133 ("SFAS 133"),
        "Accounting for Derivative Instruments and Hedging Activities".  This
        statement establishes accounting and reporting standards for derivative
        instruments.  The statement requires that an entity recognize all
        derivatives as either assets or liabilities in the statement of
        financial position and measure those instruments at fair value.  In
        June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
        Instruments and Hedging Activities - Deferral of the Effective Date of
        FAS Statement 133," which postponed the adoption date of SFAS No. 133.
        As such, the Company is not required to adopt the statement until fiscal
        2001.  Had the Company implemented SFAS 133 for the current reporting
        period, there would have been no material effect on the financial
        statements.

7.      Basic EPS  excludes  the  dilutive  effect of  common  stock  equivalent
        securities   and  is   computed   by   dividing   net   income   by  the
        weighted-average  number of common  shares  outstanding  for the period.
        Diluted  EPS  reflects  the  potential  dilution  that  could  occur  if
        securities or other  instruments to issue common stock were exercised or
        converted  into common stock or resulted in the issuance of common stock
        that then shared in the earnings of the entity. A reconciliation between
        basic and diluted EPS is as follows:

                                         For the                For the
                                 Three Months Ended    Nine Months Ended
                                      September 30,        September 30,
                                 ------------------      ---------------
                                   1999     1998          1999     1998
                                 -------   -------      -------  -------
     Net income                  $  912    $ 3,118      $    30  $ 10,957
     Shares used in net income
      per share - basic          10,289     10,095       10,219    10,069

     Effect of dilutive securities:
     Stock options                  180        393          242       450
                                -------    -------      -------   -------
     Shares used in net income
     per share - diluted         10,469     10,488       10,461    10,519

     Net income
      per share-basic             $0.09      $0.31        $0.00     $1.09

     Net income
      per share-diluted           $0.09      $0.30        $0.00     $1.04

        During the third quarter of 1999,  options to purchase 562,919 shares of
        common stock with exercise prices ranging from $12.50 to $20.94 and with
        expiration  dates  ranging up to August 15, 2009 were  outstanding,  but
        were not included in the computation of diluted EPS because the options'
        exercise prices were greater than the average market price of the common
        shares.  During  the first  nine  months of 1999,  options  to  purchase
        531,405 shares of common stock with exercise  prices ranging from $13.88
        to $20.94 and with  expiration  dates ranging up to August 15, 2009 were
        outstanding,  but were not  included in the  computation  of diluted EPS
        because  the  options'  exercise  prices were  greater  than the average
        market price of the common shares. During both the third quarter and the
        first  nine  months of 1999,  853,000  common  equivalent  shares of the
        convertible subordinated debentures were not included in the diluted EPS
        calculation as a result of their antidilutive effect.

        Options to purchase  548,495 and 1,874 shares of common stock during the
        third  quarter  and the first nine  months of 1998,  respectively,  with
        exercise prices ranging from $17.75 to $20.94 and with expiration  dates
        of May  26,  2008,  were  outstanding,  but  were  not  included  in the
        computation  of diluted EPS because the  options'  exercise  prices were
        greater   than  the  average   market   price  of  the  common   shares.
        Additionally, during both the third quarter and the first nine months of
        1998,  905,000 common equivalent shares of the convertible  subordinated
        debentures  were not included in the diluted EPS calculation as a result
        of their antidilutive effect.



<PAGE>8



8.      Effective May 1, 1999,  the Company  purchased the assets of New England
        Affiliated  Technologies  ("NEAT")  for $16.3  million  from  Instrument
        Industries,  Inc. The acquisition  was accounted for as a purchase.  The
        purchase price consists of assets acquired of $4.7 million,  liabilities
        assumed of $1.8 million and goodwill of $13.4 million.  NEAT is a leader
        in the  application  of  high-performance  motion  control for  advanced
        positioning  systems. The company has approximately 100 employees at its
        manufacturing   facility  in  Lawrence,   MA,  and  recorded   sales  of
        approximately $13 million in 1998.

9.      The Company recorded a $3.1 million  restructuring  charge in the second
        quarter  of 1999  for the  consolidation  of its  worldwide  drives  and
        controls  business and cost  reductions in its Industrial and Commercial
        motion control operations.  The charge was primarily for severance costs
        of $2.3 million  associated  with the  termination of  approximately  87
        employees in the U.S., Europe, and Israel. The balance of the charge was
        mainly to provide for the  subletting  of a leased  facility  which will
        allow the Company to move one of its operations to a smaller,  more cost
        effective  facility.  At September 30, 1999,  approximately $0.7 million
        for  the   termination  of  33  people  has  been  charged  against  the
        restructuring accrual.

10.     On July 1, 1999,  the Company  completed  the purchase of its  long-time
        naval  systems   partner,   Calzoni   S.p.A.   of  Bologna,   Italy  for
        approximately $13.0 million. Of the purchase price $2.7 million was paid
        in cash and a note payable was issued for the  remainder of the purchase
        price and is payable within the next twelve  months.  The purchase price
        consists of assets acquired of $33 million,  liabilities  assumed of $30
        million and goodwill of $10 million.  Calzoni  designs and builds motion
        systems and  components  primarily for naval  platforms and is a leading
        maker of submarine masts.  Calzoni has facilities in Bologna, as well as
        Milan and Florence. Sales in 1998 were approximately $25 million.

11.     Over the past  several  years,  the  Company  has  notified  a number of
        domestic and foreign  companies that it believes infringe certain motion
        control  patents  owned by the  Company.  As  previously  reported,  the
        Company has concluded  royalty  bearing  licenses and  settlements  with
        third parties with respect to these patents.  The Company  believes that
        its  patents  are an  important  asset of the  Company,  and  intends to
        enforce its legal rights against alleged infringers.

        In May 1999, the Company commenced a patent  infringement action against
        Yaskawa  Electric  Corporation and Yaskawa  America,  Inc. in the United
        States District Court,  Western District of Virginia,  Roanoke Division,
        alleging that  defendants'  products  infringe  certain of the Company's
        patents.  The Company is seeking monetary damages and equitable  relief.
        In June 1999,  Allen-Bradley Company L.L.C. and Reliance Motion Control,
        Inc. commenced an action in the Eastern District Court, Eastern District
        of  Wisconsin  against  the  Company  for  a  declaratory  judgement  of
        non-infringement   requesting  the  court  to  enter  a  judgement  that
        plaintiffs'  products do not infringe  certain of the  Company's  motion
        control patents.

12.     In early  November,  1999 the Corporation  acquired an eastern  European
        manufacturer of precision  motors for a purchase price of  approximately
        $12 million.  The  Corporation  utilized its existing lines of credit to
        fund this acquisition.

<PAGE>9


           Management's Discussion and Analysis of Financial Condition
                                 and Results of Operations


        For the three months ended  September 30, 1999, the Company had sales
of $63.0 million and a net income of $0.9 million or $0.09 per common share
(diluted).  These results  compare with sales for the three months ended
September 30, 1998 of $61.9 million and net income of $3.1 million, equal to
$0.30 per common share (diluted).  For the nine months ended September 30, 1999,
the Company had sales of $182.4 million and net income, after restructuring
charges, of $30,000,  or $0.00 per common share (diluted).  These results
compare  with sales for the nine  months  ended  September  30, 1998 of $179.0
million and net income of $11.0 million,  equal to $1.04 per common share
(diluted).  Excluding the  restructuring  charge recorded in 1999, and discussed
below,  the  Company's  net income for the nine months ended  September 30 would
have been $2.0 million, equal to $0.19 per share (diluted). Excluding the impact
of the Special Items in 1998 discussed  below,  the Company's net income for the
nine months  ended  September  30, 1998 would have been $7.4  million,  equal to
$0.70 per share (diluted).

         The Company recorded a $3.1 million  restructuring charge in the second
quarter of 1999 for the  consolidation  of its  worldwide  drives  and  controls
business,  and for cost  reductions  in its  industrial  and  commercial  motion
control  operations (the  "Restructuring").  The impact of the consolidation and
cost-reduction  efforts  will  result in a more  efficient  organization  and is
expected to produce annual savings of approximately $5 million in 2000.

        During the first quarter of 1998, the Company  announced the first major
license  agreement for its pioneering  electronic  motion control patents in the
amount of $27.2  million,  which,  after legal and other  expenses,  resulted in
income of $21.2 million. In connection with its patent enforcement program), the
Company has engaged  counsel to continue  enforcement  of the  Company's  patent
estate,  and  accordingly,  has recorded a charge of $6.8 million to cover legal
expenses and other related costs.  The Company recorded a pre-tax charge of $2.7
million,  primarily  relating  to the  write-down  of  goodwill  from  its  1994
acquisition of the assets of Sperry  Marine.  Also in the first quarter of 1998,
the Company  incurred  $1.3 million of expenses in  conjunction  with the tender
offer for Pacific Scientific Company. Finally, the Company elected to change the
vesting method for post-retirement  medical insurance  benefits,  resulting in a
charge of $1.6 million.  The total of these items had a positive  impact in 1998
of $8.8 million to the reported  income  before  income taxes of the Company and
$3.6 million to the net income of the Company.  Collectively,  the items in this
paragraph  from the first  quarter of 1998 will be referred  to as the  "Special
Items" to provide  for  comparative  discussion  of the  Company's  results on a
consistent basis.


                              RESULTS OF OPERATIONS


        The following table reflects the results of operations for the Company's
two operating segments excluding the impact of the Restructuring and the Special
Items. This comparison  provides a consistent basis by which to view the results
of the Company's two operating segments (in millions):

                                         For the                For the
                                    Three Months Ended      Nine Months Ended
                                       September 30,          September 30,
                                    1999      1998          1999         1998
                                    -------- ---------    ---------  ----------
Industrial and Commercial Group:
              Bookings              $ 37.8   $ 26.1       $ 107.9       $ 100.1
              Sales                   34.0     37.3          98.8         102.4
              Profit before tax        1.7      2.9           2.0           6.3
Aerospace and Defense Group:
              Bookings              $ 32.7   $ 18.3       $ 118.1       $  78.4
              Sales                   29.0     24.6          83.5          76.6
              Profit before tax        2.0      3.0           8.0           8.8



<PAGE>10



1999 versus 1998

        The profit before taxes for the three months  ending  September 30, 1999
of $1.4 million  compares with a profit before taxes of $4.5 million in the same
period of 1998.  The loss before taxes for the nine months ending  September 30,
1999 of $0.3 million  compares  with profit  before tax of $19.6  million in the
same period of 1998.  Excluding the  Restructuring in 1999 and the Special Items
in 1998  discussed  above,  the income before taxes would have been $2.8 million
for the nine months ending  September 30, 1999 compared with profit before taxes
of $10.8 million for the nine months ending September 30, 1998.

        For the three  months ended  September  30, 1999,  the  Company's  sales
increased  $1.1  million or 2% as compared  to the same  period a year ago.  The
Aerospace  and Defense  Group's  revenue  increased 18% to $29.0 million for the
three months ended  September  30, 1999 from $24.6  million for the three months
ended  September 30, 1998. The increase  reflects the Calzoni  acquisition,  and
increased revenues for its defense systems and aerospace subsystems offsetting a
decline in sales of the group's  motion control  components.  The Industrial and
Commercial  Group's  motion control  businesses  continued to be affected by the
slowdown in the  domestic  machine tool sector and the  continued  impact of the
Asian economy on the group's high volume  business.  Sales to the Industrial and
Commercial Group's markets of $34.0 million for the three months ended September
30, 1999  represented  a decrease of 9% from the $37.3  million of sales in same
period of 1998, excluding the acquisition of NEAT sales declined 20%.

        The  Company's  sales  increased  $3.3 million or 2% for the nine months
ended  September  30,  1999 as  compared  to the  same  period a year  ago.  The
Aerospace and Defense Group's revenue increased 9% to $83.5 million for the nine
months  ended  September  30, 1999 from $76.6  million for the nine months ended
September 30, 1998.  The increase  reflects the  acquisition  of Calzoni in July
1999 and initial  shipments  under long term aerospace  contracts by the group's
French  operation.  These  increases  offset  declines  in  the  Industrial  and
Commercial  Group's motion control  businesses due to a slowdown in the domestic
machine tool sector and the continued impact of the Asian economy on the group's
high volume business.  Sales to the Industrial and Commercial Group's markets of
$98.8  million for the nine months ended  September  30, 1999  represented  a 4%
decline  from the  $102.4  million  in same  period of 1998.  This  decline  was
partially offset by the acquisitions of NEAT and Magnedyne,  and excluding these
acquisitions sales declined 16%.

        The Company's overall gross margin as a percentage of sales declined for
both the three and nine months  ended  September  30, 1999  compared to the same
periods in 1998. The  Industrial  and Commercial  Group had an increase in gross
margin as a percentage of sales to 31% for the third quarter of 1999 from 29% in
1998.  The increase in margin was  primarily  due to the NEAT  acquisition.  The
Industrial and Commercial Group's gross margin as a percentage of sales improved
significantly  over the 25% reported for the second  quarter due, in large part,
to the  Restructuring,  where the Company has reduced its  overhead  costs.  The
Aerospace  and Defense  Group had a decline in gross margin as a  percentage  of
sales to 26% for the  third  quarter  of 1999  from 33% in 1998 as a result of a
volume decline in its component  sales.  For the nine months ended September 30,
1999 the Industrial and Commercial Group's gross margin as a percentage of sales
was 28%,  down from 31% in the same  period of the prior  year.  The  decline in
margin  reflects the lower gross profit  attained by the group in the first nine
months of 1999 as  compared  to 1998 which was due to lower  revenues  without a
corresponding  reduction in fixed costs. The Aerospace and Defense Group's gross
margin for the nine months ended September 30, 1999 declined to 29% from 31% for
the comparable  period in 1998. This decline was a result of a volume decline in
its component sales.

        Sales and  marketing  expenses  were $6.5 million or 10% of sales in the
second  quarter of 1999 as compared to $5.7 million or 9% for the same period in
1998.  Sales and marketing  expenses were $19.0 million or 10% in the first nine
months of 1999 as compared to $17.4  million or 10% for the same period in 1998.
The increased spending is principally due to the NEAT and Calzoni acquisitions.

        General and administrative expenses were $8.0 million or 13% of sales in
the third  quarter of 1999 as compared  to $6.2  million or 10% of sales for the
same period in 1998. General and  administrative  expenses were $21.2 million or
12% in the first nine months of 1999 as compared to $17.6 million or 10% for the
same period in 1998.  This increase  reflects the inclusion of Magnedyne,  NEAT,
and Calzoni costs and goodwill  amortization  in 1999,  and external  consulting
costs associated with improvements made to the Company's information systems.

        Research and  development  expenses were $3.0 million or 5% of sales for
the third  quarter of 1999 as compared  with $2.6 million or 4% of sales for the
same period in the prior year.  For the first nine months of 1999,  research and
development  expenses were $9.5 million or 5% of sales compared to $8.5 or 5% of
sales in the same period of the prior  year.  The  increase  in R&D  expenses is
attributable  to  increased  spending on  aerospace  programs  by the  Company's
subsidiary in France, and the NEAT acquisition.





<PAGE>11



Interest and Taxes

        Interest  expense was $3.0  million and $2.6  million for the nine month
periods  ending  September  30,  1999 and 1998,  respectively.  The  increase in
interest  expense is due to an increase in borrowing to fund the purchase of the
NEAT assets during the second quarter of 1999.

        The Company  recorded a tax  provision  of 35% for the three  months and
nine months ended  September  30,  1999.  The tax rate for the nine months ended
September  30, 1998 was 44%.  The 1998 rate  reflected  the impact of the patent
licensing income, recorded in the first quarter of 1998, taxable in the U.S. and
subject to Japan  withholding  tax.  Excluding  this Special Item, the Company's
effective tax rate was 31% in 1998. The Company's effective tax rate,  excluding
Special Items, is less than the statutory U.S. tax rate as some of the Company's
foreign  subsidiaries operate in countries where the statutory rate is less than
the U.S. rate, or the Company is operating under a tax holiday agreement.

        Bookings increased by $26.1 million or 59% for the third quarter of 1999
as compared to the third  quarter of 1998.  Without the impact of  acquisitions,
bookings  increased $18.6 million or 42%,  reflecting  increased bookings in the
Aerospace  and Defense  Group's  system and subsystem  businesses,  and improved
bookings  by  the  Industrial  and  Commercial  Group  due to  increases  in the
semiconductor  and  electronics  sector and the high volume  business.  Bookings
increased  $47.5 million or 27% during the first nine months of 1999 as compared
to the same  period in the  prior  year.  The  increase  is due to the  improved
bookings  in the  Aerospace  and  Defense  Group,  which  included a $22 million
submarine periscope order, and the impact of acquisitions.


                     LIQUIDITY AND CAPITAL RESOURCES

        The  Company's  consolidated  cash  position  decreased  by $6.5 million
during the nine months ended September 30, 1999. Cash provided by operations was
$0.3 million,  $22.1 million was used for  investing  activities,  and financing
activities provided $16 million.

        The Company used $5.5 million to fund working capital requirements. This
was  principally  due to increased  requirements  by the  Aerospace  and Defense
Group's systems business reflecting increased inventory procured under long term
military contracts.

        The Company's investing activities used $22.1 million primarily relating
to the  acquisitions  of NEAT and Calzoni which totaled $18.5  million.  Capital
expenditures  used $5.5  million,  and the  Company  received  $2.1  million  in
connection with the sale of buildings.

        The Company's  financing  activities provided $16 million of cash during
the nine months  ended  September  30,  1999.  This was  principally  due to the
borrowing  under the  Company's  credit  facility to fund the  purchase of NEAT.
Common  dividends  paid were $0.6 million or $0.06 per common share for the nine
months ended September 30, 1999.

        The  Company  believes  that  it  can  generate   sufficient  cash  from
operations and its current line of credit to finance its cash  requirements  for
capital expenditures,  mandatory sinking fund payments,  potential acquisitions,
and working capital needs for the next twelve months.

   Year 2000 Issue

     The year 2000 issue is the result of computer  programs having been written
using two digits,  rather than four, to define the  applicable  year. Any of the
Company's  computers,   computer  programs,   manufacturing  and  administration
equipment or products  that have  date-sensitive  software may  recognize a date
using "00" as the year 1900 rather than the year 2000.  If any of the  Company's
systems or  equipment  that have  date-sensitive  software  use only two digits,
system failures or miscalculations may result causing disruptions of operations,
including,  among other things, a temporary inability to process transactions or
send and receive  electronic data with third parties or engage in similar normal
business activities.

     During 1998, the Company formed an ongoing  internal review team to address
the year 2000 issue that encompasses  operating and administrative  areas of the
Company.  A team of global  professionals  has been engaged in a process to work
with Company personnel to identify and resolve significant year 2000 issues in a
timely manner. In addition,  executive  management regularly monitors the status
of the Company's year 2000 remediation plans. The process includes an assessment
of issues and development of remediation plans, where necessary,  as they relate
to internally used software,  computer hardware and use of computer applications
in the Company's  manufacturing processes and products. In addition, the Company
is engaged in assessing the year 2000 issue with significant suppliers.

<PAGE>12



     The assessment process has been completed at the Company's U.S. operations.
With respect to the Company's international  operations,  the assessment process
has been  completed for computer  software and hardware  information  technology
systems used internally by the Company.  In addition,  the Company is finalizing
its assessment of significant  suppliers at all major locations to determine the
extent to which the Company is vulnerable to third parties' failure to remediate
their own year 2000 issues.  Finally,  related to products  sold by the Company,
the Company believes it has little if any exposure to  contingencies  related to
year 2000 issues.

     During the past three  years,  as part of business  modernization  programs
intended  to reduce  cycle  time and  improve  profitability,  the  Company  has
purchased   Enterprise  Resource  Planning  ("ERP")  Systems  for  some  of  its
operations  in the U.S. and other  international  locations,  which the software
vendors  have  indicated  are  year  2000  compliant.  The  Company  is  in  the
implementation  phase for these systems and other  ancillary  financial  systems
with many sites  expected to achieve  full  implementation  before  November 30,
1999.  Some sites are not  expected to  implement  new ERP systems by the end of
1999 and accordingly, the Company has begun making the current systems year 2000
compliant. The cost of making  those  adaptations  are not  expected to be
material and will be expensed in the period  incurred.  It is expected that the
Company's  internal systems will be in full  compliance  before the year 2000.
If, due to unforeseen circumstances,  the  implementation  of the  plan is not
completed  on a timely basis,  the year 2000 could have a material impact on
the operations  of the Company.

     The Euro

     On January 1, 1999,  eleven of fifteen  member  countries  of the  European
Union  established  fixed  conversion  rates between their  existing  currencies
("legacy currencies") and one common currency,  the euro. The euro now trades on
currency exchanges and may be used in business  transactions.  The conversion to
the euro  eliminates  currency  exchange  rate  risk  among  the  eleven  member
countries.  Beginning in January 2002, new euro-denominated bills and coins will
be issued.  The  Company's  business  units  significantly  affected by the euro
conversion  have  established  plans to address  the  issues  raised by the euro
currency conversion, and expect to be substantially complete with these plans by
the year 2000.  These issues include,  among others,  the need to adapt computer
and  financial  systems,  business  processes  and  equipment,  and the  need to
accommodate euro-denominated  transactions and the impact of one common currency
on product pricing, taxation and governmental and legal regulations. The Company
does not expect the system and equipment  conversion costs to be material to its
financial  condition,  results of  operations  or cash  flows.  Due to  numerous
uncertainties,  the Company cannot reasonably estimate the effects currency will
have on pricing and the resulting  impact,  if any, on its  financial  condition
results of operations or cash flows.

     Forward Looking Information

     Certain  statements in this report are "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. All forward
looking statements involve risks and uncertainties. In particular, any statement
contained herein, in press releases, written statements or other documents filed
with the Securities and Exchange Commission,  or in the Company's communications
and  discussions  with  investors  and analysts in the normal course of business
through meetings,  phone calls and conference calls,  regarding the consummation
and benefits of future  acquisitions,  as well as  expectations  with respect to
future sales, operating efficiencies and product expansion, are subject to known
and unknown risks, uncertainties and contingencies, many of which are beyond the
control of the Company.  These factors may cause actual results,  performance or
achievements to differ  materially  from  anticipated  results,  performances or
achievements. Factors that might affect such forward looking statements include,
but are not limited to, overall economic and business conditions; the demand for
the  Company's  goods and services;  the timing of and market  acceptance of new
products;  competitive factors in the industries and geographic markets in which
the Company competes;  changes in tax requirements  (including tax rate changes,
new tax laws and revised tax law  interpretations);  interest rate  fluctuations
and  other  capital  market   conditions,   including   foreign   currency  rate
fluctuations;  economic and political  conditions in international  markets; the
ability to achieve  anticipated  synergies  and other cost savings in connection
with acquisitions; the ability to achieve cost savings and its subsequent
financial performance from its second quarter restructuring; the timing, impact
and other uncertainties of future acquisitions; and the Company's ability and
its customers' and suppliers' ability to replace, modify or upgrade computer
programs in order to adequately address the year 2000 issue. Any forward
looking statements should be considered in light of these factors.


<PAGE>13



                             PART II - OTHER INFORMATION


Item 5.  Other Information

        In  early  November,  1999,  the  Company  acquired  a  manufacturer  of
brushless electronic servo motors located in Brno, Czech Republic.  These motors
are sold primarily in eastern and western Europe to  manufacturers of industrial
machinery  and  equipment.   The  purchase  price  for  this   acquisition   was
approximately $12 million.

Item 6.  Exhibits and Reports on Form 8-K

        (a) Exhibits - Listed below are the exhibits filed with this report.

                      27      Financial Data Schedules.


        (b)  Reports on Form 8-K - none



<PAGE>14


                                         SIGNATURES


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



                                                  KOLLMORGEN CORPORATION


                                                  By:   /s/  Robert J. Cobuzzi
                                                Robert J. Cobuzzi, Senior Vice
                                                      President, Treasurer and
                                                      Chief Financial Officer


Date:   November 12, 1999