<PAGE>   1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
    ENDED AUGUST 1, 1998, OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
    FROM____________ TO____________ .

    COMMISSION FILE NUMBER 333-38223

                              ARGO-TECH CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                   31-1521125
     (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NO.)

        23555 EUCLID AVENUE
         CLEVELAND, OHIO                                    44117
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)

(216) 692-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

          X   YES         NO
         ---         ----


     ALL OF THE OUTSTANDING CAPITAL STOCK OF THE REGISTRANT IS HELD BY AT
     HOLDINGS CORPORATION.

     AS OF AUGUST 31, 1998, 3,000 SHARES OF THE REGISTRANT'S COMMON STOCK, $.01
     PAR VALUE, WERE OUTSTANDING.


<PAGE>   2



                                      INDEX

                                                                       Page No.

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

     Consolidated Balance Sheets as of August 1, 1998 and 
         October 25, 1997                                                   3

     Consolidated Statements of Operations for the 40 weeks and 
         13 weeks ended August 1, 1998 and August 2,  1997                  4

     Consolidated Statements of Cash Flows for the 40 weeks ended 
         August 1, 1998 and August 2, 1997                                  5

     Notes to Consolidated Financial Statements                         6 - 7

Item 2 - Management's Discussion and Analysis of Financial 
               Condition and Results of Operations                      8 - 12

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K                                  13

Signature                                                                  14


<PAGE>   3


PART I - FINANCIAL INFORMATION

ARGO-TECH CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF AT HOLDINGS CORPORATION)

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>

                                                                   August 1,       October 25,
                                                                     1998             1997
                                                                 -----------       -----------
<S>                                                               <C>               <C>       
ASSETS                                                           (Unaudited)

CURRENT ASSETS:
       Cash and cash equivalents                                  $   6,256         $   9,361 
       Receivables, net                                              23,832            24,383 
       Inventories                                                   30,906            38,354 
       Deferred income taxes and prepaid expenses                     6,124             1,636 
                                                                  ---------         --------- 
                                                                                              
                        Total current assets                         67,118            73,734 
                                                                  ---------         --------- 
                                                                                              
PROPERTY AND EQUIPMENT, net of                                                                
       accumulated depreciation                                      34,446            37,181 
                                                                                              
GOODWILL, net of accumulated amortization                           118,619           121,191 
                                                                                              
INTANGIBLE ASSETS                                                    57,229            60,245 
                                                                                              
OTHER ASSETS                                                          8,823             8,609 
                                                                  ---------         --------- 
                                                                                              
Total Assets                                                      $ 286,235         $ 300,960 
                                                                  =========         ========= 
                                                                                              
LIABILITIES                                                                                   
                                                                                              
CURRENT LIABILITIES:                                                                          
       Current portion of long-term debt                          $   4,775         $   6,904 
       Accounts payable                                               4,945             6,369 
       Accrued liabilities                                           20,075            17,814 
                                                                  ---------         --------- 
                                                                                              
                        Total current liabilities                    29,795            31,087 
                                                                  ---------         --------- 
                                                                                              
LONG-TERM DEBT, net of current maturities                           223,791           241,958 
                                                                                              
OTHER NONCURRENT LIABILITIES                                         31,708            32,137 
                                                                  ---------         --------- 
                                                                                              
                        Total  Liabilities                          285,294           305,182 
                                                                  ---------         --------- 
                                                                                              
REDEEMABLE COMMON STOCK                                               4,813             4,813 
                                                                                              
REDEEMABLE ESOP STOCK                                                29,738            29,826 
  Unearned ESOP stock                                                (9,660)          (10,920)
                                                                  ---------         --------- 
                                                                     20,078            18,906 
SHAREHOLDERS' EQUITY/(DEFICIENCY):                                                            
       Common Stock, $.01 par value, authorized 3,000 shares;                                 
          3,000 shares issued and outstanding                          --                --   
       Paid-in capital                                                 --                --   
       Accumulated deficit                                          (23,950)          (27,941)
                                                                  ---------         --------- 
                                                                                              
                        Total shareholders' equity/(deficiency)     (23,950)          (27,941)
                                                                  ---------         --------- 
                                                                                              
Total Liabilities and Shareholders' Equity/(Deficiency)           $ 286,235         $ 300,960 
                                                                  =========         ========= 
                                                                                    
</TABLE>

The accompanying notes are an integral part of these statements.




<PAGE>   4

ARGO-TECH CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF AT HOLDINGS CORPORATION)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

UNAUDITED
<TABLE>
<CAPTION>

                                                           40 weeks ended                                    13 weeks ended
                                              -----------------------------------------       ------------------------------------
                                                       August 1,            August 2,                    August 1,       August 2,
                                                          1998                1997                          1998           1997
                                              -----------------------------------------       ------------------------------------

<S>                                               <C>                 <C>                          <C>                <C>         
Net revenues                                      $       128,631     $         84,892             $      42,796      $     31,733
Cost of revenues                                           81,875               48,697                    26,375            16,806
                                              -----------------------------------------       ------------------------------------

          Gross profit                                     46,756               36,195                    16,421            14,927
                                              -----------------------------------------       ------------------------------------

Selling, general and administrative                        16,956                7,210                     5,526             2,315
Research and development                                    5,053                5,065                     1,962             1,496
Amortization of intangible assets                           5,611                1,860                     1,856               605
                                              -----------------------------------------       ------------------------------------

          Operating expenses                               27,620               14,135                     9,344             4,416
                                              -----------------------------------------       ------------------------------------

Income from operations                                     19,136               22,060                     7,077            10,511
Interest expense                                           16,411                9,222                     5,074             3,582
Other, net                                                   (76)                (313)                       140              (76)
                                              -----------------------------------------       ------------------------------------

Income before income taxes and
  extraordinary loss                                        2,801               13,151                     1,863             7,005
                                              -----------------------------------------       ------------------------------------

Income tax provision                                        1,432                5,299                       955             2,656
                                              -----------------------------------------       ------------------------------------

Income before extraordinary loss                            1,369                7,852                       908             4,349

Extraordinary loss, net of income tax
  benefit of $1,019                                             -                1,529                         -             1,529
                                              -----------------------------------------       ------------------------------------

Net income                                        $         1,369    $           6,323            $          908     $       2,820
                                              =========================================       ====================================
</TABLE>




The accompanying notes are an integral part of these statements.
<PAGE>   5


ARGO-TECH CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF AT HOLDINGS CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

UNAUDITED
<TABLE>
<CAPTION>

                                                                                     40 weeks ended
                                                                          ---------------------------------
                                                                             August 1,            August 2,
                                                                               1998                1997
                                                                          --------------         ----------
<S>                                                                       <C>                    <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                $1,369                 $6,323
   Adjustments to reconcile net income to net cash
     provided by operating activities:
   Depreciation                                                               5,080                  3,351
   Amortization of goodwill and deferred financing costs                      6,441                  2,658
   Compensation expense recognized in connection with
     employee stock ownership plan                                            3,061                  2,304
   Amortization of inventory step-up                                         10,681
   Deferred income taxes                                                     (5,641)                  (239)
   Extraordinary loss on early extinguishment
     of debt                                                                                         1,529

   Changes in operating assets and liabilities:
      Receivables                                                               551                 (3,916)
      Inventories                                                            (3,233)                (1,743)
      Prepaid expenses                                                         (152)                    10
      Accounts payable                                                       (1,424)                (1,408)
      Accrued and other liabilities                                           3,065                   (579)
      Other, net                                                                237                    481
                                                                          ---------              ---------

   Net cash provided by operating activities                                 20,035                  8,771
                                                                          ---------              ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                      (2,345)                (1,775)
                                                                          ---------              ---------
   Net cash used in investing activities                                     (2,345)                (1,775)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Additional borrowing of long-term debt                                      --                  141,100
   Repayment of long-term debt                                              (20,296)              (107,600)
   Redemption of redeemable preferred stock                                    --                  (25,908)
   Payment of redeemable preferred dividends                                   --                  (19,298)
   Payment of financing related fees                                           (499)                (1,475)
                                                                          ---------              ---------
   Net cash used in financing activities                                    (20,795)               (13,181)

CASH AND CASH EQUIVALENTS:
Net decrease for the period                                                  (3,105)                (6,185)
Balance, Beginning of period                                                  9,361                 13,556
                                                                          ---------              ---------

Balance, End of period                                                       $6,256                 $7,371
                                                                          =========              =========

</TABLE>

The accompanying notes are an integral part of these statements.
<PAGE>   6

ARGO-TECH CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF AT HOLDINGS CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 40 WEEKS ENDED AUGUST 1, 1998 AND AUGUST 2, 1997
--------------------------------------------------------
(UNAUDITED)

1.     BASIS OF PRESENTATION

      The principal operations of Argo-Tech Corporation (A Wholly-Owned
      Subsidiary of AT Holdings Corporation) and its Subsidiaries (the 
      "Company") include the design, manufacture and distribution of aviation
      products, primarily aircraft fuel pumps, throughout the world. In 
      addition, the Company leases a portion of its manufacturing facility 
      to other parties. The Company's fiscal year ends on the last Saturday
      in October. The Company is obligated to fulfill certain obligations of
      AT Holdings Corporation. As a result, those obligations have been 
      reflected in the Company's financial statements.

      Effective August 3, 1997, the Company established itself as a parent,
      holding company with 3 wholly-owned operating guarantor subsidiaries,
      Argo-Tech Corporation (HBP), Argo-Tech Corporation (OEM) and Argo-Tech
      Corporation (Aftermarket). On September 26, 1997, the Company acquired a
      fourth wholly-owned operating guarantor subsidiary, J.C. Carter Company,
      Inc. ("Carter"). The Company has no outside assets, liabilities or
      operations apart from its wholly-owned subsidiaries. The Senior
      Subordinated Notes are fully, unconditionally, jointly and severally
      guaranteed by the guarantor subsidiaries, and therefore, separate
      financial statements of the guarantor subsidiaries will not be presented.
      Management has determined that the information presented by such separate
      financial statements of the guarantor subsidiaries is not material to
      investors. All of the Company's subsidiaries are guarantors except two
      wholly-owned subsidiaries that have inconsequential assets, liabilities
      and equity. Their only operations are the result of intercompany activity
      which is immediately dividended back to the Company.

2.     UNAUDITED FINANCIAL INFORMATION

      The financial information included herein is unaudited; however, the
      information reflects all adjustments (consisting solely of normal
      recurring adjustments) that are, in the opinion of management, necessary
      for a fair presentation of the Company's financial position and results of
      operations and cash flows for the interim periods presented. The results
      of operations for the 40 weeks ended August 1, 1998 are not necessarily
      indicative of the results to be expected for the full year.

3.  INVENTORIES

      Inventories are stated at standard cost which approximates the costs which
      would be determined using the first-in, first-out (FIFO) method. The
      recorded value of inventories is not in excess of market value.
      Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>

                                                            August 1,    October 25,
                                                              1998           1997

<S>                                                        <C>           <C>      
               Finished goods                              $    2,087    $   1,874
               Work-in-process and purchased parts             21,009       19,918
               Raw materials and supplies                      12,102       20,160
                                                           ----------    ---------
                             Total                             35,198       41,952
               Reserve for excess and obsolete inventory       (4,292)      (3,598)
                                                           ----------    ---------

               Inventories - net                           $   30,906    $  38,354
                                                           ==========    =========
</TABLE>
<PAGE>   7

      The Carter inventory included $10.7 million at October 25, 1997 which
      represents the unamortized portion of inventories at their fair value as
      of the date of acquisition in accordance with Accounting Principles Board
      Opinion No. 16 -"Business Combinations." Based on Carter's inventory
      turnover rate, $10.7 million has been included in cost of revenues for the
      40 week period ended August 1, 1998.

4.    CONTINGENCIES

      Environmental Matters - The soil and groundwater at the Company's Euclid,
      Ohio facility and the Costa Mesa, California facility contain elevated
      levels of certain contaminants which are currently in the process of being
      removed and/or remediated. Because the Company has certain indemnification
      rights from former owners of the facilities for liabilities arising from
      these or other environmental matters, in the opinion of the Company's
      management, the ultimate outcome is not expected to materially affect the
      Company's financial condition, results of operations or liquidity.

      Other Matters - The Company is subject to various legal actions and other
      contingencies. In the opinion of the Company's management, after reviewing
      the information which is currently available with respect to such matters
      and consulting with the Company's legal counsel, any liability which may
      ultimately be incurred with respect to these additional matters is not
      expected to materially affect the Company's financial condition, results
      of operations or liquidity.

5.    PROPOSED PUBLIC OFFERING AND BENEFITS RESTRUCTURING

      The Company's parent anticipates making an initial public offering of the
      parent's common stock in an underwritten public offering expected to occur
      later this year. A wholly owned subsidiary of the Company's parent,
      Argo-Tech Group, Inc., has filed a registration statement with respect to
      such offering with the Securities and Exchange Commission. In connection
      with such offering, the Company's parent would merge with and into
      Argo-Tech Group, Inc. with Argo-Tech Group, Inc. becoming the Company's
      parent. Such offer shall only be made pursuant to a prospectus, and this
      periodic report shall not be deemed to be an offer or solicitation of an
      offer to buy any of the parent's securities.

      In connection with the parent's initial public offering, the Company's
      existing stock based compensation plans will be modified or terminated.

      It is anticipated that the Company will elect to ( i ) terminate its
      Employee Stock Ownership Plan ("ESOP"), ( ii ) grant all remaining stock
      appreciation rights ("SARs") outstanding under it SAR Plan, ( iii )
      immediately vest all granted stock options and SARs and ( iv ) terminate
      the SAR Plan and supplemental employee retirement plan ("SERP"). The
      Company will also recognize compensation expense for the SERP in
      connection with the termination of the ESOP. The Company expects that
      these actions will result in a non-recurring charge of $25.2 million
      ($25.2 million after tax). The ESOP termination will result in the
      repayment of the $10.9 million ESOP Loan to the Company through the return
      of 779,998 shares of the parent's common stock. The Company will also
      allow management to purchase an aggregate of 295,050 shares of the
      parent's common stock at the initial public offering price in settlement
      of SAR Plan and SERP liability. Finally, in connection with the
      termination of the ESOP and the SAR Plan, the Company anticipates that it
      will grant options to acquire an aggregate of 878,412 shares of parent
      common stock to the 308 participating employees.

      The Company anticipates that the net proceeds from its parent's initial
      public offering would be used to repay bank debt under the Company's
      credit facility. The Company expects to subsequently reborrow some or all
      of the available amounts under its credit facility.

      The foregoing statements are forward-looking statements and there can be
      no assurance that the Company's parent's initial public offering will be
      consummated or that any proceeds will be used to repay any portions of the
      Company's indebtedness.
<PAGE>   8

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

               Argo-Tech Corporation ("Argo-Tech" or the "Company" ) is a
leading designer, manufacturer and servicer of high performance fuel flow
devices for the aerospace industry. The Company provides a broad range of
products and services to substantially all commercial and domestic military
engine and airframe manufacturers, to airlines worldwide and to the U.S. and
certain foreign militaries. The Company is the world's leading supplier of main
engine fuel pumps to the commercial aircraft industry and is a leading supplier
of airframe products and aerial refueling systems. The Company is also a leading
manufacturer of components for ground fueling systems. On September 26, 1997 the
Company acquired all of the outstanding shares of J. C. Carter ("Carter"), a
manufacturer of aircraft fluid control component parts, industrial marine
cryogenic pumps and ground fueling components. As used herein, references to 
"ATC" refer to the Company's direct and indirect wholly owned subsidiaries,
excluding Carter.

               The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
consolidated financial statements. Argo-Tech's fiscal year ends on the last
Saturday of October and is identified according to the calendar year in which it
ends.

RESULTS OF OPERATIONS FOR 13 WEEK PERIOD ENDED AUGUST 1, 1998 COMPARED WITH THE
13 WEEK PERIOD ENDED AUGUST 2, 1998

               Net revenues for the 13 week period ended August 1, 1998
increased $11.1 million, or 35.0%, to $42.8 million from $31.7 million for the
13 week period ended August 2, 1997. This increase was primarily due to the
acquisition of Carter in September, 1997 and increased customer demand in the
ATC commercial OEM partially offset by lower aftermarket revenues. In the 13
week period ended August 1, 1998, revenues attributable to Carter were $12.0
million, or 108.1% of the net revenue increase. ATC commercial OEM revenues
increased $2.0 million, or 27.0%, to $9.4 million and commercial aftermarket
revenues decreased $3.0 million, or 14.7% to $17.4 million in the 13 week period
ended August 1, 1998. The increase in ATC commercial OEM revenues was due to
continued strength in airline traffic and airline capital spending. ATC
commercial aftermarket revenues were lower primarily due to the timing of
certain aftermarket orders. For example, the 13 week period ended August 2, 1997
includes a large aftermarket order which this year is scheduled to ship in the
fourth fiscal quarter of 1998 rather than the third fiscal quarter. Aftermarket
revenues tend to occur in large quantities, the timing of which can
significantly impact quarterly comparisons. ATC military revenues of $2.6
million and industrial and other revenues of $1.4 million in the 13 week period
ended August 1, 1998 were unchanged from the prior comparable period.

               Gross profit for the 13 week period ended August 1, 1998
increased $1.5 million, or 10.1%, to $16.4 million from $14.9 million in the 13
week period ended August 2, 1997 due to the inclusion of Carter, offset by lower
ATC commercial aftermarket revenues, a greater percentage of lower margin ATC
OEM revenues and $1.7 million of amortization related to the step-up of Carter
inventory to fair market value. Gross margin for the 13 week period ended August
1, 1998 decreased to 38.3% from 47.0% for the 40 week period ended August 2,
1997 due to a greater percentage of lower margin ATC OEM sales and amortization
related to the step-up of Carter inventory to fair value, partially offset by
higher margin Carter sales and improved operating efficiency in the Cleveland
facility manufacturing operations. Excluding the $1.7 million charge for
amortization related to the step-up of inventory to fair value in connection
with the acquisition, gross margin for the 13 week period ended August 1, 1998
was 42.3%.

               Operating expenses for the 13 week period ended August 1, 1998
increased $4.9 million, or 111.4%, to $9.3 million from $4.4 million in the 13
week period ended August 2, 1997. This increase is primarily attributable to the
inclusion of Carter operating expenses and amortization of intangible assets
which totaled 

<PAGE>   9

$4.4 million, and an increase of $.5 million in ATC expenses related to the
implementation of a stock appreciation rights plan and miscellaneous expenses at
the Cleveland facility related to compliance with environmental regulations.
Operating expenses as a percent of revenues increased to 21.7% for the 13 week
period ended August 1, 1998 from 13.9% for the comparable period in 1997.
Excluding the $1.3 million of Carter amortization of intangible assets,
operating expenses as a percent of revenues would have been 18.7% for the 13
week period ended August 1, 1998.

               Income from operations for the 13 week period ended August 1,
1998 decreased $3.4 million, or 32.4%, to $7.1 million from $10.5 million in the
13 week period ended August 2, 1997. This decrease was primarily due the lower
ATC aftermarket revenues and higher mix of lower margin ATC OEM revenues, the
amortization related to the step-up of Carter inventory to fair market value and
amortization of Carter intangible assets, offset by the inclusion of Carter
operating results. As a percent of revenues, income from operations for the 13
week period ended August 1, 1998 decreased to 16.6% from 33.1% for the 13 week
period ended August 2, 1997. Excluding the $1.7 million charge for amortization
related to the step-up of inventory to fair value in connection with the
acquisition, income from operations as a percent of revenues was 20.6%.

               Interest expense for the 13 week period ended August 1, 1998
increased $1.5 million, or 41.7%, to $5.1 million from $3.6 million for the 13
week period ended August 2, 1997 primarily due to the issuance of the $140.0
million Senior Subordinated Notes in connection with the acquisition of Carter 
in September, 1997.

               The income tax provision for the 13 week period ended August 1,
1998 decreased $1.7 million, or 63.0%, to $1.0 million from $2.7 million in the
13 week period ended August 2, 1997 reflecting a decrease of $5.1 million in
pre-tax income, to $1.9 million for the 13 week period ended August 1, 1998 from
$7.0 million for the 13 week period ended August 2, 1997.

               Income before extraordinary loss for the 13 week period ended
August 1, 1998 decreased $3.3 million, or 76.7%, to $1.0 million from $4.3
million for the 13 week period ended August 2, 1997 primarily due to the revenue
and expense factors discussed above.

               Net income for the 13 week period ended August 1, 1998 decreased
$1.9 million, or 67.9%, to $0.9 million from $2.8 million for the 13 week period
ended August 2, 1997 primarily due to the revenue and expense factors discussed
above partially offset by the non recurrence of a $1.5 million extraordinary
loss related to the early extinguishment of debt under the Company's previous
bank credit agreement. Excluding the $1.7 million charge for amortization
related to the step-up of inventory to fair value in connection with the
acquisition, net income would have been $2.0 million for the 13 week period
ended August 1, 1998.

RESULTS OF OPERATIONS FOR THE 40 WEEK PERIOD ENDED AUGUST 1, 1998 COMPARED WITH
THE 40 WEEK PERIOD ENDED AUGUST 2, 1997

               Net revenues for the 40 week period ended August 1, 1998
increased $43.7 million, or 51.5%, to $128.6 million from $84.9 million for the
40 week period ended August 2, 1997. This increase was primarily due to the
acquisition of Carter in September, 1997 and increased customer demand in the
ATC OEM and commercial aftermarket product lines. Revenues attributed to Carter
in the 40 week period ended August 1, 1998, were $36.6 million, or 83.8% of the
net revenue increase. ATC OEM revenues increased $3.7 million, or 17.0% to $25.5
million and ATC commercial aftermarket revenues increased $2.2 million, or 4.2%,
to $54.4 million in the 40 week period ended August 1, 1998 due to continued
strength in airline traffic and airline capital spending. ATC military revenues
increased $1.4 million, or 21.2%, to $8.0 million, while other revenues declined
$0.2 million , or 4.6% to $4.1 million, in the 40 week period ended August 1,
1998. The increase in military revenues is primarily due to increased F-15
foreign military shipments. The decline in other revenues was due to a planned
reduction of certain services offered to Business Park tenants.
<PAGE>   10

               Gross profit for the 40 week period ended August 1, 1998
increased $10.6 million, or 29.3%, to $46.8 million from $36.2 million in the 40
week period ended August 2, 1997 due to the inclusion of Carter, increased ATC
aerospace revenues and improved operating efficiency in the Cleveland facility,
offset by $10.7 million of amortization related to the step-up of Carter
inventory to fair market value. Gross margin for the 40 week period ended August
1, 1998 decreased to 36.4% from 42.6% for the 40 week period ended August 2,
1997 due to amortization related to the step-up of Carter inventory to fair
value, partially offset by favorable Carter sales mix and improved operating
efficiency in the Cleveland facility manufacturing operations. Excluding the
$10.7 million charge for amortization related to the step-up of inventory to
fair value in connection with the acquisition, gross margin increased to 44.7%
for the 40 week period ended August 1, 1998.

               Operating expenses for the 40 week period ended August 1, 1998
increased $13.5 million, or 95.7%, to $27.6 million from $14.1 million in the 40
week period ended August 2, 1997. This increase is primarily attributable to the
inclusion of Carter operating expenses and amortization of intangible assets,
expenses related to the implementation of a stock appreciation rights plan and
miscellaneous expenses at the Cleveland facility related to compliance with
environmental regulations offset by a decrease in ATC customer directed research
and development expense. Operating expenses as a percent of revenues increased
to 21.5% for the 40 week period ended August 1, 1998 from 16.6% for the
comparable period in 1997. Excluding the $3.8 million of Carter amortization of
intangible assets, operating expenses as a percent of revenues would have been
18.5% for the 40 week period ended August 1, 1998.

               Income from operations for the 40 week period ended August 1,
1998 decreased $3.0 million, or 13.6%, to $19.1 million from $22.1 million in
the 40 week period ended August 2, 1997. This decrease was primarily due to the
inclusion of Carter results which included amortization related to the step-up
of Carter inventory to fair market value and amortization of Carter intangible
assets, partially offset by increased ATC aerospace sales and improved operating
efficiency in the Cleveland facility. As a percent of revenues, income from
operations for the 40 week period ended August 1, 1998 decreased to 14.9% from
26.0% for the 40 week period ended August 2, 1997. Excluding the $10.7 million
charge for amortization related to the step-up of inventory to fair value in
connection with the acquisition, income from operations as a percent of revenues
was 23.2%.

               Interest expense for the 40 week period ended August 1, 1998
increased $7.2 million, or 78.3%, to $16.4 million from $9.2 million for the 40
week period ended August 2, 1997 primarily due to the issuance of the Senior
Subordinated Notes in connection with the acquisition of Carter in September,
1997, the repurchase of all of the outstanding preferred stock of the Company in
March, 1997, and an increase in the average interest rate.

               The income tax provision for the 40 week period ended August 1,
1998 decreased $3.9 million, or 73.6%, to $1.4 million from $5.3 million in the
40 week period ended August 2, 1997 reflecting a decrease of $10.4 million in
pre-tax income, to $2.8 million for the 40 week period ended August 1, 1998 from
$13.2 million for the 40 week period ended August 2, 1997.

               Income before extraordinary loss for the 40 week period ended
August 1, 1998 decreased $6.5 million, or 82.3%, to $1.4 million from $7.9
million for the 40 week period ended August 2, 1997 primarily due to
amortization related to the step-up of Carter inventory to fair market value and
other revenue and expense factors discussed above. Excluding the $10.7 million
charge for amortization related to the step-up of inventory to fair value in
connection with the acquisition, income before extraordinary loss was $7.8
million.

               Net income for the 40 week period ended August 1, 1998 decreased
$4.9 million, or 77.8%, to $1.4 million from $6.3 million for the 40 week period
ended August 2, 1997 primarily due to amortization related to the step-up of
Carter inventory to fair market value and other the revenue and expense factors
discussed above partially offset by the non recurrence of a $1.5 million
extraordinary loss related to the early extinguishment of debt under the
Company's previous bank credit agreement. Excluding the $10.7 million 
<PAGE>   11

charge for amortization related to the step-up of inventory to fair value in
connection with the acquisition, net income would have been $7.8 million.

FLUCTUATIONS OF OPERATING RESULTS;  LIMITATION OF QUARTERLY COMPARISONS

               The Company's results of operations are subject to fluctuations
from quarter to quarter due to changes in demand for its products, changes in
product mix and other factors. Demand for the Company's products can vary from
quarter to quarter due to changes in demand for, and timing of deliveries of,
OEM, aftermarket and military products and services. In particular, the timing
of the Company's aftermarket sales tend not to occur on a predictable schedule
and, furthermore, the sales tend to occur in large quantities which can
significantly impact quarterly comparisons. In addition, net revenues of the
Company's products in the third and fourth quarters can be lower than the first
two quarters because of planned production shut downs at the Company's Cleveland
Facility and holiday-related manufacturing facility shut downs by certain
customers. These changes in product mix may cause margins to vary from quarter
to quarter.

               For example, in the first fiscal quarter of 1998, the Company's
sales were comparatively high due to large volumes shipped to a distributor. In
addition, the sales for this period consisted of a comparatively high percentage
of aftermarket sales. This combination of high-volume, high margin sales led to
comparatively favorable results in the first quarter, despite the amortization
charges relating to the acquisition. However, in the second fiscal quarter of
1998, the Company's sales mix had a greater percentage of lower margin OEM sales
and, as a result, operational expenses rose despite a drop in net revenues and
the Company experienced a net loss of $975,000 for this quarterly period. A
similar fluctuation occurred in the third fiscal quarter of 1997 when, due to
comparatively high sales and a larger percentage of aftermarket sales, the
Company's net income was unusually high.

               In addition, on September 26, 1997, ATC acquired all of the
outstanding shares of Carter for $107.6 million, including acquisition costs.
Carter's inventory was increased by $12.2 million to record inventories at their
fair value as of the date of acquisition in accordance with Accounting
Principles Board Opinion No. 16 - "Business Combinations." Based on Carter's
inventory turnover rate, $1.5 million, $4.5 million, $4.5 million and $1.7
million of this amount is included in cost of revenues for the fourth quarter of
1997 and the first, second and third quarters of 1998, respectively. In
addition, $99.7 million of identified intangibles and goodwill are being
amortized over an 8 to 40 year period. These amortizations increased operating
expenses $0.4 million, $1.2 million, $1.3 million and $1.3 million for the
fourth quarter of 1997 and the first, second and third quarters of 1998,
respectively.

               Accordingly, year-to-year and quarter-to-quarter comparisons of
quarterly results may not be meaningful, and quarterly results during the year
are not necessarily indicative of the results that may be expected for any
future period or for the entire year.

LIQUIDITY AND CAPITAL RESOURCES

               The Company is a holding company that receives all of its
operating income from its subsidiaries. As a result, Argo-Tech's primary source
of liquidity for conducting business activities and servicing its indebtedness
has been cash flows from operating activities.

               Cash for the period ended August 1, 1998 decreased $3.1 million,
primarily due to the repayment of $20.3 million on term loans, an increase in
inventory and a decrease in accounts payable and deferred tax liabilities offset
by improved operating results and a favorable change in receivables and accrued
and other liabilities.

               Capital expenditures for the 40 weeks ended August 1, 1998
totaled $2.3 million compared to $1.8 million for the 40 weeks ended August 2,
1997. The Company expects to incur capital expenditures of 

<PAGE>   12

approximately $4.2 million for the remainder of fiscal year 1998, related to the
continued maintenance of facilities, equipment and systems to support current
operating activities.

               Long-term debt at August 1, 1998 consisted of $88.4 million
principal amount of term loans and $140.0 million principal amount of Senior
Subordinated Notes. Payments of $20.3 million were made on term loans, which
included scheduled payments of $3.9 million as well as prepayments of $1.4
million as a result of the Company's excess cash flow, as defined in the amended
credit facility, at October 25, 1997 and $15.0 million as a voluntary
prepayment. The Company has available, after $0.3 million of letters of credit,
a $19.7 million revolving credit facility. As of August 1, 1998, there were no
borrowings on the revolving credit facility. The amended credit facility
contains no restrictions on the ability of the Company's subsidiaries to make
distributions to the Company.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

               From time to time, information provided by the Company,
statements by its employees or information included in its filings with the
Securities and Exchange Commission (including those portions of the Management's
Discussion and Analysis that refer to the future) may contain forward-looking
statements that are not historical facts. Those statements are "forward-looking"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements, and the Company's future performance, operating
results, financial position and liquidity, are subject to a variety of factors
that could materially affect results. Some, but not necessarily all, of these
factors include: the Company's dependence on the aerospace industry; government
regulation and oversight; defense spending; competition; product and
environmental liabilities; and risks associated with the Company's workforce,
suppliers, and future acquisitions.


<PAGE>   13


PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K

            (a)   Exhibits - Schedule 27 - Financial Data Schedule

            (b)   Reports - No reports on Form 8-K have been filed during the
                  quarter ended August 1, 1998.



<PAGE>   14


                                    SIGNATURE
                                    ---------

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


Date: September 4, 1998                   ARGO-TECH CORPORATION

                                          By: /s/  Yoichi Fujiki
                                             --------------------
                                              Yoichi Fujiki
                                              Vice President and Treasurer
                                              (Duly Authorized Officer)

                                          By: /s/  Paul A. Sklad
                                             -------------------
                                              Paul A. Sklad
                                              Controller
                                              (Principal Accounting Officer)