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

                             --------------------

                                   FORM 10-K

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

                    For the fiscal year ended July 31, 1996
                        Commission file number: 0-18198

                             DeVlieg-Bullard, Inc.
             ------------------------------------------------------

             (Exact name of registrant as specified in its charter)

                  Delaware                         62-1270573
         -----------------------------------------------------------------
         (State of incorporation)     (I.R.S. employer identification no.)

              One Gorham Island, Westport, Connecticut       06880 
--------------------------------------------------------------------------------
              (Address of principal executive offices)     (Zip code)

      Registrant's telephone number, including area code:  203-221-8201
                                                           ------------
         Securities registered pursuant to Section 12(b) of the Act:
                                      None
         -----------------------------------------------------------

          Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
          -----------------------------------------------------------
                                (Title of class)

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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part Ill of this Form 10-K or any amendment to
this Form 10-K. [X]

At July 31, 1996, the aggregate market value of the voting stock held by
nonaffiliates was approximately $16,439,597.  The market value calculation was
determined using the closing price of registrant's common stock on August 31,
1996, as reported on the NASDAQ National Market System, and assumes all shares
beneficially owned by executive officers and members of the Board of Directors
of the registrant are shares owned by "affiliates," a status which each of the
executive officers and directors individually disclaims.

DeVlieg-Bullard, Inc., had 12,250,000 shares of common stock outstanding at
August 31, 1996.
<PAGE>   2
                      DOCUMENTS INCORPORATED BY REFERENCE





<TABLE>
<CAPTION>
                                 Documents from which portions are
Part of Form 10-K                    incorporated by reference
-----------------                ---------------------------------
      <S>                        <C>
      III                        Proxy Statement relating to the 
                                 Company's Annual Meeting of Stockholders 
                                 on December 18, 1996
</TABLE>





                                       2
<PAGE>   3
                                     PART I

ITEM 1.          BUSINESS

GENERAL

DeVlieg-Bullard, Inc., (the "Company") is a diversified industrial concern
specializing in manufacturing, servicing, upgrading, automating and
remanufacturing precision engineered machine tools.  The Company also
manufactures sophisticated original and replacement tooling products used in
industrial machine tools.  Considered together, these businesses provide a
diversified line of original equipment and aftermarket machine tool services
and products ranging from highly automated remanufactured machine tools to
replacement parts.  In addition, the Company produces high quality stationary
power tools for use in the woodworking and metalworking industries.

The Company, headquartered in Westport, Connecticut, conducts its business
through the Services Group, National Acme, Tooling Systems Group and Industrial
Group in facilities located in California, Connecticut, Illinois, Michigan,
Ohio, Pennsylvania, Tennessee, the United Kingdom and Germany.

For financial information on the Company's business segments, see Note 16 of
Notes to the Company Financial Statements.

The Services Group provides repair and replacement parts, field service,
rebuild, retrofit and remanufacturing services predominantly for the DeVlieg,
Bullard, American Tool, Brown & Sharpe, Futurmill, New Britain Machine,
Rockford and White-Sundstrand brand machine tools.  The Services Group conducts
its operations at facilities located in Huntington Beach, California; Cromwell,
Connecticut; Rockford, Illinois; Madison Heights, Michigan; Abbottstown,
Pennsylvania; and Twinsburg, Ohio.

The National Acme Division manufactures original equipment multiple spindle
automatic bar and chucking machines, repair and replacement parts, tooling and
attachments under the trade name of Acme-Gridley.  In addition, The National
Acme Trading Company brokers used Acme-Gridley equipment.  National Acme
conducts its operations at facilities in Cleveland and Fremont, Ohio.

The Tooling Systems Group ("Tooling Systems") manufactures precision tool
holding devices, boring tools and electronic tool management systems used in
manual and computer numerically controlled ("CNC") machine tools.  These
products are marketed under the Universal Engineering, DeVlieg-Microbore and
Cushman Industries tradenames primarily to the automotive, aerospace, defense,
construction and farm equipment industries.  Tooling Systems conducts its
operations at facilities in Frankenmuth and Gladwin, Michigan; Lutterworth,
England; and through a 50% owned joint venture in Bielefeld, Germany.

The Industrial Group, consisting of the Company's Powermatic Division
("Powermatic"), produces high quality, stationary power tools, including table
saws, shapers, bandsaws, drill presses, planers and jointers for use in the
woodworking and metalworking industries.  Powermatic conducts its operations in
two facilities, both located in McMinnville, Tennessee.


BUSINESS STRATEGY AND MARKET DEVELOPMENT

The Company's business strategy is to capitalize on the opportunities for
growth in its core businesses by increasing its penetration of existing markets
through acquisitions and expanding into new markets by introducing new products
and services.

SERVICES GROUP

As a primary provider of aftermarket services for a large installed base of
machine tools, the Company believes it has a strong competitive position in
providing replacement parts, field repair and remanufacturing services for the
DeVlieg, Bullard, American Tool, Brown & Sharpe, Futurmill, New Britain
Machine, Rockford and White-Sundstrand tradenames.  However, the installed base
of these machine tools is expected to decrease gradually over time as older
machine tools historically serviced by the Company are retired from service.
The Services Group's business strategy includes expanding to other machine tool





                                       3
<PAGE>   4

brands, by acquiring other machine tool companies and by introducing engineered
productivity improvements which prolong the life of installed base equipment.

On November 30, 1994, the Company purchased H.B. Industries, Inc. which
conducts its business as Ed Smith Machinery Sales.  The acquisition complements
the Company's existing line of Bullard products, parts and services and
strengthens the Services Group's position in the automotive market.  See Note 2
of Notes to the Company Financial Statements.

On January 23, 1995, the Company acquired essentially all of the assets of
Mideastern, Inc. which has been an important provider of field and
remanufacturing services and aftermarket replacement parts for New Britain
Machine automatic screw machines since it was founded in 1986.  The acquisition
of Mideastern, Inc., and the addition of its four former owners, strengthens
the Services Group's New Britain Machine parts remanufacturing capability and
adds field service expertise to the services provided to the New Britain
Machine customer base.  See Note 2 of Notes to the Company Financial
Statements.

NATIONAL ACME

On October 23, 1995, the Company purchased The National Acme Company, a leading
manufacturer of original equipment multiple spindle bar and chucking machines,
as well as a supplier of related aftermarket parts and service.  See Note 2 of
Notes to the Company Financial Statements.

National Acme's reputation has been based on building the most durable multiple
spindle automatic bar and chucking machines in the world.  This has resulted in
a large installed base of machines around the world, including machines built
by three licensees spanning over 50 years.  National Acme's business strategy
includes increased emphasis on international markets, as well as cost
reductions in its aftermarket parts business.

TOOLING SYSTEMS GROUP

The primary strategy for Tooling Systems is to gain market share in its product
lines through continued emphasis on the acquisition of additional tooling
companies and by providing superior customer service, including product
quality, delivery and application engineering.  To further its ability to
distribute Microbore products, Tooling Systems opened a sales and warehousing
facility in the United Kingdom in fiscal 1991 and began distribution in Mexico
during fiscal 1993 and in Asian markets during fiscal 1995.  New product
introductions have enhanced Tooling Systems' product offerings and are
important to its market development.

On September 9, 1994, the Company acquired certain assets of Cushman
Industries, Inc., a manufacturer of work holding devices including manual
chucks, power chucks and special order work holding systems.  See Note 2 of
Notes to the Company Financial Statements.

INDUSTRIAL GROUP

Powermatic enjoys strong name recognition and a reputation for quality among
its customers.  Powermatic expects to capitalize on these strengths by
continuing to extend its line of woodworking machinery intended for the light
industrial market and the home hobbyist.

OPERATING GROUPS

SERVICES GROUP

The Services Group provides repair and replacement parts, field service,
rebuild, retrofit and remanufacturing services through its Parts Operation and
Remanufacturing Operation.

Parts Operation.  The Parts Operation provides aftermarket services, consisting
of repair and replacement parts, predominantly for the DeVlieg, Bullard,
American Tool, Brown & Sharpe, Futurmill, New Britain Machine, Rockford and
White-Sundstrand brand machine tools.





                                       4
<PAGE>   5

Parts are sold primarily through direct customer contact.  The Parts Operation
employs a technically-oriented customer service group composed of 13 customer
service representatives and seven technical support personnel.  Because of the
age, variety and technical complexity of the machine tool population,
identification of replacement parts or repair solutions requires technically
qualified employees who are familiar with the products served.  Products are
marketed to over 5,000 active customers, consisting primarily of aerospace and
defense contractors, automotive and transportation equipment manufacturers,
farm equipment builders, manufacturers of industrial equipment and precision
tool and die shops located throughout the United States and overseas.

The Parts Operation's warranty policy covers all of its aftermarket products
and services and generally provides a 90-day warranty on defects in materials
and a 30-day warranty on defects in workmanship for replacement parts.

Remanufacturing Operation.  The Remanufacturing Operation provides field
service, rebuild, retrofit and remanufacturing services for numerous brands of
machine tools, including DeVlieg, Bullard, American Tool, Brown & Sharpe,
Futurmill, New Britain Machine, Rockford and White-Sundstrand brands.  The
remanufacture of a machine tool, typically consisting of replacing worn parts
and components, realigning the machine, and adding updated CNC capability and
electrical and mechanical enhancements, generally takes four to six months to
complete.  Once completed, a remanufactured machine is a "like new,"
state-of-the-art machine costing approximately 50% of the cost of a replacement
machine.

The Remanufacturing Operation employs approximately 80 persons including more
than 30 field service engineers.  The technical complexity and variety of
product enhancements that relate to rebuilding, retrofitting and
remanufacturing machine tools require highly skilled sales, engineering and
assembly personnel.  The Remanufacturing Operation's services are sold through
direct sales personnel, numerous nonexclusive distributors located throughout
the United States and direct customer inquiries.

The Remanufacturing Operation's warranty policy covers all newly manufactured
and remanufactured products and generally provides a one-year parts and labor
warranty.

NATIONAL ACME

National Acme manufactures new machines, provides repair and replacement parts
through its Machines and Aftermarket operations and brokers used machines
through its National Acme Trading Company.

Machines.  National Acme manufactures high quality, original equipment multiple
spindle automatic bar and chucking machines.  These are sold through direct
customer contact and through distributors world-wide under the Acme-Gridley and
NAMCO trade names.  The selling prices for National Acme machines range from
$100,000 to over $1.0 million.

Aftermarket.  Parts, tooling and attachments are sold directly to customers and
through distributors.  National Acme has six customer service representatives
and six field service technicians, who provide technical assistance.
Approximately 4,900 parts are stocked for "off the shelf" shipment to
customers.  In addition, a quick response program in manufacturing responds to
customer breakdowns on parts not available from stock.

All machines and aftermarket parts are covered by a one-year warranty.

National Acme Trading Company.  Used Acme-Gridley machines are sold through
telemarketing and direct mail.  Popular machine sizes are stocked.  Technicians
are available to provide selective repairs or rebuilds as required.  Machines
are usually sold "as is."  Depending on the work performed on the machines,
limited warranties are available.

TOOLING SYSTEMS GROUP

Tooling Systems manufactures precision tool holders, boring tools, electronic
tool management systems and work holding chucks for use in tooling a wide range
of metal cutting machine tools and machining centers, including manual,
multiple spindle and general purpose machines along with CNC machining





                                       5
<PAGE>   6

centers, with and without automatic tool changers, and all types of lathes.
Tooling Systems includes the product offerings of Universal Engineering,
DeVlieg-Microbore and Cushman Industries.  These product names have been
continuously present in their markets for over 50 years.

Tool Holders.  The primary focus of Tooling Systems is on the design and
manufacture of precision engineered tool holders and accessories.  The products
are used in metal cutting machine tools, including tooling for manual machines,
proprietary Kwik Switch tooling systems, tooling systems for high production
dial and transfer machines, and tooling for CNC machining centers.  Tool
holders and accessories provide the link between the drive shaft and the
cutting surface of machine tools, and are required to hold tolerances of up to
 .0001 of an inch.  The selling prices for tool holders range from $50 to $800.

Boring Tools.  Through its Microbore product line, Tooling Systems provides an
expanded line of standard and custom designed adjustable cartridge-type boring
tools used to cut, drill or bore metal and other parts.  The Microbore product
line of boring tools provides rigidity and allows for rapid dimensional changes
while maintaining precise tolerance levels.  The selling prices for boring
tools range from $125 to $10,000.

Electronic Tool Management Systems.  Tooling Systems also supplies electronic
tool management systems, consisting of optical preset machines, which utilize
photosensitive reading heads to determine the length and diameter of the tool
boring set.  Employing custom designed software packages, these machines preset
and provide inventory control and a range of data for tooling away from the
machining center, thereby assuring fast, accurate set-up and changeovers on CNC
machining centers.  The selling prices for these products are from $15,000 and
up.

Work Holding Systems.  Through its Cushman product line, Tooling Systems
supplies Cushman chucks and work holding products to assist customers with
holding parts and tools.  Chucks and work holding products range from manual
and power chucks, super spacers, jaws, as well as special designs and rebuild
services.  The selling prices of chucks range from $500 to $50,000.

Products offered by Tooling Systems are sold to users of precision metal
cutting machine tools, including the automotive, aerospace, defense,
construction and equipment manufacturing industries.  The automotive industry
is Tooling Systems' largest customer source, representing approximately 45% of
Tooling Systems' net sales in fiscal year 1996.  Tooling Systems provides its
customers with a range of catalog products as well as special engineered
products.  In this regard, Tooling Systems employs six engineers to work
directly with customer design engineers and purchasing agents to provide
solutions for unique tooling applications.

Substantially all of Tooling Systems' product line is sold by approximately 350
nonexclusive distributors located throughout the United States.  A direct sales
force assists the distributors and sells a portion of the product line directly
to original equipment manufacturers.  Tooling Systems' direct sales force is
paid a salary plus commission.

Tooling Systems offers no express warranty with respect to its tool holders and
boring tools.  With respect to its electronic tool management systems, Tooling
Systems' warranty policy provides a one-year warranty on parts and labor for
defects of workmanship or material.

The basic raw material employed in the manufacturing process used by Tooling
Systems is steel bar stock, which is available from a number of sources.
Tooling Systems is not dependent on any one supplier and has not experienced
difficulty in obtaining necessary raw materials.

INDUSTRIAL GROUP

POWERMATIC.  Powermatic manufactures and markets a broad line of high quality,
stationary power tools, and related replacement parts and accessories, each
used primarily in the woodworking and metalworking industries.  Powermatic
offers a line of stationary tools for both industrial use and for home
hobbyists (the "Artisan" line).





                                       6
<PAGE>   7

Industrial Product Line.  The primary focus of Powermatic is on the design,
manufacture and distribution of high quality, manually operated stationary
woodworking power tools and repair parts, including table saws, shapers,
bandsaws, drill presses, planers and jointers.  Powermatic's industrial product
line is marketed primarily to manufacturers of millwork items, cabinetry and
furniture as well as educational and institutional markets for use in
industrial arts and vocational training.  Powermatic also produces a line of
manually operated stationary metalworking machines and related replacement
parts and accessories.  These products are marketed primarily to machine,
maintenance and tool and die shops.

During fiscal 1996, approximately 90% of the products comprising the industrial
line were designed and manufactured by Powermatic.  The remaining industrial
products are manufactured to Powermatic's specifications by firms located in
Taiwan, Italy and the United States.  The Company believes there are
alternative sources of supply for its industrial line products.  The selling
prices for Powermatic's industrial line products range from $500 to $20,000.

Artisan Product Line.  The Artisan product line was introduced in February 1989
with five high quality, stationary woodworking power tools primarily for the
light industrial market and the home hobbyist.  Today, the Artisan product line
consists of ten different woodworking products.  These products are
manufactured by Taiwanese suppliers to Powermatic's specifications.  The
Company believes there are alternative sources of supply for its Artisan
product line.  The selling prices for Powermatic's Artisan line products range
from $100 to $1,200.

Powermatic's Industrial and Artisan product lines are sold through
approximately 650 nonexclusive distributors located throughout the United
States.  Powermatic's district sales managers are paid a salary plus commission
and its manufacturing representatives are paid on a commission-only basis.

Powermatic's warranty policy covers all of its manufactured products and
generally provides a warranty on parts and labor of one year or 2,000 hours of
use, whichever occurs first.

SEASONALITY

The Company's business is subject to certain seasonal fluctuations in sales,
with a pattern of net sales being lower in December due to plant closings
during the holidays and in the summer months due to customer shutdowns,
vacations and less activity from the home hobbyist.

COMPETITION

SERVICES GROUP

The market for aftermarket products and services for the machine tools serviced
by the Company is  competitive, with competition from numerous independent
parts, service and rebuild suppliers with various sales and resource levels.
Management believes the Company has a competitive advantage with respect to the
DeVlieg, Bullard, American Tool, Brown & Sharpe, Futurmill, New Britain
Machine, Rockford and White-Sundstrand brand machine tools because the Company
owns an estimated 200,000 drawings and all other documents and customer lists
related to such machine tools, and employs skilled personnel who have been
trained for and have experience with these products.  As a result, management
believes the Services Group has a dominant market share with respect to
providing services for these brands of machine tools.

Principal competitive factors for the Services Group's products and services
are customer service and technical support, delivery times, price and
proprietary technology.

NATIONAL ACME

National Acme was inventor of the multiple spindle automatic bar and chucking
machines in 1896.  Since that time, National Acme has sold more multiple
spindle automatics than any other company.  The market is competitive with
competition coming from a number of companies both domestically and
internationally.  The Company believes National Acme's competitive advantages
are based on the durability of its machines, the large installed base of
machines and its technical expertise.  To complement its durability, National
Acme has developed a new high precision design with a unique carrier holding
feature, which allows





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<PAGE>   8

customers to produce parts with substantially increased accuracy at faster
speeds.  The new design will provide advantages with both its accuracy and 
speed.

A large number of small companies compete in the Aftermarket business.
Principal competitive factors are proprietary technology, technical support,
delivery and price.

TOOLING SYSTEMS GROUP

The market for Tooling Systems' product lines is highly competitive.  There are
a number of companies which manufacture precision tool holding devices and
other products within Tooling Systems' product lines that have greater sales
and financial resources than the Company.  However, management believes that
Tooling Systems is one of the largest domestic manufacturers whose primary
focus is on the design and manufacture of precision tool holding, boring,
electronic tool management system and work holding products.  Principal
competitive factors for precision tooling products are product quality,
delivery, service and price.

INDUSTRIAL GROUP

The market for Powermatic products is also highly competitive, with substantial
competition from both domestic and foreign manufacturers, many of which have
significantly greater sales and financial resources than the Company.
Principal competitive factors for Powermatic's product lines include product
quality, delivery, service and price.

PATENTS AND TRADEMARKS

The Company possesses rights to over 200 domestic and foreign patents and
trademarks relating to its businesses.  While the Company considers its patents
and trademarks important in the operation of its business, its business is not
dependent on any single patent or trademark or group of patents or trademarks.
However, the Company considers the following trademarks to be important to its
business: Acme-Gridley(R), American Tool(R), Artisan(R), Belsaw(R), Brown &
Sharpe(R), Bullard(R), Cushman(R), DeVlieg(R), Futurmill(R), Microbore(R), New
Britain Machine(R), Powermatic(R), Universal Engineering(R) and
White-Sundstrand(R).  The Company licenses the White-Sundstrand(R) trademark
from Sundstrand Corporation under an agreement which will expire in 2008.  The
Company sublicenses the Belsaw(R) trademark from C.B. Tool & Supply, Inc. under
an agreement which will expire in 2001.  The Company licenses the Brown &
Sharpe(R) trademark from Brown & Sharpe Manufacturing Company under an
agreement which expires in 1998.  The DeVlieg(R) and Microbore(R) trademarks
are licensed from D.V. Associates, L.P. pursuant to a license agreement, and
the Company's rights thereto are subject to its payment of certain license
fees.  The Company holds an option to purchase such trademarks from D.V.
Associates, L.P.

EMPLOYEES

As of July 31, 1996, the Company had approximately 900 employees, approximately
540 of whom were hourly employees and 360 of whom were salaried employees.
Approximately 125 hourly employees at the Tooling Systems Group in Frankenmuth,
Michigan are covered by a collective bargaining agreement expiring in May 1997.
Approximately 130 hourly employees at the Powermatic Division in McMinnville,
Tennessee are covered by a collective bargaining agreement expiring in July
1998.  Approximately 195 employees at National Acme in Cleveland, Ohio are
covered by a collective bargaining agreement expiring in October 1997.

ENVIRONMENTAL MATTERS

The Company, and the industry in which it competes, are subject to
environmental laws and regulations concerning emissions to the air, discharges
to waterways, and the generation, handling, storage, transportation, treatment
and disposal of waste materials.  These laws and regulations are constantly
evolving and the Company cannot predict accurately the effect they will have on
the Company in the future.  It is the Company's policy to comply with all
applicable environmental, health and safety laws and regulations.  In many
instances, the implementing regulations have not been finalized.  Even where
regulations have been adopted, they are subject to varying and conflicting
interpretations and





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<PAGE>   9

implementation.  In some cases, compliance can only be achieved by capital
expenditures.  The Company cannot accurately predict what capital expenditures,
if any, may be required.

Management believes that all operations conducted by the Company are in all
material respects in compliance with all applicable laws and regulations
relating to environmental matters.

EXECUTIVE OFFICERS

The following table sets forth certain information regarding the executive
officers of the Company:

<TABLE>
<CAPTION>
          Name                       Age             Position with Company
          ----                       ---             ---------------------
   <S>                               <C>          <C>
   William O. Thomas                 55           President and Chief Executive
                                                  Officer and Director

   Lawrence M. Murray                54           Vice President and Chief
                                                  Financial Officer
</TABLE>


Officers are elected by the Board of Directors.  There are no family
relationships among any officers.

The following is a brief summary of the business experience of the executive
officers of the Company:

William O. Thomas has been a Director of the Company since 1986, served as its
Chairman from 1986 to December 1989 and served as its Vice Chairman from
December 1989 until March 2, 1992.  Effective March 2, 1992, Mr. Thomas was
elected President and Chief Executive Officer of the Company.  Mr. Thomas is
currently a Director of Sanitas, Inc.  He received his B.S. degree from Purdue
University.

Lawrence M. Murray was elected as Vice President, Chief Financial Officer and
Secretary of the Company effective June 15, 1992, and has served in these
capacities since then, except that, from December 15, 1993 to June 13, 1996, he
served as Assistant Secretary.  From 1985 until 1992, Mr. Murray served as Vice
President and Chief Financial Officer of Sanitas, Inc.  He is currently a
Director of Sanitas, Inc.  Mr. Murray received his B.S. and M.B.A. degrees from
Indiana University.





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<PAGE>   10
ITEM 2.          PROPERTIES

The Company, headquartered in Westport, Connecticut, conducts its operations at
facilities located in California, Connecticut, Illinois, Michigan, Ohio,
Pennsylvania, Tennessee, the United Kingdom and Germany (50% owned joint
venture).  The Company currently operates one shift a day, five days a week
with workforce and workweek adjustments made as required.  Management believes
that the Company's facilities are in good condition and provide adequate
capacity to meet the Company's needs for the foreseeable future.  The following
table sets forth certain information relating to the Company's principal
facilities:

<TABLE>
<CAPTION>
                                    Approx.                                         Owned/Leased
                                  Floor Area                                        (Expiration
Location                          in Sq. Ft.        Principal Uses                 Date if Leased)
--------                          ----------        --------------                 ---------------
<S>                                <C>         <C>                                  <C>
DEVLIEG-BULLARD, INC.:             
  Westport, CT                       5,300     Corporate Headquarters               Leased (2002)

SERVICES GROUP:                    
  Parts:                           
  Rockford, IL                      60,000     Administrative offices;              Leased (1999)
                                               warehousing of repair parts

  Madison Heights, MI               10,000     Warehousing of repair parts          Leased (1997)

  Remanufacturing:                 
  Twinsburg, OH                     50,000     Remanufacturing                      Leased (2002)

  Abbottstown, PA                   13,000     Administrative offices;              Owned
                                               Remanufacturing; field service
                                               support and sales

  Cromwell, CT                      44,600     Administrative offices;              Leased (1997)
                                               remanufacturing

  Huntington Beach, CA               7,400     Field service support and sales      Leased (1998)

NATIONAL ACME:                     
  Cleveland, OH                    559,700     Administrative offices and           Owned
                                               manufacturing

  Fremont, OH                       56,000     Warehouse and distribution center    Leased (1996)

TOOLING SYSTEMS GROUP:             
  Frankenmuth, MI                  100,000     Administrative offices; design       Leased (2006)
                                               and manufacture of tooling
                                               products

  Gladwin, MI                       40,000     Manufacturing, shipping and          Owned
                                               assembly

  Lutterworth, UK                    8,500     Sales offices, warehousing of        Leased (1997)
                                               repair parts
INDUSTRIAL GROUP:                  
  Powermatic:                      
  McMinnville, TN                  217,200     Administrative offices and           Leased (2006)
                                               manufacturing

  McMinnville, TN                   59,800     Foundry; administrative offices;     Leased (2006)
                                               and production
</TABLE>


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<PAGE>   11
ITEM 3.          LEGAL PROCEEDINGS

On March 2, 1992, a purported class action suit was filed in the United States
District Court for the District of Connecticut against the Company, Stanwich
Oil & Gas, Inc., the First Boston Corporation and certain of the Company's
officers and directors.  The suit alleged violations of the federal securities
laws and state and federal common law in connection with alleged
misrepresentations and omissions made by the Company in connection with its
initial public offering in March 1990 and in certain reports later issued by
the Company.  While management believes the allegations were without merit, in
March 1996 the Company and all the remaining defendants, collectively, reached
a settlement of the suit with representatives of the purported class.  Under
the terms of the settlement, the defendants collectively would pay a total of
approximately $1.5 million over approximately five months.  The Company accrued
$2.4 million in fiscal 1996 for the settlement and related litigation costs.
The settlement was approved by the court at a hearing on July 19, 1996.
Management believes the settlement to be in the best interest of the Company
and its shareholders.

On November 3, 1995, a jury rendered a verdict against the Company in the net
amount of approximately $1.3 million, plus interest, relating to a civil suit
filed against the Company in Supreme Court for the State of New York, County of
Erie, styled Watson Bowman Acme Corp. v. DeVlieg-Bullard, Inc.  A final
determination of the amount of the judgment has not been made at this time.
The plaintiff had alleged losses resulting from a breach of contract by the
Company, as successor to DeVlieg-Lyons Integrated Systems, Inc., in connection
with the delivery to the plaintiff of a CNC Milling Machine.  The suit was
originally filed on November 21, 1991.  The Company had countersued for the
remaining balance due under the contract of approximately $280 thousand.

The Company believes that the jury's verdict in this case failed to consider
material evidence in the case that indicates that the Company was not in breach
of the contract; a Notice of Appeal was filed on February 9, 1996.  No
assurance can be given that such appeal will be successful.  Accordingly, the
Company made an accrual in fiscal 1996 in the amount of $2.2 million for the
jury's verdict, plus interest and other costs.

The Company is also involved in litigation and proceedings, including product
liability claims, in the ordinary course of its business.  The Company does not
believe that the outcome of such litigation will have a material adverse effect
upon the Company, after taking into account any proceeds of available insurance.

ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.





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<PAGE>   12
                                    PART II

ITEM 5.          MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
                 MATTERS

The Company's common stock trades on the NASDAQ Stock Market under the symbol
"DVLG."  The following table sets forth the high and low sales prices for the
shares of common stock as reported in the NASDAQ National Market System for
each quarterly period of the last two fiscal years.

<TABLE>
<CAPTION>
                                                         High          Low
                                                         ----          ---
<S>                           <C>                       <C>           <C>
For Fiscal Year 1996
--------------------
Quarter ended:                July 31                   $ 2.875       $ 2.25
                              April 30                    2.75          2.00
                              January 31                  2.6875        1.875
                              October 31                  3.125         1.6875

For Fiscal Year 1995                              
--------------------
Quarter ended:                July 31                   $ 2.125       $ 1.25
                              April 30                    2.50          1.625
                              January 31                  1.875         1.375
                              October 31                  2.00          1.125
</TABLE>                                           
                                                   
The Company has not declared any cash dividends on the common stock since
inception.  Declaration of dividends with respect to the common stock is at the
discretion of the Board of Directors.  Any determination to pay dividends will
depend upon the financial condition, capital requirements, results of 
operations and other factors deemed relevant by the Board of Directors.  The
declaration of dividends is subject to certain restrictive covenants contained
in the Company's loan agreements.  See Notes 7 and 8 of Notes to the Company
Financial Statements.

The Company had 149 holders of record (not including individual participants in
securities position listings) of its common stock as of July 31, 1996, 
representing approximately 1,100 individual participants.

The transfer agent and registrar for the common stock is The First National 
Bank of Boston.


                                       12
<PAGE>   13

ITEM 6.          SELECTED FINANCIAL DATA

The following selected historical data presented for each of the five years in
the period ended July 31, 1996, and as of the end of each of the five years in
the period ended July 31, 1996, are derived from the Company Financial
Statements.  The following data should be read in conjunction with "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Item 8 - Financial Statements and Supplementary Data."

<TABLE>
<CAPTION>
                                                                  DEVLIEG-BULLARD, INC. (c)
                                                           (in thousands, except per share data)
                                                1996 (a)    1995 (b)      1994        1993 (d)     1992 (e)
                                                --------    --------      ----        --------     --------
     <S>                                       <C>          <C>         <C>           <C>           <C>
     RESULTS OF OPERATIONS (C):
     Net sales                                 $113,314     $78,150     $63,619       $58,604      $64,268
     Gross profit                                31,459      22,155      18,079        18,111       13,338
     Operating profit (loss)                      8,308       5,243       2,790         3,521       (5,925)
     Nonrecurring charges                         4,600       1,500           -             -        6,392
     Income (loss) from continuing
     operations                                   3,635       3,405       2,832         2,821      (12,372)
       before interest and taxes
     Income (loss) from                            (717)      1,393       1,579         1,652      (13,583)
       continuing operations
     Net income (loss)                             (717)      1,393       1,579         7,490      (10,838)
     Income (loss) per common share:
       Continuing operations                   $  (0.06)    $  0.11     $  0.13       $  0.13      $ (1.16)

       Net income (loss)                          (0.06)       0.11        0.13          0.61        (0.94)
     Average common shares and
       equivalents outstanding                   12,250      13,257      12,436        12,250       12,250
     ASSETS AND CAPITAL:
     Total current assets                      $ 61,509     $36,321     $33,462       $30,030      $33,747
     Property, plant and equipment               13,306       6,876       6,340         6,637        7,899
     Total assets                               119,803      66,232      51,263        45,056       48,903
     Revolving credit agreement                  19,195      12,115           -        10,811       15,247
     Total current liabilities                   48,515      25,490      12,474        23,305       37,724
     Long-term debt                              15,175      13,639      14,577         2,949        1,003
     Total liabilities                           98,219      45,662      33,887        33,627       39,755
     Stockholders' equity                        21,584      20,570      17,376        11,429        9,148

</TABLE>

(a)  On October 23, 1995, the Company acquired The National Acme Company.
     This acquisition was accounted for as a purchase.  See Note 2 of Notes
     to the Company Financial Statements.

     Fiscal 1996 also includes nonrecurring charges of $4,600 for
     litigation settlements (see "Item 3 - Legal Proceedings").

(b)  On September 9, 1994, the Company acquired specified assets of Cushman
     Industries, Inc.  On November 30, 1994, the Company acquired H.B.
     Industries, Inc.  On January 23, 1995, the Company acquired
     substantially all of the assets of Mideastern, Inc.  These
     acquisitions were accounted for as purchases.  See Note 2 of Notes to
     the Company Financial Statements.

     Fiscal 1995 also includes nonrecurring charges of $1,500 for a
     litigation settlement.

(c)  On November 24, 1992, the Company sold the assets of its Penberthy,
     Inc. subsidiary.  Accordingly, Penberthy has been reflected as a
     discontinued operation for periods presented and fiscal 1993 and 1992
     results of operations have been restated, but assets and capital have
     not been restated.

(d)  Effective August 1, 1992, the Company adopted Financial Accounting
     Standard No. 106, "Employers' Accounting for Postretirement Benefits
     Other Than Pensions."  As a result, the Company recorded a one-time,
     non-cash charge of $4,588 representing the cumulative effect of this
     accounting change and increased expenses for postretirement benefits
     by $191 for the 1993 fiscal year.  Also, effective August 1, 1992, the
     Company adopted Financial Accounting Standard No. 109, "Accounting for
     Income Taxes."

     On March 23, 1993, the Company acquired the Brown & Sharpe grinding
     machine business from Brown & Sharpe Manufacturing Company.  The
     acquisition was accounted for as a purchase.

(e)  Fiscal 1992 includes nonrecurring charges of $6,392 related to certain
     restructuring activities.  Additionally, charges of $3,545 related to
     inventory obsolescence were included in cost of sales.





                                       13
<PAGE>   14

ITEM 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS

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

OVERVIEW OF RESULTS
Fiscal 1996 was a year of growth in sales and earnings for the Company.  The
Company also continued to benefit from the cost reduction and process
improvement programs undertaken in fiscal years 1992-1996.  In addition to
modest growth in the Company's operating groups, the National Acme acquisition,
which occurred during the year, contributed $29,570 in sales and $2,949 in
operating profit to the overall results.

ACQUISITION  (See Note 2 of Notes to the Company Financial Statements)
On October 23, 1995, the Company purchased The National Acme Company.  National
Acme, located in Cleveland, Ohio, is a leading manufacturer of multiple spindle
automatic bar and chucking machines, marketed under the trade name Acme-
Gridley, as well as a supplier of related aftermarket parts and services.  This
acquisition further strengthens the Company's original equipment offerings and
provides a base for further growth of the original equipment and related parts
and service business.

RESULTS OF OPERATIONS
The following table sets forth selected items from the Statements of Operations
as a percentage of the Company's net sales for the periods indicated.  The
discussion which follows should be read in conjunction with the Company's
Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
                                            Fiscal year ended July 31,
                                             1996      1995     1994
                                             ----      ----     ----
<S>                                          <C>       <C>      <C>
Net sales                                    100.0%    100.0%   100.0%
Cost of sales                                 72.2      71.7     71.6
Gross profit                                  27.8      28.3     28.4
Operating expenses                            20.4      21.6     24.0
Operating profit                               7.3       6.7      4.4
Nonrecurring charges                           4.1       1.9      -
Net income                                    (0.6)      1.8      2.5
</TABLE>

FISCAL 1996 COMPARED TO FISCAL 1995.

SALES
Net sales for fiscal 1996 were $113,314 compared to $78,150 for fiscal 1995, an
increase of $35,164, or 45.0%.  The acquisition of National Acme added $29,570
to net sales.  Net sales for fiscal 1996 for the Services Group increased
$4,316, or 12.4%, and the Industrial Group increased $1,539, or 6.9%, while the
Tooling Systems Group had a slight decrease of $261, or approximately 1%.

GROSS PROFIT
Gross profit for fiscal 1996 was $31,459 compared to $22,155 in fiscal 1995, an
increase of $9,304, or 42.0%.  The increase is primarily the result of the
acquisition of National Acme, which added $8,163 in gross profit.  The Services
Group increased $1,264, or 11.4%, and the Industrial Group increased $628, or
12.1%, offset by a reduction in gross profit in the Tooling Systems Group of
$751.  Gross profit as a percent of sales was 27.8% in fiscal 1996 as compared
with 28.3% in fiscal 1995.  The decrease in gross margin as a percent of net
sales is primarily due to the decline in the Tooling Systems Group, which was
24.3% in fiscal 1996 as compared with 27.6% in fiscal 1995, primarily due to
the assimilation of the Cushman business acquired in fiscal 1995.

OPERATING EXPENSES
Operating expenses in fiscal 1996 were $23,151 compared to $16,912 in the prior
year, an increase of $6,239.  The increase is primarily due to the acquisition
of National Acme, which increased operating expenses by $5,214.  As a percent
of net sales, operating expenses were 20.4% compared with 21.6% in the prior
year.





                                       14
<PAGE>   15

OTHER EXPENSES
Other expenses were $73 in fiscal 1996, compared to $338 in fiscal 1995.  The
fiscal 1995 expenses included $372 in costs associated with an unsuccessful
acquisition and $300 in royalty fees, offset by a $305 gain on the sale of land
held for disposition.

NONRECURRING CHARGES
Litigation expenses of $4,600 were recorded during fiscal 1996.  Of these
expenses, $2,200 relates to an adverse judgment rendered in a breach of
contract suit.  Although the Company accrued for the full jury verdict, plus
interest and other legal costs, it has filed a Notice of Appeal against the
verdict on the grounds that the jury's verdict was against the weight of the
evidence.  The balance of $2,400 is for legal costs incurred in connection with
the settlement of the class action suit filed in 1992.  The litigation alleged
violations of the federal securities laws and state and federal common law in
connection with the Company's initial public offering in March 1990.  The
Company, Stanwich Oil & Gas, Inc., the First Boston Corporation and certain of
the Company's officers and directors were included as defendants in the suit.
While management believes the allegations in the lawsuit were without merit,
the Company agreed to settlement to avoid continued litigation costs related to
the suit.  See "Item 3 - Lease Proceedings."  See also Note 10 of Notes to the
Company Financial Statements for a discussion of the Class B Stock Purchase
Warrants.

The Company incurred a $1,500 litigation settlement charge in fiscal 1995.  The
litigation had sought in excess of $10 million in damages and alleged
violations of state fraudulent conveyance statutes in connection with the
acquisition by the Company of certain assets of DeVlieg, Inc., in September
1988 and March 1990.  The Company, certain of its present and former officers
and directors and several unrelated third parties were included as defendants
in the suit.  While management believed the allegations in the lawsuit were
without merit, the Company agreed to settlement to avoid continued litigation
costs related to the suit.

INTEREST EXPENSE
Interest expense was $4,404 in fiscal 1996 compared to $2,594 in fiscal 1995,
an increase of $1,810.  The increase in interest expense is attributable to a
higher outstanding debt balance, primarily due to the acquisition of National
Acme (see Note 2 of Notes to the Company Financial Statements) and higher
effective interest rates.

INCOME TAXES
The income tax benefit was $52 and $582 for fiscal 1996 and 1995, respectively.
The income tax benefit recorded in fiscal 1996 relates to the loss recorded in
fiscal 1996 as a result of the litigation expenses for the year.  The fiscal
1995 tax benefit is primarily due to the Company's release of $2,962 of its
valuation allowance previously recorded against deferred tax assets.  This
amount was released based on expectations of continued profitability.  Of the
released valuation allowance, $1,189 was included in the benefit for income
taxes on the statement of operations and $1,773 was credited to the balance
sheet account "Excess purchase price over net assets from the Services Group
acquisition."

FISCAL 1995 COMPARED TO FISCAL 1994.

SALES
Net sales for fiscal 1995 were $78,150 compared to $63,619 for fiscal 1994, an
increase of $14,531, or 22.8%, reflecting increases in all of the Company's
operating groups.  The increase in net sales by operating group consisted of
$6,653, or 23.7%, in the Services Group; $4,369, or 25.9%, in the Tooling
Systems Group; and $3,509, or 18.8%, in the Industrial Group.  The Industrial
Group increase is especially noteworthy given that a three-week strike reduced
sales by an estimated $700 during the fourth quarter of fiscal 1995.  The
Industrial Group entered into a new collective bargaining agreement with the
United Steelworkers of America, which expires on July 1, 1998.  Fiscal 1995
results include additions from acquired businesses as follows:  Cushman added
$3,494 to the Tooling Systems Group and Ed Smith and Mideastern added $1,161
and $2,995, respectively, to the Services Group.  Excluding the sales added by
acquired business, the Services Group net sales increased $2,497, or 8.9%,
compared to the prior year, reflecting increases in its Parts and
Remanufacturing Operations.  The Tooling Systems Group's net sales, excluding
the addition from Cushman, were $875, or 5.2%, higher than fiscal 1994.





                                       15
<PAGE>   16

GROSS PROFIT
Gross profit for fiscal 1995 was $22,155 compared to $18,079 in fiscal 1994, an
increase of $4,076, or 22.6%, reflecting increases in each operating group.
Gross profit as a percentage of net sales was 28.3% and 28.4% in fiscal 1995
and 1994, respectively, with increases in the Services Group, offset by
declines in the Tooling Systems and Industrial Groups.

OPERATING EXPENSES
Operating expenses in fiscal 1995 were $16,912, or 21.6% of net sales, compared
to $15,289, or 24.0% of net sales, in fiscal 1994.  Operating expenses in
fiscal 1995 exceeded prior year levels due to the higher sales volume and costs
added by acquired businesses.

OTHER EXPENSES
Other expenses were $338 in fiscal 1995 compared with income of $42 in fiscal
1994.  The fiscal 1995 amount includes $372 in costs associated with an
unsuccessful acquisition and $300 in royalty fees, offset by a $305 gain on the
sale of land held for disposition.

NONRECURRING CHARGES
In the second quarter of fiscal 1995, the Company settled for $1,500 a civil
suit filed by a committee of unsecured creditors of DeVlieg, Inc. and
debtor-in-possession, DeVlieg, Inc. 

INTEREST EXPENSE
Interest expense was $2,594 in fiscal 1995 compared to $1,345 in fiscal 1994,
an increase of $1,249.  The increase in interest expense was due to higher
average outstanding debt balances, primarily due to acquisitions, and higher
effective interest rates, particularly on the Company's subordinated debentures
which were issued in May 1994.

INCOME TAXES
The fiscal 1995 income tax benefit was $582 compared to a $92 benefit in fiscal
1994.  The fiscal 1995 income tax benefit is primarily due to the Company's
release in the second quarter of fiscal 1995 of $2,962 of its valuation
allowance previously recorded against deferred tax assets.  This amount was
released based on expectations of continued profitability.  Of the released
valuation allowance, $1,189 was included in the benefit for income taxes on the
statement of operations and $1,773 was credited to the balance sheet account
"Excess purchase price over net assets from the Services Group acquisition."

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS
Historically, the Company's continuing operations have been financed by
internally generated funds.  Acquisitions have been funded with increases in
indebtedness, while funds from divestitures have generally been used to reduce
indebtedness (see Note 2 of Notes to the Company Financial Statements).

Net cash provided by operating activities was $3,494 in fiscal 1996 compared to
$1,363 in fiscal 1995, an increase of $2,131.  Included in these results is
$2,329 in payments made against the $4,600 accrued for litigation settlement
(see "Item 3 - Legal Proceedings").  Net of these items, cash flow from
operating activities would have been $5,823.

Cash used for capital expenditures was $1,138, $970 and $1,020, in fiscal 1996,
1995, and 1994, respectively.  The Company currently has no material
commitments for specific capital expenditures.

Cash of $10,656 was used in fiscal 1996 for the National Acme acquisition.
During fiscal 1995, $12,151 of cash was used for acquisitions.

FINANCING AND INVESTING
The balance outstanding under the Company's revolving credit agreement was
$19,195 at July 31, 1996, compared to $12,115 at July 31, 1995.  Long-term
debt, including current maturities, at July 31, 1996, was $18,107, compared to
$15,788 at July 31, 1995, an increase of $2,319.  The Company's total
indebtedness was $37,302 and $27,903 at July 31, 1996, and 1995, respectively,
an increase of $9,399.





                                       16
<PAGE>   17

Cash and equivalents at July 31, 1996 was $768, an increase of $353 compared to
July 31, 1995.  Net cash provided by financing activities was $8,672 in fiscal
1996 compared to net cash provided by financing activities of $10,004 in the
prior year.

As outlined in Notes 7 and 8 of Notes to the Company Financial Statements, the
Company entered into a new $30,000 senior debt facility in October 1995, which
consisted of a $25,000 revolving credit agreement and a $5,000 term loan.  The
term loan requires monthly principal payments of $86 that began November 30,
1995.  Borrowings under this facility were used to repay the then existing
senior debt facility, to finance the National Acme acquisition (see Note 2 of
Notes to the Company Financial Statements) and to provide for working capital
requirements.  On April 12, 1996, the Company obtained a new term loan in the
amount of $3,000 to assist in the financing of the litigation costs (See "Item
3 - Legal Proceedings") and increased the senior credit facility to $32,000.
The new term loan requires monthly principal payments of $83 that began June
30, 1996.  The term loans require payments through September 30, 1998, with
final payments totalling $2,667 due on October 23, 1998.

The new senior debt facility aggregating approximately $32,000 at July 31,
1996, is comprised of $7,063 in term loans and a revolving credit agreement
which provides for borrowings up to $24,699.  Interest on the term loans is
payable monthly at 1.25% above prime rate or, at the Company's option, at
alternative rates based on LIBOR.  The effective rate based on LIBOR was 8.75%
at July 31, 1996.  As of July 31, 1996, the Company's new revolving credit
agreement, which matures on October 23, 1998, subject to renewal, permits
borrowings of up to $24,699 subject to collateral maintenance requirements.
Interest on outstanding borrowings under the revolving credit agreement is
payable monthly in arrears at 1% above the prime rate or, at the Company's
option, at alternative rates based on LIBOR.  The effective rate based on LIBOR
was 8.5% at July 31, 1996.  The amount the Company may borrow under the
revolving credit agreement is based upon a formula related to the Company's
eligible accounts receivable and inventories, reduced by outstanding letters of
credit.  Unused borrowings available at July 31, 1996, were $2,692, after
reduction for funds reserved for settlement of the litigation costs discussed
above.

Pursuant to the Subordinated debt facility, the Company issued Subordinated
Debentures in May 1994 in the principal amount of $12,000.  Of this amount,
$4,000 was replaced by Junior Subordinated Debt (see Note 8 of Notes to the
Company Financial Statements).  Interest payments on the Subordinated
Debentures of 11.5% per annum are payable quarterly in arrears commencing July
1, 1994.  The Subordinated Debentures provide for the repayment of principal of
$2,000 in fiscal 1999 and fiscal 2000 and $4,000 in fiscal 2001.  Interest on
the Junior Subordinated Debt accrues at 14.5%, and the cash interest of 11% per
annum is payable quarterly in arrears commencing January 1, 1996.  The Junior
Subordinated Debt provides for the repayment of principal of $4,000 and unpaid
interest in June 2001 or thirty days after the payment of the Subordinated
Debentures.

In connection with the issuance of the Subordinated Debentures in May 1994, the
Company issued the holders warrants to purchase one million shares of the
Company's common stock at $0.01 per share, which were valued at $1,750, and a
presently indeterminable number of additional shares at $0.01 per share, which
became available based upon the settlement of certain legal proceedings (see
Note 10 of Notes to the Company Financial Statements).  In addition, in
connection with the issuance of the Junior Subordinated Debt and refinancing of
the senior credit facility, the Company issued 500 additional Class A and 750
Class C stock purchase warrants (see Note 10 of Notes to the Company Financial
Statements).  These were valued at $1,750.

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

OUTLOOK
The following discussion includes certain forward-looking statements.  Actual
results could differ materially from those reflected by the forward-looking
statements contained in this document and a number of factors may affect future
results, liquidity and capital resources.  These factors include: the fact that
the Company derives a substantial portion of its sales from cyclical
industries, including the automotive, aerospace and housing industries; the
ability to introduce new products in a timely fashion; the pace of
technological changes effecting the products manufactured and services provided
by the Company; the Company's substantial debt service requirements, much of
which is based on variable rates; the





                                       17
<PAGE>   18

dependence of the Company's growth on acquisitions and the Company's ability to
finance such acquisitions and to profitably integrate the acquired
operations; the level of margins achievable in the markets served by the
Company; and the ability to continue to minimize operating expenses.  Although
the Company believes it has the business strategy and resources needed for
improved operations, future sales and margin trends cannot be reliably
predicted.

During the past two fiscal years, the Company has recorded pre-tax charges of
$6,100 to accrue for or settle three separate lawsuits which preceded or
resulted from the initial public offering in March 1990.  At this time, the
Company is not a party to any legal proceeding the outcome of which, in
management's opinion, would have a material adverse effect on the Company's
consolidated results of operations or financial position.

The Company actively seeks to expand by acquisition, as well as through the
growth of its present businesses.  A significant acquisition would require
additional borrowings.  There can be no assurance that the Company would be
able to obtain financing on acceptable terms.

IMPACT OF INFLATION
Management does not believe that inflation has had a material impact on the
Company's net sales or net income during the last three fiscal years.
Borrowings under the senior credit facility bear interest at short-term rates.
Increases in the prevailing rate of inflation could be accompanied by increases
in short-term interest rates, which could have an adverse impact on the
Company's net income and cash flow.





                                       18
<PAGE>   19

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Accountants

Balance Sheets
  July 31, 1996, and 1995

Statements of Operations
  Years ended July 31, 1996, 1995 and 1994

Statements of Cash Flows
  Years ended July 31, 1996, 1995 and 1994

Statements of Changes in Stockholders' Equity
  Years ended July 31, 1996, 1995 and 1994

Notes to the Company Financial Statements





                                       19
<PAGE>   20

                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and
Stockholders of DeVlieg-Bullard, Inc.


In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) on page 42 of this report present fairly, in all material
respects, the financial position of DeVlieg-Bullard, Inc., at July 31, 1996,
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended July 31, 1996, in conformity with generally
accepted accounting principles.  These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits.  We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for the opinion expressed above.



/s/ PRICE WATERHOUSE LLP

Stamford, Connecticut
September 4, 1996





                                       20
<PAGE>   21

DEVLIEG-BULLARD, INC.
BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                          July 31,
                                                                                  --------------------------
                                                                                  1996                  1995
                                                                                  ----                  ----
 <S>                                                                         <C>                   <C>
 ASSETS

 Current assets:
   Cash and cash equivalents                                                 $     768             $     415
   Accounts receivable                                                          17,505                12,634
   Inventories                                                                  42,071                22,421
   Prepaid expenses and other current assets                                     1,165                   851
                                                                             ---------             ---------
 Total current assets                                                           61,509                36,321
 Property, plant and equipment                                                  13,306                 6,876
 Engineering drawings                                                           18,366                 8,409
 Goodwill                                                                       11,472                 7,058
 Other assets                                                                   15,150                 7,568
                                                                             ---------             ---------

 Total assets                                                                $ 119,803             $  66,232
                                                                             =========             =========

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
   Accounts payable                                                          $   9,854             $   6,520
   Accrued expenses and other current liabilities                               16,534                 4,706
   Revolving credit agreement                                                   19,195                12,115
   Current maturities of long-term debt                                          2,932                 2,149
                                                                             ---------             ---------
 Total current liabilities                                                      48,515                25,490

 Long-term debt                                                                 15,175                13,639
 Postretirement benefit obligation                                              22,830                 5,022
 Other noncurrent liabilities                                                   11,699                 1,511
                                                                             ---------             ---------

 Total liabilities                                                              98,219                45,662
                                                                             ---------             ---------

 Commitments and contingencies (Note 15)

 Stockholders' equity:
   Common stock, $0.01 par value;
     authorized 30,000,000 shares;
     issued and outstanding 12,250,000                                             123                   123
   Additional paid-in capital                                                   34,049                32,299
   Excess purchase price over net assets from
     the Services Group acquisition                                            (16,358)              (16,358)
   Retained earnings                                                             3,946                 4,663
   Cumulative translation adjustment                                              (176)                 (157)
                                                                             ---------             ---------

 Total stockholders' equity                                                     21,584                20,570
                                                                             ---------             ---------

 Total liabilities and stockholders' equity                                  $ 119,803             $  66,232
                                                                             =========             ========= 
</TABLE>


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





                                       21
<PAGE>   22

DEVLIEG-BULLARD, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                            Year ended July 31,              
                                                            -------------------------------------------------
                                                            1996                 1995                    1994
                                                            ----                 ----                    ----
<S>                                                       <C>                   <C>                   <C>
Net sales                                                 $113,314              $78,150               $63,619
Cost of sales                                               81,855               55,995                45,540
                                                          --------              -------               -------
    Gross profit                                            31,459               22,155                18,079
                                                                                               
Operating expenses:                                                                            
  Engineering                                                1,623                1,083                 1,148
  Selling                                                   10,553                7,650                 6,613
  General and administrative                                10,975                8,179                 7,528
                                                          --------              -------               -------
Total operating expenses                                    23,151               16,912                15,289
                                                          --------              -------               -------
                                                                                               
Operating profit                                             8,308                5,243                 2,790
                                                                                               
Nonrecurring charges                                         4,600                1,500                     -
Other (income) expense, net                                     73                  338                   (42)
                                                          --------              -------               -------
                                                                                               
Income before interest and taxes                             3,635                3,405                 2,832
Interest expense                                             4,404                2,594                 1,345
                                                          --------              -------               -------
                                                                                               
Income (loss)  before income taxes                            (769)                 811                 1,487
(Benefit) for income taxes                                     (52)                (582)                  (92)
                                                          --------              -------               -------
                                                                                               
Net income (loss)                                         $   (717)             $ 1,393               $ 1,579
                                                          ========              =======               =======
                                                                                               
Income (loss) per common share                            $  (0.06)             $  0.11               $  0.13
                                                          ========              =======               =======
                                                                                               
Weighted average common shares and                                                             
equivalents outstanding                                     12,250               13,257                12,436
                                                          ========              =======               =======
</TABLE>



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





                                       22
<PAGE>   23

DEVLIEG-BULLARD, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               Year ended July 31,
                                                                 ----------------------------------------------
                                                                        1996           1995           1994
                                                                        ----           ----           ----
<S>                                                                <C>               <C>            <C>
Cash flows from operating activities:
Net income                                                         $    (717)        $ 1,393        $ 1,579
Adjustments to reconcile net income to net
    cash provided by operating activities:
    Depreciation and amortization                                      4,612           2,721          1,776
    Deferred income taxes                                               (636)         (2,181)        (2,878)
    Provision for losses on accounts receivable                          152             187            107
    Gain on disposal of other assets                                       -            (305)             -
    Net change in assets and liabilities:
       Accounts receivable                                               285            (793)          (887)
       Inventories                                                    (4,936)         (1,546)          (345)
       Prepaid expenses and other current assets                        (758)            643           (948)
       Accounts payable                                                1,402             414            587
       Accrued expenses and other current liabilities                  3,638            (623)          (762)
       Other, net                                                        452           1,453          2,505
                                                                   ---------         -------        -------

    Net cash provided by operating activities                          3,494           1,363            734
                                                                   ---------         -------        -------

Cash flows from investing activities:
   Acquisitions, net                                                 (10,656)        (12,151)             -
   Capital expenditures                                               (1,138)           (970)        (1,020)
   Proceeds from sale of other assets                                      -             487              -
                                                                   ---------         -------        -------

   Net cash (used for) investing activities                          (11,794)        (12,634)        (1,020)
                                                                   ---------         -------        -------

Cash flows from financing activities:
   Net borrowings (repayment) of revolving credit
     agreement                                                         7,080          12,115        (10,811)
   Payments of long-term debt                                         (5,193)         (2,111)        (1,492)
   Proceeds from issuance of long-term debt                            8,000               -         15,000
   Debt issuance costs                                                (1,215)              -         (1,035)
                                                                   ---------         -------        -------

   Net cash provided by financing activities                           8,672          10,004          1,662
                                                                   ---------         -------        -------

Effect of exchange rate changes on cash                                  (19)             28            (17)
                                                                   ---------         -------        -------

Net change in cash and cash equivalents                                  353          (1,239)         1,359
Cash and cash equivalents at beginning of period                         415           1,654            295
                                                                   ---------         -------        -------
Cash and cash equivalents at end of period                         $     768         $   415        $ 1,654
                                                                   =========         =======        =======
</TABLE>



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





                                       23
<PAGE>   24

Supplemental disclosures of cash flow information:

<TABLE>
<CAPTION>
                                                                             Year ended July 31,         
                                                                 ----------------------------------------
                                                                      1996            1995           1994
                                                                      ----            ----           ----
   <S>                                                              <C>             <C>            <C>
   Cash paid during the period for:
     Interest                                                       $3,808          $2,397         $1,284
     Income taxes, net of refunds                                      (83)           (445)          (852)
</TABLE>

Supplemental schedule of non-cash investing and financing information:

During fiscal 1996, the Company assumed liabilities in the amount of $38,781 in
connection with the acquisition of The National Acme Company.

During fiscal 1995, the Company issued $1,277 of debt and assumed liabilities
in the amount of $1,048 in connection with the acquisitions (see Note 2).

In Connection with the consent by the holders of the $12,000 principal amount
of subordinated debentures to the acquisition of National Acme and to the
refinancing of the Company's senior credit facility and to the refinancing of
$4,000 principal amount of such subordinated debentures, the Company issued
stock purchase warrants valued at $1,750.  Such amount was credited to
Additional paid-in capital and charged as a discount to subordinated
debentures, reducing the carrying value of the debentures (see Note 10).

During fiscal 1994, the Company issued subordinated debentures with detachable
stock purchase warrants.  The fair market value of the warrants aggregated
$1,750.  Such amount was credited to Additional paid-in capital and charged as
a discount to subordinated debentures, reducing the carrying value of the
debentures (see Notes 10 and 12).

The amortization of the debt discount was $342, $190 and $25 in fiscal 1996,
1995 and 1994, respectively.

The Company's tax benefit related to the excess purchase price from the
Services Group acquisition reduces the Company's income tax liability (see Note
1).  Such amount included in fiscal 1996 and 1995 and 1994 is $0, $1,773, and
$2,635 respectively.

During fiscal 1996, 1995 and 1994, the Company entered into capital leases for
equipment totaling $471, $0, and $253 respectively, which were financed by
capital lease obligations.





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





                                       24
<PAGE>   25

DEVLIEG-BULLARD, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)


<TABLE>
<CAPTION>
                                                 Common                                                     
                                                 ------
                                                 Shares                     Additional          Excess      
                                                 ------                     ----------          ------
                                             Issued and          Common        Paid-in        Purchase      
                                             ----------          ------        -------        --------
                                            Outstanding           Stock        Capital           Price 
                                            -----------           -----        -------           -----
 Year ended                                                                                                 
 ----------
 July 31, 1996, 1995 & 1994                                                                                 
 --------------------------
 <S>                                             <C>               <C>         <C>            <C>           
 Balance, July 31, 1993                          12,250            $123        $30,549        $(20,766)     
                                                                                                            
 Net Income                                           -               -              -               -      
                                                                                                            
 Issuance of stock purchase warrants                  -               -          1,750               -      
 Tax benefit realized related to Excess                                                                     
   purchase price of Services Group                   -               -              -           2,635      
 Foreign currency translation adjustment              -               -              -               -       
                                                 ------            ----        -------        --------
                                                                                                            
 Balance, July 31, 1994                          12,250             123         32,299         (18,131)     
                                                                                                            
 Net Income                                           -               -              -               -      
 Tax benefit realized related to Excess                                                                     
   purchase price of Services Group                   -               -              -           1,773      
 Foreign currency translation adjustment              -               -              -               -
                                                 ------            ----        -------        --------
                                                                                                            
 Balance, July 31, 1995                          12,250             123         32,299         (16,358)     
                                                                                                            
 Net Income                                           -               -              -               -      
 Issuance of stock purchase warrants                  -               -          1,750               -      
 Foreign currency translation adjustment              -               -              -               -
                                                 ------            ----        -------        --------
                                                                                                            
 Balance, July 31, 1996                          12,250            $123        $34,049        $(16,358)     
                                                 ======            ====        =======        ========

<CAPTION>
                                                 Retained
                                                 --------
                                                 Earnings       Cumulative
                                                 --------       ----------
                                             (Accumulated      Translation
                                             ------------      -----------
                                                  Deficit)      Adjustment            Total
                                                  --------      ----------            -----
 Year ended                                 
-----------
 July 31, 1996, 1995 & 1994                 
 --------------------------                                           
 <S>                                               <C>               <C>            <C>                                            
 Balance, July 31, 1993                            $1,691            $(168)         $11,429
                                            
 Net Income                                         1,579                -            1,579

 Issuance of stock purchase warrants                    -                -            1,750
 Tax benefit realized related to Excess     
   purchase price of Services Group                     -                -            2,635
 Foreign currency translation adjustment                -              (17)             (17)
                                                   ------            -----          -------
                                            
 Balance, July 31, 1994                             3,270             (185)          17,376
                                            
 Net Income                                         1,393                -            1,393
 Tax benefit realized related to Excess     
   purchase price of Services Group                     -                -            1,773
 Foreign currency translation adjustment                -               28               28
                                                   ------            -----          -------
                                            
 Balance, July 31, 1995                             4,663             (157)          20,570
                                            
 Net Income                                          (717)               -             (717)
 Issuance of stock purchase warrants                    -                -            1,750
 Foreign currency translation adjustment                -              (19)             (19)
                                                   ------            -----          -------
                                            
 Balance, July 31, 1996                            $3,946            $(176)         $21,584
                                                   ======            =====          =======
</TABLE>



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





                                      25
<PAGE>   26

                             DEVLIEG-BULLARD, INC.
                   NOTES TO THE COMPANY FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF OPERATIONS
DeVlieg-Bullard, Inc. (the "Company"), is a diversified industrial concern
specializing in manufacturing, servicing, upgrading, automating and
remanufacturing precision engineered machine tools.  The Company also
manufactures sophisticated original and replacement tooling products used in
industrial machine tools and a variety of power tools for niche industrial
markets.  The Company conducts its business through four operating groups: the
Services Group, National Acme, the Tooling Systems Group and the Industrial
Group.

BASIS OF PRESENTATION
The financial statements include all accounts of the Company after elimination
of all significant interdivision transactions and balances.  Certain amounts in
the fiscal 1995 and 1994 financial statements have been reclassified to conform
with the fiscal 1996 presentation.  Amounts, except per share data, are
expressed in thousands.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an initial maturity of
three months or less to be cash equivalents.  The Company invests excess funds
in short-term, interest-bearing obligations.  When a balance is outstanding on
the Company's revolving credit agreement, all available cash is used to
decrease such outstanding balance.

INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined on the first-in, first-out basis.  Cost includes material, labor and
manufacturing overhead.  Approximately 40% of the total inventory value is
determined on the basis of the last-in, first-out (LIFO) method of inventory
accounting.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost.  Cost represents estimated
fair market value at date of acquisition for acquired businesses, or the
predecessor entity's net book value if acquired by the Company from a related
party.  Depreciation is computed over the estimated useful lives of the assets,
ranging from three to thirty-one years, by the straight-line method.  Assets
recorded under capital leases and leasehold improvements are amortized over the
shorter of their useful lives or the term of the related leases by use of the
straight-line method.  Depreciation for tax purposes is calculated in
accordance with applicable Internal Revenue Code provisions.

OTHER ASSETS
Intangible assets, consisting of engineering drawings and bills of material for
parts and machine assemblies, are amortized over their estimated useful lives,
ranging from ten to thirty years, using the straight-line method.  Goodwill,
the excess of purchase price over net assets acquired, is amortized over the
estimated useful lives, ranging from fifteen to thirty years.  Deferred
financing costs are amortized on a straight-line basis, which is not materially
different from the effective interest method, over the life of the related
indebtedness.

FOREIGN CURRENCY TRANSLATION
Foreign currency assets and liabilities are translated at exchange rates in
effect on reporting dates, and income and expenses are translated at rates in
effect on transaction dates.  The resulting differences due to changing
exchange rates are charged or credited directly to the "Cumulative translation
adjustment" account included as part of stockholders' equity.





                                       26
<PAGE>   27

REVENUE RECOGNITION
Revenue recognized on long-term contracts is based on the
percentage-of-completion method.  Deferred revenue from noncompetition
agreements is recognized over the contractual period of the agreement,
generally five years.  All other revenue is recognized when earned.

INCOME TAXES
The Company uses Financial Accounting Standards Board Statement No. 109 ("SFAS
109"), "Accounting for Income Taxes." SFAS 109 requires that deferred taxes be
established for all temporary differences between the book and tax bases of
assets and liabilities.

A portion of the assets and liabilities acquired by the Company from a related
party was recorded at the predecessor entity's net book value for financial
reporting purposes.  The difference between the fair value and the
predecessor's book value at the purchase date is reflected in the account
"Excess purchase price over net assets from the Services Group acquisition."
The tax benefit of the amortization of this difference is recorded upon
realization as an increase to stockholders' equity by reducing the account
"Excess purchase price over net assets from the Services Group acquisition."

INCOME (LOSS) PER SHARE
Income per share is computed by dividing net income available to common
stockholders by the weighted average number of common shares and equivalents
outstanding during the period.  Outstanding stock options, which are common
stock equivalents, are included in the calculation if they are dilutive.  Stock
purchase warrants, which are common stock equivalents, are included in the
calculation of income per share from the date of issuance (see Note 10).  Loss
per share is computed by dividing net loss by the weighted average number of
shares outstanding during the period.  Stock options and stock purchase
warrants are not considered in this calculation as they would be anti-dilutive.

NOTE 2 - ACQUISITIONS

NATIONAL ACME
On October 23, 1995, the Company acquired (the "Acquisition") all of the
outstanding stock of The National Acme Company, an Ohio corporation ("National
Acme").  Immediately following the consummation of the Acquisition, National
Acme was merged with and into the Company with the Company as the surviving
corporation.

The consideration paid for the Acquisition consisted of $8,987 at closing for
the outstanding stock of National Acme and in consideration for a noncompete
agreement, and $1,314 for additional purchase price adjustment in March 1996,
as well as closing costs.  The Company borrowed funds from its new senior debt
facility to finance the Acquisition (see Notes 7 and 8).

National Acme, located in Cleveland, Ohio, manufactures Acme-Gridley
multiple spindle automatic bar and chucking machines and supplies related
aftermarket parts and service.

The Acquisition was accounted for by the purchase method of accounting and,
accordingly, the purchase price has been allocated to the estimated fair market
value of net assets acquired based on information available at this time.  Such
amounts may change as additional information becomes available.  The excess of
purchase price over net assets acquired of $4,831 has been allocated to
goodwill and $10,695 to engineering drawings.  These amounts will be amortized
on a straight-line basis over thirty years.  The noncompete agreement of $1,400
will be amortized on the straight-line basis over ten years.  Liabilities of
$38,781 were assumed in connection with the Acquisition, primarily for
postretirement medical benefits ($20,559) and pension benefits ($10,926).  The
results of operations of National Acme have been included in the Company's
balance sheet starting with the second quarter of fiscal 1996.





                                       27
<PAGE>   28

The following pro forma information has been prepared assuming the acquisition
of National Acme had occurred on August 1, 1995 and 1994, respectively.

Pro forma results of operations:
<TABLE>
<CAPTION>
(unaudited - in thousands, except per share data)                          Year ended July 31,
                                                                    ------------------------------      
                                                                         1996                 1995
                                                                         ----                 ----
                      <S>                                            <C>                  <C>
                      Net sales                                      $121,798             $114,869
                                                                     ========             ========
                      Net income                                        $(598)              $1,290
                                                                        =====               ======
                      Net income per common share                     $ (0.05)               $0.09
                                                                      =======                =====
                      Average shares outstanding                       12,250               13,953
                                                                       ======               ======
</TABLE>

In preparing the unaudited pro forma summary of operations, adjustments were
made to the historical financial statements to reflect increases in the
revolving line of credit and interest expense; amortization of intangible
assets; depreciation of fixed asset write-up to fair market value; and other
estimated purchase accounting entries.  The pro forma results are not
necessarily indicative of what would have been obtained if the operations had
been combined during fiscal 1996 and 1995, nor are they necessarily indicative
of the results that may occur in the future.

CUSHMAN INDUSTRIES
On September 9, 1994, the Company acquired specified operating assets of
Cushman Industries, Inc. ("Cushman"), a company in Chapter 11 bankruptcy,
including accounts receivable, inventories, selected machinery and equipment,
trademarks and intellectual property from the Cushman Industries Liquidating
Trust which had been established for the benefit of Cushman creditors.  The
purchase price was approximately $3,100 and another $2,800 was recorded for the
relocation and consolidation of the Cushman operation into the Company's
manufacturing facility in Frankenmuth, Michigan.  The acquisition was accounted
for by the purchase method of accounting and, accordingly, the purchase price
has been allocated to the fair market value of net assets acquired.  The excess
purchase price over net tangible assets acquired has been allocated in the
amounts of $2,800 to engineering drawings and $2,000 to goodwill and is being
amortized on a straight-line basis over 30 years.  Cushman's results of
operations are included in the Company's financial statements from the date of
acquisition.  Cushman manufactures a broad line of manual and power chucks for
machine tool work holding applications.  The Company conducts this business as
part of its Tooling Systems Group.

H.B. INDUSTRIES, INC.
On November 30, 1994, the Company acquired all of the outstanding capital stock
of H.B. Industries, Inc., which conducts its business as Ed Smith Machinery
Sales ("Ed Smith").  Ed Smith sells replacement parts for the Bullard product
line of machine tools.  The purchase price was approximately $3,000.  The
acquisition was accounted for by the purchase method of accounting and,
accordingly, the purchase price has been allocated to the fair market value of
net assets acquired.  The excess purchase price over net assets acquired of
approximately $2,300 was recorded as goodwill and is being amortized on a
straight-line basis over a 15-year period.  Ed Smith's results of operations
are included in the Company's financial statements from the date of
acquisition.  The business is operated by the Company's Services Group.

MIDEASTERN
On January 23, 1995, the Company purchased substantially all of the assets and
assumed certain liabilities of Mideastern, Inc. ("Mideastern").  Mideastern
rebuilds and provides repair parts and service for a variety of machine tools
under the New Britain Machine brand name.  The purchase price for this
acquisition was approximately $5,300, which consisted of $3,100 cash
consideration to the sellers, issuance of a $600 subordinated earnout note to
the sellers, stock options (see Note 8), Mideastern debt of $359 repaid by the
Company at closing, closing costs incurred, and liabilities assumed.  The
acquisition was accounted for by the purchase method of accounting and,
accordingly, the purchase price has been allocated to assets acquired and
liabilities assumed based upon the fair market value at the date of
acquisition.  The excess purchase price over net assets acquired of
approximately $2,900 was recorded as goodwill and is being amortized on a
straight-line basis over 15 years.  The results of operations of Mideastern
since acqusition are included in the Company's financial statements with the
Services Group.

The Company borrowed funds from its revolving credit agreement to finance these
acquisitions.





                                       28
<PAGE>   29

NOTE 3 - ACCOUNTS RECEIVABLE

Accounts receivable consisted of:


<TABLE>
<CAPTION>
                                                                                July 31,
                                                                      ------------------------- 
                                                                        1996               1995
                                                                        ----               ----
<S>                                                                   <C>                <C>
  Trade receivables                                                   $15,666            $11,443
  Unbilled receivables on contracts in progress                         2,377              1,486
  Other                                                                   136                627
                                                                      -------            -------
                                                                       18,179             13,556
 Less: allowance for doubtful accounts                                   (674)              (922)
                                                                      -------            -------
                                                                      $17,505            $12,634
                                                                      =======            =======
</TABLE>

The Company's trade receivables are concentrated in the machine tool and
related manufacturing industries.  Unbilled receivables on contracts in
progress represent revenue recognized under the percentage of completion basis
and are expected to be received within one year.  All amounts included in
unbilled receivables on contracts in progress are related to long-term
contracts and are reduced by appropriate progress billings.

NOTE 4 - INVENTORIES

Net inventories consisted of:
<TABLE>
<CAPTION>
                                                                                July 31,
                                                                     ---------------------------        
                                                                         1996               1995
                                                                         ----               ----
  <S>                                                                <C>               <C>
  Raw materials                                                      $  1,451          $     781
  Work-in-process                                                      13,650              5,303
  Finished goods                                                       26,970             16,337
                                                                     --------          ---------        
                                                                
                                                                     $ 42,071          $  22,421
                                                                     ========          =========
</TABLE>

Valuation reserves for obsolete, excess and slow-moving inventory aggregated
$10,922 and $6,105 at July 31, 1996 and 1995, respectively.  Inventories valued
using LIFO were $15,970 at July 31, 1996.  There was no LIFO reserve against
those inventories.  The financial accounting basis for the inventories of
acquired companies exceeds the tax basis by $12,224 at July 31, 1996.

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of:
<TABLE>
<CAPTION>
                                                                                 July 31,
                                                                     ---------------------------        
                                                                         1996             1995
                                                                         ----             ----
  <S>                                                                <C>                 <C>
  Real property                                                      $  5,765            $ 2,382
  Machinery and equipment                                              14,140              9,928
  Capitalized leased assets                                             2,010              1,539
  Furniture and fixtures                                                4,134              3,278
                                                                     --------            -------
                                                                       26,049             17,127
  Less: allowance for accumulated depreciation                        (12,743)           (10,251)
                                                                      -------            -------
                                                                      $13,306            $ 6,876
                                                                      =======            =======
</TABLE>

Depreciation expense, including amortization of leased assets, totaled $2,512,
$1,966 and $1,584 for fiscal years 1996, 1995 and 1994, respectively.
Capitalized leased assets are comprised of computer hardware, software and
related installation costs.

NOTE 6 - OTHER ASSETS
<TABLE>
<CAPTION>
  Other assets consisted of:                                                    July 31,
                                                                      --------------------------
                                                                         1996               1995
                                                                         ----               ----
  <S>                                                                 <C>               <C>
  Engineering drawings                                                $22,611            $12,021
  Less: accumulated amortization                                       (4,245)            (3,612)
                                                                      -------           --------
                                                                      $18,366           $  8,409
                                                                      =======           ========
</TABLE>





                                       29
<PAGE>   30



<TABLE>
<CAPTION>
                                                                                  July 31,
                                                                      --------------------------        
                                                                         1996               1995
                                                                         ----               ----
  <S>                                                                 <C>                 <C>
  Goodwill                                                            $12,258             $7,295
  Less: accumulated amortization                                         (786)              (237)
                                                                      -------             ------
                                                                      $11,472             $7,058
                                                                      =======             ======
  Other assets:                                      
  Deferred taxes, net of valuation allowance         
           (Note 12)                                                  $11,024             $5,059
  Deferred financing costs                                              2,745              1,515
  Investments carried at equity                                           137                137
  Pension asset                                                            40                432
  Other                                                                 3,389              1,535
                                                                      -------             ------
                                                                       17,335              8,678
  Less:  accumulated amortization                                      (2,185)            (1,110)
                                                                      -------             ------
           Total other assets                        
                                                                      $15,150             $7,568
                                                                      =======             ======
</TABLE>

Amortization of intangible and other assets totaled $2,257, $1,065, and $668
for the years ended July 31, 1996, 1995 and 1994, respectively.

NOTE 7 - REVOLVING CREDIT AGREEMENT

On October 23, 1995, the Company replaced its existing revolving credit
agreement and term loan with a $30,000 senior credit facility comprised of a
$25,000 revolving credit agreement and a $5,000 term loan.  The term loan
requires monthly principal payments of $86 that began November 30, 1995.  The
funding occurred on October 23, 1995, contemporaneously with the Company's
completion of the acquisition of National Acme (see Note 2).  On April 12,
1996, the Company obtained an additional $3,000 term loan to help fund the
litigation settlement costs (see Note 15) and increased the senior credit
facility to $32,000.  The new term loan requires monthly principal payments of
$83 that began June 30, 1996.  The term loans require payments through
September 30, 1998, with final payments totalling $2,667 due on October 28,
1998.  Interest rates are based on the prime rate or alternative rates based on
LIBOR.

The senior credit facility is secured by all of the Company's assets.  Under
the terms of the facility, the Company is required to comply with various
operational and financial covenants, as defined, including (i) minimum net
worth, (ii) interest coverage ratio, (iii) liabilities to net worth ratio, (iv)
current ratio, (v) fixed charge coverage ratio and (vi) minimum earnings
levels, as defined.  In addition, the facility places limitations on the
Company's ability to make capital expenditures and to pay dividends.

The facility matures on October 23, 1998, subject to renewal by agreement of
the parties.  Amounts available under the revolving credit agreement are based
upon a formula related to the Company's eligible accounts receivable and
inventories.  Interest on outstanding balances is payable monthly in arrears.
Interest rates are based on the prime rate or alternative rates based on LIBOR.
A line of credit fee of 0.25% per annum is payable monthly on the difference
between the revolving credit agreement and the average loan balance under the
agreement.  The revolving credit agreement also provides for a $300 loan
facility fee paid at closing and a collateral management fee of $50 per year,
payable at the date of closing and annually thereafter.  There are early
termination fees should the Company terminate the agreement prior to its third
anniversary.

Borrowings of $23,900 under the senior credit facility were incurred at the
closing to retire the then existing senior credit facility and to finance the
Acquisition.  The Company has incurred approximately $1,200 in refinancing
costs.  These costs will be capitalized and amortized over the life of the
debt.  At July 31, 1996, borrowings outstanding under the revolving credit
agreement were $19,195.  The rate in effect at July 31, 1996, was 8.5%.





                                       30
<PAGE>   31

NOTE 8 - LONG-TERM DEBT
<TABLE>
<CAPTION>
                                                                                July 31,
                                                                    ----------------------------
                                                                         1996               1995
                                                                         ----               ----
<S>                                                                 <C>                 <C>
Term Loans                                                          $   7,063           $  2,500
Subordinated Debentures, net of discount                                9,141             10,465
Note payable                                                                -              1,083
Promissory note                                                           320                427
Capital lease obligations                                                 818                713
Other                                                                     765                600
                                                                    ---------           --------
                                                                       18,107             15,788
Less:  current maturities                                              (2,932)            (2,149)
                                                                    ---------           --------
                                                                    $  15,175           $ 13,639
                                                                    =========           ========
</TABLE>

The Term Loans (see Note 7) had initial principal amounts of $5,000 and $3,000
and require monthly payments of approximately $86 that began November 30, 1995,
and $83 that began June 30, 1996, through September 30, 1998.  On October 23,
1998, $2,667 will be due under the Term Loans.  Interest on the Term Loan is
payable monthly at 1.25% above prime rate or, at the Company's option, at
alternative rates based on LIBOR.  The rate in effect at July 31, 1996 was
8.75%.

On May 25, 1994, the Company entered into an investment agreement with a
syndicate of lenders pursuant to which, among other things, the Company issued
Subordinated Debentures in the aggregate amount of $12,000.  Consummation of
the Acquisition (see Note 2) and the refinancing of the senior credit facility
(see Note 7) required the consent of the holders of the Subordinated Debentures
pursuant to the terms of the investment agreement.  Due to the inability of the
Company to obtain the consent of one of the debenture holders on mutually
agreeable terms, Charles E. Bradley and John G. Poole, directors and
significant shareholders of the Company, loaned the Company $2,500 and $1,500,
respectively, pursuant to the terms of Junior Subordinated Debentures, to
replace the principal owed to one of the Subordinated Debenture holders.

Interest on the Subordinated Debt is 11.5% per annum, payable quarterly in
arrears commencing July 1, 1994.  Interest on the Junior Subordinated Debt
accrues at the rate of 14.5% per annum, with cash interest payable at 11% per
annum on a quarterly basis commencing January 1, 1996.

The Subordinated Debentures are due $2,000 in fiscal years 1999 and 2000 and
$4,000 in fiscal year 2001.  The Junior Subordinated Debentures plus unpaid
interest are due June 30, 2001, or 30 days after the Subordinated Debt is paid
in full.

Also in connection with the refinancing, the holders of the Subordinated Debt
agreed to release their security interest in the Company's assets.  Mr. Bradley
has pledged assets to secure the Subordinated Debt and will receive $90
annually as a collateral fee for as long as the pledge is in effect, payable in
monthly installments.

Under the terms of the Subordinated Debentures, the Company is required to
comply with various operational and financial covenants which are the same
nature as those required under the terms of the senior credit facility (see
Note 7) but at reduced levels.  Refinancing costs of $1,215 and $1,035 were
incurred as a result of the replacement of the revolving credit agreement in
fiscal 1996 and issuance of the Subordinated Debentures in fiscal 1994,
respectively, which were deferred and are being amortized over the life of the
new debt agreements.

In conjunction with the issuance of the Subordinated Debentures in May 1994,
the Company issued one million stock purchase warrants (see Note 10).  The
discount on the Subordinated Debentures initially aggregating $1,750 represents
the fair market value of the stock purchase warrants issued to the original
holders of the Subordinated Debentures.  In connection with the refinancing of
the senior credit facility and the issuance of the Junior Subordinated Debt,
the Company issued an additional 500 Class A stock purchase warrants and 750
Class C stock purchase warrants (see Note 10).  An additional discount of
$1,750 was recorded on the Subordinated Debt and the Junior Subordinated Debt,
representing the fair market value of the stock purchase warrants issued.  The
discount was $2,943 and $1,535 at July 31,





                                       31
<PAGE>   32

1996 and 1995, respectively, and is being amortized over the remaining life of
the Subordinated Debentures using effective interest rates of approximately 21%
and 15%, respectively.

The note payable issued for $3,250 in December 1992 is due in three equal
annual installments beginning December 1993 and results from the Company's
redemption of its outstanding Class F, Series A Preferred Stock.  The note
bears interest at 7% per annum, payable quarterly in arrears, and was fully
repaid in December 1995.

A promissory note of $427 was issued in connection with the Cushman acquisition
(see Note 2).  It is payable in four equal annual installments of $107 with the
first installment paid in September 1995.

Other long-term debt includes $400 related to earnout note originally issued
for $600 in connection with the Mideastern acquisition (see Note 2).  It is
payable in equal annual installments of $200 beginning January 31, 1996,
providing certain earnings levels are attained related to the acquired
operations.  The note bears interest at a rate of 8% and interest payments will
be made through January 31, 1997, however, the payment of interest thereafter
is also contingent upon the attainment of certain earnings levels as specified
in the note.

Also included in other long-term debt is $365 for a mortgage assumed in
connection with the acquisition of National Acme (see Note 2) is due August
1996.

Scheduled debt maturities for the next five fiscal years in the aggregate are
as follows:

<TABLE>
<CAPTION>
                                                                    Amount
                  <S>                                               <C>
                  1997                                              $2,932
                  1998                                               2,553
                  1999                                               5,263
                  2000                                               2,100
                  2001                                               8,192
</TABLE>

NOTE 9 - STOCKHOLDERS' EQUITY

In October 1995 and May 1994, the Company issued stock purchase warrants with
an aggregate fair market value of $1,750 and $1,750, respectively (see Notes 8
and 10).  Such amounts increased Additional paid-in capital.

NOTE 10 - STOCK OPTIONS AND STOCK PURCHASE WARRANTS

STOCK OPTIONS
Pursuant to the Company's 1989 Employee Stock Plan, an incentive stock
compensation plan which permits the issuance of up to 1,300 shares of common
stock, options have been granted to certain employees to purchase shares of the
Company's common stock at a price not less than the fair market value at the
date of grant.  The options granted during fiscal 1996, 1995 and 1994 vest and
become exercisable in installments of 30% at the end of the first and second
years and 40% at the end of the third year, and they terminate ten years from
the date of grant.  The options granted prior to fiscal 1994 are exercisable in
annual installments of up to 20% of the total shares represented by options,
commencing one year from the date of grant and terminating ten years
thereafter.





                                       32
<PAGE>   33

Transactions under this plan are summarized as follows:
<TABLE>
<CAPTION>
                                                                             Shares               Price
                                                                          Under Option            Range
                                                                          ------------            -----
 <S>                                                                             <C>          <C>
 Outstanding at July 31, 1994                                                      778        $1.75 - 2.625
   Forfeited                                                                       (20)          1.8125
   Granted December 14, 1994                                                       170            1.625
   Granted February 22, 1995                                                         6           1.9375
                                                                                 -----  
 Outstanding at July 31, 1995                                                      934        1.625 - 2.625
   Forfeited                                                                       (20)           2.625
   Granted December 13, 1995                                                       131           2.4375
   Granted February 28, 1996                                                        26            2.25
                                                                                 -----
   Outstanding July 31, 1996                                                     1,071        $1.625 - 2.50
                                                                                 =====
 Exercisable at July 31, 1996                                                      584        $1.625 - 2.50
                                                                                 =====  
</TABLE>

Effective June 15, 1992, all then outstanding options were surrendered and
reissued at an exercise price of $2.00 per share, the then fair market value of
the stock.

Effective January 10, 1991, the Company adopted a stock option plan for its
outside directors, and granted each outside director an option to purchase five
thousand shares of common stock (an aggregate of twenty-five thousand shares)
at $2.50 per share, the then fair market value of the shares.  The Company has
reserved a total of fifty thousand shares for issuance under this stock option
plan.  The options are exercisable in annual installments of up to 20% of the
total shares represented by the options commencing one year from the date of
grant and terminating ten years thereafter.

On January 27, 1995, in connection with the Mideastern acquisition (see Note
2), the Company issued options to the former Mideastern shareholders to
purchase up to 100 shares of common stock at a purchase price of $1.50 per
share.  If, on January 27, 1998, the fair market value of the shares covered by
these options is not at least $3.50 per share (subject to adjustment), the
optionee may elect to redeem the options for $1.50 per share.

STOCK PURCHASE WARRANTS
In conjunction with the issuance of the Subordinated Debentures (see Note 8),
the Company issued Class A Stock Purchase Warrants (the "Class A Warrants")
which permit holders of the Subordinated Debentures to purchase one million
shares of the Company's common stock at an exercise price of $0.01 per share.
The Class A Warrants are exercisable from May 25, 1996, through May 25, 2004,
or three years after final payment of the Subordinated Debentures, if later.
The Company also issued an unlimited number of Class B Stock Purchase Warrants
(the "Class B Warrants"), which became available to the Subordinated Debenture
holders as a result of the settlement of the class action suit filed in 1992
(see Note 15).  The actual number of warrants to be issued cannot be determined
at this time because they are based on a formula that uses the average closing
stock price for 90 days prior to May 25, 1997.  If the average stock price for
the 90 days prior to May 25, 1997 is $4.29 or higher, no additional warrants
will be issued.  However, if the average stock price is $3.00 or $1.75 for the
90 days prior to May 25, 1997, the number of warrants to be issued would be
approximately 360 and 1,200, respectively.

In connection with the issuance of the Junior Subordinated Debt, the Company
issued Class A Stock Purchase Warrants (the "Class A Warrants") to Messrs.
Bradley and Poole, representing the right to purchase 52 and 31 shares of the
Company's common stock, respectively.  These Class A Warrants were originally
issued to the Subordinated Debenture holder who was replaced by the Junior
Subordinated Debt which was issued  to Messrs. Bradley and Poole.

Pursuant to the terms of the Investment Agreement, as amended, the Company
issued additional Class A Stock Purchase Warrants to acquire 500 shares of the
Company's Common Stock.  The Company also issued Class C Stock Purchase
Warrants to acquire 750 shares of the Company's Common Stock, subject to
adjustment in certain circumstances ("Class C Warrants") to the Subordinated
and Junior Subordinated Debenture holders, pro rata based on the principal
amount of the Subordinated Debt and Junior Subordinated Debt.  The exercise
price of the Class A and Class C Warrants is $0.01 per share.





                                       33
<PAGE>   34

The Class A Warrants may be exercised at any time in whole or in part from and
after October 23, 1997, and shall expire the later of three years from the date
of final payment on the Subordinated Debt or May 25, 2004.  The Class C
Warrants may be exercised at any time after October 31, 1998, subject to
earlier exercise upon the sale of the Company, and expire on the later of three
years after the payment of the Subordinated Debt or October 31, 2005.

The number of shares of the Company's Common Stock which the holders of the
Class C Warrants have the right to acquire may be reduced based on the Company
attaining earnings levels, as defined in the Investment Agreement, as amended.
Although the Company believes that it will attain sufficient earnings levels
such that the holders of the Class C Warrants will not have the right to
acquire shares of the Company's common stock pursuant thereto, no assurance can
be given that the Company will attain satisfactory earnings levels.  As a
result of this uncertainty, the Company has recorded 200 warrants as likely to
be issued at this time.  The additional Class A and Class C Warrants have an
aggregate fair market value of $1,750.  Such amount increased Additional
paid-in capital and is recorded as a discount to the Subordinated Debentures.
This discount will be amortized as interest expense over the life of the
Subordinated Debt.

The Class A Warrants, Class B Warrants and Class C Warrants are subject to
anti-dilution protection and the holders of such warrants are entitled to
certain registration rights.

NOTE 11 - EMPLOYEE BENEFIT PLANS

PENSION
The Company has noncontributory defined benefit pension plans covering
essentially all of its hourly and salaried employees, except employees of the
Services Group.  The plans provide retirement, death and disability benefits to
eligible employees based upon age, salary and length of service.  The Company's
funding policy for these plans is to satisfy the minimum funding requirements
of ERISA, which is tax deductible under the Internal Revenue Code.

The Company assumed pension liabilities of $10,926 as a result of the
acquisition of The National Acme Company on October 23, 1995 (see Note 2).
Assets of the plans, comprised of temporary cash investments, convertible
debentures, preferred and common stocks, including 110 shares of the Company's
common stock, are invested in a master trust.

Pension expense is as follows:
<TABLE>
<CAPTION>
                                                                                    Year ended July 31,
                                                                      ---------------------------------------------
                                                                         1996               1995               1994
                                                                         ----               ----               ----
  <S>                                                                 <C>                  <C>              <C>
  Service cost                                                        $   656              $ 253            $    73
  Interest on projected benefit obligation                              2,393                925                874
  Actual return on plan assets                                         (4,080)              (812)            (1,859)
  Net amortization and deferral                                         1,979               (162)               982
                                                                      -------              -----            -------
                                                                      $   948              $ 204            $    70
                                                                      =======              =====            =======
</TABLE>

The funded status of plans in which plan assets at fair market value exceed the
projected benefit obligation is presented below:

<TABLE>
<CAPTION>
                                                                               July 31,
                                                                      --------------------------
                                                                         1996               1995
                                                                         ----               ----
  <S>                                                                 <C>                <C>
  Plan assets at fair market value                                    $ 6,526            $ 5,572
  Projected benefit obligation                                          4,564              4,481
                                                                      -------            -------
  Excess fair value of assets over projected benefit      
  obligation                                                            1,962              1,091
  Unrecognized net gain                                                (1,638)              (822)
                                                                      -------            -------
  Accrued pension asset                                               $   324            $   269
                                                                      =======            =======
</TABLE>

The projected benefit obligations at July 31, 1996, and 1995 include
accumulated benefit obligations of $4,564 and $4,481 and vested benefit
obligations of $4,476 and $4,386, respectively.





                                       34
<PAGE>   35

The funded status of plans in which the projected benefit obligation exceeds
plan assets at fair market value is presented below:

<TABLE>
<CAPTION>
                                                                                July 31,
                                                                     ---------------------------
                                                                         1996               1995
                                                                         ----               ----
  <S>                                                                <C>                 <C>
  Plan assets at fair market value                                   $ 34,266            $ 6,264
  Projected benefit obligation                                         44,879              7,553
                                                                     --------            -------
  Excess projected benefit obligation over       
      fair value of assets                                            (10,613)            (1,289)
  Unrecognized transition obligation                                      219                256
  Unrecognized net gain                                                (2,994)              (620)
  Unrecognized prior service cost and other                               841                911
  Contribution after measurement date                                     126                 33
  Additional liability required                                           (87)              (547)
                                                                     ========            =======
  Accrued pension liability                                          $(12,508)           $(1,256)
                                                                     =========           =======
</TABLE>

The projected benefit obligations at July 31, 1996, and 1995 include
accumulated benefit obligations of $44,486 and $7,553 and vested benefit
obligations of $43,140 and $7,315, respectively.

The discount rate used in determining the actuarial present value of the
projected benefit obligation was 8.0% and 8.25% for fiscal 1996 and 1995,
respectively.  The expected long-term rate of return on plan assets was 9% for
both years.

OTHER EMPLOYEE BENEFITS
The Company also has two defined contribution pension plans pursuant to Section
401(k) of the Internal Revenue Code.  Non-union employees and all salaried
employees of the Company are eligible for participation in the Savings Plan.
Plan participants may contribute up to 12% of gross compensation.  The Company
matches 50% of participant contributions of up to 6% of each participant's
gross compensation.  Contribution expense for the years ended July 31, 1996,
1995 and 1994 was $343, $127 and $93, respectively.

Certain employees hired by National Acme after April 1, 1986, no longer accrue
benefits under the defined benefit pension plans and the Company contributes 3%
of gross compensation to an Hourly Savings Plan.  Contributions under this plan
were $99 during fiscal 1996.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain employees with health and life insurance benefits
after retirement.  Health insurance benefits require employee contributions in
certain cases.  The Company assumed postretirement medical liabilities of
$20,559 as a result of the acquisition of The National Acme Company on October
23, 1995 (see Note 2).

Postretirement benefit cost includes the following components:

<TABLE>
<CAPTION>
                                                                                     Year ended July 31,
                                                                      ---------------------------------------------     
                                                                         1996               1995               1994
                                                                         ----               ----               ----
<S>                                                                   <C>                  <C>                <C>
Service cost                                                          $   129              $  71              $  38
Interest on projected benefit obligation                                 1203                460                222
Amortization of actuarial losses                                            3                 26                  -
                                                                      -------              -----              -----
Net periodic postretirement benefit cost                              $ 1,335              $ 557              $ 260
                                                                      =======              =====              =====
</TABLE>

The Company has not funded any portion of its postretirement benefit
obligations.





                                       35
<PAGE>   36

The following table sets forth the funded status of the plans and the amount
recognized in the accompanying balance sheets:
<TABLE>
<CAPTION>
                                                                                 July 31,
                                                                      --------------------------        
                                                                         1996               1995
                                                                         ----               ----
   <S>                                                                <C>                 <C>
   Retirees                                                           $19,835             $3,613
   Active plan participants - fully eligible                            1,285                587
   Other active plan participants                                       2,877              1,440
                                                                      -------             ------
   Accumulated postretirement benefit obligation                       23,997              5,640
   Unrecognized gain/(loss)                                               994               (618)
                                                                      -------             ------
                                                                      $24,991             $5,022
                                                                      =======             ======
</TABLE>

The assumed discount rate used to measure the accumulated postretirement
benefit obligation was 8.0% and 8.25% for fiscal 1996 and 1995, respectively.
The medical cost trend rate in fiscal 1996 and 1995 was 9% and 10%,
respectively, declining on a linear basis to a terminal rate of 5.5% by the
year 2003.  A one percentage point increase in the assumed health care cost
trend rates for each future year would have increased fiscal 1996 and 1995
costs by approximately $89 and $70, respectively, and the accumulated
postretirement benefit obligation as of July 31, 1996 and 1995 by $1,259 and
$603, respectively.

NOTE 12 - INCOME TAXES

Effective August 1, 1992, the Company adopted SFAS 109 (see Note 1).  Pre-tax
(loss)/income from continuing operations was $(769), $811 and $1,487 in fiscal
1996, 1995 and 1994, respectively.

The (benefit) provision for income taxes on income (loss) is summarized below:

<TABLE>
<CAPTION>
                                                                                     Year ended July 31,
                                                                        -------------------------------------------
                                                                         1996               1995               1994
                                                                         ----               ----               ----
<S>                                                                     <C>               <C>                 <C>
Current tax expense
    Federal                                                             $ 132             $   31              $ 151
    State and local                                                       170                120                  -
                                                                        -----             ------              -----
    Total current                                                         302                151                151
                                                                        -----             ------              -----
Deferred tax expense (benefit)
    Federal                                                              (301)              (623)              (207)
    State and local                                                       (53)              (110)               (36)
                                                                        -----             ------              -----
    Total deferred                                                       (354)              (733)              (243)
                                                                        -----             ------              -----
Total                                                                   $ (52)            $ (582)             $ (92)
                                                                        =====             ======              =====
</TABLE>





                                       36
<PAGE>   37

Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
                                                                                July 31,
                                                                     ---------------------------        
                                                                         1996               1995
                                                                         ----               ----
  <S>                                                                <C>                 <C>
  Intangible assets                                                  $( 1,570)           $(1,678)
  Fixed assets                                                         (2,900)              (976)
  Inventories                                                          (4,632)                 -
                                                                     --------            -------
  Gross deferred tax liabilities                                       (9,102)            (2,654)
                                                  
  Credit carryforwards                                                    354                474
  Noncompetition agreement                                                240                425
  Inventory reserves                                                    4,038              2,521
  Intangible assets                                                     2,954              3,647
  Accounts receivable reserves                                            275                378
  Accrued postretirement benefits                                      10,005              2,009
  Accrued pension benefits                                              4,676                 56
  Accrued expenses and other                                            2,289                686
                                                                      -------            -------
  Gross deferred tax assets                                            24,831             10,196
  Deferred tax assets valuation allowance                              (4,705)            (2,483)
                                                                      -------            -------
  Net deferred taxes                                                  $11,024            $ 5,059
                                                                      =======            =======
</TABLE>

The tax benefit resulting from the amortization of excess tax basis (i.e. the
excess over recorded book value) of certain intangible assets will reduce the
equity account "Excess purchase price over net assets from the Services Group
acquisition," which will increase stockholders' equity (see Note 1).

The Company recorded deferred tax assets of $7,551 related to the acquisition
of National Acme (see Note 2) and also established a valuation allowance of
$2,222 due to uncertainty of the realization of the deferred tax assets.  The
Company released $2,962 of valuation allowance in fiscal 1995 because of
profitable results in recent history and expectations of income within the
foreseeable future.

The differences between the U.S. federal statutory tax rate and the Company's
effective rate on income from continuing operations are as follows:
<TABLE>
<CAPTION>
                                                                                    Year ended July 31,
                                                                          ---------------------------------------       
                                                                           1996             1995             1994
                                                                           ----             ----             ----
<S>                                                                       <C>            <C>               <C>
Statutory rate                                                             34.0%           34.0%            35.0%
Valuation allowance                                                          -           (146.6)           (50.4)
State income taxes, net of federal benefit                                (10.0)           19.2               -
Liability of former group                                                    -               -               8.6
Nondeductible goodwill                                                    (23.4)             -                -
Other nondeductible items                                                  (0.8)            6.3              1.3
Other                                                                       6.9            15.3             (0.7)
                                                                          -----          ------            -----
                                                                            6.7%          (71.8)%           (6.2)%
                                                                          =====          ======            =====
</TABLE>

The Company has investment tax credit carryforwards of $234 which expire at
various dates through the year 2000.  The Company also has minimum tax credit
carryforwards of $120 which have no expiration.

NOTE 13 - RELATED PARTIES

STANWICH PARTNERS, INC. ("SPI")
Two of the principals of SPI serve on the Company's Board of Directors.  The
Company has a consulting agreement, as amended, with SPI through July 1998,
which provides for payments to SPI for consulting services of $261 per year for
each of the three fiscal years ending July 31, 1996, 1997 and 1998.  Aggregate
SPI consulting fee expense under all agreements was $261 for each of the fiscal
years ended July 31, 1996, 1995 and 1994.  At July 31, 1995, the Company had
prepaid consulting fees to SPI of $109.  In fiscal 1996, the Company paid $250
for additional services in connection with the refinancing of the senior credit
facility (see Notes 7 and 8).  In fiscal 1995, the Company paid $180 for
additional services in connection with the purchase of Cushman, Mideastern and
Ed Smith (see Note 2).





                                       37
<PAGE>   38

In fiscal 1996, 1995 and 1994 the Company reimbursed SPI approximately $5, $7
and $7, respectively, for travel expenses incurred by SPI on behalf of the
Company.

D.V. ASSOCIATES, L.P.
Pursuant to a license agreement, the Company licenses certain trademarks from
D.V. Associates, L.P., and the Company's rights to these trademarks are subject
to the payment of certain license fees.  The Company paid license fees to D.V.
Associates, L.P., of $300 in fiscal 1996, 1995 and 1994.  The Company holds an
option to purchase the trademarks from D.V. Associates, L.P., for $3,000.  Two
of the Company's directors have limited partnership interests in D.V.
Associates, L.P.

SOMERSWORTH, INC. ("SOMERSWORTH")
Through December 21, 1989, the Company was an 80%-owned subsidiary of a
wholly-owned subsidiary of Somersworth.  The Company and Somersworth were
parties to a tax-sharing agreement.  In fiscal 1994, the Company paid a $151
assessment to the Internal Revenue Service for the last period the Company was
included in Somersworth's consolidated tax return.  Such amount is included in
fiscal 1994 income tax expense.

CHARLES E. BRADLEY AND JOHN G. POOLE
In order to obtain the consent of the Subordinated Debt holders to the
refinancing of the senior credit facility in October, 1995, Messrs. Bradley and
Poole, directors and significant shareholders of the Company, loaned the
Company $2,500 and $1,500, respectively, pursuant to the terms of Junior
Subordinated Debentures, to replace the principal owed to one of the
Subordinated Debenture holders.  Also in connection with the refinancing, the
holders of the Subordinated Debt agreed to release their security interest in
the Company's assets.  Mr. Bradley has pledged assets to secure the
Subordinated Debt and will receive $90 annually as collateral fee for as long
as the pledge is in effect, payable in monthly installments.  During fiscal
1996, the Company paid $68 as collateral fee to Mr. Bradley and $191 and $115
in interest expense on the Junior Subordinated Debt to Messrs. Bradley and
Poole, respectively.

COMPANY POLICY
It is the policy of the Company that any transaction between the Company and
any of its officers, directors or 5% stockholders, or affiliates thereof, must
be on terms no less favorable than those which would be obtained from
unaffiliated parties.  In addition, transactions which exceed $100 must be
approved by a majority of the disinterested members of the Company's Board of
Directors.

NOTE 14 - LEASE COMMITMENTS

The Company has various noncancelable operating leases relating principally to
machinery and equipment and real property, which expire at various dates
through 2006.  Three of the Company's operating facilities were leased in April
1986 under an operating lease with an initial 20-year term.  This lease
initially required monthly payments of $69 and contains an escalation
provision, effective commencing on the fifth anniversary of the lease and
thereafter at each five-year anniversary, based on increases in the consumer
price index.  Monthly payments are $80, after assignment of the lease for the
Penberthy facility and after the escalation effective May 1996.  The lease is
renewable for four additional five-year terms.  Upon completion of the initial
20-year term, the Company is required to renew the lease for at least one
five-year term or purchase the property.  Accordingly, the minimum rental
commitments shown below reflect one additional five-year renewal term.





                                       38
<PAGE>   39

Rental expense relative to all operating leases for the years ended July 31,
1996, 1995 and 1994 was $2,731, $2,156, and $2,123, respectively.  At July 31,
1996, future minimum rental commitments under noncancelable operating leases
with a term in excess of one year are as follows:


<TABLE>
                                  <S>                       <C>
                                  Fiscal year
                                  1997                      $  2,238
                                  1998                         1,962
                                  1999                         1,809
                                  2000                         1,531
                                  2001                         1,492
                                  Thereafter                   9,629
                                                             -------    
                                                             $18,661
                                                             =======       
</TABLE>

NOTE 15 - COMMITMENTS AND CONTINGENCIES

On August 4, 1993, the Company, certain of its present and former officers and
directors and several unrelated third parties were included as defendants in a
civil suit filed in the United States District Court for the Northern District
of Illinois, Western District.  The suit was filed by a committee of unsecured
creditors of DeVlieg, Inc., a company in Chapter 11 proceedings in the
Bankruptcy Court for the Northern District of Illinois, and
debtor-in-possession, DeVlieg, Inc.  The litigation sought in excess of $10
million in damages and alleged violations of state fraudulent conveyance
statutes in connection with the acquisition by the Company of certain assets of
DeVlieg, Inc., in September 1988 and March 1990.  The Company settled this suit
for $1.5 million during fiscal 1995.  This was recorded as a nonrecurring
charge in the Statements of Operations.  The settlement is effective as to the
Company and each of its present and former officers and directors party to the
suit.

On March 2, 1992, a purported class action suit was filed in the United States
District Court for the District of Connecticut against the Company, Stanwich
Oil & Gas, Inc., the First Boston Corporation and certain of the Company's
officers and directors.  The suit alleged violations of the federal securities
laws and state and federal common law in connection with alleged
misrepresentations and omissions made by the Company in connection with its
initial public offering in March 1990 and in certain reports later issued by
the Company.  While management continues to believe the allegations were
without merit, in March 1996 the Company and all the remaining defendants,
collectively, reached a settlement of the suit with representatives of the
purported class.  Under the terms of the settlement, the defendants
collectively would pay a total of approximately $1.5 million over approximately
five months.  The Company has accrued $2.4 million in fiscal 1996 for the
settlement and related litigation costs.  The settlement was approved by the
court at a hearing on July 19, 1996.  Management believes the settlement to be
in the best interest of the Company and its shareholders.

On November 3, 1995, a jury rendered a verdict against the Company in the net
amount of approximately $1.3 million, plus interest, relating to a civil suit
filed against the Company in the Supreme Court for the State of New York,
County of Erie, styled Watson Bowman Acme Corp. v. DeVlieg-Bullard, Inc.  A
final determination of the amount of the judgment has not been made at this
time.  The plaintiff has alleged losses resulting from a breach of contract by
the Company, as successor to DeVlieg-Lyons Integrated Systems, Inc., in
connection with the delivery to the plaintiff of a CNC Milling Machine.  The
suit was originally filed on November 21, 1991.  The Company had countersued
for the remaining balance due under the contract of approximately $280
thousand.

The Company believes that the jury's verdict in this case failed to consider
material evidence in the case that indicates that the Company was not in breach
of the contract; a Notice of Appeal was filed on February 9, 1996.  No
assurance can be given that such appeal will be successful.  Accordingly, the
Company made an accrual in the first quarter of fiscal 1996 in the amount of
$2.2 million for the jury's verdict, plus interest and other costs.

At July 31, 1996, the accrued liability for these cases was $2,309.

The Company is also involved in litigation and proceedings, including product
liability claims, in the ordinary course of its business.  The Company does not
believe that the outcome of such litigation will





                                       39
<PAGE>   40

have a material adverse effect upon the Company, after taking into account any
proceeds of available insurance.

NOTE 16 - BUSINESS SEGMENTS

The Company's business activities are conducted by four business segments: the
Services Group, National Acme, the Tooling Systems Group and the Industrial
Group.  Financial information for each of these segments is summarized below:

<TABLE>
<CAPTION>
                                                 Operating                                           Depreciation
                                        Net         Profit  Identifiable               Capital                and
                                      Sales          (Loss)       Assets       Expenditures (a)      Amortization
                                      -----          ------       ------       ----------------      ------------
 <S>                               <C>              <C>         <C>                    <C>                 <C>
 Year ended July 31, 1996:
 Services Group                    $ 39,034         $5,763      $ 33,173               $   395             $1,615
 National Acme                       29,570          2,949        50,053                   558              1,174
 Tooling Systems Group               20,983          1,055        19,942                    40                963
 Industrial Group                    23,727          1,155         8,022                   441                527
 Corporate                                -         (2,614)        8,613                   175                333
                                   --------         ------      --------               -------             ------
      Total                        $113,314         $8,308      $119,803               $ 1,609             $4,612
                                   ========         ======      ========               =======             ======

 Year ended July 31, 1995:
 Services Group                    $ 34,716         $4,790      $ 33,262               $   417             $1,427
 Tooling Systems Group               21,246          1,792        19,805                   140                827
 Industrial Group                    22,188            701         6,222                   360                536
 Corporate                                -         (2,040)        6,943                    53                (69)
                                   --------         ------      --------               -------             ------
      Total                        $ 78,150         $5,243      $ 66,232               $   970             $2,721
                                   ========         ======      ========               =======             ======

 Year ended July 31, 1994:
 Services Group                    $ 28,063         $2,494      $ 24,874               $   576             $1,198
 Tooling Systems Group               16,877          1,624        12,495                   408                499
 Industrial Group                    18,679            536         6,922                   213                422
 Corporate                                -         (1,864)        6,972                    76               (343)
                                   --------         ------      --------               -------             ------
      Total                        $ 63,619         $2,790      $ 51,263               $ 1,273             $1,776
                                   ========         ======      ========               =======             ======
</TABLE>



Notes

(a)      Capital expenditures include $471, $0, and $253 of leased assets
         financed by capital lease obligations in fiscal 1996, 1995 and 1994,
         respectively.

NOTE 17 - FOURTH QUARTER EVENTS

During the fourth quarter of fiscal 1996, the Company made adjustments in the
amount of $466 to reduce the pension and other postretirement benefits expense
related to the National Acme acquisition (see Note 2) based on the results of
actuarial estimates.





                                       40
<PAGE>   41

                                    PART III



ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                 AND FINANCIAL DISCLOSURE

None.

ITEM 10.         DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held on December 18, 1996, contains, under the caption
"Election of Directors," information required by Item 10 of Form 10-K as to
directors of the Company and is incorporated herein by reference.  Pursuant to
General Instruction G(3), certain information concerning executive officers of
the Company is included in Part I of this Form 10-K, under the caption
"Executive Officers."

ITEM 11.         EXECUTIVE COMPENSATION

The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held on December 18, 1996, contains, under the caption
"Executive Compensation and Other Information," information required by Item 11
of Form 10-K and is incorporated herein by reference.

ITEM 12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held on December 18, 1996, contains, under the captions
"Security Ownership of Certain Beneficial Owners" and "Election of Directors,"
information required by Item 12 of Form 10-K and is incorporated herein by
reference.

ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held on December 18, 1996, contains, under the caption
"Certain Relationships and Related Transactions," information required by Item
13 of Form 10-K and is incorporated herein by reference.





                                       41
<PAGE>   42

                                    PART IV


ITEM 14.         EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM
                 10-K

(a)(1)   The following financial statements of DeVlieg-Bullard, Inc., are
         included herein under Item 8 of Part II; Pages 19 to 40.

         Report of Independent Accountants

         Balance Sheets
           July 31, 1996 and 1995

         Statements of Operations
           Years ended July 31, 1996, 1995 and 1994

         Statements of Cash Flows
           Years ended July 31, 1996, 1995 and 1994

         Statements of Changes in Stockholders' Equity
           Years ended July 31, 1996, 1995 and 1994

         Notes to the Company Financial Statements

  (2)    The following financial statement schedules of DeVlieg-Bullard, Inc.,
         are included herein on pages S-1 to S-3:

         Report of Independent Accountants on Financial Statement Schedules

         Schedule VIII   -     Valuation and Qualifying Accounts

         All other schedules for which provision is made in the applicable
         accounting regulation of the Securities and Exchange Commission are
         not required under the related instructions or are inapplicable and
         therefore have been omitted.

  (3)    Management Contracts and Compensatory Plans and Arrangements

         DeVlieg-Bullard, Inc., 1989 Employee Stock Plan (included as Exhibit 
         10.03).

         DeVlieg-Bullard, Inc., 1991 Stock Option Plan for Outside Directors
         (included as Exhibit 10.05).

         Non-Interference and Non-Disclosure Agreement executed by William O.
         Thomas dated May 25, 1994 (included as Exhibit 10.12).

         Consulting Agreement dated as of August 1, 1995, between the Company
         and Stanwich Partners, Inc. (included as Exhibit 10.14).

(b)      DeVlieg-Bullard, Inc., did not file any reports on Form 8-K for the
         quarter ended July 31, 1996.





                                       42
<PAGE>   43

(c)      Exhibits:

Exhibit
Number   Description


3.1      Restated Certificate of Incorporation of the Company.  (Incorporated
         by reference to the Company's Registration Statement on Form S-1
         Registration No. 33-32725.)

3.2      Restated Bylaws of the Company.  (Incorporated by reference to the
         Company's Registration Statement on Form S-1, Registration No.
         33-32725.)

4.1      Specimen Common Stock Certificate.  (Incorporated by reference to the
         Company's Registration Statement on Form S-1, Registration No.
         33-32725.)

4.2      Article IV of the Restated Certificate of Incorporation of the
         Company.  (Included in Exhibit 3.1.)

10.01    Form of Registration Rights Agreement dated as of March 22, 1990,
         among the Company and certain stockholders identified therein.
         (Incorporated by reference to the Company's Registration Statement on
         Form S-1, Registration No. 33-32725.)

10.02    License Agreement dated as of March 22, 1990, between D.V. Associates,
         L.P. and the Company.  (Incorporated by reference to the Company's
         Registration Statement on Form S-1, Registration No. 33-32725.)

10.03    DeVlieg-Bullard, Inc., 1989 Employee Stock Plan.  (Incorporated by
         reference to the Company's Registration Statement on Form S-1,
         Registration No. 33-32725.)

10.04    Amendment No. 1 to Shareholders' Agreement dated December 15, 1989.
         (Incorporated by reference to the Company's Registration Statement on
         Form S-1, Registration No. 33-32725.)

10.05    DeVlieg-Bullard, Inc., 1991 Stock Option Plan for Outside Directors.

10.06    Amended and Restated Lease Agreement by and between Corporate Property
         Associates 5 and DeVlieg-Bullard, Inc., dated as of April 3, 1986, and
         amended and restated as of November 24, 1992.  (Incorporated by
         reference to the Company's Annual Report on Form 10-K for the year
         ended July 31, 1993.)

10.07    Investment Agreement dated May 25, 1994, among (i) the Company and
         (ii) Allied Investment Corporation, Allied Investment Corporation II
         and Allied Capital Corporation, Banc One Capital Partners Corporation,
         and PNC Capital Corp.  The Company agrees to furnish supplementally a
         copy of any omitted schedules to the Commission upon request.
         (Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended April 30, 1994.)

10.08    Debenture in the original principal amount of $2,360,000 issued May
         25, 1994, by the Company to Allied Investment Corporation, the "Allied
         Investment Corporation Debenture."  In addition, the Company issued
         the following debentures which are substantially identical to the
         Allied Investment Corporation Debenture except as to Holder and
         amount:

<TABLE>
         Holder                                              Principal Amount
         ------                                              ----------------
         <S>                                                       <C>
         Allied Investment Corporation II                          $1,300,000
         Allied Capital Corporation                                   340,000
         Banc One Capital Partners Corporation                      4,000,000
         PNC Capital Corp.                                          4,000,000
</TABLE>

         (Incorporated by reference to the Company's Quarterly Report on Form 
         10-Q for the quarter ended April 30, 1994.)                         


                                       43
<PAGE>   44

10.09    Class A Stock Purchase Warrant issued by the Company May 25, 1994, to
         PNC Capital Corp., the "PNC Class A Warrant," for the right to
         purchase 333,333 shares of the Company's common stock.  In addition,
         the Company issued the following warrants which are substantially
         identical to the PNC Class A Warrant except as to Holder and number of
         shares subject to warrant:

<TABLE>
<CAPTION>
                                                             Number of Shares
         Holder                                            Subject to Warrant
         ------                                            ------------------
         <S>                                                          <C>
         Allied Investment Corporation                                196,668
         Allied Investment Corporation II                             108,333
         Allied Capital Corporation                                    28,333
         Banc One Capital Partners Corporation                        333,333
</TABLE>
         (Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended April 30, 1994.)

10.10    Class B Stock Purchase Warrant issued to PNC Capital Corp., the "PNC
         Class B Warrant," by the Company May 25, 1994, for the right to
         purchase one-third of the number of shares of the Company's common
         stock available in the aggregate pursuant to the terms of paragraph
         2.02 of the Investment Agreement (an unexecuted form of which
         constitutes Exhibit 2.01 to the Investment Agreement referred to above
         in Exhibit 10.25 to this report).  In addition, the Company issued the
         following warrants which are substantially identical to the PNC Class
         B Warrant except as to Holder and number of shares subject to warrant:
<TABLE>
<CAPTION>
         Pro Rata Share of                                    Shares Subject
         Holder                                                   to Warrant
         ------                                                   ----------
         <S>                                                           <C>
         Allied Investment Corporation                                 19.7%
         Allied Investment Corporation II                              10.8%
         Allied Capital Corporation                                     2.8%
         Banc One Capital Partners Corporation                         33.3%
</TABLE>
         (Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended April 30, 1994.)

10.11    Registration Agreement dated May 25, 1994, by and between
         DeVlieg-Bullard, Inc., and Allied Investment Corporation, Allied
         Investment Corporation II, Allied Capital Corporation, Banc One
         Capital Partners Corporation and PNC Capital Corp.  (Incorporated by
         reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended April 30, 1994.)

10.12    Non-Interference and Non-Disclosure Agreement executed by William O.
         Thomas dated May 25, 1994.  (Incorporated by reference to the
         Company's Quarterly Report on Form 10-Q for the quarter ended April
         30, 1994.)

10.13    First Amendment to the DeVlieg-Bullard, Inc., 1989 Employee Stock Plan
         approved by the Company's stockholders at the annual meeting of
         stockholders held on December 15, 1993.  (Incorporated by reference to
         the Company's Proxy Statement dated November 19, 1993.)

10.14    Consulting Agreement dated as of August 1, 1995, between the Company
         and Stanwich Partners, Inc.  (Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended July 31,
         1995.)

10.15    Memorandum of Closing dated as of September 9, 1994, between the
         Company and the Cushman Industries Liquidating Trust.  (Incorporated
         by reference to the Company's Annual Report on Form 10-K for the year
         ended July 31, 1994.)

10.16    Product Supply Agreement dated as of September 9, 1994, between the
         Company and the Cushman Industries Liquidating Trust.  (Incorporated
         by reference to the Company's Annual Report on Form 10-K for the year
         ended July 31, 1994.)





                                       44
<PAGE>   45

10.17    Stock Purchase Agreement by and between the shareholders of H.B.
         Industries, Inc.  and DeVlieg-Bullard, Inc., dated November 30, 1994.
         The Company agrees to furnish supplementally any omitted schedules to
         the Commission upon request.  (Incorporated by reference to the
         Company's Quarterly Report on Form 10-Q for the quarter ended October
         31, 1994.)

10.18    Asset Purchase Agreement dated January 23, 1995, by and between
         DeVlieg-Bullard, Inc., Mideastern, Inc., and the shareholders of
         Mideastern, Inc.  (Pursuant to Item 601(b)(2) of Regulation S-K, the
         schedules to this agreement are omitted but will be provided
         supplementally to the Commission upon request.)  (Incorporated by
         reference to the Company's Current Report on Form 8-K dated February
         3, 1995.)

10.19    Earnout Note dated January 23, 1995, in the principal amount of
         $600,000 issued by DeVlieg-Bullard, Inc., to Mideastern, Inc.
         (Incorporated by reference to the Company's Current Report on Form 8-K
         dated February 3, 1995.)

10.20    Stock Purchase Agreement among Acme-Cleveland Corporation, AC
         Intermediate Company and DeVlieg-Bullard, Inc., Dated September 7,
         1995.  (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to
         this agreement are omitted but will be provided supplementally to the
         Commission upon request.)  (Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended July 31, 1995.)

10.21    Financing and Security Agreement dated October 23, 1995, between the
         CIT Group/Business Credit, Inc. and DeVlieg-Bullard, Inc.
         (Incorporated by reference to the Company's Form 8-K dated November 7,
         1995.)

10.22    Revolving Loan Promissory Note dated October 23, 1995, in the
         principal amount of $25,000,000 between the CIT Group/Business Credit,
         Inc., and DeVlieg-Bullard, Inc. (Incorporated by reference to the
         Company's Form 8-K dated November 7, 1995.)

10.23    Term Loan Promissory Note dated October 23, 1995, in the principal
         amount of $5,000,000 between the CIT Group/Business Credit, Inc., and
         DeVlieg-Bullard, Inc.  (Incorporated by reference to the Company's
         Form 8-K dated November 7, 1995.)

10.24    First Amendment to Investment Agreement dated October 23, 1995, among
         Banc One Capital Partners Corporation, PNC Capital Corp., Allied
         Investment Corporation, Allied Investment Corporation II, Allied
         Capital Corporation II, Charles E. Bradley, Sr., John G. Poole and
         DeVlieg-Bullard, Inc.  (Incorporated by reference to the Company's
         Form 8-K dated November 7, 1995.)

10.25    Debenture in the original principal amount of $2,500,000 issued
         October 23, 1995, by DeVlieg-Bullard, Inc., to Charles E. Bradley, Sr.
         (Incorporated by reference to the Company's Form 8-K dated November 7,
         1995.)

10.26    Debenture in the original principal amount of $1,500,000 issued
         October 23, 1995, by DeVlieg-Bullard, Inc., to John G. Poole.
         (Incorporated by reference to the Company's Form 8-K dated November 7,
         1995.)

10.27    Class A Stock Purchase Warrant issued by DeVlieg-Bullard, Inc. on
         October 23, 1995, to Charles E. Bradley, Sr.  (the "Bradley Class A
         Warrant") for the right to purchase 52,083 shares of the





                                       45
<PAGE>   46

         Company's common stock.  In addition, the Company issued the following
         additional Class A Stock Purchase Warrants, which were substantially
         identical to the Bradley Class A Warrant, except as to the holder and
         number of shares subject to the warrant:
<TABLE>
<CAPTION>
                                                                      Number of Shares                       
         Holder                                                     Subject to Warrant                       
         ------                                                     ------------------
         <S>                                                                   <C>                           
         John G. Poole                                                          31,250                       
         Charles E. Bradley, Sr.                                               104,166                       
         John G. Poole                                                          62,500                       
         Banc One Capital Partners Corporation                                 166,667                       
         PNC Capital Corp.                                                     166,667                       
         Allied Capital Corporation II                                          21,250                       
         Allied Investment Corporation II                                       81,250                       
         Allied Investment Corporation                                         147,501                       
</TABLE>
         (Incorporated by reference to the Company's Form 8-K dated November 7,
         1995.)

10.28    Class B Stock Purchase Warrant issued by DeVlieg-Bullard, Inc. dated
         October 23, 1995, to PNC Capital Corp.  (The "PNC Class B Warrant")
         for the right to purchase a presently indeterminable number of shares
         of the Company's common stock.  In addition, the Company issued
         substantially identical Class B Stock Purchase Warrants to each of
         Banc One Capital Partners Corporation, Allied Investment Corporation,
         Allied Investment Corporation II and Allied Capital Corporation II.
         (Incorporated by reference to the Company's Form 8-K dated November 7,
         1995.)

10.29    Class C Stock Purchase Warrant issued by DeVlieg-Bullard, Inc., dated
         October 23, 1995, to PNC Capital Corp.  (the "PNC Class C Warrant")
         for the right to purchase 250,000 shares of the Company's common
         stock.  In addition, the Company issued the following additional Class
         C Stock Purchase Warrants, which are substantially identical to the
         PNC Class C Warrant, except as to the holder and number of shares
         subject to the warrant:
<TABLE>
<CAPTION>
                                                                      Number of Shares                       
         Holder                                                     Subject to Warrant                       
         ------                                                     ------------------                       
         <S>                                                                   <C>                           
         Banc One Capital Partners Corporation                                 250,000                       
         Charles E. Bradley, Sr.                                               156,250                       
         John G. Poole                                                          93,750                       
</TABLE>
         (Incorporated by reference to the Company's Form 8-K dated November 7,
         1995.)

10.30    Credit Support Agreement dated October 23, 1995, between
         DeVlieg-Bullard, Inc., and CPS Holdings, Inc.  (Incorporated by
         reference to the Company's Form 8-K dated November 7, 1995)

10.31    First Amendment to Registration Rights Agreement dated October 23,
         1995, among Allied Investment Corporation, Allied Investment
         Corporation II, Allied Capital Corporation II, Banc One Capital
         Partners Corporation, PNC Capital Corp., Charles E. Bradley, Sr., John
         G. Poole and DeVlieg-Bullard, inc.  (Incorporated by reference to the
         Company's Form 8-K dated November 7, 1995.)

10.32    First Amendment to Financing and Security Agreement dated April 12,
         1996, between The CIT Group/Business Credit, Inc., and
         DeVlieg-Bullard, Inc.  (Incorporated by reference to the Company's
         Form 10-Q for the quarter ended April 30, 1996.)

10.33    Term Loan Promissory Note dated April 12, 1996, in the principal
         amount of $3,000,000 between The CIT Group/Business Credit, Inc., and
         DeVlieg-Bullard, Inc.  (Incorporated by reference to the Company's
         Form 10-Q for the quarter ended April 30, 1996.)

10.34    Second Amendment to the DeVlieg-Bullard, Inc. 1989 Employee Stock
         Option Plan.

11       Computation of Earnings per Share

23       Consent of Price Waterhouse LLP

27       Financial Data Schedule (for SEC use only)





                                       46
<PAGE>   47

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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, on September 25, 1996.


DEVLIEG-BULLARD, INC.


By:      /s/ William O. Thomas
         ---------------------
         William O. Thomas
         President and
         Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

Signatures and Title(s)                                              Date
-----------------------                                              ----




/s/  William  O. Thomas                                    September 25, 1996
-----------------------
     William O. Thomas
     President and Chief Executive Officer
     and Director
     (Principal Executive Officer)


/s/  Lawrence M. Murray                                    September 25, 1996
-----------------------
     Lawrence M. Murray
     Vice President and Chief Financial Officer
     (Principal Financial and
     Accounting Officer)


/s/  Charles E. Bradley                                    September 25, 1996
-----------------------
     Charles E. Bradley, Director,
     Chairman of the Board


/s/  Thomas L. Cassidy                                     September 25, 1996
----------------------
     Thomas L. Cassidy, Director


/s/ George A. Chandler                                     September 25, 1996
----------------------
     George A. Chandler, Director





                                       47
<PAGE>   48

Signatures and Title(s)                                              Date




/s/  John G. Poole                                         September 25, 1996
------------------
     John G. Poole, Director


/s/  Burton C. Borgelt                                     September 25, 1996
----------------------
     Burton C. Borgelt, Director


/s/  John R. Kennedy                                       September 25, 1996
--------------------
     John R. Kennedy, Director


/s/  John E. McConnaughy, Jr.                              September 25, 1996
-----------------------------
     John E. McConnaughy, Jr., Director





                                       48
<PAGE>   49

                             DeVlieg-Bullard, Inc.
                     Index To Financial Statement Schedules




                                  Description

Report of Independent Accountants on Financial
Statement Schedules                                                     S-2

Schedule VIII   -Valuation and Qualifying Accounts                      S-3


All other financial statement schedules are either not required or not
applicable to the Company.





                                      S-1
<PAGE>   50

                       REPORT OF INDEPENDENT ACCOUNTANTS
                        ON FINANCIAL STATEMENT SCHEDULES


To the Board of Directors
of DeVlieg-Bullard, Inc.


Our audits of the financial statements referred to in our report dated
September 4, 1996 appearing on page 20 of this Form 10-K also included an audit
of the Financial Statement Schedule listed in the index appearing under Item
14(a)(2) of this Form 10-K on page 42.  In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements.





/s/ PRICE WATERHOUSE LLP

Stamford, Connecticut
September 4, 1996





                                      S-2
<PAGE>   51

                             DeVlieg-Bullard, Inc.
               Schedule VIII - Valuation and Qualifying Accounts
                                 (in thousands)



<TABLE>
<CAPTION>
                                                      Additions        Additions
                                    Balance at       Charged to       Charged to                          Balance at
                                August 1, 1993          Expense            Other       Deductions      July 31, 1994
                                --------------          -------            -----       ----------      -------------
<S>                                     <C>           <C>                <C>          <C>                    <C>
Accounts Receivable                     $  969        $   107            $   36(1)    $    (276)(2)          $   836
Inventories                              6,690         (1,556)(3)             -             (99)(4)            5,035
Deferred Tax Assets                      9,746               -                -          (4,301)               5,445


                                                      Additions        Additions
                                    Balance at       Charged to       Charged to                          Balance at
                                August 1, 1994          Expense            Other       Deductions      July 31, 1995
                                --------------          -------            -----       ----------      -------------
Accounts Receivable                     $  836        $   187           $   189(5)      $  (290)(2)          $   922
Inventories                              5,035           (205)(3)         1,296(5)          (21)(4)            6,105
Deferred Tax Assets                      5,445              -                -           (2,962)               2,483


                                                      Additions        Additions
                                    Balance at       Charged to       Charged to                          Balance at
                                August 1, 1995          Expense            Other       Deductions      July 31, 1996
                                --------------          -------            -----       ----------      -------------
Accounts Receivable                    $   922        $    61            $  178(5)        $(487)                $674
Inventories                              6,105            (68)(3)         4,942(5)          (57)              10,922
Deferred Tax Assets                      2,483              -             2,222(5)            -                4,705
Litigation Reserve                          38          4,600(6)             -           (2,329)               2,309
</TABLE>



(1)      Recoveries of amounts previously written off.

(2)      Write-off amounts deemed uncollectible.

(3)      Provision for obsolescence, net of inventory sold.

(4)      Scrapped inventory.

(5)      Includes reserves of companies acquired (see Note 2 of Notes to the
         Company Financial Statements).

(6)      See Note 15 of Notes to the Company Financial Statements for a
         description of litigation expenses.





                                      S-3