BRIDGEPORT MACHINES INC, 10-K, 1999-05-19

BRIDGEPORT MACHINES INC
10-K, 1999-05-19
MACHINE TOOLS, METAL CUTTING TYPES

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

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

For the fiscal year ended March 28, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________

Commission file number 000-25102

BRIDGEPORT MACHINES, INC.
(Exact name of registrant as specified in its charter)

Delaware 06-1169678
(State of incorporation) IRS Employer
Identification No.

500 Lindley Street, Bridgeport, CT 06606
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (203) 367-3651

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
------------------- ------------------------
None Not applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value per share (the "Common Stock")
(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 III of this Form 10-K or any amendments to
this Form 10-K [ X ]

<PAGE>
The aggregate market value of voting stock held by nonaffiliates of the
registrant on May 17, 1999 was approximately $34,744,000.

The number of shares of the registrant's Common Stock, $.01 par value,
outstanding on May 17, 1999 was 5,568,104.

DOCUMENTS INCORPORATED BY REFERENCE:

None

<PAGE>
The Private Securities Litigation Reform of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Annual Report on Form 10-K is forward-looking, such as information relating to
the expansion of the use of the Company's products into the factory floor
market, expansion of the Company's marketing efforts into foreign markets, the
Company's ability to develop additional sources of supply, the Company's
shipment of its current backlog, the Company's expected expenditures on
environmental matters, the Company's use of cash in operating activities, the
Company's ability to satisfactorily resolve any outstanding litigation, the
ability of the Company to meet working capital needs, and the effect on the
Company of the adoption of certain accounting standards. Such forward-looking
information involves important risks and uncertainties that could significantly
affect expected results in the future from those expressed in any
forward-looking statements made by, or on behalf of, the Company. These risks
and uncertainties include, but are not limited to, uncertainties relating to
general economic conditions, product introductions, contingent liabilities,
changes in currency exchange rates, the mix of products sold and the profit
margins thereon, order cancellations or reduced bookings by customers or
distributors, discounting necessitated by price competition, and general market
conditions.

PART I

ITEM 1. BUSINESS

(A) General Development of the Business

General Description of the Business

Bridgeport Machines, Inc. (the "Company" or "Bridgeport Machines") has
manufactured and distributed metal cutting machine tools and accessories for 60
years. The Company's products include machining centers, manual milling
machines, CNC ("Computer Numerical Control") manual tool change milling machines
and related software, lathes, surface grinders and CAM (Computer-Aided
Manufacturing) and machine control software. The Company markets its products
under several brand names including "Bridgeport" and "Harig."

The Company is headquartered in Bridgeport, Connecticut and has
additional manu-facturing facilities in Leicester, England, Kempten, Germany and
Elgin, Illinois. The Company believes that it is the leading manufacturer of
manual milling machines, surface grinders and CNC manual tool change milling
machines in the United States and believes it is the market leader in sales of
vertical machining centers in the United Kingdom.
<PAGE>
The Company's customers are primarily small (up to 20 employees) and
medium (up to 200 employees) independent job shops worldwide. These independent
job shops manufacture components for various industries such as aerospace,
automotive, computer, defense, medical equipment, farm implement, construction
equipment, energy and transportation. In addition, the Company's products are
used in the tool rooms and repair shops of large manufacturing companies such as
The Boeing Company, General Motors Corporation and Rolls-Royce plc.

The Company was established in 1939 and was acquired by Textron Inc.
("Textron") in 1968. In 1986, the Company was acquired in a leveraged buyout
transaction by a group of investors, which included members of the Company's
current management. Commencing in 1991, the machine tool industry in the
Company's primary markets experienced a cyclical downturn in demand. Although
the Company took steps to mitigate the effects of rapidly declining orders by
closing plants, consolidating various operations, shifting production and
reducing personnel, as well as implementing a financial recapitalization, the
Company experienced net losses for fiscal 1991 and 1992 and the nine months
ended January 2, 1993.

In December 1992, the Company completed the final stages of (i) an
operational restructuring and (ii) a financial restructuring and
recapitalization, pursuant to which the Company obtained a new revolving credit
facility, reduced outstanding subordinated debt and converted all shares of its
outstanding preferred stock to Common Stock (the "1992 Recapitalization"). The
Company accounted for the operational restructuring and the 1992
Recapitalization as a quasi-reorganization as of January 3, 1993.

In January 1994, Bridgeport Machines entered into a joint venture
agreement with two other companies to establish a joint venture company. The
joint venture company named P.T. Bridgeport Perkasa Machine Tools (the "JV") is
owned 40% by Bridgeport Machines. The JV was formed as a foreign capital
investment company under the laws of Indonesia. The purpose of the JV will be to
manufacture machine tools in Indonesia for sale within the Association of
South-East Asian Nations. As of March 1999, the JV had no substantive
activities.

In November 1994, the Company's registration statement related to
2,500,000 shares of its Common Stock was declared effective by the United States
Securities and Exchange Commission (the "SEC"). Of these shares, 1,500,000 were
sold to the public by the Company and the remaining 1,000,000 shares were sold
by existing shareholders. The net proceeds received by the Company from the sale
of its Common Stock were approximately $12.9 million.

In February 1995, Bridgeport Machines entered into a joint venture
agreement with Chang Zheng Machine Tool Company Ltd. of China (a company
incorporated in the Peoples Republic of China) to establish a joint venture
company. The joint venture company named Chengdu Chang Zheng Bridgeport Machine
Tools Ltd. (the "JV Ltd.") is owned 48% by Bridgeport Machines. The JV Ltd. was
formed under the Sino-Foreign Joint Venture Enterprise Act of the Peoples
Republic of China ("China"). JV Ltd. manufactures machining centers in China for
sale within China, North Korea, Mongolia and the Commonwealth of Independent
States.

In February 1995, Bridgeport Machines entered into a strategic alliance
agreement with Engineering Geometry Systems ("EGS"). The agreement provides for
the joint development and marketing of proprietary technology for use in the CAM
market. In addition, the Company purchased 19.5% of the stock of EGS for
$250,000 and agreed to make loans available to EGS of up to an aggregate amount
of $500,000.
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In June 1995, the Company established an indirect wholly owned
subsidiary, Bridgeport Machines GmbH, in the Republic of Germany. This
subsidiary acquired certain assets of a German machine tool manufacturer that
was in bankruptcy. The assets acquired consisted of machinery and equipment that
have been used by the Company to establish manufacturing operations in Germany.
In addition, the subsidiary entered into a lease for manufacturing and office
space in Germany. The Company paid approximately 6 million pound sterling
(approximately $9.6 million) for the assets.

Recent Developments

During the fiscal year ended April 3, 1999, the Company experienced a
decline in incoming net orders in North America and Europe of approximately 34%
and 18%, respectively, as compared to the fiscal year ended March 28, 1998.
During the fiscal fourth quarter ended April 3, 1999, the Company experienced a
decline in incoming net orders in North America and Europe of approximately 41%
and 37%, respectively, as compared to the fiscal fourth quarter ended March 28,
1998. These declines appear to represent a cyclical trend in the United States
and the United Kingdom, the Company's two principal markets, of declining
purchases by customers for machine tools in the segment of the machine tool
industry in which the Company participates. The Company cannot predict for what
period of time the decreased level of customer purchases could continue, whether
the level of customer purchases will decline further, or the level at which
incoming orders will be.

On April 23, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Goldman Industrial Group, Inc. ("Goldman")
and Bronze Acquisition Corp., a wholly owned subsidiary of Goldman ("Merger
Sub"). Pursuant to the terms and subject to the conditions of the Merger
Agreement, Merger Sub will merge with and into the Company (the "Merger"), with
the Company as the surviving corporation. As a result of the Merger, each
outstanding share of Common Stock, (other than shares owned by the Company,
Goldman, Merger Sub or any subsidiary thereof or shares with respect to which
the holders have perfected appraisal rights under Delaware law) will be
converted into the right to receive $10.00 per share in cash. The consummation
of the Merger is subject to the satisfaction of a number of conditions,
including, without limitation, stockholder approval of the Merger Agreement and
the termination or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The foregoing
description of the Merger and the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, which is an exhibit to this Annual Report
on Form 10-K.

On April 23, 1999, as a condition and inducement to Goldman and Merger
Sub entering into the Merger Agreement, each of Textron, Lehman LBO Inc., State
of Delaware Employees Retirement Fund, Joseph E. Clancy and Dan L. Griffith
(collectively, the "Principal Stockholders") entered into an agreement with
Goldman (the "Goldman Voting Agreements") pursuant to which each Principal
Stockholder, among other things, has granted Goldman a proxy with respect to the
voting of the shares of Common Stock over which such Principal Stockholder has
voting control, upon the terms and subject to the conditions set forth in such
Principal Stockholder's Goldman Voting Agreement. The foregoing description of
the Goldman Voting Agreements contained herein is qualified in its entirety by
reference to the Goldman Voting Agreements, which are exhibits to this Annual
Report on Form 10-K.

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<PAGE>
(B) Financial Information About Industry Segments

The Company participates in the metal cutting machine tool segment of
the machine tool industry.

Industry Background

There are two principal methods utilized in metalworking: metal cutting
and metal forming. Metal cutting machine tools utilize a process in which a part
or finished product is generated or shaped by either rotating a toothed cutter
or rotating the workpiece. These processes are generally referred to as milling,
drilling, turning and grinding. Metal forming machine tools shape parts from
flat metal sheets through the process of forming, bending and shearing.

Typically, early metal working machines were either manually operated
or specifically engineered for a production application. The advent of numerical
control in 1952 further automated the operation of a machine tool and increased
its efficiency. In 1976, micro- processors were integrated with numerical
controls resulting in CNC machine tool systems which allowed personnel on the
shop floor to program and perform sophisticated metal working tasks without
central office support. These systems permitted economical and automated
manufacturing of different parts in short production runs.

According to the American Machinist 1998 World Machine Tool Survey,
approximately 73% of all machine tools are made for metal cutting applications.
The milling machine is one of the most commonly used metal cutting machine
tools. Milling is a machining process whereby a surface is shaped with a
rotating toothed cutter. Grinding is a machining process whereby a surface is
shaped with a rotating abrasive wheel or tool and is similar to milling in terms
of shapes that can be generated from the machines. Grinding often follows
milling, drilling and turning of a part to produce desired surface finish. Parts
are also generated directly on grinding machines. Lathing is a machining process
whereby a surface is shaped with a tool applied to a rotating part and is
similar to milling.

CNC controlled milling machines, which were introduced in the 1970's,
precisely shape parts by instructing the machine to move a cutting tool across
and/or through the part according to a program for the specific part. Some CNC
milling machines, referred to as machining centers, are equipped with automatic
tool changers which allow several different drills, taps or mills to be used in
a programmed sequence on the same part, without having to remove the part from
the machine.

The Company believes that the metal cutting machine tool industry
consists of two broad markets: (i) large, customized, highly engineered,
automated manufacturing systems

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used in the manufacture of various capital goods and consumer durables and (ii)
stand-alone, standardized, relatively lower priced, machine tools used
principally by small to medium-sized job shops to manufacture short-run,
machined components. The Company competes primarily in the latter market.

Although the Company expects its principal long-term growth to come
from its CNC products, the Company believes that there will continue to exist
demand for manual milling machines. It is generally believed that several
fundamental factors will support long-term demand for CNC machine tools and
particularly for user-friendly products such as those sold by the Company. The
principal factors include the shrinking supply of skilled machinists, the need
for improved productivity and the need for replacement of older machine tools.

Company Strategy

The Company's business objective is to continue to maintain a leading
position in the manufacture and distribution of metal cutting machine tools to
small and medium-sized job shops in the United States and the United Kingdom and
to expand international sales outside of its traditional markets. The Company
intends to continue to capitalize on its brand name recognition and its
reputation for product reliability, quality and functionality, and customer
service. The key elements of the Company's strategy are as follows:

- Continue Product/Service Focus: The focus of the Company's sales
efforts will continue to be on standardized, general purpose machine
tools for the worldwide short-run metal cutting market, emphasizing
product quality, functionality and ease of use, as well as customer
service and after-market support.

- Sell Higher Technology Products to its Existing Customer Base: The
Company is engaged in a "step-up" marketing program designed to sell
CNC machine tools to its large customer base of users of its manual
metal cutting machines. Through its machining center product lines, the
Company expects to expand beyond the tool room market to the factory
floor market. With the machining center, the Company has greater access
to the production shops of manufacturers to which the Company can
market its entire product line.

- Expand International Markets: The Company plans to expand its marketing
efforts in China, Singapore, Thailand, Malaysia and other Pacific Rim
countries principally through manufacturing joint ventures, licensing
or other similar arrangements with local companies.

- Maintain Competitiveness and Manufacturing Flexibility: The Company has
positioned itself to be competitive on a global basis through product
innovation and cost-effective manufacturing. The presence of facilities
in the United States, the United Kingdom and Germany allows for
manufacturing and sourcing flexibility.

Among other things, competition, economic conditions and market
conditions play an important role in the Company's ability to achieve its
objectives and there is no assurance the Company can successfully implement its
strategy in the future.
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<PAGE>
Products

The following table sets forth the percentage of net sales by product
estimated by the Company for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- --------------

<S> <C> <C> <C>
Machining Centers 49.4% 44.5% 48.4%
CNC Milling Machines 11.1 14.7 15.0
Manual Milling Machines 12.0 12.7 10.4
Lathes 8.9 10.8 10.6
Surface Grinders 3.8 4.4 4.6
Software 0.8 1.0 1.0
After Market Sales & Support 14.0 11.9 10.0
----- ----- -----

Total 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Machining Centers

The Company currently offers eight models of vertical "bed-type"
machining centers and two bridge type frame model machining centers. These
products are designed to provide CNC controlled precision machining with a
variety of cutting tools.

Each of the machining center products consists of four basic
subsystems: a CNC control system, a multiple axis electromechanical system for
moving and positioning the work piece and rotating the cutting tool, a single
axis electromechanical system for automatic tool changing and a heavy metal
frame fully enclosed with appropriate sheet metal safety guarding. The Company's
machining centers are standardized products which the Company believes are
competitive in their respective product classes, incorporating controls and
certain other components that represent "state-of-the-art" technology.

CNC Milling Machines

The Company's CNC milling machines line consists of three basic
products: "EZ-TRAK," "DX-Control" and "Interact." The EZ-TRAK product line is
composed of two basic models. This machine uses a "teach" method to do
repetitive functions or can be programmed to do such functions.

The DX-Control line consists of two basic CNC milling machines
manufactured in the United States and fitted with the Company's proprietary CNC
control system. The control features the Company's proprietary machine
controller card. Its open architecture allows the control to be easily upgraded.
The DX-Control has networking capability and allows quick programming of
complicated parts either at the machine on the shop floor or off the machine on
a remote computer. The Company believes that its DX-Control, which is used in
the EZ-TRAK

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and DX-Control product lines, represents "state-of-the-art" technology for
PC-based controls in the metal cutting machine tool industry.

The Interact product line is composed of three basic models which
incorporate a CNC control system produced by a third party. The Interact series
is equipped with "state-of-the-art" interactive programming capabilities with
plain language data entry and visual display of program sequence. Because data
entry and display are simplified, the Interact is shop-floor programmable and is
particularly attractive to first-time CNC users or smaller tool rooms without
separate programming facilities. The Interact line is manufactured in the United
Kingdom.

Manual Milling Machines

The Company's manual milling machine has become a standard tool in
small work-shops, vocational schools and tool rooms of large manufacturing
companies. The Company's basic manual milling machine, commonly referred to as
the "Bridgeport," is offered with various options. The Company has shipped over
330,000 manual milling machines since 1939 to customers in more than 60
countries. The Company believes that its manual milling machines represent
"state-of-the-art" technology in their product class.

Lathes

Since 1982, the Company has imported to and distributed in the U.S.
lathes manufactured by Industrias Romi, S.A. ("Romi") of Brazil, one of the
largest machine tool manufacturers in South America. The Company imports
standard engine lathes along with a series of CNC lathes which utilize the
Company's PC-based control. Bridgeport markets the lathes which utilize the
Company's control under the "EZ-PATH" name. The Company believes the EZ-PATH
lathes represent "state-of-the-art" technology in their product class.

Surface Grinders

The Company's surface grinders are sold under its Harig brand name. The
Harig line is made up of manual grinders, automatic grinders and CNC grinders.
The Harig surface grinder addresses the largest unit volume segment of the
United States market. Recognizing the importance of providing a competitive,
quality product, the Company has focused on increasing the efficiency of its
grinder manufacturing methods and improving the product offering. The Company
believes that its manual grinders and CNC grinders represent "state-of-the-art"
technology in their respective product classes.

CAM Products

The Company sells its proprietary, computer-aided manufacturing system
called EZ-CAM. This product provides Bridgeport CNC users with a convenient
stand-alone programming tool. The Company's EZ-CAM products may impact favorably
on the demand for the Company's machines by providing end-users with a
compatible, Company supported off-line programming system.

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The EZ-CAM products are Company-designed software programs, which are
menu driven and utilize readily available PC hardware. The programs are
compatible with almost every CNC control machine. The Company has also developed
additional software packages for digitizing information and for programming
lathes and coordinate measuring machines. The Company believes that its EZ-CAM
products represent "state-of-the-art" technology in their product class.

In 1995, the Company entered into a strategic alliance agreement with
EGS for the joint development and marketing of additional proprietary technology
for use in the CAM market. As part of this alliance, the Company sells
EZ-FeatureMill and EZ-Turn software which are Windows based CAM software. The
EZ-FeatureMill and EZ-Turn software were developed by EGS in conjunction with
the Company.

Marketing and Sales

The Company markets its products through its direct sales and service
force of approximately 150 employees, which is among the largest in the
industry. The Company's sales organization operates through nine sales and
service centers, four of which are located throughout the continental United
States, two in England, one in Germany, one in Holland and one in Malaysia. In
addition, the Company maintains other sales offices in the United States. See
"Properties."

Complementing its direct sales and service force, the Company sells and
distributes its full range of products through approximately 75 independent
distributors covering approxi-mately 60 countries. The independent distributor
purchases machines, accessories and parts from the Company and maintains an
inventory of products and spare parts. In most cases, the independent
distributor assumes the labor component of the warranty service and the
technical training responsibility for all Company products sold through such
distributor. The Company typically enters into one-year contracts with each of
its independent distributors, pursuant to which such distributors are able to
sell all or a portion of the Company's product line. These contracts generally
permit such distributors to sell products of other companies. In certain cases,
the Company has granted distributors the exclusive right to distribute its
products in particular markets outside of the United States.

The Company offers its domestic customers the ability to purchase its
products through financing arrangements provided by Textron Financial
Corporation ("TFC"), a subsidiary of Textron, and to a lesser extent, by others.
The Company believes that the financing arrangements provided by TFC are
available from others on substantially similar terms.

No customer, including distributors, accounted for more than 10.0% of
net sales during fiscal 1999 and the loss of any one customer would not have a
material adverse effect upon the Company.

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After Market Sales and Support

With the large installed base of the Company's products in customer
locations, the Company has a significant after market replacement parts and
service business. The Company believes that the technical support and repair
service provided to its customers through its direct sales force and distributor
network differentiate the Company's products from those of its competitors.
Because the useful life of metal cutting machine tools can be significantly
affected by factors such as amount and nature of product use and maintenance and
repair practices of a customer, the Company believes its emphasis on technical
support and repair service increases customer satisfaction with its products.
Technical support includes installation, training and applications engineering
as well as programming support. Service support includes repairing machines,
assisting customers in diagnosing parts requirements and/or machine problems,
and shipping replacement parts to customers on a timely basis. The Company
typically ships repair parts within 24 hours of receipt of an order.

The Company's warranty policy covers all manufactured products and
typically provides a warranty on parts and labor of one to two years after the
date of purchase by the end user of CNC machine tools and a two-year warranty on
parts and one-year warranty on labor for manual milling machines.

In connection with the Company's leveraged buyout transaction in 1986,
Textron assumed certain product liability exposure for products shipped by the
Company prior to the effective date of the closing of such transaction. The
Company currently maintains product liability insurance coverage, which it
considers adequate for all of its products.

Product Development

The Company's product development is customer-driven, relying on
surveys, specific customer input and other marketing information. Product
development activities focus on developing improvements on and new applications
for existing machine tool products, introducing new machine tool products and
enhancing its proprietary software systems. The Company believes that its
product development strategy, coupled with its continuous quality improvement
and manufacturing cost reduction programs, will enable the Company to continue
to compete successfully in the global machine tool market.

The Company continues to invest in the development of next generation
CNC controls and related software.

Manufacturing and Supply

The Company manufactures and assembles its products at its plants in
Bridgeport, Connecticut, Elgin, Illinois, Leicester, England and Kempten,
Germany. Products are manufactured from components purchased from third parties
and from parts manufactured by the Company from various raw materials. Upon
completion of the manufacturing process, products undergo extensive inspection
and testing to insure quality control. Many electrical and mechanical components
are standard items and are readily available from multiple sources. In certain
circumstances, to take advantage of price and quality, the Company may determine
to
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purchase certain components from a single or limited number of sources. The
Company has not had significant supply interruptions in these components or raw
materials in recent years, and it believes it could develop alternative sources
of supply if supply interruptions were to occur. However, depending upon
conditions in existence at the time such a future interruption were to occur, no
firm assurance can be given that there would be no effect on the Company's
operations. Any significant interruption in the supply of one or more components
or raw materials could have a material adverse effect on revenues and net
income.

Patents, Licenses and Trademarks

The Company owns a number of patents, but does not consider any single
patent to be material to its business. In addition, the Company considers
certain of its products to be proprietary and believes its Bridgeport, Harig,
and EZ-PATH trademarks have substantial value. The Company typically requires
certain employees to execute appropriate non-competition and confidentiality
agreements.

The Company licenses certain technology from unaffiliated third
parties, none of which is material to the Company's operations.

The Company licenses its DX-Control technology in Brazil for use in
products sold only in Latin America. The Company also licenses certain rights to
manufacture Company designed machines in Brazil, China and Indonesia.

Seasonality

The Company experiences a seasonal decline in net sales during its
second fiscal quarter, particularly during the July and August summer holiday
period. During such period, the Company's manufacturing facilities typically
close for approximately one to three weeks. The fourth fiscal quarter may also
experience decreases in net sales as a result of weather conditions.

Backlog

Backlog consists of firm orders received from customers and
distributors. Such orders are subject to cancellation. At April 3, 1999, backlog
was approximately $14.6 million, compared with approximately $36.5 million at
March 28, 1998. The Company's backlog balances fluctuate as a result of many
factors including length of time to deliver products, new product introductions
and market conditions. The Company expects to ship substantially all of its
current backlog during fiscal year 2000. However, no firm assurance can be given
since many factors which affect the Company's ability to manufacture its
products could change.

Competition

The metal cutting segment of the machine tool industry is highly
competitive. The Company believes that it competes primarily on the basis of
product quality, reliability, price,

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<PAGE>
features, functionality, availability, service and support. The Company competes
with a number of firms, some of which are larger and have greater financial
resources than the Company.

In the vertical machining center market, the Company competes in the
United States primarily with Fadal Engineering Co., Inc. (a subsidiary of
Thyssen Inc.) and Haas Automation Inc., who the Company believes have the
leading market shares, and primarily with Cincinnati Milicron (a subsidiary of
Unova Inc.) and Haas Automation Inc. in the United Kingdom, where the Company
believes it has the largest market share.

In the United States and United Kingdom, the Company competes in the
manual milling machine markets primarily with several Taiwanese manufacturers.
The Company believes it has the leading market share of these products in the
United States and the United Kingdom.

In its other product lines, the Company competes with a number of
firms, some of which are larger and have greater financial resources than the
Company.

Research and Development

The Company's research and development involves creating new products
and modifying existing products to meet market demands and exploring
alternatives to reduce the cost of manufacturing.

Research and development costs are expensed as incurred. Research and
development expense was $3,982,000, $5,364,000 and $5,091,000 for the fiscal
years ended April 3, 1999, March 28, 1998 and March 29, 1997, respectively.

Environmental Matters

The Company's owned and leased facilities are subject to numerous
environmental laws and regulations concerning, among other things, emissions to
the air, discharges to surface and ground water, and the generation, handling,
storage, transportation, treatment and disposal of toxic and hazardous
substances. Under various Federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may become liable for the costs of removal or remediation of hazardous
or toxic substances on, under or in such property, typically without regard to
fault. In June 1994, the Company and Textron entered into a settlement agreement
whereby Textron agreed to accept sole responsibility to remediate hazardous
substances in certain areas of the Bridgeport facility to the extent required by
law, and the Company and Textron agreed to share equally the costs to remediate
groundwater beneath the property. Based upon the current understanding by the
Company, the Company believes that its share of such costs will not be material.
No firm assurances can be given since conditions, such as environmental laws,
may change and the future outcome may differ.

Except as set forth above, the Company believes that its facilities are
in compliance in all material respects with all applicable United States
Federal, state and local environmental laws, ordinances and regulations, as well
as comparable laws and regulations outside the United States. No assurances can
be given, however, that the current environmental condition

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of the Company's owned and leased facilities are not other than as currently
understood by the Company, or will not be adversely affected by the condition of
properties in the vicinity of the Company's owned and leased properties, or by
the activities of third parties unrelated to the Company or by former owners or
operators of the Company's owned or leased facilities, or that future laws,
ordinances or regulations will not impose any material environmental liability
on the Company.

Employees

As of April 3, 1999, the Company had 934 full-time employees,
consisting of 451 employees based in the United States, 371 employees based in
the United Kingdom, 96 employees based in Germany, 10 employees based in Holland
and 6 employees based in Malaysia. None of the Company's United States employees
is currently represented by any union. The Company's United Kingdom employees
were covered by annual collective bargaining agreements which expired on March
28, 1999. Currently, the employees in the United Kingdom are working without a
collective bargaining agreement. A portion of the Company's German employees are
represented by a three person workers council in accordance with German law. The
Company believes that its relations with its employees are good.

(D) Financial Information About Foreign and Domestic Operations and Export
Sales

See Note 10 of Notes to Consolidated Financial Statements for
information with respect to the Company's sales, operating income and
identifiable assets by geographic region.

12
<PAGE>
ITEM 2. PROPERTIES

The following table sets forth certain information, as of April 3,
1999, relating to the Company's principal facilities:
<TABLE>
<CAPTION>
Approximate
Location Principal Activities Square Feet Owned/Leased
-------- -------------------- ----------- ------------
<S> <C> <C> <C>
Bridgeport, Connecticut Corporate Headquarters; 247,000 Owned
Manufacture of Milling
Machines, CNC Mills and
Machining Centers

Bridgeport, Connecticut Assembly and distribution 26,000 Leased
(expires 12/00 with
Company option to
renew to 12/02)

Bridgeport, Connecticut Distribution 17,000 Leased
(expires 1/03 with
Company option to
renew to 1/08)

Leicester, England Manufacture of Machining 113,000 Owned
Centers and CNC Mills

Leicester, England Warehouse and assembly 50,000 Leased
(expires 1/00)

Kempten, Germany Manufacture of Machining 107,000 Leased
Center Parts and Assembly (expires 6/02 with
Company options
to renew to 6/15)

Elgin, Illinois Manufacture of Grinding 50,000 Owned
Machines

Bristol, Pennsylvania Software and Control 16,000 Leased
Development (expires 12/01)
</TABLE>
The Company also leases four sales and service centers and two sales
offices in the United States with an aggregate floor space of approximately
46,000 square feet. The Company also leases two sales and service centers in the
United Kingdom, with aggregate floor space of approximately 6,310 square feet,
one in Holland with floor space of approximately 14,000 square feet, one in
Germany with floor space of approximately 12,000 square feet and one in Malaysia
with floor space of approximately 1,600 square feet.

13
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

Other than discussed below, the Company is not engaged in any legal
proceedings other than ordinary routine litigation incidental to its business.

On August 12, 1998, the Company was named as a defendant in an action
filed by Alamo Iron Works, Inc. ("Alamo") in the State of Texas District Court.
Alamo alleges that the Company breached a contract under which Alamo distributed
the Company's products and that the Company performed tortious interference with
Alamo's present and prospective business relationships and employee
relationships. Alamo seeks among other things an award of damages to compensate
Alamo for the above allegations.

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

None

14
<PAGE>

PART II

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

(A) Market Information

The Common Stock of the Company is traded on the Nasdaq National Market
under the trading symbol "BPTM." The range of high and low reported bid prices
for the Common Stock during fiscal 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal 1999
-----------
First Quarter Ended June 27, 1998 $13-7/8 $10-1/2
Second Quarter Ended October 3, 1998 $12-1/8 $8-5/8
Third Quarter Ended January 2, 1999 $9 $4-3/8
Fourth Quarter Ended April 3, 1999 $8-3/4 $4-11/16

Fiscal 1998
-----------
First Quarter Ended June 28, 1997 $11-1/4 $8-1/2
Second Quarter Ended September 27, 1997 $12-1/4 $9-3/4
Third Quarter Ended December 27, 1997 $13-3/8 $10
Fourth Quarter Ended March 28, 1998 $12-3/4 $10-1/2
</TABLE>

(B) Holders

As of May 17, 1999, as reported by the Company's transfer agent, shares
of Common Stock were held by 72 holders, based upon the number of record
holders, including several holders who are nominees for an undetermined number
of beneficial owners.

The Company has not declared or paid a cash dividend during the two
fiscal years ended April 3, 1999, and its present policy is to retain any
earnings for use in its business.

Payment of dividends is dependent upon the earnings and financial
condition of the Company and other factors which its Board of Directors may deem
appropriate. The Company expects to use any future earnings in its operations
and consequently does not intend to pay out cash dividends on its Common Stock
in the foreseeable future. In addition, the Company is currently prohibited from
declaring or paying any cash dividends on its Common Stock by the terms of its
revolving credit facility.

15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands, except per share data)

Year Year Year Year Year
Ended Ended Ended Ended Ended
April 3, March 28, March 29, March 30, April 1,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Income Data:

Net sales $ 179,758 $ 213,770 $ 227,549 $ 209,214 $ 148,783
Net income (loss) (486) 3,915 8,001 8,424 6,921
Basic earnings (loss) per share $ (0.09) $ 0.69 $ 1.41 $ 1.49 $ 1.48
Basic weighted average shares
Outstanding 5,619 5,657 5,679 5,665 4,660
Diluted earnings (loss) per share $ (0.09) $ 0.69 $ 1.40 $ 1.47 $ 1.48
Diluted weighted average
Shares outstanding 5,619 5,672 5,720 5,748 4,673
</TABLE>

<TABLE>
<CAPTION>
April 3, March 28, March 29, March 30, April 1,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

Balance Sheet Data:

Working Capital $ 50,040 $ 51,600 $ 49,696 $ 39,148 $ 42,810
Total assets 102,966 136,110 131,711 129,156 88,394
Long-term debt obligations 1,086 3,142 5,862 4,475 3,101
Stockholders' equity 67,166 69,323 65,586 57,109 50,209
</TABLE>

16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Results of Operations

The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items reflected in the Company's
Consolidated Financial Statements:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- --------------

<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 20.5 22.4 22.4
Selling, general & administrative
expenses 19.5 17.8 15.7
Operating income 1.0 4.6 6.7
Interest expense (1.2) (1.2) (1.2)
Other income (expense), net (0.1) - -
Income (loss) before income taxes (0.3) 3.4 5.5
Income taxes - 1.6 2.0
Net income (loss) (0.3)% 1.8% 3.5%

</TABLE>
Fiscal Calendar

The Company's fiscal year is the 52 or 53 week period ending Saturday
nearest to March 31. Fiscal 1998 was a 52 week year while fiscal 1999 is a 53
week year.

Year Ended April 3, 1999 ("fiscal 1999") Compared to Year Ended March 28, 1998
("fiscal 1998")

Net sales were $179.8 million in fiscal 1999, a decrease of $34.0
million, or 15.9%, as compared to fiscal 1998. The decrease in sales consists
primarily of a decrease in sales of approximately $35.2 million and $4.5 million
in North America and the Pacific Rim/South America, respectively, partially
offset by a $5.7 million increase in sales in Europe. The decreases in sales are
primarily a result of weaker market conditions in the United States and the
Pacific Rim/South America. The increase in sales in Europe was comprised of
increased sales in continental Europe partially offset by decreased sales in the
U.K. of $7.6 million. The decrease in sales in the United Kingdom is primarily a
result of weaker market conditions.

During fiscal 1999, the Company's net incoming orders in North America
and Europe were approximately 34% and 18% less, respectively, than the incoming
orders in fiscal 1998. During the fiscal fourth quarter ended April 3, 1999, the
Company experienced a decline in incoming net orders in North America and Europe
of approximately 41% and 37%, respectively, as compared to the fiscal fourth
quarter ended March 28, 1998. These declines appear to represent a cyclical
trend in the United States and the United Kingdom, the Company's two principal
markets, of declining purchases by customers for machine tools in the segment of
the machine tool industry in which the Company participates. The Company cannot
predict for what period of time the decreased level of customer purchases could
continue, whether the level of customer purchases will decline further, or the
level at which incoming orders will be.

17
<PAGE>
Backlog at April 3, 1999 was approximately $14.6 million compared with
approximately $36.5 million at March 28, 1998. Of the backlog at April 3, 1999,
approximately $5.7 million relates to sales primarily in North America and
approximately $8.9 million relates to sales primarily in Europe. The Company's
backlog balances fluctuate as a result of many factors including length of time
to deliver products, new product introductions and market conditions. At the
current levels of backlog, the Company is more dependent on future incoming
orders than it has been in the recent past. During fiscal 1999, the Company's
incoming orders in North America and Europe were approximately 34% and 18% less,
respectively, than the incoming orders in fiscal 1998. During the fiscal fourth
quarter ended April 3, 1999, the Company experienced a decline in incoming net
orders in North America and Europe of approximately 41% and 37%, respectively,
as compared to the fiscal fourth quarter ended March 28, 1998.

Gross profit was $36.9 million in fiscal 1999, a decrease of $10.9
million, or 22.8%, as compared to fiscal 1998. The gross profit decline was a
result of an approximate $11.4 million decline in gross profit in the Company's
U.S. operations primarily due to decreased North American sales offset somewhat
by an increase in gross profit in the Company's European operations. Gross
profit as a percent of net sales was 20.5% compared with 22.4% in fiscal 1998.
The decline in gross profit as a percent of sales was predominately due to the
decline in sales in North America which resulted in a lower profit margin in the
Company's U.S. operations. As a result of lower North American sales, the
Company's production volume decreased in its U.S. operations resulting in less
absorption of its fixed costs.

Selling, general and administrative expenses were $35.0 million in
fiscal 1999, a decrease of $3.0 million, or 7.9%, as compared to fiscal 1998.
The decrease consisted of $0.8 million in advertising expenses, $1.8 million in
compensation and related expenses and $0.7 million research and development
expenditures, partially offset by direct selling expenses in the Company's newly
established Malaysian operations. As a percentage of net sales, selling, general
and administrative expenses were 19.5% in fiscal 1999, as compared to 17.8% for
fiscal 1998.

Operating income was $1.9 million for fiscal 1999, as compared to $9.7
million in fiscal 1998.

Interest expense was $2.2 million in fiscal 1999 as compared to $2.6
million in fiscal 1998.

The benefit for income taxes in fiscal 1999 was not substantive because
tax benefits related to certain losses incurred in the Company's European
operations were not established in fiscal 1999 because they were not currently
recognizable for tax return purposes. The tax provision of $3.5 million in
fiscal 1998 primarily represents a tax provision for the U.S. operating results.
In addition, tax benefits for losses incurred in the Company's German operations
were not established in fiscal 1998 because they were not currently recognizable
for tax return purposes.

Year Ended March 28, 1998 ("fiscal 1998") Compared to Year Ended March 29, 1997
("fiscal 1997")

Net sales were $213.8 million in fiscal 1998, a decrease of $13.8
million, or 6.1%, as compared to fiscal 1997. The decrease was primarily a
result of a decline in sales by the

18
<PAGE>
Company's European operations of approximately $16.7 million partially offset by
an increase in sales by the Company's U.S. operation of $2.9 million. The
decline in sales in the Company's European operations is primarily a result of
difficulties in the Company's ability to export products built in the Company's
United Kingdom facility to other European countries due to the increased cost of
these products to the Company's non United Kingdom customers as a result of the
increased value of the British pound versus other European currencies.

Backlog at March 28, 1998 was approximately $36.5 million, compared with
approximately $35.5 million at March 29, 1997.

Gross profit was $47.8 million in fiscal 1998, a decrease of $3.3
million, or 6.4% as compared to fiscal 1997. As a percentage of net sales, gross
profit in fiscal 1998 was 22.4% as compared to 22.4% in fiscal 1997. Gross
profit as a percent of sales in the Company's European operations declined
approximately 4.5 percentage points while gross profit in the Company's U.S.
operations increased approximately 2.5 percentage points.

The decline in European gross profit as a percent of sales is a result
of a drop in unit volume and price discounting. Both of these occurrences were
primarily a result of the increased costs of the Company's United Kingdom built
products to its non United Kingdom customers resulting from the strength of the
British pound versus other European currencies. The net decline in European
gross profit was offset to some extent as a result of the Company's purchasing
its German distributor in August 1997. As a result of this purchase, the
Company's fiscal 1998 gross profit includes the distribution margin for sales
made to end customers in Germany. This new operation contributed approximately
$1.8 million or 0.5 percentage points to consolidated gross profit in fiscal
1998.

The increase in U.S. gross profit as a percentage of sales is a result
of increased margins on the Company's U.S. built machining centers due to cost
reduction initiatives and the elimination of price promotions which existed in
fiscal 1997.

Selling, general and administrative expenses in fiscal 1998 were $38.0
million, an increase of $2.4 million, or 6.7%. Of this increase, $2.0 million
related to the Company's German distribution operation acquired in fiscal 1998.
As a percentage of net sales, selling, general and administrative expenses were
17.8% in fiscal 1998 as compared to 15.7% in fiscal 1997.

Operating income in fiscal 1998 was $9.7 million, a decrease of $5.7
million, or 36.7%, as compared to fiscal 1997. The decrease in operating income
is a result of a decline in the Company's European operation's operating income
of $9.9 million, offset to some extent by an increase of $4.2 million in the
Company's operating income in its U.S. operations.

Interest expense was $2.6 million in fiscal 1998, as compared to $2.9
million in fiscal 1997.

Provision for income taxes was $3.5 million, a decrease of $1.2 million,
as compared to fiscal 1997. The effective tax rate was 46.9% in fiscal 1998 as
compared to 36.7% in fiscal 1997. The increase in the effective tax rate was
primarily a result of losses incurred in the Company's German operations for
which no tax benefit was recognized since such benefit could not be currently
recognized for income tax reporting purposes. In addition, in fiscal 1997

19
<PAGE>
the effective tax rate was reduced by utilization of German net operating losses
generated in the prior year.

Recent Developments

On April 23, 1999, the Company entered into the Merger Agreement with Goldman
and Merger Sub. Pursuant to the terms and subject to the conditions of the
Merger Agreement, in the Merger, Merger Sub will merge with and into the
Company, with the Company as the surviving corporation. As a result of the
Merger, each outstanding share of Common Stock (other than shares owned by the
Company, Goldman, Merger Sub or any subsidiary thereof or shares with respect to
which the holders have perfected appraisal rights under Delaware law) will be
converted into the right to receive $10.00 per share in cash. The consummation
of the Merger is subject to the satisfaction of a number of conditions,
including, without limitation, stockholder approval of the Merger Agreement and
the termination or expiration of the waiting period under the HSR Act.

Foreign Operations

During fiscal 1999, net sales outside North America represented
approximately 50.5% of total net sales, as compared to 41.9% for fiscal 1998. A
substantial portion of these net sales were made by the Company's European
operations.

Generally, from time to time, the Company enters into forward exchange
contracts to provide economic hedges against foreign currency fluctuations on
its intercompany sales transactions between its U.S. and U.K. operations and for
payments for certain inventory purchases. At April 3, 1999, the Company had no
commitments under any forward purchase contracts.

Liquidity and Capital Resources

As of April 3, 1999, the Company had working capital of $50.0 million
compared with $51.6 million at March 28, 1998. The Company meets its short-term
financing needs through cash from operations and its revolving credit facility.
The revolving credit facility provides for maximum borrowings of up to $24.5
million in the United States and $19.5 million in the United Kingdom. The
borrowing availability is limited to the sum of (a) 80% of eligible accounts
receivable plus (b) 40% of eligible inventory (limited to $13.5 million for
domestic inventory and $10.0 million for foreign inventory) minus (x) the
aggregate amount of outstanding letters of credit and (y) any reserves deemed
reasonable by the lenders. Based upon this formula, as of April 3, 1999, the
Company could borrow approximately an additional $22.8 million under the
revolving credit facility, as amended, beyond the balance already borrowed. The
revolving credit facility is available through December 2002. The Company has
term loans which aggregate approximately $2.4 million as of April 3, 1999. These
loans are repayable monthly with total principal payments of approximately
$119,250 per month in the aggregate.

In February 1999, the Company executed a waiver and amendment to its
revolving credit facility to change, among other items, the senior interest
coverage covenant, as defined in the

20
<PAGE>
credit facility, from a requirement that the Company maintain a coverage ratio
of at least 4.0 to 1.0, measured at the end of each fiscal quarter, to a ratio
of at least 1.0 to 1.0, measured at the end of each fiscal quarter, until April
3, 2000 and to waive any event of default that may have occurred, as a result of
the Company not achieving the required ratio of 4.0 to 1.0 as of January 2,
1999.

The table below presents the summary of cash flow for the periods
indicated:
<TABLE>
<CAPTION>

FISCAL 1999 FISCAL 1998
----------- -----------

<S> <C> <C>
Net cash provided by (used in)
operating activities $ 17,435,000 $ 8,782,000

Net cash provided by (used in)
investing activities (1,679,000) (4,871,000)

Net cash provided by (used in)
financing activities (16,751,000) (2,006,000)
</TABLE>
Net cash provided by (used in) operating activities fluctuates between
periods primarily as a result of differences in net income, the level of sales
activity and the timing of the collection of accounts receivable, purchase of
inventory and payment of accounts payable. During fiscal 1999 and 1998, a
decrease in the Company's trade accounts receivable provided $13.9 million and
$1.7 million, respectively, in cash from operations. In fiscal 1999, a decrease
in inventory provided $13.2 million in cash from operations while in fiscal 1998
an increase in inventory of $0.5 million was a use of cash in operations.

The net cash used in investing activities in fiscal 1998 includes the
acquisition of certain assets of the Company's German distributor for $1.8
million. The net cash provided by (used in) financing activities in fiscal 1999
and fiscal 1998 represents primarily net repayments of debt.

The Company's short-term liquidity is somewhat affected by seasonal
fluctuations in accounts receivable levels. During typical years, the Company's
accounts receivable and inventories decrease during the July and August summer
holiday period. The January through March period may also experience decreases
in receivables as a result of weather conditions.

The Company believes that cash generated from operations and borrowings
available under the revolving credit facility will be sufficient to meet its
working capital and capital expenditure requirements for at least 12 months from
April 3, 1999. Such facility, together with cash from operations, is expected to
be sufficient to enable the Company to meet its working capital and capital
expenditure needs for the longer term. However, there can be no assurance that
liquidity would not be adversely impacted by a decline in general economic
conditions or that future credit facilities will be available.

21
<PAGE>
Changes in Financial Position

At April 3, 1999, trade accounts receivable decreased $14.5 million
(37%) and inventories decreased $14.5 million (22%), respectively, as compared
to March 28, 1998. The declines in accounts receivable and inventory are a
result of the decline in sales due to weaker market conditions in North America
and the United Kingdom.

Seasonality

The Company experiences a seasonal decline in net sales during its
second fiscal quarter, particularly during the July and August summer holiday
period. During such period, the Company's manufacturing facilities close for
approximately one to three weeks. The fourth fiscal quarter may also experience
decreases in net sales as a result of weather conditions.

Economic Cycles

The overall market for machine tools is cyclical, reflecting economic
conditions, production capacity utilization, changes in tax and fiscal policies,
corporate profitability and financial condition as well as the general level of
business confidence. During fiscal 1999, the Company's incoming orders in North
America and Europe were approximately 34% and 18% less, respectively, than the
incoming orders in fiscal 1998. During the fiscal fourth quarter ended April 3,
1999, the Company experienced a decline in incoming net orders in North America
and Europe of approximately 41% and 37%, respectively, as compared to the fiscal
fourth quarter ended March 28, 1998. These declines appear to represent a
cyclical trend in the United States and the United Kingdom, the Company's two
principal markets, of declining purchases by customers for machine tools in the
segment of the machine tool industry in which the Company participates. The
Company cannot predict for what period of time the decreased level of customer
purchases could continue, whether the level of customer purchases will decline
further, or the level at which incoming orders will be.

Year 2000 Readiness Disclosure

Many companies may face potential serious business problems because
software applications and business equipment developed in the past may not
properly recognize future calendar dates due to Year 2000 limitations. These
problems could cause systems to become unstable, stop working or provide
incorrect data based upon dates.

The Company is continuing its assessment of the impact on the Year 2000
issue on its operations. Based upon its assessment to date, the Company believes
that the majority of its significant internal computer operating and date
sensitive systems are Year 2000 compliant or will be able to operate after the
date change without having a material adverse impact on the Company's
operations. Part of this belief is based upon third party representations.
Discussions to date with critical and important third party suppliers have not
indicated that any significant problems will occur as a result of the Year 2000
that would materially effect the Company's ability to operate. Many of the
Company's suppliers are still working on ensuring that they will be Year 2000
compliant. Based on the current status of the Company's Year 2000 compliance
assessment, the estimated total costs to be incurred for all the Company's Year
2000 related projects are not expected to exceed approximately $200,000. Such
expenses will

22
<PAGE>
be expensed as incurred and are exclusive of systems being replaced or upgraded
in the normal course of business.

The risk factors the Company faces include the possibility that it has
not identified one or more internal system which is not Year 2000 compliant and
the failure of such system materially impacts the Company's ability to operate.
In addition, the failure of critical and important suppliers to correct their
material Year 2000 compliance problems could result in serious disruptions in
their normal business activities and operations.
Such disruptions could materially impact the Company's ability to operate.

The Company's contingency plans include identifying alternative
suppliers to current suppliers who are critical and important and are determined
by the Company to be a risk as a result of such supplier's lack of Year 2000
compliance. The Company cannot be assured that alternative suppliers will be
identified.

In addition, the Company's customer base may also be facing problems
related to Year 2000. Such problems could affect their spending plans and thus
potentially impact the Company's future sales.

Due to the intricate nature of the Year 2000 problems that could arise
if the Company and other entities with which it transacts business fail to
address this issue, such problems could result in a material adverse impact on
the Company's operations and a material financial risk to the Company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Consolidated Financial Statements beginning on page F-1.

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

None

23
<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Joseph E. Clancy 69 Chairman of the Board of Directors
Dan L. Griffith 58 President, Chief Executive Officer and Director
Walter C. Lazarcheck 35 Vice President and Chief Financial Officer
Malcolm Taylor 63 Senior Vice President and Managing Director-
European Operations
Robert J. Cresci 55 Director
Eliot M. Fried 66 Director
Bhikhaji M. Maneckji 50 Director
</TABLE>
Joseph E. Clancy has served as Chairman of the Board since 1988 and was
Chief Executive Officer of Bridgeport Machines from 1986 to June 1995 and
President from 1986 until September 1994. From 1968 to 1986, Mr. Clancy served
the Bridgeport Machines Division of Textron in various senior management
positions, including as President from 1978 to 1986. Mr. Clancy currently serves
as a director of People's Bank, Bridgeport, Connecticut. Mr. Clancy is Chairman
of Bridgeport Machines' Nominating Committee.

Dan L. Griffith has served as Chief Executive Officer of Bridgeport
Machines since June 1995, and as President since September 1994. Mr. Griffith
also served as Chief Financial Officer of Bridgeport Machines from 1986 to June
1995 and Executive Vice President from 1986 to September 1994. Mr. Griffith has
been a Director since April 1992. Mr. Griffith joined the Bridgeport Machines
Division of Textron in 1983 after holding various financial positions with
Textron. Mr. Griffith is a member of Bridgeport Machines' Nominating Committee.

Walter C. Lazarcheck has served as Vice President and Chief Financial
Officer of Bridgeport Machines since June 1995. Mr. Lazarcheck joined Bridgeport
Machines in January 1995 as Vice President - Finance. Mr. Lazarcheck previously
was an audit manager for Arthur Andersen LLP and worked for Arthur Andersen LLP
from 1985 to 1994.

Malcolm Taylor has served as Senior Vice President and Managing
Director-European Operations since September 1995. From 1988 to September 1995,
Mr. Taylor was Managing Director of Bridgeport Machines' United Kingdom
subsidiary, Bridgeport Machines Ltd. From 1984 to 1988, Mr. Taylor was Managing
Director of Bridgeport Machines Ltd.'s Singapore operations. Mr. Taylor has been
associated with Bridgeport Machines for 27 of the last 34 years.

Robert J. Cresci has served as a Director of Bridgeport Machines since
1986, except for the period from August to November 1991. Mr. Cresci has been a
Managing Director of Pecks Management Partners Ltd., an investment management
firm, since September 1990.
<PAGE>
Mr. Cresci currently serves on the boards of EIS International, Inc., Sepracor,
Inc., Arcadia Financial, Ltd., Hitox, Inc., Film Roman, Inc., Aviva Petroleum
Ltd., Quest Education Corporation, Castle Dental Centers, Inc., Candlewood Hotel
Co., SeraCare, Inc. and several private companies. Mr. Cresci is a member of
Bridgeport Machines' Compensation Committee.

Eliot M. Fried has served as a Director of Bridgeport Machines since
1988. Mr. Fried has been a Managing Director of Lehman Brothers Inc. ("Lehman
Brothers") and its predecessors since 1991. Prior thereto, he was Senior
Executive Vice President of Lehman Brothers. Mr. Fried is a director of Axsys
Technologies, Inc. and L-3 Communications Holdings, Inc. Mr. Fried is Chairman
of Bridgeport Machines' Compensation Committee and a member of Bridgeport
Machines' Audit Committee.

Bhikhaji M. Maneckji has been a Director of Bridgeport Machines since
May 1995. Mr. Maneckji is the designee Board member of Textron. See
"Compensation Committee Interlocks and Insider Participation." Mr. Maneckji is
Vice President and General Counsel-Textron Industrial Products, Textron Inc.
From October 1995 to January 1997, Mr. Maneckji was General Counsel-Textron
Industrial Products, Textron Inc. From 1986 to October 1995, Mr. Maneckji was
Assistant General Counsel and Assistant Secretary of Textron. From 1973 to 1986,
Mr. Maneckji served Textron in various positions. Mr. Maneckji is Chairman of
Bridgeport Machines' Audit Committee.

25
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information regarding the cash and other
compensation paid or accrued and certain long-term awards made to the Chief
Executive Officer and the four highest paid named executives for services in all
capacities for the fiscal years ending April 3, 1999, March 28, 1998 and March
29, 1997.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

LONG-TERM
COMPENSATION
------------

Annual Compensation Awards
Def. Comp.
(1) Securities
Other Underlying
Annual Options/ All Other
Name and Principal Compen- SARs Compen-
Position Year Salary ($) Bonus ($) sation ($) (# Shares) sation($)
-------- ---- ------ --- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
J.E. Clancy 1997 275,000 - 919 - 10,287
Chairman of the Board 1998 240,385 - 82 - 9,347
1999 125,000 - - - 3,332(2)

D.L. Griffith 1997 255,769 - - 10,000 8,332
President, Chief 1998 278,461 - - 15,000 9,256
Executive Officer and 1999 290,000 - - - 4,221(3)
Director

M.S. LaMonica, Jr. 1997 151,754 28,502 569 - 6,060
Vice President- 1998 52,735 29,037 74 - 2,288
Marketing & Sales (4)

R. L. Rochford 1998 81,016 57,091 27 6,000 4,522
Vice President-Sales 1999 88,400 43,238 307 - 2,230(5)

M. Taylor 1997 182,931(6) - - 5,000 657(6)
Senior Vice President 1998 194,443(6) - - 9,900 879(6)
and Managing Director- 1999 201,836(6) - - - 873(6)
European Operations

R.J. LoStocco 1997 130,000 - 1,643 - 5,036
Vice President- 1998 136,246 - 3,002 6,000 6,088
Administration and 1999 121,350 - 327 - 3,510(7)
Secretary (7)

Walter C. Lazarcheck 1997 117,654 - - 10,000 3,595
Vice President & 1998 129,419 - - 9,900 4,038
Chief Financial Officer 1999 139,150 - - - 1,686(8)
</TABLE>
- ------------------------
1) Fringe benefit amounts are omitted to the extent the aggregate value of
such benefits is less than the lesser of 10% of salary and bonus, or
$50,000. Amounts listed in this column represent above-market interest on
deferred compensation.
2) Consists of (i) $1,442 contributed by Bridgeport Machines to Mr. Clancy's
account under the Company's 401(k) savings plan and (ii) $1,890 in life
insurance premiums paid by Bridgeport Machines for the benefit of Mr.
Clancy.
26
<PAGE>
3) Consists of (i) $3,546 contributed by Bridgeport Machines to Mr. Griffith's
account under Bridgeport Machines' 401(k) savings plan and (ii) $675 in
life insurance premiums paid by Bridgeport Machines for the benefit of Mr.
Griffith.
4) Mr. LaMonica, Jr. resigned from his position as Vice President-Marketing &
Sales on July 3, 1997. Mr. Rochford assumed the position of Vice
President-Sales in fiscal 1998.
5) Consists of (i) $1,885 contributed by Bridgeport Machines to Mr. Rochford's
account under Bridgeport Machines' 401(k) savings plan and (ii) $345 in
life insurance premiums paid by Bridgeport Machines for the benefit of Mr.
Rochford.
6) The compensation was paid in United Kingdom pounds sterling and translated
at average rates. Amount listed under All Other Compensation -1999 consists
of $873 in medical insurance premiums paid by Bridgeport Machines for the
benefit of Mr. Taylor.
7) Mr. LoStocco resigned from his position as Vice President-Administration
and Secretary on December 31, 1999. Consists of (i) $1,620 contributed by
Bridgeport Machines to Mr. LoStocco's account under Bridgeport Machines'
401(k) savings plan and (ii) $1,890 in life insurance premiums paid by
Bridgeport Machines for the benefit of Mr. LoStocco.
8) Consists of (i) $1,605 contributed by Bridgeport Machines to Mr.
Lazarcheck's account under Bridgeport Machines' 401(k) savings plan and
(ii) $81 in life insurance premiums paid by Bridgeport Machines for the
benefit of Mr. Lazarcheck.

The following table sets forth information regarding grants of stock
options made during fiscal year 1999 to each of the named executive officers.

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Potential Realized Value
Number of at
Securities % of Total Assumed Annual Rates of
Underlying Options Granted Exercise or Stock Price Appreciation
Options to Employees Base Price for Option Term
Name Granted (#) in Fiscal Year ($/Sh) Expiration Date 5% 10%
---- ----------- -------------- ------ --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
J. E. Clancy - - - - - -
D. L. Griffith - - - - - -
W. C. Lazarcheck - - - - - -
R. L. Rochford - - - - - -
M. Taylor - - - - - -
</TABLE>
The following table sets forth the information concerning the option
exercises during fiscal 1999 and the fiscal year-end value of unexercised
options.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1999 Fiscal Year and 1999 Fiscal Year-End Option Values

Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired on Value Fiscal Year-End Fiscal Year-End (1)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
J. E. Clancy - - - - $ - $ -
D. L. Griffith - - 41,666 3,334 $ - $ -
W. C. Lazarcheck - - 17,467 9,933 $ - $ -
R. L. Rochford - - 4,000 4,000 $ - $ -
M. Taylor - - 19,133 8,267 $ - $ -
</TABLE>

27
<PAGE>
(1) Amounts listed are based upon the $6.125 per share closing price for the
Common Stock on the Nasdaq National Market on April 1, 1999 (last trading
day in fiscal 1999).

Pension Scheme

Bridgeport Machines maintains a Pension Scheme for its United Kingdom
operations ("UK Pension Scheme"). The following table sets forth the estimated
annual benefit payable upon retirement under the UK Pension Scheme.

Pension Plan Table
<TABLE>
<CAPTION>
-------------------------- Years of Service --------------------------

Remuneration 15 20 25 30
<S> <C> <C> <C> <C>
$145,000 $32,625 $43,500 $54,375 $65,250
160,000 36,000 48,000 60,000 72,000
175,000 39,373 52,500 65,625 78,750
190,000 42,750 57,000 71,250 85,500
205,000 46,125 61,500 76,875 92,250
210,000 47,250 63,000 78,750 94,500
215,000 48,375 64,500 80,625 96,750
220,000 49,500 66,000 82,500 99,000
</TABLE>
The Remuneration column relates to a participant's annual salary such as
that set forth in the Salary column of the Summary Compensation Table. A
participant's pensionable salary is the highest average annual salary of any
three consecutive years during the last ten years prior to retirement. The
normal retirement date for participants is age 65. The normal retirement benefit
consists of a stream of monthly payments over the life of the participant.
Malcolm Taylor, Senior Vice President and Managing Director -European
Operations, is a participant in Bridgeport Machines' UK Pension Scheme and is 63
years old and has 27 years of service.

Compensation of Directors

Each Director who is not an employee of Bridgeport Machines receives
from Bridgeport Machines an annual fee of $12,500, a meeting fee of $500 for
each Board or Committee meeting attended and reimbursement of expenses incurred
in attending meetings. Each non-employee Director was granted under the
Directors Plan an option to purchase 7,500 shares of Common Stock upon the
consummation of Bridgeport Machines' initial public offering in December 1994.
Those non-employee Directors who were not directors at such time were granted an
option to purchase 7,500 shares of Common Stock upon being appointed Director of
the Company. In addition, each non-employee Director will automatically be
granted annually an option to purchase an additional 2,000 shares of Common
Stock on the date of each of Bridgeport Machines' annual meetings of
stockholders.

28
<PAGE>
Employment Agreements

Joseph E. Clancy, Dan L. Griffith and Walter C. Lazarcheck have
employment agreements with Bridgeport Machines. Under such agreements, Mr.
Clancy serves as Chairman of the Board and as an Executive Officer for a base
salary of $125,000. Mr. Griffith serves as President and Chief Executive Officer
for a base salary of $290,000. Mr. Lazarcheck serves as Vice President, Chief
Financial Officer and Secretary for a base salary of $139,150. The base salary
is automatically adjusted annually for increases in U.S. City Average Consumer
Price Index. The agreements also provide for annual salary increases as
determined by the Board of Directors. The term of each agreement continues until
the earlier of the executive's retirement, death, disability or voluntary
termination. Under the agreements, Messrs. Clancy, Griffith and Lazarcheck are
also provided the opportunity to participate in pension and welfare plans,
programs and benefits offered generally to all executives.

In the event of termination of employment of Messrs. Clancy, Griffith
or Lazarcheck by Bridgeport Machines for cause, or if the executive resigns
other than by reason of a substantial breach of the employment agreement by
Bridgeport Machines, the executive will be entitled only to his base salary and
benefits through the date of termination. In the event of termination of
employment without cause or resignation by the executive as a result of a
substantial breach of the employment agreement by Bridgeport Machines (such as
reduction in base salary), the executive will be entitled to two years' base
salary plus any bonus awarded (but not received) during the current or preceding
year and benefits for two years following termination of the agreement.

Each of Mr. Clancy, Mr. Griffith and Mr. Lazarcheck has agreed to
refrain from competing with Bridgeport Machines for two years following
termination of employment or resignation therefrom. The agreements provide that
the restricted period may be extended if the executive violates the
non-competition provisions. Additionally, the executive forfeits any right to
severance if he materially breaches such provisions.

Bridgeport Machines is permitted to assign the agreement to any
business that acquires all or substantially all of the assets of Bridgeport
Machines by merger, consolidation or otherwise.

Malcolm Taylor entered into an employment agreement in September 1996
pursuant to which he serves as Senior Vice President-Bridgeport Machines, Inc.
and Managing Director of Bridgeport Machines' European Operations. The agreement
has a term of two years after which it may be terminated by Bridgeport Machines
at any time upon not less than 24 months notice or by Mr. Taylor at any time
upon not less than 12 months notice. The agreement presently provides for an
annual salary of 122,325 pound sterling (approximately $198,000), subject to
annual increases as determined by the board of Bridgeport Machines' United
Kingdom subsidiary. Under the agreement, Mr. Taylor is provided the opportunity
to participate in Bridgeport Machines' bonus programs and pension and welfare
plans and benefits. In the event Mr. Taylor is unable to perform his duties
under the agreement as a result of illness or other incapacity beyond his
control, he will be entitled to receive all or part of his salary for a period
of six months or longer at the Board's discretion.

Certain officers and directors of the Company have agreements which
will be effected as a result of the Merger. In addition, certain officers of the
Company have entered into new

29
<PAGE>
employment or consulting arrangements that become effective at the effective
time of the Merger (the "Effective Time"). These existing and new agreements are
discussed below.

Stock Options. Immediately prior to the Effective Time, each option
granted pursuant to the Company's stock option plans will become fully vested
and immediately exercisable. Each holder of a stock option outstanding
immediately prior to Effective Time will be entitled to receive and will be paid
in full satisfaction of such stock option, or each stock option will after the
Effective Time be exercisable for, a cash payment equal to the product of (i)
the excess, if any, of the Merger consideration of $10.00 over the exercise
price per share of Common Stock subject to such option multiplied by (ii) the
number of shares of Common Stock subject to such option immediately prior to the
Effective Time, less any income or employment tax withholding required under the
Internal Revenue Code of 1986, as amended, or any provision of state, local or
foreign tax law.

New Employment Arrangements. The employment of Dan L. Griffith will
terminate upon completion of the Merger. Under the terms of Mr. Griffith's
present employment agreement , Mr. Griffith will be paid his current base
salary, in accordance with the Company's normal payroll practices, and allowed
to participate in the Company's benefit plans for the two-year period commencing
on his termination date. As of Mr. Griffith's termination date, he will be
retained as a consultant to the Company for six months. The terms of the
consulting agreement are discussed below.

Following the Merger, Walter C. Lazarcheck will continue his employment
with the Company as its Vice President, Chief Financial Officer and Secretary
pursuant to the terms of his present employment agreement. Mr. Lazarcheck will
also be paid a bonus of $69,575 by Goldman at the time of the closing of the
Merger.

Following the Merger, Malcolm Taylor will continue his employment as
the Managing Director European Operations pursuant to the terms of his present
service agreement. Mr. Taylor will also be paid a bonus of UK(pound)57,576 by
Goldman, one-half to be paid at the time of the closing of the Merger and the
remainder to be paid six months thereafter, provided Mr. Taylor continues to
perform his present obligations under his service agreement.

New Consulting Agreement. Dan L. Griffith will be retained as a
consultant to the Company for the six-month period commencing as of the closing
of the Merger (the "Term"). Under the terms of the consulting agreement, Mr.
Griffith will receive $1,000 for each day on which he provides consulting
services to the Company, and $500 for each business day for which no services
are provided to the Company. Mr. Griffith will also receive a lump sum payment
of $72,500 at the time of the closing of the Merger. At the end of the Term Mr.
Griffith will receive an additional lump sum payment of $72,500 (reduced by the
aggregate payments received by Mr. Griffith on days for which no consulting
services are performed for the Company). During the Term and continuing until
July 31, 2000, Mr. Griffith is prohibited from engaging in certain competitive
business activities with the Company and its affiliates.

30
<PAGE>
Compensation Committee Interlocks and Insider Participation

The Compensation Committee currently consists of Robert J. Cresci and
Eliot M. Fried. None of the members of the Compensation Committee is or has been
an officer or employee of Bridgeport Machines. No executive officer of
Bridgeport Machines served on any board of directors or compensation committee
of any entity (other than Bridgeport Machines) with which any member of the
Compensation Committee is affiliated.

The following agreements relate to certain relationships and related
transactions involving among others, the members of the Compensation Committee.

Recapitalization Voting Agreement. In connection with the 1992
Recapitalization, existing stockholders of Bridgeport Machines ("Existing
Stockholders") who, as of July 24, 1998, owned a total of 1,958,309 shares of
Common Stock, entered into an agreement (the "Recapitalization Voting
Agreement") pursuant to which they agreed to vote their shares to elect members
of the Board of Directors as follows: (i) one Director designated by Textron, as
holder of 1,189,233 shares of Common Stock and (ii) one Director designated by
Kansas Debt Fund ("KDF") and State of Delaware Employees Retirement Fund
("DERF"), acting by a majority of an aggregate of 608,538 shares of Common Stock
held by KDF and DERF, of which KDF currently owns approximately 63%. Such voting
arrangements lapse in each case, on the earlier of December 31, 2000 or the date
on which the covered shares owned by Textron or KDF and DERF, as the case may
be, constitute less than 5% of the outstanding Common Stock.

Pursuant to the Termination Agreement and Waiver, Textron, KDF and DERF
waived their rights with respect to each share of Common Stock held by an
Existing Stockholder that is sold or otherwise transferred by the Existing
Stockholder to a person or entity which is not an affiliate (as defined in the
Termination Agreement and Waiver) of such Existing Stockholder (see also
"-Textron Stockholders Agreement" below). In addition, each of the parties to
the Voting Agreement waived any and all rights granted to it pursuant to the
Voting Agreement with respect to any shares of Common Stock sold in Bridgeport
Machines' initial public offering in December 1994.

Textron Stockholders Agreement. In connection with the 1992
Recapitalization, Existing Stockholders with respect to certain shares of Common
Stock (the "Covenanted Shares"), agreed to share with Textron certain proceeds
from the sale or disposition of their respective shares of Common Stock. Such
price sharing arrangement was terminated in fiscal 1995 and no longer has any
effect.

During the term of the agreement, the holders of the Covenanted Shares
also agreed to vote their shares in favor of a Textron nominee to the Board of
Directors, provided that such agreement shall not preclude such holders from
voting in favor of any other nominee in addition to the Textron nominee. All
Covenanted Shares are subject to the Recapitalization Voting Agreement and, as a
result, the Textron Stockholders Agreement does not provide the Textron nominee
with additional votes (see "-Recapitalization Voting Agreement" above).

The voting arrangement under the Textron Stockholders Agreement will
continue in effect until the earlier of December 15, 2000 or the date on which
the shares received by Textron in the 1992 Recapitalization constitute less than
5% of the outstanding Common Stock

31
<PAGE>
or, with respect to each Covenanted Share, until the occurrence of any of the
following events with respect to such share and compliance by the holder with
applicable procedures: (i) the sale of a Covenanted share at $7.05 or more in a
transaction where no public market exists for the Common Stock, (ii) the first
sale of such Covenanted Share while a public market for the Common Stock exists,
(iii) the sale of such Covenanted Share in a transaction involving a sale of all
of the Common Stock and (iv) the distribution, whether in dissolution, by
dividend or otherwise, to Bridgeport Machines' stockholders of all of the net
proceeds of the sale by Bridgeport Machines of substantially all of its assets.
In the event Textron disposes of any of its original 1,448,400 shares of Common
Stock (Textron currently holds 1,189,233 of such shares) while the covenant is
in effect, such covenant will lapse with respect to a proportionate number of
Covenanted Shares. In addition, pursuant to the Termination Agreement and
Waiver, Textron waived its voting rights with respect to each Covenanted Share
that is sold or otherwise transferred by a holder to a person or entity other
than an affiliate (as defined in the Termination Agreement and Waiver). (See
"-Recapitalization Voting Agreement" above.)

32
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of May 17, 1999 the beneficial
ownership of Common Stock by (i) each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (ii) the
directors and executive officers individually and (iii) the directors and
executive officers as a group.
<TABLE>
<CAPTION>
Shares Percent of
Name Beneficially Owned (1) Total Shares
---- ---------------------- ------------
<S> <C> <C>
Textron Inc. 1,207,733 21.6%
40 Westminster Street
Providence, RI 02903

Citigroup Inc. (2) 711,796 12.8
153 East 53rd Street
New York, NY 10043

Lehman Brothers Holdings, Inc. 639,935 11.5
Three World Financial Center
New York, NY 10285

High Technology Holding Corp. (3) 568,700 10.2
2229 South Yale Street
Santa Ana, CA 92704

Kansas Debt Fund, Nominee for
Kansas Public Employees Retirement Systems (12) 535,910 9.6
c/o Portfolio Advisors, Inc.
9 Old Kings Highway South
Darien, CT 06820

U.S. Bancorp (4) 316,140 5.7
601 2nd Ave. South
Minneapolis, MN 55402

Joseph E. Clancy 82,043 1.5
Dan L. Griffith (5) 94,777 1.7
Walter C. Lazarcheck (6) 17,467 *
Robert L. Rochford (7) 4,000 *
Malcolm Taylor (8) 26,883 *
Robert J. Cresci (9) 11,500 *
Eliot M. Fried (10) 21,500 *
Bhikhaji M. Maneckji (11) - *
All Directors and Executive Officers 258,170 4.5
as a group (total 8 persons)
</TABLE>
- ------------
* Less than 1% of the outstanding Common Stock

1) Pursuant to the regulations of the SEC, shares are deemed to be
"beneficially owned" by a person if such person directly or indirectly has
or shares the power to vote or dispose of such shares whether or not such
person has any pecuniary interest in such shares or the right to acquire
the power to vote or dispose of such shares within 60 days, including any
right to acquire through the exercise of any option, warrant or right.
2) In a Schedule 13G filed with the SEC on January 22, 1999, Citigroup Inc.
reported that as of January 12, 1999 it held 711,796 shares of Common
Stock. Citigroup Inc. reported that it possessed: (i) shared dispositive
power with respect to 711,796 shares and (ii) shared voting power with
respect to 711,796 shares.
33
<PAGE>
3) In a Schedule 13D filed with the SEC on July 22, 1998 as amended on March
15, 1999, High Technology Holding Corp. reported that as of March 15, 1999,
it held 568,700 shares of Common Stock. High Technology Holding Corp.
reported that it possessed: (i) sole dispositive power with respect to
568,700 shares and (ii) sole voting power with respect to 568,700 shares.
4) In a Schedule 13G filed with the SEC on March 1, 1999, U.S. Bancorp, a
parent holding company, reported that as of December 31, 1998 it held
316,140 shares of Common Stock. U.S. Bancorp reported that it possessed:
(i) sole dispositive power with respect to 316,140 shares and (ii) sole
voting power with respect to 303,540 shares.
5) Includes 41,666 shares which may be acquired by Mr. Griffith upon the
exercise of immediately exercisable options.
6) Consists of 17,467 shares which may be acquired by Mr. Lazarcheck upon the
exercise of immediately exercisable options.
7) Consists of 4,000 shares which may be acquired by Mr. Rochford upon the
exercise of immediately exercisable options.
8) Includes 19,133 shares which may be acquired by Mr. Taylor upon the
exercise of immediately exercisable options.
9) Consists of 11,500 shares which may be acquired by Mr. Cresci upon the
exercise of immediately exercisable options. Does not include 226,166
shares beneficially owned by DERF, which Mr. Cresci may be deemed to
beneficially own by virtue of his position as a Managing Director of Pecks
Management Partners Ltd., investment advisor for such fund.
10) Includes 11,500 shares which may be acquired by Mr. Fried upon the exercise
of immediately exercisable options. Does not include shares beneficially
owned by Lehman Brothers Holdings, Inc., which Mr. Fried may be deemed to
beneficially own by virtue of his position as Managing Director of Lehman
Brothers Holdings, Inc.
11) Does not include shares beneficially owned by Textron, which includes
shares underlying stock options registered in Mr. Maneckji's name, of which
Mr. Maneckji disclaims beneficial ownership.
12) The Company's register of stockholders of record indicates that, as of May
17, 1999, KDF, Nominee for Kansas Public Employees Retirement Systems,
holds 535,910 shares of Common Stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following agreements relate to certain relationships and related
transactions involving among others, the members of the Board of Directors.

Settlement of Certain Environmental Matters. In connection with the
leveraged buy-out of Bridgeport Machines from Textron in 1986, Textron agreed to
retain liability for, among other things, historic contamination related to
Bridgeport Machines' facility in Bridgeport, Connecticut. Subsequent to
Bridgeport Machines' leveraged buy-out transaction in 1986, contamination was
identified at the Connecticut facility. Textron disputed the extent of its
liability for remediation of the contamination. Bridgeport Machines commenced
litigation against Textron. In settlement of the litigation, Textron and
Bridgeport Machines entered into an agreement in June 1994 which allocates
remediation costs between Textron and Bridgeport Machines (the "Settlement
Agreement"). Under the Settlement Agreement, Textron agreed to accept sole
responsibility to remediate hazardous substances in certain areas of the
Bridgeport Machines' facility to the extent required by law, and Bridgeport
Machines and Textron agreed to share equally the costs to remediate groundwater
beneath the property.

Textron Financing Arrangements. Bridgeport Machines offers to its
customers the ability to finance purchases through financing arrangements
provided by TFC, a subsidiary of Textron. TFC determines whether or not to
extend financing to customers on a case by case basis. In the event of default
by a customer, Bridgeport Machines is under no obligation to repurchase the
equipment.

34
<PAGE>
Bridgeport Machines believes that the loss of TFC as a financing source would
not have a material adverse effect on Bridgeport Machines.

Assumption of Product Liability by Textron. In connection with
Bridgeport Machines' leveraged buy-out transaction in 1986, Textron assumed
certain product liability exposure for products shipped by Bridgeport Machines
prior to the effective date of the closing of such transaction.

Goldman Voting Agreements for Principal Stockholders Other Than
Textron. In connection with the execution of the Merger Agreement, each of the
Principal Stockholders entered into a Goldman Voting Agreement with Goldman
pursuant to which such Principal Stockholder, among other things, has granted
Goldman a proxy to vote the shares of Common Stock over which such Principal
Stockholder has voting control in favor of the adoption and approval of the
Merger Agreement and the transactions contemplated thereby at the special
meeting of stockholders to approve the Merger Agreement.

Each Principal Stockholder has agreed not to sell, transfer or
otherwise dispose of, or reduce his interests in, any shares of Common Stock
owned by such stockholder prior to the termination of such Stockholder's Goldman
Voting Agreement.

Each Principal Stockholder has additionally agreed not to, directly or
indirectly, (i) solicit, initiate or encourage (or authorize any person to
solicit, initiate or encourage) any inquiry, proposal or offer from any person
(other than Goldman) to acquire the business, property or capital stock of the
Company or any of its subsidiaries, or any acquisition of a substantial equity
interest in, or a substantial amount of the assets of, the Company or any of its
subsidiaries or (ii) participate in any discussion or negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or participate in, facilitate or encourage any effort
or attempt by any person (other than Goldman) to do or seek any of the
foregoing. However, each Principal Stockholder or its representative, as a
member of the Board of Directors, may take actions in such capacity as are
permitted under the Merger Agreement.

Each Goldman Voting Agreement will terminate upon the earlier of (i)
the Effective Time, and (ii) the termination of the Merger Agreement in
accordance with the provisions thereof.

Textron's Goldman Voting Agreement. The Goldman Voting Agreement with
Textron consists of the identical terms and conditions as are present in the
other Goldman Voting Agreements. In addition, if the Merger Agreement is
terminated under circumstances that obligate Bridgeport to pay to Goldman a
termination fee, Textron has agreed in its Goldman Voting Agreement to pay to
Goldman an amount equal to the product of (a) the amount by which the
consideration per share paid to Textron in the transaction triggering such
termination exceeds $10.00, and (b) the total number of shares of Common Stock
transferred by Textron in such transaction.

The foregoing description of the Goldman Voting Agreements is qualified
in its entirety by reference to the Goldman Voting Agreements which are exhibits
to this Annual Report on Form 10-K.

Textron Confirmation Letter. In connection with execution of the Merger
Agreement, Textron and Goldman entered into a letter agreement, dated April 23,
1999, which confirms the obligation of Textron to indemnify the Surviving
Corporation following the Merger for environmental claims under the Purchase and
Sale Agreement, dated as of May 7, 1986, by and between the Company and Textron,
and the Settlement Agreement, dated as of June 22, 1994, by and between the
Company and Textron.

Lehman Brothers' Engagement as Financial Advisor. Lehman Brothers acted
as financial advisor to the Company in connection with the pending sale of the
Company to Goldman. Mr. Eliot Fried, a Managing
<PAGE>
Director of Lehman Brothers, is a director of the Company. In addition,
affiliates of Lehman Brothers own approximately 639,935 shares of the Common
Stock.

On April 23, 1999, at a meeting of the Company's Board of Directors to
approve the Merger Agreement, Lehman Brothers rendered its oral opinion to the
Board of Directors that, as of such date, and based upon and subject to certain
matters stated in Lehman Brothers' written opinion, the consideration to be
received by the stockholders of the Company in the sale of the Company was fair,
from a financial point of view, to the Company's stockholders. Lehman Brothers
subsequently confirmed its oral opinion by delivery of its written opinion dated
April 23, 1999.

As compensation for its services as financial advisor to the Company in
connection with the sale of the Company, the Company has paid to Lehman Brothers
a retainer of $50,000 and incurred a fee of $250,000 upon delivery of its
fairness opinion and has agreed to pay Lehman Brothers a fee of 1.125% of the
total consideration (including the Company's total debt less cash and marketable
securities) involved in the sale of the Company upon closing of the sale, from
which the opinion fee will be deducted. In addition, the Company has agreed to
reimburse Lehman Brothers for reasonable out-of-pocket expenses incurred in
connection with, and to indemnify Lehman Brothers for certain liabilities that
may arise out of, its engagement by the Company and its rendering of its
opinion.

Certain other relationships and related transactions are described
above under "Compensation Committee Interlocks and Insider Participation."

36
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K

(A) Financial Statements and Schedules

The Consolidated Financial Statements and Schedules listed in the
accompanying Index to Consolidated Financial Statements (at page F-1)
are filed as part of this Annual Report on Form 10-K, and are included
in Item 8 hereof. Financial Statement Schedules not listed therein are
either not required or the information required to be included therein
is reflected in the Consolidated Financial Statements.

(B) Reports on Form 8-K

A Current Report Form 8-K was filed on March 15, 1999 reporting a
suggestion by a stockholder.

A Current Report on Form 8-K was filed on March 23, 1999 reporting the
Board of Directors' response to the stockholder suggestion outlined in
the Current Report on Form 8-K filed on March 15, 1999.

A Current Report on Form 8-K was filed on April 27, 1999 outlining a
Plan of Merger approved by the Board of Directors involving the
Company.

Exhibit
Number
- ------

37
<PAGE>
10.1.5 Notice and Waiver of Kansas Debt Fund, as nominee for Kansas Public
Employees Retirement System (b)
10.1.6 Notice and Waiver of State of Delaware Employees Retirement Fund (b)
10.2.1 Revolving Credit and Security Agreement dated as of December 18, 1992,
as amended (a)
10.2.2 Amendment No. 4 to Revolving Credit and Security Agreement dated as of
December 18, 1992 (a)
10.2.3 Amended and Restated Revolving Credit, Term Loan and Security Agreement
dated as of December 23, 1994 (c)
10.2.4 Consent and Amendment No. 2 to Amended and Restated Revolving Credit,
Term Loan and Security Agreement (d)
10.2.5 Amendment No. 3 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (g)
10.2.6 Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (i)
10.2.7 Amendment No. 5 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (j)
10.2.8 Amendment No. 6 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (k)
10.2.9 Amendment No. 7 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (l)
10.2.10 Waiver and Amendment No. 8 to Amended and Restated Revolving Credit,
Term Loan and Security Agreement (l)
10.3.1 Company's 1994 Stock Incentive Plan (a)T
10.3.2 Form of Stock Option Grant under Company's 1994 Stock Incentive Plan
(e) T
10.4.1 Company's 1994 Non-Employee Director Stock Option Plan (a)T
10.4.2 Form of Stock Option Grant under Company's 1994 Non-Employee Director
Stock Option Plan (e) T
10.5 Employment Agreement between the Company and Joseph E. Clancy (k) T
10.6 Employment Agreement between the Company and Dan L. Griffith (f)T
10.6.1 Consulting Agreement between the Company and Dan L. Griffith T
10.7 Employment Agreement between Bridgeport Machines Limited and Malcolm
Taylor (h)T
10.8 Purchase and Sale Agreement dated as of May 7, 1986 between the Company
and Textron Inc. (a)
10.9 Settlement Agreement dated June 22, 1994 between the Company and
Textron Inc. (a)
10.10.1 Management Subscription Agreements dated June 30, 1986 (a)
10.10.2 Termination Agreement among the Company and Management Purchasers (b)
10.10.3 Notice and Waiver of Lehman Brothers Holdings, Inc. (b) Lease
Agreement, dated June 2, 1995, between Alu-Billets Produktions GmbH and
Bridgeport Machines GmbH
10.11.1 a) German version (binding agreement) (d)
10.11.2 b) English translation (d)
10.12 Employment Agreement between the Company and Walter C. Lazarcheck (k) T
10.13 Affiliate's Agreement, dated as of April 23, 1999, between Goldman
Industrial Group, Inc. and Textron Inc. (m)
10.14 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc. and Lehman LBO Inc. (m)
38
<PAGE>
10.15 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc. and the State of Delaware Employees Retirement Fund (m)
10.16 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc. and Joseph E. Clancy (m)
10.17 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc.and Dan L. Griffith (m)
11. Statement of Calculation of Earnings Per Share (n)
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27. Financial Data Schedule
- --------------------

(a) Incorporated by reference from the Company's Registration on Form S-1
(Registration No. 33-84820), as filed with the Commission on October 6,
1994.

(b) Incorporated by reference from Amendment No. 1 to the Company's
Registration on Form S-1 (Registration No. 33-84820), as filed with the
Commission on October 26, 1994.

(c) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 31, 1994.

(d) Incorporated by reference from the Company's Current Report on Form 8-K
dated as of June 2, 1995.

(e) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended April 1, 1995.

(f) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995.

(g) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 30, 1995.

(h) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended March 30, 1996.

(i) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 28, 1996.

(j) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended March 29, 1997

(k) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended March 28, 1998
39
<PAGE>
(l) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended January 2, 1999.

(m) Incorporated by reference from the Company's Current Report on Form 8-k
dated April 23, 1999.

(n) Not included because computation can be determined from material
contained in the Consolidated Financial Statements included in this
Annual Report on Form 10-K.

T A management contract or compensatory plan or arrangement required to
be filed pursuant to Item 14(c) of this report.

40
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

BRIDGEPORT MACHINES, INC.
(Registrant)

By: /s/ Walter C. Lazarcheck
------------------------
Walter C. Lazarcheck
Vice President & Chief Financial Officer

Date: May 17, 1999

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 as the dates indicated.

Signature Title Date

/s/ Joseph E. Clancy Chairman of the Board May 17, 1999
- --------------------
Joseph E. Clancy

/s/ Dan L. Griffith President, Chief Executive May 17, 1999
- ------------------- Officer and Director
Dan L. Griffith (Principal Executive Officer)

/s/ Walter C. Lazarcheck Vice President & Chief Financial May 17, 1999
- ------------------------ Officer (Principal Financial
Walter C. Lazarcheck and Accounting Officer)

/s/ Robert J. Cresci Director May 17, 1999
- --------------------
Robert J. Cresci

/s/ Eliot M. Fried Director May 17, 1999
- ------------------
Eliot M. Fried

/s/Bhikhaji M. Maneckji Director May 17, 1999
- -----------------------
Bhikhaji M. Maneckji

41
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Bridgeport Machines, Inc. and Subsidiaries

Report of Independent Public Accountants

Consolidated Balance Sheets as of April 3, 1999 and
March 28, 1998

Consolidated Statements of Operations for the three years
ended April 3, 1999

Consolidated Statements of Stockholders' Equity for the
three years ended April 3, 1999

Consolidated Statements of Cash Flows for the three years
ended April 3, 1999

Notes to Consolidated Financial Statements

Schedules to Financial Statements are not required

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Bridgeport Machines, Inc.:

We have audited the accompanying consolidated balance sheets of Bridgeport
Machines, Inc. (a Delaware corporation) and subsidiaries as of April 3, 1999 and
March 28, 1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three fiscal years ended
April 3, 1999. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bridgeport Machines,
Inc. and subsidiaries as of April 3, 1999 and March 28, 1998 and the results of
their operations and their cash flows for each of the three fiscal years ended
April 3, 1999 in conformity with generally accepted accounting principles.

/s/ARTHUR ANDERSEN LLP
----------------------
ARTHUR ANDERSEN LLP

Stamford, Connecticut
May 17, 1999
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 3, 1999 AND MARCH 28, 1998

ASSETS 1999 1998
------ ------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash ............................................. $ 3,844,000 $ 4,892,000
Trade accounts receivable, less allowance
of $1,402,000 in 1999 and $1,551,000
in 1998 ........................................ 24,712,000 39,236,000
Inventories ...................................... 52,206,000 66,707,000
Prepaid income taxes ............................. 433,000 --
Deferred income taxes ............................ 2,499,000 3,100,000
Prepaid expenses and other current assets ........ 940,000 1,190,000
------------- -------------

Total current assets ..................... 84,634,000 115,125,000
------------- -------------

PROPERTY, PLANT AND EQUIPMENT:
Land ............................................. 342,000 351,000
Buildings, improvements and leasehold improvements 4,116,000 4,081,000
Machinery and equipment .......................... 19,342,000 19,880,000
Furniture, fixtures and computer systems ......... 6,267,000 5,979,000
------------- -------------

30,067,000 30,291,000

Less: Accumulated depreciation ......... (12,684,000) (10,586,000)
------------- -------------

Property, plant and equipment, net ............... 17,383,000 19,705,000
------------- -------------

INVESTMENTS IN AND ADVANCES TO AFFILIATES .......... 649,000 859,000

OTHER ASSETS, net of accumulated amortization
of $357,000 in 1999 and $1,585,000 in 1998 ....... 300,000 421,000
------------- -------------

Total assets ............................ $ 102,966,000 $ 136,110,000
============= =============

</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 3, 1999 and MARCH 28, 1998
(Continued)

LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
------------------------------------ ------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdrafts ................................. $ 786,000 $ 2,386,000
Working capital revolver ........................ 9,770,000 23,106,000
Accounts payable ................................ 9,366,000 20,153,000
Accrued expenses ................................ 13,408,000 14,396,000
Income taxes payable ............................ -- 1,001,000
Current portion of long-term debt obligations ... 1,264,000 2,483,000
------------- -------------

Total current liabilities ............... 34,594,000 63,525,000

LONG-TERM DEBT OBLIGATIONS ........................ 1,086,000 3,142,000

OTHER LONG-TERM LIABILITIES ....................... 120,000 120,000
------------- -------------

Total liabilities ....................... 35,800,000 66,787,000
------------- -------------

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares
authorized, no shares issued .................. -- --
Common stock, $.01 par value, 13,000,000 shares
authorized, 5,704,404 shares issued
at April 3, 1999 and 5,702,404 shares
issued at March 28, 1998 ...................... 57,000 57,000
Capital in excess of par value .................. 38,533,000 38,513,000
Retained earnings - subsequent to reclass-
ification of $6,750,000 deficit as part of the
quasi-reorganization as of January 3, 1993 .... 30,505,000 30,991,000
Other comprehensive income:
Cumulative translation adjustment ............. (784,000) 271,000
Treasury stock at cost, 136,300 shares at
April 3, 1999 and 50,000 shares
at March 28, 1998 ............................. (1,145,000) (509,000)
------------- -------------

Total stockholders' equity .............. 67,166,000 69,323,000
------------- -------------

Total liabilities & stockholders' equity $ 102,966,000 $ 136,110,000
============= =============

</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED APRIL 3, 1999

Year Ended Year Ended Year Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- --------------
<S> <C> <C> <C>
Net sales .................................. $ 179,758,000 $ 213,770,000 $ 227,549,000

Cost of sales .............................. 142,857,000 165,976,000 176,484,000
------------- ------------- -------------

Gross profit ..................... 36,901,000 47,794,000 51,065,000

Selling, general and administrative expenses 35,032,000 38,045,000 35,661,000
------------- ------------- -------------

Operating income ................. 1,869,000 9,749,000 15,404,000

Interest expense ........................... (2,213,000) (2,608,000) (2,858,000)

Other income (expenses), net ............... (115,000) 225,000 90,000
------------- ------------- -------------

Income (loss) before provision for
income taxes ................... (459,000) 7,366,000 12,636,000

Provision for income taxes ................. 27,000 3,451,000 4,635,000
------------- ------------- -------------

Net income (loss) ................ $ (486,000) $ 3,915,000 $ 8,001,000
============= ============= =============

Basic earnings (loss) per share ............ $ (0.09) $ 0.69 $ 1.41
============= ============= =============

Diluted earnings (loss) per share .......... $ (0.09) $ 0.69 $ 1.40
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED APRIL 3, 1999

Accumulated
Other
Comprehensive
Income
Common Stock Capital Cumulative
------------------- in Excess Retained Translation Treasury Comprehensive
Shares Par Value of Par Value Earnings Adjustment Stock Income
------ --------- ------------ -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, March 30, 1996 5,676,697 $57,000 $ 38,259,000 $19,075,000 $(282,000) $ -
--------- ------- ------------ ----------- --------- -----------

Comprehensive Income:
Net income for the year ended
March 29, 1997 - - - 8,001,000 - - $ 8,001,000

Other Comprehensive Income:
Translation adjustment for the year
ended March 29, 1997 - - - - 450,000 - 450,000
-----------
Total Comprehensive Income $ 8,451,000
===========
Issuance of stock for exercises of
stock options 2,664 - 26,000 - - -
--------- ------- ----------- ----------- --------- -----------

BALANCE, March 29, 1997 5,679,361 57,000 38,285,000 27,076,000 168,000 -
--------- ------- ----------- ----------- --------- -----------

Comprehensive Income:
Net income for the year ended
March 28, 1998 - - - 3,915,000 - - $ 3,915,000
Other Comprehensive Income:
Translation adjustment for the year
ended March 28, 1998 - - - - 103,000 - 103,000
-----------
Total Comprehensive Income $ 4,018,000
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED APRIL 3, 1999
(continued)

Accumulated
Other
Comprehensive
Income
Common Stock Capital Cumulative
------------------- in Excess Retained Translation Treasury Comprehensive
Shares Par Value of Par Value Earnings Adjustment Stock Income
------ --------- ------------ -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock for exercises of
stock options 23,043 - 228,000 - - -
Purchase of treasury stock - - - - - (509,000)
--------- ------- ------------ ----------- --------- -----------

BALANCE, March 28, 1998 5,702,404 57,000 38,513,000 30,991,000 271,000 (509,000)
--------- ------- ------------ ----------- --------- -----------

Comprehensive Income:
Net loss for the year ended
April 3, 1999 - - - (486,000) - - $ (486,000)
Other Comprehensive Loss:
Translation adjustment for the year
ended April 3, 1999 - - - - (1,055,000) - (1,055,000)
-----------
Total Comprehensive Loss $(1,541,000)
===========
Issuance of stock for exercises of
stock options 2,000 - 20,000 - - -

Purchase of treasury stock - - - - - (636,000)
--------- ------- ------------ ----------- --------- -----------

BALANCE, April 3, 1999 5,704,404 $57,000 $38,533,000 $30,505,000 $(784,000) $(1,145,000)
========= ======= =========== =========== ========= ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED APRIL 3, 1999

Year Ended Year Ended Year Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income (loss) .................................................... $ (486,000) $ 3,915,000 $ 8,001,000
------------ ------------ ------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation ..................................................... 3,824,000 3,341,000 3,166,000
Amortization ..................................................... 104,000 98,000 128,000
(Increase) decrease in deferred income taxes ..................... 601,000 44,000 (464,000)
Net (gain) loss on sale of property, plant andequipment .......... 16,000 (6,000) (48,000)

Changes in operating assets and liabilities, net of
Business acquired:
Decrease (increase) in net trade accounts receivable ............. 13,944,000 1,661,000 3,827,000
Decrease (increase) in inventories ............................... 13,165,000 (482,000) (5,543,000)
Decrease (increase) in prepaid expenses and other
current assets ................................................ (205,000) 816,000 (633,000)
Decrease (increase) in other assets .............................. 190,000 202,000 80,000
Increase (decrease) in bank overdrafts ........................... (1,600,000) 132,000 279,000
Increase (decrease) in accounts payable and accrued
expenses ...................................................... (12,118,000) (939,000) (3,490,000)
------------ ------------ ------------

Total adjustments ............................................ 17,921,000 4,867,000 (2,698,000)
------------ ------------ ------------
Cash flows provided by (used in) operating activities ........ 17,435,000 8,782,000 5,303,000
------------ ------------ ------------

CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Capital expenditures ................................................. (1,751,000) (3,049,000) (3,433,000)
Proceeds from sale of property, plant and equipment .................. 72,000 27,000 146,000
Purchase of certain assets of a distributor .......................... -- (1,849,000) --
------------ ------------ ------------
Cash flows provided by (used in) investing activities ........ (1,679,000) (4,871,000) (3,287,000)
------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED APRIL 3, 1999
(continued)

Year Ended Year Ended Year Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Sale of common stock ................................................. 20,000 228,000 26,000
Borrowings under working capital revolver ............................ 3,431,000 10,999,000 11,402,000
Repayments under working capital revolver ............................ (16,035,000) (10,137,000) (17,995,000)
Borrowing of other debt .............................................. -- -- 5,000,000
Payments of other debt and capitalized lease obligations ............ (3,531,000) (2,587,000) (2,281,000)
Purchase of treasury stock ........................................... (636,000) (509,000) --
------------ ------------ ------------
Cash flows provided by (used in) financing activities ........ (16,751,000) (2,006,000) (3,848,000)
------------ ------------ ------------

Effect of exchange rate changes on cash ............................ (53,000) (5,000) (136,000)
------------ ------------ ------------

Net change in cash ........................................... (1,048,000) 1,900,000 (1,968,000)
CASH, beginning of period .............................................. 4,892,000 2,992,000 4,960,000
------------ ------------ ------------
CASH, end of period .................................................... $ 3,844,000 $ 4,892,000 $ 2,992,000
============ ============ ============

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid ........................................................ $ 2,018,000 $ 2,682,000 $ 2,809,000
Income taxes paid, net ............................................... $ 878,000 $ 6,667,000 $ 4,960,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
<PAGE>
BRIDGEPORT MACHINES, INC.
-------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

(1) The Company:
------------

Bridgeport Machines, Inc. and subsidiaries (the "Company") is a
manufacturer and distributor of metal cutting machine tools and
accessories. The Company manufactures its products in the U.S. and
Europe. Sales are principally in North America and Europe. A
substantial portion of the end users of the Company's products are
small and medium sized independent job shops who produce machined
parts for customers in a wide variety of industries.

(2) Summary of Significant Accounting Policies:
------------------------------------------

Principles of consolidation-
----------------------------

The consolidated financial statements include all the accounts of
Bridgeport Machines, Inc. and all of its wholly owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated. Less than 20% owned investments are accounted for on
the cost basis. Investments that the Company owns 20% to 50% of are
accounted for on the equity basis.

Fiscal year-
------------

The Company's fiscal year is the 52- or 53-week period ending the
Saturday nearest to March 31. Fiscal 1999 was a 53-week year.
Fiscal 1998 and 1997 were 52-week years. Fiscal 1999, 1998 and 1997
ended on April 3, March 28 and March 29, respectively.

Use of estimates-
-----------------

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the 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 revenue and expenses during the reporting
period. Actual results could differ from these estimates.

Cash-
-----

Cash consists primarily of uncleared cash deposits. These balances
are periodically invested in overnight cash equivalent investment
alternatives.
<PAGE>
Accounts receivable-
--------------------

The Company's trade receivables are primarily due from domestic and
international distributors and manufacturing companies in a wide
variety of industries.

Inventories-
------------

Inventories located in the United States are valued at the lower of
cost under the last-in, first-out (LIFO) method or net realizable
value. All other inventories are valued at the lower of cost under
the first-in, first-out (FIFO) method or net realizable value.

Property, plant and equipment-
------------------------------

Land is stated at cost. As part of a quasi-reorganization
implemented on January 3, 1993, the accumulated depreciation
related to plant and equipment was netted against the related gross
plant and equipment balances as of the date of the
quasi-reorganization. Additions since the quasi-reorganization are
stated at cost. Depreciation and amortization is calculated using
the straight-line method over the estimated useful lives of the
various classes of depreciable assets or, in the case of leasehold
improvements, over the term of the lease, whichever is shorter.
Estimated useful lives are as follows:

Buildings and improvements 8-32 years
Machinery and equipment 3-12 years
Furniture and fixtures 5-10 years

Other assets-
-------------

Other assets include deferred debt issuance costs that are being
amortized over the term of the related debt agreements which are up
to six years.

Translation of foreign currencies-
----------------------------------

Adjustments resulting from the translation of financial statements
of the Company's foreign subsidiaries are excluded from the
determination of income and are accumulated in a separate component
of stockholders' equity. Gains or losses on foreign currency
transactions principally relate to the translation of intercompany
receivables and payables and from forward foreign exchange
contracts. These gains and losses are included in income on a
current basis.

Revenue recognition-
--------------------

Revenue is recognized by the Company when products are shipped.

<PAGE>
Research and development costs-
-------------------------------

Research and development costs are expensed as incurred. These
costs have been incurred in connection with the design, development
and enhancement of the Company's products and include costs to
develop software. Research and development expense was $3,982,000,
$5,364,000 and $5,091,000 for the years ended April 3, 1999, March
28, 1998 and March 29, 1997, respectively.

Earnings per share-
-------------------

In February 1997, Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("FAS 128"), was issued. FAS 128
established new standards for computing and presenting earnings per
share. The Company adopted the new standard in the third quarter of
fiscal 1998. Previously reported earnings per share amounts have
been restated.

Impairment of Long Lived Assets-
--------------------------------

The recoverability of the excess of cost over fair value of net
assets acquired, as well as other long lived assets, are evaluated
by an analysis of operating results and considerations of other
significant events or changes in the business environment. If
Management believes an impairment exists, the carrying amount of
these assets would be reduced to their fair value as defined in
Statement of Financial Accounting Standards No. 121.

Recently Issued Accounting Pronouncement-
------------------------------------------

In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
which provides new guidelines for accounting for derivative
instruments was issued. The Company is currently analyzing what, if
any, impact the new guidelines will have on the Company. The new
statement is effective for financial periods beginning after June
15, 1999.

In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" was issued. This statement establishes standards for
reporting information about operating segments in annual financial
statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers.
This statement is effective for the current fiscal year. The
Company operates in one industry segment.

Reclassifications-
------------------

Certain reclassifications have been made to prior year balances to
conform to current year presentation.
<PAGE>
(3) Inventories:
------------

Inventories, which include material, labor and manufacturing overhead,
are stated at the lower of cost or market (net realizable value). Cost
is determined using the last-in, first-out (LIFO) method for domestic
inventories and the first-in, first-out (FIFO) method for foreign
inventories.

Inventories consisted of the following as of April 3, 1999 and March
28, 1998:

1999 1998
----------- -----------
Raw materials $13,820,000 $18,351,000
Work-in-process 16,986,000 25,217,000
Finished goods 21,400,000 23,139,000
------------ ------------

$52,206,000 $66,707,000
=========== ===========

Had the FIFO method been used for all inventories, inventory would have
been approximately the same value as shown at April 3, 1999 and March
28, 1998. Inventories valued under the LIFO method comprised
approximately 50% and 48% of consolidated inventories before the LIFO
adjustment at April 3, 1999 and March 28, 1998, respectively.

(4) Investments in and Advances to Affiliates:
------------------------------------------

The Company owns 19.5% of the stock of an entity which designs,
develops and markets customized computer aided manufacturing software.
In addition, Bridgeport Machines has agreed to provide loans to this
entity of up to $500,000. As of April 3, 1999, the Company has a loan
receivable of approximately $337,000 from and an investment of
approximately $312,000 in this entity.

In fiscal 1995, the Company entered into a joint venture agreement
under which it owns 48% of a company in the Peoples Republic of China.
The purpose of this joint venture is to manufacture machine tools in
China. The Company contribution to the joint venture consisted of
certain technology, equipment and training services. As of April 3,
1999, the joint venture company had limited activity.

In fiscal 1994, the Company entered into a joint venture agreement
under which it owns 40% of a company in Indonesia. The purpose of this
joint venture is to manufacture machine tools for sale in southeast
Asia. As its contribution to the joint venture, the Company is required
to contribute certain technology and cash. The required investment for
40% ownership if all capital of the joint venture were to be called,
net of certain payments required to be made to Bridgeport Machines by
the joint venture, is approximately $1,900,000. Through April 3, 1999,
the Company has contributed $278,000 for capital. As of April 3, 1999,
the joint venture company had no substantive activities.
<PAGE>
(5) Accrued Expenses:
-----------------

Accrued expenses consisted of the following as of April 3, 1999 and
March 28, 1998:

1999 1998
----------- ------------
Payroll and related accruals $ 2,588,000 $ 3,563,000
Accrued insurance 2,759,000 2,450,000
Warranty reserves 3,982,000 4,100,000
Other 4,079,000 4,283,000
----------- ------------

$13,408,000 $14,396,000
=========== ===========

(6) Financial Instruments:
----------------------

From time to time, the Company enters into forward exchange contracts
to provide economic hedges against foreign currency fluctuations on its
intercompany payables and future inventory purchases. At April 3, 1999,
the Company had no commitments under forward purchase contracts.

Gains (losses) on foreign currency transactions, which are included in
other expense, net in the consolidated statements of income, were
$(125,000), $(114,000) and $61,000 for the years ended April 3, 1999,
March 28, 1998 and March 29, 1997, respectively.

(7) Working Capital Revolver:
-------------------------

The Company has a revolving credit and term loan facility, as amended,
that provides for maximum revolving borrowings of $24.5 million by the
domestic entity of the Company and $19.5 million by the U.K. subsidiary
of the Company. Loan availability under the facility is limited to the
sum of (a) 80% of eligible accounts receivable plus (b) 40% of eligible
inventory (limited to $13.5 million for domestic inventory and $10.0
million for foreign inventory) minus (x) the aggregate amount of
outstanding letters of credit and (y) any reserves deemed reasonable by
the lenders. Based upon this formula, as of April 3, 1999, the Company
could borrow approximately an additional $22.8 million under the
revolving credit facility, as amended, beyond the balance already
borrowed.
<PAGE>
At April 3, 1999 and March 28, 1998, the amounts outstanding were as
follows:
<TABLE>
<CAPTION>
Borrowings Outstanding
-------------------------------
1999 1998
---------- -----------
<S> <C> <C>
U.S. Revolver prime based borrowings:
(7.75% at April 3, 1999 and 8.75% at
March 28, 1998) $ 54,000 $ 3,876,000

U.S. Revolver LIBOR based borrowings:
(7.6836%) - 5,500,000

U.K. Revolver LIBOR based borrowings:
(7.5375%) 4,916,000 -
(7.3375%) 4,800,000 -
(9.6675%) - 7,682,000
(9.6875%) - 3,528,000
(9.7475%) - 2,520,000
---------- -----------

$9,770,000 $23,106,000
========== ===========
</TABLE>

Under the facility, the Company has the option of electing either the
prime rate plus 0.25%, the Eurodollar rate plus 2.0% or the Sterling
rate plus 2.0% when it makes a borrowing. For all prime rate based
borrowings, the interest rate will be adjusted automatically each time
there is a change in the prime rate. The LIBOR (Eurodollar or Sterling
rate) based borrowings' interest rates are fixed for periods of one,
two or three months at the Company's option. At the end of the period,
the Company can change to a different available interest method. Should
the Company's senior interest coverage ratio, as defined in the credit
facility, be below a ratio of 2.0 to 1.0 at the end of a fiscal
quarter, the interest charges described above are increased 0.25
percentage points for the subsequent periods in which the ratio is
below 2.0 to 1.0.

The Company is required to pay an unused line fee of 0.375% per annum
on the average unused facility balance.

The facility requires the Company to, among other things, maintain
minimum levels of net assets, working capital, current ratio and
interest coverage ability. In addition, the facility limits the amount
of capital expenditures the Company can make on an annual basis and
prohibits the payment of cash dividends. Borrowings under the facility
are collateralized by the Company's receivables, equipment, inventory,
real property and other assets. The facility expires in December 2002.
<PAGE>
In February 1999, the Company executed a waiver and amendment to its
revolving credit facility to change, among other items, the senior
interest coverage covenant, as defined in the credit facility, from a
requirement that the Company maintain a coverage ratio of at least 4.0
to 1.0, measured at the end of each fiscal quarter, to a ratio of at
least 1.0 to 1.0, measured at the end of each fiscal quarter, until
April 3, 2000 and to waive any event of default that may have occurred,
as a result of the Company not achieving the required ratio of 4.0 to
1.0 as of January 2, 1999.

(8) Debt Obligations:
-----------------

Debt obligations consisted of the following as of April 3, 1999 and
March 28, 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Variable rate term loan $ 450,000 $ 2,931,000

Fixed rate term loan .. 1,900,000 2,694,000
----------- -----------

2,350,000 5,625,000

Less: current portion (1,264,000) (2,483,000)
----------- -----------

Long-term portion ..... $ 1,086,000 $ 3,142,000
=========== ===========
</TABLE>
The variable rate term loan borrowing is repayable monthly through
December 1999 with total principal installment payments amounting to
approximately $56,250 per month. The Company has two interest rate
options for the variable rate term loans: prime rate plus 0.50% and
Eurodollar rate plus 2.50%. As of April 3, 1999, the term loans bear
interest at 6.9% through April 30, 1999, at which time a new interest
option election will be made.

In August 1996, the Company borrowed the fixed rate term loan. This
term loan bears interest at 7.345% until November 1999 and at 6.0%
beyond that date. The loan is repayable in monthly principal
installments of approximately $63,000 through June 2001 and a final
payment of approximately $850,000 in July 2001.

(9) Acquisition of Assets:
----------------------

On August 1, 1997, the Company acquired certain assets and assumed
certain liabilities of its German distributor. The acquisition was
accounted for as a purchase. The Company paid approximately $1,800,000
in cash for the assets acquired and assumed approximately $2,500,000 of
liabilities. The purchase price approximated book value. The purchase
did not meet the significant subsidiary rules of SEC reporting
requirements.
<PAGE>
(10) Segment and Customer Information:
---------------------------------
<TABLE>
<CAPTION>

Year Ended Year Ended Year Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- --------------
<S> <C> <C> <C>
Net Sales:
North America ........ $ 89,046,000 $ 124,241,000 $ 121,766,000
Foreign .............. 87,516,000 83,031,000 99,669,000
Export ............... 3,196,000 6,498,000 6,114,000
------------- ------------- -------------

Total ........... $ 179,758,000 $ 213,770,000 $ 227,549,000
============= ============= =============

Operating Income (loss):
Domestic and Export .. $ (176,000) $ 8,360,000 $ 4,194,000
Foreign .............. 1,922,000 1,121,000 11,032,000
Eliminations ......... 123,000 268,000 178,000
------------- ------------- -------------

Total .... $ 1,869,000 $ 9,749,000 $ 15,404,000
============= ============= =============

Identifiable Assets:
Domestic and Export . $ 71,927,000 $ 87,945,000 $ 85,393,000
Foreign ............. 54,572,000 72,803,000 66,740,000
Eliminations ........ (23,533,000) (24,638,000) (20,422,000)
------------- ------------- -------------

Total .... $ 102,966,000 $ 136,110,000 $ 131,711,000
============= ============= =============

Net Assets:
Domestic and Export $ 58,560,000 $ 59,064,000 $ 54,477,000
Foreign ............ 22,807,000 23,256,000 23,260,000
Eliminations ....... (14,201,000) (12,997,000) (12,151,000)
------------- ------------- -------------

Total ........... $ 67,166,000 $ 69,323,000 $ 65,586,000
============= ============= =============
</TABLE>
The breakout of Domestic and export assets is not available since these
operations use common resources and, as a result, the breakout of
operating income between domestic and export is not available. Foreign
sales represent principally Europe. Foreign identifiable assets and net
assets represent principally the Company's European operations. No
individual customer accounted for 10% or more of net sales for any of
the periods presented.
<PAGE>
(11) Income Taxes:
-------------

The provision for income taxes on earnings consisted of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- -------------
<S> <C> <C> <C>
Current:
Federal ............. $ (484,000) $ 2,591,000 $ 1,655,000
Foreign ............. 86,000 49,000 3,052,000
State and local ..... (176,000) 767,000 392,000
----------- ----------- -----------

(574,000) 3,407,000 5,099,000
----------- ----------- -----------

Deferred:
Federal ............. 533,000 134,000 (287,000)
Foreign ............. (110,000) (88,000) (89,000)
State and local ..... 178,000 (2,000) (88,000)
----------- ----------- -----------

601,000 44,000 (464,000)
----------- ----------- -----------

$ 27,000 $ 3,451,000 $ 4,635,000
=========== =========== ===========
</TABLE>
The tax provisions differ from amounts computed by applying the U.S.
statutory federal income tax rate due to the following:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
April 3, 1999 March 28, 1998 March 29, 1997
------------- -------------- ---------------
<S> <C> <C> <C>
Federal income
tax expense (benefit)
at statutory rates ......... $ (156,000) $ 2,504,000 $ 4,423,000
State taxes .................. 2,000 505,000 198,000
Foreign provision (benefit)
on income (loss) of
foreign subsidiaries
different than
statutory rate ............. 153,000 330,000 (321,000)
Other ........................ 28,000 112,000 335,000
----------- ----------- -----------

$ 27,000 $ 3,451,000 $ 4,635,000
=========== =========== ===========
</TABLE>
Pretax foreign income (loss) was $(520,000), $(1,085,000) and
$9,384,000 for the years ended April 3, 1999, March 28, 1998 and March
29, 1997, respectively.
<PAGE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases. The items which
comprise net deferred income taxes are as follows:
<TABLE>
<CAPTION>
April 3, 1999 March 28, 1998
------------- --------------

<S> <C> <C>
Inventory differences .................... $ (166,000) $ 300,000
Depreciation and amortization ............ (728,000) (547,000)
Liabilities and reserves not
currently tax deductible ............... 3,040,000 3,468,000
Net operating loss carryforwards ......... 438,000 450,000
Other .................................... 176,000 (60,000)
Valuation reserves ....................... (261,000) (511,000)
----------- -----------

$ 2,499,000 $ 3,100,000
=========== ===========
</TABLE>

(12) Commitments and Contingencies:
------------------------------

Minimum future operating lease obligations at April 3, 1999, by year
and in the aggregate, are as follows:

2000 $1,568,000
2001 1,125,000
2002 886,000
2003 226,000
2004 40,000
Thereafter 282,000

Operating leases relate principally to manufacturing, office and
warehouse facilities with non-cancellable portion expiring on various
dates through the year 2011. Operating lease expense for the years
April 3, 1999, March 28, 1998 and March 29, 1997 approximated
$1,702,000, $1,649,000 and $1,743,000, respectively.

The Company has been named a Potentially Responsible Party related to
contamination which occurred at seven offsite disposal sites. The
Company believes that the actions relating to these contaminations
occurred prior to current ownership of the Company and as part of the
purchase agreement, the Company's prior owner, Textron Inc., has
retained these liabilities and has indemnified the Company for these
liabilities. In addition, there exists certain environmental cleanup
that must be performed related to a site owned by the Company. The
Company believes that the cost of this cleanup to the Company will not
be significant and has accrued the estimated cost of this cleanup.

In addition to the matters discussed above, the Company is subject to
various other legal proceedings, claims and liabilities which have
arisen in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability, if any, with respect to
these actions will not materially affect the financial results of
operations or financial position of the Company.
<PAGE>
The Company has employment agreements with several employees under
which the Company is required to pay total salaries for these employees
of approximately $750,000 annually. The term of each agreement
continues until the earlier of the employee's retirement, death,
disability or voluntary termination.

The Company has outstanding letters of credit at April 3, 1999 of
approximately $1,500,000 principally related to insurance programs.

(13) Employee Benefit Plans:
-----------------------

The Company has an employee profit sharing plan which covers
substantially all U.S. employees and allows participants to make
contributions by salary reduction pursuant to Section 401(k) of the
Internal Revenue Code. Company contributions are made at the discretion
of the Board of Directors. For the years ended April 3, 1999, March 28,
1998 and March 29, 1997, the Company recorded expense of approximately
$76,000, $808,000 and $754,000, respectively.

The Company's U.K. subsidiary maintains the Bridgeport Machines Limited
Pension Scheme ("Bridgeport Plan"). The Bridgeport Plan covers
substantially all full-time U.K. employees. The benefits paid are based
on an average final compensation formula. The Company generally funds
the minimum amount as established by its consulting actuary. Employees
generally contribute approximately 6% of their earnings.

The pension cost for each of the last three fiscal years for the
Bridgeport Plan is comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (net of
employee contributions) .... $ 609,000 $ 625,000 $ 312,000
Interest cost ................ 1,863,000 1,833,000 1,555,000
Expected return on plan assets (1,927,000) (1,873,000) (1,340,000)
Net amortization ............. 10,000 985,000 (554,000)
----------- ----------- -----------

$ 555,000 $ 1,570,000 $ (27,000)
=========== =========== ===========

</TABLE>
<PAGE>
Based on the latest actuarial information available, the following
table shows the changes in benefit obligations and plan assets and the
funded status of the Bridgeport Plan and amounts recognized in the
balance sheet as of April 3, 1999 and March 28, 1998.
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>

Changes in Benefit Obligation
Benefit obligation, beginning of year ...... $ 27,938,000 $ 21,016,000
Service cost ............................... 1,388,000 625,000
Interest cost .............................. 1,863,000 1,833,000
Actuarial (gain) loss ...................... 697,000 5,006,000
Benefits paid .............................. (1,064,000) (800,000)
Effect of currency exchange rate changes ... (899,000) 258,000
------------ ------------
Benefit obligation, end of year ......... $ 29,923,000 $ 27,938,000
============ ============

Changes in Plan Assets
Fair value of plan assets, beginning of year $ 25,978,000 $ 20,787,000
Actual return of assets .................... 2,040,000 4,014,000
Employer contributions ..................... 935,000 995,000
Employee contributions ..................... 779,000 815,000
Benefits paid .............................. (1,064,000) (800,000)
Administrative expenses .................... (221,000) (89,000)
Effect of currency exchange rate changes ... (833,000) 256,000
------------ ------------
Fair value of plan assets, end of year .. $ 27,614,000 $ 25,978,000
============ ============

Funded status reconciliation
Funded status, end of year ................. $ (2,309,000) $ (1,960,000)
Unrecognized net loss ...................... 1,565,000 980,000
Transition obligation ...................... 136,000 150,000
------------ ------------
Accrued pension liability ............... $ (608,000) $ (830,000)
============ ============

</TABLE>

Following are the significant assumptions used by the plan's actuary:

1999 1998
---- ----

Discount rate 5.75% 6.75%
Rate of increase in compensation levels 3.25% 4.25%
Long-term rate of return on assets 7.00% 7.50%
<PAGE>
(14) Stock Option Plan and Stock Awards:
-----------------------------------

The Company maintains the 1994 Stock Option Plan, as amended, pursuant
to which the Company can issue stock options, stock appreciation
rights, stock bonuses, restricted stock awards, performance units and
phantom stock. The Company reserved 409,750 shares of common stock for
issuance under this plan, of which 51,840 are available for future
issuance. Each option granted vests and becomes exercisable over a
period of three years at a rate of one third annually and expires five
years from the date of grant.

In addition, the Company maintains the 1994 Non-Employee Director Stock
Option Plan, as amended, under which 120,000 shares of common stock
were reserved for issuance; 64,000 shares are available for future
issuance under this plan. This plan has a term of ten years and
annually each non-employee director will be automatically granted an
option to purchase 2,000 shares of common stock. Each option granted
under this plan vests and becomes exercisable over a period of three
years at a rate of one third annually and expires five years from the
date of grant. The exercise prices of all future options granted will
be the fair market value of the common stock on the day prior to the
date the option is granted.

The following table summarizes the activity under the plans:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
------- --------------
<S> <C> <C>
March 30, 1996 .......................... 215,786 $ 11.03
Options issued ...................... 40,500 12.12
Options exercised ................... (2,664) 10.00
Options cancelled ................... (13,502) 13.31
-------
March 29, 1997 .......................... 240,120 11.09
Options issued ...................... 133,600 10.75
Options exercised ................... (23,043) 9.88
Options cancelled ................... (15,834) 10.40
-------
March 28, 1998 .......................... 334,843 11.08
Options issued ...................... 13,500 10.78
Options exercised ................... (2,000) 10.00
Options cancelled ................... (41,335) 10.93
-------
April 3, 1999 ........................... 305,008 11.11
=======
</TABLE>

As of April 3, 1999, of the options outstanding, 119,908, 129,600,
28,500, 18,500 and 8,500 are exercisable at a weighted average exercise
price of $10.20, $11.06, $13.26, $14.46 and $10.41, respectively, and
expire in fiscal 2000, 2001, 2002, 2003 and 2004 respectively.
<PAGE>
The Company applies APB Opinion 25 in accounting for its stock option
plans. Accordingly, no compensation expense has been recognized for
stock options granted. The Company adopted the disclosure only
alternative of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (FAS 123), in fiscal 1997.
Under FAS 123, companies can, but are not required to, elect to
recognize compensation expense for all stock-based awards, using a fair
value methodology.

The Company used the Black-Scholes model to value the stock options
granted. This model may not be indicative of the actual fair value of
such options were a ready market available. The weighted average
assumptions used to estimate the value of the options and the weighted
average estimated fair value of an option granted, are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Term (years) 5 5
Volatility 41% 26%
Risk-free interest rate 6.75% 6.75%
Dividend yield 0 0
Weighted average fair value $4.40 $3.92
</TABLE>

Had the Company determined compensation cost based upon the fair value
at the date of grant for its stock options under FAS 123, the Company's
net income (loss) and earnings (loss) per share would have been the
proforma results below:
<TABLE>
<CAPTION>

1999 1998 1997
---- ---- ----

<S> <C> <C> <C>
Proforma net income (loss) $(596,000) $3,849,000 $7,953,000
Proforma basic earnings (loss) per share ($0.11) $0.68 $1.40
Proforma diluted earnings (loss) per share ($0.11) $0.68 $1.39
</TABLE>
Proforma computations for purposes of FAS 123 only consider the portion
of the estimated fair value of awards earned in the four years ended
April 3, 1999. Additional awards in future years would effect the
computations for future years.
<PAGE>
(15) Earnings Per Share
------------------

Basic earnings per common share for the three years ended April 3, 1999
are calculated by dividing net income by weighted average common shares
outstanding during the period. Diluted earnings per common share for
the three years ended April 3, 1999 are calculated by dividing net
income by weighted average common shares outstanding during the period
plus dilutive potential common shares which are determined as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Weighted average common shares outstanding 5,619,000 5,657,000 5,679,000
Effect of dilutive options to purchase
common stock ........................... 0 15,000 41,000
--------- --------- ---------
Adjusted weighted average common shares .. 5,619,000 5,672,000 5,720,000
========= ========= =========
</TABLE>
Dilutive potential common shares are calculated in accordance with the
treasury stock method which assumes that proceeds from the exercise of
all options are used to repurchase common stock at market value. The
number of shares remaining after the proceeds are exhausted represents
the potentially dilutive effect of the securities.

Stock options to purchase 305,008 and 73,000 shares of common stock at
prices ranging from $9.50 to $16.25 and $11.44 to $16.25 per share,
respectively, were outstanding at April 3, 1999 and March 28, 1998,
respectively, but were not included in the computation of diluted
earnings per share because the options' exercise prices were greater
than the average market price of the common stock. These options expire
in fiscal years 2000 to 2004.

(16) Comprehensive Income
--------------------

In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("FAS 130") was issued. FAS 130
requires the disclosure of comprehensive income to reflect changes in
equity that result from transactions and economic events from non-owner
sources. Comprehensive income for the last three fiscal years presented
below include foreign currency translation items. There was no tax
expense or tax benefit associated with the foreign currency translation
items.
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) ............. $ (486,000) $ 3,915,000 $ 8,001,000
Foreign currency
translation adjustments ..... (1,055,000) 103,000 450,000
----------- ----------- -----------
Comprehensive income (loss) ... $(1,541,000) $ 4,018,000 $ 8,451,000
=========== =========== ===========
</TABLE>
<PAGE>
(17) Quarterly Financial Data (Unaudited)
------------------------------------
<TABLE>
<CAPTION>

(In thousands, except per share amounts)

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal 1999
Net sales ......................... $ 51,086 $ 48,447 $ 41,885 $ 38,340
Operating income (loss) ........... 1,576 500 557 (764)
Net income (loss) ................. 547 59 (122) (970)
Basic earnings (loss) per share ... 0.10 0.01 (0.02) (0.17)
Diluted earnings (loss) per share.. 0.10 0.01 (0.02) (0.17)

Fiscal 1998
Net sales ......................... $ 54,546 $ 44,896 $ 58,728 $ 55,600
Operating income (loss) ........... 3,333 (150) 3,322 3,244
Net income (loss) ................. 1,501 (757) 1,724 1,447
Basic earnings (loss) per share.... $ 0.26 ($ 0.13) $ 0.31 $ 0.26

Diluted earnings (loss) per share.. $ 0.26 ($ 0.13) $ 0.31 $ 0.26
</TABLE>

Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not
necessarily equal the total computed for the year. In accordance with FAS 128,
earnings per share for previously reported periods have been restated.

(18) Subsequent Event (Unaudited)
-----------------------------

On April 23, 1999, the Company and Goldman Industrial Group, Inc.
announced the execution of a definitive merger agreement. Under the
terms of the definitive merger agreement, which was approved by the
Board of Directors of the Company, stockholders of Bridgeport Machines
will receive $10.00 in cash for each share of Bridgeport Machines
common stock that they own.

The transaction requires the approval of the shareholders of the
Company and is subject to other customary closing conditions. The
holders of approximately 40% of the outstanding common stock of
Bridgeport Machines have agreed to vote in favor of the transaction.
<PAGE>

INDEX TO EXHIBITS

EXHIBITS

Exhibit
Number Description
- ------ -----------

Asset Purchase Agreement, dated June 2, 1995, between Schultz & Braun
GmbH, W. P. Werner Schneider and Bridgeport Machines GmbH
2.1.1 a) German version (binding agreement) (d)
2.1.2 b) English translation (d)
2.2 Agreement and Plan of Merger, dated as of April 23, 1999, by and among
Goldman Industrial Group, Inc., Bronze Acquisition Corp. and Bridgeport
Machines, Inc. (m)
3.1 Amended and Restated Certificate of Incorporation (a)
3.2 Amended and Restated Bylaws (a)
4. See Amended and Restated Certificate of Incorporation, filed as Exhibit
3.1 (a)
10.1.1 Plan and Agreement of Recapitalization for the Company dated as of
December 15, 1992 (with certain exhibits) (a)
10.1.2 Termination Agreement and Waiver of Nominee Rights, effective March 8,
1995, among the Company and certain stockholders (e)
10.1.3 Termination and Registration Rights Agreement between the Company and
Textron Inc. (b)
10.1.4 Notice and Waiver of Textron Inc. (b)
<PAGE>
10.1.5 Notice and Waiver of Kansas Debt Fund, as nominee for Kansas Public
Employees Retirement System (b)
10.1.6 Notice and Waiver of State of Delaware Employees Retirement Fund (b)
10.2.1 Revolving Credit and Security Agreement dated as of December 18, 1992,
as amended (a)
10.2.2 Amendment No. 4 to Revolving Credit and Security Agreement dated as of
December 18, 1992 (a)
10.2.3 Amended and Restated Revolving Credit, Term Loan and Security Agreement
dated as of December 23, 1994 (c)
10.2.4 Consent and Amendment No. 2 to Amended and Restated Revolving Credit,
Term Loan and Security Agreement (d)
10.2.5 Amendment No. 3 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (g)
10.2.6 Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (i)
10.2.7 Amendment No. 5 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (j)
10.2.8 Amendment No. 6 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement (k) 10.2.9 Amendment No. 7 to Amended and Restated
Revolving Credit, Term Loan and Security Agreement (l)
10.2.10 Waiver and Amendment No. 8 to Amended and Restated Revolving Credit,
Term Loan and Security Agreement (l)
10.3.1 Company's 1994 Stock Incentive Plan (a)T
10.3.2 Form of Stock Option Grant under Company's 1994 Stock Incentive Plan
(e) T
10.4.1 Company's 1994 Non-Employee Director Stock Option Plan (a)T
10.4.2 Form of Stock Option Grant under Company's 1994 Non-Employee Director
Stock Option Plan (e) T
10.5 Employment Agreement between the Company and Joseph E. Clancy (k) T
Employment Agreement between the Company and Dan L. Griffith (f)T
10.6.1 Consulting Agreement between the Company and Dan L. Griffith T
10.7 Employment Agreement between Bridgeport Machines Limited and Malcolm
Taylor (h)T
10.8 Purchase and Sale Agreement dated as of May 7, 1986 between the Company
and Textron Inc. (a)
10.9 Settlement Agreement dated June 22, 1994 between the Company and
Textron Inc. (a)
10.10.1 Management Subscription Agreements dated June 30, 1986 (a)
10.10.2 Termination Agreement among the Company and Management Purchasers (b)
10.10.3 Notice and Waiver of Lehman Brothers Holdings, Inc. (b) Lease
Agreement, dated June 2, 1995, between Alu-Billets Produktions GmbH and
Bridgeport Machines GmbH
10.11.1 a) German version (binding agreement) (d)
10.11.2 b) English translation (d)
10.12 Employment Agreement between the Company and Walter C. Lazarcheck (k) T
10.13 Affiliate's Agreement, dated as of April 23, 1999, between Goldman
Industrial Group, Inc. and Textron Inc. (m)
10.14 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc. and Lehman LBO Inc. (m)
<PAGE>
10.15 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc. and the State of Delaware Employees Retirement Fund (m)
10.16 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc. and Joseph E. Clancy (m)
10.17 Affiliate's Agreement, dated April 23, 1999, between Goldman Industrial
Group, Inc.and Dan L. Griffith (m)
11. Statement of Calculation of Earnings Per Share (n)
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27. Financial Data Schedule
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