<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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

For the quarter ended 30 September 1998
                                       or

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

For the transition period from _________ to _________

Commission File No. 1 - 1997

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

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

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

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


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



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

The number of common shares outstanding as of October 23, 1998 was 3,769,427.

<PAGE>   2


               THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES

                               INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                              NUMBER
                                                                                              ------

<S>                                                                                              <C>
PART 1.  FINANCIAL INFORMATION:

                  ITEM 1. - Condensed Financial Statements:

                      Balance Sheets - 30 September 1998 and 31 December 1997                    2


                      Statements of Operations and Comprehensive Income -
                      Three Quarters and Quarter ended 30 September 1998 and 1997                3


                      Statements of Cash Flow -
                      Three Quarters ended 30 September 1998 and 1997                            4

                      Notes to Condensed Financial Statements                                    5-6


                  ITEM 2. - Management's Discussion and Analysis
                            of Financial Condition and Results of
                            Operations                                                           7-8


PART II. OTHER INFORMATION:

                  ITEMS 1- 5    Inapplicable                                                     9

                  ITEM 6        Exhibits and Reports on Form 8-K                                 9
</TABLE>

                                       1
<PAGE>   3

PART 1 - FINANCIAL INFORMATION

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                            CONDENSED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                            30 September     31 December
                                                                1998            1997
                                                                ----            ----
                                                            (Unaudited)
<S>                                                          <C>           <C>
                                     ASSETS
                                     ------

CURRENT ASSETS:
    Cash                                                     $    2,149    $    5,022
    Accounts receivable                                          23,462        26,762
    Costs and estimated earnings in excess of
        billings on uncompleted contracts                           736           337
    Inventories                                                   8,942        11,142
    Prepaid expenses                                                 36           540
    Deferred income taxes                                         2,312         3,102
                                                             ----------    ----------

         Current assets                                          37,637        46,905


PROPERTY, PLANT & EQUIPMENT - NET                                 9,772         8,649
PREPAID PENSION COSTS                                            18,281        15,723
DEFERRED INCOME TAXES                                             1,153         1,153
OTHER ASSETS                                                      3,150         3,439
                                                             ----------    ----------

                                                             $   69,993    $   75,869
                                                             ==========    ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES:
    Accounts payable                                         $    6,119    $   10,138
    Accrued liabilities                                          11,190        16,016
    Billings in excess of costs and estimated
        earnings on uncompleted contracts                         5,052         5,096
    Current maturities of long-term debt                             46           577
                                                             ----------    ----------

         Current liabilities                                     22,407        31,827

LONG-TERM DEBT                                                    4,101         1,598
OTHER ACCRUED LIABILITIES                                         1,212         1,175

SHAREHOLDERS' EQUITY:
    Preferred stock                                                  14            14
    Common stock                                                  5,815         5,741
    Unearned compensation, restricted stock                         (68)          (77)
    Retained earnings                                            36,754        35,739
    Translation adjustment                                         (242)         (148)
                                                             ----------    ----------
                                                                 42,273        41,269
                                                             ----------    ----------

                                                             $   69,993    $   75,869
                                                             ==========    ==========
</TABLE>

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

                                       2
<PAGE>   4


                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
           CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                    (In thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
                               Three Quarters Ended 30 September  Quarter Ended 30 September
                               ---------------------------------  --------------------------
                                              1998         1997       1998        1997
                                              ----         ----       ----        ----

<S>                                       <C>         <C>         <C>         <C>       
Net sales                                 $   60,427  $   81,066  $   18,168  $   25,523

Operating costs and expenses:
    Cost of sales                             48,335      68,370      14,441      21,317
    Selling, general and administrative        9,471      11,275       3,015       3,502
                                          ----------  ----------  ----------  ----------

Operating income                               2,621       1,421         712
                                                                                     704

Other income (expense):
    Interest expense                            (252)       (891)        (72)       (187)
    Interest income                              125         212          12
                                                                                      96
    Other income (expense)                      (102)       (530)         13        (932)
                                          ----------  ----------  ----------  ----------

Income (loss)  before income taxes             2,392         212         665        (319)

Income tax provision (benefit)                   791         (73)        226        (143)
                                          ----------  ----------  ----------  ----------

Net income (loss)                              1,601         285         439        (176)

Other comprehensive (income), loss
    net of tax - foreign
    currency translation
    adjustments                                  (62)       (265)         52         (51)
                                          ----------  ----------  ----------  ----------

Comprehensive income                      $    1,539  $       20  $      491
                                                                              $     (227)
                                          ==========  ==========  ==========  ==========
Average common shares outstanding              3,768       3,762       3,769       3,762
                                          ==========  ==========  ==========  ==========

Net income per common share,              $      .42  $      .08  $      .12  $     (.05)
    basic and diluted                     ==========  ==========  ==========  ==========
                    
                                                                              


Dividends per share:
     Preferred                            $     1.35  $     1.35  $      .45  $      .45
     Common                               $      .15  $      .15  $      .05  $      .05
</TABLE>



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


                                       3
<PAGE>   5

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                       Three Quarters Ended 30 September
                                                       ---------------------------------
                                                              1998          1997
                                                              ----          ----

<S>                                                       <C>           <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                            $    1,601    $      285
    Adjustments to reconcile net income to net
       cash provided by (used in) operating activities:
        Depreciation                                             716         1,170
        Pension income                                        (2,420)       (1,318)
        Deferred tax provision                                   791
        Changes in assets and liabilities:
           Accounts receivable                                 2,901        14,336
           Inventories                                         2,200         4,483
           Other assets                                          793          (457)
           Accounts payable                                   (4,018)       (5,664)
           Accrued liabilities                                (4,789)          (80)
           Advance payments on contracts                         (44)        4,471
           Accrued income taxes                                               (176)
                                                          ----------    ----------

    Net cash provided by (used in) operating activities       (2,269)       17,050


CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                      (1,877)         (356)
    Proceeds from sale of fixed assets                                       1,996
                                                          ----------    ----------

    Net cash provided by (used in) investing activities       (1,877)        1,640

CASH FLOWS FROM FINANCING ACTIVITIES:
    Dividends                                                   (585)         (584)
    Repayments of short-term borrowings, net                               (15,766)
    Proceeds from long-term borrowings                         6,971            
    Repayments of long-term borrowings                        (5,000)           
    Issuance of restricted stock                                                19
                                                          ----------    ----------

    Net cash provided by (used in) financing activities        1,386       (16,331)

EFFECT OF EXCHANGE RATES ON CASH                                (113)         (404)
                                                          ----------    ----------

INCREASE (DECREASE) IN CASH                                   (2,873)        1,955 

CASH - BEGINNING OF PERIOD                                     5,022         4,848
                                                          ----------    ----------

CASH - END OF PERIOD                                      $    2,149    $    6,803
                                                          ==========    ==========
</TABLE>


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

                                       4
<PAGE>   6

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                 THREE QUARTERS ENDED 30 SEPTEMBER 1998 AND 1997


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

         The balance sheet at 31 December 1997 presents condensed financial
         information taken from the audited financial statements. The interim
         financial statements are unaudited. In the opinion of management, all
         adjustments, which consist of normal recurring adjustments necessary to
         present fairly the financial position and results of operations for the
         interim periods presented, have been made. The results shown for the
         periods presented in 1998 are not necessarily indicative of the results
         that may be expected for the entire year.

         The Accounting Standards Executive Committee ("AcSEC") of the AICPA has
         issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of
         Computer Software Developed or Obtained for Internal Use" effective for
         financial statements for fiscal years beginning after December 15,
         1998. SOP 98-1 provides guidance on accounting for the costs of
         computer software developed or obtained for internal use. The Company
         has chosen earlier application of SOP 98-1, effective for 1998, in
         conjunction with the Company's implementation of its Enterprise
         Resource Planning system.

         The Company has adopted SFAS No. 129 "Disclosure of Information about
         Capital Structure", which was effective for financial statements for
         periods ending after December 15, 1997 and established standards for
         disclosing information about an entity's capital structure. The
         adoption of SFAS No. 129 had no significant effect on the Company's
         disclosures about its capital structure.

         The Company has adopted SFAS No. 130, "Reporting Comprehensive Income",
         which was effective for financial statements for periods beginning
         after December 15, 1997 and established standards for reporting and
         display of comprehensive income and its components (revenues, expenses,
         gains and losses) in a full set of general-purpose financial
         statements. The only non-owner source of change in equity in 1997 and
         1998 is the Company's translation adjustment related to its investment
         in foreign subsidiaries.

         The Company has adopted SFAS No. 131, "Disclosure about Segments of an
         Enterprise and Related Information", which was effective for fiscal
         years beginning after December 15, 1997 and established standards for
         the way that public business enterprises report information about
         operating segments in annual financial statements and requires that
         those enterprises report selected information about operating segments
         in interim financial reports issued to shareholders. It also
         establishes standards for related disclosures about products and
         services, geographic areas and major customers. The Company's adoption
         of FASB No. 131 has not had a material impact on its financial
         statement presentation or related disclosures.

         In June 1998, the Financial Accounting Standards Board (the "FASB")
         issued Statement of Financial Accounting Standards ("SFAS") No. 133,
         "Accounting for Derivative Instruments and Hedging Activities". SFAS
         No. 133 establishes standards for derivative instruments, including
         certain derivative instruments imbedded in other contracts, and for
         hedging activities. It requires that an entity recognizes all
         derivatives as either assets or liabilities in the statement of
         financial position and measures those instruments at fair value. This
         statement is effective for all fiscal quarters of fiscal years
         beginning after June 15, 1999. The Company does not expect the effect
         of SFAS No. 133 on its financial statements to be significant.

         Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles have been condensed or omitted. It is suggested
         that these financial statements be read in conjunction with the
         financial statements and notes thereto included in the Company's 31
         December 1997 annual report to shareholders.


                                       5
<PAGE>   7

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                 THREE QUARTERS ENDED 30 SEPTEMBER 1998 AND 1997


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

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


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

         The Company's inventories consist of the following balances (in
         thousands):                                           
         <TABLE>                                               
         <CAPTION>                                             
                                    30 September 31 December   
                                        1998        1997       
                                                               
         <S>                         <C>         <C>           
         Finished goods              $    1,915  $    2,729    
         Work-in process and parts   $   10,495      12,381    
         Raw materials                      874         320    
         Less LIFO reserve               (4,342)     (4,288)   
                                     ----------  ----------    
         Net inventories             $    8,942  $   11,142    
                                     ==========  ==========    
         </TABLE>



4.        INDEBTEDNESS
          ------------

         In May 1998, the Company executed a $15 million revolving credit
         facility. The amount available under the credit facility is based on
         eligible accounts receivable and inventory. The Company had $14.2
         million available under the revolving credit facility of which $4
         million was borrowed at 30 September 1998.

         This facility can be converted to a term loan on May 29, 2001 and is
         payable in eight quarterly installments beginning June 30, 2001.

5.        OPTION TO SELL REAL ESTATE
          --------------------------

         In August, the Company executed on option to sell 39 acres of land. The
         option price is $1.56 million and the option requires various
         conditions to be satisfied and stipulates closing of the sale by
         February 15, 1999. A six month extension beyond February 15, 1999 is
         available to the buyer at a revised purchase price of $1.6 million. The
         Company's carrying value of the land is $82,000.


                                       6

<PAGE>   8

                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                 THREE QUARTERS ENDED 30 SEPTEMBER 1998 AND 1997


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

         During the last half of 1997 the Company sold or decided to close its
         Sidney and German operations. To facilitate comparison to the periods
         presented for this year, all references in the following discussion to
         the periods in 1997 are adjusted to eliminate the impact of these
         operations.

         Net earnings for the three quarters and quarter ended 30 September 1998
         were $1,601,000, or $.42 per share, and $439,000, or $.12 per share,
         respectively compared to net earnings of $638,000, or $.17 per share,
         and a loss of $13,000 or ($.03) per share, respectively, from ongoing
         operations for the same periods of 1997. The increase in earnings was
         principally the result of a strong first three quarters at the coil
         processing operation and improved profit margins on contracts in
         process. A reduction in interest expense associated with lower
         borrowing levels during the first three quarters of 1998 also
         contributed to increased earnings. The coating and laminating operation
         has operated at a loss in 1998 due to limited sales during its start up
         phase. The machine tool division has been negatively impacted by
         increased competition and a lower demand for its products. This
         situation has affected this division's selling prices and gross margins
         and has resulted in lower income in 1998 compared to 1997. Backlog at
         30 September 1998 for the Company was $32.9 million compared to $49.9
         million at 30 September 1997.

         Net sales for the three quarters and quarter ended 30 September 1998
         were $60.4 and $18.2 million, respectively, compared to $67.2 and $22.2
         million for the same periods in 1997. The decrease was primarily due to
         the Company entering 1998 with a lower backlog than it had in the
         beginning of 1997 as well as increased competition in the machine tool
         segment, particularly from Japan, along with lower demand for its
         products. Cost of sales as a percentage of sales was 80% and 79.5% for
         the three quarters and quarter ended 30 September 1998 compared to
         83.7% and 82.6% for the same periods in 1997. The improvement occurred
         mainly in the coil processing operations, as a result of better margins
         on equipment presently being produced.

         Selling, general and administrative expenses were $9.5 million and $3.0
         million for the three quarters and quarter ended 30 September 1998,
         respectively, compared to $8.2 million and $2.8 million during the same
         periods in 1997. The Company has incurred higher expenses in 1998 due
         to increased sales and marketing activities and to position itself for
         future growth.


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

         During the first three quarters of 1998, the Company's operating
         activities required $2.3 million of cash, which was used to reduce
         accounts payable ($4.0 million) and accrued liabilities ($4.8 million).
         A reduction in accounts receivable and inventories provided $5.1
         million of cash in 1998. Capital expenditures required $1.9 million in
         cash while dividends paid were $585,000 in the first nine months of
         1998. The remaining cash requirement was funded from the Company's cash
         balances and from additional net borrowings of $2.0 million under the
         Company's revolving credit facility. The requirement for cash during
         the first three quarters of 1998 was primarily due to the Company's
         ability to collect advance payments from customers of its coil
         processing operation in 1997, while cash was used to pay manufacturing
         costs during 1998. The Company forecasts that its operating activities
         will provide cash during the remainder of 1998.


                                       7

<PAGE>   9


                THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                 THREE QUARTERS ENDED 30 SEPTEMBER 1998 AND 1997


         In May 1998, the Company executed a $15,000,000 revolving credit
         facility, with the amount available under the credit facility based on
         eligible accounts receivable and inventory. The Company had $15 million
         available under the revolving credit facility, of which $4 million was
         borrowed at 30 September 1998. This facility can be converted to a term
         loan on May 29, 2001 and is payable in eight quarterly installments
         beginning June 30, 2001.

         YEAR 2000
         ---------

         Year 2000 Issues arise because of the inability of many existing
         computer systems and software, which utilize a two-digit conversion for
         recording years, to properly recognize and process information relating
         to a year that begins with "20" instead of "19". In early 1998, the
         Company began a Company-wide program to replace its internal
         information processing systems for reasons unrelated to Year 2000
         Issues. It expects to complete this program during the third quarter of
         1999, which should result in its internal information processing
         systems being Year 2000 compliant. The cost to the Company to fully
         implement this new system is estimated at approximately $2.5 million.
         Funds for this program are expected to be available to the Company from
         its internal operations and, if necessary, from its lines of credit. As
         part of a comprehensive Year 2000 compliance project, the Company is
         also assessing other key aspects of its operating and administrative
         processes which, if they would become inoperable due to Year 2000
         issues, would have a material impact on the Company's ability to
         continue its normal operations. This program includes a plan to
         identify the extent to which key vendors and consultants are addressing
         this same issue and an assessment of the Company's products. The
         Company will monitor and evaluate the progress of its vendors and
         consultants on this matter. The Company is also reviewing its
         non-information technology systems to determine the extent of any
         changes that may be necessary and presently believes that there will be
         minimal changes necessary for compliance. Although the Company cannot
         assess the result of this evaluation until it has obtained further
         information, based upon the work it has performed to date, it is not
         presently aware of any Year 2000 issues which would have a disruptive
         impact on its operations or a material adverse impact upon its
         financial condition or results of operation.

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

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

         In addition to historical information, this document contains various
         forward-looking statements, involving risks and uncertainties, which
         could cause actual results to differ materially from these statements.
         These risks include, but are not limited to, changes in economic
         conditions, interest rates, price and product offering competition from
         domestic and foreign entities, customer purchasing patterns, labor
         costs, product liability issues and other legal claims and governmental
         regulatory issues.


                                       8
<PAGE>   10



         PART II - OTHER INFORMATION



         Items 1-5 - Inapplicable
         Item 6    - Exhibits and Reports on Form 8-K

              No reports on Form 8-K were filed during the quarter ended 30 
              September 1998.

                                       9
<PAGE>   11

                                    SIGNATURE



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






                                        THE MONARCH MACHINE TOOL COMPANY
                                        (Registrant)



DATE:  6 November 1998                  By /s/ Karl A. Frydryk
     ---------------------------          ------------------------------
                                        Karl A. Frydryk
                                        Vice President & Chief Financial Officer


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