<PAGE>  

                  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 quarterly period ended September 30, 1996

                                  OR

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

                     Commission file number   1-5356


                PENN ENGINEERING & MANUFACTURING CORP.
-----------------------------------------------------------------------------
       (Exact name of registrant as specified in its charter)

Delaware                                        23-0951065
-------------------------------         --------------------------
(State or other jurisdiction of             (I.R.S. Employer
incorporation or organization)             Identification No.)

P.O. Box 1000, Danboro, Pennsylvania                  18916
---------------------------------------------------------------------------
(Address of principal executive offices)           (Zip Code)

                             (215) 766-8853
---------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

                             Not Applicable
---------------------------------------------------------------------------
             (Former name, former address and former fiscal year,
                      if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
documents and reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes    X    No
                                             --------    -------
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the last practicable
date: 1,707,082 shares of Class A common stock, $.01 par value and
6,971,246 shares of common stock, $.01 par value, outstanding on
November 1, 1996.

                                        1

<PAGE> 


                     PART I. FINANCIAL INFORMATION
         PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS

                              ASSETS
                                 (Unaudited)
                            September 30, 1996      December 31, 1995  
CURRENT ASSETS              ------------------     ------------------
  Cash and cash equivalents        $4,024,308             $1,459,370
  Short-term investments           18,460,859              5,987,981
  Accounts receivable-trade        25,756,368             21,744,900
  Allowance for doubtful accounts  (1,000,000)              (900,000)
  Inventories (Note 2)             27,929,129             20,274,571
  Prepaid expenses                  2,565,617              2,556,893
  Deferred income taxes             1,000,421                958,888     
                                   ----------             ----------
    Total current assets           78,736,702             52,082,603
                                   ----------             ----------

PROPERTY
  Property, plant & equipment      94,714,762             76,837,686
  Less accumulated depreciation    38,035,518             34,896,199
                                   ----------             ----------
    Property - net                 56,679,244             41,941,487
                                   ----------             ----------

OTHER ASSETS                        2,400,000              2,050,000
                                   ----------             ----------
      TOTAL                      $137,815,946            $96,074,090
                                 ============            ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable                                           $1,500,000
  Accounts payable-trade           $4,812,434              4,302,773
  Dividends payable                   867,832
  Accrued expenses:
    Pension & profit sharing        2,782,771              3,983,621
    Income taxes                      233,833                468,268
    Payroll & commissions           4,720,197              2,426,097
    Other                             603,303                521,559
                                   ----------             ----------
    Total current liabilities      14,020,370             13,202,318
                                   ----------             ----------

ACCRUED PENSION COST                4,216,009              4,714,701
                                   ----------             ----------  
DEFERRED INCOME TAXES               2,589,201              2,066,179
                                   ----------             ---------- 
STOCKHOLDERS' EQUITY (See Note 3)
  Class A common stock                 17,720                 17,720
  Common stock                         71,661                 53,161
  Additional paid-in capital       35,423,393              2,686,448
  Retained earnings                82,836,370             74,851,423
  Unrealized (loss) on 
     investments -net of tax          (64,265)               (60,303)
  Cumulative foreign currency
     translation adjustment          (342,556)              (505,600)
  Treasury stock                     (951,957)              (951,957)
                                   ----------             ----------
     Total stockholders' equity   116,990,366             76,090,892
                                  -----------             ----------
      TOTAL                      $137,815,946            $96,074,090
                                 ============            ===========
 
See Notes to Condensed Consolidated Financial Statements

                                       2
<PAGE>  


              PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
        STATEMENTS OF CONDENSED CONSOLIDATED INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>                                      
                                                THREE MONTHS ENDED                NINE MONTHS ENDED         
                                    ------------------------------------- -------------------------------------
                                    September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
                                        (Unaudited)        (Unaudited)        (Unaudited)        (Unaudited)
                                    ------------------ ------------------ ------------------ ------------------ 
<S>                                     <C>                <C>                <C>               <C>
REVENUES:                                                                    
   Net Sales                            $38,713,584        $34,080,372        $119,224,887      $106,277,130
   Other income                             437,714            224,530             668,529           843,163
                                        -----------        -----------         -----------       ----------- 
                                         39,151,298         34,304,902         119,893,416       107,120,293
                                        -----------        -----------         -----------       ----------- 
COST AND EXPENSES                                                             
   Cost of products sold                 26,609,149         23,677,065          82,801,504        73,452,576
   Selling, general & administrative      6,823,851          5,442,893          21,101,852        17,792,485  
                                        -----------        -----------         -----------       ----------- 
                                         33,433,000         29,119,958         103,903,356        91,245,061
                                        -----------        -----------         -----------       -----------
INOME BEFORE INCOME TAXES                 5,718,298          5,184,944          15,990,060        15,875,232
PROVISION FOR INCOME TAXES                2,147,000          1,801,000           5,985,000         6,011,000
                                        -----------        -----------         -----------       -----------
NET INCOME                                3,571,298          3,383,944          10,005,060         9,864,232
RETAINED EARNINGS - BEGINNING            80,132,905         70,061,853          74,851,423        64,520,460 
CASH DIVIDEND                              (867,833)          (469,448)         (2,020,113)       (1,408,343)
                                        -----------        -----------         -----------       -----------
RETAINED EARNINGS - ENDING              $82,836,370        $72,976,349         $82,836,370       $72,976,349
                                        ===========        ===========         ===========       ===========
NET INCOME PER SHARE (See Note 3)             $0.41              $0.50               $1.35             $1.44
                                        ===========        ===========         ===========       ===========
WEIGHTED AVERAGE SHARES
  OUTSTANDING (See Note 3)                8,638,111          6,828,328           7,435,992         6,828,328

CASH DIVIDEND PER SHARE (see Note 3)           $.10              $.069               $.269             $.207


</TABLE>
         See Notes to Condensed Consolidated Financial Statements

                                        3
<PAGE>  


         PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
            STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

                                                    NINE MONTHS ENDED
                                             -----------------------------
                                          (Unaudited)         (Unaudited)
                                      September 30, 1996  September 30, 1995
                                      ------------------  ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                  $10,005,060        $9,864,232
Adjustments to reconcile net income to net
 cash provided by operating activities:
    Depreciation                              3,825,472         2,986,400
    Loss on disposal of property                 47,339            17,799
    Gain on disposal of investments                   0           (18,332)
    Changes in assets and liabilities:
      (Increase) in receivables              (3,911,468)         (333,546)
      (Increase) in inventories              (7,654,558)       (1,329,746)
      (Increase) in prepaid expenses, etc.       (8,724)       (1,263,264)  
      (Increase)decrease in deferred               
         income taxes-current                   (41,533)           20,056
      (Increase) in other assets               (350,000)         (360,000)
      Increase in accounts payable              509,661         2,167,604
      Increase in accrued expenses              940,559           707,530
      Increase(decrease) in accrued 
         pension cost                          (498,692)          379,641 
      Increase in deferred income 
         taxes- noncurrent                     523,022           111,810
                                             ----------        ----------
       Net cash provided by
          operating activities                3,386,138        12,950,184
                                             ----------        ----------
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES:                                      
     Property additions                     (18,646,182)      (10,047,993)
     Additions to available-for-sale 
         investments                             (4,367)                0     
     Additions to held-to-maturity 
         investments                       (412,182,675)      (25,614,933) 
     Proceeds from disposal of 
         available-for-sale investments         193,636           778,402
     Proceeds from disposal of
         held-to-maturity investments       399,514,033        21,137,762
     Proceeds from disposal of property          41,225             1,705    
                                            -----------        ----------
       Net cash used in investing activities(31,084,330)      (13,745,057)
                                             ----------        ----------
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                                      
     Net short-term borrowings               41,750,000                 0
     Net short-term repayments              (43,250,000)                0
     Proceeds from issuance of common stock  32,755,445                 0
     Dividends paid                          (1,152,281)         (938,897)
                                             ----------         ---------
     Net cash provided (used) by
         financing activities                30,103,164          (938,897)
                                             ----------         ---------
     Effect of exchange rate and investment  
         reserve changes on cash                159,966          (166,104)
                                              ---------         --------- 
     Net increase (decrease) in cash and 
         cash equivalents                     2,564,938        (1,899,874)
     Cash and cash equivalents at
         beginning of year                    1,459,370         6,106,565
                                              ---------         --------- 
     Cash and cash equivalents at end of year$4,024,308        $4,206,691
                                             ==========        ==========

SUPPLEMENTAL CASH FLOW DATA:                                                   
     Cash paid during the year for:                                        
        Income taxes                          $5,521,600       $6,329,247
        Interest                                 217,907            9,433
                                                     
See Notes to Condensed Consolidated Financial Statements
                  
                                        4
<PAGE> 


          PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES              
           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                
                           September 30, 1996                                 
    
                                                       
                                                       
Note 1. Condensed Consolidated Financial Statements (Unaudited)                
---------------------------------------------------------------          
  The accompanying interim financial statements should be read in conjunction
with the annual financial statements and notes thereto included in
Registrant's Annual Report. The information contained in this report is
unaudited and subject to year-end audit and adjustment. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
have been made which are necessary for a fair presentation of Registrant's
consolidated financial position at September 30, 1996 and 1995 and the 
consolidated statements of income and cash flows for the three-month and
nine-month periods then ended. The results of operations for the nine months
ended September 30, 1996 are not necessarily indicative of the results of
operations to be expected for the year ending December 31, 1996.

Note 2. Inventories
-------------------
  Substantially all of the Registrant's domestic fastener inventories are
priced on the lower of last-in, first-out (LIFO) cost or market method. The
remainder of the inventories are priced on the first-in, first-out (FIFO)
method, at the lower of cost or market.         
               
                                                       
       Inventories are as follows:                                    
                                  (Unaudited)                       
                                September 30, 1996       December 31, 1995    
                                ------------------       -----------------
         Raw material               $4,411,164               $4,569,522
         Tooling                     4,291,299                3,610,307
         Work-in-process             8,177,215                6,511,667
         Finished goods             11,049,451                5,583,075
                                    ----------               ----------
            TOTAL                  $27,929,129              $20,274,571
                                    ==========               ==========
                                                       
If the FIFO method of inventory valuation had been used by Registrant for
all inventories, inventories would have been $9,130,354 and $8,027,875 higher
than reported at September 30, 1996 and December 31, 1995, respectively, and
net income would have been $690,000 and $556,000 higher than reported for the
nine months ended September 30, 1996 and 1995, respectively. Included in other 
assets is long-term tooling inventory totaling $2,400,000 and $2,050,000 at
September 30, 1996 and December 31, 1995, respectively.
                 
Note 3. Reclassification
------------------------
  On May 22, 1996, Registrant effected a reclassification of its existing
common stock whereby each share of existing $1.00 par value common stock
became one share of new $.01 par value Class A voting common stock (the
"Stock Reclassification"). On May 23, 1996, Registrant effected a 4-for-1
stock split, in the form of a stock dividend, payable in shares of $.01 par
value non-voting common stock to stockholders of record on May 3, 1996
(the "Stock Dividend"). The change in par value of the Class A common stock
as a result of the Stock Reclassification resulted in the transfer of  
$1,754,305 from Class A common stock to additional paid-in capital, and the 
Stock Dividend resulted in the issuance of 5,316,075 new common shares, and
in the transfer of $53,161 from retained earnings to common stock.
Accordingly, the stockholders' equity section of the Balance Sheet at 
December 31, 1995 and the references in the Statements of Condensed 
Consolidated Income and Retained Earnings to average number of shares 
outstanding and per share amounts for the three and nine month periods
ended September 30, 1995 have been restated to reflect the Stock 
Reclassification and the Stock Dividend.

                                        5

<PAGE> 


           PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES               

                             September 30, 1996                                

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

Quarter Ended September 30, 1996 vs. Quarter Ended September 30, 1995
---------------------------------------------------------------------
   Consolidated net sales for the quarter ended September 30, 1996 were $38.7
million, versus $34.1 million for the quarter ended September 30, 1995, a
13.5% increase. Sales to customers outside the United States for the quarter
ended September 30, 1996 were $10.1 million, versus $8.5 million for the
quarter ended September 30, 1995, an 18.8% increase.
   Net sales for the fastener operation for the quarter ended September 30,
1996 were $31.7 million, versus $27.1 million for the quarter ended September
30, 1995, a 17.0% increase. The number of fastener units shipped within North
America (including Canada) increased approximately 7.0% from the third
quarter of 1995 to the third quarter of 1996, and represented approximately
69.3% of the total fasteners shipped in the third quarter of 1996. The number
of fastener unit shipments to Europe increased approximately 1.2% from the
third quarter of 1995 to the third quarter of 1996. The number of units
shipped to the Asia-Pacific region increased 33.1% in the third quarter
of 1996 from the third quarter of 1995 as a result of increased demand by
computer and electronic equipment manufacturers in the Asia-Pacific region.
The average selling prices for fasteners shipped in the third quarter of 1996
increased approximately 9.1% compared to the third quarter of 1995 as a 
result of a change in product mix toward higher priced fasteners and a 2.9% 
price increase effective April 1, 1996.
  Net sales for the motor operation for the third quarter of 1996 were $7.1
million, versus $7.0 million for the third quarter of 1995, a 1.4% increase.
The number of motors sold decreased 4.5% from the third quarter of 1995 to
the third quarter of 1996 while the average selling price increased 5.1%.
  Consolidated gross margin for the third quarter of 1996 was $12.1 million,
versus $10.4 million for the third quarter of 1995, a 16.3% increase. 
Fastener gross margin for the third quarter of 1996 increased 21.2% from the
third quarter of 1995 as a result of the increased number of units sold, a
a change in product mix towards higher margin fasteners, production
efficiencies, and a decrease in employee benefit costs. As a percent of 
sales, fastener gross margin increased from 31.5% in the third quarter of
1995 to 32.7% in the third quarter of 1996. Motor gross margin, as a percent
of sales, decreased from 26.7% in the third quarter of 1995 to 25.0% in the
third quarter of 1996.
   Selling, general, and administrative expenses ("SG&A") for the third
quarter of 1996 were $6.8 million, versus $5.4 million for the
third quarter of 1995, a 25.4% increase. The establishment of a Singapore 
distribution center in the first quarter of 1996 accounted for approximately
4.5% of this increase. The remainder of the increase was due to additional 
SG&A staff to handle the increased volume, wage increases for current staff, 
and increased legal and other professional fees that resulted from
Registrant's recent public offering but which were not directly related to
the offering.
   Consolidated net income for the third quarter of 1996 was $3.6 million,
versus $3.4 million for the third quarter of 1995, a 5.5% increase. 
Other income increased 94.9% due to income received from the temporary  
investment of the public offering proceeds as well as favorable currency
exchange rates in the third quarter of 1996. The overall effective tax rate
increased from 34.7% in the third quarter of 1995 to 37.5% in the third
quarter of 1996 primarily due to a favorable retroactive adjustment made in
the third quarter of 1995 as a result of a reduction in the Pennsylvania
income tax rate and apportionment factor.

                                        6

<PAGE> 


           PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
                             September 30, 1996

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


                
Nine Months Ended September 30, 1996 vs. Nine Months Ended September 30, 1995
-----------------------------------------------------------------------------
   Consolidated net sales for the nine months ended September 30, 1996 were 
$119.2 million, versus $106.3 million for the nine months ended September 30, 
1995, a 12.1% increase. Sales to customers outside the United States for the 
nine months ended September 30, 1996 were $29.5 million, versus $27.4 million
the nine months ended September 30, 1995, a 7.7% increase.
   Net sales for the fastener operation for the nine months ended September 
30, 1996 were $96.8 million, versus $84.7 million for the nine months ended  
September 30, 1995, a 14.3% increase. The number of fastener units shipped 
within North America (including Canada) increased approximately 4.8% from the
first nine months of 1995 to the first nine months of 1996, and represented 
approximately 68.7% of total fasteners shipped in the first nine months of 
1996. The number of fastener shipments to Europe increased approximately 3.8%
in the first nine months of 1996 compared to the first nine months of 1995, 
while the number of units shipped to the Asia-Pacific region increased 4.4% 
from the first nine months of 1995 to the first nine months of 1996. The 
continued strong demand for personal computers as well as other electronic 
equipment was the main cause of the increased shipment volume in all three
regions. The average selling price of fasteners shipped in the first nine
months of 1996 increased approximately 4.6% compared to the first nine months 
of 1995 mainly due to a 2.9% price increase effective April 1, 1996 and a 
change in product mix.
   Net sales of the motor operation for the first nine months of 1996 were
$22.4 million, versus $21.6 million for the first nine months of 1995, a 3.7%
increase. The number of motors sold increased approximately 5.1% in the
first nine months of 1996 compared to the first nine months of 1995 while the
average selling price declined 1.5% as a result of a temporary change in
product mix toward lower margin motors.
   Consolidated gross margin for the first nine months of 1996 was $36.4
million, versus $32.8 million for the first nine months of 1995, an 11.0%
increase. Fastener gross margin increased 13.2% in the first nine months of 
1996 compared to the first nine months of 1995 mainly as a result of the 
increased number of units sold. As a percent of sales, however, fastener  
gross margin decreased from 31.8% in the first nine months of 1995 to 31.5% 
in the first nine months of 1996 because cost increases incurred for raw 
material, outside screw machine services, and tooling were not fully offset 
by price increases, production efficiencies, and cost containment. Motor 
gross margin increased 0.5% in the first nine months of 1996 compared to 
the first nine months of 1995 due to a shift in product mix towards lower
margin motors.
   Selling, general, and administrative expenses ("SG&A") for the first nine
months of 1996 were $21.1 million, versus $17.8 million for the first nine
months of 1995, an 18.5% increase. SG&A, as a percent of sales, increased
from 16.7% in the first nine months of 1995 to 17.7% in the first nine months
of 1996. Additional SG&A staff, wage increases for the current staff, and
the establishment of a Singapore distribution center all contributed to the
increased SG&A expense.
   Consolidated net income for the first nine months of 1996 was $10.0 
million, versus $9.9 million for the first nine months of 1995, a 1.0%
increase. Other income decreased 20.7% as a result of decreased investment
income during the first nine months of 1996(primarily during the first
six months of 1996), and less favorable currency exchange rates in 1996 
compared to 1995.

                                       7

<PAGE>


           PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
                             September 30, 1996   


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



Liquidity and Capital Resources
-------------------------------
   Liquidity needs for the nine months ended September 30, 1996 consisted 
primarily of $18.6 million of capital expenditures which included the  
completion of a 43,000 square foot addition to the Registrant's Danboro 
facility and for increased inventory availability in the European and  
Asia-Pacific regions. The inventory increase included $3.0 million finished
goods inventory and other assets purchased from Registrant's new distributor
in Singapore. The Registrant's primary source of cash in the third quarter of 
1996 came from the issuance of 1,850,000 shares of non-voting common stock.
Part of the offering proceed were used to repay all outstanding short-term 
borrowings and the remainder will be used to finance additional capital
expenditures including approximately $8.5 million for the construction of a
new fastener manufacturing facility in Winston-Salem, N.C. and new equipment
for that facility. At September 30, 1996, Registrant also had approximately
$27.5 million available under its short-term lines of credit. Accordingly, the
Registrant anticipates that its existing capital resources and cash flow
generated from future operations will enable it to maintain its current level
of operations and its planned operations for the forseeable future.
   Registrant, along with a large number of other entities, has been 
designated a potentially responsible party (PRP) by the U.S. Environmental
Protection Agency under the Comprehensive Environmental Response, 
Compensation and Liability Act, which potentially subjects PRP to joint and
several liability for the costs of such cleanup. Based on Registant's 
assessment of the costs associated with its environmental responsibilites, 
compliance with federal, state, and local laws regulating the discharge of
materials into the environment, or otherwise relating to the protection of
the environment, has not had and in the opinion of Registrant's management, 
will not have a material effect on Registrant's financial position, net 
income, capital expenditures or competitive position.

                                       8

<PAGE> 


                   PART II OTHER INFORMATION

Item 1. Legal Proceedings
-------------------------
Reference is made to Part 1, Item 3 of the Registrant's Form 10-K Annual
Report for the year ended December 31, 1995.

Item 2. Changes in Securities
-----------------------------
On July 3, 1996, a public offering of 1,850,000 shares of Registrant's
non-voting Common Stock by Registrant and 1,000,000 shares of Registrant's
non-voting Common Stock by certain selling stockholders was consummated. Net
proceeds from shares sold by Registrant of $32,755,000 were used to repay
existing short-term indebtedness and the remainder will be used to finance
future capital expenditures.

Item 3. Defaults Upon Senior Securities
---------------------------------------
Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
Not Applicable                                      

Item 5. Other Information
-------------------------
Not Applicable

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits:
    Exhibit No.    Description
    -----------    -----------
      10.2         Penn Engineering & Manufacturing Corp. 1996 Employee
                   Stock Purchase Plan

      27           Financial Statement Data Schedule. (Filed herewith.)
    
(b) Reports on Form 8-K
    None

                                        9

<PAGE> 


                                 SIGNATURE

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



                               PENN ENGINEERING & MANUFACTURING CORP.


Dated: November 14, 1996        By:  /s/ Kenneth A. Swanstrom
                               ----------------------------
                                Kenneth A. Swanstrom
                                Chairman/ CEO/ President



Dated: November 14, 1996        By:  /s/ Mark W. Simon
                               ----------------------------
                                Mark W. Simon
                                Vice-President - Finance


                                 EXHIBIT INDEX

Exhibit No.      Description
-----------      -----------
10.2             Penn Engineering & Manufacturing Corp. 1996 Employee
                 Stock Purchase Plan

27               Financial Statement Data Schedule. (Filed herewith.)