<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 quarterly period ended March 31, 1998

                                  OR

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES AND 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
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(Address of principal executive offices)           (Zip Code)

                             (215) 766-8853
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             (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
6,935,559 shares of common stock, $.01 par value, outstanding on 
May 13, 1998.




                       





<PAGE>  2


                     PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
----------------------------
          PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS                           (Unaudited) 
                                March 31, 1998     December 31, 1997  
CURRENT ASSETS                  --------------     ------------------
  Cash and cash equivalents       $10,521,653             $6,826,152
  Short-term investments           12,512,356             10,844,382
  Accounts receivable-trade        30,109,952             27,994,379
  Allowance for doubtful accounts    (550,000)              (550,000)
  Inventories (Note 2)             27,856,433             26,678,203
  Prepaid expenses                  1,795,429              2,130,357
                                   ----------             ----------
    Total current assets           82,245,823             73,923,473
                                   ----------             ----------

PROPERTY
  Property, plant & equipment     120,848,894            119,289,752
  Less accumulated depreciation    47,298,407             45,392,774
                                  -----------            -----------
    Property - net                 73,550,487             73,896,978
                                  -----------            -----------

OTHER ASSETS                        3,291,000              3,172,000
                                  -----------            ----------- 
      TOTAL                      $159,087,310           $150,992,451
                                  ===========            ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable-trade           $6,452,356             $5,825,920
  Dividends payable                   949,730                      0
  Accrued expenses:
    Pension & profit sharing        1,643,037              2,522,230
    Income taxes                    2,565,860                806,392
    Payroll & commissions           4,033,003              2,961,321
    Other                           1,532,798              1,396,289
                                   ----------             ----------
    Total current liabilities      17,176,784             13,512,152
                                   ----------             ----------

ACCRUED PENSION COST                4,330,429              4,330,429
                                   ----------             ----------  
DEFERRED INCOME TAXES               4,551,525              4,231,374
                                   ----------             ---------- 
STOCKHOLDERS' EQUITY (See Note 3)
  Class A common stock                 17,720                 17,720
  Common stock                         71,870                 71,870
  Additional paid-in capital       35,877,797             35,877,797
  Retained earnings               100,003,704             96,687,693
  Accumulated other comprehensive
    income                           (624,364)            (1,418,429)
  Treasury stock                   (2,318,155)            (2,318,155)
                                  -----------            -----------
     Total stockholders' equity   133,028,572            128,918,496
                                  -----------            -----------
      TOTAL                      $159,087,310           $150,992,451
                                  ===========            ===========
 
See Notes to Condensed Consolidated Financial Statements

<PAGE>  3


           PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
 STATEMENTS  OF  CONDENSED  CONSOLIDATED  INCOME AND  RETAINED EARNINGS
                                      
                                                 THREE MONTHS ENDED
                                         --------------------------------
                                                     (Unaudited)
                                         March 31, 1998    March 31, 1997
                                         --------------    -------------- 
                                                                    
NET SALES                                  $46,724,908        $39,015,773
COST OF PRODUCTS SOLD                       32,131,336         27,236,591
                                           -----------        ----------- 
GROSS PROFIT                                14,593,572         11,779,182
                                           -----------        -----------
OTHER EXPENSES:                                                             
   Selling expenses                          4,803,605          4,206,198
   General & administrative expenses         3,388,939          3,095,437
                                           -----------        -----------
                                             8,192,544          7,301,635
                                           -----------        -----------
OPERATING PROFIT                             6,401,028          4,477,547
OTHER INCOME - NET                             279,713            173,056 
                                           -----------        ----------- 
INCOME BEFORE INCOME TAXES                   6,680,741          4,650,603
PROVISION FOR INCOME TAXES                   2,415,000          1,676,000
                                           -----------        -----------
NET INCOME                                   4,265,741          2,974,603
RETAINED EARNINGS - BEGINNING               96,687,693         85,822,011
CASH DIVIDEND                                 (949,730)          (867,832)
                                           -----------        -----------
RETAINED EARNINGS - ENDING                $100,003,704        $87,928,782
                                           ===========        ===========
NET INCOME PER SHARE-BASIC AND DILUTED           $0.49              $0.34
                                           ===========        ===========
WEIGHTED AVERAGE SHARES
   OUTSTANDING                               8,633,999          8,678,326

CASH DIVIDEND PER SHARE                           $.11               $.10


         See Notes to Condensed Consolidated Financial Statements




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

                                                    THREE MONTHS ENDED
                                             -----------------------------
                                                       (Unaudited)
                                             March 31, 1998 March 31, 1997
                                             -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                       $4,265,741    $2,974,603
Adjustments to reconcile net income to net
 cash provided by operating activities:
    Depreciation                                  1,924,077     1,492,144
    Loss on disposal of property                      6,226        14,399
    Gain on disposal of investments                       0          (625)
    Changes in assets and liabilities:
      (Increase) decrease in receivables         (1,897,670)    1,404,103
      Decrease in refundable income taxes                 0       806,342
      (Increase) in inventories                    (907,401)   (1,322,389)
      (Increase)decrease in prepaid expenses,etc.   341,933      (186,285)  
      (Increase) decrease in deferred 
         income taxes-current                             0       112,948
      (Increase) in other assets                   (119,000)      (60,000) 
      Increase in accounts payable                  610,722       906,880
      Increase in accrued expenses                2,083,831       397,040
      Increase in deferred income taxes
          - noncurrent                              320,151       194,980
                                                 ----------    ----------
       Net cash provided by operating activities  6,628,610     6,734,140 
                                                 ----------    -----------
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES:                                      
     Property additions                          (1,599,746)   (4,743,064)
     Additions to held-to-maturity investments   (5,988,066)   (9,666,912)
     Proceeds from disposal of
         held-to-maturity investments             4,357,821     7,920,362
     Proceeds from disposal of property              46,072            32    
                                                 ----------    ----------
       Net cash used in investing activities     (3,183,919)   (6,489,582)
                                                 ----------    ----------
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                                      
     Acquisition of treasury stock                        0         ( 484)
                                                -----------     ---------
     Net cash used in financing activities                0          (484)
                                                -----------     ---------
     Effect of exchange rate changes on cash        250,810        68,389  
                                                -----------     --------- 
     Net increase in cash and cash equivalents    3,695,501       312,463
     Cash and cash equivalents at
         beginning of year                        6,826,152     4,208,339
                                                -----------     --------- 
     Cash and cash equivalents at end of period $10,521,653    $4,520,802
                                                ===========    ==========

SUPPLEMENTAL CASH FLOW DATA:                                                   
     Cash paid during the year for:                                        
        Income taxes                               $ 27,613      $105,600
        Interest                                          0         1,380
                                                     
See Notes to Condensed Consolidated Financial Statements                  
                               
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           PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES                
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                
                              March 31, 1998
                                    
    
                                                       
                                                       
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 the
Registrant's Annual Report for the year ended December 31, 1997. 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
March 31, 1998 and 1997 and the consolidated statements of income and cash
flow for the three-month periods then ended. The results of operations for
the three months ended March 31, 1998 are not necessarily indicative of the
results of operations to be expected for the year ending December 31, 1998.
                                                                  
Note 2. Inventories
-------------------
  Substantially all of 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)                     
                                 March 31, 1998      December 31, 1997       
                                 --------------      -----------------
         Raw material               $4,781,939             $4,347,554
         Tooling                     3,519,567              3,391,208
         Work-in-process             9,285,890              8,073,292
         Finished goods             10,269,037             10,866,149
                                    ----------              ---------
            TOTAL                  $27,856,433            $26,678,203
                                    ==========             ==========
                                                       
  If the FIFO method of inventory valuation had been used by Registrant for
all inventories, inventories would have been $8,804,119 and $8,704,119 higher
than reported at March 31, 1998 and December 31, 1997, respectively, and net
income would have been $64,000 and $15,000 higher than reported for the
three months ended March 31, 1998 and 1997 respectively. Included in other
assets is long-term tooling inventory totaling $3,291,000 and $3,172,000 at
March 31, 1998 and December 31, 1997, respectively.                 
                                                       

Note 3. Comprehensive Income
----------------------------
  As of January 1, 1998 the Registrant adopted Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income". Statement
No. 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of this Statement had no 
impact on the Registrant's net income or stockholders' equity. Statement
No. 130 requires unrealized gains or losses on the Registrant's available-
for-sale securities and foreign currency translation adjustments, which prior
to adoption were reported separately in stockholders' equity, to be included
in other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement No. 130.
  During the first quarter of 1998 and 1997, total comprehensive income
amounted to $5,059,806 and $2,482,761, respectively.

Note 4. Reclassifications
-------------------------
  Certain reclassifications have been made to prior year amounts and balances
to conform with the 1998 presentation.

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             PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               March 31, 1998


Note 5. 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 
period. Actual results could differ from those estimates.
            



<PAGE> 7

          

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.
          
                                                       
                                                       
Quarter Ended: March 31, 1998 vs. March 31, 1997                               
------------------------------------------------
    Consolidated net sales for the quarter ended March 31, 1998 were $46.7
million, versus $39.0 million for the quarter ended March 31, 1997, a 19.7%
increase. Sales to customers outside the United States for the quarter ended
March 31, 1998 were $13.1 million, versus $10.7 million for the quarter ended
March 31, 1997, a 22.4% increase. Net sales for the fastener operation for 
the quarter ended March 31, 1998 were $37.8 million, versus $32.0 million for
the quarter ended March 31, 1997, an 18.1% increase. Motor sales were $8.9
million for the quarter ended March 31, 1998, versus $7.0 million recorded 
for the quarter ended March 31, 1997, a 27.1% increase.
   The number of fastener units sold to independent customers increased
approximately 27.4% in the first quarter of 1998 compared to the first quarter 
of 1997. The number of fastener units sold within North America increased
approximately 28.4% in the first quarter of 1998 compared to the first quarter
of 1997 and represented approximately 70.5% of total fasteners sold in the 
first quarter of 1998. Distributor shipments to end customers continue to be
strong, especially in the personal computer market. Shipments in the first
quarter of 1997 were still affected by unusually high distributor inventory
levels that have since stabilized. The number of fastener units sold into
Europe also increased approximately 34.9% in the first quarter of 1998 
compared to the first quarter of 1997 and represented approximately 25.3% of
total fasteners sold in the first quarter of 1998. The increase in the  
European market is mainly due to a surge in the automotive market as well as 
an overall strong European economy. The number of fastener units sold into the
Asia-Pacific region decreased approximately 13.9% from the first quarter of
1997 to the first quarter of 1998 mainly as a result of the continued economic
uncertainty in the region. The number of motors sold increased 26.6% in the
first quarter of 1998 compared to the first quarter of 1997. Continued strong
demand from the semiconductor equipment manufacturing market, the data storage
and retrieval market, and the graphic imaging market all contributed to the
motor sales increase.
    The average selling price for fasteners shipped in the first quarter of
1998 decreased approximately 4.0% from $65.30 per thousand fasteners sold in
the first quarter of 1997 to $62.66 per thousand fasteners sold in the first
quarter of 1998. This decrease is mainly due to a change in product mix 
due to a return to more normal distributor ordering patterns. In the quarter
ended March 31, 1997, distributors were over-inventoried in the lower priced
stock items and therefore items shipped were higher specialty items. The
average selling price of Pittman motors increased from $42.52 per motor in
the first quarter of 1997 to $42.85 per motor in the first quarter of 1998. 
    Consolidated gross profit for the first quarter of 1998 was $14.6 million, 
versus $11.8 million for the first quarter of 1997, a 23.7% increase. Fastener
gross profit margins increased 22.9% from the first quarter of 1997 to the 
first quarter of 1998 due to a decrease in outside supplemental screw machine 
support, a decrease in tooling expenditures, and higher volume which offset 
increases in fixed costs. Motor gross profit increased 29.7% from the first
quarter of 1997 to the first quarter of 1998 due to increased sales volume.
    Consolidated selling, general, and administrative expenses ("SG&A") for 
the first quarter of 1998 were $8.2 million, versus $7.3 million for the
first quarter of 1997, a 12.3% increase. SG&A, as a percent of sales,  
decreased however from 18.7% in the first quarter of 1997 to 17.5% in the 
first quarter of 1998.
 
<PAGE> 8

             PENN ENGINEERING & MANUFACTURING CORP. & SUBSIDIARIES 
                               March 31, 1998

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


    Consolidated net income for the first quarter of 1998 was $4.3 million, 
versus $3.0 million for the first quarter of 1997. Other income increased 
61.6% due to higher investment income and realized currency gains in the
United Kingdom.

Liquidity and Capital Resources
-------------------------------
    Net cash provided by operations totaled $6.6 million for the quarter
ended March 31, 1998. These funds are being temporarily invested in
anticipation of increased capital spending during the remaining three quarters
of 1998. Short-term investments increased 15.4% from $10.8 million at
December 31, 1997 to $12.5 million at March 31, 1998. Also, the Company had
approximately $27.5 million available at March 31, 1998 under its short-term
lines of credit. Accordingly, the Company 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 growth for the
forseeable future.

Item 3. Quantitative and Qualitative Disclosure About Market Risk.
------------------------------------------------------------------
  Not Applicable.

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                        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, 1997.

Item 2. Changes in Securities
-----------------------------
Not Applicable

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
-------------------------
None

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits:
    Exhibit No.            Description
    -----------            -----------
         3.1          Restated Certificate of Incorporation (Incorporated by
                      reference to Exhibit 3.1 of the Registrant's Form 10-Q
                      Quarterly Report for the period ended June 30, 1996.)

         3.2          By-laws, as amended (Incorporated by reference to 
                      Exhibit 3(ii) of the Registrant's Form 10-K Annual
                      Report for the year ended December 31, 1994.) 

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





<PAGE> 10
   
                                 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: May 13, 1998        By:  /s/ Kenneth A. Swanstrom
                               ----------------------------
                                Kenneth A. Swanstrom
                                Chairman/ CEO/ President



Dated: May 13, 1998        By:  /s/ Mark W. Simon
                               ----------------------------
                                Mark W. Simon
                                Vice-President - Finance