<PAGE>

                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 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: December 31, 1997

[ ] 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:  0-4791

                          PAUL MUELLER COMPANY
------------------------------------------------------------------------
         (Exact name of registrant as specified in its charter)

                                Missouri
------------------------------------------------------------------------
     (State or other jurisdiction of incorporation or organization)

                               44-0520907
------------------------------------------------------------------------
                  (I.R.S. Employer Identification No.)

           1600 West Phelps, Springfield, Missouri    65802
------------------------------------------------------------------------
          (Address of principal executive offices)  (Zip Code)

                             (417) 831-3000
------------------------------------------------------------------------
          (Registrant's telephone number, including Area Code)

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

-------------------------    -------------------------------------------
  (Title of each class)      (Name of each exchange on which registered)

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

                  Common Stock par value $1 per share
------------------------------------------------------------------------
                            (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 con-
tained, 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 amendment to this Form 10-K:  [X]

State the aggregate market value of the voting stock held by nonaffili-
ates of the Registrant:  The aggregate market value shall be computed by 
reference to the price at which the stock was sold, or the average bid 
and asked prices of such stock as of a specified date within 60 days 
prior to the date of filing.  Aggregate market value on February 27, 
1998, based on the last reported closing price:  $ 38,725,988

Indicate the number of shares outstanding of each of the Registrant's 
classes of common stock, as of March 13, 1998:  

      Common stock, $1 par value, outstanding:  1,168,021 shares       

Portions of the Proxy Statement for the annual meeting of shareholders 
to be held May 4, 1998, are incorporated by reference into Part III.

                                    1

<PAGE>   2

PART I

ITEM 1. - DESCRIPTION OF BUSINESS

     A.   GENERAL DEVELOPMENT OF BUSINESS

          The Registrant was incorporated under the laws of Missouri in 
          1946 as the successor to a business begun in 1940 to perform 
          general sheet metal work, primarily for the building industry.  
          In the mid-1940's, the Registrant expanded its operations to 
          include the manufacture of poultry processing equipment and 
          stainless steel cheese-making vats for dairy plants.  The 
          Registrant in 1955 began manufacturing stainless steel milk 
          coolers for dairy farms and in 1960 began manufacturing stain-
          less steel storage tanks and discontinued its sheet metal 
          operations.  The Registrant purchased a water purification 
          product line in January 1987.  Today, the Registrant is one 
          of the world's largest manufacturers of milk coolers for dairy 
          farms.  The Registrant is also one of the nation's leading 
          manufacturers of standard and custom-made stainless steel pro-
          cessing equipment for the food and dairy, beverage, chemical 
          and pharmaceutical, and other industries.  The Registrant 
          opened a microbrewery and brewpub operation in December 1997 
          to showcase its brewery technology capability and expand its 
          marketing of brewery systems.

          The Registrant entered into a license agreement in January 
          1992 under which it acquired the right to manufacture and 
          market water distillation equipment.  Sales can be made on a 
          nonexclusive basis to the water bottling industry and for 
          industrial process water applications; pharmaceutical, 
          laboratory and medical applications; and for milk concen-
          tration. The Registrant began selling equipment during 1992.

          The Registrant entered into a license agreement in February 
          1994 under which it acquired the rights to manufacture and 
          market evaporator assemblies used in liquid-ice systems.  The 
          agreement provides the Registrant an exclusive license to 
          manufacture and to sell or to sublicense its rights for the 
          following applications: HVAC; gas turbine; process cooling of 
          food and chemicals; and concentration of milk, fruit juices 
          and acid solutions.  The exclusive license is restricted to 
          specific territories defined by application.  The license is 
          exclusive until expiration of the patents, but may become 
          nonexclusive if royalties fail to equal specified minimum 
          levels for any calendar year.  The Registrant is also the sole 
          licensee of the technology for milk cooling on dairy farm 
          applications with no minimum annual royalties required.  The 
          Registrant began manufacturing and marketing equipment in 
          1995.

          The Registrant has a license agreement with a Dutch company, 
          which was extended during 1994 for five years, for the pro-
          duction and sale of Mueller Dairy Farm Equipment in Europe, 
          which provides royalties for the Registrant.

                                    2

<PAGE>   3

     B.   FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
<TABLE>
                         EARNINGS DATA BY INDUSTRY SEGMENT
<CAPTION>
                                         Dairy Farm   Processing
                                         Equipment    Equipment  Consolidated
                                        -----------  -----------  -----------
                                                         1997
                                        -------------------------------------
          <S>                           <C>          <C>          <C>
          Sales to unaffiliated 
            customers.................. $22,390,144  $64,302,878  $86,693,022
                                        ===========  ===========  ===========
          Operating profit............. $ 3,793,311  $ 1,320,461  $ 5,113,772
                                        ===========  ===========
          General corporate expenses...                            (1,578,672)
          Other income.................                               412,440
                                                                  -----------
          Income from operations 
            before income taxes........                           $ 3,947,540
                                                                  ===========
          Identifiable assets at 
            December 31................ $11,987,432  $27,857,839  $39,845,271
                                        ===========  ===========
          Corporate assets.............                            16,702,019
                                                                  -----------
          Total assets at December 31..                           $56,547,290
                                                                  ===========
          Additions to property, 
            plant and equipment........ $ 1,351,065  $ 6,108,650
                                        ===========  ===========
          Depreciation expense......... $   780,138  $ 1,112,297
                                        ===========  ===========
<CAPTION>
                                                         1996
                                        -------------------------------------
          <S>                           <C>          <C>          <C>
          Sales to unaffiliated 
            customers.................. $19,169,174  $64,781,816  $83,950,990
                                        ===========  ===========  ===========
          Operating profit............. $ 2,762,583  $ 5,024,339  $ 7,786,922
                                        ===========  ===========
          General corporate expenses...                            (1,943,816)
          Other income.................                               646,913
                                                                  -----------
          Income from operations 
            before income taxes........                           $ 6,490,019
                                                                  ===========
          Identifiable assets at 
            December 31................ $10,401,372  $21,171,140  $31,572,512
                                        ===========  ===========
          Corporate assets.............                            21,612,459
                                                                  -----------
          Total assets at December 31..                           $53,184,971
                                                                  ===========
          Additions to property, 
            plant and equipment........ $   829,961  $   886,576
                                        ===========  ===========
          Depreciation expense......... $   842,512  $ 1,157,830
                                        ===========  ===========
<CAPTION>
                                                         1995
                                        -------------------------------------
          <S>                           <C>          <C>          <C>
          Sales to unaffiliated 
            customers.................. $17,954,458  $60,421,178  $78,375,636
                                        ===========  ===========  ===========
          Operating profit............. $ 2,545,379  $   819,115  $ 3,364,494
                                        ===========  ===========
          General corporate expenses...                            (1,815,617)
          Other income.................                             1,065,776
                                                                  -----------
          Income from operations 
            before income taxes........                           $ 2,614,653
                                                                  ===========
          Identifiable assets at 
            December 31................ $10,576,803  $24,430,407  $35,007,210
                                        ===========  ===========
          Corporate assets.............                            19,671,694
                                                                  -----------
          Total assets at December 31..                           $54,678,904
                                                                  ===========
          Additions to property, 
            plant and equipment........ $   719,071  $ 1,017,864
                                        ===========  ===========
          Depreciation expense......... $   751,451  $ 1,143,519
                                        ===========  ===========
</TABLE>

     C.   NARRATIVE DESCRIPTION OF BUSINESS

          The Registrant's industry segments include Dairy Farm Equip-
          ment and Processing Equipment.

          The Dairy Farm Equipment segment includes sales of milk 
          coolers, pre-coolers, automatic washing systems and heat 
          recovery equipment to the dairy farm industry.  The Dairy
          Farm Equipment segment includes sales to domestic and export 
          markets.

                                    3

<PAGE>   4

          The Processing Equipment segment includes:  (1) food, dairy, 
          meat and poultry processing equipment; (2) beer, wine and 
          beverage equipment; (3) chemical and pharmaceutical equipment; 
          (4) industrial heat transfer equipment; (5) thermal energy 
          storage equipment; and (6) water distilling/pure steam gener-
          ating equipment.

          The food, dairy, meat and poultry processing equipment mar-
          kets include stainless steel storage and mixing tanks, food 
          processors, cookers and coolers, and a variety of other 
          custom-fabricated tanks.

          The beer, wine and beverage equipment markets include stain-
          less steel storage and fermentation tanks, brewhouse equipment 
          and other special equipment for breweries, wineries, distil-
          leries and soft drink bottlers.

          The chemical, pharmaceutical and industrial equipment markets 
          include stainless steel and other alloy pressure vessels and 
          tanks, tank components, water purification products, systems 
          and applications for a variety of heat transfer products, and 
          thermal energy storage equipment.

          The Processing Equipment segment includes sales to the domes-
          tic and export markets.

          Information as to classes of products:
<TABLE>
                              SALES DATA BY PRODUCT CATEGORY
                                (In Thousands of Dollars)
<CAPTION>
                                        1997          1996            1995
                                   -------------  -------------  -------------
                                            % of           % of           % of
                                           Total          Total          Total
                                    Sales  Sales   Sales  Sales   Sales  Sales
                                   ------- -----  ------- -----  ------- -----
          <S>                      <C>      <C>   <C>      <C>   <C>      <C>
          DAIRY FARM EQUIPMENT.... $22,390   26%  $19,169   23%  $17,955   23%

          PROCESSING EQUIPMENT
            Food and Beverage 
               Equipment.......... $24,732   28%  $24,626   29%  $24,972   32%
            Chemical, Pharmaceuti-
               cal and Industrial 
               Equipment..........  39,571   46%   40,156   48%   35,449   45%
                                   -------  ----  -------  ----  -------  ----
                                   $64,303   74%  $64,782   77%  $60,421   77%
                                   -------  ----  -------  ----  -------  ----
               TOTAL.............. $86,693  100%  $83,951  100%  $78,376  100%
                                   =======  ====  =======  ====  =======  ====
</TABLE>

          Raw materials used in the fabrication of Registrant's products 
          are readily available from sources in the United States.  The 
          Registrant purchases a component from a German vendor under a 
          sales and supply agreement for its plate heat exchanger pro-
          duct line.

          Patents held by the Registrant generally are not considered 
          significant to the successful conduct of each segment's busi-
          ness.  Trademarks are registered for the Registrant's name, 
          for certain products sold in the Processing Equipment segment 
          and for the products sold in the Dairy Farm Equipment segment 
          in the key markets served by the Registrant.  Trademarks are 
          considered significant to the successful conduct of the Dairy 
          Farm Equipment segment business.  Key license agreements that 
          are maintained by the Registrant have been discussed in Sec-
          tion A above.

          In general, the seasonality of the Registrant's business seg-
          ments is not material.

          The Registrant carries a significant inventory of standard 
          sizes of stainless steel coil and plate used in the manufac-
          ture of its products.  For some Processing Equipment orders,

                                    4

<PAGE>   5

          stainless steel is specifically ordered for the project.  The 
          Registrant provides extended payment terms primarily for export 
          orders with payment secured generally by a letter of credit 
          and to qualifying domestic Dairy Farm Equipment distributors.  
          The Registrant requires down payments or progress payments on 
          significant Processing Equipment orders.

          Sales of the Registrant's products are distributed among 
          several customers, and sales to any one customer are not 
          significant to total consolidated sales.  Sales to any one 
          customer did not exceed 10% of the Registrant's consolidated 
          sales during 1997.

          The backlog of sales was approximately $29,898,000 at February 
          28, 1998, compared to approximately $28,400,000 at February 
          28, 1997.  It is anticipated that substantially all of the 
          February 28, 1998, backlog will be shipped during the current 
          fiscal year.

          In the Processing Equipment segment, there are several compe-
          titors, most of which are smaller than the Registrant.  Many 
          Processing Equipment projects are bid among several possible 
          suppliers, which tends to make pricing very competitive.  The 
          principal methods of competition are price, quality, delivery 
          and service.  In the Dairy Farm Equipment segment, there are 
          relatively few competitors, and the Registrant is one of the 
          largest manufacturers of farm milk coolers in the world.

          During 1997, stainless steel prices declined compared to the 
          prior year.  Stainless steel prices are projected to be rela-
          tively stable during 1998 due to a market overcapacity and 
          foreign competition.

          The Registrant spent $719,200 in 1997, $653,200 in 1996, and 
          $597,600 in 1995 on research activities relating to the 
          development of new products or services and the improvement 
          of existing products or services.  Ten full-time administra-
          tive employees are engaged in this activity.

          It is not anticipated that compliance with Federal, State and 
          local provisions, which have been enacted or adopted regu-
          lating the discharge of materials into the environment or 
          otherwise relating to the protection of the environment, will 
          have a material effect upon the capital expenditures, earnings 
          or competitive position of the Registrant and its subsidi-
          aries.

          The number of employees at December 31, 1997, was 903.

          As previously reported, the labor contract with the Sheet 
          Metal Workers Union (which covers a portion of the employees 
          at the Springfield, Missouri, plant) expired on June 11, 1994.  
          Negotiations with union representatives continued until an 
          impasse was reached, and the Registrant implemented specific 
          provisions of its final offer effective September 19, 1994.  
          In November 1994, the Regional Director of the National Labor 
          Relations Board (NLRB) also concluded that a lawful impasse 
          had been reached in negotiations prior to the Registrant's 
          implementation of its offer.

          However, on December 22, 1994, the Regional Director of the 
          NLRB issued an unfair labor practice complaint against the 
          Registrant for refusing to supply information to union repre-
          sentatives about the personal health insurance claims of 
          individual employees and their dependents and reversed his 
          previous decision regarding the implementation of changes in 
          wages and benefits.  A hearing on these and other unfair labor 
          practice issues was held during August 1996 by an administra-
          tive law judge of the NLRB, who ruled against the Registrant 
          on some unfair labor practice issues, and the Registrant and 
          the union have both appealed the decision to the NLRB.  A 
          decision by the NLRB is not expected for several months, and 
          there can be an appeal from any NLRB decision, either by the 
          Registrant or by the union.  An additional hearing was held 
          before an administrative law judge of the NLRB in November 

                                    5

<PAGE>   6

          1997, and the judge ruled against the Registrant on the unfair 
          labor practice issues involved.  The Registrant has appealed 
          the decision to the NLRB.  A final determination of all 
          charges pending may take up to two years; however, management 
          believes, based on an evaluation by counsel, that there is no 
          material financial exposure to the Registrant.

          The Registrant currently employs about 900 people, of which 
          approximately 400 at the Springfield, Missouri, facility are 
          represented by the Sheet Metal Workers Union.  The Interna-
          tional Union called a strike which began on July 25, 1995, and 
          the largest number of employees participating was approxi-
          mately 185 during the fourth quarter of 1995.  A substantial 
          number of employees returned to work during 1996, and cur-
          rently there are only 20 employees participating.  No action 
          has been taken by the Union to prevent nonstriking employees 
          from working.

          The Registrant has implemented the provisions of its revised 
          and final offer effective April 1, 1996, which remains open 
          for the Union's acceptance, and no further negotiations are 
          scheduled.  

          The Registrant has facilities located in Springfield, 
          Missouri, and Osceola, Iowa.  There are approximately 800 
          employees assigned to the Springfield facility, and there are 
          an additional 100 employees at the Osceola facility, none of 
          which are represented by a labor union.

     D.   FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS 
          AND EXPORT SALES

          Information about the amounts of export sales is covered in 
          Note 5 of the Notes to Consolidated Financial Statements found 
          in Part II, Item 8, and is incorporated herein by reference.

          Export sales were about 40% Dairy Farm Equipment and 60% 
          Processing Equipment during 1997.

ITEM 2. - PROPERTIES

     The Registrant's primary domestic manufacturing facilities are 
     located in Springfield, Missouri, and occupy approximately 720,000 
     square feet on 50 acres of land.  These facilities are owned by 
     the Registrant, as is all of the equipment it uses.  The original 
     section of the present Springfield plant was built in 1950 and 
     consisted of 23,720 square feet.  Since then, the Registrant has 
     added to this facility many times in the course of a continuing 
     program for enlarging and modernizing its facilities and increasing 
     its capabilities.  The last addition of approximately 14,100 square 
     feet was made in 1981.  In February 1987, the Registrant acquired 
     an additional manufacturing facility in Osceola, Iowa, which con-
     tains approximately 216,000 square feet.

     In February 1997, the Registrant purchased land and a building
     in downtown Springfield, Missouri, for the purpose of operating 
     a microbrewery and brewpub.

ITEM 3. - LEGAL PROCEEDINGS

     There are no material pending legal proceedings, other than or-
     dinary routine litigation incidental to the business or matters 
     for which insurance coverage is adequate, which involves the Regis-
     trant, nor is any director, officer or any management security 
     holder involved in any litigation that could adversely affect the 
     Registrant.

                                    6

<PAGE>   7

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

     Registrant did not submit any matter to a vote of security holders, 
     through a solicitation of proxies or otherwise, during the fourth 
     quarter of 1997.

ITEM 10. (from PART III) - EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
            Name          Age         Position(s) with Registrant
     -------------------  ---  -----------------------------------------
     <S>                  <C>  <C>
     Paul Mueller<F1>     82   Chairman of the Board and Director
     Daniel C. Manna<F1>  51   President and Director
     Donald E. Golik<F1>  54   Senior Vice President and Chief Financial 
                                  Officer, Secretary and Director
<FN>
<F1> Individual has been employed by the Registrant through the past 
     five years.
</FN>
</TABLE>

     Each of the above officers was elected to serve until the next 
     annual meeting of the Board of Directors, which will be held on 
     May 4, 1998, and until his successor shall have been duly elected 
     and qualified or until his earlier resignation or removal.

                                    7

<PAGE>   8

PART II

ITEM 5. - MARKET FOR THE REGISTRANT'S COMMON STOCK AND 
          RELATED SECURITY HOLDER MATTERS

     The Registrant's common stock is traded on the Nasdaq National 
     Market tier of The Nasdaq Stock Market(SM) under the symbol MUEL.  
     As of December 31, 1997, there were approximately 300 shareholders 
     of record and approximately 800 beneficial shareholders.

     Market high and low prices and quarterly cash dividends in 1997 and 
     1996 were as follows:

<TABLE>
<CAPTION>
                       1997 Quarter Ended              1996 Quarter Ended
                 ------------------------------  ------------------------------
                 Mar 31  Jne 30  Spt 30  Dec 31  Mar 31  Jne 30  Spt 30  Dec 31
                 ------  ------  ------  ------  ------  ------  ------  ------
     <S>         <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
     MARKET PRICE 
     OF STOCK
     High....... 43      39      49-1/2  45      34-1/2  34      35      43
     Low........ 36-1/2  34-1/4  37-1/4  36-1/2  30      29-3/4  31-3/4  33

     CASH 
     DIVIDENDS
     Declared 
     per share.. $0.60   $0.60   $0.60   $0.60   $0.50   $0.50   $0.50   $0.60
</TABLE>

ITEM 6. - SELECTED FINANCIAL DATA
<TABLE>
                      SELECTED FINANCIAL DATA - FIVE-YEAR SUMMARY
<CAPTION>
                         1997        1996        1995        1994        1993
                     ----------- ----------- ----------- ----------- -----------
     <S>             <C>         <C>         <C>         <C>         <C>
     Net sales...... $86,693,022 $83,950,990 $78,375,636 $79,475,354 $73,756,659
     Net income..... $ 2,944,540 $ 4,424,019 $ 1,954,653 $ 3,510,966 $ 2,217,656
     Earnings per 
      common share..      $ 2.52      $ 3.79      $ 1.67      $ 3.01      $ 1.90
     Weighted average
      common shares
      outstanding...   1,168,021   1,168,021   1,168,021   1,168,021   1,168,021
     Dividends de-
      clared per 
      common share..      $ 2.40      $ 2.10      $ 2.00      $ 2.00      $ 2.00
     Total assets... $56,547,290 $53,184,971 $54,678,904 $54,250,236 $52,947,295
     Long-term debt. $   161,434 $   161,434 $   161,434 $ 3,153,747 $ 3,153,747
</TABLE>

                                    8

<PAGE>   9

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

     The information discussed below in Management's Discussion and 
     Analysis of Operating Results and Financial Condition contains 
     statements regarding matters that are not historical facts, but 
     rather are forward-looking statements.  These statements are based 
     on current financial and economic conditions and current expecta-
     tions, and involve risk and uncertainties.  Actual future results 
     may differ materially depending on a variety of factors.  These 
     factors, some of which are identified in the discussion accompany-
     ing such forward-looking statements, include, but are not limited 
     to, milk prices, feed costs, weather conditions, dairy farm con-
     solidation and other factors affecting the profitability of dairy 
     farmers, the price of stainless steel, actions of competitors, 
     labor strife, the Registrant's execution of internal performance 
     plans, economic conditions in key export markets, the level of 
     capital expenditures in the U.S. economy, and other changes to 
     business conditions.

     OPERATING RESULTS

     The primary factors affecting 1997 results were a significantly 
     reduced effect of LIFO, a lower gross margin rate, higher 
     operating expenses, and a provision made for a lawsuit.

     SALES -- Comparative consolidated sales for the past three years 
     were as follows:
<TABLE>
<CAPTION>
                                                Sales
                                   ------------------------------
                                      (in thousands of dollars)
                                     1997       1996       1995
                                   --------   --------   --------
          <S>                      <C>        <C>        <C>
          Dairy Farm Equipment.... $ 22,390   $ 19,169   $ 17,955
          Processing Equipment....   64,303     64,782     60,421
                                   --------   --------   --------
                                   $ 86,693   $ 83,951   $ 78,376
                                   ========   ========   ========
</TABLE>

     Sales of Dairy Farm Equipment increased by $3,221,000 during 1997 
     compared to 1996.  About 63% of the improvement was attributable 
     to domestic operations, with the balance resulting from increased 
     export sales of Dairy Farm Equipment.  Although the average price 
     for milk during 1997 was about 10% lower than the average price 
     during 1996 and feed costs remained relatively high, milk produc-
     tion did increase in 1997 over the prior year.  Domestic sales of 
     Dairy Farm Equipment were aided in 1997 by a favorable backlog at 
     the beginning of 1997, a sales promotion in the fourth quarter of 
     1997, and an expansion of larger dairy operations, primarily in the 
     southwestern market of the United States.  Although the number of 
     milk coolers sold declined slightly in 1997 compared to 1996, there 
     was a significant increase in the average size of domestic milk 
     cooler sold such that the higher unit prices more than offset the 
     effect on sales revenue due to the decline in units.  In contrast, 
     export sales of Dairy Farm Equipment included approximately a 16% 
     increase in the number of milk coolers sold.  The improvement in 
     export sales was primarily due to increased sales to countries in 
     North America, South America, Africa, and Europe.

     During 1996, sales of Dairy Farm Equipment increased by $1,214,000.  
     All of the increase was attributable to domestic operations, as 
     unit sales of milk coolers increased by 17%.  The domestic market 
     remained relatively soft early in 1996 due to extremely high costs 
     for feed.  However, in the spring, the milk price began to escalate 
     and reached an all-time record high level during the third quarter 
     of 1996.  In spite of high feed costs, milk prices were at levels 
     that allowed dairy farmers to invest in additional milk cooling 
     and storage capacity.  The level of export sales of Dairy Farm 
     Equipment for 1996 was comparable to 1995.  Economic problems in 
     Argentina and Mexico and the effect of "mad cow disease" in the 
     United Kingdom and Ireland slowed sales to those countries.  How-
     ever, modest growth was achieved in other export markets, and 
     export sales were maintained at approximately the same level as 
     in the prior year.

                                    9

<PAGE>   10

     For 1998, the domestic market conditions for Dairy Farm Equip-
     ment are expected to remain similar to the year just ended.  
     Milk production is not expected to increase and, with moderate milk 
     prices anticipated and continued relatively high feed costs, these 
     factors could have the effect of reducing dairy expansions.  With 
     respect to the outlook for export sales during 1998, we expect 
     continued economic improvement in the Mexican economy, along with 
     areas in Latin America, and the United Kingdom market should con-
     tinue to be favorable for Dairy Farm Equipment.  Although the Asian 
     financial crisis could slow sales to that area, we expect stable 
     conditions in the other markets we serve, which may provide the 
     opportunity for some growth in order entry and sales.

     In the domestic Dairy Farm Equipment market, the number of dairy 
     farms continues to decline.  This consolidation process leaves 
     fewer dairy farm operations and the need for larger milk cooling 
     and storage equipment.  The Registrant is well positioned to meet 
     the cooling and storage requirements of the changing marketplace, 
     and any impact on revenues and profitability will depend upon the 
     rate at which farm consolidation continues.

     During 1997, sales of Processing Equipment decreased by about 1%, 
     or $500,000.  Processing Equipment order entry for 1997 was about 
     3% lower than for 1996 due to very competitive market conditions.  
     Another significant factor affecting sales of Processing Equipment 
     was the low backlog of our traditional custom-fabricated products 
     at the beginning of 1997 that was attributable to extremely low 
     order entry during the third quarter of 1996.  This translated into 
     a low level of shipments for the first quarter of 1997, from which 
     we were unable to recover during the year.  Although order entry 
     for our traditional custom-fabricated products was slow for the 
     first quarter of 1997, order entry for the year was 15% higher.  
     However, the timing of the order entry was such that there was not 
     sufficient time to complete and ship the products during 1997.  
     Additionally, sales were lower for our Heat Transfer products 
     (Temp-Plate [Registered] Heat Transfer Surface and Accu-Therm 
     [Registered] Plate Heat Exchangers) and Component Products due to 
     aggressive pricing competition.  Although we were able to improve 
     sales of our PyroPure (Registered) Water Purification Systems and 
     Thermal Energy Storage Systems, the increase was not sufficient to 
     offset the decrease in our other Processing Equipment products.

     During 1996, sales of Processing Equipment increased by about 7%, 
     or $4,361,000.  Although order entry for Processing Equipment was 
     comparable between 1996 and 1995, the backlog at the beginning of 
     1996 for Processing Equipment was approximately $6,000,000 higher 
     than at the beginning of 1995.  An increase in sales was recorded 
     in 1996 in our traditional custom-fabricated products, such as 
     Pharmaceutical Processing Equipment and Component Products, as 
     well as increases in PyroPure Water Purification Systems and Accu-
     Therm Plate Heat Exchangers.  During mid-1996, approximately 100 
     employees, who had been on strike, returned to work.  As the 
     strike primarily affected Processing Equipment, the return of the 
     experienced employees allowed us to increase our capacity and effi-
     ciency in the fabrication of traditional Processing Equipment.  
     Additionally, export sales of Processing Equipment were approxi-
     mately 40% higher during 1996 compared to 1995.

     With respect to 1998 operations, although the overall backlog of 
     Processing Equipment at December 31, 1997, is down slightly from 
     the level at the end of 1996, our backlog of traditional custom-
     fabricated products is about 30% higher.  Our level of order entry 
     and sales in 1998 will depend upon the capital expenditure environ-
     ment in 1998.  Although quote activity was relatively strong for 
     the fourth quarter of 1997, the outlook is for capital expenditures 
     to slow during 1998 compared to 1997, as corporate profit growth is 
     projected to moderate with the result that companies will likely 
     spend less on capital goods.  We expect very competitive conditions 
     to continue for the projects that are available, particularly with 
     respect to price and delivery.  Additionally, the Asian financial 
     crisis will have a negative effect on companies located in that 
     region, and construction spending and capital investment are ex-
     pected to slow in 1998.  This could have an adverse impact on order 
     entry and sales of certain products included in the Processing 
     Equipment segment that are sold into the Asian market.  During the 
     past year, 

                                   10

<PAGE>   11

     the Registrant expanded its brewery systems capabilities, and 
     this provides the potential for additional business for custom-
     fabricated Processing Equipment.

     During 1997, after price increases in March and June, stainless 
     steel prices declined to more reasonable levels. Looking to 1998, 
     stainless steel prices are expected to remain relatively flat due 
     to worldwide increases in stainless steel production capacity and 
     to continuing pricing pressure afforded by foreign suppliers.

     As previously reported, the labor contract with the Sheet Metal 
     Workers Union (which covers a portion of the employees at the 
     Springfield, Missouri, plant) expired on June 11, 1994.  Negotia-
     tions with union representatives continued until an impasse was 
     reached, and the Registrant implemented specific provisions of its 
     final offer effective September 19, 1994.  In November 1994, the 
     Regional Director of the National Labor Relations Board (NLRB) also 
     concluded that a lawful impasse had been reached in negotiations 
     prior to the Registrant's implementation of its offer.

     However, on December 22, 1994, the Regional Director of the NLRB 
     issued an unfair labor practice complaint against the Registrant 
     for refusing to supply information to union representatives about 
     the personal health insurance claims of individual employees and 
     their dependents, and the Regional Director reversed his previous 
     decision regarding the implementation of changes in wages and bene-
     fits.  A hearing on these and other unfair labor practice issues 
     was held during August 1996 by an administrative law judge of the 
     NLRB, who ruled against the Registrant on some unfair labor prac-
     tice issues, and the Registrant and the union have both appealed 
     the decision to the NLRB.  A decision by the NLRB is not expected 
     for several months, and there can be an appeal from any NLRB deci-
     sion, either by the Registrant or by the union.  An additional 
     hearing was held before an administrative law judge of the NLRB in 
     November 1997, and the judge ruled against the Registrant on the 
     unfair labor practice issues involved.  The Registrant has appealed 
     the decision to the NLRB.  A final determination of all charges 
     pending may take up to two years; however, management believes, 
     based on an evaluation by counsel, that there is no material 
     financial exposure to the Registrant.

     The Registrant currently employs about 900 people, of which 
     approximately 400 at the Springfield, Missouri, facility are 
     represented by the Sheet Metal Workers Union.  The International 
     Union called a strike which began on July 25, 1995, and the largest 
     number of employees participating was approximately 185 during the 
     fourth quarter of 1995.  A substantial number of employees returned 
     to work during 1996, and currently there are only 20 employees 
     participating.  No action has been taken by the Union to prevent 
     nonstriking employees from working.

     The Registrant implemented the provisions of its revised and final 
     offer effective April 1, 1996, which remains open for the Union's 
     acceptance, and no further negotiations are scheduled.

     The Registrant has facilities located in Springfield, Missouri, and 
     Osceola, Iowa.  There are approximately 800 employees assigned to 
     the Springfield facility, and at the Osceola facility, there are an 
     additional 100 employees, none of which are represented by a labor 
     union.

     Sales backlog totaled $25,579,000 at December 31, 1997, versus 
     $27,400,000 and $25,700,000 at the end of 1996 and 1995, respec-
     tively.  The backlog of Processing Equipment was $22,500,000, 
     $23,000,000, and $22,200,000 at the end of 1997, 1996, and 1995, 
     respectively, with the remaining balance in each year attributable 
     to Dairy Farm Equipment.  Substantially all of the December 31, 
     1997, backlog will be shipped during the current year.

     OPERATING INCOME -- Operating income for 1997 was $3,535,000 
     versus $5,843,000 for 1996.  The factors contributing to the 
     decrease were a significantly smaller LIFO effect, a lower gross 
     margin rate, and an increase in operating expenses.  Although the 
     inventory level at the end of 1997 was higher than at the end 

                                   11

<PAGE>   12

     of 1996, a change in the mix of the components of inventory and 
     the effect of a decline in steel prices during 1997 resulted in a 
     reduction in the required LIFO reserve, and this had the effect 
     of increasing operating income by $440,000.  On the other hand, 
     during 1996 a significant decrease in the inventory levels, coupled 
     with a decline in stainless steel prices, resulted in a reduction 
     of the required LIFO reserve, which increased operating income by 
     approximately $1,859,000.  The gross margin rate was also lower 
     during 1997 compared to 1996 primarily for custom-fabricated 
     Processing Equipment.  Competitive market conditions, coupled with 
     several complex projects, resulted in lower margins.  Operating 
     expenses were also higher in 1997 compared to 1996, as manufac-
     turing burden increased due to increased sales and production
     inefficiencies.  Additionally, selling, general, and administra-
     tive expenses were higher in 1997 compared to 1996, as expenditures 
     were higher for personnel, advertising, trade shows, and travel 
     expense due to the increase in marketing activities during the 
     year.

     Operating income for 1996 was $5,843,000 compared to $1,549,000 
     for 1995.  The major factors contributing to the increase in 
     operating income, in comparing 1996 to 1995, were the increase in 
     sales of $5,575,000 and the significant reduction in the LIFO 
     reserve.  In addition to the increase in sales, gross margins 
     improved in 1996 compared to 1995, particularly for custom-
     fabricated Processing Equipment, which was the product area most 
     affected by the strike.  During 1996, the significant decrease 
     in inventory levels, coupled with the decline in stainless steel 
     prices, resulted in a reduction in the required LIFO reserve, and 
     this had the effect of increasing operating income by approximately 
     $1,859,000.  Expenditures for selling, general, and administrative 
     expenses were comparable between 1996 and 1995, and this was due 
     primarily to the curtailment of selling expenses during the first 
     half of 1996 when there was still a significant number of employees 
     participating in the strike.

     The profitability of Processing Equipment is much lower than for 
     Dairy Farm Equipment, as a substantial number of Processing Equip-
     ment projects are engineered-to-order.  These projects require much 
     greater support from the sales, engineering, and manufacturing 
     areas and a higher degree of skill to fabricate.  Also, the risks 
     of manufacturing are greater because the products are custom-
     designed and built, and the chances of misinterpretation, errors, 
     and mistakes are, in general, much greater than with a standard 
     product.  Many of the projects are bid among several possible 
     suppliers, which tends to make pricing very competitive.

     On the other hand, Dairy Farm Equipment is a standard product, 
     and engineering designs have been well defined and manufacturing 
     methods have been refined for efficiency.  The proprietary nature 
     of the product also permits more attractive pricing.  There are 
     relatively few competitors, and the Registrant is one of the 
     largest manufacturers of dairy farm milk coolers.

     Inflation is a factor that affects the cost of operations, and 
     the Registrant seeks ways to minimize the effect on operating 
     results.  To the extent permitted by competitive conditions, higher 
     material prices, labor costs and operating costs are passed on to 
     the customer by increasing prices.  The Registrant uses the LIFO 
     method of accounting for inventories, and under this method, the 
     cost of products sold, as reported in the financial statements, 
     approximates the current replacement cost.  Additionally, the 
     Registrant uses accelerated depreciation methods in charging 
     depreciation expense to current operations, which to a certain 
     extent offsets the effect of the increased cost of replacement 
     productive capacity.

     Management has determined that its manufacturing software and 
     certain internally developed software must be modified to make them 
     year 2000 compliant.  The computer operating system and the finan-
     cial software are year 2000 compatible.  Management is currently 
     in the process of examining its manufacturing software and certain 
     internally developed software systems and making the necessary 
     modifications to those systems.  Management does not believe the 
     cost associated with the year 2000 issue will be material to the 
     Registrant's financial position or results of operations.

                                   12

<PAGE>   13

     OTHER INCOME (EXPENSE) -- Although the average level of investable 
     funds was lower during 1997 compared to 1996, the average interest 
     rate for 1997 was higher, which resulted in a comparable level of 
     interest income.  The average interest rate was lower during 1996, 
     and interest income increased compared to 1995, as the average 
     level of investable funds was higher.  Interest expense was lower 
     during 1997, as a $3,000,000 Floating Rate Weekly Demand Industrial 
     Development Revenue Bond issue was repaid on December 1, 1996.  
     Interest expense in 1996 and 1995 was consistent with the interest 
     rate levels during those years.

     Other, net for 1997 was lower than 1996 primarily due to a provi-
     sion of $775,000 made as a result of an adverse decision in a 
     lawsuit.  The Registrant was the defendant in a breach-of-contract 
     / breach-of-warranty lawsuit concerning reactor vessels sold in 
     1992 in Tarrant County, Texas (Alcon Laboratories, Inc. -vs- Paul 
     Mueller Company).  As a result of a trial that ended September 19, 
     1997, the Registrant received an adverse decision and the final 
     judgment awarded damages, interest and attorney's fees totaling 
     approximately $1,700,000 to the plaintiff.  Management believes 
     that this decision was incorrect and, based on advice of legal 
     counsel, has appealed the decision.  During 1997, a provision of 
     $775,000 was made for the estimated liability for ultimate reso-
     lution of this matter.  If the decision is upheld on appeal, the 
     Registrant's liability will exceed the reserve that has been 
     established. Other income for 1996 was lower than 1995 due to 
     an additional 401(k) match, reduced miscellaneous income, lower 
     trucking operation results, and reduced royalty income.

     PROVISION FOR INCOME TAXES -- The effective tax rates for 1997, 
     1996, and 1995 were 25.4%, 31.8%, and 25.2%, respectively.  The 
     effective tax rates for 1997, 1996, and 1995 were below the 
     statutory rate (34%) primarily as a result of tax-exempt interest, 
     the lower effective tax rate for the foreign sales corporation, 
     and tax credits.

     FINANCIAL CONDITION

     LIQUIDITY - CAPITAL RESOURCES -- Working capital was $20,599,000 
     at December 31, 1997, compared to $26,082,000 at December 31, 1996.  
     The current ratio, a measure of liquidity, was 2.31 at December 31, 
     1997, versus 3.09 at December 31, 1996.  The Registrant has no 
     significant amount of long-term debt.

     Net cash provided by operations was $5,473,000 in 1997 compared 
     to $9,723,000 in 1996 and $5,160,000 in 1995.  The 1997 cash flow 
     was primarily attributable to net income, an increase in current 
     liabilities, and depreciation and amortization expense.  The 1996 
     cash flow was primarily attributable to net income, a decrease in 
     inventories, and depreciation and amortization expense.  The 1995 
     cash flow was primarily attributable to net income, depreciation 
     and amortization expense, a decrease in accounts and notes re-
     ceivable, and an increase in advanced billings.

     Capital expenditures for the most recent three years were 
     $7,777,000 in 1997, $2,131,000 in 1996, and $2,284,000 in 1995.  
     The increase in capital expenditures for 1997 compared to the prior 
     years related to the establishment of a microbrewery and brewpub 
     operation in Springfield, Missouri, and the addition of a corporate 
     aircraft.  In support of the Registrant's efforts to expand its 
     marketing of brewery systems, the Registrant opened a microbrewery 
     and brewpub operation in December 1997.  The operation will show-
     case the Registrant's brewery technology capability, while also 
     functioning as a training and product-development facility for 
     brewery equipment.  The corporate aircraft was purchased to faci-
     litate travel primarily in the marketing of the Registrant's 
     products.

     The level of planned expenditures for 1998 is $3,000,000, none of 
     which has been committed as of December 31, 1997.  Anticipated 
     expenditures are primarily for plant equipment to maintain quality 
     and improve efficiency.  Management has the discretion of lowering 
     the level of expenditures if operating results deviate from bud-
     geted performance.

                                   13

<PAGE>   14

     The Registrant has a $2,000,000 bank borrowing facility that ex-
     pires May 31, 1998, none of which is currently used.  Management 
     believes that cash flows provided by operations and the strong cash 
     and investment position will continue to be sufficient to satisfy 
     the Registrant's working capital requirements, normal capital ex-
     penditure levels, and anticipated dividends.  A policy of requiring 
     down payments and progress payments on large Processing Equipment 
     orders has had a favorable effect on cash flows.  Management ex-
     pects internally generated funds to be sufficient to finance 
     operations, and this is consistent with historical performance.

     Statement of Financial Accounting Standards (SFAS) No. 125, 
     "Accounting for Transfers and Servicing of Financial Assets and 
     Extinguishment of Liabilities," was issued in June 1996, effective 
     for the Registrant's 1997 fiscal year, and the adoption of SFAS No. 
     125 did not have a material effect on the Registrant's financial 
     position or results of operations.  SFAS No. 128, "Earnings per 
     Share," was issued in February 1997, effective for the Registrant's 
     1997 fiscal year, and the adoption of SFAS No. 128 had no effect on 
     the Registrant's disclosure for earnings per share.

     SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, 
     "Disclosure About Segments of an Enterprise and Related Informa-
     ion," both issued in June 1997, are effective for the Registrant's 
     1998 fiscal year and are not expected to have a material effect on 
     the Registrant's financial position or results of operations.

                                   14

<PAGE>   15

ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1997 and 1996
<CAPTION>
                                                          1997         1996
                                                      -----------  -----------
<S>                                                   <C>          <C>
ASSETS
------
Current Assets:
  Cash and cash equivalents (Note 1)................  $ 3,401,527  $ 2,220,648
  Available-for-sale investments, at market (Note 1)    8,347,227   14,605,457
  Accounts and notes receivable, less reserve of 
      $559,261 in 1997 and $698,036 in 1996 for 
      doubtful accounts (Note 1)....................   16,113,239   15,328,569
  Inventories (Note 1) -
    Raw materials and components....................  $ 5,101,658  $ 3,768,312
    Work-in-process.................................    1,727,815      719,176
    Finished goods..................................    1,202,936    1,497,536
                                                      -----------  -----------
                                                      $ 8,032,409  $ 5,985,024
  Prepayments.......................................      474,430      403,260
                                                      -----------  -----------
          Total Current Assets......................  $36,368,832  $38,542,958
Other Assets (Notes 2 and 3)........................    3,523,801    3,486,087
Property, Plant and Equipment - at cost (Note 1) -
  Land and land improvements........................  $ 2,712,112  $ 2,611,250
  Buildings.........................................   12,876,279   10,477,887
  Shop equipment....................................   26,165,326   23,872,341
  Transportation, office & other equipment..........   12,118,952    9,524,357
  Construction-in-progress..........................      440,278      621,210
                                                      -----------  -----------
                                                      $54,312,947  $47,107,045
  Less - Accumulated depreciation...................   37,658,290   35,951,119
                                                      -----------  -----------
                                                      $16,654,657  $11,155,926
                                                      -----------  -----------
                                                      $56,547,290  $53,184,971
                                                      ===========  ===========

LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
Current Liabilities:
  Accounts payable..................................  $ 4,295,684  $ 2,282,897
  Accrued expenses -
    Income taxes (Note 3)...........................      290,700      799,467
    Payrolls........................................    2,125,019    2,334,298
    Vacations.......................................    1,907,269    1,633,914
    Other (Note 6)..................................    1,926,361    1,324,925
  Advance billings..................................    5,225,012    4,085,152
                                                      -----------  -----------
          Total Current Liabilities.................  $15,770,045  $12,460,653
Other Long-Term Liabilities (Note 2)................    1,100,036    1,188,399
Contingencies (Note 6)..............................
Shareholders' Investment:
  Common stock, par value $1 per share--Authorized 
      20,000,000 shares--Issued 1,342,325 shares....  $ 1,342,325  $ 1,342,325
  Preferred stock, par value $1 per share--
      Authorized 1,000,000 shares--No shares issued.            -            -
  Paid-in surplus...................................    4,306,728    4,306,728
  Retained earnings.................................   36,582,189   36,440,899
                                                      -----------  -----------
                                                      $42,231,242  $42,089,952
  Less - Treasury stock, 174,304 shares, at cost....    2,554,033    2,554,033
                                                      -----------  -----------
                                                      $39,677,209  $39,535,919
                                                      -----------  -----------
                                                      $56,547,290  $53,184,971
                                                      ===========  ===========
</TABLE>

  The accompanying notes are an integral part of these balance sheets.

                                   15

<PAGE>   16

<TABLE>
                      CONSOLIDATED STATEMENTS OF INCOME
            For the Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
                                            1997         1996         1995
                                        -----------  -----------  -----------
<S>                                     <C>          <C>          <C>
Net Sales.............................. $86,693,022  $83,950,990  $78,375,636
Cost of Sales (Note 1).................  66,826,192   62,252,750   61,012,139
                                        -----------  -----------  -----------
  Gross profit......................... $19,866,830  $21,698,240  $17,363,497
Selling, General & Administrative
    Expenses (Note 1)..................  16,331,730   15,855,134   15,814,620
                                        -----------  -----------  -----------
  Operating income..................... $ 3,535,100  $ 5,843,106  $ 1,548,877
Other Income (Expense):
  Interest income...................... $   704,965  $   710,324  $   581,456
  Interest expense (Note 4)............     (15,930)    (107,619)    (129,608)
  Other, net (Note 6)..................    (276,595)      44,208      613,928
                                        -----------  -----------  -----------
                                        $   412,440  $   646,913  $ 1,065,776
                                        -----------  -----------  -----------
      Income before provision 
        for income taxes............... $ 3,947,540  $ 6,490,019  $ 2,614,653
Provision for Income Taxes (Note 3)....   1,003,000    2,066,000      660,000
                                        -----------  -----------  -----------
Net Income............................. $ 2,944,540  $ 4,424,019  $ 1,954,653
                                        ===========  ===========  ===========
Earnings per Common Share (Note 1).....      $ 2.52       $ 3.79       $ 1.67
                                             ======       ======       ======
</TABLE>

    The accompanying notes are an integral part of these statements.

<TABLE>
            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
            For the Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
               Common Stock                                 Treasury Stock
           --------------------   Paid-in    Retained   ---------------------
            Shares      Amount    Surplus    Earnings    Shares      Amount
           ---------  ---------  ---------  ----------  --------   ----------
                         $'s        $'s         $'s                    $'s
<S>        <C>        <C>        <C>        <C>         <C>        <C>
Balance, 
12-31-94   1,342,325  1,342,325  4,306,728  34,851,113  (174,304)  (2,554,033)

Add 
(Deduct):
Net income         -          -          -   1,954,653         -            -
Dividends, 
$2 per com-
mon share          -          -          -  (2,336,042)        -            -
           ---------  ---------  ---------  ----------  --------   ----------
Balance, 
12-31-95   1,342,325  1,342,325  4,306,728  34,469,724  (174,304)  (2,554,033) 

Add 
(Deduct):
Net income         -          -          -   4,424,019         -            -
Dividends, 
$2.10 per 
common 
share              -          -          -  (2,452,844)        -            -
           ---------  ---------  ---------  ----------  --------   ----------
Balance, 
12-31-96   1,342,325  1,342,325  4,306,728  36,440,899  (174,304)  (2,554,033) 

Add 
(Deduct):
Net income         -          -          -   2,944,540         -            -
Dividends, 
$2.40 per 
common 
share              -          -          -  (2,803,250)        -            -
           ---------  ---------  ---------  ----------  --------   ----------
Balance, 
12-31-97   1,342,325  1,342,325  4,306,728  36,582,189  (174,304)  (2,554,033)
           =========  =========  =========  ==========  ========   ==========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                   16

<PAGE>   17

<TABLE>
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
                                             1997         1996         1995
                                         -----------  -----------  -----------
<S>                                      <C>          <C>          <C>
Cash Flows from Operating Activities:
  Net income............................ $ 2,944,540  $ 4,424,019  $ 1,954,653
  Adjustments to reconcile net income
      to net cash provided by 
      operating activities:
    Bad debt (recovery) expense.........     (16,744)     279,061      114,432
    Depreciation and amortization.......   2,296,292    2,560,862    2,507,260
    (Gain) on sales of equipment........     (41,523)      (7,603)      (7,711)
    Changes in assets and liabilities-
      Decrease (increase) in 
          interest receivable...........      58,230     (124,140)      83,180
      (Increase) decrease in accounts
          and notes receivable..........    (767,926)  (2,573,970)   1,691,385
      (Increase) decrease in inventories  (2,047,385)   5,212,831   (1,818,373)
      (Increase) decrease in prepayments     (71,170)     214,185      (24,667)
      (Increase) decrease in 
          other assets..................    (102,047)     203,293     (150,295)
      Increase (decrease) in 
          accounts payable..............   2,012,787      322,074     (325,454)
      Increase (decrease) in 
          accrued expenses..............     156,745    1,296,750   (1,543,014)
      Increase (decrease) in 
          advance billings..............   1,139,860   (2,053,740)   2,890,583
      (Decrease) in other 
          long-term liabilities.........     (88,363)     (30,192)    (212,059)
                                         -----------  -----------  -----------
        Net Cash Provided by 
            Operating Activities........ $ 5,473,296  $ 9,723,430  $ 5,159,920

Cash Flows (Requirements) from 
    Investing Activities:
  Proceeds from maturities 
      of investments.................... $20,780,000  $22,431,823  $20,235,000
  Purchases of investments.............. (14,580,000) (24,850,000) (20,170,000)
  Proceeds from sales of equipment......      87,768        7,603       12,376
  Additions to property, plant 
      and equipment.....................  (7,776,935)  (2,130,531)  (2,284,352)
                                         -----------  -----------  -----------
        Net Cash (Required) by 
          Investing Activities.......... $(1,489,167) $(4,541,105) $(2,206,976)

Cash Flows (Requirements) from 
    Financing Activities:
  Repayment of debt..................... $         -  $(3,000,000) $         -
  Dividends paid........................  (2,803,250)  (2,452,844)  (2,336,042)
                                         -----------  -----------  -----------
        Net Cash (Required) by 
            Financing Activities........ $(2,803,250) $(5,452,844) $(2,336,042)
                                         -----------  -----------  -----------

Net Increase (Decrease) in Cash......... $ 1,180,879  $  (270,519) $   616,902

Cash and Cash Equivalents at 
  Beginning of Year.....................   2,220,648    2,491,167    1,874,265
                                         -----------  -----------  -----------
Cash and Cash Equivalents at 
  End of Year........................... $ 3,401,527  $ 2,220,648  $ 2,491,167
                                         ===========  ===========  ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                   17

<PAGE>   18

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     December 31, 1997, 1996 and 1995

(1) SUMMARY OF ACCOUNTING POLICIES:

    PRINCIPLES OF CONSOLIDATION -- Paul Mueller Company (Registrant) 
    specializes in the manufacture of high-quality stainless steel 
    tanks and industrial processing equipment.  The Registrant serves 
    the food, beverage, chemical, pharmaceutical and other process 
    industries and the dairy farm market.  The financial statements 
    include the accounts of the Registrant and its wholly owned sub-
    sidiaries, Mueller International Sales Corporation, a foreign sales 
    corporation (FSC), and Mueller Transportation, Inc. (Companies).  
    All significant intercompany accounts and transactions have been 
    eliminated in consolidation.  Effective January 1, 1997, all trans-
    portation operations, previously performed by the Registrant, and 
    the related assets were transferred to Mueller Transportation, Inc., 
    a wholly owned subsidiary.

    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, the disclosure of 
    contingent assets and liabilities at the date of the financial 
    statements, and the reported amounts of revenues and expenses during 
    the reporting period.  Actual results could differ from those 
    estimates.

    REVENUE RECOGNITION AND RETAINAGES -- Revenue from sales of manu-
    factured products is recognized upon passage of title to the 
    customer, which generally coincides with shipment.  Contracts with 
    some customers provide for a portion of the sales amount to be 
    retained by the customer for a period of time after completion of 
    the contract.  Retainages included in accounts receivable were 
    $426,300 at December 31, 1997, and $175,900 at December 31, 1996.

    INVENTORIES -- The Registrant's inventories are recorded at the 
    lower of cost, last-in, first-out (LIFO), or market.  Cost includes 
    material, labor, and manufacturing burden required in the production 
    of the Registrant's products.

    Under the first-in, first-out (FIFO) method of accounting, which 
    approximates current cost, Registrant inventories would have been 
    $6,679,563, $7,119,773, and $8,978,736 higher than those reported 
    at December 31, 1997, 1996, and 1995, respectively.

    A reduction in inventory quantities during 1996 resulted in liqui-
    dation of LIFO quantities recorded at lower costs prevailing in 
    prior years as compared with the cost of 1996 purchases.  The 
    effect was to lower the cost of sales, which increased net income 
    by $531,300, or $0.45 per share.

    RESEARCH AND DEVELOPMENT -- Research and development costs are 
    charged to expense as incurred and were $719,200 in 1997, $653,200 
    in 1996, and $597,600 in 1995.

    DEPRECIATION POLICIES -- The Companies provide for depreciation 
    expense using principally the double-declining balance method for 
    new items and the straight-line method for used items.  The economic 
    useful lives for the more significant items within each property 
    classification are as follows:
<TABLE>
<CAPTION>
                                                        Years
                                                       -------
          <S>                                          <C>
          Buildings...................................      40
          Land improvements........................... 10 - 20
          Shop equipment..............................  5 - 10
          Transportation, office and other equipment..  3 - 10
</TABLE>

    Maintenance and repairs are charged to expense as incurred.  The 
    cost and accumulated depreciation of assets retired are removed 
    from the accounts, and any resulting gains or losses are reflected 
    in net income currently.

                                   18

<PAGE>   19

    EARNINGS PER COMMON SHARE -- The net income per share of common 
    stock has been computed on the basis of weighted average shares 
    outstanding (1,168,021 shares in 1997, 1996, and 1995).

    INVESTMENTS -- The Registrant classifies its investments in tax-
    exempt bonds and tax-exempt variable rate preferred stock funds 
    as available-for-sale and records them at market value.  These 
    securities are a part of the Registrant's asset/liability manage-
    ment program and may be sold in response to capital or liquidity 
    needs.  Investments in tax-exempt bonds generally have maturities 
    from three to twelve months.  Available-for-sale investments on the 
    accompanying consolidated balance sheets at December 31, 1997 and 
    1996, include:
<TABLE>
<CAPTION>
                                                   1997         1996
                                               -----------  -----------
    <S>                                        <C>          <C>
    Tax-exempt bonds.........................  $ 7,200,000  $11,900,000
    Tax-exempt preferred stock funds.........    1,000,000    2,500,000
    Accrued interest.........................      147,227      205,457
                                               -----------  -----------
                                               $ 8,347,227  $14,605,457
                                               ===========  ===========
</TABLE>

    Unrealized holding gains and losses were not material as of December 
    31, 1997 or 1996.  There were no realized gains or losses during 
    1997, 1996, or 1995.

    STATEMENTS OF CASH FLOWS -- For purposes of the statements of cash 
    flows, the Registrant considers all short-term highly liquid 
    investments in money market funds to be cash equivalents.

    Interest and income tax payments for each of the three years during 
    the period ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
                                      1997         1996         1995
                                  -----------  -----------  -----------
    <S>                           <C>          <C>          <C>
    Interest payments...........  $    15,900  $   107,600  $   129,300
                                  ===========  ===========  ===========
    Income tax payments.........  $ 1,601,700  $ 1,336,600  $ 1,275,200
                                  ===========  ===========  ===========
</TABLE>

(2) RETIREMENT PLANS:

    The Registrant has a Profit Sharing and Retirement Savings Plan 
    [401(k) plan] in which substantially all employees are eligible 
    to participate.  The plan provides for a match of employees' con-
    tributions up to a specified limit.  The plan also has a profit-
    sharing feature whereby an additional match is made if the 
    Registrant's net income reaches predetermined levels established 
    annually by the Board of Directors.  The funds of the plan are 
    deposited with an insurance company and are invested at the 
    employee's option in one or more investment funds.  The Regis-
    trant's contributions to the plan were $336,500 for 1997, $587,500 
    for 1996, and $289,800 for 1995.

    The Registrant has pension plans covering substantially all 
    employees.  Benefits under the plans are based either on final 
    average pay or a flat benefit formula.

    Total pension expense under the plans was $659,900 in 1997, $364,200 
    in 1996, and $98,700 in 1995.  Management's policy is to fund 
    pension expense that is currently deductible for tax purposes.

                                   19

<PAGE>   20

    The following table sets forth the funded status of the plans at 
    December 31, 1997 and 1996:
<TABLE>
<CAPTION>
                                   Funded Status
    ---------------------------------------------------------------------------
                                                              December 31
                                                       ------------------------
                                                           1997         1996
                                                       -----------  -----------
    <S>                                                <C>          <C>
    Actuarial present value of accumulated benefit 
      obligation, including vested benefits of 
      $22,820,100 and $20,155,800 at December 31, 
      1997 and 1996, respectively..................... $26,128,000  $22,373,300
                                                       ===========  ===========
    Plans' assets at fair value, primarily listed 
      stocks and insurance company investment funds... $33,008,900  $28,502,600
    Actuarial present value of projected benefit 
      obligation for services rendered to date........  29,600,900   25,145,400
                                                       -----------  -----------
    Assets in excess of projected benefit obligation.. $ 3,408,000  $ 3,357,200
    Unrecognized net (gain)...........................  (3,679,000)  (3,250,200)
    Unrecognized net (asset)..........................  (1,174,500)  (1,511,400)
    Unrecognized prior service cost...................   2,211,500    2,309,100
                                                       -----------  -----------
    Prepaid pension asset............................. $   766,000  $   904,700
                                                       ===========  ===========
</TABLE>

    Prepaid pension assets of $2,392,700 and $2,452,900 at December 31, 
    1997 and 1996, respectively, are included in other assets on the 
    accompanying consolidated balance sheets.  Pension liabilities of 
    $1,626,700 and $1,548,200 at December 31, 1997 and 1996, respec-
    tively, are included in current and other long-term liabilities on 
    the accompanying consolidated balance sheets.

    Net pension expense for the Registrant's plans includes the follow-
    ing components:
<TABLE>
<CAPTION>
                                       1997         1996         1995
                                   -----------  -----------  -----------
    <S>                            <C>          <C>          <C>
    Service cost - benefit  
      earned during year.........  $ 1,005,400  $   897,200  $   662,700
    Interest cost on projected 
      benefit obligation.........    1,927,300    1,692,400    1,493,700
    Actual return on assets......   (5,086,200)  (3,249,700)  (4,654,500)
    Amortization of unrecognized
      net assets.................     (130,900)    (206,600)    (231,200)
    Deferred asset gain (loss)...    2,944,300    1,230,900    2,828,000
                                   -----------  -----------  -----------
    Net pension expense..........  $   659,900  $   364,200  $    98,700
                                   ===========  ===========  ===========
</TABLE>

    The weighted average expected long-term rate of return on plan 
    assets used in the determination of annual pension expense was 8.5% 
    for 1997, 1996, and 1995.  The weighted average assumed discount 
    rates used to measure the projected benefit obligation were 7.0% at 
    December 31, 1997, and 7.5% at December 31, 1996.  The assumed rate 
    of compensation increase used to measure the projected benefit obli-
    gation was 4.5% at December 31, 1997 and 1996, for the applicable 
    plan.

(3) INCOME TAXES:

    The provision for taxes on income from operations includes:
<TABLE>
<CAPTION>
                                         1997        1996        1995
                                      ----------  ----------  ----------
    <S>                               <C>         <C>         <C>
    Current tax expense.............  $1,087,800  $1,823,800  $  780,200
    Deferred, net...................     (84,800)    242,200    (120,200)
                                      ----------  ----------  ----------
                                      $1,003,000  $2,066,000  $  660,000
                                      ==========  ==========  ==========
</TABLE>

    The deferred tax consequences of temporary differences in reporting 
    items for financial statement and income tax purposes are recog-
    nized, if appropriate.  Net deferred tax assets of $778,200 and

                                   20

<PAGE>   21

    $693,400 at December 31, 1997 and 1996, respectively, are included 
    in other assets on the accompanying consolidated balance sheets.  
    The income tax effect of temporary differences comprising the 
    deferred tax assets and deferred tax liabilities in the accompany-
    ing consolidated balance sheets is a result of the following:
<TABLE>
<CAPTION>
                                                     1997        1996
                                                  ----------  ----------
    <S>                                           <C>         <C>
    Deferred Tax Assets:
        Insurance...............................  $   82,100  $  107,700
        Vacation................................     635,800     547,900
        Warranty................................      56,200     142,400
        Doubtful accounts.......................     206,900     258,300
        Healthcare benefits.....................     176,000     185,000
        Lawsuit.................................     367,400           -
        Other...................................     110,800     226,000
                                                  ----------  ----------
                                                  $1,635,200  $1,467,300
                                                  ==========  ==========
    Deferred Tax Liabilities:
        Depreciation............................  $  292,100  $  219,500
        Pensions................................     538,000     527,600
        Other...................................      26,900      26,800
                                                  ----------  ----------
                                                  $  857,000  $  773,900
                                                  ==========  ==========
</TABLE>

    A reconciliation between the statutory federal income tax rate (34%) 
    and the effective rate of income tax expense for each of the three 
    years during the period ended December 31, 1997, follows:
<TABLE>
<CAPTION>
                                 1997              1996              1995
                           ----------------  ----------------  ----------------
                             Amount      %     Amount      %     Amount      %
                           ----------  ----  ----------  ----  ----------  ----
    <S>                    <C>         <C>   <C>         <C>   <C>         <C>
    Statutory federal 
     income tax........... $1,342,200  34.0  $2,206,600  34.0  $  889,000  34.0
    Increase (decrease) in
     taxes resulting from:
      State tax, net of 
       federal benefit....     53,700   1.4      67,600   1.0      17,700   0.7
      Tax-exempt interest.   (137,400) (3.5)   (165,700) (2.6)   (147,800) (5.7)
      Tax credits.........    (22,200) (0.5)    (14,400) (0.2)    (23,400) (0.9)
      FSC exempt income...   (138,700) (3.5)   (138,500) (2.1)   (105,400) (4.0)
      Other, net..........    (94,600) (2.5)    110,400   1.7      29,900   1.1
                           ----------  ----  ----------  ----  ----------  ----
                           $1,003,000  25.4  $2,066,000  31.8  $  660,000  25.2
                           ==========  ====  ==========  ====  ==========  ====
</TABLE>

(4) DEBT:

    The $3,000,000 Floating Rate Weekly Demand Industrial Development 
    Revenue Bond issue due December 1, 1996, was repaid as required.

(5) OPERATIONS BY INDUSTRY AND EXPORT SALES:

    A description of the various industries in which the Companies 
    operate and a summary of operations by industry are included on 
    pages 3 and 4 of this annual report.  The information included 
    therein is incorporated as an integral part of these consolidated 
    financial statements.

    The Registrant's export sales were $18,696,700 in 1997, $16,263,700 
    in 1996, and $13,385,800 in 1995.

    Export sales during 1997, 1996 and 1995, respectively, were made 
    to the following geographic areas:  North America - $6,065,400, 
    $5,581,400, and $4,275,800; Asia and the Far East - $7,665,000, 

                                   21

<PAGE>   22

    $6,648,300, and $5,395,200; and other areas - $4,966,300, 
    $4,034,000, and $3,714,800.  

    During 1997, 1996 and 1995, sales to any one customer were not 
    in excess of 10% of consolidated sales.

(6) CONTINGENCIES:

    The Registrant was the defendant in a breach-of-contract / breach-
    of-warranty lawsuit concerning reactor vessels sold in 1992 in 
    Tarrant County, Texas (Alcon Laboratories, Inc. -vs- Paul Mueller 
    Company).  As a result of a trial that ended September 19, 1997, 
    the Registrant received an adverse decision, and the final judg-
    ment awarded damages, interest, and attorney's fees totaling 
    approximately $1,700,000 to the plaintiff.  Management believes 
    the decision was incorrect and, based on the advice of legal 
    counsel, has appealed the decision.  As a result of the decision, 
    a provision of approximately $775,000 was made during 1997 as an 
    estimate of the liability for the ultimate resolution of the matter 
    and is included in other, net on the accompanying consolidated 
    statements of income, and the related reserve is included in accrued 
    expenses on the consolidated balance sheets.  If the decision is 
    upheld on appeal, the Registrant's liability will exceed the reserve 
    that has been established.

    The Registrant is a defendant in two other lawsuits pending at 
    December 31, 1997.  In the opinion of management, after consultation 
    with legal counsel, the outcome of these lawsuits will not have a 
    material adverse effect on the Registrant's consolidated financial 
    statements.

    The Registrant employs nearly 900 people, of which approximately 400 
    are represented by the Sheet Metal Workers Union.  The International 
    Union called a strike beginning July 25, 1995, and currently 20 em-
    ployees are participating.  The Registrant has unfair labor practice
    charges pending before the National Labor Relations Board, and the 
    final determination of these charges may take up to two years.  
    However, management believes, based on evaluation by counsel, that 
    there is no material financial exposure to the Registrant.

                                   22

<PAGE>   23

<TABLE>
                 FINANCIAL HIGHLIGHTS BY QUARTER (UNAUDITED)
                    (In Thousands, Except Per Share Data)
<CAPTION>
                                       Quarter Ended
                ---------------------------------------------------------------
                    March 31        June 30       September 30    December 31
                --------------- --------------- --------------- ---------------
                  1997    1996    1997    1996    1997    1996    1997    1996
                ------- ------- ------- ------- ------- ------- ------- -------
                          <F2>                    <F3>            <F4>    <F5>
<S>             <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Net sales...... $17,208 $18,690 $21,868 $21,526 $23,404 $21,187 $24,213 $22,548
Gross 
  profit<F1>... $ 4,229 $ 4,065 $ 5,401 $ 5,026 $ 4,986 $ 5,426 $ 5,251 $ 7,181
Net income..... $   436 $   500 $ 1,047 $   971 $   360 $ 1,171 $ 1,102 $ 1,782
Earnings per 
 common share..  $ 0.37  $ 0.43  $ 0.90  $ 0.83  $ 0.31  $ 1.00  $ 0.94  $ 1.53
<FN>
<F1> Because the inventory determination under the LIFO method can only 
     be made at the end of each fiscal year based on the inventory 
     levels and costs at that point, interim LIFO determinations must 
     be based on management's estimate of expected year-end inventory 
     levels and costs.

<F2> Net income for the first quarter of 1996 was favorably affected 
     by an insurance refund of $197,000 after tax, or $0.17 per share.

<F3> Net income for the third quarter of 1997 was unfavorably affected 
     by a provision of $488,000 after tax, or $0.42 per share, made as 
     a result of an adverse jury decision in a breach-of-contract / 
     breach-of-warranty lawsuit.

<F4> Net income for the fourth quarter of 1997 was favorably affected 
     by a LIFO adjustment.  The adjustment increased net income by 
     $510,400, or $0.44 per share.

<F5> Net income for the fourth quarter of 1996 was favorably affected 
     by a LIFO adjustment.  The adjustment increased net income by 
     $1,321,300, or $1.13 per share.
</FN>
</TABLE>

                                   23

<PAGE>   24

                REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Paul Mueller Company:

     We have audited the accompanying consolidated balance sheets of 
PAUL MUELLER COMPANY (a Missouri corporation) AND SUBSIDIARIES as of 
December 31, 1997 and 1996, and the related consolidated statements of 
income, shareholders' investment, and cash flows for each of the three 
years in the period ended December 31, 1997.  These financial statements 
are the responsibility of the Registrant's management.  Our responsi-
bility 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 state-
ment presentation.  We believe that our audits provide a reasonable 
basis for our opinion.

     In our opinion, the financial statements referred to above present 
fairly, in all material respects, the financial position of Paul Mueller 
Company and Subsidiaries as of December 31, 1997 and 1996, and the 
results of their operations and their cash flows for each of the three 
years in the period ended December 31, 1997, in conformity with gener-
ally accepted accounting principles.

     Our audits were made for the purpose of forming an opinion on the 
basic financial statements taken as a whole.  Schedule II is the respon-
sibility of the Registrant's management and is presented for purposes of 
complying with the Securities and Exchange Commission's rules and is not 
part of the basic financial statements.  This schedule has been sub-
jected to the auditing procedures applied in the audit of the basic 
financial statements and, in our opinion, fairly states in all material 
respects the financial data required to be set forth therein in relation 
to the basic financial statements taken as a whole.

                                         /s/  ARTHUR ANDERSEN LLP
Kansas City, Missouri,
     February 13, 1998

ITEM 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     There have been no disagreements on accounting principles or finan-
     cial statement disclosure with the independent public accountants.

                                   24

<PAGE>   25

PART III

ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information as to Directors of the Registrant required by Item 10 
     is included on pages 4 and 5 of the Registrant's Proxy Statement 
     for the annual meeting of shareholders to be held May 4, 1998, and 
     is incorporated herein by reference.  The information concerning 
     executive officers is set forth on page 7 of Part I hereof.

ITEM 11. - EXECUTIVE COMPENSATION

     Information as to executive compensation required by Item 11 is 
     included on pages 5 and 6 of the Registrant's Proxy Statement for 
     the annual meeting of shareholders to be held May 4, 1998, and is 
     incorporated herein by reference.

ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT

     Information as to security ownership of certain beneficial owners 
     and management required by Item 12 is included on pages 3, 4, and 
     5 of the Registrant's Proxy Statement for the annual meeting of 
     shareholders to be held May 4, 1998, and is incorporated herein by 
     reference.

ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information as to certain relationships and related transactions 
     required by Item 13 is included on page 5 of the Registrant's Proxy 
     Statement for the annual meeting of shareholders to be held May 4, 
     1998, and is incorporated herein by reference.

                                   25

<PAGE>   26

PART IV

ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS 
           ON FORM 8-K

     A. The financial statements and schedules, required under Part II-
        Item 8, are as follows:

        1. The consolidated financial statements of the Registrant and 
           its subsidiaries, for the year ended December 31, 1997:

           - Consolidated Balance Sheets..............December 31, 1997 
                                                      and 1996
           - Consolidated Statements of Income........For years ended 
                                                      December 31, 1997, 
                                                      1996 and 1995
           - Consolidated Statements of 
             Shareholders' Investment.................For years ended 
                                                      December 31, 1997, 
                                                      1996 and 1995
           - Consolidated Statements of Cash Flows....For years ended 
                                                      December 31, 1997, 
                                                      1996 and 1995
           - Notes to Consolidated Financial 
             Statements...............................December 31, 1997, 
                                                      1996 and 1995
           - Financial Highlights by Quarter..........For years ended 
                                                      December 31, 1997 
                                                      and 1996
           - Report of Independent Public Accountants

        2. Additional financial statement schedules included herein:

           -  Schedule II - Valuation and Qualifying Accounts....Page 28

           -  All other schedules are not submitted because they are 
              not applicable or not required, or because the required 
              information is included in the financial statements or 
              notes thereto.

        3. The exhibits set forth in the Exhibit Index found on pages 29 
           through 31.

     B. No reports on Form 8-K were filed by the Registrant during the 
        last quarter of 1997.

                                   26

<PAGE>   27

SIGNATURES -

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

                               PAUL MUELLER COMPANY

DATE   March 13, 1998          BY     /S/    DANIEL C. MANNA
       --------------             -------------------------------------
                                             Daniel C. Manna
                                                President
                                        (Chief Executive Officer)

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

DATE   March 13, 1998          BY     /S/    DANIEL C. MANNA
       --------------             -------------------------------------
                                             Daniel C. Manna
                                          President and Director
                                        (Chief Executive Officer)

DATE   March 13, 1998          BY     /S/     PAUL MUELLER
       --------------             -------------------------------------
                                              Paul Mueller
                                         Chairman of the Board
                                              and Director

DATE   March 13, 1998          BY     /S/    DONALD E. GOLIK
       --------------             -------------------------------------
                                             Donald E. Golik
                                  Senior Vice President, Chief Financial 
                                     Officer, Secretary and Director

DATE   March 13, 1998          BY     /S/   ROBERT A. BECKER
       --------------             -------------------------------------
                                            Robert A. Becker
                                                Director

DATE   March 13, 1998          BY     /S/    DAVID T. MOORE
       --------------             -------------------------------------
                                             David T. Moore
                                                Director

DATE   March 13, 1998          BY     /S/  WILLIAM B. JOHNSON
       --------------             -------------------------------------
                                           William B. Johnson
                                                Director

DATE   March 13, 1998          BY     /S/ WILLIAM R. PATTERSON
       --------------             -------------------------------------
                                          William R. Patterson
                                                Director

DATE   March 13, 1998          BY     /S/ CHARLES M. RUPRECHT
       --------------             -------------------------------------
                                          Charles M. Ruprecht
                                                Director

                                   27

<PAGE>   28

                                                            SCHEDULE II
<TABLE>
                   PAUL MUELLER COMPANY AND SUBSIDIARIES
                    VALUATION AND QUALIFYING ACCOUNTS
               FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>
               Balance at    Charged to     Charged                     Balance
               Beginning     Costs and      to Other                   at End of
               of Period      Expenses      Accounts     Deductions      Period
                --------      --------      --------      --------      --------
RESERVE FOR 
DOUBTFUL ACCOUNTS
<S>             <C>           <C>           <C>           <C>           <C>
12-31-97.....   $698,036      $(82,689)     $      -      $ 56,086<F1>  $559,261
12-31-96.....   $531,601      $316,990      $      -      $150,555<F1>  $698,036
12-31-95.....   $679,018      $ 20,465      $      -      $167,882<F1>  $531,601
<FN>
<F1> Accounts written off during the year.
</FN>
</TABLE>

                                   28

<PAGE>   29
<TABLE>
                             EXHIBIT INDEX
<CAPTION>
Number                          Description                          Page No.
------  -----------------------------------------------------------  --------
 <S>    <C>                                                             <C>
  (3)   ARTICLES OF INCORPORATION AND BY-LAWS - The Restated Arti-
        cles of Incorporation of the Registrant filed with the 
        Secretary of State on May 20, 1991, and the Restated 
        By-Laws of the Registrant dated May 6, 1991, attached 
        as Exhibit (3), page 19, of the Registrant's Form 10-K for 
        the year ended December 31, 1991, are incorporated herein 
        by reference.

  (4)   INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS -

        (a) A specimen stock certificate (unlimited denomination) 
            representing shares of the common stock, par value $1 
            per share, attached as Exhibit (4), page 69, of the 
            Registrant's Form 10-K for the year ended December 31, 
            1981, is incorporated herein by reference.

        (b) Shareholder Rights Plan, dated January 29, 1991, between 
            Paul Mueller Company and United Missouri Bank of Kansas 
            City, N.A., is incorporated by reference to Form 8-A
            under the Securities Exchange Act of 1934, dated 
            January 31, 1991, and filed with the Securities and 
            Exchange Commission on February 1, 1991.

 (10)   MATERIAL CONTRACTS -

        (a) Exclusive License Agreement between Registrant and 
            Superstill Technology, Inc. dated January 9, 1992, 
            Addendum No. 1 dated January 28, 1992, and Addendum 
            No. 2 dated June 15, 1992, were attached as Exhibit 
            (10), page 30, of the Registrant's Form 10-K for the 
            year ended December 31, 1996, and is incorporated 
            herein by reference.

        (b) The following Material Contracts, attached as Exhibit 
            (10) of the Registrant's Form 10-Q for the quarter 
            ended September 30, 1995, are incorporated herein by 
            reference:
<C> CAPTION
                              Description                  Page No.
            ---------------------------------------------  --------
            <S>                                               <C>
            1. Paul Mueller Company Tax Savings Plan and 
               Trust, effective January 1, 1996, and 
               adopted by the Board of Directors on 
               August 2, 1995............................     11

            2. Paul Mueller Company Dependent Care Assis-
               tant Plan, effective January 1, 1996, and 
               adopted by the Board of Directors on 
               August 2, 1995............................     22
 <S>    <C>                                                             <C>
        (c) Paul Mueller Company Noncontract Employees Retirement 
            Plan, as amended and restated effective January 1, 1989, 
            and adopted by the Board of Directors of the Registrant 
            on May 7, 1990, was attached as Exhibit (10), page 179, 
            of the Registrant's Form 10-K for the year ended 
            December 31, 1990, and is incorporated herein by 
            reference.  Amendment Number One, effective October 29,
            1991, was adopted by the Board of Directors on October 
            29, 1991, and Amendment Number Two, effective June 1, 
            1992, was adopted by the Board of Directors on May 4, 

                                   29

<PAGE>   30

<CAPTION>
Number                          Description                          Page No.
------  -----------------------------------------------------------  --------
 <S>    <C>                                                             <C>
            1992, and both were attached as Exhibit (10), page 18, 
            of the Registrant's Form 10-K for the year ended 
            December 31, 1992, and both are incorporated herein by 
            reference.  Amendment Number Three was adopted by the 
            Board of Directors on July 26, 1994, and Amendment 
            Number Four, effective January 1, 1994, was adopted by 
            unanimous consent of the Executive Committee of the 
            Board of Directors on December 5, 1994, and both were 
            attached as Exhibit (10), page 59, of the Registrant's 
            Form 10-K for the year ended December 31, 1994, and both 
            are incorporated herein by reference.  Amendment Number 
            Five, adopted by the Board of Directors on October 31, 
            1995, was attached as Exhibit (10), page 26, of the 
            Registrant's Form 10-Q for the quarter ended September 
            30, 1995, and is incorporated herein by reference.  
            Amendment Number Six, effective January 1, 1996, and 
            executed on May 6, 1996, was attached as Exhibit (10), 
            page 14, of the Registrant's Form 10-Q for the quarter 
            ended March 31, 1996, and is incorporated herein by 
            reference.

        (d) Paul Mueller Company Employee Benefit Plan, amended and 
            restated effective March 22, 1995, and adopted by the 
            Trustees on April 14, 1995, was attached as Exhibit (10), 
            page 10, of the Registrant's Form 10-Q for the quarter 
            ended March 31, 1995, and is incorporated herein by 
            reference.  The First Amendment, adopted by the Trustees 
            on October 12, 1995, was attached as Exhibit (10), page 
            25, of the Registrant's Form 10-Q for the quarter ended 
            September 30, 1995, and is incorporated herein by 
            reference.  The Second Amendment, effective April 1, 
            1996, and executed on May 15, 1996, was attached as 
            Exhibit (10), page 11, of the Registrant's Form 10-Q 
            for the quarter ended June 30, 1996, and is incorporated 
            herein by reference.

        (e) Paul Mueller Company Profit Sharing and Retirement 
            Savings Plan, restated effective January 1, 1993, and 
            adopted by the Trustees on June 22, 1994, was attached 
            as Exhibit (10), page 15, of the Registrant's Form 10-K 
            for the year ended December 31, 1994.  The First Amend-
            ment, effective September 1, 1997, was executed on 
            August 14, 1997........................................     32

        (f) Paul Mueller Company Contract Employees Retirement 
            Plan, restated effective January 1, 1992, and adopted 
            November 17, 1992, was attached as Exhibit (10), 
            page 22, of the Registrant's Form 10-K for the year 
            ended December 31, 1992, and is incorporated herein by 
            reference.  Amendment Number One, effective September 
            19, 1994, was executed October 20, 1994, and Amendment 
            Number Two, effective January 1, 1993, was executed 
            December 2, 1994, and both were attached as Exhibit 
            (10), page 67, of the Registrant's Form 10-K for the 
            year ended December 31, 1994, and are incorporated 
            herein by reference.  Amendment Number Three, executed 
            April 10, 1996, was attached as Exhibit (10), page 10, 
            of the Registrant's Form 10-Q for the quarter ended 
            March 31, 1996, and is incorporated herein by reference.  
            Amendment Number Four, executed July 26, 1996, was 
            attached as Exhibit (10), page 11, of the Registrant's 
            Form 10-Q for the quarter ended September 30, 1996, and 
            is incorporated herein by reference.

        (g) Agreement and Declaration of Trust for the Paul Mueller 
            Company Employee Benefit Plan dated May 2, 1988, at-
            tached as Exhibit (10), page 107, of the Registrant's 
            Form 10-K for the year ended December 31, 1988, is 
            incorporated herein by reference.

                                   30

<PAGE>   31

<CAPTION>
Number                          Description                          Page No.
------  -----------------------------------------------------------  --------
 <S>    <C>                                                             <C>
        (h) Paul Mueller Company Salaried and Clerical Employees 
            Retirement Trust, as amended August 11, 1981, was 
            attached as Exhibit (10), page 318, of the Registrant's 
            Form 10-K for the year ended December 31, 1981, and is 
            incorporated herein by reference.  The First Amendment 
            to the trust, adopted by the Board of Directors on 
            May 1, 1983, was attached as Exhibit (10), page 160, 
            of the Registrant's Form 10-K for the year ended 
            December 31, 1983, and is incorporated herein by 
            reference.

        (i) Executive Compensation Plans and Arrangements:
 <S>       <C>                                                          <C>
             i. Paul Mueller Company Supplemental Executive Retire-
                ment Plan, effective January 1, 1996, adopted by 
                the Board of Directors on February 8, 1996, was 
                attached as Exhibit (10), page 30, of the Regis-
                trant's Form 10-K for the year ended December 31, 
                1995, and is incorporated herein by reference.

            ii. Executive Short-Term Incentive Plan, adopted
                January 31, 1995, attached as Exhibit (10), page 71,
                of the Registrant's Form 10-K for the year ended 
                December 31, 1994, is incorporated herein by 
                reference.
 <S>    <C>                                                             <C>
 (21)   SUBSIDIARIES OF THE REGISTRANT.............................     56

 (27)   FINANCIAL DATA SCHEDULE AS OF DECEMBER 31, 1997............     57
</TABLE>

                                   31