<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, 1998

Commission File Number:  0-4791

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

                              Missouri
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   (State or other jurisdiction of incorporation or organization)

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

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

                           (417) 831-3000
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        (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 re-
ports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days: Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K:  [X]

The aggregate market value of the voting stock of the Registrant
held by nonaffiliates on February 26, 1999, was $35,320,167.  As of
March 12, 1999, there were 1,168,021 shares of common stock, $1
par value, of the Registrant outstanding.

Portions of the Proxy Statement for the annual meeting of shareholders
to be held May 3, 1999, 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 stain-
          less steel milk coolers for dairy farms and in 1960 began
          manufacturing stainless 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 custom-made stainless
          steel processing equipment for the food, dairy, beverage,
          chemical, pharmaceutical, and other industries.  The Regis-
          trant's products are incorporated into a wide variety of
          industrial applications, including food and beverage pro-
          cessing, pharmaceutical and chemical processing, water
          distillation, heat transfer, HVAC, heat recovery, process
          cooling, and thermal energy storage.  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 manufac-
          turing and marketing equipment in 1995.

          The Registrant has a license agreement with a Dutch company
          for the production and sale of Dairy Farm Equipment in
          Europe, which provides royalties for the Registrant.  The
          license will terminate March 31, 2000, unless it is extended
          by agreement of the parties.

          The Registrant formed Mueller Field Operations, Inc., a
          wholly owned subsidiary, during 1998 to perform field
          fabrication, installation, and erection services.

                                   2

<PAGE>   3

     B.   FINANCIAL INFORMATION ABOUT SEGMENTS

          Information about the earnings data by segment and sales
          by product category are covered in Note 5 of the Notes to
          Consolidated Financial Statements found in Part II, Item 8,
          and is incorporated herein by reference.

     C.   NARRATIVE DESCRIPTION OF BUSINESS

          The Registrant's segments include Dairy Farm Equipment and
          Industrial Equipment.

          The Dairy Farm Equipment segment includes standard products
          that are built to stock and are available for sale from
          inventory.  The Dairy Farm Equipment segment sells milk
          cooling and storage equipment and accessories, refrigeration
          units, and heat recovery equipment for use on dairy farms
          to independent dealers for resale.  Sales are made to the
          domestic and export markets.

          The Industrial Equipment segment includes products that
          are designed and built to customer specifications.  The
          Industrial Equipment segment sells the following products
          directly to industrial customers:  food, beverage, chemical,
          and pharmaceutical processing equipment; tank components;
          industrial heat transfer equipment; pure water equipment;
          thermal energy storage equipment; and commercial refrigera-
          tion equipment.  Food processing equipment includes stain-
          less steel storage and mixing tanks, food processors,
          cookers and coolers, and a variety of other custom-
          fabricated tanks.  Beverage processing equipment includes
          stainless steel storage and fermentation tanks, brewhouse
          equipment, and other special equipment for breweries,
          wineries, distilleries, and soft-drink bottlers.  Chemical
          and pharmaceutical processing equipment includes stainless
          steel and other alloy pressure vessels.  Other industrial
          equipment products include water purification equipment,
          heat transfer equipment, thermal energy storage equipment,
          and commercial refrigeration equipment.

          The Industrial Equipment segment includes sales to the
          domestic and export markets.

          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 heat
          transfer product line.

          Patents held by the Registrant generally are not considered
          significant to the successful conduct of each segment's
          business.  Trademarks are registered for the Registrant's
          name for certain products sold in the Industrial Equipment
          segment and for the products sold in the Dairy Farm Equip-
          ment 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 Section A above.

          In general, the seasonality of the Registrant's business
          segments is not material.

          The Registrant carries a significant inventory of standard
          sizes of stainless steel coil and plate used in the manu-
          facture of its products.  For some Industrial Equipment
          orders, stainless steel is specifically ordered for the
          project.  The Registrant provides extended payment terms

                                   3

<PAGE>   4

          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 pay-
          ments and/or progress payments on significant Industrial
          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 1998.

          The backlog of sales was approximately $29,958,000 at
          February 28, 1999, compared to approximately $29,898,000
          at February 28, 1998.  It is anticipated that substantially
          all of the February 28, 1999, backlog will be shipped during
          the current fiscal year.

          In the Industrial Equipment segment, there are several
          competitors, most of which are smaller than the Registrant.
          Many Industrial Equipment projects are bid among several
          possible suppliers, which tends to make pricing very com-
          petitive.  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 1998, stainless steel prices remained relatively flat
          compared to the prior year.  Stainless steel prices are
          projected to be higher during 1999 due to announced price
          increases by the mills.  Also, the dumping suits filed in
          1998 by the domestic stainless steel producers will tend to
          restrict the inflow of lower-priced foreign steel.

          The Registrant spent $978,900 in 1998, $719,200 in 1997,
          and $653,200 in 1996 on research activities relating to the
          development of new products or services and the improvement
          of existing products or services.  Fourteen full-time admin-
          istrative employees are engaged in this activity.

          It is not anticipated that compliance with Federal, State
          and local provisions, which have been enacted or adopted
          regulating 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
          subsidiaries.

          The number of employees at December 31, 1998, was 854.

          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
          representatives about the personal health insurance claims
          of individual employees and their dependents and reversed
          his previous decision regarding the implementation of

                                   4

<PAGE>   5

          changes in wages and benefits.  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 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 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 hearing was held before an administrative law
          judge of the NLRB in December of 1998, and the judge ruled
          against the Registrant on one minor issue, which it will
          not appeal.  The union has appealed the other decisions 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 finan-
          cial exposure to the Registrant.

          The Registrant currently employs about 860 people, of which
          approximately 380 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 partici-
          pating.  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 760
          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.

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 approxi-
     mately 14,100 square feet was made in 1981.  In February 1987,
     the Registrant acquired an additional manufacturing facility in
     Osceola, Iowa, which contains approximately 216,000 square feet.

     In February 1997, the Registrant purchased land and a building,
     which contains about 21,000 square feet, in downtown Springfield,
     Missouri, for the purpose of operating a microbrewery and brew-
     pub.

                                   5

<PAGE>   6

ITEM 3. - LEGAL PROCEEDINGS

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

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 1998

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

<TABLE>
<CAPTION>
            Name          Age       Position(s) with Registrant
     -------------------  ---  -------------------------------------
     <S>                  <C>  <C>
     Paul Mueller<F1>     83   Chairman of the Board and Director
     Daniel C. Manna<F1>  52   President and Director
     Donald E. Golik<F1>  55   Senior Vice President and Chief Finan-
                               cial 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 3, 1999, and until his successor shall have been duly elected
     and qualified or until his earlier resignation or removal.

                                   6

<PAGE>   7

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 Stock
     Market(R) under the symbol MUEL.  As of December 31, 1998,
     there were approximately 270 shareholders of record and approxi-
     mately 760 beneficial shareholders.

     Market high and low prices and quarterly cash dividends in 1998
     and 1997 were as follows:

<TABLE>
<CAPTION>
                   1998 Quarter Ended                1997 Quarter Ended
             ------------------------------    ------------------------------
             Mar 31  Jne 30  Spt 30  Dec 31    Mar 31  Jne 30  Spt 30  Dec 31
             ------  ------  ------  ------    ------  ------  ------  ------
     MARKET PRICE OF STOCK
     <S>     <C>     <C>     <C>     <C>       <C>     <C>     <C>     <C>
     High... 43      41      43-3/4  42        43      39      49-1/2  45
     Low.... 36-3/4  36-1/4  37      36-13/16  36-1/2  34-1/4  37-1/4  36-1/2
<CAPTION>
     CASH DIVIDENDS
     <S>     <C>     <C>     <C>     <C>       <C>     <C>     <C>     <C>
     Declared
     per
     share.. $0.60   $0.60   $0.60   $0.60     $0.60   $0.60   $0.60   $0.60
</TABLE>

ITEM 6. - SELECTED FINANCIAL DATA

<TABLE>
                      SELECTED FINANCIAL DATA - FIVE-YEAR SUMMARY
<CAPTION>
                       1998        1997        1996        1995        1994
                   ----------- ----------- ----------- ----------- -----------
     <S>           <C>         <C>         <C>         <C>         <C>
     Net sales.... $89,745,547 $86,693,022 $83,950,990 $78,375,636 $79,475,354
     Net income... $ 3,134,301 $ 2,944,540 $ 4,424,019 $ 1,954,653 $ 3,510,966
     Earnings
      per common
      share.......      $ 2.68      $ 2.52      $ 3.79      $ 1.67      $ 3.01
     Weighted
      average
      common
      shares out-
      standing....   1,168,021   1,168,021   1,168,021   1,168,021   1,168,021
     Dividends
      declared
      per common
      share.......      $ 2.40      $ 2.40      $ 2.10      $ 2.00      $ 2.00
     Total assets. $55,137,271 $56,547,290 $53,184,971 $54,678,904 $54,250,236
     Long-term
      debt........ $   161,434 $   161,434 $   161,434 $   161,434 $ 3,153,747
</TABLE>

                                   7

<PAGE>   8

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

     Certain information discussed 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
     expectations 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
     accompanying such forward-looking statements, include, but are
     not limited to, milk prices, feed costs, weather conditions,
     dairy farm consolidation and other factors affecting the profit-
     ability 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

     Although sales and gross margins were higher for 1998 compared to
     1997, these factors were mitigated by an adverse LIFO provision
     and higher operating expense.

     SALES -- Comparative consolidated sales for the past three years
     were as follows:

<TABLE>
<CAPTION>
                                                Sales
                                   ------------------------------
                                      (in thousands of dollars)
                                     1998       1997       1996
                                   --------   --------   --------
          <S>                      <C>        <C>        <C>
          Dairy Farm Equipment.... $ 19,193   $ 22,390   $ 19,169
          Industrial Equipment....   70,553     64,303     64,782
                                   --------   --------   --------
                                   $ 89,746   $ 86,693   $ 83,951
                                   ========   ========   ========
</TABLE>

     Sales of Dairy Farm Equipment decreased by $3,197,000 during 1998
     compared to 1997, with about 46% of the decline attributable to
     domestic operations and the balance resulting from reduced export
     sales.  Although the average milk price during 1998 was an all-
     time high and feed costs were reasonable, the number of milk
     coolers sold in the domestic market was down by 21% from the
     prior year.  The starting backlog of Dairy Farm Equipment for
     1998 was 30% lower than the prior year; and during the first
     half of 1998, there was a soft market due to declining milk
     prices and unfavorable weather conditions in the major dairying
     areas of the U.S.  Additionally, there were concerns about U.S.
     governmental involvement in milk prices.  Although milk prices
     increased significantly during the last half of the year and feed
     costs were reasonable, milk production increased only slightly
     from the prior year and milk cooling and storage equipment sales
     lagged. Export sales of Dairy Farm Equipment experienced a de-
     cline of 23% for 1998, with a 22% decline in the number of milk
     cooling units sold.  The reduction in sales related directly to
     economic problems in key foreign markets, coupled with a strong
     U.S. dollar.  The decline in export sales was primarily due to
     decreased sales to countries in South America, Europe, Africa,
     and North America.

     During 1997, sales of Dairy Farm Equipment increased by
     $3,221,000 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

                                   8

<PAGE>   9

     high, production 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 coolers 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 cooler units sold.  The improvement in export
     sales was primarily due to increased sales to countries in North
     America, South America, Africa, and Europe.

     For 1999, although the milk price is expected to decline from
     its record high, the milk price on average and feed costs are
     expected to be at reasonable levels.  Domestic dairy farmers
     experienced a profitable year during 1998; and with reasonable
     milk prices and feed costs, low interest rates, and low land
     values anticipated for 1999, conditions are favorable for
     increased milk production.  With respect to the outlook for
     export sales of Dairy Farm Equipment for 1999, international
     markets are expected to improve somewhat.  This is primarily
     true for Europe and to some extent in Latin America where cer-
     tain countries are expected to have improved economic conditions.

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

     During 1998, sales of Industrial Equipment were $70,553,000, an
     increase of about 10% from the prior year.  The improvement was
     primarily attributable to processing equipment sales, which in-
     creased by 25% over 1997.  The sales improvement was the direct
     result of a higher backlog of processing equipment at the begin-
     ning of 1998, coupled with an increase in order entry of over
     7% for the whole Industrial Equipment segment during 1998 com-
     pared to 1997.  The increase in processing equipment sales for
     1998 primarily related to an export order for brewery equipment.
     Although most Industrial Equipment product lines recorded sales
     increases during 1998, some product lines experienced declines
     due to the impact of the Asian financial crisis.

     During 1997, sales of Industrial Equipment decreased by about
     $500,000.  Industrial Equipment order entry for 1997 was about
     3% lower than for 1996 due to very competitive market conditions.
     Another significant factor affecting sales of Industrial Equip-
     ment was the low backlog for processing equipment at the begin-
     ning 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 processing equipment 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.  For other Industrial
     Equipment product lines, sales were adversely affected by aggres-
     sive price competition; and although we were able to improve
     sales of some of our product lines, the improvements were not
     sufficient to increase overall sales for the Industrial Equipment
     segment.

     Looking forward to 1999, the Industrial Equipment segment back-
     log, as we start the year, is approximately 11% lower than
     at the beginning of 1998.  Additionally, economic growth is

                                   9

<PAGE>   10

     predicted to slow during 1999, as corporate profit margins are
     expected to deteriorate.  Exports are expected to be weak in
     1999 due to the strong dollar and the economic problems overseas,
     and this will have the effect of subduing growth in the U.S.
     economy.  Capital expenditures for 1999 are projected to in-
     crease, but at a slower rate than in 1998 as companies are
     expected to reduce costs to maintain cash flow.  With the
     economic outlook projected, we foresee very competitive con-
     ditions for our Industrial Equipment segment during 1999 with
     respect to pricing and delivery, particularly for large projects.
     Although the Asian financial crisis has eased somewhat, it will
     still have a negative effect on companies located in that region,
     and construction and capital investment are projected to be weak
     again in 1999.  This could have an adverse impact on order entry
     and sales of certain products included in the Industrial Equip-
     ment segment that are sold into the Asian market.  Generally,
     the outlook for foreign economic growth remains sluggish, with
     Europe being the area most likely to provide some measure of
     growth during 1999.  During 1998, Mueller Field Operations,
     Inc., was established to do field fabrication, erection and
     installation services.  This is a new capability that offers
     the potential for additional business for the Industrial Equip-
     ment segment.

     During 1998, stainless steel prices remained relatively flat.
     However, looking to 1999, it appears the price of stainless steel
     will be in a state of flux, as mills are attempting to increase
     prices; but inventories of imported, lower-priced foreign stain-
     less steel in the United States are continuing to cause pricing
     pressure.

     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.  Exten-
     sive negotiations were conducted with union representatives, but
     a new contract was not achieved.  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 union has filed unfair labor practice complaints against
     the Registrant; and as a result, hearings were held in August
     of 1996 and in November of 1997 before an administrative law
     judge of the National Labor Relations Board (NLRB), and the
     decisions of both hearings have been appealed to the NLRB.  An
     additional hearing was held before an administrative law judge
     of the NLRB in December of 1998, and the judge ruled against
     the Registrant on one minor issue, which it will not appeal.
     The union has appealed the other decisions to the NLRD.  A final
     determination of all charges pending may take up to two years.
     However, management believes, based on an evaluation by counsel,
     there is no material financial exposure to the Registrant.

     The Registrant currently employs about 860 people, of which
     approximately 380 at the Springfield, Missouri, facility are
     represented by the Sheet Metal Workers Union.  The Registrant
     has facilities located in Springfield, Missouri, and Osceola,
     Iowa.  There are approximately 760 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 $22,008,000 at December 31, 1998, versus
     $25,579,000 and $27,400,000 at the end of 1997 and 1996, respec-
     tively.  The backlog of Industrial Equipment was $20,081,000,
     $22,500,000, and $23,000,000 at the end of 1998, 1997, and 1996,

                                  10

<PAGE>   11

     respectively, with the remaining balance in each year attribu-
     table to Dairy Farm Equipment.  Substantially all of the December
     31, 1998, backlog will be shipped during the current year.

     OPERATING INCOME -- Operating income for 1998 was $3,890,000
     versus $3,535,000 for 1997.  Although sales and gross profit
     improved during 1998, operating profit was adversely affected by
     a LIFO provision and higher operating expenses.  The improvement
     in gross profit was primarily due to processing equipment, as
     sales were higher than the prior year and gross margins increased
     due to orders of higher quality, coupled with improved plant
     labor efficiency. The inventory level at the end of 1998 was
     greater than at the end of 1997, which required an increase in
     the required LIFO reserve; and this had the effect of decreasing
     operating income by $730,000.  On the other hand, for 1997, there
     was a reduction in the required LIFO reserve, and this had the
     effect of increasing operating income by $440,000.  Selling,
     general, and administrative expenses were higher in 1998 compared
     to 1997, as expenditures were higher for personnel, manufac-
     turers' representative's commissions, travel expenses, medical
     expenses, and product development costs.

     Operating income for 1997 was $3,535,000 versus $5,843,000 for
     1996.  The factors contributing to the decrease were a signifi-
     cantly smaller LIFO effect, a lower gross margin rate, and an
     increase in operating expenses.  In 1997, a decline in steel
     prices 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 processing equipment.  Competitive market condi-
     tions, coupled with several complex orders, resulted in lower
     margins.  Operating expenses were also higher in 1997 compared to
     1996, as manufacturing burden increased due to increased sales
     and production inefficiencies.  Additionally, selling, general,
     and administrative 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 acti-
     vities during the year.

     The profitability of Industrial Equipment is lower than for Dairy
     Farm Equipment, as generally all Industrial Equipment projects
     are engineered-to-order.  The projects require much greater sup-
     port from the sales, engineering, and manufacturing areas and a
     higher degree of skill to fabricate.  Also, the risks of manufac-
     turing 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 Industrial Equipment projects are bid among several possi-
     ble suppliers, which tends to make pricing very competitive.  On
     the other hand, the Dairy Farm Equipment segment sells standard
     products, and engineering designs have been well defined and
     manufacturing methods have been refined for efficiency.  The
     proprietary nature of the products also permits more attractive
     pricing.  There are relatively few competitors, and the Regis-
     trant 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.

                                  11

<PAGE>   12

     OTHER INCOME (EXPENSE) -- The average level of investable funds
     and the average interest rate were lower during 1998 compared
     to 1997, which resulted in a lower level of interest income.
     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.
     A $3,000,000 Floating Rate Weekly Demand Industrial Development
     Revenue Bond issue was repaid on December 1, 1996, which reduced
     interest expense in 1997 and 1998.

     Other, net for 1998 and 1996 was greater than 1997 primarily due
     to a provision of $775,000 made in 1997 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 Labora-
     tories, 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 plain-
     tiff.  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 resolution of this matter.  If the deci-
     sion is upheld on appeal, the Registrant's liability will exceed
     the reserve that has been established.

     PROVISION FOR INCOME TAXES -- The effective tax rates for 1998,
     1997, and 1996 were 28.5%, 25.4%, and 31.8%, respectively.  The
     effective tax rates for 1998, 1997, and 1996 were below the sta-
     tutory rate (34%) primarily as a result of the lower effective
     tax rate for the foreign sales corporation, tax-exempt interest,
     and tax credits.

     YEAR 2000 ISSUE -- The Year 2000 issue exists because many com-
     puter systems and applications, including those imbedded in
     equipment and facilities, use two-digit rather than four-digit
     date fields to designate an applicable year.  Any of the Regis-
     trant's computer systems or plant equipment systems that have
     time-sensitive software may recognize a date using "00" as the
     year 1900 rather than the year 2000.  This could result in a
     system failure or miscalculation, causing a disruption of
     operations.

     Management began the process of assessing the Year 2000 issues
     in July 1997.  The AS/400 computer operating system was upgraded
     in November 1997 as a result of the need for enhanced function-
     ality, and it is Year 2000 compliant.  The financial software
     system and the design engineering system are both Year 2000
     compatible.  The manufacturing software and certain internally
     developed software must be modified to make them Year 2000 com-
     pliant.  The manufacturing software and certain internally
     developed software systems have all been examined, and approxi-
     mately 330 files have been identified that will require remedi-
     ation.  Seventy-five percent of the files identified have been
     remediated, and testing has been performed to verify that the
     files are Year 2000 compliant.  The files and associated code
     are tested in isolation to verify proper performance.  After
     successful testing, the remediated files are placed into produc-
     tion with all other files to insure that they perform properly.
     Remediation and testing of the balance of the files should be
     completed by June 30, 1999.

     The cost associated with the remediation and testing effort
     will consist primarily of personnel costs that are expensed as
     incurred and funded through operating cash flows.  Personnel
     costs incurred in 1997 and 1998 were approximately $200,000.
     These costs are estimated to be approximately $70,000 for 1999.
     Management has also purchased approximately $30,000 of software
     and hardware for the project, which have been capitalized and
     are being amortized and depreciated in accordance with Registrant
     policies.

                                  12

<PAGE>   13

     Management is in the process of surveying companies with which
     it has important commercial relationship (major vendors and
     customers) to insure that their systems are Year 2000 compliant
     and that there will be no disruption in the supply of goods or
     services or disruption of sales and payments.  Management has
     completed the assessment of its noninformation technology systems
     within its facilities, and substantially all equipment has been
     determined to be compliant.  Management is also monitoring the
     progress of its outside suppliers of utilities and phone service
     to insure that they will be Year 2000 compliant.  The Regis-
     trant's products are Year 2000 compliant, or Year 2000 compliance
     is not an issue.

     Management does not believe that there is a significant risk of
     noncompliant internal systems.  Based on internal assessments and
     the work completed to date, management believes that the Year
     2000 issue should not pose significant operational problems or
     have a material impact on the Registrant's consolidated financial
     position, results of operations, or cash flow.  Files that are
     being remediated are being put into production, which provides
     the opportunity to determine any noncompliance problems.  Addi-
     tionally, a more comprehensive system test will be performed
     after all remediation has been completed.  Management believes
     that any noncompliance from internal systems would be isolated
     and could be remediated without a major disruption of operations.
     Management believes that the key risk factors associated with the
     Year 2000 are those they cannot directly control, primarily the
     readiness of key suppliers.  The failure of a critical third
     party vendor to be Year 2000 compliant could significantly
     disrupt operations.  Management intends to closely monitor the
     progress of key vendors as to their Year 2000 compliance and to
     assess the potential impact on the Registrant.  Essential raw
     materials used in production are normally stocked, and stocking
     levels could be increased if there are indications of potential
     problems.  Additionally, management will identify alternate
     sources of supply to insure that there is no disruption in the
     flow of materials used in production.

     The forecast of cost and the date on which management believes
     it will complete its Year 2000 modifications are based on its
     best estimate which, in turn, were based on management's assump-
     tions of future events, including continued availability of
     resources and other factors.  Management cannot be sure that
     these estimates will be achieved, and actual results could differ
     from those anticipated.

     FINANCIAL CONDITION

     LIQUIDITY - CAPITAL RESOURCES -- Working capital was $19,424,000
     at December 31, 1998, compared to $20,599,000 at December 31,
     1997.  The current ratio, a measure of liquidity, was 2.39 at
     December 31, 1998, versus 2.31 at December 31, 1997.  The Regis-
     trant has no significant amount of long-term debt.

     Net cash provided by operations was $2,495,000 in 1998 compared
     to $5,473,000 in 1997 and $9,723,000 in 1996.  The 1998 cash flow
     was primarily attributable to net income and to depreciation and
     amortization expense.  The 1997 cash flow was primarily attri-
     butable 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.

     Capital expenditures for the most recent three years were
     $4,769,000 in 1998, $7,777,000 in 1997, and $2,131,000 in 1996.
     Capital expenditures during 1998 included a substantial portion
     to improve production efficiency and reduce through-put time.
     The increase in capital expenditures for 1997 compared to the

                                  13

<PAGE>   14

     other years related to the establishment of a microbrewery/
     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/brewpub operation in December 1997.  The operation
     showcases 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
     facilitate travel primarily in the marketing of the Registrant's
     products.

     The level of planned expenditures for 1999 is $3,000,000, none
     of which has been committed as of December 31, 1998.  Anticipated
     expenditures are primarily for plant equipment to maintain qua-
     lity and improve efficiency.  Management has the discretion of
     lowering the level of expenditures if operating results deviate
     from budgeted performance.

     The Registrant has a $2,000,000 bank borrowing facility that
     expires on May 31, 1999, none of which is currently used.
     Management believes that cash flow provided by operations and
     the cash and investment position will continue to be sufficient
     to satisfy the Registrant's working capital requirements, normal
     capital expenditure levels, and anticipated dividends.  A policy
     of requiring down payments and progress payments on large Indus-
     trial Equipment orders provides a favorable effect on cash flows.
     Management expects internally generated funds to be sufficient
     to finance operations, and this is consistent with historical
     performance.

     Market risks relating to the Registrant's operations result
     primarily from changes in foreign-exchange rates, interest
     rates, as well as stainless steel prices.  The Registrant
     periodically enters into foreign-exchange forward or spot
     contracts to hedge the exposure to foreign-currency-denominated
     purchase transactions.  Forward contracts generally have maturi-
     ties of less than three months.  Foreign-currency-denominated
     purchases were $3,700,000, $2,200,000, and $2,000,000 for 1998,
     1997, and 1996, respectively.  There were no foreign-exchange
     forward contracts outstanding or currencies held at December 31,
     1998 or 1997.  The Registrant's financial instruments that are
     exposed to interest rate risks consist of available-for-sale
     investments that are recorded at market value.  Available-for-
     sale investments are maintained in high-quality securities that
     consist of tax-exempt bonds, taxable bond funds, and taxable
     and tax-exempt variable rate preferred stock funds.  Tax-exempt
     bonds generally have maturities of from three to twelve months.
     Unrealized holding gains and losses were not material as of
     December 31, 1998 or 1997, and there were no significant realized
     gains or losses during 1998, 1997, or 1996.  The Registrant does
     not use financial instruments for trading purposes.  The risk of
     significant changes in stainless steel pricing for Industrial
     Equipment segment projects that extend over several months is
     managed by contracting for the stainless steel at the time the
     project is obtained.

     Concentration of credit risk, with respect to receivables, is
     limited due to the large number of customers and their dispersion
     across a wide geographic area.  The Registrant performs credit
     evaluations of all new customers and periodically reviews the
     financial condition of existing customers.  For Industrial
     Equipment segment orders, down payments and/or progress payments
     are generally required based on the dollar value of the order and
     customer creditworthiness.  Foreign receivables generally are
     secured by irrevocable letters of credit confirmed by a major
     U.S. bank.

     Statement of Financial Accounting Standards (SFAS) No. 133,
     "Accounting for Derivative Instruments and Hedging Activities,"
     issued in June 1998 and effective for the Registrant's 1999
     fiscal year, is not expected to have a material effect on the
     Registrant's financial position or results of operations.

                                  14

<PAGE>   15

ITEM 7.A. - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
     
Certain information concerning market risk is set forth in Item 7,
page 14, and is incorporated herein by reference.  Other disclosure
requirements are not submitted because they are not applicable or they
are not material.

                                  15

<PAGE>   16

ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
                         CONSOLIDATED BALANCE SHEETS
                         December 31, 1998 and 1997
<CAPTION>
                                                          1998         1997
                                                      -----------  -----------
<S>                                                   <C>          <C>
ASSETS
------
Current Assets:
Cash and cash equivalents (Note 1)..................  $ 1,358,060  $ 3,401,527
  Available-for-sale investments,
      at market (Note 1)............................    5,254,224    8,347,227
  Accounts and notes receivable, less reserve of
      $641,899 in 1998 and $559,261 in 1997 for
      doubtful accounts (Note 1)....................   16,030,138   16,113,239
  Inventories (Note 1) -
    Raw materials and components....................  $ 6,256,675  $ 5,101,658
    Work-in-process.................................    1,808,244    1,727,815
    Finished goods..................................    2,247,814    1,202,936
                                                      -----------  -----------
                                                     $ 10,312,733  $ 8,032,409
  Prepayments.......................................      437,607      474,430
                                                      -----------  -----------
          Total Current Assets......................  $33,392,762  $36,368,832
Other Assets (Notes 2 and 3)........................    2,955,817    3,523,801
Property, Plant and Equipment - at cost (Note 1) -
  Land and land improvements........................  $ 3,087,283  $ 2,712,112
  Buildings.........................................   13,228,773   12,876,279
  Shop equipment....................................   28,702,060   26,165,326
  Transportation, office and other equipment........   13,016,281   12,118,952
  Construction-in-progress..........................      752,855      440,278
                                                      -----------  -----------
                                                      $58,787,252  $54,312,947
  Less - Accumulated depreciation...................   39,998,560   37,658,290
                                                      -----------  -----------
                                                      $18,788,692  $16,654,657
                                                      -----------  -----------
                                                      $55,137,271  $56,547,290
                                                      ===========  ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
Current Liabilities:
  Accounts payable..................................  $ 3,077,192  $ 4,295,684
  Accrued expenses -
    Income taxes (Note 3)...........................      214,520      290,700
    Payrolls........................................    2,532,346    2,125,019
    Vacations.......................................    1,931,177    1,907,269
    Other (Note ....................................    1,700,454    1,926,361
  Advance billings..................................    4,513,524    5,225,012
                                                      -----------  -----------
          Total Current Liabilities.................  $13,969,213  $15,770,045
Other Long-Term Liabilities (Note 2)................    1,159,798    1,100,036
Contingencies (Note 4)
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.................................   36,913,240   36,582,189
                                                      -----------  -----------
                                                      $42,562,293  $42,231,242
  Less - Treasury stock, 174,304 shares, at cost....    2,554,033    2,554,033
                                                      -----------  -----------
                                                      $40,008,260  $39,677,209
                                                      -----------  -----------
                                                      $55,137,271  $56,547,290
                                                      ===========  ===========
</TABLE>
              The accompanying notes are an integral part of
                    these consolidated balance sheets.

                                  16

<PAGE>   17

<TABLE>
                    CONSOLIDATED STATEMENTS OF INCOME
          For the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
                                            1998         1997         1996
                                        -----------  -----------  -----------
<S>                                     <C>          <C>          <C>
Net Sales.............................. $89,745,547  $86,693,022  $83,950,990
Cost of Sales (Note 1).................  68,173,874   66,826,192   62,252,750
                                        -----------  -----------  -----------
  Gross profit......................... $21,571,673  $19,866,830  $21,698,240
Selling, General & Administrative
  Expenses (Note 1)....................  17,682,108   16,331,730   15,855,134
                                        -----------  -----------  -----------
  Operating income..................... $ 3,889,565  $ 3,535,100  $ 5,843,106
Other Income (Expense):
  Interest income...................... $   403,564  $   704,965  $   710,324
  Interest expense.....................     (14,635)     (15,930)    (107,619)
  Other, net (Note 4)..................     104,807     (276,595)      44,208
                                        -----------  -----------  -----------
                                        $   493,736  $   412,440  $   646,913
                                        -----------  -----------  -----------
      Income before provision
        for income taxes............... $ 4,383,301  $ 3,947,540  $ 6,490,019
Provision for Income Taxes (Note 3)....   1,249,000    1,003,000    2,066,000
                                        -----------  -----------  -----------
Net Income............................. $ 3,134,301  $ 2,944,540  $ 4,424,019
                                        ===========  ===========  ===========
Basic Earnings per
  Common Share (Note 1)................      $ 2.68       $ 2.52       $ 3.79
                                             ======       ======       ======
</TABLE>
             The accompanying notes are an integral part of
                     these consolidated statements.

<TABLE>
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
          For the Years Ended December 31, 1998, 1997 and 1996
<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,
12-31-95   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)

Add
(Deduct):
Net income         -          -          -   3,134,301         -            -
Dividends,
$2.40 per
common
share              -          -          -  (2,803,250)        -            -
           ---------  ---------  ---------  ----------  --------   ----------
Balance,
12-31-98   1,342,325  1,342,325  4,306,728  36,913,240  (174,304)  (2,554,033)
           =========  =========  =========  ==========  ========   ==========
</TABLE>
              The accompanying notes are an integral part of
                      these consolidated statements.

                                  17

<PAGE>   18

<TABLE>
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
           For the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
                                             1998         1997         1996
                                         -----------  -----------  -----------
<S>                                     <C>          <C>          <C>
Cash Flows from Operating Activities:
  Net income........................... $ 3,134,301  $ 2,944,540  $ 4,424,019
  Adjustments to reconcile net income
      to net cash provided by
      operating activities:
    Bad debt (recovery) expense........      (4,834)     (16,744)     279,061
    Depreciation and amortization......   2,687,894    2,296,292    2,560,862
    (Gain) on sales of equipment.......      (8,328)     (41,523)      (7,603)
    Changes in assets and liabilities -
      Decrease (increase) in
        interest receivable............      70,684       58,230     (124,140)
      Decrease (increase) in accounts
        and notes receivable...........      87,935     (767,926)  (2,573,970)
      (Increase) decrease in
        inventories....................  (2,280,324)  (2,047,385)   5,212,831
      Decrease (increase) in
        prepayments....................      36,823      (71,170)     214,185
      Decrease (increase) in
        other assets...................     511,984     (102,047)     203,293
      (Decrease) increase in
        accounts payable...............  (1,218,492)   2,012,787      322,074
      Increase in accrued expenses.....     129,148      156,745    1,296,750
      (Decrease) increase in
        advance billings...............    (711,488)   1,139,860   (2,053,740)
      Increase (decrease) in other
        long-term liabilities..........      59,762      (88,363)     (30,192)
                                        -----------  -----------  -----------
        Net Cash Provided by
          Operating Activities......... $ 2,495,065  $ 5,473,296  $ 9,723,430

Cash Flows (Requirements) from
    Investing Activities:
  Proceeds from maturities
    of investments..................... $15,508,981  $20,780,000  $22,431,823
  Purchases of investments............. (12,486,663) (14,580,000) (24,850,000)
  Proceeds from sales of equipment.....      10,923       87,768        7,603
  Additions to property,
    plant, and equipment...............  (4,768,523)  (7,776,935)  (2,130,531)
                                        -----------  -----------  -----------
        Net Cash (Required) by
          Investing Activities......... $(1,735,282) $(1,489,167) $(4,541,105)
Cash Flows (Requirements)
    from Financing Activities:
  Repayment of debt.................... $         -  $         -  $(3,000,000)
  Dividends paid.......................  (2,803,250)  (2,803,250)  (2,452,844)
                                        -----------  -----------  -----------
        Net Cash (Required) by
          Financing Activities......... $(2,803,250) $(2,803,250) $(5,452,844)
                                        -----------  -----------  -----------
Net (Decrease) Increase in Cash........ $(2,043,467) $ 1,180,879  $  (270,519)
Cash and Cash Equivalents
  at Beginning of Year.................   3,401,527    2,220,648    2,491,167
                                        -----------  -----------  -----------
Cash and Cash Equivalents
  at End of Year....................... $ 1,358,060  $ 3,401,527  $ 2,220,648
                                        ===========  ===========  ===========
</TABLE>
              The accompanying notes are an integral part of
                      these consolidated statements.

                                  18

<PAGE>   19

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   December 31, 1998, 1997 and 1996

(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
    subsidiaries, Mueller International Sales Corporation, a foreign
    sales corporation (FSC); Mueller Transportation, Inc.; and Mueller
    Field Operations, Inc. (Companies).  All significant intercompany
    accounts and transactions have been eliminated in consolidation.
    Effective January 1, 1997, all transportation operations, pre-
    viously performed by the Registrant, and the related assets were
    transferred to Mueller Transportation, Inc.

    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
    manufactured 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
    $102,600 at December 31, 1998, and $426,300 at December 31, 1997.

    INVENTORIES -- The Registrant's inventories are recorded at the
    lower of cost on a last-in, first-out (LIFO) basis 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
    $7,409,602, $6,679,563, and $7,119,773 higher than those reported
    at December 31, 1998, 1997, and 1996, 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 $978,900 in 1998, $719,200
    in 1997, and $653,200 in 1996.

    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:

                                  19

<PAGE>   20

<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.

    EARNINGS PER COMMON SHARE -- The net income per share of common
    stock has been computed on the basis of shares outstanding
    (1,168,021 shares in 1998, 1997, and 1996).

    INVESTMENTS -- The Registrant classifies its investments in tax-
    exempt bonds, a taxable bond fund, and taxable 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 management 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 con-
    solidated balance sheets at December 31, 1998 and 1997, include:

<TABLE>
<CAPTION>
                                                 1998         1997
                                             -----------  -----------
    <S>                                      <C>          <C>
    Taxable bond fund....................... $   552,682  $ 1,000,000
    Tax-exempt bonds........................   3,625,000    6,200,000
    Tax-exempt preferred stock funds........           -    1,000,000
    Taxable preferred stock fund............   1,000,000            -
    Accrued interest........................      76,542      147,227
                                             -----------  -----------
                                             $ 5,254,224  $ 8,347,227
                                             ===========  ===========
</TABLE>

    Unrealized holding gains and losses were not material as of
    December 31, 1998 or 1997.  There were no significant realized
    gains or losses during 1998, 1997, or 1996.

    STATEMENTS OF CASH FLOWS -- For purposes of the statements of
    cash flows, the Registrant considers investments with a maturity
    of three months or less to be cash equivalents.

    Interest and income tax payments for each of the three years
    during the period ended December 31, 1998, were as follows:

<TABLE>
<CAPTION>
                                    1998         1997         1996
                                -----------  -----------  -----------
    <S>                         <C>          <C>          <C>
    Interest payments.......... $    14,600  $    15,900  $   107,600
    Income tax payments........ $ 1,420,500  $ 1,601,700  $ 1,336,600
</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

                                  20

<PAGE>   21

    employees' contributions 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
    Registrant's contributions to the plan were $415,300 for 1998,
    $336,500 for 1997, and $587,500 for 1996.

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

    Total pension expense under the plans was $781,800 in 1998,
    $659,900 in 1997, and $364,200 in 1996.  Management's policy is
    to fund pension expense that is currently deductible for tax
    purposes.

    The following table sets forth the required disclosures for the
    pension plans at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                         1998         1997
                                                     -----------  -----------
    <S>                                              <C>          <C>
    Change in Benefit Obligation
      Benefit obligation at beginning of year....... $29,600,900  $25,263,700
      Service cost..................................   1,172,900    1,005,400
      Interest cost.................................   2,129,600    1,927,300
      Actuarial loss................................     731,800    2,505,600
      Benefits paid and expenses....................  (1,103,000)  (1,101,100)
                                                     -----------  -----------
      Benefit obligation at end of year............. $32,532,200  $29,600,900
                                                     ===========  ===========
    Change in Plan Assets
      Fair value of plan assets
        at beginning of year........................ $33,008,900  $28,502,600
      Actual return on plan assets..................   3,699,500    5,086,200
      Employer contribution.........................     688,200      521,200
      Benefits paid and expenses....................  (1,103,000)  (1,101,100)
                                                     -----------  -----------
      Fair value of plan assets at end of year...... $36,293,600  $33,008,900
                                                     ===========  ===========
    Reconciliation
      Funded status................................. $ 3,761,400  $ 3,408,000
      Unrecognized net actuarial (gain).............  (4,269,900)  (3,692,600)
      Unrecognized transition (asset)...............    (810,400)  (1,160,900)
      Unrecognized prior service cost...............   1,991,300    2,211,500
                                                     -----------  -----------
      Prepaid benefit cost.......................... $   672,400  $   766,000
                                                     ===========  ===========
<CAPTION>
                                            1998         1997         1996
                                        -----------  -----------  -----------
    <S>                                 <C>          <C>          <C>
    Components of Pension Expense
      Service cost..................... $ 1,172,900  $ 1,005,400  $   897,200
      Interest cost....................   2,129,600    1,927,300    1,692,400
      Expected return on plan assets...  (2,388,500)  (2,141,900)  (2,018,800)
      Amortization of
        transition (asset).............    (350,500)    (350,500)    (350,500)
      Amortization of
        prior service cost.............     220,200      220,200      143,900
      Recognized net actuarial (gain)..      (1,900)        (600)           -
                                        -----------  -----------  -----------
      Pension expense.................. $   781,800  $   659,900  $   364,200
                                        ===========  ===========  ===========
</TABLE>

                                  21

<PAGE>   22

    Prepaid pension assets of $2,377,500 and $2,392,700 at December
    31, 1998 and 1997, respectively, are included in other assets
    on the accompanying consolidated balance sheets.  Pension lia-
    bilities of $1,705,100 and $1,626,700 at December 31, 1998 and
    1997, respectively, are included in current and other long-term
    liabilities on the accompanying consolidated balance sheets.

    The weighted average expected long-term rate of return on plan
    assets used in the determination of annual pension expense was
    8.5% for 1998, 1997, and 1996.  The weighted average assumed
    discount rate used to measure the benefit obligation was 7.0% at
    December 31, 1998 and  1997.  The assumed rate of compensation
    increase used to measure the benefit obligation was 4.5% at
    December 31, 1998 and 1997, for the applicable plan.

(3) INCOME TAXES:

    The provision for taxes on income from operations includes:

<TABLE>
<CAPTION>
                                      1998        1997        1996
                                   ----------  ----------  ----------
    <S>                            <C>         <C>         <C>
    Current tax expense........... $1,037,200  $1,087,800  $1,823,800
    Deferred, net.................    211,800     (84,800)    242,200
                                   ----------  ----------  ----------
                                   $1,249,000  $1,003,000  $2,066,000
                                   ==========  ==========  ==========
</TABLE>

    The deferred tax consequences of temporary differences in report-
    ing items for financial statement and income tax purposes are
    recognized, if appropriate.  Net deferred tax assets of $320,000
    and $778,200 at December 31, 1998 and 1997, 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 accom-
    panying consolidated balance sheets is a result of the following:

<TABLE>
<CAPTION>
                                                   1998       1997
                                                ---------  ---------
    <S>                                         <C>        <C>
    Deferred Tax Assets:
        Insurance............................. $   69,800  $   82,100
        Vacation..............................    637,200     635,800
        Warranty..............................     18,500      56,200
        Doubtful accounts.....................    237,500     206,900
        Healthcare benefits...................    164,300     176,000
        Lawsuit...............................    383,500     367,400
        Other.................................    126,000     110,800
                                               ----------  ----------
                                               $1,636,800  $1,635,200
                                               ==========  ==========
    Deferred Tax Liabilities:
        Depreciation.......................... $  658,300  $  292,100
        Pensions..............................    510,300     538,000
        Other.................................    148,200      26,900
                                               ----------  ----------
                                               $1,316,800  $  857,000
                                               ==========  ==========
</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, 1998, follows:

                                  22

<PAGE>   23

<TABLE>
<CAPTION>
                               1998              1997              1996
                         ----------------  ----------------  ----------------
                           Amount      %     Amount      %     Amount      %
                         ----------  ----  ----------  ----  ----------  ----
    <S>                  <C>         <C>   <C>         <C>   <C>         <C>
    Statutory federal
     income tax......... $1,490,300  34.0  $1,342,200  34.0  $2,206,600  34.0
    Increase (decrease)
      in taxes resulting
      from:
     State tax, net of
      federal benefit...     65,400   1.5      53,700   1.4      67,600   1.0
     Tax-exempt
      interest..........    (71,100) (1.6)   (137,400) (3.5)   (165,700) (2.6)
     Tax credits........    (27,200) (0.6)    (22,200) (0.5)    (14,400) (0.2)
     FSC exempt income..   (170,900) (3.9)   (138,700) (3.5)   (138,500) (2.1)
     Other, net.........    (37,500) (0.9)    (94,600) (2.5)    110,400   1.7
                         ----------  ----  ----------  ----  ----------  ----
                         $1,249,000  28.5  $1,003,000  25.4  $2,066,000  31.8
                         ==========  ====  ==========  ====  ==========  ====
</TABLE>

(4) 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 $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 another lawsuit pending at
    December 31, 1998.  In the opinion of management, after consul-
    tation with legal counsel, the outcome of the lawsuit will not
    have a material adverse effect on the Registrant's consolidated
    financial statements.

    The Registrant employs nearly 860 people, of which approximately
    380 are represented by the Sheet Metal Workers Union.  The
    International Union called a strike beginning July 25, 1995, and
    currently 20 employees 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 ex-
    posure to the Registrant.

(5) SEGMENT DATA:

    The Registrant has two reportable segments:  Industrial Equipment
    and Dairy Farm Equipment.  The Registrant's Industrial Equipment
    segment sells the following products directly to industrial cus-
    tomers:  food, beverage, chemical, and pharmaceutical processing
    equipment; industrial heat transfer equipment; pure water equip-
    ment; thermal energy storage equipment; and commercial refrigera-
    tion equipment.  The Registrant's Dairy Farm Equipment segment
    sells milk cooling and storage equipment and accessories, refri-
    geration units, and heat recovery equipment for use on dairy farms
    to independent dealers for resale.

    Management evaluates performance and allocates resources based
    on operating income or loss before income taxes.  The account-
    ing policies of the reportable segments are the same as those

                                  23

<PAGE>   24

    described in Summary of Accounting Policies in Note 1 to these
    Consolidated Financial Statements.  There are no intersegment
    sales.

    The Registrant's reportable segments are managed separately
    because they offer different products.  Industrial Equipment
    products have been aggregated because they are designed and built
    to a customer's specifications, and they use common processes and
    resources in the manufacturing operation.  The long-term financial
    performance of the product lines included in the Industrial Equip-
    ment segment is affected by similar economic conditions.  The
    Dairy Farm Equipment segment includes standard products that are
    built to stock and are available for sale from inventory.  The
    demand for Dairy Farm Equipment products relates to the economic
    factors that influence the profitability of dairy farmers.

<TABLE>
<CAPTION>
                                                  1998
                           --------------------------------------------------
                            Dairy Farm   Industrial    Other /
                            Equipment    Equipment    Corporate  Consolidated
                           -----------  -----------  -----------  -----------
    <S>                    <C>          <C>          <C>          <C>
    Revenues from
     external customers... $19,192,965  $70,552,582  $         -  $89,745,547
    Depreciation and
     amortization expense. $   506,320  $ 1,866,868  $   314,706  $ 2,687,894
    Income (expense)
     before income tax.... $ 2,472,637  $ 2,105,629  $  (194,965) $ 4,383,301
    Assets................ $10,761,132  $32,806,912  $11,569,227  $55,137,271
    Additions to
     property, plant,
     and equipment........ $   426,789  $ 4,030,797  $   310,937  $ 4,768,523
<CAPTION>
                                                  1997
                           --------------------------------------------------
                            Dairy Farm   Industrial    Other /
                            Equipment    Equipment    Corporate  Consolidated
                           -----------  -----------  -----------  -----------
    <S>                    <C>          <C>          <C>          <C>
    Revenues from
     external customers... $22,390,144  $64,302,878  $         -  $86,693,022
    Depreciation and
     amortization expense. $   780,138  $ 1,176,630  $   339,524  $ 2,296,292
    Income before
     income tax........... $ 3,454,940  $   272,869  $   219,731  $ 3,947,540
    Assets................ $11,987,432  $27,857,839  $16,702,019  $56,547,290
    Additions to
     property, plant,
     and equipment........ $ 1,236,037  $ 6,067,429  $   473,469  $ 7,776,935
<CAPTION>
                                                  1996
                           --------------------------------------------------
                            Dairy Farm   Industrial    Other /
                            Equipment    Equipment    Corporate  Consolidated
                           -----------  -----------  -----------  -----------
    <S>                    <C>          <C>          <C>          <C>
    Revenues from
     external customers... $19,169,174  $64,781,816  $         -  $83,950,990
    Depreciation and
     amortization expense. $   842,512  $ 1,313,830  $   404,520  $ 2,560,862
    Income before
     income tax........... $ 2,479,867  $ 3,917,004  $    93,148  $ 6,490,019
    Assets ............... $10,401,372  $21,171,140  $21,612,459  $53,184,971
    Additions to
     property, plant,
     and equipment........ $   812,711  $ 1,059,414  $   258,406  $ 2,130,531
</TABLE>

    Revenues from external customers by product category for the three
    years ended December 31, 1998, were:

<TABLE>
<CAPTION>
                                            1998         1997         1996
                                        -----------  -----------  -----------
    <S>                                 <C>          <C>          <C>
    Milk cooling & storage equipment... $17,144,400  $20,455,089  $18,285,168
    Processing equipment...............  47,613,127   38,066,204   39,964,316
    Other industrial equipment.........  24,988,020   28,171,729   25,701,506
                                        -----------  -----------  -----------
                                        $89,745,547  $86,693,022  $83,950,990
                                        ===========  ===========  ===========
</TABLE>

                                  24

<PAGE>   25

    Revenues by geographic location are attributed to countries based
    on the location of the customer and for the three years ended
    December 31, 1998, were:

<TABLE>
<CAPTION>
                                            1998         1997         1996
                                        -----------  -----------  -----------
    <S>                                 <C>          <C>          <C>
    United States...................... $65,914,311  $67,996,277  $67,687,328
    North America......................   6,935,491    6,065,359    5,581,414
    Asia & the Far East................  13,385,745    7,665,046    6,648,292
    Other areas........................   3,510,000    4,966,340    4,033,956
                                        -----------  -----------  -----------
                                        $89,745,547  $86,693,022  $83,950,990
                                        ===========  ===========  ===========
</TABLE>

    During the years presented, 1998 included export sales to Japan
    ($10,358,984) that were in excess of 10% of consolidated sales.

    All long-lived assets owned by the Registrant and its subsidiaries
    are located in the United States.

    During 1998, 1997, and 1996, sales to any one customer were not in
    excess of 10% of consolidated sales.

<TABLE>
                  FINANCIAL HIGHLIGHTS BY QUARTER (UNAUDITED)
                     (In Thousands, Except Per Share Data)
<CAPTION>
                                     Quarter Ended
              ---------------------------------------------------------------
                  March 31        June 30       September 30    December 31
              --------------- --------------- --------------- ---------------
                1998    1997    1998    1997    1998    1997    1998    1997
              ------- ------- ------- ------- ------- ------- ------- -------
                                                        <F2>    <F3>    <F4>
<S>           <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Net sales.... $17,424 $17,208 $24,810 $21,868 $25,126 $23,404 $22,386 $24,213
Gross
 profit (a).. $ 4,793 $ 4,229 $ 6,875 $ 5,401 $ 5,970 $ 4,986 $ 3,934 $ 5,251
Net income
 (loss)...... $   701 $   436 $ 1,684 $ 1,047 $ 1,117 $   360 $  (368)$ 1,102
Earnings
 (loss) per
 common
 share.......  $ 0.60  $ 0.37  $ 1.44  $ 0.90  $ 0.96  $ 0.31  $(0.32) $ 0.94
<FN>
<F1> Because the inventory determination under the LIFO method can
     only be made at the end of each fiscal year based on the inven-
     tory 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 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.

<F3> Net income for the fourth quarter of 1998 was unfavorably
     affected by a LIFO adjustment and by large healthcare claims.
     The effect of the LIFO adjustment decreased net income by
     $284,000, or $0.24 per share, and the healthcare claims de-
     creased net income by $328,000, or $0.28 per share.

<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.
</FN>
</TABLE>

                                  25

<PAGE>   26

               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, 1998 and 1997, and the related consolidated statements
of income, shareholders' investment, and cash flows for each of the
three years in the period ended December 31, 1998.  These financial
statements and Schedule II are the responsibility of the Registrant's
management.  Our responsibility is to express an opinion on these
financial statements and Schedule II based on our audits.

     We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a rea-
sonable 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, 1998 and
1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in
conformity with generally 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 pre-
sented 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 subjected 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 12, 1999

ITEM 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

                                  26

<PAGE>   27

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 3, 1999,
     and is incorporated herein by reference.  The information con-
     cerning executive officers is set forth on page 6 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 3, 1999, 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 3, 1999, 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 3, 1999, and is incorporated herein by reference.

                                  27

<PAGE>   28

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, 1998:

           - Consolidated Balance Sheets............December 31, 1998
                                                    and 1997
           - Consolidated Statements of Income......For years ended
                                                    December 31, 1998,
                                                    1997 and 1996
           - Consolidated Statements of
             Shareholders' Investment...............For years ended
                                                    December 31, 1998,
                                                    1997 and 1996
           - Consolidated Statements of
             Cash Flows.............................For years ended
                                                    December 31, 1998,
                                                    1997 and 1996
           - Notes to Consolidated
             Financial Statements...................December 31, 1998,
                                                    1997 and 1996
           - Financial Highlights by Quarter........For years ended
                                                    December 31, 1998
                                                    and 1997
           - Report of Independent
             Public Accountants

        2. Additional financial statement schedules included herein:

           -  Schedule II - Valuation and
              Qualifying Accounts.............................Page 30
           -  All other schedules are not submitted
              because they are not applicable or
              not required, or because the required
              information is included in the finan-
              cial statements or notes thereto.

        3. The exhibits set forth in the Exhibit Index found on pages
           31 through 33.

     B. No reports on Form 8-K were filed by the Registrant during the
        last quarter of 1998.

                                  28

<PAGE>   29

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 12, 1999        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 12, 1999        BY     /S/    DANIEL C. MANNA
       --------------           -------------------------------------
                                           Daniel C. Manna
                                        President and Director
                                      (Chief Executive Officer)

DATE   March 12, 1999        BY     /S/     PAUL MUELLER
       --------------           -------------------------------------
                                            Paul Mueller
                                       Chairman of the Board
                                            and Director

DATE   March 12, 1999        BY     /S/    DONALD E. GOLIK
       --------------           -------------------------------------
                                           Donald E. Golik
                                Senior Vice President, Chief Financial
                                     Officer, Secretary and Director

DATE   March 12, 1999        BY     /S/    DAVID T. MOORE
       --------------           -------------------------------------
                                           David T. Moore
                                              Director

DATE   March 12, 1999        BY     /S/  WILLIAM B. JOHNSON
       --------------           -------------------------------------
                                         William B. Johnson
                                              Director

DATE   March 12, 1999        BY     /S/ WILLIAM R. PATTERSON
       --------------           -------------------------------------
                                        William R. Patterson
                                              Director

DATE   March 12, 1999        BY     /S/ CHARLES M. RUPRECHT
       --------------           -------------------------------------
                                        Charles M. Ruprecht
                                              Director

                                  29

<PAGE>   30

<TABLE>
                                                                  SCHEDULE II
                    PAUL MUELLER COMPANY AND SUBSIDIARIES
                      VALUATION AND QUALIFYING ACCOUNTS
                 FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<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>
12-31-98...  $559,261      $125,703      $      -      $ 43,065<F1>  $641,899
12-31-97...  $698,036      $(82,689)     $      -      $ 56,086<F1>  $559,261
12-31-96...  $531,601      $316,990      $      -      $150,555<F1>  $698,036
<FN>
<F1> Accounts written off during the year.
</FN>
</TABLE>

                                  30

<PAGE>   31

<TABLE>
                               EXHIBIT INDEX
<CAPTION>
Number                          Description                          Page No.
------  -----------------------------------------------------------  --------
 <S>    <C>                                                             <C>
  (3)   ARTICLES OF INCORPORATION AND BY-LAWS - The Restated Ar-
        ticles 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) The 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) The 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>                                            <C>
            1. The 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. The Paul Mueller Company Dependent Care
               Assistant Plan, effective January 1, 1996,
               and adopted by the Board of Directors on
               August 2, 1995.............................    22
 <S>    <C>                                                             <C>
        (c) The Paul Mueller Company Noncontract Employees Retirement
            Plan, as amended and restated effective January 1, 1989,

                                  31

<PAGE>   32

<CAPTION>
Number                          Description                          Page No.
------  -----------------------------------------------------------  --------
 <S>    <C>                                                             <C>
            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 Decem-
            ber 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, 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) The Paul Mueller Company Employee Benefit Plan, amended
            and restated effective June 1, 1998, and adopted by the
            Trustees on August 5, 1998, was attached as Exhibit
            (10), page 33, of the Registrant's Form 10-Q for the
            quarter ended September 30, 1998, and is incorporated
            herein by reference.

        (e) The 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
            Amendment, effective September 1, 1997, was executed
            on August 14, 1997, was attached as Exhibit (10), page
            32, of the Registrant's Form 10-K for the quarter ended
            December 31, 1997, and is incorporated herein by refer-
            ence.

        (f) The 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 refer-
            ence.  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) The Agreement and Declaration of Trust for the Paul
            Mueller Company Employee Benefit Plan dated May 2, 1988,

                                  32

<PAGE>   33

<CAPTION>
Number                          Description                          Page No.
------  -----------------------------------------------------------  --------
 <S>    <C>                                                             <C>
            attached as Exhibit (10), page 107, of the Registrant's
            Form 10-K for the year ended December 31, 1988, is in-
            corporated herein by reference.

        (h) The Paul Mueller Company Salaried and Clerical Employees
            Retirement Trust, as amended August 11, 1981, was at-
            tached 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) The Executive Compensation Plans and Arrangements:

             i. The Paul Mueller Company Supplemental Executive Re-
                tirement 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. The 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 refer-
                ence.

 (21)   SUBSIDIARIES OF THE REGISTRANT.............................     34

 (27)   FINANCIAL DATA SCHEDULE AS OF DECEMBER 31, 1998............     35
</TABLE>

                                  32