SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    ----------

                                    FORM 10-Q

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

                  For the quarterly period ended March 31,1999

                        Commission File Number: 333-10611

                               UNIFRAX CORPORATION
             (Exact name of registrant as specified in its charter)


         Delaware                                      34-1535916
(State or other jurisdiction               (I.R.S. Employer Identification No.)
 of incorporation)

               2351 Whirlpool Street, Niagara Falls, NY 14305-2413
               (Address of principal executive offices) (Zip Code)
       Registrant's telephone number, including area code: (716) 278-3800
                   -------------------------------------------


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

<PAGE>

                               Unifrax Corporation
                                    Form 10-Q
                                      Index

                                                                        Page No.
                                                                        --------

PART I.      FINANCIAL INFORMATION

Item 1.      Condensed Consolidated Financial Statements (Unaudited)

             Condensed Consolidated Balance Sheets at
                  March 31, 1999 and December 31, 1998........................1

             Condensed Consolidated Statements of Income for the
                  Three-month periods ended March 31, 1999 and 1998...........2

             Condensed Consolidated Statements of Cash Flow for the
                  Three-month periods ended March 31, 1999 and 1998...........3

             Notes to Condensed Consolidated Financial Statements.............4

Item 2.      Management's Discussion and Analysis of
             Financial Condition and Results of Operations....................8

Item 3.      Qualitative and Quantitative Disclosure About Market Risk.......10

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings...............................................11
Item 2.      Changes in Securities and Use of Proceeds.......................11
Item 3.      Defaults on Senior Securities...................................11
Item 4.      Submission of Matters to a Vote of Security Holders ............11
Item 5.      Other Information...............................................11
Item 6.      Exhibits and Reports on Form 8-K................................11

Signatures...................................................................12

<PAGE>

PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

                               Unifrax Corporation
                      Condensed Consolidated Balance Sheets
                  (Unaudited - In Thousands, Except Share Data)


<TABLE>
<CAPTION>

                                                                  December 31          March 31
                                                                     1998                1999
                                                                     ----                ----
<S>                                                         <C>                 <C>
ASSETS
Current assets:
     Cash                                                   $           43      $           52
     Accounts receivable, less allowances of $708
         and $559, respectively                                     12,953              14,472
     Inventories                                                    10,343              10,056
     Deferred income taxes                                           2,494               2,494
     Prepaid expenses and other current assets                         220                 335
                                                               -----------          ----------
Total current assets                                                26,053              27,409

Property, plant and equipment, at cost                              74,363              74,869
     Less accumulated depreciation and amortization                (37,656)            (38,774)
                                                               -----------          ----------
                                                                    36,707              36,095

Deferred income taxes                                               22,402              21,900
Organization costs, net of accumulated amortization
     of $1,642 and $1,829, respectively                              3,279               3,092
Other assets                                                           213                 249
                                                               -----------          ----------
                                                           $        88,654       $      88,745
                                                               ===========          ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Note payable -- affiliate                                 $     7,000          $    7,000
     Current portion of long term debt                               3,750               5,500
     Accounts payable                                                3,306               2,283
     Accrued expenses                                                7,139               9,857
                                                              ------------         -----------
Total current liabilities                                           21,195              24,640

Long term debt                                                     105,950             102,000
Accrued postretirement benefit cost                                  3,472               3,596
Other long-term obligations                                            161                 161
                                                              ------------         -----------
Total liabilities                                                  130,778             130,397

STOCKHOLDERS' DEFICIT
Common stock--$.01 par value;
 shares authorized--40,000;
 shares issued and outstanding--20,000                                  --                  --
Redeemable convertible cumulative preferred
  stock--voting $.01 par value;
  shares authorized--10,000,
  shares issued and outstanding--1,666.67
  (aggregate liquidation preference of
  $2,686 and $2,724, respectively,
  including dividends in arrears)                                       --                  --
Additional paid-in capital                                          42,520              42,520
Accumulated deficit                                                (84,361)            (83,700)
Accumulated other comprehensive income                                (283)               (472)
                                                              ------------        ------------
Total stockholders' deficit                                        (42,124)            (41,652)
                                                              ------------        ------------
                                                          $         88,654      $       88,745
                                                              ============        ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

                               Unifrax Corporation

                   Condensed Consolidated Statements of Income
                           (Unaudited - In Thousands)



                                                     Three Months Ended March 31
                                                          1998           1999
                                                          ----           ----

Net sales                                             $  21,734      $  21,173

Cost of goods sold                                       10,912         11,223
                                                        -------         ------
Gross profit                                             10,822          9,950

Selling, general and
   administration expenses                                5,866          5,777
                                                        -------         ------

Operating income                                          4,956          4,173
Other income (expense), net                                  79            (82)
                                                        -------         ------
Income before interest and income taxes                   5,035          4,091
Interest expense                                         (3,031)        (2,931)
                                                        -------        -------

Income before income taxes                                2,004          1,160
Provision for income taxes                                  511            499
                                                        -------        -------
Net income                                            $   1,493     $      661
                                                        =======        =======




See accompanying notes to condensed consolidated financial statements.

<PAGE>

                               Unifrax Corporation

                 Condensed Consolidated Statements of Cash Flows
                           (Unaudited - In Thousands)

<TABLE>
<CAPTION>

                                                                                         Three Months Ended March 31
                                                                                          1998                1999
                                                                                          ----                ----
<S>                                                                                  <C>              <C> 
OPERATING ACTIVITIES
Net income                                                                           $   1,493        $        661
Depreciation and amortization                                                            1,426               1,305
Other adjustments and changes in operating assets and liabilities                          544               1,273
                                                                                        ------               -----
Cash provided by operating activities                                                    3,463               3,239

INVESTING ACTIVITIES
Capital expenditures                                                                      (416)             (1,037)
Proceeds from sales of property, plant and equipment                                        19                   7
                                                                                        ------               -----
Cash used in investing activities                                                         (397)             (1,030)

FINANCING ACTIVITIES
Repurchase of Senior Notes                                                                   -              (2,000)
Borrowings under revolving loan                                                          4,900               7,000
Repayments of revolving loan                                                            (6,900)             (6,700)
Repayment of term loan                                                                  (1,000)               (500)
                                                                                        ------              ------
Cash used in financing activities                                                       (3,000)             (2,200)
                                                                                        ------              ------

Net increase in cash                                                                        66                   9
Cash--beginning of period                                                                  359                  43
                                                                                        ------             -------
Cash--end of period                                                                  $     425         $        52
                                                                                        ======             =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

                               Unifrax Corporation

              Notes to Condensed Consolidated Financial Statements
                                 March 31, 1999


NOTE A - BASIS OF PRESENTATION

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
Unifrax   Corporation  ("The  Company"  or  "Unifrax")  have  been  prepared  in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  In the opinion of management,  all adjustments  (consisting only of
normal recurring  accruals)  considered  necessary for a fair  presentation have
been included.  Results for the period ended March 31, 1999, are not necessarily
indicative of the results that may be expected for the year ending  December 31,
1999. For further  information,  refer to the consolidated  financial statements
and the notes  thereto for the year ended  December  31,  1998,  included in the
Company's  annual  report on Form 10-K filed with the  Securities  and  Exchange
Commission.  All capitalized terms used in these notes to condensed consolidated
financial statements that are not defined herein have the meanings given to them
in such consolidated  financial  statements and notes to consolidated  financial
statements.

NOTE B - INVENTORIES

The components of inventory consist of the following (in thousands):

                                              December 31            March 31
                                                1998                  1999
                                                ----                  ----

       Raw materials and supplies          $     3,459           $     3,482
       Work in process                           2,008                 1,827
       Finished products                         4,341                 4,304
                                                ------                ------
                                                 9,808                 9,613

       Adjustment to LIFO Cost                     535                   443
                                                ------                ------
                                             $  10,343             $  10,056
                                                ======                ======

<PAGE>

NOTE C - CONTINGENCIES

Ceramic Fibers

Regulatory agencies and others,  including the Company, are currently conducting
scientific  research to determine the potential health impact resulting from the
inhalation  of  airborne  ceramic  fibers.  To date,  studies  of  workers  with
occupational  exposure  to  airborne  ceramic  fiber  have  found no  clinically
significant  relationship between prior or current exposure to ceramic fiber and
disease in humans;  however,  independent  animal  studies have  indicated  that
ceramic fiber inhaled by test animals at elevated doses can produce  respiratory
disease,  including cancer.  The results of this research have been inconclusive
as to whether or not ceramic fiber  exposure  presents an  unreasonable  risk to
humans.

From  time  to  time   Carborundum,   as  predecessor  to  Unifrax,   and  other
manufacturers  of ceramic  fibers  have been  named as  defendants  in  lawsuits
alleging death or personal injury as a result of exposure in the manufacture and
handling of ceramic fiber and other  products.  The amount of any liability that
might  ultimately  exist with  respect to these  claims or any other  unasserted
claims is presently not determinable.  The Company believes the lawsuits brought
against The  Carborundum  Company  have been  without  merit and the  litigation
currently  pending,  or to its  knowledge  threatened,  will not have a material
adverse  effect on the  financial  condition  or  results of  operations  of the
Company. The Company's belief is based on the fact that, although animal studies
have  indicated that ceramic fiber inhaled by test animals at elevated doses can
cause  disease,  there is no evidence that exposure to refractory  ceramic fiber
has resulted in disease in humans.

Consistent  with  customary  practice  among   manufacturers  of  ceramic  fiber
products,  Carborundum  entered into agreements with distributors of its product
whereby  Carborundum  agreed  to  indemnify  the  distributors   against  losses
resulting from ceramic fiber claims and the costs to defend against such claims.
To the best of the Company's knowledge,  there have been no historical,  nor are
there  any  current,   ceramic   fiber   exposure   claims  made  against  these
indemnification agreements. Consequently, the amount of any liability that might
ultimately   exist  with  respect  to  these   indemnities   is  presently   not
determinable.

Pursuant to the Recapitalization  Agreement,  BP America Inc. and certain of its
affiliates  (collectively  "BP  America"),  has agreed to indemnify  the Company
against  liabilities  for personal  injury and wrongful  death  attributable  to
exposure  which  occurred  prior to the  Closing to  refractory  ceramic  fibers
manufactured  by the  Company.  BP America has agreed to  indemnify  the Company
against all liabilities  arising from exposure claims pending at the time of the
Closing.  For all other claims arising from alleged  exposure  occurring  solely
prior to Closing,  BP America has agreed to indemnify the Company against 80% of
all losses,  until the total loss which the Company incurs reaches $3.0 million,
after which time BP America has agreed to indemnify the Company  against 100% of
such losses. BP America has agreed to indemnify the Company against all punitive
damages  attributable  to the  conduct of the Company  prior to  Closing.  Where
losses arise from alleged  exposure  both before and after  Closing,  the losses
will be  allocated  between BP America and the Company,  pro rata,  based on the
length of exposure or pursuant to  arbitration  if initiated by the Company.  To
date the Company has incurred no claims  losses  applicable  to the $3.0 million
total mentioned above.

The Company cannot avail itself of this indemnity for losses attributable to the
Company's failure to maintain a Product  Stewardship Program consistent with the
program  maintained  by  the  Company  prior  to  Closing,   as  modified  in  a
commercially   reasonable   manner  in  accordance  with  changing   regulatory,
scientific  and  technical  factors.  BP shall not  indemnify  the Company  with
respect to any  liabilities  for wrongful death or personal injury to the extent
caused by the failure of the Company to maintain a Product  Stewardship  Program
consistent  with that  maintained  by the Company  prior to the Closing.  In the
Company's  opinion,  the Product  Stewardship  Program has been  maintained in a
manner  consistent  with these  requirements.  Unifrax intends to defend ceramic
fiber claims vigorously.

Environmental Matters

The Company is subject to loss contingencies  pursuant to various federal, state
and local environmental laws and regulations. These include possible obligations
to remove or mitigate the effects on the environment of the placement,  storage,
disposal or release of certain  chemical or petroleum  substances by the Company
or by other parties.

Superfund  Sites.  The Company may be named as a potentially  responsible  party
("PRP") pursuant to the Comprehensive  Environmental  Response  Compensation and
Liability Act of 1980, as amended  ("CERCLA" or "Superfund") or comparable state
law in connection with off-site disposal of hazardous substances at three sites,
and The Carborundum  Company has entered into a Consent Decree with the New York
State Department of Environmental Conservation to remediate contamination at the
facility  located in Sanborn,  New York. While the Company's  ultimate  clean-up
liability at the sites at which the Company is a potential  PRP is not presently
determinable,  the Company does not expect to incur any material  liability with
respect to any of these sites,  individually or in the aggregate, as a result of
its activities at these sites.  Furthermore,  BP America has agreed to indemnify
the Company for certain environmental liabilities, which might ultimately exist,
under the  Recapitalization  Agreement.  In  addition,  BP America  has  assumed
liability for other  potential  off-site  clean-up  obligations  associated with
Carborundum.  The sites at which the Company has maintained  potential  off-site
liability and the Carborundum Sanborn, New York facility are described below.

Kline Trail Site. In 1984, the Company  voluntarily advised the State of Indiana
of potential unauthorized disposal of waste at an Indiana site by a transporter.
No response from the state has been received,  and no further  information about
the  potential  for  remediation  costs at the site  has  been  received  by the
Company. It is expected that little or no liability will be associated with this
site.

PCB Inc.,  Site.  The New  Carlisle,  Indiana  facility  received a request  for
information from the EPA in 1994 concerning potential responsibility for cleanup
of the PCB  Treatment  site  located in Kansas  City,  Kansas  and Kansas  City,
Missouri.  Records  indicate that a number of  capacitors  from the New Carlisle
facility of The Carborundum Company,  now Unifrax Corporation,  were sent to the
PCB  Treatment  site. A response  documenting  the timely  destruction  of those
materials  was  submitted  to the EPA. In  September  1997 the EPA  contacted BP
America via letter to verify  that a total of 10,900  pounds of  capacitors  and
transformers had been sent to the site by BP America/Carborundum.  No additional
information  on  cleanup  timing or cost has since been  received.  Based on the
total  pounds  delivered  by all  parties to the site,  the  liability,  if any,
ultimately  attributable  to BP America or Carborundum is not expected to have a
material adverse effect on the Company's financial position.

Osage Metals Site.  Osage Metals Co., Inc. was a scrap metal  business in Kansas
City, Kansas,  that reclaimed metals from various sources,  including metal from
used  transformers  and capacitors.  Osage  purchased  transformer and capacitor
scrap metal from PCB Treatment Co., Inc.  ("PCB Inc." above) and others.  An EPA
sampling  of soil at the  Osage  site  indicated  the  presence  of PCB and lead
contamination.  In early 1998 BP  America  was  notified  by the EPA that it was
potentially  liable under CERCLA for response  costs at the Osage site.  Through
April 1997 the EPA had incurred  $1.2 million of the  estimated  $1.8 million in
cleanup  costs  related to the Osage site and was seeking  recovery of the costs
from  potentially  responsible  parties.  Based on documents BP America received
from the EPA showing volumetric rankings, BP  America/Carborundum  accounted for
approximately one tenth of one percent of the total weight of capacitors sent to
PCB Treatment, Inc. Consequently, the liability, if any, ultimately attributable
to BP America or Carborundum  is not expected to have a material  adverse effect
on the Company's financial position.

Shulman Site.  The Company has potential  liability  with respect to the Shulman
Site in St. Joseph  County,  Indiana.  The site is a landfill  which the Company
believes  to have been  contaminated  by  chemicals  migrating  from an adjacent
facility.  Plant trash from the New Carlisle facility was hauled to the site. An
agreement has been reached pursuant to which the Company,  as part of a response
group,  agreed to assume  approximately 5% of certain  response costs,  which to
date includes $1.7 million for installation of a water line. The Company's share
of that cost is under $100,000.  The owner of the adjacent  facility has assumed
the  bulk of site  remediation  costs  to  date.  It is  anticipated  that  site
remediation  will  ultimately  involve  installing a clay cap over the site, the
cost of which is not yet known.

Sanborn Site. Under the terms of an agreement with BP America,  Unifrax leases a
portion of the present  manufacturing  facilities on this site. The  Carborundum
Company's  Sanborn,  New York site was used by a number  of  former  Carborundum
operations. Testing in the area has found that contamination by volatile organic
compounds  is  present in the soil and  groundwater.  Neither  past nor  current
operations of Unifrax are believed to have contributed to, or to be contributing
to, the existence of this  contamination.  While The Carborundum Company entered
into a Consent  Decree  with the State of New York under which it was to conduct
remedial  activities  at the site,  BP America  has taken  title to and  assumed
liability for the  remediation of this property as of October 30, 1996.  Efforts
to remediate this site, chiefly by means of soil vapor extraction,  are expected
to continue for some time.

Under the terms of the Recapitalization Agreement, BP America assumed liability,
and the rights to recovery from third parties, for environmental remediation and
other similar required actions with respect to certain environmental obligations
of Unifrax including the above, which existed as of the Closing Date.

The Company may, in the future, be involved in further environmental assessments
or clean-ups.  While the ultimate requirement for any such remediation,  and its
cost, is presently not known,  and while the amount of any future costs could be
material  to the  results  of  operations  in  the  period  in  which  they  are
recognized,  the Company does not expect these costs, based upon currently known
information and existing requirements,  to have a material adverse effect on its
financial position.

Legal Proceedings

In addition to the ceramic  fiber and  environmental  matters  discussed  above,
BP/Carborundum and Unifrax are involved in litigation relating to various claims
arising out of their  operations  in the normal  course of  business,  including
product  liability  claims.  While  the  outcomes  of this  litigation  could be
material to the results of  operations  in the period  recognized,  based on the
current claims asserted the management of the Company believes that the ultimate
liability,  if any, resulting from such matters will not have a material adverse
effect on the Company's financial position.

The  Carborundum  Company  has been  named in  numerous  legal  claims  alleging
pre-Closing  asbestos exposure.  None of the current or past products of Unifrax
are asbestos-containing  materials, as defined by OSHA. For these claims related
to pre-Closing  Carborundum Company matters, BP America has responsibility under
the Recapitalization Agreement and is managing the claims directly.

NOTE D - LONG TERM DEBT

On March 8, 1999 the  Company  repurchased  $2.0  million of Senior  Notes for a
total of $2,055,000.

NOTE E - COMPREHENSIVE INCOME

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting  Comprehensive Income".  Statement 130 establishes
new  rules  for the  reporting  and  display  of  comprehensive  income  and its
components.  The adoption of this  Statement  had no impact on the Company's net
income or stockholders' deficit. Statement 130 requires the Company's cumulative
translation  adjustment,  which prior to adoption  was  reported  separately  in
stockholders'  equity, to be included in other comprehensive  income. Prior year
financial  statements have been reclassified to conform with the requirements of
Statement 130. During the three months ended March 31, 1999, total comprehensive
income,  which was  comprised  of net income and  foreign  currency  translation
adjustments, amounted to approximately $472,000 ($1,458,000 for 1998).

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Forward Looking Statements

Statements  included in this  Management  Discussion  and  Analysis of Financial
Condition and Results of  Operations  and elsewhere in this document that do not
relate to present or  historical  conditions  are "forward  looking  statements"
within the meaning of that term in Section 27A of the Securities Act of 1933, as
amended,  and of Section 21F of the Securities Exchange Act of 1934, as amended.
Additional  oral or written  statements  may be made by the Company from time to
time, and such statements may be included in documents filed with the Securities
and Exchange  Commission.  Such forward  looking  statements  involve  risks and
uncertainties  which could cause results or outcomes to differ  materially  from
those expressed in such forward looking  statements.  Forward looking statements
include, without limitation, any statement that may predict, forecast,  indicate
or imply future results, performance or achievements,  and may contain the words
"believe", "anticipate", "expect", "estimate", "project", "will continue", "will
result", or words or phrases of similar meaning.  Among the important factors on
which  such  statements  are based are  assumptions  concerning  the  continuing
strength  of the  ceramic  fiber  market on which the  Company is  substantially
dependent,  changing  prices  for  ceramic  fiber  products,  acceptance  of new
products,  the status of health and safety  issues  affecting  the ceramic fiber
industry in general  and the Company in  particular,  the  Company's  continuing
ability  to  operate  under  the   restrictions   imposed  by  the   substantial
indebtedness  which it is subject to, the risks  associated  with  international
operations,  the impact of environmental regulations on the Company's operations
and  property  and  related   governmental   regulations,   and  the  continuing
availability of certain raw materials,  including vermiculite which is purchased
from an overseas source.

Three Months Ended March 31, 1999 Compared With Three Months Ended
March 31, 1998

Net sales for the first  quarter of 1999  decreased by $0.5 million or 2.6% from
$21.7  million  in 1998 to $21.2  million  in 1999,  due to lower  sales in some
traditional market applications,  including  petrochemicals and steel, and lower
sales in  porosity-controlled  products,  due to changes in automotive  industry
airbag system designs.

Gross profit  decreased by $0.8 million,  or 8.1%, from $10.8 million in 1998 to
$10.0 million in 1999.  Gross profit as a percentage of net sales decreased from
49.8% in 1998 to 47.0% in 1999.  The gross profit  decrease was due to the lower
sales volume and downward price pressure in the automotive  market,  and in some
traditional markets.

Selling, general and administrative expenses decreased by $0.1 million, or 1.5%,
from  $5.9  million  in 1998 to $5.8  million  in  1999.  Selling,  general  and
administrative  expenses as a percentage  of net sales  increased  slightly from
27.0% in 1998 to 27.3% in 1999.

Operating income decreased by $0.8 million,  or 15.8%, from $5.0 million in 1998
to $4.2 million in 1999. Operating income as a percentage of net sales decreased
from  22.8%  in 1998 to 19.7% in 1999,  as a result  of the  factors  previously
indicated.

Interest expense decreased by $0.1 million, or 3.3% from $3.0 million in 1998 to
$2.9  million  in 1999 due to the  lower  level of long  term  debt,  and  lower
interest rates. Interest expense decreased slightly as a percentage of net sales
from 13.9% in 1998 to 13.8% in 1999.

Provision  for income  taxes  remained  at $0.5  million  in 1998 and 1999.  The
effective  income  tax  rate  increased  from  25.5%  in 1998 to  43.0% in 1999,
primarily as a result of recognizing, during 1998, certain deferred tax benefits
resulting from the Recapitalization  and due to losses in overseas  subsidiaries
for which no income tax benefit has been recognized.

Net income  decreased by $0.8 million or 55.7% from $1.5 million in 1998 to $0.7
million in 1999, as a result of the factors previously indicated.  Net income as
a percentage of net sales decreased from 6.9% in 1998 to 3.1% in 1999.

Liquidity and Capital Resources

During the  three-month  period ended March 31, 1999,  the Company's  cash flows
from operating  activities  decreased by $0.3 million or 6.5%, from $3.5 million
in 1998 to $3.2 million in 1999.  This  decrease was primarily the result of the
lower net income.

Cash used by investing  activities  increased by $0.6 million,  or 159.4%,  from
$0.4 million in 1998 to $1.0 million in 1999. This increase was primarily due to
higher capital spending.

Cash used by financing activities decreased by $0.8 million from $3.0 million in
1998 to $2.2  million  in 1999.  During the first  quarter  of 1999 the  Company
purchased $2.0 million of its Senior Notes.

Management  believes that cash flows from  operations  and the available  credit
facility will be sufficient to fund operating and capital  expenditure needs for
1999.

As of October 30, 1996,  the Company  entered into a tax sharing  agreement with
Unifrax Holding Co. ("Holding").  The results of its operations are now included
in the consolidated U.S.  corporate income tax return of Holding.  The Company's
provision  for income  taxes is computed as if the Company  filed its annual tax
returns on a  separate  Company  basis.  The  current  portion of the income tax
provision will be satisfied by a payment to or from Holding.

At December  31,  1998,  the Company  had Federal and State net  operating  loss
carryforwards  totaling  approximately  $17.4 million which will be available to
offset future taxable income.  These net operating loss carryforwards  expire in
2011 through 2013.

Legal Proceedings

Reference  is made to the  information  included  in Note C to the  consolidated
financial  statements  of the Company  included  under Item 1 in this Form 10-Q,
which is hereby incorporated herein by reference.

Impact of Year 2000

Some of the  Company's  older  computer  programs  were written using two digits
rather than four to define the  applicable  year.  As a result,  those  computer
programs would recognize a date using "00" as the year 1900 rather than the year
2000.  This could have caused a system  failure or  miscalculation  resulting in
disruptions of operations,  including, among other things, a temporary inability
to process  transactions,  send invoices,  or engage in similar normal  business
activities.

The Company has completed an assessment of its Year 2000  readiness and believes
it has identified all significant  areas with potential  date-related  problems.
The Company has determined  which of those  identified areas are critical to the
normal  operation of the  business,  and has  developed a  remediation  plan for
non-compliant,  critical areas. Of those non- compliant,  critical systems,  the
Company has completed and put into production corrections or upgrades to all but
one identified  system as of March 31, 1999. The completed  systems  include all
line of business software,  support software and networks, with the exception of
payroll.  Payroll is the final critical  system,  and is being  addressed by the
outsourcing vendor. Conversion to a Year 2000 compliant version is scheduled for
the second  quarter of 1999.  The Company is working with the payroll  vendor to
assure that this timetable is met.

In addition  to the  critical  systems  identified,  there are other  systems or
pieces of equipment which assist in the day to day operation of the Company, but
are not vital to business operations.  An action plan is in place to provide for
the Year 2000 readiness of these other items either through  upgrade,  repair or
replacement.  This is a continuous  process  which is underway  now, and will be
continuing  through  1999.  Although the Company  expects that these other items
will be Year 2000  compliant by late 1999,  the Company  does not believe  these
other items will seriously  disrupt the orderly  conduct of its business even if
not corrected or replaced within the time frame.

It is the Company's  current  policy to keep much of its  operational  software,
both critical and  noncritical on maintenance  contracts  which provide the most
current  versions of the software as a part of the contracts.  Most vendors have
supplied  Year  2000  compliant  software  as a part  of  their  normal  product
enhancement and evolution,  and these upgrades have been or are being applied to
achieve Year 2000 readiness. The Company understands from these software vendors
that they have performed  substantial product quality assurance testing of their
products  prior to general  release,  contributing  to their  assurance of their
products'  Year  2000  readiness.  In  addition,  the  Company,  as  part of its
implementation  process,   performed  additional  testing  and  verification  of
substantially all software,  including software not under maintenance contracts.
Although  the  software  has been tested to the best of the  supplier's  and the
Company's  ability,  there is no absolute  assurance that these various software
systems are indeed Year 2000 compliant.

The total Year 2000 project cost is estimated at  approximately  $250,000  which
includes  $100,000 for the purchase of new software and  equipment  that will be
capitalized, and $150,000 that will be expensed as incurred. To date the Company
has incurred and expensed  approximately  $125,000  primarily for the assessment
effort and remediation of the line of business software. All funds used for Year
2000 remediation  have been treated as a part of normal  operating  expenses and
on-going capital budgeting.

The costs of the  project and the  completion  date of the  remaining  items are
based  on  management's   best  estimates  which  were  derived  using  numerous
assumptions of future events,  including the continued  availability  of certain
resources  and other  factors.  However  there can be no  guarantee  that  these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause material differences include, but
are not limited to, the availability and cost of personnel trained in this area,
the  ability to locate and  correct  all  relevant  computer  codes and  similar
uncertainties.

The Company's  review of the status of key supplier's  Year 2000 readiness leads
management  to expect  that  there  will be no  material  adverse  impact in key
suppliers'  ability to provide the Company with the products and services needed
for the orderly  conduct of business in the year 2000 and beyond.  In  addition,
the Company has not been able to identify any probable indirect material adverse
impact on its  operations  or  financial  condition  likely  to result  from the
effects of the Year 2000 problems on its vendors,  customers,  agents,  or other
third parties,  but the ability to assess such effects is extremely  limited and
the failure of third parties to  appropriately  address Year 2000 problems could
have material adverse effects on the Company.

The only Year  2000  problem  that the  Company  has  identified  and  considers
reasonably  likely of  occurrence  that might  materially  adversely  affect the
Company's results of operations or financial condition would be if the Company's
payroll  vendor  were  unable to  deliver a Year 2000  compliant  upgrade on the
promised schedule. The vendor has indicated to the Company that they have a Year
2000  compliant  version of their  software  running in production  with several
other  customers.  The Company is working with them and  monitoring  the project
closely to assure timely completion of the effort. Should the payroll vendor not
be able to deliver a Year 2000  compliant  version of their software by December
31, 1999, the Company could be required to calculate its payroll  information on
a  manual  basis  until  at an  alternative  payroll  service  provider  can  be
identified and qualified.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

<PAGE>

PART II.   OTHER INFORMATION

Item 1.      Legal Proceedings

             Reference  is made  to the  information  included  in Note C to the
             consolidated  financial  statements  of the Company and included in
             this Form 10-Q, which is hereby incorporated herein by reference.

Item 2.      Changes in Securities and Use of Proceeds

             None.

Item 3.      Defaults on Senior Securities

             None.

Item 4.      Submission of Matters to a Vote of Security Holders

             None.

Item 5.      Other Information

             None.

Item 6.      Exhibits and Reports on Form 8-K

(a)          Exhibits

             27.1   Financial Data Schedule

(b)          No  reports on Form 8-K have been  filed  during the period
             covered by this report.

<PAGE>



                                   SIGNATURES


     PURSUANT TO THE  REQUIREMENTS  OF THE SECURITIES  EXCHANGE ACT OF 1934, THE
REGISTRANT  HAS DULY  CAUSED  THIS  REPORT  TO BE  SIGNED  ON ITS  BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.



                                             UNIFRAX CORPORATION



Date:  May 10, 1999                          By: /s/ William P. Kelly
       ------------                              ---------------------
                                             William P. Kelly, President and
                                             Chief Executive Officer


Date:  May 10, 1999                          By: /s/ Mark D. Roos
       ------------                               ---------------------
                                             Mark D. Roos, Vice President
                                             and Chief Financial Officer