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 September 30, 1998


                        Commission File Number: 333-10611

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


   Delaware                                             34-1535916
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 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
               September 30, 1998 and December 31, 1997.....................1

          Condensed Consolidated Statements of Income for the
               Three-month and nine-month periods ended 
               September 30, 1998 and 1997..................................2

          Condensed Consolidated Statements of Cash Flow for the
               Nine-months ended September 30, 1998 and 1997................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.   Quantitative and Qualitative Disclosures About Market Risk.......13

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings................................................14
Item 2.   Changes in Securities............................................14
Item 3.   Defaults on Senior Securities....................................14
Item 4.   Submission of Matters to a Vote of Security Holders .............14
Item 5.   Other Information................................................14
Item 6.   Exhibits and Report on Form 8-K..................................14

Signatures.................................................................15
<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        September 30
                                                            1997               1998
                                                            ----               ----
ASSETS
Current assets:
<S>                                                       <C>              <C>        
     Cash                                                 $      359       $       781
     Accounts receivable, less allowances of $1,254
         and $1,139, respectively                             12,720           13,195
     Inventories                                               7,885            9,773
     Deferred income taxes                                     2,320            2,320
     Prepaid expenses and other current assets                   411              337
                                                            ---------        --------
Total current assets                                          23,695           26,406

Property, plant and equipment, at cost                        70,907           72,368
     Less accumulated depreciation and amortization          (33,391)         (36,681)
                                                            --------         --------
                                                              37,516           35,687

Deferred income taxes                                         24,849           23,340
Organization costs, net of accumulated amortization
     of $875 and $1,438, respectively                          4,030            3,467
Other assets                                                     372              254
                                                            ---------        --------
                                                            $ 90,462         $ 89,154
                                                            =========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                      $   3,206        $   2,491
     Accrued expenses                                          7,568           10,075
                                                               ------          ------
Total current liabilities                                     10,774           12,566
Long term debt                                               115,500          108,400
Note payable--affiliate                                        7,000            7,000
Accrued postretirement benefit cost                            3,209            3,401
Other long-term obligations                                      158              161
                                                             --------        --------
Total liabilities                                            136,641          131,528

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 $2,536
      and $2,649, respectively,
     including dividends in arrears)                             --                --
Additional paid-in capital                                    42,520           42,520
Accumulated deficit                                          (88,406)         (84,606)
Accumulated other comprehensive income                          (293)            (288)
                                                          -----------      -----------
Total stockholders' deficit                                  (46,179)         (42,374)
                                                           ----------        --------
                                                            $ 90,462         $ 89,154
                                                            =========        ========

</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
                               Unifrax Corporation

                   Condensed Consolidated Statements of Income
                           (Unaudited - In Thousands)


<TABLE>
<CAPTION>

                                          Three Months Ended September  30               Nine Months Ended September 30
                                          --------------------------------               ------------------------------
                                                 1997              1998                       1997             1998
                                                 ----              ----                       ----             ----

<S>                                           <C>               <C>                       <C>               <C>    
Net Sales                                     $20,533           $20,767                   $65,234           $64,524

Cost of goods sold                             10,112            10,396                    33,135            32,375
                                               -------           ------                    -------           ------
Gross profit                                   10,421            10,371                    32,099            32,149

Selling, general and
    administrative expenses                     5,106             6,110                    16,780            17,958
                                                -----             -----                    ------            ------

Operating income                                5,315             4,261                    15,319            14,191

Interest expense                               (3,118)           (2,973)                   (9,462)           (9,015)
Other income (expense), net                       (10)             123                         67               226
                                             ---------       ---------                 -----------        ---------

Income before income taxes and
   extraordinary item                           2,187             1,411                     5,924             5,402
Provision for income taxes                        892               417                     2,421             1,537
                                              -------        ----------                  ---------          -------

Income before extraordinary item                1,295               994                     3,503             3,865

Extraordinary item - loss on
   extinguishment of debt, net of income
   taxes of $28                                    --                65                        --                65
                                           -----------         ---------             -------------       ----------

NET INCOME                                     $ 1,295           $  929                   $ 3,503           $ 3,800
                                               =======           ======                   =======           =======

</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
                               Unifrax Corporation

                 Condensed Consolidated Statements of Cash Flows
                           (Unaudited - In Thousands)
<TABLE>
<CAPTION>

                                                            Nine Months Ended September 30
                                                                 1997               1998
                                                                 -----              ----
OPERATING ACTIVITIES
<S>                                                           <C>                 <C>    
Net income                                                    $ 3,503             $ 3,800
Depreciation and amortization                                   3,838               4,248
Other adjustments and changes in operating 
assets and liabilities                                          5,398               1,201
                                                            ----------           --------
Cash provided by operating activities                          12,739               9,249

INVESTING ACTIVITIES
Capital expenditures                                           (7,063)             (1,772)
Deferred software and other costs                                  14                --
Proceeds from sales of property, plant and equipment              115                  45
                                                           -----------          ---------
Cash used in investing activities                              (6,934)             (1,727)

FINANCING ACTIVITIES
Repurchase of Senior Notes                                        --               (2,000)
Borrowings under revolving loan                                12,600              17,450
Repayments of revolving loan                                  (12,300)            (19,550)
Repayment of term loan                                         (7,000)             (3,000)
                                                            ----------             -------
Cash used in financing activities                              (6,700)             (7,100)

Net increase/decrease in cash                                    (895)                422
Cash--beginning of period                                         898                 359
                                                           -----------          ---------
CASH--END OF PERIOD                                        $        3           $     781
                                                           ===========          =========

</TABLE>

See accompanying notes to condensed consolidated financial statements.
<PAGE>

                               Unifrax Corporation
              Notes to Condensed Consolidated Financial Statements
                               September 30, 1998


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  September  30,  1998,  are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 1998. For further information,  refer to the consolidated financial
statements and the notes thereto for the year ended December 31, 1997,  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                 September 30
                                      1997                         1998
                                   -------------                 ------------

  Raw materials and supplies          $1,598                       $2,447
  Work in process                      1,551                        1,935
  Finished products                    4,410                        4,886
                                      -------                      ------
                                       7,559                        9,268
  Adjustment to LIFO Cost                326                          505
                                    ---------                   ---------
                                     $ 7,885                       $9,773
                                     ========                      ======

<PAGE>
NOTE C - CONTINGENCIES

Ceramic Fibers

Regulatory agencies and others,  including the Company,  have been investigating
the potential  health impact  associated with the inhalation of airborne ceramic
fibers. To date, the results of this research have been inconclusive.

Various legal  proceedings  and claims have been made against  manufacturers  of
ceramic  fibers,  including the Company,  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 is presently not determinable.

Consistent  with  customary  practice  among   manufacturers  of  ceramic  fiber
products,  the  Company,  while a  division  of BP  America,  had  entered  into
agreements  with  distributors  of its product whereby the Company had agreed to
provide a limited indemnification to selected distributors and customers against
losses  resulting from ceramic fiber claims and the costs to defend against such
claims.  The amount of any liability that might ultimately exist with respect to
these indemnities is presently not determinable.

Pursuant    to    the    Unifrax    Corporation    Recapitalization    Agreement
("Recapitalization  Agreement"),  BP America Inc. and certain of its  affiliates
(collectively  "BPA"),  has agreed to indemnify the Company against  liabilities
for personal injury and wrongful death  attributable  to exposure,  prior to the
Closing,  to refractory  ceramic  fibers  manufactured  by the Company.  BPA 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,  BPA 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 BPA has agreed to indemnify the
Company  against  100% of such losses.  BPA 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 BPA and the Company, pro rata, based on the
length of exposure or pursuant to arbitration if initiated by the Company.

To  maintain  indemnity  protection,  the  Company  must  continue  its  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. 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.

Under the terms of the Recapitalization  Agreement,  BPA 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 existing 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.

Prior to divestment, the Company owned a site in Sanborn, NY, at which extensive
remediation  activity  is  currently  being  undertaken.  The site was used by a
number of former  Carborundum  operations  other than the  Company.  Testing has
indicated that certain  contamination  is present in the soil.  Neither past nor
current  operations of the Company are believed to have contributed to, or to be
contributing   to,  the  existence  of  the   contamination.   BPA  has  assumed
responsibility for implementing  remedial  activities  specified by the State of
New York which required removal of the  contamination,  chiefly by means of soil
vapor  extraction.  Under the terms of an agreement,  BPA has taken title to and
assumed  liability for the  remediation of this property as of October 30, 1996.
Unifrax leases a portion of the present manufacturing facilities on this site.

Legal Proceedings

The  Company is  involved in  litigation  relating to claims  arising out of its
operations in the normal course of business, including product liability claims.
From  time to time  the  Company  has  been  named as a  defendant  in  lawsuits
involving  alleged injury  suffered from exposure to ceramic fiber.  The Company
believes that it is not presently a party to any litigation the outcome of which
would have a material  adverse  effect on its financial  condition or results of
operations.  Pursuant to the Recapitalization Agreement, BPA agreed to indemnify
the  Company,  subject to  certain  limitations,  against  all  currently  known
lawsuits and certain future lawsuits alleging exposure to ceramic fiber.

Various other legal proceedings and claims have been made against the Company in
the  ordinary  course of  business.  While the amounts  could be material to the
results of operations in the period recognized,  in the opinion of management of
the Company,  the ultimate  liability,  if any, resulting from such matters will
not have a material adverse effect on the Company's financial position.

<PAGE>
NOTE D - LONG TERM DEBT

During the second quarter of 1998, the Company entered into a Consent and Second
Amendment  to the Loan and Security  Agreement  (the  "Consent and  Amendment").
Under the provisions of the Consent and Amendment:

         a)   the banks have consented,  under certain  circumstances,  to allow
              the  Company to prepay,  prior to  December  31,  1998,  up to $10
              million of the Senior Notes or the note payable affiliate,
         b)   the  interest  rates on the  revolving  loan and  term  loan  were
              revised to range from LIBOR plus 1.00% to LIBOR plus 1.75%, and
         c)   the Company is permitted to borrow, prior to December 31, 1998, up
              to $7 million under the term loan facility.

On August 25,  1998 the  Company  repurchased  $2 million of Senior  Notes for a
total of  $2,092,500.  The excess of the purchase price over book value has been
shown on the accompanying  Statement of Income as an  extraordinary  item net of
applicable income taxes.


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 and nine months ended September 30, 1998,
total  comprehensive  income,  which was  comprised  of net income  and  foreign
currency  translation  adjustments,   amounted  to  approximately  $968,000  and
$3,805,000, respectively ($1,269,000 and $3,338,000, respectively for 1997). 
<PAGE>
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.  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 a source in China.

           Three Months Ended September 30, 1998 Compared With Three Months
           Ended September 30, 1997

           Net sales for the third quarter of 1998  increased by $0.3 million or
           1.1% from $20.5 million in 1997 to $20.8 million in 1998.

           Gross profit  remained  unchanged  at $10.4  million in both 1997 and
           1998.  Gross profit as a percentage of net sales decreased from 50.8%
           in 1997 to 49.9% in 1998. The gross profit decrease was primarily due
           to lower  selling  prices as a result of  competition  in  automotive
           products,   offset  in  part  by  a  one  time  decrease  in  royalty
           liabilities.

           Selling,  general  and  administrative  expenses  increased  by  $1.0
           million,  or 19.7% from $5.1 million in 1997 to $6.1 million in 1998,
           primarily as a result of recruitment  and relocation  costs for sales
           and marketing  personnel,  the  non-recurring  elimination  of a $0.3
           million  liability in 1997  relating to the provision for an airborne
           emissions  study,  increased  new  product  development  and  testing
           expenses,   and   additional   resources  on  strategic   development
           initiatives.  Selling,  general  and  administrative  expenses  as  a
           percentage of net sales increased from 24.9% to 29.4% in 1998.


           Operating  income  decreased  by $1.0  million,  or 19.8%,  from $5.3
           million  in 1997 to $4.3  million  in  1998.  Operating  income  as a
           percentage  of net  sales  decreased  from  25.9% in 1997 to 20.5% in
           1998, as a result of the factors previously indicated.

           Interest expense decreased by $0.1 million, or 4.7% from $3.1 million
           in 1997 to $3.0  million in 1998 due  primarily to the lower level of
           long term debt.  Interest  expense  decreased as a percentage  of net
           sales from 15.2% in 1997 to 14.3% in 1998.

           Provision for income taxes  decreased by $0.5 million,  or 53.3% from
           $0.9 million in 1997 to $0.4 million in 1998.  The  effective  income
           tax rate decreased from 40.8% in 1997 to 29.6% in 1998,  primarily as
           a result of  recognizing  deferred  tax benefits  resulting  from the
           Recapitalization which were previously unrecognized.

           Extraordinary  items net of income  taxes were $0.1  million in 1998,
           compared to zero in 1997, and related to the excess of purchase price
           over book value of $2 million Senior Notes  repurchased on August 25,
           1998.

           Net income  decreased  by $0.4  million or 28.3% from $1.3 million in
           1997 to $0.9 million in 1998,  as a result of the factors  previously
           indicated.  Net income as a percentage  of net sales  decreased  from
           6.3% in 1997 to 4.5% in 1998.

           Nine Months Ended September  30, 1998 Compared With Nine Months
           Ended September 30, 1997

           Net sales for the first nine months of 1998 decreased by $0.7 million
           or 1.1% from $65.2  million  in 1997 to $64.5  million in 1998 due to
           lower  sales in porosity  controlled  products  and some  traditional
           blanket applications.

           Gross  profit  remained  the same in 1997 and 1998 at $32.1  million.
           Gross profit as a  percentage  of net sales  increased  from 49.2% in
           1997  to  49.8%  in  1998.  The  increase  was due to  fewer  outside
           purchases  and  resales of ceramic  fiber and a one time  decrease in
           royalty  liabilities,  offset  in  part  by the  lower  sales  and by
           increased price competition in several markets.

           Selling,  general  and  administrative  expenses  increased  by  $1.2
           million or 7.0% from $16.8  million in 1997 to $18.0 million in 1998,
           primarily as a result of recruitment  and relocation  costs for sales
           and marketing  personnel,  the  non-recurring  elimination  of a $0.3
           million  liability in 1997  relating to the provision for an airborne
           emissions  study,  increased  new  product  development  and  testing
           expenses and additional resource allocation on strategic  development
           initiatives.  Selling,  general  and  administrative  expenses  as  a
           percentage of sales increased from 25.7% in 1997 to 27.8% in 1998.

           Operating  income  decreased  by $1.1  million,  or 7.4%  from  $15.3
           million  in 1997 to $14.2  million  in 1998.  Operating  income  as a
           percentage  of net  sales  decreased  from  23.5% in 1997 to 22.0% in
           1998, as a result of the factors previously indicated.

           Interest expense  decreased by $0.5 million or 4.7% from $9.5 million
           in 1997 to $9.0 million in 1998  primarily  due to the lower level of
           long  term  debt.  Interest  expense  as a  percentage  of net  sales
           decreased from 14.5% in 1997 to 14.0% in 1998.

           Provision for income taxes  decreased  $0.9 million,  or 36.5%,  from
           $2.4 million in 1997 to $1.5 million in 1998.  The  effective  income
           tax rate decreased from 37.1% in 1997 to 28.5% in 1998,  primarily as
           a result of  recognizing  deferred  tax benefits  resulting  from the
           Recapitalization which were previously unrecognized.

           Extraordinary  items were $0.1  million in 1998,  compared to zero in
           1997,  and related to the excess of purchase price over book value of
           $2 million Senior Notes repurchased on August 25, 1998.

           Net income  increased by $0.3  million,  or 8.5% from $3.5 million in
           1997 to $3.8  million  in 1998,  as a result  of  factors  previously
           indicated.  Net income as a percentage  of net sales  increased  from
           5.4% in 1997 to 5.9% in 1998.

           Liquidity and Capital Resources

           During the nine-month  period ended September 30, 1998, the Company's
           cash flows from  operating  activities  decreased  by $3.5 million or
           27.4%,  from  $12.7  million in 1997 to $9.2  million  in 1997.  This
           decrease was the result of increases in the level of inventories  and
           reductions in the level of accounts payable, offset in part by higher
           net income, depreciation and accrued expenses.

           Cash outflows from  investing  activities  decreased  $5.2 million or
           75.1%  from  $6.9  million  in 1997 to $1.7  million  in  1998.  This
           decrease  was  due to  lower  capital  spending  as a  result  of the
           completion  of the expansion  project at the New  Carlisle,  Indiana,
           facility.

           Cash outflows  from  financing  activities  increased by $0.4 million
           from $6.7  million in 1997 to $7.1  million in 1998.  During 1998 the
           Company made  voluntary  prepayments  of principal of $3.0 million on
           its Term Loan, repurchased $2 million of Senior Notes and repaid $2.1
           million against its $20 million revolving credit facility.

           Management believes that cash flows from operations and the available
           credit  facility  will be  sufficient  to fund  operating and capital
           expenditure needs for 1998.

          During the second quarter of 1998, the company  entered into a Consent
          and Second Amendment to the Loan and Security  Agreement (the "Consent
          and Amendment"). Under the provisions of the Consent and Amendment:

           a)   the banks have consented, under certain circumstances,  to allow
                the Company to prepay,  prior to December  31,  1998,  up to $10
                million of the Senior Notes or the note payable-affiliate,

           b)   the  interest  rates on the revolving loan and  term  loan  were
                revised to range from

                LIBOR plus 1.00% to LIBOR plus 1.75%, and

           c)   the company is permitted to borrow,  prior to December 31, 1998,
                up to $7 million under the term loan facility.

           On August 25, 1998 the Company repurchased $2 million of Senior Notes
           for a total of $2,092,500. The excess of the purchase price over book
           value has been shown on the  Statement of Income as an  extraordinary
           item net of applicable income taxes.


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 those
critical  areas.  Of those critical  systems,  the Company has completed and put
into production  corrections or upgrades to all but one identified  system as of
September 30, 1998. The completed systems include all line of business software,
support  software,  networks  and plant  production  control  systems,  with the
exception of payroll. That final critical system, payroll, is being addressed by
the  outsourcing  vendor  and is on  schedule  for  conversion  to a  Year  2000
compliant  version in the first quarter of 1999. The Company is working with the
payroll vendors 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 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,  has performed
additional  testing and verification prior to production  cutover.  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 or 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 a part of normal  operating
expenses and on-going capital  budgeting.  The external and  extraordinary  Year
2000 Information  Technology  remediation costs are estimated to total less than
5% of the IT budget.

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  on their
indicated  schedule  the  Company  would be required  to  calculate  its payroll
information on a manual basis, until an alternative payroll service provider can
be identified and qualified.


Effects of New Accounting Pronouncements

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 and nine
months ended September 30, 1998, total comprehensive income, which was comprised
of  net  income  and  foreign  currency  translation  adjustments,  amounted  to
approximately $968,000 and $3,805,000,  respectively ($1,269,000 and $3,338,000,
respectively for 1997).


Item 3.      Quantitative and Qualitative Disclosures About Market Risk
             Not Applicable


PART II.   OTHER INFORMATION

Item 1.        Legal Proceedings

               None.

Item 2.        Changes in Securities

               Note  D  of  notes  to  the  condensed   consolidated   financial
               statements  included  in this  report is  incorporated  herein by
               reference.

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: November 13, 1998                     By: /s/ William P. Kelly
      -----------------                     --------------------
                                            William P. Kelly, President and
                                            Chief Executive Officer


Date: November 13, 1998                     By: /s/ Mark D. Roos
      -----------------                     --------------------
                                            Mark D. Roos, Vice President
                                            and Chief Financial Officer