<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               __________________
                                   FORM 10-Q
                                 _____________
                                        
  [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1998

  [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
       FROM _______________ TO __________________

                        COMMISSION FILE NUMBER 333-43195
                      Commission File Number 333-43195-01

                             SCOVILL FASTENERS INC.
                             SCOVILL HOLDINGS INC.
     (Exact name of registrants as specified in their respective charters)
<TABLE>
<CAPTION>
<S>                                <C>                           <C>
          Delaware                        3965                     95-3959561
          Delaware                        6719                     58-2365743
(State or other jurisdiction of    (Primary Standard Industrial  (I.R.S. Employer
incorporation or organization)     Classification Code Number)   Identification Number)
 
</TABLE>
                             SCOVILL FASTENERS INC.
                             SCOVILL HOLDINGS INC.
                               POST OFFICE BOX 44
                               1802 SCOVILL DRIVE
                          CLARKESVILLE, GEORGIA 30523
                                  706-754-4181
 (Name, address, including zip code, and telephone number, including area code,
                  of registrants' principal executive offices)
                              ___________________


  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 [ ] 

Number of shares of Common Stock outstanding as of October 15, 1998 was
4,655,500.
<PAGE>
 
                             SCOVILL HOLDINGS INC.
                             SCOVILL FASTENERS INC.
                                        
                         QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998
                                        
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                            PART I - FINANCIAL INFORMATION                                Page No.
                                                                                         -----------
 
Item 1.  Financial Statements -
<S>                                                                                      <C>
        Consolidated Balance Sheets at September 30, 1998 and December 31, 1997...         3
        Consolidated Statements of Operations for the three and nine month
         periods ended September 30, 1998 and 1997................................         4
        Consolidated Statements of Cash Flows for the nine months ended
         September 30, 1998 and 1997..............................................         5
        Notes to Consolidated Financial Statements................................         6

Item 2. Management's Discussion and Analysis of Financial Condition and Results         
         of Operations............................................................         7
 
                          PART II - OTHER INFORMATION
 
Item 6. Exhibits and Reports on Form 8-K..........................................         12
        SIGNATURES ...............................................................         13
</TABLE>

                                       2
<PAGE>
 
                             SCOVILL HOLDINGS INC.
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                        
<TABLE>
<CAPTION>
 
                                                                                       September 30,      December 31,
                                                                                            1998              1997
                                                                                        (Unaudited)
                                                                                    ------------------------------------
<S>                                                                                   <C>               <C>
                                             ASSETS
Current Assets
  Cash and cash equivalents.........................................................         $    547           $  2,821
  Accounts receivable, net of allowances of $1,233 and $894, respectively...........           15,596             11,502
  Inventories.......................................................................           25,220             24,292
       Other........................................................................              589                839
                                                                                             --------           --------
            Total Current Assets....................................................           41,952             39,454
                                                                                             --------           --------
Property, Plant and Equipment, Net..................................................           69,071             72,505
Intangible Assets ..................................................................          111,651            114,243
                                                                                             --------           --------
                                                                                             $222,674           $226,202
                                                                                             ========           ========
                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Current maturities of long-term debt  ............................................         $  3,632           $  1,649
  Accounts payable  ................................................................            7,346             11,458
  Accrued liabilities  .............................................................            7,707              9,470
  Accrued interest  ................................................................            3,907              1,062
                                                                                             --------           --------
     Total Current Liabilities  ....................................................           22,592             23,639
                                                                                             --------           --------
Long-Term Liabilities
  Revolving line of credit  ........................................................            9,950                 --
  Long-term debt ...................................................................          125,813            128,199
  Employee benefits  ...............................................................           24,486             24,499
  Deferred income taxes  ...........................................................            1,815              5,380
  Other.............................................................................            3,419              3,676
                                                                                             --------           --------
     Total Long-Term Liabilities  ..................................................          165,483            161,754
                                                                                             --------           --------
Series A Cumulative Redeemable Exchangeable Preferred Stock, $.001 par value,
         200,000 shares authorized, none at September 30, 1998 and 100,000 issued
          at December 31, 1997 (liquidation preference of $100 per share)...........               --              9,400
                                                                                             --------           --------
Stockholders' Equity
 Series B Preferred Stock, $.0001 par value, 16,200,000 shares authorized,
  4,655,500 at September 30, 1998 and 3,655,500 at December 31, 1997 shares issued
   and outstanding..................................................................               --                 --
 Common stock, $.0001 par value, 6,000,000 shares authorized,
     4,655,500 at September 30, 1998 and 3,655,500 at December 31, 1997 shares
      issued and outstanding  ......................................................               --                 --
 Additional paid-in capital--preferred  ............................................           49,942             39,700
 Additional paid-in capital--common  ...............................................              503                400
 Predecessor basis adjustment  .....................................................           (7,831)            (7,831)
 Retained earnings (deficit)  ......................................................           (8,252)              (781)
 Foreign currency translation adjustment  ..........................................              237                (79)
                                                                                             --------           --------
     Total Stockholders' Equity  ...................................................           34,599             31,409
                                                                                             --------           --------
                                                                                             $222,674           $226,202
                                                                                             ========           ========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
                              of these statements.

                                       3
<PAGE>
 
                             SCOVILL HOLDINGS INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                        
  The consolidated financial statements of the Company and the Predecessor-KSCO
are not comparable in certain respects (Note 1).

<TABLE>
<CAPTION>
                                               THE COMPANY     PREDECESSOR - KSCO     THE COMPANY     PREDECESSOR - KSCO
                                             ----------------  -------------------  ----------------  -------------------
                                                NINE MONTHS ENDED SEPTEMBER 30,       THREE MONTHS ENDED SEPTEMBER 30,
                                             1998 (UNAUDITED)   1997 (UNAUDITED)    1998 (UNAUDITED)   1997 (UNAUDITED)
                                             ----------------------------------- ---------------------------------------
<S>                                          <C>                       <C>                  <C>               <C>
 
  Net sales  .....................................   $70,939     |        $73,466           $21,945       |      $23,701
  Cost of sales  .................................    52,628     |         53,368            16,635       |       17,502
                                                    --------     |        -------           -------       |      -------
   Gross profit  .................................    18,311     |         20,098             5,310       |        6,199
  Selling, general and administrative                            |                                        | 
      expenses ...................................    11,735     |         11,697             3,650       |        3,498
  Restructuring and asset impairment                             |                                        | 
      charge......................................     2,968     |             --             1,000       |           --
  Amortization expense  ..........................     2,924     |          2,230               972       |          731
                                                    --------     |        -------           -------       |      -------
   Operating income (loss)  ......................       684     |          6,171              (312)      |        1,970
  Other expense   ................................        62     |            430                10       |          179
  Interest expense  ..............................    11,470     |          2,493             3,973       |          866
                                                    --------     |        -------           -------       |      -------
  Income (loss) before income                                    |                                        | 
      tax provision (benefit)  ...................   (10,848)    |          3,248            (4,295)      |          925
  Income tax provision                                           |                                        | 
      (benefit)  .................................    (3,607)    |          1,436            (1,432)      |          514
                                                    --------     |        -------           -------       |      -------
  Net income (loss)  .............................  $ (7,241)    |        $ 1,812           $(2,863)      |      $   411
                                                    --------     |        -------           -------       |      -------
   Dividends on redeemable                                       |                                        | 
    preferred stock...............................       230     |             --                --       |           --
                                                    --------     |        -------           -------       |      -------
  Net income (loss) available                                    |                                        | 
          to common stockholders..................  $ (7,471)    |        $ 1,812           $(2,863)      |      $   411
                                                    ========     |        =======           =======       |      =======
</TABLE>                                                           
                                                                                

                                                                                
The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       4
<PAGE>
 
                             SCOVILL HOLDINGS INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                        
  The consolidated financial statements of the Company and the Predecessor-KSCO
are not comparable in certain respects (Note 1).

<TABLE>
<CAPTION>
                                               THE COMPANY             PREDECESSOR - KSCO   
                                      ---------------------------------------------------- 
                                                  NINE MONTHS ENDED SEPTEMBER 30,           
                                            1998 (UNAUDITED)           1997 (Unaudited)    
                                      ---------------------------------------------------- 
<S>                                            <C>                         <C>                      
CASH FLOWS FROM OPERATING
 ACTIVITIES:
Net income (loss) available     
 to common stockholders......................   $ (7,471)     |            $ 1,812 
Adjustments to reconcile net                                  |
 income (loss) available to                                   |
 common stockholders to net                                   |
 cash provided by (used in)                                   |
 operating activities:                                        |
  Depreciation...............................      8,279      |              4,213
  Amortization...............................      3,497      |              2,230
  Deferred income taxes  ....................     (1,918)     |               (723)
  Asset impairment charge....................        940      |                 --
  Non-operating preferred stock dividends....        345      |                 --
                                                              |
  Changes in operating                                        |
   assets and liabilities:                                    |
     Accounts receivable, net................     (4,094)     |             (2,610)
     Inventories  ...........................       (928)     |             (2,431)
     Other current assets  ..................        250      |                434
     Accounts payable  ......................     (4,112)     |             (1,131)
     Accrued liabilities  ...................        812      |              1,263
     Other assets and                                         | 
      liabilities  ..........................     (1,370)     |               (364)
                                                --------      |            -------
NET CASH (USED IN) PROVIDED                                   |
 BY OPERATING ACTIVITIES.....................     (5,770)     |              2,693
                                                --------      |            -------
CASH FLOWS FROM INVESTING                                     |
 ACTIVITIES:                                                  |
Additions to property, plant                                  |
 and equipment...............................     (6,044)     |             (4,114)
                                                --------      |            -------
NET CASH USED IN INVESTING                                    |
 ACTIVITIES..................................     (6,044)     |             (4,114)
                                                --------      |            -------
CASH FLOWS FROM FINANCING                                     |
 ACTIVITIES:                                                  |
Net borrowings on line of                                     |
  credit.....................................      9,950      |              2,506
Proceeds of long-term debt  .................         --      |                213
Repayments of long-term debt.................       (410)     |               (490)
Redemption of preferred                                       |
 stock and payments of  dividends............    (10,345)     |                 --
Issuance of common and                                        |
  preferred stock  ..........................     10,345      |                 --
                                                --------      |            -------
NET CASH PROVIDED BY                                          |
  FINANCING ACTIVITIES.......................      9,540      |              2,229
                                                --------      |            -------
NET (DECREASE) INCREASE IN                                    |
 CASH........................................     (2,274)     |                808
CASH AT BEGINNING OF PERIOD..................      2,821      |                603
                                                --------      |            -------
CASH AT END OF PERIOD........................   $    547      |            $ 1,411
                                                ========      |            =======
SUPPLEMENTAL DISCLOSURE OF                                    |
 CASH FLOW INFORMATION                                        |
      Interest paid  ........................   $  8,051      |            $ 2,411
                                                ========      |            =======
      Income taxes paid  ....................   $     70      |            $    86
                                                ========                   =======
</TABLE>
                                                                
The accompanying notes to consolidated financial statements are an integral part
                              of these statements.              

                                       5
<PAGE>
 
                             SCOVILL HOLDINGS INC.              
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
          (ALL AMOUNTS EXPRESSED IN THOUSANDS, OR AS OTHERWISE NOTED)
                                                                
                                                                
NOTE 1.    BASIS OF PRESENTATION AND BUSINESS                   
                                                                
The interim financial statements presented herein include the accounts of
Scovill Holdings Inc. ("Holdings") and its wholly owned subsidiaries (together
with Holdings, the "Company") as of September 30, 1998 and December 31, 1997 and
for the three and nine month periods ended September 30, 1998  and of
Predecessor  KSCO (defined below) for the three and nine month periods ended
September 30, 1997.                                             

The accompanying unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments which are in the
opinion of the Company necessary for a fair statement of the results of the
interim periods.  The operating results for the three and nine month periods
ended September 30, 1998 and 1997 are not indicative of the results that would
be obtained for the entire fiscal year or any other interim period.  Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been omitted from these consolidated financial statements pursuant to the
applicable rules and regulations of the SEC.  These financial statements should
be read in conjunction with the audited consolidated financial statements and
notes thereto included in the annual report on Form 10-K for the year ended
December 31, 1997.

Scovill Acquisition Inc. ("SAI") and Holdings, both Delaware corporations, were
formed by Saratoga Partners III L.P. in 1997 to effect the acquisition of
Scovill Fasteners Inc., a Delaware Corporation ("Fasteners").  Pursuant to a
Stock Purchase Agreement, SAI, then a wholly-owned subsidiary of Holdings,
purchased all of the capital stock of KSCO Acquisition Corporation ("KSCO" or
"Predecessor-KSCO") on November 26, 1997 for a purchase price of approximately
$168.8 million less the amount of indebtedness of the Company existing
immediately prior to closing of the acquisition (including indebtedness that was
not repaid in connection with the transactions).  Concurrently with the
acquisition, SAI merged with and into KSCO, and KSCO merged with and into
Fasteners, with Fasteners surviving the mergers.  As a result, Fasteners is
currently a wholly owned subsidiary of Holdings.  The purchase of KSCO capital
stock by SAI and the mergers of SAI and KSCO into Fasteners are together
referred to as the "Saratoga Acquisition."  The effect of such changes
significantly impairs the comparability of the results of operations of the
Company and the Predecessor-KSCO.

In connection with the Saratoga Acquisition, the Company issued $100 million of
11.25% Senior Notes due 2007  (the "Notes"), pursuant to an Indenture, dated
November 26, 1997. The proceeds of the Notes offering were used to finance, in
part, the purchase by SAI of all of the capital stock of KSCO which then owned
all of the capital stock of the Company.  Following the mergers described above,
the Notes became obligations of Fasteners. In connection with the Saratoga
Acquisition, Fasteners entered into a new senior secured credit facility (the
"New Credit Facility"), consisting of a $28.0 million term loan (the "Term
Loan") and a $25.0 million revolving credit facility (the "Revolving Credit
Facility").

The Company is in the process of amending certain provisions of its Credit
Facility to allow for a proposed acquisition and in the third quarter amended
the New Credit Facility to revise certain EBITDA definitions.  The New Credit
Facility amendment will be completed concurrent with the consummation of the
acquisition, which is expected in the fourth quarter 1998.

                                       6
<PAGE>
 
<TABLE>
<CAPTION>
 
NOTE 2.    INVENTORIES
<S>        <C>
</TABLE>

Inventories consisted of the following at:

<TABLE>
<CAPTION>
                                      September 30, 1998        December 31, 1997
                               -------------------------------------------------------
<S>                              <C>                              <C>
         Raw materials                      $ 2,341                      $ 2,792
         Work in process                      6,938                        6,310
         Finished goods                      15,941                       15,190
                               ------------------------------------------------------
                                            $25,220                      $24,292
                               ======================================================
</TABLE>
                                                                                

NOTE 3.  RESTRUCTURING AND ASSET IMPAIRMENT CHARGE

In June 1998, the Company announced a corporate restructuring plan.  The plan
includes outsourcing the production of plastic components, which was previously
performed in the Company's existing manufacturing facilities.  As a result, in
June 1998, the Company recorded a restructuring charge of approximately $1.0
million related to severance payments to be paid to approximately 30 terminated
employees and a $1.0 million asset impairment charge related to plastics
component part production fixed assets to be disposed of under the plan.  In
July 1998, under the restructuring plan discussed above, an additional severance
benefit was paid under the terms of an employment agreement.

NOTE 4.  PREFERRED STOCK REDEMPTION

In February 1998, the Company sold additional shares of common stock for
approximately $10.3 million.  The proceeds were used to redeem the outstanding
redeemable exchangeable preferred stock and warrants.

NOTE 5.   NEW ACCOUNTING STANDARDS

The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"), and Statement of Financial Accounting Standards No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits -
an amendment of FASB Statements No. 87, 88, and 106" ("SFAS 132), effective
January 1, 1998.  SFAS 130 establishes standards to measure all changes in
equity that result from transactions and other economic events other than
transactions with owners.  Comprehensive income is the total of net income and
all other nonowner changes in equity.  SFAS 131 introduces a new segment
reporting model called the "management approach."  The management approach is
based on the manner in which management organizes segments within a company for
making operating decisions and assessing performance.  The management approach
replaces the notion of industry and geographic segments.  SFAS 132 revises
disclosures about pension and other postretirement benefit plans, yet it does
not change the measurement or recognition of those plans.  The disclosures
relative to SFAS 130, 131 and 132 do not significantly affect the Company's
current disclosures and will be presented in the Company's 1998 Annual Report on
Form 10-K.

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS
133").  This Statement requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair value.  Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting.  SFAS 133 will be effective for the Company's fiscal year 2000.
Management believes that this Statement will not have a significant impact on
the Company's financial condition or results of operations.

                                       7
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following "Safe Harbor Statement" is made pursuant to the Private
Securities Litigation Reform Act of 1995. Certain statements contained in the
body of this Report are forward-looking statements (rather than historical
facts) that are subject to risks and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. Such forward-looking statements are based on management's current
plans and expectations and are subject to a number of uncertainties that could
cause actual results to differ materially from those described in such
statements. Such uncertainties and risks include, but are not limited to: the
highly leveraged nature of the Company, its substantial debt service
requirements and the substantial operating and financing restrictions on the
Company under the terms of the New Credit Facility, as amended, the Indenture,
and the other agreements governing the Company's indebtedness; the risks and
uncertainties inherent in doing business abroad, the volatility of the price of
raw materials; increasing domestic and foreign competition; increasingly complex
and stringent environmental laws and regulations; delays or difficulties
associated with systems conversion and Year 2000 compliance; and general
economic conditions. The preceding list of uncertainties, however, is not
intended to be exhaustive, and should be read in conjunction with other
cautionary statements in the Company's publicly-filed reports and its final Form
S-1 Registration Statement, dated December 24, 1997 (Commission File No. 333-
43195).

NINE MONTHS ENDED SEPTEMBER 30, 1998 (COMPANY) COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1997 (PREDECESSOR-KSCO)

Net Sales  Net sales decreased $2.5 million, or 3.4% from $73.4 million to $70.9
million. Such decrease is primarily a result of decreased sales in  industrial
markets evidenced by decreased sales of $0.8 and $1.2 million in the DOT and PCI
product lines, respectively, in addition to a decrease in sales of $0.7 million
in the plastics product line and $0.3 million in sales of Scovill-Europe, offset
by increased sales in Asian markets.

Gross Profit  Gross profit decreased $1.8 million, or 8.9% from $20.1 million to
$18.3 million, which is primarily a result of a decrease in sales volume, in
addition to a change in sales mix.

Selling, General and Administrative Expenses ("SG&A")  SG&A remained consistent
at $11.7 million which equaled 16.6% and 15.9% of sales for each of the nine
month periods ended September 30, 1998 and 1997.

Restructuring and Asset Impairment Charge  In June 1998, the Company announced a
corporate restructuring plan.  The plan includes outsourcing the production of
plastic components, which was previously performed in the Company's existing
manufacturing facilities.  As a result, in June 1998, the Company recorded a
restructuring charge of approximately $1.0 million related to severance payments
to be paid to approximately 30 terminated employees and a $1.0 million
impairment charge related to plastics component part production fixed assets to
be disposed of under the plan.  The Company will pay the severance benefits
discussed above over 12 months ending June 30, 1999, the majority of which will
be paid in the second and third quarters of 1998.  In July 1998, an additional
severance benefit of $1.0 million was paid under the terms of an employment
agreement.  As a result of the restructuring, the Company expects reductions in
future annual operating expenses which should enable the Company to be more
competitive.

Operating Income  Operating income decreased $5.5 million as a result of a
decrease in gross profit of $1.8 million, a restructuring and impairment charge
of $3.0 million, in addition to an increase in amortization expense of $0.7
million as a result of increased goodwill in connection with the Saratoga
Acquisition.

Interest Expense  Interest expense increased by $9.0 million as a result of the
increase in debt under the Notes and the New Credit Facility.

                                       8
<PAGE>
 
Income Tax Provision (Benefit)  The income tax benefit was $3.6 million in the
nine months ended September 30, 1998 compared to a provision of $1.4 million in
the nine months ended September 30, 1997.

Net Income (Loss)  The net loss available to common stockholders was $7.5
million in the nine months ended September 30, 1998 compared to net income of
$1.8 million in the nine months ended September 30, 1997 attributable to the
factors discussed above.
 
THREE MONTHS ENDED SEPTEMBER 30, 1998 (COMPANY) COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1997 (PREDECESSOR-KSCO)

Net Sales  Net sales decreased $1.8 million, or 7.4% from $23.7 million to $21.9
million. Such decrease is primarily a result of decreased sales in industrial
markets evidenced by decreased sales of $0.5 million and $0.4 million in the DOT
and PCI product lines, respectively.  Additionally, sales in Europe and Canada
each decreased by $0.3 million for the three months ended September 30, 1998
compared with the three months ended September 30, 1997.  Additionally, sales in
Asia decreased $0.5 million, offset by increased sales in Mexico of $0.1 million
for the three months ended September 30, 1998 compared with the three months
ended September 30, 1997.

Gross Profit  Gross profit decreased $0.9 million, or 14.3% from $6.2 million to
$5.3 million, which is primarily a result of decreased sales volume.

Selling, General and Administrative Expenses ("SG&A")  SG&A increased $0.2
million, or 4.3% from $3.5 million to $3.7 million for the three months ended
September 30, 1998 and 1997, respectively and equaled approximately  16.6% and
14.8%  of sales for the three months ended September 30, 1998 and 1997,
respectively.

Restructuring and Asset Impairment Charge  See discussion above.

Operating Income (Loss)  Operating income decreased $2.3 million primarily as a
result of a decrease in gross profit of $0.9 million, a restructuring charge
recorded in July 1998 of $1.0 million, an increase in SG&A of $0.2 million, in
addition to an increase in amortization expense of $0.2 million as a result of
increased goodwill in connection with the Saratoga Acquisition.

Interest Expense  Interest expense increased by $3.1 million as a result of the
increase in debt under the Notes and the New Credit Facility.

Income Tax Provision (Benefit)  The income tax benefit was $1.4 million in the
three months ended September 30, 1998 compared to a provision of $0.5 million in
the three months ended September 30, 1997.

Net Income (Loss)  The net loss was $2.9 million in the three months ended
September 30, 1998 compared to net income of $0.4 million in the three months
ended September 30, 1997 attributable to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company derived its cash from funds generated by operations
and from third-party financings.   As of September 30, 1998 and December 31,
1997, $10.0 million and $0 borrowings were outstanding under the Revolving
Credit Facility, with $8.6 million of availability at September 30, 1998.  In
December 1997, the Company issued $100 million of 11.25% Senior Notes, the
proceeds of which were used to finance, in part, the purchase by SAI of all of
the capital stock of KSCO which then owned all of the capital stock of the
Company. The Company's liquidity requirements consist primarily of scheduled
payments of principal and interest on its indebtedness, working capital needs
and capital expenditures. The Company believes that its operating cash flow,

                                       9
<PAGE>
 
together with borrowings under the New Credit Facility, will be sufficient to
meet its operating expenses and capital requirements, and its debt service
requirements over the next twelve months and beyond.  However, in the event the
Company requires additional capital during such period, it will be required to
secure new capital sources or expand its bank credit facility.  In such event,
there can be no assurances that additional capital will be available or
available on terms acceptable to the Company.

As of November 12, 1998, the Company is in final negotiations for the
acquisition of a company based in the Northeast U.S. that manufactures and
distributes eyelets and fasteners primarily for the electric component and
medical product industries, for an estimated purchase price ranging from $5 to
$6.5 million.  Although management is confident the proposed acquisition will be
completed, there can be no assurances that such transaction will be consummated
or consummated within the fourth quarter of 1998.

The Company is in the process of amending certain provisions of its Credit
Facility to allow for the proposed acquisition and in the third quarter amended
the New Credit Facility to revise certain EBITDA definitions.  The New Credit
Facility amendment will be completed concurrent with the consummation of the
acquisition, which is expected in the fourth quarter 1998.

YEAR 2000 COMPLIANCE

The widespread use of computer software that relies on two digits, rather that
four digits, to define the applicable year when performing computation functions
may cause computers and computer-controlled systems to malfunction when
processing data on and after January 1, 2000 (the "Y2K issue").

In consideration of the potential impact of the Y2K issue on its domestic
business, operations, and financial condition, the Company has addressed issues
which may arise from its systems as described below.  The Company's foreign
subsidiaries are in the process of either implementing new systems or upgrading
existing systems which are expected to be Y2K compliant.
 
The Company has implemented an integrated software package, BPCS, effective July
1, 1998 which is Y2K compliant.  BPCS was implemented as a complete Enterprise
Resource Planning (ERP) package which is utilized by the Company's customer
service, manufacturing shop floor, and accounting departments.  The Company's
manufacturing processes are not dependent upon computer technology and therefore
should not be affected by the Y2K issue.  The Company estimates that its future
costs for remediation of Y2K issues on a Company-wide basis will  not have
significant impact on the financial condition of the Company.

The Company is in the process of inquiring of its suppliers and vendors, and
significant customers to determine that their operations are Y2K compliant.
Where practicable, the Company will seek alternative sources of suppliers.
However, such Y2K-related failures by such parties remain a possibility and
could have an adverse impact on the Company's results of operations or financial
condition.

The Company believes that its continuing assessment, planning and implementation
process will be effective to achieve a level of readiness that will meet the
challenges presented by Y2K issues in a timely manner.  Although the Company is
evaluating the Y2K readiness of third-party software, computer technology and
other hardware and software, the Company cannot guarantee the Y2K readiness of
third-party products, services, or providers that may impact the Company's
operations.

Based on the remediation efforts to date, the Company does not believe that any
problems resulting from the Y2K issue will have a material adverse effect on its
financial condition or results of operations.

EBITDA

EBITDA is defined for the purpose of this report as net income (loss) before
interest expense (including amortization of deferred financing costs), provision
(benefit) for income taxes, depreciation, amortization, rental payments on
synthetic lease on attaching machines, restructuring and asset impairment
charge, and management fees.

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<PAGE>
 
The Company has included information concerning EBITDA in this report because it
is used by certain investors as a measure of a company's ability to service its
debt.  EBITDA is not required or recognized as a measure of financial
performance under generally accepted accounting principles in the U.S. ("GAAP"),
and should not be considered an alternative to net income determined in
accordance with GAAP as an indicator of operating performance or as an
alternative to cash flow from operating activities determined in accordance with
GAAP as a measure of liquidity. The Company's use of EBITDA may not be
comparable to similarly titled measures used by other companies due to their use
of different financial statement components in calculating EBITDA.

EBITDA decreased $1.5 million, or 9.2%, from $16.8 million to $15.3 million
primarily as a result of a decrease in gross profit, resulting from decreased
sales volume for the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1997.

EBITDA decreased $1.0 million, or 18.2%, from $5.5 million to $4.5 million
primarily as a result of a decrease in gross profit, resulting from a decrease
in sales volume for the three months ended September 30, 1998 compared to the
three months ended September 30, 1997.

Cash Flows

Net cash used in the Company's operating activities was $5.8 million for the
first nine months of 1998. Principal working capital changes included increases
of $4.1 million and $0.9 million in accounts receivable and inventories,
respectively, and a net decrease of accounts payable and accrued liabilities of
$3.3 million. The Company's cash used in investing activities during the first
nine months of 1998 was $6.0 million for capital expenditures.  Net cash
provided by financing activities was $9.5 million, of which $10.0 million
represents borrowings under the Revolving Credit Facility.

The Indenture and the New Credit Facility place significant restrictions on the
Company's ability to incur additional indebtedness, pay dividends or repurchase
stock or make other distributions, create liens, make certain investments, sell
assets, or enter into mergers or consolidations.

                                       11
<PAGE>
 
                           PART II  OTHER INFORMATION

Item 6.       Exhibits and Reports on Form 8-K
 

             (a) Exhibit 4.01 - Amendment No. 3 to the Bank Credit Agreement
 
             (b) Exhibit 27 - Financial Data Schedule

             (c)  Reports on Form 8-K

                  None

                                        

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<PAGE>
 
                                   SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) 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.


                                  Scovill Holdings Inc.
                                  Scovill Fasteners Inc.



Date:  November 13, 1998         /s/   David J. Barrett
                                 -----------------------
                                    DAVID J. BARRETT,
                                  Chief Executive Officer and Director


                                        
Date:  November 13, 1998          /s/   Martin A. Moore
                                  ----------------------
                                    MARTIN A. MOORE
                                  Executive Vice President,
                                  Chief Financial Officer and
                                  Principal Accounting Officer

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