<PAGE>   1

                                    FORM 10-Q

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

[X] For the quarterly period ended April 3, 1999

Commission file number 1-6687

                            JOHNSTON INDUSTRIES, INC.
                            -------------------------                          
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                Delaware                                         11-1749980
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                         Identification No.)

105 Thirteenth Street, Columbus, Georgia                           31901
(Address of principal executive offices)                         (Zip Code)

                                 (706) 641-3140
                                 --------------
              (Registrant's telephone number, including area code)

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    [ ]

The number of shares outstanding of the Registrant's Common Stock as of April 3,
1999 was 10,721,872 shares.

<PAGE>   2



                   JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES


                               INDEX TO FORM 10-Q


                         PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                                      PAGE(S)

<S>                                                                                   <C>
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

               Consolidated Balance Sheets
                    April 3, 1999 and January 2, 1999                                      4

               Consolidated Statements of Operations
                    Three Months ended April 3, 1999 and
                    April 4, 1998                                                          5

               Consolidated Statements of Cash Flows
                    Three Months ended April 3, 1999 and April 4, 1998                   6-7

               Notes to Condensed Consolidated Financial Statements                     8-12

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS                                     13-18

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
               ABOUT MARKET RISK                                                          19


                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS                                                                20

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                              20

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                                 20

         SIGNATURE PAGE                                                                   21

         EXHIBIT 11 - STATEMENTS OF COMPUTATION OF
               PER SHARE EARNINGS                                                         22

         EXHIBIT 27 - FINANCIAL DATA SCHEDULE
               (For SEC Use Only)                                                         23
</TABLE>


                                       2
<PAGE>   3

                         PART I - FINANCIAL INFORMATION


ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                       3
<PAGE>   4

JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 
AS OF APRIL 3, 1999 AND JANUARY 2, 1999 
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                                APRIL 3,          JANUARY 2,
                                                                                  1999               1999
                                                                               ---------          ----------

<S>                                                                            <C>                <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                   $   1,525           $   1,231
   Accounts and notes receivable net of allowance for
      doubtful accounts of $1,392 and $1,442                                      35,982              34,768
   Inventories                                                                    57,300              58,079
   Assets held for sale                                                            3,943               3,788
   Deferred income taxes                                                           1,651               1,249
   Prepaid expenses and other                                                      3,735               3,111
                                                                               ---------           ---------
      Total current assets                                                       104,136             102,226

Property, plant and equipment-net                                                 95,983              99,486

Goodwill - net of accumulated amortization of $1,885 and $1,728                   10,688              10,845
Intangible asset-pension                                                           1,651               1,651
Other assets                                                                       4,796               5,331
                                                                               ---------           ---------

Total assets                                                                   $ 217,254           $ 219,539
                                                                               =========           =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                                            $  13,462           $  13,867
   Accrued expenses                                                               11,939               9,859
   Revolving credit facility                                                      67,703              66,954
   Current maturities of long-term debt                                           11,614               9,989
   Income taxes payable                                                              503                 479
                                                                               ---------           ---------
      Total current liabilities                                                  105,221             101,148

Long-term debt - less current maturities                                          47,176              51,109
Other liabilities                                                                  8,646               8,878
Deferred income taxes                                                              9,684              10,130
                                                                               ---------           ---------
   Total Liabilities                                                             170,727             171,265

STOCKHOLDERS' EQUITY:
   Common stock, par value $.10 per share; authorized,
      20,000 shares; issued 12,468                                                 1,246               1,246
   Additional paid-in capital                                                     21,445              21,445
   Retained earnings                                                              32,103              33,850
                                                                               ---------           ---------
      Total                                                                       54,794              56,541
   Less treasury stock; 1,746 shares                                              (8,267)             (8,267)
                                                                               ---------           ---------

      Total stockholders' equity                                                  46,527              48,274
                                                                               ---------           ---------

Total liabilities and stockholders' equity                                     $ 217,254           $ 219,539
                                                                               =========           =========
</TABLE>

See Notes to Condensed Consolidated Financial Statements


                                       4
<PAGE>   5

JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 3, 1999 AND APRIL 4, 1998 
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED      
                                                                                ----------------------------
                                                                                APRIL 3,           APRIL 4,
                                                                                 1999                1998
                                                                               ---------           ---------
<S>                                                                            <C>                 <C>
Net sales                                                                      $  65,032           $  79,839
                                                                               ---------           ---------

Costs and expenses:
   Cost of sales                                                                  57,730              70,060
   Selling, general and administrative                                             6,559               7,053
   Amortization of goodwill                                                          157                 157
   Restructuring and impairment charges                                               --                 100
                                                                               ---------           ---------
      Total costs and expenses                                                    64,446              77,370
                                                                               ---------           ---------
Income from operations                                                               586               2,469

Other expenses (income):
   Interest expense                                                                3,118               3,213
   Interest income                                                                  (228)                (79)
   Other-net                                                                         456                 668
                                                                               ---------           ---------
      Total other expenses - net                                                   3,346               3,802

Equity in earnings of equity investees                                               158                  --
                                                                               ---------           ---------

Loss before benefit for income taxes                                              (2,602)             (1,333)

Benefit for income taxes                                                            (855)               (398)
                                                                               ---------           ---------

Net loss                                                                       $  (1,747)          $    (935)
                                                                               =========           =========

Net loss per common share:
   Basic and diluted                                                           $   (0.16)          $   (0.09)
                                                                               =========           =========

Weighted average number of common shares outstanding                              10,722              10,743
                                                                               =========           =========
</TABLE>

See Notes to Condensed Consolidated Financial Statements


                                       5
<PAGE>   6

JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED      
                                                                                ----------------------------
                                                                                APRIL 3,           APRIL 4,
                                                                                 1999                1998
                                                                               ---------           ---------
<S>                                                                            <C>                 <C>
OPERATING ACTIVITIES:
   Net loss                                                                    $  (1,747)          $    (935)
   Adjustments to reconcile net loss to net cash provided
      by operating activities:
         Depreciation                                                              4,880               5,093
         Amortization of goodwill                                                    157                 157
         Amortization of deferred financing costs                                    698                 757
         Provision for bad debts                                                      47                 143
         Loss on disposal of fixed assets                                             33                  39
         Undistributed earnings of equity investees                                 (158)                 --
         Changes in operating assets and liabilities:
            Accounts and notes receivable                                         (1,261)             (5,309)
            Inventories                                                              779               1,081
            Deferred income taxes                                                   (848)               (249)
            Prepaid expenses and other assets                                       (774)               (162)
            Accounts payable                                                        (252)               (588)
            Accrued expenses                                                       2,080               2,082
            Income taxes payable                                                      24                (198)
            Other liabilities                                                       (232)                382
                                                                               ---------           ---------

            Total adjustments                                                      5,173               3,228
                                                                               ---------           ---------

         Net cash provided by operating activities                                 3,426               2,293
                                                                               ---------           ---------

INVESTING ACTIVITIES:
   Additions to property, plant and equipment                                     (1,539)             (3,922)
   Increase (decrease) in non-operating accounts payable                            (153)                317
   Proceeds from sale of fixed assets                                                129                 290
   Proceeds from sale of Jupiter assets                                               --                 630
                                                                               ---------           ---------

      Net cash used in investing activities                                       (1,563)             (2,685)
                                                                               ---------           ---------
</TABLE>

                                                                     Continued


                                       6
<PAGE>   7

JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(IN THOUSANDS)
(UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED      
                                                                                ----------------------------
                                                                                APRIL 3,           APRIL 4,
                                                                                 1999                1998
                                                                               ---------           ---------
<S>                                                                            <C>                 <C>
FINANCING ACTIVITIES:
 Principal payments of long-term debt                                            (66,987)             (5,220)
 Proceeds from issuance of long-term debt                                         65,418               3,700
                                                                               ---------           ---------

  Net cash used in financing activities                                           (1,569)             (1,520)
                                                                               ---------           ---------

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS                                 294              (1,912)

CASH AND CASH EQUIVALENTS:
 Beginning of Period                                                               1,231               2,284
                                                                               ---------           ---------

 End of Period                                                                 $   1,525           $     372
                                                                               =========           =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 Cash paid (received) during the three months for:
  Interest                                                                     $   2,754           $   2,632
                                                                               =========           =========

  Income taxes                                                                 $     (30)          $      51
                                                                               =========           =========
</TABLE>


See Notes to Condensed Consolidated Financial Statements             Concluded


                                       7
<PAGE>   8

JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF APRIL 3, 1999 AND JANUARY 2, 1999, AND FOR THE THREE MONTHS ENDED APRIL 3,
1999 AND APRIL 4, 1998 
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)


1.       BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include
the accounts of Johnston Industries, Inc. ("Johnston"), its direct wholly owned
subsidiary, Johnston Industries Alabama, Inc. ("JI Alabama") and its indirect
wholly owned subsidiaries, Johnston Industries Composite Reinforcements, Inc.
("JICR") and Greater Washington Investments, Inc. ("GWI") (collectively, the
"Company"). All significant intercompany balances have been eliminated in
consolidation.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information in footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
unaudited condensed consolidated financial statements reflect all adjustments
which are necessary for a fair presentation. All such adjustments, other than
those relating to restructuring and loss on impairment, are of a normal
recurring nature. Operating results for the three months ended April 3, 1999 are
not necessarily indicative of the results that may be expected for the entire
year. The condensed consolidated financial statements included herein should be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended January 2, 1999.

2.       ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments imbedded in other contracts, and for
hedging activities. It requires that, at adoption, hedging relationships should
be designated anew and that entities recognize all derivatives as either assets
or liabilities in the statement of financial position and to measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. This statement is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999. The adoption of SFAS No. 133 is not
expected to have a material impact on the Company.

3.       INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>

                                                         APRIL 3, 1999      JANUARY 2, 1999        
                                                         -------------      ---------------
<S>                                                      <C>                <C>
Inventories-FIFO cost flow assumption
     Finished goods ...................................    $  33,217          $  33,136
     Work-in process ..................................        8,285              8,793
     Raw materials ....................................       11,984             12,317
     Direct materials and supplies ....................        4,668              4,687
                                                           ---------          ---------
                                                              58,154             58,933
     Less LIFO reserve ................................         (854)              (854)
                                                           ---------          ---------
         Inventories - LIFO cost flow assumption ......    $  57,300          $  58,079
                                                           =========          =========
</TABLE>


                                       8
<PAGE>   9

4.       ASSETS HELD FOR SALE

Assets held for sale consisted of the following:

<TABLE>
<CAPTION>
                                                         APRIL 3, 1999      JANUARY 2, 1999        
                                                         -------------      ---------------
<S>                                                      <C>                <C>
Jupiter investments ...................................    $   3,427          $   3,272
Other real estate .....................................          516                516
                                                           ---------          ---------
                                                           $   3,943          $   3,788
                                                           =========          =========
</TABLE>


Concurrent with the acquisition of Jupiter National, Inc. in March 1996, the
Company's management made the decision to discontinue the venture capital
investment segment of Jupiter's operation. The remaining portfolio investments,
which have not been disposed of, are included in assets held for sale 

5.       PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                         APRIL 3, 1999      JANUARY 2, 1999        
                                                         -------------      ---------------
<S>                                                      <C>                <C>
Land ..................................................    $     932          $     935
Buildings .............................................       36,457             36,105
Machinery and equipment ...............................      203,576            202,680
                                                           ---------          ---------
                                                             240,965            239,720
Less accumulated depreciation .........................      144,982            140,234
                                                           ---------          ---------
     Property, plant, and equipment - net .............    $  95,983          $  99,486
                                                           =========          =========
</TABLE>

6.       LONG-TERM DEBT AND REVOLVING CREDIT FACILITY

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                    APRIL 3, 1999      JANUARY 2, 1999        
                                                                    -------------      ---------------
<S>                                                                 <C>                <C>
Term loans ......................................................       $  57,152          $  59,402
Revolving credit facility .......................................          67,703             66,954
Purchase money mortgage debt ....................................             891                913
Industrial development note (net of unamortized discount) .......             449                439
Capital lease obligations .......................................             298                344
                                                                        ---------          ---------
Total ...........................................................         126,493            128,052
Less current maturities and revolving credit facility ...........         (79,317)           (76,943)
                                                                        ---------          ---------
                                                                        $  47,176          $  51,109
                                                                        =========          =========
</TABLE>

The Company has a credit agreement with a syndicate of lenders (the "Bank Credit
Agreement"), which was entered into on March 28, 1996. The Bank Credit
Agreement, as amended to date, provides aggregate loans of up to $160,000,
including a revolving credit loan (the "Revolving Credit Facility") of up to
$80,000, a term loan for


                                       9
<PAGE>   10

$40,000 ("Term Loan A") and a term loan for an additional $40,000 ("Term Loan
B"). The maturity date for all borrowings under the Bank Credit Agreement is
July 1, 2000.

As of April 3, 1999, the Company had outstanding borrowings under the Bank
Credit Agreement of $124,855 and $9,586 unused under the Revolving Credit
Facility net of $211 of standby letters of credit.

COVENANTS AND RESTRICTIONS - Under the terms of the Bank Credit Agreement,
substantially all assets are pledged as collateral for the borrowings under the
Bank Credit Agreement. The Bank Credit Agreement requires the Company to
maintain certain financial ratios and specified levels of tangible net worth,
places a limit on the Company's level of capital expenditures and its ability to
effect certain types of mergers or acquisitions, and permits the Company to pay
cash dividends on its Common Stock provided certain financial tests are met.
Under these financial tests, at April 3, 1999, the Company was not permitted to
declare or pay cash dividends.

Proceeds from sale of certain defined assets are generally applied against the
term loans in inverse order of the loan maturities.

AMENDMENTS TO THE BANK CREDIT AGREEMENT - The Bank Credit Agreement has been
amended several times, the latest amendment of which was executed on April 1,
1999 (the "1999 Amendment") to modify certain covenants. Although the Company
was in compliance with existing covenants at January 2, 1999, it had anticipated
the need for amendments to cover periods beyond January 2, 1999, without which,
technical noncompliance with certain financial covenants was considered to be
imminent. In addition to covenant modifications, the 1999 amendment also
included an increase in interest rates of 1/2 of 1% which took effect on April
4, 1999. As of April 4, 1999, the Company was in compliance with the covenants
under the Bank Credit Agreement.

The increase in interest rates is geared to maintenance of certain ratios. If
the Company's financial position, and the related ratios improve, the amended
agreement provides for a decrease in interest rates for Term Loan A and the
Revolving Credit Facility.

In addition to limited covenant modifications, which were effective through
January 2, 1999, and increased interest rates, a March 30, 1998 amendment (the
"March 1998 Amendment") required the Company to adopt new cash management
procedures during the second quarter of 1998, which included establishment of a
lock-box with instruction for customers to remit payments directly to the
lock-box. As a result of this lock-box arrangement, generally accepted
accounting principles required the Company to classify the Revolving Credit
Facility, which has a maturity date of July 1, 2000, as a current liability.
Pursuant to the March 1998 Amendment, the Company agreed that a collateral
monitoring arrangement should be put into effect whereby the Company is
required, through an independent collateral monitoring agent, to report certain
financial data on a periodic basis to the lenders.

The Company paid amendment fees as a result of both the 1999 Amendment and the
March 1998 Amendment in an amounts equal to 1/4 of 1% of Term Loan A, Term Loan
B, and the Revolving Credit Facility, respectively.

7.       EARNINGS PER SHARE

Earnings per share is not presented on a diluted basis, as the effect of
dilutive securities was anti-dilutive due to net losses for all periods
presented.


                                       10
<PAGE>   11

8.       INCOME TAXES

The benefit for income taxes from continuing operations as computed under SFAS
No. 109, "Accounting for Income Taxes", is comprised of the following:

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED       
                                                           -------------------------------
                                                           APRIL 3, 1999     APRIL 4, 1998
                                                           -------------     -------------
<S>                                                        <C>               <C>
Federal:
     Current ..........................................       $ (11)            $(207)
     Deferred .........................................        (749)             (178)
                                                              -----             -----
                                                               (760)             (385)
State:
     Current ..........................................           4                 4
     Deferred .........................................         (99)              (17)
                                                              -----             -----
                                                                (95)              (13)

Benefit for income taxes ..............................       $(855)            $(398)
                                                              =====             =====
</TABLE>

The reconciliation of the Company's effective income tax benefit rate to the
Federal statutory rate from continuing operations of 34% follows:


<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED       
                                                           -------------------------------
                                                           APRIL 3, 1999     APRIL 4, 1998
                                                           -------------     -------------
<S>                                                        <C>               <C>
Federal income tax benefit at statutory rate ..........       $ (885)           $ (453)
State income tax benefit, net of Federal tax benefit ..          (63)               (9)
Amortization of goodwill ..............................           53                53
Other - net ...........................................           40                11
                                                              ------            ------
                                                              $ (855)           $ (398)
                                                              ------            ------
Effective rate ........................................        32.86%            29.86%
                                                              ======            ======
</TABLE>

The effective tax rates in 1999 and 1998 were affected by the amortization of
goodwill and other operating expenses, which are not tax deductible.

9.       SEGMENT AND RELATED INFORMATION

The Company's principal operations include manufacturing and marketing of
finished and unfinished (greige) fabrics plus processing and marketing of
textile waste fibers and fabrics. The Company's operations are organized around
manufacturing processes and its reportable business segments include the Greige
Fabrics Division, the Finished Fabrics Division and the Fiber Products Division.
All remaining operations have been aggregated as "All Other". Segments are
evaluated on the basis of income (loss) on continuing operations before income
taxes. Intersegment transactions are generally recorded at cost.


                                       11
<PAGE>   12

Financial and related information for business segments is as follows:

<TABLE>
<CAPTION>
                                                         Greige     Finished      Fiber         All    Reconciling
             Year                                        Fabrics     Fabrics     Products      Other   Eliminations  Consolidated
                                                        --------    --------     --------   --------   ------------  ------------
<S>                                                     <C>         <C>          <C>         <C>        <C>          <C>
AS OF AND FOR THE THREE MONTHS ENDED APRIL 3, 1999
Trade revenues                                          $ 28,074    $ 25,300     $ 8,683    $   2,975    $      --     $  65,032
Intersegment revenues                                      1,508       1,234         224           --       (2,966)           --
Income (loss) before income taxes                            390         860         564       (4,416)          --        (2,602)
Total assets                                             106,049      71,896      20,147      338,689     (319,527)      217,254


AS OF AND FOR THE THREE MONTHS ENDED APRIL 4, 1998
Trade revenues                                          $ 41,833    $ 25,980     $ 9,216    $   2,810    $      --     $  79,839
Intersegment revenues                                      2,118         828         302           --       (3,248)           --
Income (loss) before income taxes                          4,968      (1,738)        576       (5,139)          --        (1,333)
Total assets                                             114,023      78,234      17,342      410,822     (386,032)      234,389
</TABLE>


10.      RELATED PARTY TRANSACTIONS

Redlaw Industries, Inc. ("Redlaw"), a stockholder, was the commissioned sales
agent for the Company for substantially all sales of the Company's products into
Canada under the terms of a non-exclusive sales agency agreement from May 1994
until December 1998. As of April 4, 1998 there was approximately $245 of
inventory located at a warehouse in Canada, which was supervised by Redlaw, and
there were accrued commissions payable to Redlaw of $34. Commissions of
approximately $74 were paid to Redlaw for the three months ended April 4, 1998.


                                       12
<PAGE>   13


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL

The accompanying unaudited condensed consolidated financial statements include
the accounts of Johnston Industries, Inc. ("Johnston"), its direct wholly owned
subsidiary, Johnston Industries Alabama, Inc. ("JI Alabama") and its indirect
wholly owned subsidiaries, Johnston Industries Composite Reinforcements, Inc.
("JICR") and Greater Washington Investments, Inc. ("GWI") (collectively, the
"Company").

RESULTS OF OPERATIONS

Net sales for the three months ended April 3, 1999 decreased $14.8 million from
the three months ended April 4, 1998. Of the factors which contribute to this
comparative decline, the two most significant include world economic conditions,
particularly currency and financial instability in Eastern Europe plus Asia and
South America to a lesser degree, and softness in both domestic and world demand
for certain textile products, particularly apparel fabrics. While the Company
may not compete directly in some of the markets which have been directly
affected, a resulting level of heightened competition indirectly affects a
majority of the textile industry taken as a whole.

An analysis of changes in net sales by market is as follows (in millions):

<TABLE>
<CAPTION>
                                                                    INCREASE/
                                                                    (DECREASE)
                                                                    ---------

<S>                                                                 <C>
Industrial/Automotive.......................................         $ (1,442)
Home Furnishings/Hospitality................................          (12,376)
Apparel.....................................................             (417)
Specialty Markets/Miscellaneous.............................             (572)
                                                                      -------
     Net Trade Sales........................................         $(14,807)
                                                                     ========
</TABLE>

-        Sales of industrial and automotive fabrics for the quarter declined by
         7.3% compared to the first quarter of 1998. Reduced sales of these
         fabrics were largely the result of an inventory reduction program
         initiated by a single customer.

-        Sales of home furnishing and hospitality  fabrics declined by 27.9% 
         from the levels recorded for the first quarter of 1998. Reduced sales
         of upholstery substrate fabrics account for the majority of this
         reduction. Currency and economic difficulties in Eastern Europe during
         the second quarter of 1998 sharply impacted demand for fabrics produced
         by customers of the Greige Fabrics Division. Economic conditions in
         this region of the world have precluded a recovery of this demand to
         date. To a lesser degree, decreased sales of residential furniture
         fabrics, casual furniture fabrics and top-of-the-bed fabrics contribute
         to the overall decline. Sales of napery fabrics by the Finished Fabrics
         Division grew by 50% over the same period in the prior year, partially
         offsetting the declines as discussed above.

-        The Greige Fabrics Division capitalized on certain short-term 
         opportunities to sell apparel fabrics at attractive margins during 1997
         and early 1998. Demand from these orders has now been filled and
         apparel activity has returned to a normal level.

-        Sales to specialty markets reflect declines in sales of yarn by the 
         Greige Fabrics Division and sales of remnants by the Fiber Products
         Division plus the impact of a fire at the Fiber Products Division's
         DeWitt Plant (see discussion below at Legal and Other Matters).
         Competitive conditions have driven prices for sales yarn very low,
         making it difficult to move excess yarn capacity profitably. However,
         sales of composite reinforcement fabrics grew by 5.9% for the first
         quarter of 1999 as compared to the same period in 1998, mitigating, in
         part, the effect of the declines described above.

The Company's backlog of customer orders was $66.5 million at April 3, 1999
compared to $49.4 at January 2, 1999 and $74.4 million at April 4, 1998.
Compared to the order backlog at April 4, 1998, the April 3, 1999 order 


                                       13
<PAGE>   14

backlog reflects the impact of currency and economic difficulties in Eastern
Europe, Asia and South America. Although order backlog had reached an unusually
low level at January 2, 1999, it had risen to $64.4 million by the end of
January 1999, and has increased only minimally since that time. Management
continues to believe that world and domestic economic conditions will impact
demand through at least the first two quarters of 1999, and perhaps longer for
certain markets.

Gross margin as a percentage of net sales for the three months ended April 3,
1999 was 11.2% compared to 12.2% for the same period in 1998. Improvements in
operating efficiencies, particularly at the Finished Fabrics Division, were more
than offset by the effect of reduced capacity utilization at the Greige Fabrics
Division resulting from indirect declines in demand from Eastern Europe, and
lost production due to the fire at Fiber Product's DeWitt Plant (see discussion
below at Legal and Other Matters).

For the three months ended April 3, 1999, selling, general and administrative
expenses decreased by $494 thousand (7.0%) from the same period in 1998. Reduced
sales of certain upholstery fabrics have resulted in decreased selling costs.
Additionally, professional services associated with a 1997 realignment were
substantially concluded in April 1998.

Interest expense was $3.1 million for the three months ended April 3, 1999
compared to $3.2 million for the three months ended April 4, 1998. Changes in
interest expense reflect the effects of both reduced average borrowings and
increased average rates associated with the March 30, 1998 amendment to the
Company's bank credit agreement (the "Bank Credit Agreement"), as discussed
below. Obligations under the Bank Credit Agreement at April 3, 1999 were $1.5
million less than obligations at January 2, 1999 and $11.2 million less than
obligations at April 4, 1998.

During the first quarters of 1999 and 1998, approximately $401 thousand and $480
thousand of deferred loan costs, respectively, were charged to Other-net. These
amounts represent the unamortized balance of original loan costs and prior
amendment costs which are related to provisions of the Bank Credit Agreement
which were amended on March 30, 1998 and April 1, 1999, respectively. In March
1999, approximately $346 thousand of deferred loan costs were capitalized in
connection with the 1999 amendment and are being amortized over the remaining
term of the 1999 amendment, which is effective through January 1, 2000. A net
amount of approximately $211 thousand was recorded in Other-net during the first
quarter of 1999 for insurance proceeds receivable as a result of fire damage at
the Fiber Products Division's DeWitt Plant (see discussion below at Legal and
Other Matters).

LIQUIDITY AND CAPITAL RESOURCES

The Company's needs for capital resources have been filled through cash
generated from operating activities and have been supported by availability of
borrowings under its Bank Credit Agreement, which was entered into on March 28,
1996. The Bank Credit Agreement, as amended to date, provides aggregate loans of
up to $160 million including a revolving credit loan (the "Revolving Credit
Facility") of up to $80 million, a term loan for $40 million ("Term Loan A") and
a term loan for an additional $40 million ("Term Loan B"). The maturity date for
all borrowings under the Bank Credit Agreement is July 1, 2000.

As of April 3, 1999, the Company had outstanding borrowings under the Bank
Credit Agreement of $124.9 million, and $9.6 million unused under the Revolver
net of $211 thousand in standby letters of credit. Principal payments since
January 2, 1999 have reduced outstanding borrowings under the Bank Credit
Agreement by $1.5 million.

Under the terms of the Bank Credit Agreement, substantially all assets are
pledged as collateral for the borrowings under the Bank Credit Agreement. The
Bank Credit Agreement requires the Company to maintain certain financial ratios
and specified levels of tangible net worth, places a limit on the Company's
level of capital expenditures and its ability to effect certain types of mergers
or acquisitions, and permits the Company to pay cash dividends on its Common
Stock provided certain financial tests are met. Under these financial tests, at
April 3, 1999, the Company was not permitted to declare and pay cash dividends.


                                       14
<PAGE>   15

Proceeds from sale of certain defined assets are generally applied against the
term loans in inverse order of the loan maturities.

The Bank Credit Agreement has been amended several times, the latest amendment
of which was executed on April 1, 1999 (the "1999 Amendment") to modify certain
covenants. Although the Company was in compliance with existing covenants at
January 2, 1999, it had anticipated the need for amendments to cover periods
beyond January 2, 1999, without which, technical noncompliance with certain
financial covenants was considered to be imminent. In addition to covenant
modifications, the 1999 amendment also included an increase in interest rates of
1/2 of 1% which took effect on April 4, 1999. As of April 4, 1999, the Company
was in compliance with the covenants under the Bank Credit Agreement.

The increase in interest rates is geared to maintenance of certain ratios. If
the Company's financial position, and the related ratios improve, the amended
agreement provides for a decrease in interest rates for Term Loan A and the
Revolving Credit Facility.

In addition to limited covenant modifications, which were effective through
January 2, 1999, and increased interest rates, a March 30, 1998 amendment (the
"March 1998 Amendment") required the Company to adopt new cash management
procedures during the second quarter of 1998, which included establishment of a
lock-box with instruction for customers to remit payments directly to the
lock-box. As a result of this lock-box arrangement, generally accepted
accounting principles required the Company to classify the Revolving Credit
Facility, which has a maturity date of July 1, 2000, as a current liability.
Pursuant to the March 1998 Amendment, the Company agreed that a collateral
monitoring arrangement should be put into effect whereby the Company is
required, through an independent collateral monitoring agent, to report certain
financial data on a periodic basis to the lenders.

The Company paid amendment fees as a result of both the 1999 Amendment and the
March 1998 Amendment in an amounts equal to 1/4 of 1% of Term Loan A, Term Loan
B, and the Revolving Credit Facility, respectively.

On September 28, 1998, the Company entered into an agreement with Boeing Capital
Corporation, a subsidiary of The Boeing Company, which provides for leasing of
manufacturing equipment up to $10 million. As of April 3, 1999, approximately
$3.3 million of equipment had been placed on lease schedules and cumulative
spending on projects in progress under the leasing program was approximately
$6.3 million.

Cash flow provided by operating activities provided for capital reinvestment of
approximately $1.5 million, plus reduction in obligations under the Bank Credit
Agreement of $1.5 million during the three months ended April 4, 1999. While
total long-term financing and short-term borrowings have been reduced by
approximately 8% over the last twelve months, the Company continues to be highly
leveraged in comparison to periods preceding March of 1996. In consideration of
the high levels of indebtedness, management continues to focus its efforts on
reduction of debt and associated debt service costs. Although available cash has
been adequate to sustain the Company's operations, cash used for debt service
and debt reduction under the Bank Credit Agreement and cash used in the
Company's capital expenditure plan have strained the Company's available liquid
assets. Management expects improvements in cash generation from improved
operating results, from continued discipline in cost containment, reduction in
inventories, judicious review of its short term capital expenditure plans, and
use of leasing programs in lieu of cash purchases for portions of its capital
investment plan. Although no assurance can be given that cash provided by
operating and financing activities will be sufficient, management believes that
through careful planning and constraint of discretionary cash expenditures, cash
generated by operations and cash available under the Bank Credit Agreement will
be sufficient to satisfy the Company's liquidity requirements for at least the
next year.

ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments imbedded in other contracts, and for
hedging activities. It requires that, at adoption, hedging relationships should
be designated anew and that entities recognize all derivatives as either assets
or liabilities in the statement of financial position and to measure those
instruments at fair value.


                                       15
<PAGE>   16

The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. This statement is
effective for all fiscal quarters of all fiscal years beginning after June 15,
1999. The adoption of SFAS No. 133 is not expected to have a material impact on
the Company.

YEAR 2000

As a result of computer programs which historically were written using a two
rather than four digit convention to define the year component of dates, a
concern commonly known as the Year 2000 ("Year 2000") issue has arisen globally.
Computer programs and equipment that use a two digit convention may not be able
to differentiate between the 20th and 21st centuries (e.g. "00" could be either
1900 or 2000). This could result in system failures or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.

YEAR 2000 PLAN - In 1997, the Company began systematic replacement of legacy
software applications, both purchased and developed in-house, with purchased
software as to which the vendor has represented to be Year 2000 compliant or the
vendor has indicated that subsequent releases will be Year 2000 compliant prior
to July 1999. During 1998, the Company appointed a Year 2000 Coordinator,
assembled a Year 2000 Team, and prepared a Year 2000 Plan. The Company's Year
2000 Plan is subject to modification and is revised periodically as additional
information is developed.

The Company's plan to resolve potential Year 2000 problems involved the
following four phases: assessment, remediation, testing, and implementation.
Contingency plans, including data back-up, disaster recovery, and possible
modifications to procurement and production scheduling, will be developed during
the second half of 1999. Assessment of significant computer application systems
was completed in 1998. All systems were considered to be vulnerable until
objective data could be obtained and in the case of packaged software, until
vendor certification was obtained to support our assessment. Several of the
Company's computer application systems were determined to be Year 2000 compliant
and the remainder were identified for replacement or remediation.

The majority of the Company's application systems are being completely replaced
by packaged systems represented as being Year 2000 compliant. The largest
replacement project began in August 1997 for the Company's Finished Fabrics
Division. Replacement for the Fiber Products Division, which is considerably
less sophisticated than the Finished Fabrics systems, began in November 1998.
Once software is replaced or reprogrammed, a working model is prepared and work
proceeds to testing and implementation. These phases run concurrently for
different systems. The replacements, as identified above, are expected to be
completed by August 1999. For the remaining computer application systems which
will not be replaced, remediation is underway and subsequent testing is expected
to be completed by October 1999. Management believes that lines of code for
systems requiring remediation, as opposed to replacement, represent only a small
percentage of the total lines of computer code in service.

For personal computers which are critical to operations or which are part of
decision support systems, the hardware, operating systems, and application
software are being reviewed for compliance. The Company intends to upgrade or
replace all such systems once they are identified as out of compliance.

YEAR 2000 EXPOSURE FOR PRODUCTS - Based on a review of its product line, the
Company has determined that all of the products it has sold and will continue to
sell contain no electronic or computerized components which would require
remediation to be Year 2000 compliant. Accordingly, the Company believes that it
does not have material exposure as it relates to the Company's products.

THIRD PARTY READINESS - The Company has material relationships with third
parties whose failure to be Year 2000 compliant could have material adverse
impacts on the Company's business, operations or financial condition. Third
parties considered by the Company's Year 2000 Team to be in this category ("Key
Business Partners") include critical suppliers, significant customers, financial
institutions, and utility providers. In conjunction with identification of Key
Business Partners, the Company's assessment of Year 2000 risk included
evaluation of production equipment, building systems, and critical services
provided by Key Business Partners.


                                       16
<PAGE>   17

Production (manufacturing) and building (telephone, alarm, fire control, climate
control, etc.) equipment is being investigated for compliance. Additionally, the
Company screens all purchases to insure that all new equipment acquisitions are
compliant. The Key Business Partner representing each model of equipment in use
is being contacted to determine (a) if the equipment contains any hardware or
software with Year 2000 exposure, (b) if any equipment with Year 2000 exposure
is non-compliant, and (c) if upgrades or enhancements will be provided for all
non-compliant equipment. To date, the majority of Key Business Partners
representing production and building equipment have been contacted and most have
responded. The Company is not presently aware of any equipment at risk for which
remedial upgrades or enhancements will not be available. Contingency plans will
be prepared for any vulnerable equipment for which remediation is not available
on a timely basis, practical, or possible.

Vendors and suppliers of raw materials, operating supplies, utilities, plus
financial and other critical services are being surveyed for Year 2000
readiness, and the Company's Year 2000 Team is meeting with those who are
identified as Key Business Partners. Responses from vendors and suppliers of
less critical importance to our business are being evaluated and follow-up
action is being taken by the Company as it deems appropriate. A majority of the
Company's Key Business Partners for these goods and services have been contacted
and many have responded.

Significant customers identified by the Company's Year 2000 Team as Key Business
Partners are being contacted for the purpose of assessing Year 2000
preparedness. The Company is not presently aware of any customer identified as a
Key Business Partner who has been determined to be at risk and whose failure as
a result of Year 2000 exposure would materially impact the Company's business,
operations or financial condition.

To date, the Company is not aware of any Key Business Partner who has been
identified as vulnerable and whose failure as a result would materially impact
the Company's business, operations or financial condition. Although no assurance
can be given that acceptable alternatives can be developed to mitigate a failure
of business partners to achieve Year 2000 compliance, the Company will monitor
business partners for exposure and to the extent practicable, contingency plans
will be evaluated for any critical business partner who may be vulnerable.

YEAR 2000 RISKS AND COSTS - As a result of the upgrades described above and
assuming the projects in progress are completed in a satisfactory manner, the
Company believes that the Year 2000 issue will not pose significant operational
problems for the Company's computer systems and that it will be prepared in time
to minimize any material impact to the Company's business, operations or
financial condition. Failure to achieve a timely state of readiness or failure
of a Key Business Partner or other third party to effectively remediate their
affected systems could have a materially adverse impact on the Company's
business operations, or financial condition. The Company anticipates completing
the Year 2000 project no later than October 1999.

The cost of addressing the Year 2000 issues has been and will continue to be
substantially absorbed in the budget for improvement in management information
systems and by normal costs for administrative and technical employees. The
Company does not anticipate incurring significant third party costs to test or
reprogram systems, however the Company has from time to time retained contract
programmers and consultants to work on discrete projects or review aspects of
the Company's information systems, and will continue this practice into the
foreseeable future. Management believes that the cost of Year 2000 modifications
will not have a material effect on its business, operations or financial
condition.

The Company has a high level of dependence on computer application systems,
which are used to drive the business, and manufacturing equipment, which may
include advanced computerized controls. The Company believes that a number of
Key Business Partners also rely on such systems and equipment. There can be no
guarantee that the software replacement projects will be successful or that the
vendors supplying software to the Company will provide new software releases
that are Year 2000 compliant. In addition, there can be no assurances that there
will not be problems identified when screening production and support equipment,
and ancillary systems and that such problems will not have a material effect on
the Company's business, operations or financial condition. Additionally, as the
Company relies on representations given by its Key Business Partners and other
third parties, there can be no assurances that all such representations are
accurate and effective in identifying Key Business 


                                       17
<PAGE>   18

Partners and other third parties potentially at risk and that unidentifiable
risk will not have a material adverse impact on the Company's business,
operations or financial condition.

LEGAL AND OTHER MATTERS

The Company is periodically involved in legal proceedings arising in the
ordinary conduct of business. Management does not expect that such proceedings
will have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity. During 1997, management became
aware of certain industrial espionage activities that targeted the Company and
several other textile manufacturers, allegedly carried out by agents of a large
competitor. On October 8, 1998, the Company filed suit in Alabama seeking
recourse for damages and losses resulting from these alleged activities.

On Thursday March 11, 1999, a fire damaged the Company's DeWitt Plant in DeWitt,
Iowa. The fire is believed to have started in an electrical junction box in the
warehouse. The warehouse incurred substantial damage and other portions of the
Facility received lesser damage caused by smoke, heat and water. The DeWitt
Plant, which produces insulator pads for the Fiber Products Divison, resumed
operations on April 12, 1999. Management believes that substantially all losses
associated with this fire will be recovered through property and business
interruption insurance, however, no assurances can be given as to when or
whether acceptable settlements will be reached with the Company's insurance
provider.

From time to time the Company receives unsolicited indications of interest
relating to the acquisition of the Company or certain assets of the Company by
others. While management and the Board of Directors reviews each offer in
accordance with the appropriate discharge of their fiduciary duties to the
shareholders of the Company, neither the Company or any of its operations are
currently for sale as management does not believe that an appropriate value is
likely to be received given current market conditions.

RISKS AND UNCERTAINTIES

Except for historical information contained herein, the matters set forth in
this report are forward looking statements which are intended to be covered by
the "Safe Harbor" provisions of the "Private Securities Litigation Reform Act of
1995" and are subject to certain risks and uncertainties that could cause actual
results to differ materially from those in, or which could be expected based on,
such forward looking statements. The Company's expectations regarding future
sales and profits assume, among other things, reasonable continued growth in the
general economy which affects demand for the Company's products, and reasonable
stability in raw materials pricing, changes in which affect customer purchasing
decisions as well as the Company's prices and margins. The costs and benefits of
the Company's discontinuance of Jupiter venture capital investments may vary
from the Company's expectations with respect to anticipated proceeds from the
sale of assets. For a further discussion of risks and uncertainties associated
with the Company's business, readers are referred to the cautionary statement
set forth in Item 1 of the Company's annual report on Form 10-K for the year
ended January 2, 1999, which cautionary statement is incorporated by reference
herein.


                                       18
<PAGE>   19

ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rates and changes
in commodity prices. Exposure to interest rate risk relates to variable rate
obligations under the Company's Bank Credit Agreement which permits the Company
to allocate its total obligations between prime and LIBOR rate basis. Interest
rate swap agreements are utilized to manage overall borrowing costs and reduce
exposure to adverse fluctuations in interest rates. Two interest rate swap
agreements are currently in place under which the Company pays an average of
certain LIBOR based variable rates on $38 million notional principal. These
agreements, which expire on June 4, 1999, also contain interest rate caps which
further limit interest rate exposures. If interest rates related to the
Company's LIBOR obligations increased by 100 basis points over the rates in
effect at January 2, 1999, interest expense, after considering the effects of
interest rate swap agreements, would increase by approximately $870 thousand in
1999. These amounts were determined by considering the impact of hypothetical
interest rates on the Company's borrowing cost and interest rate swap
agreements. The analyses do not consider the effects of the overall reduced debt
levels anticipated in 1999. Further, in the event of a change of such magnitude,
management would likely take actions to further mitigate its interest rate
exposures. An April 1, 1999 amendment to the Company's bank credit agreement
included an increase in interest rates of 1/2% which took effect on April 4,
1999.

The Company purchases cotton through approximately ten established merchants
with whom it has long standing relationships. The majority of the Company's
purchases are executed using "on-call" contracts. These on-call arrangements are
used to insure that an adequate supply of cotton is available for the Company's
requirements. Under on-call contracts, the Company agrees to purchase specific
quantities for delivery on specific dates, with pricing to be determined at a
later time. Prices are set according to prevailing prices, as reported by the
New York Cotton Exchange, at the time of the Company's election to fix specific
contracts.

Cotton on-call with a fixed price at April 3, 1999 was valued at $5.6 million
compared to $7.4 million at January 2, 1999, and is scheduled for delivery from
April through June of 1999. At April 3, 1999, the Company had unpriced contracts
for deliveries between June 1, 1999 and August 1, 2000. Based on the prevailing
price at April 3, 1999, the value of these commitments is approximately $11.3
million for deliveries between June and December of 1999 and approximately $8
million for deliveries between January and August of 2000. As commodity price
aberrations are generally short-term in nature, and have not historically had a
significant long-term impact on operating performance, financial instruments are
not used to hedge commodity price risk.

The Company does not utilize financial instruments for trading or other
speculative purposes.


                                       19
<PAGE>   20

                   JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

No reportable legal proceedings arose in the quarter ended April 3, 1999.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

There were no matters submitted for a vote of Security Holders during the
quarter ended April 3, 1999.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits
<TABLE>

         <S>      <C>
         11       Statements of Computation of Per Share Earnings

         27       Financial Data Schedule (Filed Electronically)(for SEC use only)

(b)      Reports on Form 8-K

         (i)      NOTICE OF ADOPTION OF A SHAREHOLDER RIGHTS PLAN, AS FILED ON 
                  FORM 8-K DATED MAY 17, 1999, IS INCORPORATED BY REFERENCE HEREIN.
</TABLE>


                                       20
<PAGE>   21

JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

                                   SIGNATURES



         Pursuant to the requirements of the Securities and Exchange Act of
1934, the undersigned has duly caused this report to be filed on its behalf by
the undersigned hereto duly authorized.







                                          JOHNSTON INDUSTRIES, INC.




Dated:    May 18, 1999                    By:   /s/James J. Murray
                                                ------------------------------
                                                James J. Murray
                                                Executive Vice President and
                                                Chief Financial Officer




                                          By:   /s/James J. Murray
                                                ------------------------------
                                                James J. Murray
                                                (Principal Accounting Officer)


                                       21