SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------

                                    FORM 10-K
                                   ----------

         [X]   Annual Report  Pursuant to Section 13 or 15(d) of The  Securities
               Exchange Act of 1934 for the fiscal year ended  December 31, 1998
               or

         [ ]   Transition  Report  Pursuant  to  Section  13  or  15(d)  of  The
               Securities Exchange Act Of 1934

         Commission File Number 0-21952
                                   ----------

                          AMERICAN SAFETY RAZOR COMPANY
             (Exact name of registrant as specified in its charter)

                   Delaware                                  54-1050207
         (State or other jurisdiction of                    (IRS Employer
          incorporation or organization)                  Identification No.)


                                  P. O. Box 500
                          Staunton, Virginia 24402-0500
          (Address of principal executive offices, including zip code)
                                   ----------

               Registrant's telephone number, including area code:
                                 (540) 248-8000
                                   ----------

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par 
                                                            value $.01 per share

                                   ----------

         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 ___

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

         As of March 17,  1999,  12,110,049  shares of the  Registrant's  Common
Stock were  outstanding.  The aggregate market value of the Registrant's  Common
Stock,  which  is the only  class of  voting  stock of the  Registrant,  held by
non-affiliates  was approximately  $127,793,559 based on the closing sales price
of March 17, 1999.  Determination  of affiliate status for this purpose is not a
determination of affiliate status for any other purpose.



<PAGE>



                                Table of Contents

                                     Part I
                                                                          Page

Item 1.    Business........................................................  1

           Introduction to Our Business....................................  1
           Product Lines...................................................  2
           Sales and Marketing.............................................  3
           Manufacturing...................................................  4
           Raw Materials...................................................  5
           Competition.....................................................  5
           Other Factors Affecting Our Business............................  6

Item 2.    Properties......................................................  9

Item 3.    Legal Proceedings............................................... 10

Item 4.    Submission of Matters to a Vote of Security Holders............. 10


                                     Part II

Item 5.    Market for Registrant's Common Equity and Related Stockholder 
           Matters......................................................... 10

Item 6.    Selected Financial Data......................................... 11

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations....................................... 12

Item 8.    Financial Statements and Supplementary Data..................... 20

Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure........................................ 20

                                    Part III

Item 10.   Directors and Executive Officers of the Registrant...............21

Item 11.   Executive Compensation.......................................... 23

Item 12.   Security Ownership of Certain Beneficial Owners 
           and Management.................................................. 26

Item 13.   Certain Relationships and Related Transactions.................. 28

                                     Part IV

Item 14.   Exhibits, Financial Statement Schedule and Reports 
           on Form 8-K..................................................... 29

           Signatures...................................................... 30

-----------------------
Market  share and  product  distribution  data shown  throughout  were  obtained
through  Information  Resources  Incorporated,  a nationally  recognized  market
research  firm based in Chicago,  Illinois,  which  provides  the  Company  with
scanner based product  movement  data from U.S.  grocery  stores with annual all
commodity  volume of at least $2  million  and data from  drug  stores  and mass
merchandisers in major U.S. markets.


<PAGE>



                                     PART I

ITEM 1 - Business

Introduction to Our Business

         Established in 1875,  American Safety Razor Company  (together with its
subsidiaries,  the "Company") is a leading  manufacturer of high-quality private
label and value  brand  consumer  products.  We operate  our  business  in three
segments  consisting of Razors and Blades (which  includes  three product lines:
consumer  shaving  razors and  blades,  both store and value  brand,  blades and
bladed hand tools and specialty industrial and medical blades);  Cotton and Foot
Care and Custom Bar Soap. We  distribute  our products  principally  through the
following retail channels:  national mass  merchandisers  (Wal-Mart,  Target and
Kmart), drug stores (CVS, Walgreens and RiteAid),  supermarkets (Safeway, Publix
and Albertson's) and home improvement  centers (Home Depot,  TruServ and Sherwin
Williams).  For the fiscal year ended  December  31,  1998,  we had net sales of
$297.5 million.

         We are the  largest  manufacturer  of  private  label and  value  brand
consumer  shaving  razors and blades in the  United  States,  and are the fourth
largest  manufacturer  in the total domestic  consumer  shaving market (based on
market research data for 1998 prepared by an independent  market research firm).
These  products,  which  generated  $119.0 million of 1998 net sales  worldwide,
represent  40.0% of total net sales and  consisted of $68.5  million of domestic
net sales and $50.5 million of  international  net sales.  Our products  provide
consumers with a value-priced  alternative  to more heavily  advertised  premium
priced brands,  while providing retailers with attractive  margins.  Our shaving
razor and blade products are primarily sold both under a retailer's  store brand
and  under  our value  brand  names  such as  Personna(R),  GEM(R),  Flicker(R),
MBC(TM),  Burma Shave(R) and  Tri-Flexxx(TM).  We market both complete razor and
blade systems and components  which can be used alone or with most other premium
priced brands.  Based on independent  consumer  tests,  our products  perform at
levels  comparable  to the premium  priced  products.  We are the only  domestic
provider of a complete line of private label  disposable  razors,  blade shaving
systems and replacement blades. We attribute our leadership in the private label
and value brand markets to our long history of  dedication to quality,  low-cost
manufacturing and competitive pricing.

         We believe that we are the largest single  manufacturer of both premium
and  value-priced  replacement  blades for bladed hand tools  (based on publicly
available  information  and Company  estimates).  Our  premium and  value-priced
blades and bladed hand tools are sold primarily under our Personna(R),  American
Line(TM) and Ardell(TM) brand names.  These products  generated $48.9 million of
1998 net sales  representing  16.4% of total net sales.  This  product  category
capitalizes on our precision shaving blade technology and includes such items as
single-edge  blades,  utility and carpet knives and replacement blades and paint
scrapers.   Our  blades  and  bladed  hand  tools  are  sold  to  consumers  and
professionals through home-improvement  centers/Do-It-Yourself retailers, retail
paint  chains and  hardware  stores and to  professionals  through  wholesalers,
distributors and specialty supply jobbers.

         We  have  leveraged  our  technical  and  manufacturing   expertise  by
developing a line of high-quality specialty industrial and medical blades. These
products  generated $16.1 million of 1998 net sales,  representing 5.4% of total
net sales. These specialty industrial blades are used in manufacturing processes
employed by a variety of industries including food-processing, fiber cutting and
automotive.  In addition,  we manufacture  and market carbon and stainless steel
surgical  blades,  disposable  scalpels  and  surgical  prep blades for the U.S.
health care markets  under the  Personna(R)  brand name to  customers  including
Allegiance Health Care, McKesson General Medical and Owens & Minor.

         We  believe  we  are  the  leading   private   label  and  value  brand
manufacturer  of a full line of personal  care cotton and foot care  products in
the United  States.  This  segment  generated  $87.3  million of 1998 net sales,
representing 29.3% of total net sales. Our cotton and foot care segment offers a
full product line including cotton swabs,  cotton balls,  puffs,  cosmetic pads,
cotton rolls,  pocket tissue,  and foot care products.  We have achieved  market
leadership in this category due to a series of strategic acquisitions, including
Megas  Beauty  Care,  Inc.  in 1994,  Absorbent  Cotton  Company in 1995 and the
purchase of certain assets of the American White Cross ("AWC") business in 1997.

         We  are  a   leading   domestic   manufacturer   of   cosmetic,   bath,
pharmaceutical  and specialty  custom bar soaps.  This segment  generated  $26.2
million of 1998 net sales, representing 8.8% of total net sales, and is marketed
primarily  under  customers'  brand names.  Our major  customers  include  Estee
Lauder, Johnson & Johnson and the NuSkin Corporation.



<PAGE>

Operating Strategy

         In order to steadily grow our business,  improve  operations  and lower
our cost structure, our operating strategy is focused on five primary areas:

         o     Increase trade  penetration  through improved sales and marketing
               efforts.  We believe that private label and value brand  products
               generally  offer  higher  margins to  retailers  and  significant
               savings to consumers over premium priced  products.  We intend to
               improve  our  trade  channel   penetration   by  leveraging   our
               traditional  strengths  in key  consumer  product  categories  by
               improving the  effectiveness of our sales and marketing  efforts.
               Our  marketing   efforts  will  continue  to  focus  on  improved
               packaging and point of sale promotional activities.  In addition,
               we  expect  to  improve   coordination   between  our  sales  and
               production  functions to increase  order-fill  rates,  reduce our
               inventory levels and improve efficiency in our production lines.

         o     Expand  international  market  penetration and enter new markets.
               The international market for the shaving razor and blade category
               is  approximately  four  times  the size of the U.S.  market.  We
               expect to expand into new markets while continuing to grow within
               our current  markets.  We will continue to develop  relationships
               with  distributors in targeted  markets and establish local sales
               and  marketing   organizations  to  take  advantage  of  specific
               regional  opportunities.  To this end, we acquired  Wolco Holland
               B.V. in September 1998, which  distributes  shaving products into
               Northern  European markets.  Our  international  sales in all our
               business segments were $59.6 million in 1998.

         o     Develop and introduce new products.  We are continuously evolving
               our  primary  product  lines  with  product   improvements,   new
               innovations  and line  extensions.  We are currently  planning to
               launch our new three-blade shaving system, Tri-Flexxx(TM), to the
               U.S.  market in the  second  quarter  of 1999.  This new  shaving
               system  is   designed   to  fit  the   Gillette   Sensor(R)   and
               SensorExcel(R)  handles,  and will  allow us to  address  the new
               three blade standard being set by the Gillette Mach3(TM).

         o     Continue to grow blades and bladed hand tools product  line.  Our
               blades and bladed hand tools product line is highly  regarded for
               quality  performance and maintains  strong levels of professional
               loyalty.  Sales of these  products  were  $48.9  million in 1998.
               Historically,  this part of our  business  has  grown  internally
               through  increased  market  penetration in the  professional  and
               Do-it-Yourself  retail channels.  Our goal is to improve upon the
               historical  steady  growth in this  strong  product  category  by
               refocusing on new product introductions.

        o      Reduce   operating   costs.  We  have  implemented  a  number  of
               initiatives to reduce  operating costs and increase  productivity
               and  efficiency in our consumer  shaving and cotton and foot care
               product  lines.  Over the last  three  years we have been able to
               reduce  manufacturing  costs in our consumer shaving product line
               by opening a highly  automated  blade  manufacturing  facility in
               Knoxville,   Tennessee,  and  expanding  our  low-cost  injection
               molding, assembly and packaging operation in Obregon, Mexico. The
               integration  in 1997 of our  industrial  blade  business into our
               Verona,  Virginia  facility  permitted us to close  manufacturing
               facilities in Union and Maplewood, New Jersey. In addition, since
               our  acquisition  of AWC,  we have made  significant  progress in
               reorganizing   our  six  cotton   and  foot  care   manufacturing
               facilities.


Product Lines

         Our business  operations are  concentrated  in three product  segments:
Razors and Blades;  Cotton and Foot Care; and Custom Bar Soap. Within the Razors
and Blades  segment we offer three product  lines:  Consumer  Shaving Razors and
Blades;  Blades and Bladed  Hand Tools;  and  Specialty  Industrial  and Medical
Blades.


                                        2

<PAGE>



         The  following  table sets forth net sales and  percentage of total net
sales by segment and for product  lines for the years ended  December  31, 1996,
1997 and 1998.

<TABLE>
<CAPTION>
                                                        1996                 1997                1998
                                                  ---------------      -----------------    ----------------
                                                                     (dollars in millions)
<S>                                                 <C>      <C>         <C>        <C>       <C>       <C>
Razors and Blades
  Consumer shaving razors and blades (1)          $114.4     43.9%     $120.8      40.8%    $119.0     40.0%
  Blades and bladed hand tools                      40.7     15.6        45.4      15.3       48.9     16.4
  Specialty industrial and medical blades           16.5      6.4        16.4       5.5       16.1      5.4
                                                 -------   ------     -------    ------    -------   ------
      Total                                        171.6     65.9       182.6      61.6      184.0     61.9
Cotton and foot care (2)                            55.8     21.4        80.4      27.1       87.3     29.3
Custom bar soap                                     33.2     12.7        33.6      11.3       26.2      8.8
                                                 -------   ------     -------    ------    -------   ------
      Total                                       $260.6    100.0%     $296.6     100.0%    $297.5    100.0%
                                                  ======    =====      ======     =====     ======    =====
</TABLE>

(1) Fiscal  1996   includes  net  sales  of  Bond of  $11.2  million  since  its
acquisition on March 29, 1996.

(2) Fiscal 1997 includes net sales of AWC of $21.1 million since its acquisition
on April 22, 1997.


         Consumer Shaving Razors and Blades. We design, manufacture and market a
full line of shaving razors and blades,  including single-edge,  double-edge and
injector blades,  twin-blade  fixed and pivoting head  cartridges,  moving-blade
cartridges,   disposables,   single-edge  razors,  women's  shaving  razors  and
special-purpose  shaving  blades.  We provide  both total  shaving  systems  and
components  which can be used  alone or with most  other  nationally  recognized
premium  brands.  These  shaving  products are marketed  under our own brands or
under the store brands of our private label shaving razor and blade customers.

         Blades  and  Bladed  Hand  Tools.  We  design,  manufacture  and market
replacement  blades and bladed hand tools, such as single-edge  blades,  utility
blades and knives,  carpet blades and knives and paint scrapers  primarily under
our Personna(R),  American  Line(TM) and Ardell(TM) brand names. The majority of
our blades  and bladed  hand  tools are sold to retail  customers  through  home
improvement   centers,   retail  paint   chains  and  hardware   stores  and  to
professionals through wholesalers, distributors and specialty supply jobbers.

         Specialty  Industrial and Medical  Blades.  We design,  manufacture and
market disposable  blades for both the industrial and medical markets.  Although
the  specialty  industrial  blade market is large and diverse,  our products are
specially designed for niche industrial applications. These specialty industrial
blades perform many of the cutting,  slicing or chopping  functions  involved in
manufacturing  processes  employed  by a variety of  industries  including  food
processing,  fiber cutting and automotive.  We manufacture and market carbon and
stainless-steel  surgical blades,  disposable  scalpels and surgical prep blades
for the U.S. health-care markets under the Personna(R) brand name.

         Cotton and Foot Care.  We  believe  we are one of the  largest  private
label manufacturers and distributors of cotton swabs, cotton balls and puffs and
cotton cosmetic pads. In addition,  we also  manufacture  cotton roll, foot care
products  and  pocket  tissue.  All of the  foregoing  products  are sold  under
retailers'  private  label as well as our own value brands:  Megas(R),  ACCO(R),
Cottonettes(R)  and  Crystal(R).  We believe that we are one of the few personal
care cotton  products  manufacturers  and  distributors  that can bleach its own
cotton--a process integral to the production of cotton products.

         Custom Bar Soap. We manufacture custom-designed and formulated bar soap
for sale to a broad variety of  pharmaceutical,  skin care and department  store
customers,  primarily  under  such  customers'  own brand  names.  Our  flexible
manufacturing  equipment,   product  design  and  development  capabilities  and
reputation  for high  quality  allow us to compete in all major  custom bar soap
market segments. Our expansion of synthetic soap manufacturing capacity in a new
highly  efficient  manufacturing  facility in  Columbus,  Indiana,  reflects our
commitment to new product development and a competitive cost structure.


Sales and Marketing

         Our sales and marketing organization is divided into the following five
sales groups, based on distribution  channel and target customers:  (1) consumer
products, (2) international,  (3) Do-it-Yourself and Industrial; (4) medical and
(5) soap. Our products

                                        3

<PAGE>



are sold through our major  distribution  channels  utilizing internal sales and
marketing  resources,  as well as third-party  distributors  and  manufacturers'
representatives.  Our sales personnel  receive a fixed salary plus a bonus based
on sales performance or our earnings.

         Consumer Products. Our private label and value brand shaving razors and
blades and cotton and foot care  products are sold  through mass  merchandisers,
drug stores and  supermarket  chains.  Our sales of consumer and  personal  care
products are managed by a vice  president  who oversees  field sales and related
personnel.  Marketing  support for the value brand shaving razors and blades and
cotton and foot care products  focuses on temporary price  reductions,  point of
sale  promotions  and  direct  mail  advertisements  and  is  managed  by a vice
president.  To assist stores in promoting their private label shaving and cotton
and foot care products, we help customers develop customized marketing programs,
including managing product  introductions and promotional  planning support.  In
addition,  such merchandising  vehicles as trial-size programs,  floor displays,
point of purchase advertising,  bonus sizes, coupons,  rebates,  store signs and
promotional  packs are available and  incorporated  into  individual  customers'
programs.   We  also  provide  customers  with  market  research  to  assist  in
determining the effectiveness of various marketing programs.

         International Sales. Our international  shaving razors and blades sales
effort is headed by a vice president who directs daily activities  through group
managers  responsible for specific geographic regions. We use a variety of sales
strategies and organizations, each tailored to the specific geographic locations
in which we sell our products, including extensive use of local distributors. We
have  a  manufacturing  and  packaging  facility  in  Mexico,  a  manufacturing,
warehousing and packaging  facility in Nazareth Illit,  Israel,  warehousing and
packaging  operations  in Puerto Rico and the United  Kingdom,  and  warehousing
facilities in Canada to further our penetration in those markets.

         Do-it-Yourself and Industrial.  We sell blades and bladed hand tools to
national and regional  chains of  home-improvement/  Do-it-Yourself  centers and
paint centers as well as hardware co-op, wholesale buying groups, and industrial
distributors.  Specialty  industrial  blades are sold to direct users,  original
equipment  manufacturers  and to a wide  variety  of  distributors  who  service
professional and niche segments.  Overall management of the industrial  division
is headed by a vice  president  with  specific  responsibilities  assigned  to a
director of field sales, director of market development and a general manager in
Europe.  Marketing  needs for the entire  division  are  overseen by a marketing
manager who reports to the vice president.

         Medical.  We distribute medical blades to hospitals,  nursing homes and
other health care practitioners. Our medical blade sales efforts are headed by a
vice president who oversees a number of regional managers.  We focus our medical
blade marketing efforts primarily  through targeted  trade-journal  advertising,
direct mail promotions and medical trade shows.

         Soap.  Our soap  sales  effort is  headed by a vice  president--general
manager  who   oversees  a  number  of  sales   people  and   national   account
representatives  who work with  customers  to custom  design soap  products  and
programs. We also utilize manufacturers' representatives to sell our products to
customers in the hospitality industry, such as hotels, and to market our line of
industrial and corporate promotional products.


Manufacturing

         We are a fully  integrated  manufacturer  of shaving razors and blades,
blades for use with  bladed  hand tools and  specialty  industrial  and  medical
blades.  Our manufacturing  processes  include blade forming,  heat treating and
coating,  plastic  injection  molding and  assembly  and  packaging.  Blades are
manufactured at our facilities in Verona,  Virginia,  Knoxville,  Tennessee, and
Nazareth  Illit,  Israel.  We operate a  low-cost,  highly  efficient  injection
molding,  packaging and assembly  facility in Obregon,  Mexico. In July 1995, we
purchased a new  facility in  Knoxville,  Tennessee  in order to develop a fully
integrated shaving razors and blades  manufacturing  operation.  During 1998, we
completed our  three-year  manufacturing  plan to develop this fully  integrated
facility  which  now  performs  all  operations  attendant  to the  manufacture,
molding,  assembly  and  packaging  of shaving  razors and blades.  In 1997,  we
restructured  our industrial  blade business,  moving  substantially  all of our
operations  into  a  single  facility  in  Verona,   Virginia,  and  closed  our
manufacturing facilities in Union and Maplewood, New Jersey.

         Proprietary  manufacturing processes allow us to produce a wide variety
of products of different  quantities,  sizes and packaging  while  maintaining a
high level of quality.  We are continually  working to improve our  blade-making
productivity by adding new technologies and/or manufacturing processes.  Most of
the processes that we use to manufacture products are

                                        4

<PAGE>



proprietary.

         The  production  of our cotton and foot care  products  starts with the
receipt of cotton fibers in bales. The cotton is bleached,  either internally or
through the use of contract  bleachers.  Once the cotton has been bleached,  the
cotton is  processed  into yarn which is then used either in the  production  of
cotton balls, cotton swabs, cotton pads or other cotton products. Our cotton and
foot care products are manufactured at our facilities in Cleveland, Ohio, Valley
Park,  Missouri,  Dayville,  Connecticut,  Canavanas,  Puerto Rico, and Nogales,
Mexico.

         The  manufacture  of soap is a specialized  process which  involves the
reaction  between  tallow  (animal  fat),  vegetable  oil or a fatty acid with a
caustic  substance (called an alkaline) and water. The resulting soap mixture is
then treated with  additives to decrease the  harshness of the  substance and to
give the soap  functional  or  cosmetic  applications.  We have the  ability  to
produce soap through four different manufacturing processes, producing a variety
of soap products with  different  characteristics.  We  manufacture  soap in our
Dayton, Ohio and Columbus, Indiana facilities.


Raw Materials

         The principal raw materials used by us in the  manufacture of razor and
blade products are stainless and carbon steel,  plastics and packaging supplies,
all of which are normally readily  available in the  marketplace.  While all raw
materials  are purchased  from outside  sources,  we are not dependent  upon any
single supplier in our operations for any materials essential to our business or
not  otherwise  commercially  available  to us.  We have  been able to obtain an
adequate supply of raw materials,  and no shortage of raw materials is currently
anticipated.

         The principal raw materials used by us in the manufacture of our cotton
and foot care products include cotton fiber, plastic and paper sticks for cotton
swabs, foam insoles and packaging supplies.  We have developed several different
qualified sources for our key material requirements. We bleach cotton internally
for  a  portion  of  our   production   requirements   while  also   maintaining
relationships with several sources for outside contract bleaching.

         The prices of certain of the raw materials  used in our cotton and foot
care operations are subject to commodity  price  volatility,  particularly  with
respect to cotton fiber and paper sticks,  which may affect the profitability of
our  cotton  and foot care  products.  We have  been able to obtain an  adequate
supply of  high-quality  raw  materials,  and no  shortage of raw  materials  is
currently anticipated.

         The principal raw materials used by us in the manufacture of our custom
bar soap  products are tallow,  various  chemicals,  coconut  oil,  fatty acids,
fragrances  and packaging  supplies.  The prices of certain of the raw materials
used by us, such as coconut oil and fatty acids, are volatile,  which may affect
the profitability of our soap products.  We have been able to obtain an adequate
supply of  high-quality  raw  materials,  and no  shortage of raw  materials  is
currently anticipated.


Competition

         The shaving  razor and blade  market is  competitive  and  sensitive to
changing  consumer  preferences and demands and competition is based on quality,
price and customer service.  Our principal  competitors in the shaving razor and
blade market are Gillette,  the Schick  Division of  Warner-Lambert  and Societe
Bic, S.A. These  competitors  are  substantially  larger and have  substantially
greater resources than we do.

         We are the leading  producer of private  label and value brand  shaving
razors  and  blades in the  United  States  where our  primary  competitors  are
smaller,  privately  held  companies.  Periodically,  one of the  premium  brand
shaving razor and blade  manufacturers  mentioned above attempts to compete with
us by lowering  prices or entering the private label market.  We believe that it
is unlikely that a new shaving razor and blade  manufacturer  will appear in the
near future given the proprietary nature of the manufacturing  processes used by
us and each of our competitors.

         In the blades and bladed  hand tools and  specialty  industrial  blades
markets, competition is based on quality, price and customer service. We believe
that we compete  favorably  on these bases and are a leading  producer of blades
and bladed hand tools and specialty  industrial  blades in the United States. We
have a number of smaller competitors in blades and bladed hand tools such

                                        5

<PAGE>



as I.B.U. and U.S.  Blades.  The medical blade market is dominated by a division
of Becton Dickinson and Company.

         In  cotton  swabs,   cotton  balls,   puffs,   cotton   cosmetic  pads,
pharmaceutical and beauty coils and foot care products,  we compete on the basis
of  producing  a complete  line of  high-quality  private  label and value brand
products as well as quality,  price and customer  service.  The market for these
products  is  highly   competitive,   often  attracting   large   national-brand
manufacturers seeking to add incremental private label business.  Companies such
as  Chesebrough-Pond's,  Johnson & Johnson and Dr. Scholl's  invest  significant
resources in their premium brands,  partly in an attempt to reclaim market share
lost to private label and value brand products.  Kimberly-Clark,  in particular,
has become very active in the private label pocket tissue category.

         The  custom  bar  soap  market  is  very   fragmented   with   numerous
participants,  some of which have greater  resources than we do.  Competition in
the custom bar soap market is based  primarily  on quality,  price and  customer
service.


Other Factors Affecting Our Business

Intellectual Property

         We own a large number of U.S. and foreign trademarks used in connection
with our  blade,  cotton  and foot  care and soap  businesses.  Such  trademarks
include  "Personna(R)",  "MBC(TM)",  "GEM(R)",  "Flicker(R)",  "PFB(R)",  "Burma
Shave(R)",    "Acti-Flexx(TM)",    "Tri-Flexxx(TM)",    "Megas(R)",   "ACCO(R)",
"Cottonettes(R)",     "Crystal(R)",     "Omnibus(R)",     "Centurion(R)",    and
"Kensington(R)".  Many of our  trademarks  are  registered  in the United States
Patent and Trademark  Office or the  corresponding  trademark  agencies in other
countries.  We consider our trademarks,  in the aggregate, to be material to our
business.

         In  addition,  we own or are  licensed to use various  U.S. and foreign
patents  covering  the design and  manufacture  of certain of our  products.  We
consider our portfolio of owned and licensed  patents,  in the aggregate,  to be
material to our business.  In  particular,  the  "MBC(TM)"  patent is considered
material to our business.

         We  consider  many of the  processes  which we use to  manufacture  our
products to be proprietary.  We have not, however, applied for patent protection
for any of these processes.  We instead rely on  non-disclosure  and non-compete
agreements with employees to protect our proprietary  rights in these processes.
There  can  be no  guarantee  that  these  agreements  will  provide  sufficient
protection in this regard, or that such employees will not breach them.

         We take  actions  and  devote  resources  to protect  our  intellectual
property rights, including trademarks, patents, and proprietary processes. There
can be no assurance  that such actions and resources will be adequate to protect
such rights,  or that such rights will not be  successfully  challenged by third
parties or  government  authorities.  Moreover,  no assurance  can be given that
others will not assert rights in, or ownership of, our intellectual  property or
that we will be able to resolve such conflicts successfully.

         In  addition,  the laws of certain  foreign  countries  may not protect
intellectual property to the same extent as do the laws of the United States. As
for U.S.  law,  patent  protection  is  temporary,  and  once a patent  expires,
competitors  can make,  have made,  use or sell  products or processes  that are
identical or similar to those once covered by the expired patent.


Employees and Labor Relations

         As of December 31, 1998, we employed 2,483 people worldwide,  including
2,003 hourly employees and 480 salaried employees.

         Four  collective-bargaining  agreements cover certain of our employees:
the first, at the Verona,  Virginia  plant,  covers 369 employees and expires on
September 25, 2000; the second, at our Dayton,  Ohio plant, covers 187 employees
and expires on April 19, 1999;  the third,  at our St.  Louis plant,  covers 168
employees and expires on September 1, 1999 and the fourth at our Nazareth Illit,
Israel   plant,   covers  151  employees  and  expires  on  December  31,  1999.
Negotiations  at our Dayton,  Ohio plant have  commenced to renew the collective
bargaining agreement at this plant. In addition to the foregoing  employees,  we
employ an  aggregate  of 1,128 hourly  employees  at our  Knoxville,  Tennessee;
Cleveland, Ohio; Dayville, Connecticut; Nogales, Mexico; Canavanas, Puerto Rico;
Nottingham, England; Obregon, Mexico; and San Juan, Puerto Rico facilities, none
of whose employees

                                        6

<PAGE>



are covered by a collective-bargaining agreement. We consider our relations with
our employees to be satisfactory.


Environmental Matters

         We are subject to various federal,  state and local  environmental laws
and  regulations  and the  environmental  laws and  regulations  of the  various
foreign  jurisdictions in which we do business. We anticipate that such laws and
regulations will become increasingly stringent in the future.

         In October 1996, our review of safety and  environmental  compliance at
our razor blade  manufacturing  facility in Verona,  Virginia  revealed possible
violations  of federal and state air  regulations.  The Verona  facility  uses a
halogenated solvent,  trichloroethylene  ("TCE"), in the blade cleaning machines
attached to its blade grinders.  In December 1994, pursuant to the federal Clean
Air Act ("CAA"), the U.S. Environmental  Protection Agency ("EPA") had adopted a
rule which regulates the emissions from halogenated  solvent  cleaning  machines
(the "HSC Rule").  The HSC Rule  included a facility  notification  requirement,
emission standards and compliance deadlines. Our October 1996, compliance review
discovered  that we had not submitted  the notice that the Verona  facility uses
halogenated  solvent  cleaning  machines  to the EPA and that two of the  Verona
facility's  twenty-four  blade  cleaners had been  installed in 1994 without the
requisite new machine air emission  controls.  We promptly reported the findings
of  the  compliance  review  to  the  EPA  and to  the  Virginia  Department  of
Environmental Quality ("VDEQ").  Our report to the agencies enclosed the federal
notices for the blade cleaners and proposed to install a  facility-wide  solvent
vapor  recovery  system  designed  to reduce  TCE  emissions  to well below that
required by the HSC Rule.  By November  1997, we had installed the solvent vapor
recovery system. In June 1997, EPA Region III filed an administrative  complaint
seeking  $147,000 in  penalties.  We  contested  the penalty and, in April 1998,
settled the matter with the EPA for a penalty payment of $6,250.

         In June 1997,  the VDEQ  issued us a notice of  violation  of state air
permitting  requirements for the construction of a number of our  blade-cleaning
machines  without a permit to  construct at the Verona  facility.  The notice of
violation  was  resolved by a consent  order  requiring  the  application  for a
facility-wide  state air  operating  permit.  We submitted  the  application  in
September  1997,  and  received  the  permit  in  March  1998.  We also  filed a
major-source air operating permit  application in March 1998, to comply with the
new air operating permit program adopted by Virginia  pursuant to Title V of the
CAA.  Once issued,  the major source permit will  supersede the state  operating
permit.

         In December 1986, we entered into a Special Order with the  predecessor
agency  of the VDEQ  pursuant  to which we agreed  to  investigate  and clean up
groundwater  contamination at our Verona,  Virginia,  razor-blade  manufacturing
facility.  Pursuant to a plan of  remediation  approved by the VDEQ's  executive
director on February  18,  1988,  and fully  implemented  in 1989,  we built and
currently  operate a groundwater  treatment  facility to treat the  contaminated
groundwater. We regularly monitor the level of contamination in the groundwater.
We are not presently aware of any additional  contamination  that is required to
be remediated at this time at the Verona site.

         When we purchased the  Maplewood,  New Jersey,  facility as part of the
Ardell  acquisition,  we and the  previous  owners  of  Ardell  entered  into an
Administrative  Consent Order on March 31, 1989, with the New Jersey  Department
of Environmental Protection and Energy ("NJDEPE") obligating the previous owners
of Ardell to  perform  soil and  groundwater  remediation  under the New  Jersey
Environmental  Cleanup and  Responsibility  Act.  Through  September  1996,  the
previous  owners had assumed full  financial  and oversight  responsibility  for
remediation  of the site.  At that time, in settlement of claims by Ardell under
its insurance policies with Federal Insurance Company covering the periods March
6, 1979 to March 6, 1987,  Federal  Insurance  Company assumed primary financial
and  oversight  responsibility  for the  remediation.  The costs to complete the
remediation are being borne by Federal Insurance Company and the previous owners
of Ardell.  The previous  owners have posted the requisite  financial  assurance
bond with NJDEPE securing such remediation  obligations.  We continue to hold as
security $0.7 million with the right to offset these  amounts  against any costs
incurred to ensure remediation.  Additionally,  as security,  a letter of credit
was  obtained  by the  sellers in favor of NJDEPE in the amount of $0.6  million
which remains intact. We have incurred only limited costs to date regarding this
matter and do not expect to incur any material future costs.

         The Valley  Park,  Missouri,  plant  facility of our Megas  subsidiary,
which was acquired on March 3, 1995, is located on a parcel of land which is the
subject of a CERCLA  investigation.  This  investigation  is being undertaken in
response to a release of "hazardous substances" from upgradient industries.  The
affected  area,  which includes the  groundwater  beneath a segment of the plant
site,  has  been  found  to be  contaminated  by  various  chlorinated  solvents
including TCE and trichloroethane ("TCA"). The contaminated aquifer had been the
source of municipal water supply wells. The results of a remedial  investigation
completed for

                                        7

<PAGE>



         EPA and the State of Missouri in January 1988  indicate that the source
of the TCE contamination was located to the northwest of the Megas facility. The
EPA and the State  subsequently  developed a remediation plan to address the TCE
contamination  and have executed a Consent Order with a potentially  responsible
party to implement the plan. The focus of their  investigation has now turned to
the  remediation  of the TCA  contamination  which  the  remedial  investigation
concluded was originating  west southwest of the Megas facility.  Megas does not
use or have records of having used the identified "hazardous  substances" in its
facility and has not been found to be a potentially  responsible  party. We have
reviewed the EPA limited remediation  investigation report and performed limited
soil gas analysis on site.  The results of the testing  showed no  contamination
that could have contributed to the underlying plume.  Based on our investigation
to date,  results of the soil gas analyses  performed on site,  and  discussions
held with the Missouri Attorney General's office, we believe that it is unlikely
that Megas will be identified as a potentially  responsible  party in connection
with the EPA Superfund  site. In the unlikely  event that we are identified as a
potentially responsible party, the sellers of Megas have agreed to indemnify us,
until March 3, 2000, for certain environmental matters, including costs incurred
in connection with the Valley Park site, in an amount not to exceed $300,000.

         We, after  consultation  with our advisors,  do not believe that any of
these matters will have a material effect on our consolidated financial position
or results of operations, regardless of any claims to indemnification.


                                        8

<PAGE>



ITEM 2 - Properties

          As of March 17, 1999, we owned or leased the following facilities:

<TABLE>
<CAPTION>
                                                                                                             Lease
                                                                                 Approximate   Owned or   Termination
Products                   Location                  Type of Facility            Square Feet    Leased        Date 
--------                   --------                  ----------------            ------------   ------    ----------- 
<S>                        <C>                       <C>                          <C>            <C>       <C>  

Shaving razors and         Verona, Virginia          Manufacturing, packaging,     307,000       Owned
   blades, blades and                                  distribution, sales,
   bladed hand tools and                               and corporate offices
   specialty industrial
   and medical blades

                           Knoxville, Tennessee      Manufacturing, packaging      125,000       Owned
                                                        and distribution

                           Obregon, Mexico           Manufacturing and packaging    94,000       Leased     April 2006

                           Nazareth Illit, Israel    Manufacturing, packaging       65,000       Leased     July 2002
                                                        distribution and sales

                           Nottinghamshire,          Packaging, distribution        36,000       Leased     July 2012
                             United Kingdom            and sales

                           Rio Grande,               Packaging, distribution        26,000       Leased     June 2000
                             Puerto Rico               and sales

Cotton and foot care       Cleveland, Ohio           Manufacturing, packaging,     250,000       Leased     April 2013
                                                       distribution and sales

                           Valley Park, Missouri     Manufacturing and packaging   107,000       Owned

                           Fenton, Missouri          Distribution                   41,000       Leased     June 1999

                           Nogales, Mexico           Manufacturing, packaging       84,000       Leased     March 2000
                                                       and distribution                                   (excluding our
                                                                                                             unilateral
                                                                                                             indefinite
                                                                                                           renewal rights)

                           Dayville, Connecticut     Manufacturing and packaging    43,000       Leased     September 2002

                           Pomfret, Connecticut      Manufacturing                  14,000       Leased     Month to Month

                           Canavanas, Puerto Rico    Manufacturing, packaging       22,000       Leased     December 2008
                                                       and distribution

Soap                       Dayton, Ohio              Manufacturing, packaging,     270,000       Owned
                                                       distribution and sales

                           Columbus, Indiana         Manufacturing, packaging,      20,000       Leased     September 2005
                                                        distribution and sales
</TABLE>


         We supplement our  distribution  capabilities  through public warehouse
facilities.  In  addition,  we use contract  packagers in selected  domestic and
international markets. We believe that the variety of domestic and international
locations gives us operating flexibility.

         We consider all of our facilities to be in good operating condition and
adequate for our present  purposes.  Our  production  facilities  are capable of
being utilized at a higher capacity to support increased demand, if necessary.


                                        9

<PAGE>



ITEM 3 - Legal Proceedings

         During  1998 the  Company  purchased  bleached  cotton  from an outside
supplier for use in its pharmaceutical coil business. The Company converted this
cotton from incoming bales into a coil, which was shipped to its  pharmaceutical
customers to be used as filler in bottles of oral dosage forms of pharmaceutical
products to prevent  breakage.  During the period from March through November of
1998,  the  process by which the  Company's  supplier  bleached  this cotton was
changed by  introducing  an expanded  hydrogen  peroxide  treatment.  Subsequent
testing  indicated  varying levels of residual  hydrogen  peroxide in the cotton
processed  during this time period and the supplier in November 1998 reduced the
levels of hydrogen peroxide in its bleaching process.  The Company, to date, has
received  complaints from  approximately  10 customers  alleging  defects in the
cotton  supplied them during the period and asserting these defects may have led
to changes in their products  pharmaceutical  appearance,  and with respect to a
limited  number of  products,  potency.  As of March 26,  1999,  the Company has
received notice of 2 claims for damages in the aggregate amount of approximately
$1.7 million which the Company believes  primarily relates to alleged lost sales
and merchandise  damage,  and it is possible that additional damage claims might
be  forthcoming.  On  March  2,  1999,  at the  request  of the  Food  and  Drug
Administration,  the Company  notified all (numbering  approximately  85) of its
pharmaceutical  cotton coil  customers that it was  withdrawing  from the market
those  lots of  cotton  coil  which may  contain  elevated  levels  of  hydrogen
peroxide.

         The Company has notified its supplier that, in the Company's  view, the
supplier is primarily  responsible  for damages,  if any,  that may arise out of
this matter.  At this time, the Company's  supplier has agreed to be responsible
for the cost of fiber,  bleaching and freight of returned  product,  but has not
agreed to be responsible for any other damages and has expressed an intention to
assert defenses to our claims. The Company's insurance carriers have been timely
notified of the  existence of the claim and have agreed to provide  defense in a
reservation of rights letter,  but are continuing to evaluate  whether  coverage
would apply to all aspects of the claims.

         The  Company  has been  advised by its  general  counsel  that it has a
number of valid defenses to potential  customer  claims as well as a third party
claim  against the  supplier  for  damages,  if any,  incurred  by the  Company.
However,  management  is unable to make a  meaningful  estimate of the amount or
range of loss that could  result from an  unfavorable  outcome  relating to this
overall issue, and accordingly, there can be no assurance that our exposure from
this matter might not exceed the combination of our insurance coverage,  if any,
and our recourse to  suppliers.  It is  therefore  possible  that the  Company's
results of operations  or cash flows in a particular  quarterly or annual period
or its financial  position could be significantly  and adversely  affected by an
ultimate unfavorable outcome of this matter.

         Weston  Properties  Investments III, Ltd. has filed a claim against the
Company  for  damages  relating  to delays  in cost  overruns  attendant  to the
Company's  facility  expansion  in  Cleveland,  Ohio in the amount of  $649,000.
Management  believes  that the  outcome of this  matter will not have a material
adverse effect on the Company's  consolidated  financial  position or results of
operations.

         We are involved in various  other legal  proceedings  from time to time
incidental  to the  conduct  of our  business.  We  believe  that  any  ultimate
liability  arising  out of such  proceedings  will not have a  material  adverse
effect on our consolidated financial position or results of operations.

ITEM 4 - Submission of Matters to a Vote of Security Holders

         No matter was submitted to a vote of our stockholders during the fourth
quarter of the fiscal year ended December 31, 1998.


                                     PART II

ITEM 5 - Market for Registrant's Common Equity and Related Stockholder Matters

         Our common  stock,  par value $.01 per share  (the  "Common  Stock") is
traded  in the  over-the-counter  market  and has been  included  in the  NASDAQ
National  Market  under  the  symbol  "RAZR"  since  our Form  S-1  registration
statement  relating to the initial  public  offering of our Common  Stock became
effective  on June 8, 1993.  Information  with  respect to market  prices of our
Common Stock for each of the quarters in 1997 and 1998 is presented under Item 8
of this Report.

         As of  March  17,  1999,  our  shares  of  Common  Stock  were  held by
approximately  3,100 shareholders of record (including brokers,  dealers,  banks
and other nominees participating in The Depository Trust Company).

         We have not paid and do not anticipate paying any cash dividends on the
Common  Stock  in the  foreseeable  future.  From  time to  time,  the  Board of
Directors  intends to review our dividend policy.  Any payment of dividends will
be at the  discretion  of the Board of  Directors  and will be  dependent on our
earnings  and  financial   requirements   and  other   factors,   including  the
restrictions

                                       10

<PAGE>



imposed by the General  Corporation  Law of the State of Delaware on the payment
of dividends and covenants in our  revolving  credit  facility and the indenture
related  to the 9 7/8%  Series B Senior  Notes  described  in Note 5 of Notes to
Consolidated Financial Statements under Item 8 of this Report.

ITEM 6 - Selected Financial Data

          The  following  data (in  thousands,  except per share data) should be
read in conjunction with our consolidated  financial  statements  included under
Item 8 of this Report and  management's  discussion  and  analysis of  financial
condition and results of operations included under Item 7 of this Report

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
Statement of Income Data:                               1998        1997(1)    1996(2)     1995(3)       1994(4)
                                                        -----       ------     -------    --------       -------
<S>                                                      <C>           <C>        <C>        <C>           <C> 
Net sales                                             $297,488     $296,607   $260,636    $230,453      $192,573
Costs and expenses
   Cost of sales                                       201,978      196,991    169,949     149,994       119,192
   Selling, general and administrative expenses         63,516       60,206     54,867      48,487        43,366
   Amortization of intangible assets                     2,543        2,501      2,503       2,341         3,219
   Special charges (5)                                   3,003            -          -         947             -
                                                     ---------   ---------- ----------   ---------    ----------

Operating income                                        26,448       36,909     33,317      28,684        26,796

Interest expense                                        12,270       12,270     11,719      10,582         7,580
                                                     ---------     --------   --------    --------      --------

Income before income taxes and
   extraordinary item                                   14,178       24,639     21,598      18,102        19,216
Income taxes                                             4,076        9,570      8,425       7,241         7,895
                                                     ---------     --------  ---------   ---------     ---------

Income before extraordinary item                        10,102       15,069     13,173      10,861        11,321
Extraordinary item, net of income tax benefit(6)             -            -          -        (980)            -
                                                    ----------   ---------- ----------   ---------    ----------

Net income                                            $ 10,102     $ 15,069   $ 13,173    $  9,881      $ 11,321
                                                      ========     ========   ========    ========      ========

Basic earnings per share:
   Income before extraordinary item                      $0.83        $1.25      $1.09       $0.90         $0.94
   Extraordinary item                                        -            -          -       (0.08)            -
                                                       -------     --------   --------       -----      --------

Net income                                               $0.83        $1.25      $1.09       $0.82         $0.94
                                                         =====        =====      =====       =====         =====

Weighted average number of shares outstanding           12,107       12,094     12,093      12,093        12,093
                                                        ======       ======     ======      ======        ======

Diluted earnings per share:
   Income before extraordinary item                      $0.83        $1.23      $1.09       $0.90         $0.93
   Extraordinary item                                        -            -          -       (0.08)            -
                                                       -------     --------   --------       -----      --------

Net income                                               $0.83        $1.23      $1.09       $0.82         $0.93
                                                         =====        =====      =====       =====         =====

Weighted average number of shares outstanding           12,223       12,255     12,139      12,135        12,125
                                                        ======       ======     ======      ======        ======

                                                                            December 31,
Balance Sheet Data:                                     1998         1997       1996        1995           1994
                                                        ----         ----       ----        ----           ----

Total assets                                          $262,897     $254,081   $229,997    $208,263      $180,000
Long-term obligations, including
   current portion                                     127,333      123,612    112,181     109,789        99,577
Stockholders' equity                                    69,554       59,439     44,523      30,898        21,139
</TABLE>

                                       11

<PAGE>




(1)  Our  results of  operations  include  results  for the Cotton  Division  of
     American White Cross,  Inc.  ("AWC") since its April 22, 1997,  acquisition
     date.  Results for the period ended December 31, 1997, include net sales of
     AWC of $21.1 million.
(2)  Our results of operations  include results for Bond-America  Israel Blades,
     Ltd., and its wholly-owned  subsidiary,  A.I. Blades,  Inc.  (collectively,
     "Bond") since its March 29, 1996,  acquisition date. Results for the period
     ended December 31, 1996, include net sales of Bond of $11.2 million.
(3)  Our results of  operations  include  results for Absorbent  Cotton  Company
     ("ACCO") since its March 3, 1995,  acquisition date. Results for the period
     ended December 31, 1995, include net sales of ACCO of $16.6 million.
(4)  Our results of  operations  include  results for Megas Beauty  Care,  Inc.,
     ("Megas") since its June 10, 1994, acquisition date. Results for the period
     ended December 31, 1994, include net sales of Megas of $18.7 million.
(5)  See  Note  13 to our  Consolidated  Financial  Statements  relating  to the
     special  charges in 1998.  Special  charges in 1995 relate to a  litigation
     settlement and related expenses.
(6)  Extraordinary item relates to the early extinguishment of debt in 1995.


ITEM 7 - Management's Discussion and Analysis of Financial Condition
         and Results of Operations

General

         The  following  discussion  of  results  of  operations  and  financial
condition is based upon and should be read in conjunction  with the Consolidated
Financial  Statements of our Company and notes thereto  included under Item 8 of
this Report.

Forward-Looking Statements.

         Management's discussion and analysis of financial condition and results
of  operations  and  other  sections  of  this  Report  contain  forward-looking
statements  relating  to future  results of our  Company.  Such  forward-looking
statements are identified by use of forward-looking words such as "anticipates,"
"believes," "plans,"  "estimates,"  "expects," and "intends" or words or phrases
of similar expression.  These forward-looking  statements are subject to various
assumptions,  risks and uncertainties,  including but not limited to, changes in
political and economic  conditions,  demand for our products,  acceptance of new
products,  technology developments affecting our products and to those discussed
in our filings with the Securities and Exchange Commission.  Accordingly, actual
results could differ materially from those  contemplated by the  forward-looking
statements.

Results of Operations

         American Safety Razor Company is a leading manufacturer of high-quality
private  label and value brand  consumer  products.  As of December 31, 1998, we
adopted Statement of Financial Accounting Standards No. 131,  "Disclosures About
Segments  of an  Enterprise  and Related  Information"  ("FAS  131").  Under the
provisions of FAS 131 we have three reportable segments,  organized primarily on
the basis of differences in products,  which consist of Razor and Blades, Cotton
and Foot Care and Custom Bar Soap. The razors and blades segment  includes three
product lines,  consumer shaving razors and blades,  both store and value brand,
blades and bladed hand tools, and specialty  industrial and medical blades.  The
cotton and foot care  segment  includes  cotton  swabs,  cotton balls and puffs,
cosmetic pads, tissues,  pharmaceutical and beauty coil, and foot care products.
The custom bar soap segment includes  cosmetic/skin  care, bath,  pharmaceutical
and specialty  custom bar soaps.  We  distribute  our products to the retail and
professional trades in the United States and in selected  international markets.
The  following  table  sets  forth  information  with  respect  to our  business
segments: 

                                             Year Ended December 31,
                               ------------------------------------------------
                                   1996              1997              1998
                                   ----              ----              ----
                                             (dollars in millions)

Net Sales:
   Razors and blades (1)      $171.6   65.9%   $182.6    61.6%   $184.0    61.9%
   Cotton and foot care (2)     55.8   21.4      80.4    27.1      87.3    29.3
   Custom bar soap              33.2   12.7      33.6    11.3      26.2     8.8
                             -------  -----   -------   -----   -------   -----
      Total                   $260.6  100.0%   $296.6   100.0%   $297.5   100.0%
                              ======  =====    ======   =====    ======   =====

Operating Income:
   Razors and blades          $ 26.4   15.4%   $ 26.5    14.5%   $ 21.0    11.4%
   Cotton and foot care          4.1    7.3       6.3     7.8       4.1     4.7
   Custom bar soap               2.8    8.4       4.1    12.3       1.3     5.0
                              ------   ----    ------   -----    ------   -----
      Total                   $ 33.3   12.8%   $ 36.9    12.4%   $ 26.4     8.9%
                              ======  =====    ======   =====    ======   =====

(1)  Fiscal  1996 includes net sales of Bond of $11.2 million since its
     acquisition on March 29,  1996.  
(2)  Fiscal 1997 includes net sales of AWC of $21.1 million since its 
     acquisition on April 22, 1997.



                                       12

<PAGE>


Overview

         Net sales are gross sales net of returns and cash discounts.

         Gross profit is net sales less cost of sales,  which includes the costs
necessary to make our products,  including  the costs of materials,  production,
warehousing  and  procurement,  and  the  costs  to  ship  our  products  to our
customers,  including  freight and distribution.  The principal  elements of our
cost to make our products are raw materials and  packaging  supplies,  labor and
manufacturing  overhead.  Raw  materials,  among other things,  consist of steel
(both carbon and stainless),  cotton fiber, coconut oil, fatty acids and plastic
resins the overall  costs of which have  remained  relatively  stable during the
periods   discussed  below,   despite   susceptibility   to  significant   price
fluctuations. Labor costs consist primarily of hourly wages plus employee fringe
benefits. Manufacturing overhead generally includes indirect labor, plant costs,
depreciation and manufacturing supplies.

         Selling, general and administrative expenses include discounts from our
published  list prices,  the costs incurred to support the sale and marketing of
our products and the general and administrative  costs of managing the business,
including salaries and related benefits, commissions,  advertising and promotion
expenses, bad debts, travel and insurance.


Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

         Net Sales.  Net sales for 1998 and 1997 were  essentially  unchanged at
$297.5  million and $296.6  million,  respectively.  We did not  experience  any
significant price increases in 1998 across our three business segments.

         Razors and Blades.  Net sales of our razors and blades segment for 1998
and 1997 were $184.0 million and $182.6  million,  respectively,  an increase of
$1.4 million or 0.8%.

         Net sales of shaving  razors  and blades for 1998 and 1997 were  $119.0
million and $120.8  million,  respectively,  a decrease of $1.8 million or 1.5%.
Net sales of domestic  value  branded  shaving  products in 1998  declined  9.6%
compared  to 1997 and net  sales of  domestic  private  label  shaving  products
decreased  5.8%  over the same  period.  In 1997,  net sales of  domestic  value
branded  shaving  products were  favorably  affected by the launch of the Revlon
Perfect Finish(TM)  shaving system.  1998 sales of the Revlon Perfect Finish(TM)
shaving system were significantly  below 1997 levels and at the end of 1998, due
to a lack of demand,  we discontinued the sale of this product.  Excluding sales
of this product,  domestic value branded sales were  essentially flat during the
period.  Net sales of domestic  private  label  shaving  products  were down due
primarily  to heavy  promotional  activity by Gillette  and reduced  promotional
support by certain  customers in advance of and during the  introduction  of the
Gillette   Mach3(TM)   shaving  system.   Net  sales  of  shaving   products  in
international markets increased 8.2% (net of a 3% negative impact of unfavorable
exchange rates) reflecting stronger sales in certain markets.

         Net sales of blades and bladed  hand tools for 1998 and 1997 were $48.9
million and $45.4  million,  respectively,  an increase of $3.5 million or 7.7%.
This growth primarily  reflects  increased sales of our Personna(R),  Ardell(TM)
and American  Line(TM) brands of products as a result of distribution  gains and
new product introductions in the Personna(R) line of products.

         Net sales of specialty  industrial and medical blades for 1998 and 1997
were $16.1 million and $16.4 million,  respectively, a decrease of $0.3 million,
or 1.8%. Sales of specialty  industrial products decreased 5.0% due primarily to
cyclical  usage and purchasing  patterns by certain  customers and mix shifts to
lower  priced  blade  products.   Additionally,   certain  of  our  distributors
experienced  increased  competition in their  serviced  niche markets.  Sales of
medical  products  increased  1.6% due  primarily to increased  distribution  of
products.

         Cotton and Foot Care.  Net sales of cotton and foot care  products  for
1998 and 1997 were $87.3 million and $80.4 million, respectively, an increase of
$6.9 million,  or 8.6%.  This increase  primarily  reflects a full year of sales
resulting  from the April 1997  acquisition  of the cotton  division of American
White Cross ("AWC").

         Custom Bar Soap. Net sales of our custom bar soap products for 1998 and
1997 were $26.2  million  and $33.6  million,  respectively,  a decrease of $7.4
million,  or 22.0%.  This decrease results primarily from lower sales to certain
of our  pharmaceutical/skin  care  customers  due to weakness  in certain  Asian
markets and to a lesser extent,  reductions in inventory levels by key customers
and  delays in product  purchases  by  customers  prior to the  introduction  of
reformulated products.

                                       13

<PAGE>




         Gross Profit.  Gross profit decreased $4.1 million to $95.5 million for
1998 from $99.6 million for 1997. As a percentage of net sales, gross profit was
32.1% for 1998 and 33.6% for 1997.

         A modest 0.3% of net sales  increase in razors and blades gross margins
due to lower  manufacturing  overhead was more than offset by costs  incurred in
the  continuing  integration  of the cotton  operations of AWC with those of the
Company, and the related reorganization of our cotton operations.  During fiscal
1998, we opened a new cotton production facility in Nogales,  Mexico, closed our
Sparks,  Nevada  facility and expanded the  operations  of our  Cleveland,  Ohio
facility. The process of integrating the product lines, equipment and facilities
acquired in the AWC transaction and executing our  reorganization  plan has been
more difficult than we originally anticipated. As a result, we have experienced,
and will continue to experience in fiscal 1999,  production  inefficiencies that
have resulted in higher  manufacturing,  distribution,  and freight costs. These
difficulties have also resulted in reduced levels of customer service. We expect
that the  reorganization  of our cotton operations will be completed in 1999 and
that cost  improvements  will be  realized  in fiscal  2000 when we realize  the
benefits  from  the  actions   currently   being  taken.   In  addition  to  the
reorganization of our cotton operations, gross margins in our soap business were
negatively   impacted  by  higher  absorption  of  manufacturing   overhead  and
depreciation over a lower sales base.

         Operating  and Other  Expenses.  Selling,  general  and  administrative
expenses  were  21.4% of net sales for 1998,  compared  to 20.3% for 1997.  This
increase primarily  reflects an increase in promotional  support for our shaving
blade  products,  increased  spending  on new  product  development  activities,
primarily  with respect to  Tri-Flexxx(TM),  and  absorption  of soap  operating
expenses  over  a  smaller  sales  base.  Amortization  of  goodwill  and  other
intangible  assets was  unchanged  at $2.5  million for 1998 and 1997.  Interest
expense was unchanged at $12.3 million for 1998 and 1997.

         During 1998,  we recorded  special  charges  aggregating  $3.0 million,
which were comprised of  approximately  $1.0 million  related to our decision to
discontinue the Revlon Perfect  Finish(TM)  shaving system,  approximately  $1.8
million for certain  severance and employee  benefits related to the termination
of certain employees,  and approximately $0.2 million related to the shutdown of
our cotton  operations in Sparks,  Nevada.  Employee  terminations have resulted
primarily  from the  consolidation  of our sales forces and the  termination  of
certain other management  employees.  As of December 31, 1998 approximately $1.6
million  remained as an accrued expense on our balance sheet,  which is expected
to be substantially paid or utilized for asset impairment during 1999.

         Our  effective  income  tax rate for 1998 and 1997 was 28.7% and 38.8%,
respectively,  and varies from the United States statutory rate due primarily to
nondeductible goodwill amortization,  state income taxes, net of the federal tax
benefit,  and in 1998 due to a tax  benefit  relating to the  settlement  of tax
issues. (See Note 8 to our consolidated financial statements).


Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

         Net Sales.  Net sales for 1997 and 1996 were $296.6  million and $260.6
million,  respectively,  an increase of $36.0 million,  or 13.8%.  Sales by AWC,
since its April 22, 1997 acquisition date,  contributed $21.1 million to the net
sales  increase and sales by Bond,  since its March 29, 1996  acquisition  date,
contributed  $1.9 million to the net sales increase.  The impact of increases in
unit volume and new product offerings within our other operating units accounted
for substantially all of the remaining $13.0 million increase in net sales.

         Razors and Blades.  Net sales of our razors and blades segment for 1997
and 1996 were $182.6 million and $171.6  million,  respectively,  an increase of
$11.0 million or 6.4%.

         Net  sales of our  shaving  razors  and  blades  for 1997 and 1996 were
$120.8 million and $114.4 million,  respectively, an increase of $6.4 million or
5.6%.  Net sales of domestic  private  label  shaving  products  increased  8.2%
primarily benefitting from continued growth in sales of our MBC(TM) products and
increased  promotional  support of  products  by major  customers.  Net sales of
international   shaving  products  increased  5.1%  reflecting  stronger  sales,
primarily in Canada, Latin America, Mexico, the United Kingdom, Russia and Asia.
International net sales were negatively impacted approximately 4% by unfavorable
exchange  rates.  Net sales of domestic value branded  shaving  products were up
marginally for the year.

         Net sales of blades and bladed  hand tools for 1997 and 1996 were $45.4
million and $40.7 million,  respectively,  an increase of $4.7 million or 11.6%.
This strong growth primarily  reflects  increased sales of our American Line(TM)
and  Personna(R)  brands of products as a result of new  distribution  gains and
product-line extensions.

                                       14

<PAGE>




         Net sales of specialty  industrial and medical blades for 1997 and 1996
were $16.4 million and $16.5 million,  respectively, a decrease of $0.1 million,
or 0.8%. Sales of specialty  industrial products decreased 5.6% due primarily to
cyclical  usage and purchasing  patterns by certain  customers and mix shifts to
lower-priced blade products.  Sales of medical products increased 4.6% due to an
expanding customer base and new product offerings.

         Cotton  and Foot  Care.  Net  sales of cotton  and foot care  products,
excluding  AWC,  for  1997  and 1996  were  $59.3  million  and  $55.8  million,
respectively,  an  increase  of $3.5  million,  or 6.1%.  Cotton  and foot  care
experienced  sales  growth  across most of its product  lines due  primarily  to
increased distribution of products.

         Custom Bar Soap. Net sales of our custom bar soap products for 1997 and
1996 were $33.6  million and $33.2  million,  respectively,  an increase of $0.4
million, or 1.4%. This increase primarily reflects the continued growth in sales
of our pharmaceutical/skin care products.

         Gross Profit.  Gross profit increased $8.9 million to $99.6 million for
1997 from $90.7 million for 1996. As a percentage of net sales, gross profit was
33.6% for 1997 and 34.8% for 1996.  This decrease was primarily due to the lower
margins  earned in the newly  acquired  AWC cotton  operations  and the negative
impact of unfavorable exchange rates. This decrease was somewhat offset by lower
production  costs in the shaving blades and synthetic soap  operations and lower
material costs in the cotton operations.

         Operating  and Other  Expenses.  Selling,  general  and  administrative
expenses  were  20.3% of net sales for 1997,  compared  to 21.1% for 1996.  This
decrease  primarily  reflects spreading these costs over an increased sales base
due to the AWC acquisition. Amortization of goodwill and other intangible assets
was unchanged at $2.5 million for 1997 and 1996.  Interest expense  increased in
1997 to $12.3 million from $11.7 million in 1996 primarily  reflecting increased
borrowings to finance the AWC acquisition.

         Our  effective  income  tax rate for 1997 and 1996 was 38.8% and 39.0%,
respectively. (See Note 8 to the consolidated financial statements.)


Liquidity and Capital Resources

         Our primary  sources of  liquidity  are cash flow from  operations  and
borrowings under our revolving credit facility. For the years ended December 31,
1998, 1997 and 1996, net cash provided by operating activities amounted to $12.5
million, $12.0 million and $25.5 million, respectively.

         The  increase in net cash  provided by  operating  activities  for 1998
compared  to 1997  primarily  reflects a decrease in trade  receivables  of $1.2
million reflecting the timing of customer payments as compared to an increase of
$7.7  million  in 1997,  offset  by a decline  in net  income  and a decline  in
accounts payable.

         The  decrease  of $13.5  million  in net  cash  provided  by  operating
activities  for 1997 as  compared  to 1996 was due  primarily  to an increase in
trade accounts  receivable for our newly acquired AWC operations,  the timing of
customer  payments,   strong  year-end  sales  which  increased  trade  accounts
receivable,  an  increase in  inventories  to improve  customer  service and the
payment of certain tax liabilities.

         For the years ended December 31, 1998,  1997 and 1996, net cash used in
investing activities amounted to $12.6 million, $24.0 million and $27.9 million,
respectively.  Net cash used in investing  activities for 1998 related primarily
to capital  expenditures  of $11.4  million  and the  purchase of Wolco for $0.6
million.

         For the years ended December 31, 1998, 1997 and 1996, net cash provided
by  financing  activities  was $2.1  million,  $11.4  million and $2.2  million,
respectively.  Net cash provided by financing  activities for 1998 resulted from
net borrowings of $2.0 million.

         At December 31, 1998, long-term indebtedness amounted to $127.3 million
(including the current portion of $3.9 million),  and we had approximately $28.7
million  available  for  future  borrowings  and  letters  of  credit  under our
revolving credit  facility.  The  weighted-average  interest rate incurred by us
with respect to our debt obligations in 1998 was approximately 9.3%.

                                       15

<PAGE>




         Our liquidity requirements are primarily the funding of working capital
needs,  which consist of inventory and trade receivables,  capital  expenditures
and  scheduled   principal  and  interest  payments  on  indebtedness.   Capital
expenditures in 1998 totaled $11.4 million, as compared to $13.7 million in 1997
and $11.3  million in 1996.  We expect our capital  expenditures  to increase to
approximately  $13.0 million in 1999. It is anticipated that these  expenditures
will fund  purchases  of equipment  to support  production  capacity for new and
existing products as well as routine on-going requirements.

         We believe that our cash on hand, anticipated funds from operations and
the  amounts  available  to us  under  our  revolving  credit  facility  will be
sufficient  to cover our working  capital,  capital  expenditures,  debt service
requirements and tax obligations as well as our growth-oriented strategy for our
existing business for at least the next 12 months.


Market Risk

         The  Company  is  exposed  to  various  market  risk  factors  such  as
fluctuating  interest rates and changes in foreign  currency  rates.  These risk
factors can impact our results of operations, cash flows and financial position.
We manage these risks through  regular  operating and financing  activities  and
periodically  use  derivative  financial  instruments  such as foreign  exchange
option and forward contracts. These derivative instruments are placed with major
financial institutions and are not for speculative or trading purposes.

         The following  analysis presents the effect on the Company's  earnings,
cash flows and financial position as if the hypothetical  changes in market risk
factors  occurred  on  December  31,  1998.  Only the  potential  impacts of our
hypothetical  assumptions  are analyzed.  The analysis  does not consider  other
possible effects that could impact our business.


Interest Rate Risk

         At December 31, 1998, the Company carried $127.3 million of outstanding
debt on its books,  with $20.6  million of that total held at variable  interest
rates.  Holding all other variables constant,  if interest rates  hypothetically
increased or decreased by 10%, the impact on earnings,  cash flow and  financial
position would not be material.  In addition,  if interest rates  hypothetically
increased or decreased by 10%, with all other variables held constant,  the fair
market value of our $100.0  million 9 7/8% Series B Senior Notes would  increase
or decrease by approximately $5.0 million.


Foreign Currency Risk

         The Company sells to customers in foreign  markets  through our foreign
operations  and  through  export  sales  from  our  plants  in  the  U.S.  These
transactions are often denominated in currencies other than the U.S. dollar. Our
primary currency exposures are the Euro, British Pound Sterling, Canadian Dollar
and Mexican Peso.

         The Company  limits its foreign  currency  risk by  operational  means,
mostly by locating its manufacturing  operations in those locations where it has
significant  exposures  in major  currencies.  The Company in 1998  entered into
currency option contracts to minimize the risk of foreign currency fluctuations.
The value of these  contracts  at  December  31,  1998 was not  material  to the
Company's earnings, cash flow and financial position.


Recent Developments

         On February 12,  1999,  RSA Holdings  Corporation  and RSA  Acquisition
Corporation, which are affiliates of J.W. Childs Equity Partners II, L.P. ("J.W.
Childs"),  entered into a merger  agreement  with the  Company.  Pursuant to the
merger  agreement,  RSA  Acquisition  has made an offer to  purchase  all of the
outstanding shares of common stock of the Company at a purchase price of $14.125
per share,  upon the terms and subject to the  conditions set forth in the offer
to purchase ("the Stock Tender Offer"). The aggregate purchase price,  excluding
transaction costs, to be paid for the common stock purchased in the Stock Tender
Offer,  assuming all of the common stock (on a fully diluted basis) is tendered,
including the redemption of stock options, is approximately  $172.6 million. The
Stock Tender Offer is  conditioned  upon,  among other  conditions,  there being
validly  tendered and not withdrawn,  prior to the expiration  date of the Stock
Tender Offer, a number of shares of common stock which constitutes more than 50%
of the voting  power  (determined  on a fully  diluted  basis) of all the equity
securities of the Company and regulatory

                                       16

<PAGE>

approval. The Stock Tender Offer expires on April 2, 1999.

         The merger  agreement  provides  that,  following the completion of the
Stock Tender  Offer,  RSA  Acquisition  will be merged with and into the Company
(the "Merger"). Following the Merger, the Company will continue as the surviving
corporation and will become a direct,  wholly owned  subsidiary of RSA Holdings,
which  will  be  wholly  owned  by  J.W.  Childs,  its  affiliates  and  Company
management. Closing for the Merger is expected to occur in April 1999.

         In  connection  with  the  Merger,  the  Company  has  made an offer to
purchase (the "Note Tender Offer") all $100.0 million aggregate principal amount
of its 9 7/8% Series B Senior Notes due August 1, 2005 (the  "Existing  Notes").
In  conjunction  with the Note Tender  Offer,  the  Company  has also  solicited
consents  to  eliminate  substantially  all of the  covenants  contained  in the
indenture  relating to the Existing Notes. Any tender of Existing Notes pursuant
to the Note Tender  Offer will also be a grant of consent  with  respect to such
Existing Notes. The Note Tender Offer expires on April 6, 1999.

         Upon completion of the above transactions,  as currently  contemplated,
the  Company  expects  it  would  have  had  approximately   $226.2  million  of
indebtedness  outstanding  as of December  31,  1998 as  compared to  historical
indebtedness  outstanding of $127.3 million.  The Company also expects that as a
result of the  application  of purchase  accounting  the Company's  depreciation
expense and  amortization  of  intangible  assets will  increase.  In  addition,
certain fees and expenses to be incurred relating to the above transactions will
be  reflected  either as  components  of the cost of the  transactions  or as an
expense in the period in which the transactions are completed.

         During  1998 the  Company  purchased  bleached  cotton  from an outside
supplier for use in its pharmaceutical coil business. The Company converted this
cotton from incoming bales into a coil, which was shipped to its  pharmaceutical
customers to be used as filler in bottles of oral dosage forms of pharmaceutical
products to prevent  breakage.  During the period from March through November of
1998,  the  process by which the  Company's  supplier  bleached  this cotton was
changed by  introducing  an expanded  hydrogen  peroxide  treatment.  Subsequent
testing  indicated  varying levels of residual  hydrogen  peroxide in the cotton
processed  during this time period and the supplier in November 1998 reduced the
levels of hydrogen peroxide in its bleaching process.  The Company, to date, has
received  complaints from  approximately  10 customers  alleging  defects in the
cotton  supplied them during the period and asserting these defects may have led
to changes in their products  pharmaceutical  appearance,  and with respect to a
limited  number of  products,  potency.  As of March 26,  1999,  the Company has
received notice of 2 claims for damages in the aggregate amount of approximately
$1.7 million which the Company believes  primarily relates to alleged lost sales
and merchandise  damage,  and it is possible that additional damage claims might
be  forthcoming.  On  March  2,  1999,  at the  request  of the  Food  and  Drug
Administration,  the Company  notified all (numbering  approximately  85) of its
pharmaceutical  cotton coil  customers that it was  withdrawing  from the market
those  lots of  cotton  coil  which may  contain  elevated  levels  of  hydrogen
peroxide.

         The Company has notified its supplier that, in the Company's  view, the
supplier is primarily  responsible  for damages,  if any,  that may arise out of
this matter.  At this time, the Company's  supplier has agreed to be responsible
for the cost of fiber,  bleaching and freight of returned  product,  but has not
agreed to be responsible for any other damages and has expressed an intention to
assert defenses to our claims. The Company's insurance carriers have been timely
notified of the  existence of the claim and have agreed to provide  defense in a
reservation of rights letter,  but are continuing to evaluate  whether  coverage
would apply to all aspects of the claims.

         The  Company  has been  advised by its  general  counsel  that it has a
number of valid defenses to potential  customer  claims as well as a third party
claim  against the  supplier  for  damages,  if any,  incurred  by the  Company.
However,  management  is unable to make a  meaningful  estimate of the amount or
range of loss that could  result from an  unfavorable  outcome  relating to this
overall issue, and accordingly, there can be no assurance that our exposure from
this matter might not exceed the combination of our insurance coverage,  if any,
and our recourse to  suppliers.  It is  therefore  possible  that the  Company's
results of operations  or cash flows in a particular  quarterly or annual period
or its financial  position could be significantly  and adversely  affected by an
ultimate unfavorable outcome of this matter.

         Weston  Properties  Investments III, Ltd. has filed a claim against the
Company  for  damages  relating  to delays  in cost  overruns  attendant  to the
Company's  facility  expansion  in  Cleveland,  Ohio in the amount of  $649,000.
Management  believes  that the  outcome of this  matter will not have a material
adverse effect on the Company's  consolidated  financial  position or results of
operations.

New Accounting Standards

         In June 1998, the Financial Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging  Activities" ("FAS 133"). FAS 133 establishes  standards
for accounting and  disclosure of derivative  instruments.  This new standard is
effective for fiscal quarters of fiscal years beginning after June 15, 1999. The
implementation of this new standard is not expected to have a material effect on
our consolidated results of operations or financial position.

                                       17

<PAGE>

Year 2000 Computer Issues

         The Year 2000 issue is the result of computer  programs  being  written
using two digits  rather  than four to define the  applicable  year,  as well as
hardware  designed with similar  constraints.  Some of our computer programs and
hardware that have date  sensitive  functions may recognize a date using "00" as
the year 1900 rather than the year 2000.  This could result in a system  failure
or  miscalculations  causing  disruptions in operations  including,  among other
things, a temporary inability to process  transactions,  receive invoices,  make
payments or engage in normal business transactions.

         We are taking  action to resolve  those Year 2000 issues that are under
our control.  The overall effort  encompasses our razors and blades,  cotton and
foot care and custom bar soap business segments and covers international as well
as domestic  sites.  We are centrally  monitoring  and  controlling  the effort;
however,  there are designated  representatives at each affiliate and subsidiary
location  with  responsibility  for  resolving  site-specific  Year 2000 issues.
Following is a description of the six-phase approach we are using:

    (1)   Assessment - Identify and inventory  all  information  technology  and
          non-information technology system components that are possible sources
          of Year 2000  issues  and  assess  the  criticality  of  non-compliant
          systems in order to establish priorities for replacement or repair.

    (2)   Strategy -  Determine  the  nature and extent of Year 2000  issues and
          select a remediation  strategy (i.e.,  renovate by modifying  existing
          system,  upgrade to a later version of the system,  replace with a new
          system, or retire the affected component). After the strategy has been
          selected,  develop  project  plans to address  non-compliant  systems,
          beginning with the most critical systems.

    (3)  Remediation   -  Execute   project   plans  to  resolve   issues   with
         non-compliant systems.

    (4)  Testing - Perform testing to evaluate  effectiveness  of the corrective
         actions  taken or to  confirm  compliance  of  systems  that  have been
         certified by third parties.

    (5)  Implementation - Implement the renovated, upgraded, and replaced system
         components into the production environment.

    (6)  Contingency  Planning  - Continue  monitoring  readiness  and  complete
         necessary contingency plans.

         We have completed the Assessment and Strategy phases for  substantially
all of  our  information  technology  and  non-  information  technology  system
components.

         Our most  mission-critical  system is the "Corporate ERP" system, which
is a widely  available  software  package  that we have  moderately  customized.
Eleven of our fifteen  manufacturing,  packaging and distribution  sites utilize
the   Corporate   ERP   system  to   process   orders,   control   manufacturing
planning/work-order processing, distribute products, manage financial activities
and report  financial  results.  The eleven sites using the Corporate ERP system
include  corporate  headquarters,  U.S. and Mexican razors and blades sites, all
cotton and foot care facilities,  and all custom bar soap facilities.  The third
party vendor has responded  that all of its software  modules in use at American
Safety Razor and our  subsidiaries  are Year 2000 ready.  In addition,  the most
frequently  utilized system  functions have been tested by our users,  including
the internally developed system customizations.

         We are  currently  linked with 138  customers for exchange of documents
using the Corporate EDI (electronic data interchange)  system.  Our EDI software
has been  upgraded  to a Year 2000  compliant  version  that is now  capable  of
supporting ANSI standard  version 4010, which provides for a 4 digit year and is
the version which many of our EDI customers are adopting prior to the Year 2000.
EDI transactions  with a 2 digit year have also been tested and will continue to
be  supported  for those  customers  who elect not to convert to a 4 digit year.
Approximately  18% of the 138 EDI customers  have now been  implemented on 4010.
Testing with EDI customers will continue through the remainder of 1999.

         All  personal  computers  are being  analyzed  and tested to  determine
whether any  remediation  is  required.  We expect that the analysis and testing
process  will be complete by June 1999 and that all personal  computers  will be
Year 2000 ready by December 31, 1999.

         Our U.S. and U.K. payroll systems are Year 2000 compliant and we expect
all of our remaining  international payroll systems will be compliant by the end
of 1999.

                                       18

<PAGE>




         We are  also  assessing  the Year  2000  readiness  of  non-information
technology  systems and equipment which may include embedded  technology such as
micro-controllers.   Our  manufacturing,   assembly,   and  packaging  machines,
operating in each of our razors and blades,  cotton and foot care and custom bar
soap segments,  are scheduled to be Year 2000 compliant by the end of the second
quarter of 1999.

         Our  "worst-case"  scenario at the present  time is the  disruption  of
business operations as the result of supplier Year 2000 related failures,  which
would impair their ability to  adequately  provide us with products or services.
Our  business  processes  depend  on  our  material  suppliers  as  well  as our
infrastructure   suppliers   in  areas   such  as   electricity,   water,   gas,
communications and transportation. Year 2000 related failures by suppliers could
adversely affect business operations including payroll, manufacturing processes,
product  distribution,  material ordering,  customer-order  processing and other
support functions  dependent on the affected  supplier.  While we have a limited
ability to test and control our  suppliers'  and other third  parties' Year 2000
readiness, we are contacting major suppliers and other critical third parties to
obtain information as to their Year 2000 readiness. Razors and blades and cotton
and foot care  suppliers  were surveyed  regarding  Year 2000 issues and all key
suppliers have  indicated they plan to be compliant  during 1999. The custom bar
soap business is scheduling a meeting with its top twenty  suppliers  during the
first half of 1999 for a Year 2000 readiness review.

         Considering  the  number of  internal  and  external  systems  which we
directly or indirectly use, it is likely that there will be instances of failure
that could cause disruptions in business  processes.  The likelihood of failures
in  infrastructure  systems  and in the supply  chain  cannot be  estimated  and
therefore the impact of these failures on business  operations is uncertain.  If
we or any critical third party supplier does not complete  necessary upgrades as
planned, the Year 2000 issue may have a material impact on us.

         Necessary contingency plans are scheduled to be developed, beginning in
July 1999,  for any internal  systems that are not  compliant by the end of June
1999. Also,  contingency plans will be developed by December 1999, as needed, to
address the risk of business  disruption  due to supplier  Year 2000 issues.  As
part of contingency  planning,  we will consider a number of options to mitigate
risk, including building additional  inventory prior to year 2000,  establishing
manual backup processes and arranging for alternate suppliers.

         Since most of our Year 2000 issues are being  addressed  through normal
planned  upgrades,  incremental  external  Year 2000  costs are  expected  to be
minimal,  approximating  $115,000.  Approximately  $35,000 was spent  during the
fourth  quarter  of 1998  and  $80,000  (approximately  3.5% of our  information
technology budget) is planned to be spent during the first half of 1999.

         Readers are cautioned that forward-looking statements contained in this
discussion  of  Year  2000  issues  should  be  read  in  conjunction  with  our
disclosures under the heading "Forward-Looking Statements" above.


Inflation

      Inflation  has not been  material  to our  operations  within the  periods
presented.



                                       19

<PAGE>



ITEM 8 - Financial Statements and Supplementary Data

         The consolidated  financial  statements of the registrant are submitted
as a separate section of this Report starting on page 31. Information related to
"Quarterly Data (Unaudited)" is summarized below:

                                                  1998
                           -----------------------------------------------------
                           First          Second        Third        Fourth 
                           -----          ------        -----        -------
                          (In thousands, except per share and market price data)

Net sales                  $66,511        $73,751       $80,171      $77,055
Gross profit                19,508         23,800        26,902       25,300
Special charges (2)          1,003              -             -        2,000
Net income                     789          2,094         3,702        3,517 (1)
Earnings per share
   Basic                       .07            .17           .31          .29 (1)
   Diluted                     .06            .17           .30          .29 (1)
Market price
   High                      23.25          18.38         14.75        12.63
   Low                       17.50          11.00          8.63         8.13


(1) Includes  a tax  benefit  of  $1,546  or $.13  per  share  relating  to the
    settlement of tax issues (See Note 8 to consolidated financial statements).

(2) See Note 13 to consolidated financial statements.


                                                  1998
                            ----------------------------------------------------
                            First          Second        Third       Fourth 
                            -----          ------        -----       ------ 
                          (In thousands, except per share and market price data)

Net sales                  $63,103        $75,683       $79,061      $78,760
Gross profit                21,678         24,272        26,588       27,078
Net income                   2,554          3,385         4,438        4,692
Earnings per share
   Basic                       .21            .28           .37          .39
   Diluted                     .21            .28           .36          .38
Market price
   High                      15.75          18.13         19.38        20.75
   Low                       12.88          13.38         16.00        16.25


ITEM 9 - Changes in and Disagreements with Accountants on Accounting and 
         Financial Disclosure

          None


                                       20

<PAGE>

                                    PART III


ITEM 10 - Directors and Executive Officers of the Registrant

The Current Members of the Board

         The Company's Board currently consists of nine members. The name of the
current Directors, their ages as of March 17, 1999 and certain other information
about them are set forth below.

                                    Business Experience During
Name                       Age      the Past Five Years and Other Information
----                       ---      -----------------------------------------

                                    Each for a Three-Year  Term  Expiring at the
                                    1999 Annual Meeting of Stockholders

William C. Weathersby      57       Mr. Weathersby joined the Company in January
                                    1990,  and has  served  as  President  and a
                                    director  since that time.  Prior to joining
                                    the  Company,  Mr.  Weathersby  held  senior
                                    positions with Revlon Health Care and Squibb
                                    Corporation.  From 1985  through  1989,  Mr.
                                    Weathersby  was  Group   President,   Squibb
                                    Corporation,  and a member of its  Executive
                                    Committee.

William C. Ballard         58       Mr.  Ballard became a member of the Board of
                                    Directors  on June  15,  1993 in  connection
                                    with the Company's  initial public  offering
                                    (the "Initial Public Offering"). Mr. Ballard
                                    has  been  of  counsel  to the  law  firm of
                                    Greenebaum,  Doll & McDonald in  Louisville,
                                    Kentucky since May 1992.  From 1970 to April
                                    1992,  Mr.  Ballard held  various  positions
                                    with Humana Inc., an investor-owned hospital
                                    company,  including  most  recently  as  its
                                    Executive  Vice President and as a member of
                                    its Board of  Directors.  Mr.  Ballard  is a
                                    director of Atria Communities,  Inc., Health
                                    Care REIT,  Health  Care  Recoveries,  Inc.,
                                    Jordan  Telecommunication   Products,  Inc.,
                                    LG&E  Energy  Corp.,   Mid-America  Bancorp,
                                    Vencor, Inc. and United Healthcare Corp.

Jonathan F. Boucher        42       Mr.  Boucher became a member of the Board of
                                    Directors and the Company's  Vice  President
                                    in  April  1989  in   connection   with  the
                                    acquisitions   by   the   Company   of   its
                                    predecessor  and  Ardell  Industries,   Inc.
                                    (collectively,  the  "Acquisitions").  Since
                                    June 1983,  Mr.  Boucher has been a managing
                                    director of The Jordan Company.  Mr. Boucher
                                    is  a   director   and   officer  of  Jordan
                                    Industries,  Inc.,  Jackson Products,  Inc.,
                                    Motors   and   Gears,    Inc.   and   Jordan
                                    Telecommunication Products, Inc.

                                    Each for a Three-Year  Term  Expiring at the
                                    2000 Annual Meeting of Stockholders

Thomas H. Quinn            51       Mr.  Quinn  became  Chairman of the Board of
                                    Directors  of the  Company  in April 1989 in
                                    connection  with  the  Acquisitions.   Since
                                    1988,  Mr. Quinn has been  President,  Chief
                                    Operating  Officer  and a director of Jordan
                                    Industries,  Inc.  and Chairman of the Board
                                    and Chief Executive Officer of Welcome Home,
                                    Inc.  and a  director  of  AmeriKing,  Inc.,
                                    Motors   and   Gears,    Inc.   and   Jordan
                                    Telecommunication  Products, Inc. On January
                                    22, 1997, Welcome Home, Inc. filed a Chapter
                                    11 petition in the United States  Bankruptcy
                                    Court for the Southern District of New York.

John W. Jordan II          50       Mr.  Jordan  became a member of the Board of
                                    Directors in April 1989 in  connection  with
                                    the Acquisitions. Mr. Jordan is the managing
                                    director  of The  Jordan  Company,  which he
                                    founded in February 1982. Mr. Jordan is also
                                    a  director  of  Jordan  Industries,   Inc.,
                                    AmeriKing,   Inc.,  Carmike  Cinemas,  Inc.,
                                    Motors and Gears,  Inc., Welcome Home, Inc.,
                                    Apparel  Ventures,  Inc.,  Jackson Products,
                                    Inc.,  GFSI,  Inc.,  GFSI  Holdings,   Inc.,
                                    Jordan Telecommunication  Products, Inc. and
                                    Rockshox, Inc.


                                       21

<PAGE>



                                    Business Experience During
Name                       Age      the Past Five Years and Other Information
----                       ---      -----------------------------------------

D. Patrick Curran          50       Mr.  Curran  became a member of the Board of
                                    Directors  on June  15,  1993 in  connection
                                    with the Initial Public Offering. Mr. Curran
                                    is   President   and   Chairman   of  Curran
                                    Companies,  a  manufacturer  and supplier of
                                    specialty  chemicals,   which  he  has  been
                                    associated  with  since  1968.  He has  also
                                    served as  Chairman of Cook  Composites  and
                                    Polymers,  Inc.  since 1990. Mr. Curran also
                                    serves   on  the  Board  of   Directors   of
                                    Applebee's  International,  Inc.,  Sealright
                                    Co., Inc. and UNITOG Company.

                                    Each for a Three-Year  Term  Expiring at the
                                    2001 Annual Meeting of Stockholders

David W. Zalaznick         45       Mr.  Zalaznick  became a member of the Board
                                    of  Directors  in April  1989 in  connection
                                    with  the  Acquisitions.   Since  1982,  Mr.
                                    Zalaznick  has been a managing  director  of
                                    The Jordan Company.  Mr. Zalaznick is also a
                                    director   of   Jordan   Industries,   Inc.,
                                    AmeriKing,   Inc.,  Carmike  Cinemas,  Inc.,
                                    Marisa  Christina,  Inc.,  Motors and Gears,
                                    Inc.,   Apparel  Ventures,   Inc.,   Jackson
                                    Products,  Inc.,  GFSI, Inc., GFSI Holdings,
                                    Inc. and Jordan Telecommunication  Products,
                                    Inc.

John R. Lowden             42       Mr.  Lowden  became a member of the Board of
                                    Directors in April 1989 in  connection  with
                                    the  Acquisitions.  Mr.  Lowden  has  been a
                                    managing  director  of  The  Jordan  Company
                                    since  March 1985 and is also an officer and
                                    a director of Apparel Ventures, Inc.

Paul D. Rhines             55       Mr.  Rhines  became a member of the Board of
                                    Directors in April 1989 in  connection  with
                                    the Acquisitions. Since 1980, Mr. Rhines has
                                    been a founding general managing director of
                                    R. W.  Allsop  &  Associates  L.P.  and R.W.
                                    Allsop & Associates II, Limited  Partnership
                                    and is also a  founding  general  partner of
                                    the  general  partner of the Allsop  Venture
                                    Partners III, L.P., all of which are engaged
                                    in   financing    growth-oriented    private
                                    companies and acquisitions.

Executive Officers

         Set forth below are our executive  officers as of March 17, 1999, their
ages,  positions,  and a description of their business  experiences for the last
five  years.  Except for Mr.  Casner and Mr.  Tonnesen,  all of the below  named
executive officers have been our employees for more than the last five years.

Name                     Age    Position with Company
----                     ---    ---------------------

Thomas H. Quinn           51    Chairman of the Board, Chief Executive Officer
William C. Weathersby     57    President, Chief Operating Officer
Thomas G. Kasvin          51    Senior Vice President - Chief Financial Officer
J. Michael Casner         54    Vice President - International
John R. Lupton            57    Vice President - Operations, Cotton and 
                                                 Foot Care
John W. Paterson          56    Vice President - Medical
Michael J. Piron          58    Vice President - Technical and Logistics 
                                                 Operations
Gary R. Moorhead          50    Vice President - General Manager, Custom 
                                                 Bar Soap
Gary S. Wade              50    Vice President - Industrial/Specialty
Paul W. Tonnesen          34    Vice President - Consumer Products

         Mr. Quinn - for biographical information with respect to Mr. Quinn, see
The Current Members of the Board above.

         Mr.  Weathersby  - for  biographical  information  with  respect to Mr.
Weathersby, see The Current Members of the Board above.


                                       22

<PAGE>



         Mr.  Kasvin  joined  the  Company  in August  1991,  and served as Vice
President - Chief  Financial  Officer  until August 1996,  when he became Senior
Vice President - Chief Financial  Officer.  From May 1982 through July 1991, Mr.
Kasvin  was  corporate  controller  for the  Marmon  Group,  a  privately  held,
diversified manufacturing company.

         Mr.  Casner  joined the  Company  in June 1997,  and has served as Vice
President -  International  since that time.  Prior to joining the Company,  Mr.
Casner held  various  international  marketing  positions  with  Helene  Curtis,
Gillette and Johnson & Johnson.

         Mr.  Lupton has been  employed  in various  positions  with the Company
since 1982. Currently, Mr. Lupton serves as Vice President - Operations,  Cotton
and Foot Care. Prior to joining the Company,  Mr. Lupton spent eighteen years in
various production and engineering positions with General Electric.

         Mr.  Paterson  joined the Company in July 1993,  and has served as Vice
President - Medical since that time. From 1990 through 1992, Mr. Paterson served
as Vice President,  Marketing and Sales of Cryomedical  Sciences.  Prior to that
time,  Mr.  Paterson  held various sales and  marketing  positions  where he was
responsible  for the  marketing  of medical  devices  with Johnson & Johnson and
Abbott Laboratories.

         Mr. Piron has been Vice President - Technical and Logistics  Operations
of the Company since January 1994.  Prior to joining the Company,  Mr. Piron was
Vice  President of Operations  for the Consumer  Products Group at Bristol Myers
Squibb.  From 1963  through  1987,  Mr.  Piron held  various  manufacturing  and
logistics positions in consumer products with Johnson & Johnson,  Warner-Lambert
and Hoechst Celanese.

         Mr.  Moorhead  joined  the  Company  in 1980,  in  connection  with the
acquisition  of the Hewitt Soap  Company and held  various  sales and  marketing
positions  until April 1997,  when he became Vice  President - General  Manager,
Custom Bar Soap.

         Mr. Wade has been employed in various  sales,  management and marketing
positions in the Company's  industrial  blade  division since 1978. In 1990, Mr.
Wade was appointed Vice President -  Industrial/Specialty.  Prior to joining the
Company,  Mr. Wade was employed in various sales and sales management  positions
with the General Products Division of Philip Morris U.S.A.

         Mr.  Tonnesen joined the Company in October 1998 and has served as Vice
President - Consumer Products since that time. Prior to joining the Company, Mr.
Tonnesen was National  Sales Manager for the Personal  Care Group.  From 1994 to
1996,  Mr.  Tonnesen was Eastern Zone Sales  Manager at H. J. Heinz,  Inc./Kraft
General Foods.  From 1991 to 1994, Mr. Tonnesen held various  positions at Kraft
General Foods.


ITEM 11 - Executive Compensation

         The  following  table  sets  forth a  summary  of  certain  information
regarding  compensation  paid or accrued by the Company for services rendered to
the Company  for the fiscal  year ended  December  31,  1998,  and the two prior
fiscal  years,  paid or awarded to those persons who were, at December 31, 1998:
(i) the Company's chief executive  officer,  (ii) the Company's four most highly
compensated  executive  officers  other than the chief  executive  officer whose
total   annual   salary  and  bonus   exceeded   $100,000   during  such  period
(collectively,   the  "Named  Executive   Officers")  and  (iii)  an  additional
individual  for whom  disclosure  would have been provided but for the fact that
the  individual  was not  serving as an  executive  officer of the Company as of
December 31, 1998.


                                       23

<PAGE>



                           Summary Compensation Table
<TABLE>
<CAPTION>
                                             Annual                                                Long-Term
                                          Compensation                                           Compensation     
                                          ------------                                           ------------     
                                                                            Other Annual      Securities Underlying
Name and Principal Position             Year    Salary(1)       Bonus(2)   Compensation(3)           Options       
---------------------------             ----    ---------       --------   ---------------    ---------------------
<S>                                     <C>       <C>            <C>           <C>                 <C>        

Thomas H. Quinn                         1998      125,000              0             0                           0
   Chairman and Chief                   1997      125,000              0             0                           0
   Executive Officer                    1996      125,000              0             0                           0

William C. Weathersby                   1998      292,000              0             0                           0
   President, Chief Operating           1997      292,000        250,000             0                      15,000
   Officer and Director                 1996      288,333        245,000             0                      20,000

Thomas G. Kasvin                        1998      190,832              0             0                           0
   Senior Vice President--              1997      174,667        117,447             0                      15,000
   Chief Financial Officer              1996      159,333        110,169             0                      20,000

Michael J. Piron                        1998      161,152              0             0                           0
   Vice President -- Technical          1997      161,152         84,883             0                       7,500
   and Logistics Operations             1996      161,152         84,294        10,034 (4)                  15,000

James V. Heim                           1998      197,087              0       322,500 (5)                        0
                                        1997      206,667        136,815             0                       15,000
                                        1996      113,750        117,000        19,358 (6)                   20,000

Gary S. Wade                            1998      134,678         64,300             0                            0
   Vice President -- Industrial/        1997      124,785         45,010             0                        7,500
   Specialty                            1996      119,822         39,771             0                       10,000

</TABLE>

----------------------
(1)  Includes amounts deferred under the Company's 401(k) plan.

(2)  The  Company   provides  bonus   compensation   based  on  an  individual's
     achievement of certain  specified  objectives,  with additional  rewards if
     certain operating objectives,  including, among others, earnings per share,
     are met. Employees are eligible to receive from 10% to 100% of their annual
     compensation as a bonus under this program.  The bonus plan is administered
     by the Company's Compensation Committee.

(3)  Except as  indicated,  no executive  named in the table  received any other
     annual  compensation in an amount in excess of the lesser of either $50,000
     or 10% of the total of annual salary and loans  reported for him in the two
     preceding columns for the periods covered by this table.

(4)  Represents  the  amount  paid  by the  Company  to Mr.  Piron  for  certain
     relocation  expenses  incurred in connection  with the  commencement of his
     employment with the Company.

(5)  Payment  pursuant to  a  Separation  and  Release  Agreement  dated  as  of
     November 9, 1998 between the Company and Mr. Heim.

(6)  Represents  the  amount  paid  by the  Company  to  Mr.  Heim  for  certain
     relocation  expenses  incurred in connection  with the  commencement of his
     employment with the Company.

The following table shows stock options exercised by each of the Named Executive
Officers during the fiscal year ended December 31, 1998, including the aggregate
value of gains on the date of  exercise.  In addition,  this table  includes the
number of shares covered by both exercisable and  non-exercisable  stock options
as of fiscal  year-end,  and the values  for  unexercised  options  based on the
year-end  price of the Common  Stock.  Except as listed in the  table,  no other
Named  Executive  Officer  exercised any Company  stock options or  beneficially
owned unexercised Company stock options.

                                       24

<PAGE>





                 Aggregated Option Exercises in Last Fiscal Year
                           and Fiscal Year-End Values

<TABLE>
<CAPTION>
                                                                                                   Value of Unexercised
                                                                 Number of Unexercised            In-the-Money Options at
                                   Shares                     Options at December 31, 1998          December 31, 1998(1)
                                  Acquired       Value       ------------------------------    ----------------------------
Name                            On Exercise     Realized     Exercisable      Unexercisable    Exercisable    Unexercisable
----                            -----------     --------     -----------      -------------    -----------    -------------

<S>                                      <C>          <C>        <C>                <C>           <C>              <C>    
William C. Weathersby                     0            0          28,000             32,000        $75,500          $28,875
Thomas G. Kasvin                          0            0          35,000             30,000         99,125           22,125
Michael J. Piron                          0            0          26,000             21,500         73,500           25,875
James V. Heim                             0            0           8,000             27,000          8,000           12,000
Gary S. Wade                              0            0          22,000             15,500         64,750           12,750
</TABLE>

---------------
(1)   Based on the difference between the closing market price on December 31, 
      1998, for the Common Stock, which was $12.00 per share, and the option 
      exercise price.


Employment Agreements

         On March 3, 1995,  Sterile  Products  Holdings,  Inc.,  a  wholly-owned
subsidiary of the Company ("Holdings") and Sterile Products Corporation,  d.b.a.
Absorbent Cotton Company, Inc., a wholly-owned  subsidiary of Holdings ("ACCO"),
entered  into an  employment  agreement  with Mr.  C. C.  Van Noy (the  "Van Noy
Employment  Agreement").  Pursuant  to the  terms  of  the  Van  Noy  Employment
Agreement,  Mr. Van Noy served as the President of ACCO for two years and agreed
not to compete with  Holdings or ACCO or disclose any  confidential  information
during  the  period in which the  Annual  Retirement  Payments  (as  hereinafter
defined) are being paid to him. In exchange for his services and  agreements not
to compete or disclose certain information,  Mr. Van Noy, who has retired and no
longer  performs  services  for the  Company,  is  entitled to receive an annual
payment of $75,000 (the "Annual Retirement Payments") for a ten year period. The
Van Noy Employment  Agreement provides that the Annual Retirement Payments shall
be made to the  beneficiary  of Mr. Van Noy upon his  death,  subject to certain
adjustments.

         On December 8, 1997,  the Company  entered into  Employment  Protection
Agreements (the  "Protection  Agreements")  with each of Messrs.  Weathersby and
Kasvin (the "Executive").  The Protection  Agreement provides that, in the event
of a Change of Control (as defined therein),  the Company will pay the Executive
a lump sum in cash (the  "Change of Control  Payment")  equal to: (i) one year's
base salary (six months in the case of Mr.  Weathersby) and (ii) an amount equal
to 100% of Executive's  target bonus (50% in the case of Mr. Weathersby) for the
fiscal  year in which  the  Change  of  Control  occurs.  If,  after a Change of
Control,  Executive's  employment is terminated or is otherwise  materially  and
adversely affected, Executive will be entitled to an additional lump sum payment
equal  to the  Change  of  Control  Payment.  In  addition,  all  stock  options
previously  granted  to the  Executive,  whether  or not  vested,  shall  become
immediately  exercisable.  Executive  shall  have one  year  from  such  date to
exercise the options.

         On July 15, 1998, the Company entered into a Letter  Agreement with Mr.
Kasvin,  in which the Company agreed to pay Mr. Kasvin  $300,000 on September 1,
1999 (above and beyond  salary and other  benefits  which he is receiving) if he
remained  employed  by the  Company  until that date (or was  terminated  by the
Company  without  cause prior to that  date).  Under the Letter  Agreement,  Mr.
Kasvin  must give six  months'  notice if he intends to leave the Company and in
the event that Mr.  Kasvin  gives such notice to the  Company,  Mr.  Kasvin will
remain on the  payroll at full salary and  benefits  until the earlier of either
the date Mr. Kasvin finds other employment or December 31, 1999.

         On November 9, 1998, the Company  entered into a Separation and Release
Agreement  (the  "Release  Agreement")  with Mr.  James  V.  Heim,  Senior  Vice
President  of  Consumer  and  Personal  Products.  Pursuant  to the terms of the
Release Agreement, Mr. Heim's employment with the Company ceased on November 30,
1998.  In  satisfaction  of all Mr.  Heim's  claims for  compensation,  Mr. Heim
received a lump sum payment from the Company of $322,500.  Mr. Heim may exercise
his stock options in the Company's stock until November 30, 1999. In furtherance
of the Employee Patent and Confidential  Information  Agreement  executed by Mr.
Heim on June 3, 1996, Mr. Heim agrees that he will keep secret all  confidential
financial and proprietary  matters of the Company and will not take with him any
documents relating to the Company.

         On February 5, 1999, the Company  entered into a Letter  Agreement with
Thomas H. Quinn. Pursuant to the Letter

                                       25

<PAGE>



Agreement,  Mr. Quinn's  employment with the Company will cease upon a change of
control of the Company.  In  recognition  of his service and  dedication  to the
Company, Mr. Quinn is entitled to receive a lump sum payment,  upon consummation
of a change of control, from the Company of $374,000.


ITEM 12 - Security Ownership of Certain Beneficial Owners and Management

         The  following  table sets forth as of  December  31,  1998  (except as
otherwise  noted)  certain  information  with respect to the number of shares of
Common  Stock  beneficially  owned  by (i)  each  director  of the  Company  who
beneficially  owned Common Stock,  (ii) each executive officer of the Company as
of December 31, 1998,  named in the table under "Executive  Compensation"  under
Item 11 of this Report, who beneficially owned Common Stock, (iii) all directors
and executive  officers of the Company as a group and (iv) based on  information
available to the Company and a review of statements  filed with the SEC pursuant
to  Section  13(d) and 13(g) of the  Securities  Act of 1934,  as  amended  (the
"Exchange  Act"),  each person or entity that  beneficially  owned  (directly or
together with affiliates) more than 5% of the Common Stock. The Company believes
that each  individual or entity named has sole  investment and voting power with
respect  to shares of Common  Stock  indicated  as  beneficially  owned by them,
except as otherwise noted.

                                                                 Common
                                                                  Stock
                                               Beneficially    Percentage
Name                                              Owned(1)     Ownership(1)
----                                           ------------    ------------
Directors and Executive Officers:
Jonathan F. Boucher (2)                             360,639         2.9%
John W. Jordan II (3)                               332,140         2.7
David W. Zalaznick (4)                              303,140         2.5
William C. Weathersby (5)                           197,000         1.6
John R. Lowden (6)                                  184,860         1.5
Thomas H. Quinn (7)                                 175,200         1.4
Thomas G. Kasvin (8)                                 62,600           *
William C. Ballard (9)                               21,000           *
Michael J. Piron (10)                                26,000           *
D. Patrick Curran (11)                               15,000           *
Gary S. Wade (12)                                    36,300           *
Paul D. Rhines                                       10,343           *
All directors and executive
  officers as a group (16
  persons) (2)(3)(4)(5)(6)
  (7)(8)(9)(10)(11)(12)                           1,768,822        14.6%

Other Principal Stockholders:
Sanford C. Bernstein & Co. Inc. (13)              1,222,650        10.1%
FMR Corp. (14)                                    1,065,400         8.8%
T. Rowe Price Associates, Inc. (15)                 994,900         8.2%
1838 Investment Advisors, Inc. (16)                 697,963         5.8%

---------------------------
* Indicates beneficial ownership of less than 1% of shares of Common Stock.

(1)      Calculated  pursuant to Rule 13d-3(d) of the Exchange  Act.  Under Rule
         13d-3(d),   shares  not  outstanding  which  are  subject  to  options,
         warrants,  rights or conversion  privileges  exercisable within 60 days
         are deemed  outstanding  for the purpose of calculating  the number and
         percentage  owned by such person,  but not deemed  outstanding  for the
         purpose  of  calculating  the  percentage  owned by each  other  person
         listed.

(2)      Includes  2,000 share of Common Stock held by Thomas C. Boucher,  2,000
         shares of Common Stock held by Peter C. Boucher, 2,000 shares of Common
         Stock held by Hayden W. Boucher, each under the Uniform Gifts to Minors
         Act and for each of which Mr. Boucher disclaims  beneficial  ownership,
         6,500 shares of Common  Stock held by the  Jonathan F.  Boucher  Profit
         Sharing  Plan,  of which Mr.  Boucher is trustee,  and 3,000 shares are
         owned by the Jonathan F. Boucher

                                       26

<PAGE>



         Money Purchase Plan of which Mr. Boucher is a Trustee. Mr. Boucher is a
         managing  director of The Jordan Company,  an entity with which Messrs.
         Jordan, Zalaznick,  Quinn and Lowden are also affiliated. Mr. Boucher's
         address is c/o The Jordan Company,  767 Fifth Avenue,  48th Floor,  New
         York, New York 10153.

(3)      Includes  332,140  shares of  Common  Stock  held by John W.  Jordan II
         Revocable  Trust,  of which Mr.  Jordan  is  trustee.  Mr.  Jordan is a
         managing  director of The Jordan Company,  an entity with which Messrs.
         Boucher, Quinn, Zalaznick and Lowden are also affiliated.  Mr. Jordan's
         address is c/o The Jordan Company,  767 Fifth Avenue,  48th Floor,  New
         York, New York 10153.

(4)      Includes  7,000  shares of Common Stock held by Amy Y.  Zalaznick  1995
         Irrevocable  Trust,  7,000  shares of Common  Stock  held by Jeffrey C.
         Zalaznick 1995 Irrevocable  Trust and 7,000 shares of Common Stock held
         by Samantha M. Zalaznick 1995 Irrevocable  Trust, for each of which Mr.
         Zalaznick's  wife is  trustee  and  for  each of  which  Mr.  Zalaznick
         disclaims beneficial ownership. Mr. Zalaznick is a managing director of
         The Jordan Company, an entity with which Messrs. Boucher, Jordan, Quinn
         and  Lowden are also  affiliated.  Mr.  Zalaznick's  address is c/o The
         Jordan Company, 767 Fifth Avenue, 48th Floor, New York, New York 10153.

(5)      Includes 7,632 shares of Common Stock held by the William C. Weathersby
         Irrevocable  Trust F/B/O Marcus D.  Weathersby,  7,632 shares of Common
         Stock held by the William C. Weathersby Irrevocable Trust F/B/O William
         C.  Weathersby,  Jr., and immediately  exercisable  options to purchase
         28,000 shares of Common Stock. Mr. Weathersby's address is c/o American
         Safety Razor Company, P. O. Box 500, Staunton, Virginia 24402.

(6)      Includes  2,500  shares of Common Stock held by the Trust F/B/O John R.
         Lowden,  of which Mr.  Lowden is  co-trustee.  Mr. Lowden is a managing
         director of The Jordan Company,  an entity with which Messrs.  Boucher,
         Jordan,  Quinn and Zalaznick are also affiliated.  Mr. Lowden's address
         is c/o The Jordan Company,  767 Fifth Avenue, 48th Floor, New York, New
         York 10153.

(7)      Mr.  Quinn  is  President  and  Chief   Operating   Officer  of  Jordan
         Industries,  Inc., a company  affiliated  with The Jordan  Company,  an
         entity with which  Messrs.  Boucher,  Jordan,  Zalaznick and Lowden are
         also affiliated.  Mr. Quinn's address is c/o Jordan  Industries,  Inc.,
         1751 Lake Cook Road, Suite 550, Deerfield, Illinois 60015.

(8)      Includes 800 shares of Common Stock owned by Mr.  Kasvin's wife,  which
         shares  Mr.  Kasvin is  deemed to  beneficially  own,  and  immediately
         exercisable  options to purchase  35,000  shares of Common  Stock.  Mr.
         Kasvin's  address is c/o American Safety Razor Company,  P. O. Box 500,
         Staunton, Virginia 24402.

(9)      Includes 4,000 shares of Common Stock held by the Charitable  Remainder
         Trust F/B/O Julie W. Ballard,  2,000 shares of Common Stock held by the
         Charitable  Remainder Trust F/B/O of Elizabeth Ballard Lebhor and 2,000
         shares of Common  Stock held by the  Charitable  Remainder  Trust F/B/O
         William C. Ballard,  III, for each of which Mr. Ballard is trustee, and
         immediately  exercisable  options to purchase  10,000  shares of Common
         Stock. Mr. Ballard's address is 3300 National City Tower, 101 South 5th
         Street, Louisville, Kentucky 40202.

(10)     Includes  immediately  exercisable options to purchase 26,000 shares of
         Common Stock. Mr. Piron's address is c/o American Safety Razor Company,
         P. O. Box 500, Staunton, Virginia 24402.

(11)     Includes  immediately  exercisable options to purchase 10,000 shares of
         Common Stock.  Mr. Curran's  address is P. O. Box 419389,  Kansas City,
         Missouri 64141-6389.

(12)     Includes  immediately  exercisable options to purchase 22,000 shares of
         Common Stock.  Mr. Wade's address is c/o American Safety Razor Company,
         P. O. Box 500, Staunton, Virginia 24402.

(13)     As of January  8, 1999,  Sanford C.  Bernstein  & Co.  Inc.  Investment
         Research and Management ("Bernstein"), an investment advisor registered
         under Section 203 of the Investment Advisers Act of 1940,  beneficially
         owned 1,222,650 shares of Common Stock. Bernstein has sole voting power
         with  respect to  1,008,000  shares of Common  Stock and shared  voting
         power with respect of 25,295  shares of Common  Stock.  Voting power is
         shared with Bernstein clients who have appointed an independent  voting
         agent with instructions to vote shares in the same manner as Bernstein.
         Bernstein has sole  dispositive  power with respect to 1,222,650 shares
         of Common  Stock.  The address of Bernstein is One State Street  Plaza,
         New York, New York 10004-1545.

                                       27

<PAGE>




(14)     As  of  February  1,  1999,  Fidelity  Management  &  Research  Company
         ("Fidelity"),   a  wholly-owned   subsidiary  of  FMR  Corp.   ("FMR"),
         beneficially  owned  1,065,400  shares of  Common  Stock as a result of
         acting as investment adviser to various investment companies registered
         under Section 8 of the Investment Company Act of 1940. FMR, through its
         control  of  Fidelity,  has sole  dispositive  power  with  respect  to
         1,065,400  shares of Common  Stock and no voting  power with respect to
         1,065,400  shares of Common  Stock.  Such voting power resides with the
         Boards of  Trustees  of the funds.  FMR  carries  out the voting of the
         shares under  written  guidelines  established  by the funds' Boards of
         Trustees.  The 1,065,400  shares of Common Stock are also  beneficially
         owned by Fidelity  Low-Priced Stock Fund ("Stock Fund"). The address of
         Fidelity,   FMR  and  Stock  Fund  is  82  Devonshire  Street,  Boston,
         Massachusetts 02109.

(15)     As of February 12, 1999, T. Rowe Price Associates,  Inc. ("Price"),  an
         investment  adviser  registered  under  Section  203 of the  Investment
         Advisers  Act of 1940,  beneficially  owned  994,900  shares  of Common
         Stock.  Included  in the 994,900  shares are  700,000  shares of Common
         Stock  which are  beneficially  owned by T. Rowe Price  Small Cap Value
         Fund ("Small Cap"), an investment company registered under Section 8 of
         the Investment Company Act of 1940 as to which Price serves as advisor.
         As to the  994,900  shares of Common  Stock:  (i) Price has sole voting
         power with respect to 274,200  shares of Common Stock and Small Cap has
         sole voting  power with  respect to 700,000  shares of Common Stock and
         (ii) Price has sole dispositive power with respect to 994,900 shares of
         Common  Stock.  The  shares  of  Common  Stock  are  owned  by  various
         individual  and   institutional   investors,   which  Price  serves  as
         investment  adviser  with the power to direct  investments  and/or sole
         power to vote the  securities.  For purposes of the Exchange Act, Price
         is deemed to be the beneficial owner of such securities,  however Price
         expressly  disclaims  beneficial  ownership  of  such  securities.  The
         address  of Price  and  Small Cap is 100 E.  Pratt  Street,  Baltimore,
         Maryland 21202.

(16)     As of February 3, 1999, 1838 Investment  Advisors,  Inc.  ("1838"),  an
         investment  advisor  registered  under  Section  203 of the  Investment
         Advisers  Act of 1940,  beneficially  owned  697,963  shares  of Common
         Stock.  As to the  697,963  shares of Common  Stock 1838 has:  (i) sole
         voting  power with  respect to 434,311  shares of Common Stock and (ii)
         sole dispositive  power with respect to 697,963 shares of Common Stock.
         The  shares  of  Common  Stock  are  owned by  various  individual  and
         institutional  investors,  which 1838 serves as investment advisor with
         the  power  to  direct   investment  and/or  sole  power  to  vote  the
         securities.  The address of 1838 is 5 Radnor Corp.  Center,  Suite 320,
         Radnor, Pennsylvania 19087.


ITEM 13 - Certain Relationships and Related Transactions

         The Jordan  Company.  On July 12, 1995,  the Company and TJC Management
Corporation,  an  affiliate  of The Jordan  Company,  entered  into an  advisory
agreement (the "Advisory  Agreement").  The Advisory  Agreement provides for the
payment by the  Company  to TJC  Management  Corporation  of (a) up to 2% of the
aggregate   consideration  paid  by  the  Company  and/or  its  subsidiaries  in
connection with acquisitions or paid to the Company in connection with a sale of
the  Company  and/or its  subsidiaries  and (b) up to 1% of the amount  obtained
pursuant to any debt,  equity or other  refinancing.  In accordance with Company
policy,  the Advisory Agreement was (i) approved by a majority of the members of
the  Company's  Board and by a  majority  of the  disinterested  members  of the
Company's  Board and (ii) deemed by the  Company's  Board to be subject to terms
and  conditions  no less  favorable to the Company  than could be obtained  from
unaffiliated third parties.

         Pursuant to the terms of the Advisory  Agreement,  on May 28, 1997, the
Company  paid  to  TJC  Management  Corporation  $196,000  as  compensation  for
providing   investment  banking  and  other  consulting   services  rendered  in
connection with the acquisition by a subsidiary of the Company of certain assets
of AWC.  Messrs.  Jordan,  Zalaznick,  Boucher and Lowden are  directors  of the
Company and partners of The Jordan Company.

         During the fiscal year 1998,  the Company paid to The Jordan Company an
aggregate of $60,000 as compensation for Messrs. Jordan, Zalaznick,  Boucher and
Lowden serving as members of the Company's Board.

         On  February  12,  1999,  the Company  and TJC  Management  Corporation
amended and restated the Advisory Agreement (the "Amended Advisory  Agreement").
The  Company's  Board  unanimously  approved  the  Amended  Advisory  Agreement.
Pursuant  to the Amended  Advisory  Agreement,  the  Company and TJC  Management
Corporation  agreed upon a flat $2,500,000 fee for financial  advisory  services
payable at closing of the Stock Tender Offer which  represents  .8% of the Stock
Tender  Offer.  The  financial  advisory fee in the Amended  Advisory  Agreement
represents a reduction from the base fee of up to 2% which would  otherwise have
been paid in connection  with the Stock Tender Offer. In accordance with Company
policy,  the Amended  Advisory  Agreement  was (i) approved by a majority of the
members of the Company's  Board and a majority of the  disinterested  members of
the  Company's  Board and (ii)  deemed by the  Company's  Board to be subject to
terms and conditions no less favorable to the

                                       28

<PAGE>



Company than could be obtained from unaffiliated third parties.

         Indemnification  Agreements.  The  Company is party to  indemnification
agreements with each of the members of the Company's Board pursuant to which the
Company has agreed to indemnify and hold harmless each director from liabilities
incurred as a result of such  director's  status as a director  of the  Company,
subject to certain limitations.


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K.

(a)  (1), (2) and (3)--The response to this portion of Item 14 is submitted as a
     separate section of this Report starting on page 31.

(b)  Reports on Form 8-K filed in the fourth quarter of 1998.

     None

(c)  Exhibits--The  response  to this  portion of  Item 14  is  submitted  as  a
     separate section of this Report starting on page 61.

(d)  Financial Statement Schedule--The response  to this  portion  of Item 14 is
     submitted as a separate section of this Report on page 60.



                                       29

<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,  as of the 26th day of
March 1999.

                               AMERICAN SAFETY RAZOR COMPANY



                                /s/Thomas H. Quinn
                                ------------------
                                Thomas H. Quinn
                                Chairman of the Board and
                                Chief Executive Officer


                                Power of Attorney

Each person  whose  signature  appears  below  hereby  constitutes  and appoints
William C.  Weathersby  and Jonathan F. Boucher,  and each of them, the true and
lawful  attorneys-in-fact  and  agents of the  undersigned,  with full  power of
substitution  and  resubstitution,  for and in the name,  place and stead of the
undersigned  and to file the same,  with all  exhibits  thereto,  in any and all
capabilities,  to sign any and all amendments (including post-effective exhibits
thereto,  and other  documents in connection  therewith) with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them,  full power and authority to do and perform each and every act and
thing  requisite  and necessary to be done, as fully to all intents and purposes
as the undersigned might or could do in person,  hereby ratifying and confirming
all that said  attorneys-in-fact  and  agents,  or any of them,  or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities as of the 26th day of March 1999.


        Signature                              Title
        ---------                              -----

/s/Thomas H. Quinn                Chairman of the Board and
--------------------------          Chief Executive Officer
   Thomas H. Quinn                  (Principal Executive Officer)

/s/William C. Weathersby          Director, President and
--------------------------          Chief Operating Officer
   William C. Weathersby        

/s/Thomas G. Kasvin               Senior Vice President
--------------------------          Chief Financial Officer (Principal Financial
   Thomas G. Kasvin                 Officer and Principal Accounting Officer)

/s/Jonathan F. Boucher            Director, Vice President and Assistant
--------------------------          Secretary
   Jonathan F. Boucher
        

/s/John W. Jordan II              Director
--------------------------
   John W. Jordan II

/s/David W. Zalaznick             Director
--------------------------
   David W. Zalaznick

/s/John R. Lowden                 Director
--------------------------
   John R. Lowden

/s/Paul D. Rhines                 Director
--------------------------
   Paul D. Rhines

/s/D. Patrick Curran              Director
--------------------------
   D. Patrick Curran

/s/William C. Ballard, Jr.        Director
--------------------------
   William C. Ballard, Jr.

                                       30

<PAGE>




                           ANNUAL REPORT ON FORM 10-K

                   ITEM 8, ITEM 14(a)(1) and (2), (c) and (d)

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                                CERTAIN EXHIBITS

                          FINANCIAL STATEMENT SCHEDULE

                          YEAR ENDED DECEMBER 31, 1998

                          AMERICAN SAFETY RAZOR COMPANY

                               STAUNTON, VIRGINIA






                                       31

<PAGE>



FORM 10-K--ITEM 14(a)(1) AND (2)

American Safety Razor Company

List of Financial Statements and Financial Statement Schedule

The following consolidated financial statements of American Safety Razor Company
are included in Item 8:

        Consolidated Balance Sheets--December 31, 1998 and 1997

        Consolidated Statements of Income--Years ended December 31, 1998, 1997
        and 1996

        Consolidated Statements of Comprehensive Income--Years ended 
        December 31, 1998, 1997 and 1996

        Consolidated Statements of Cash Flows--Years ended December 31, 1998,
        1997 and 1996

        Notes to Consolidated Financial Statements--December 31, 1998

The following consolidated financial statement schedule of American Safety Razor
Company is included in Item 14(d):

        Schedule II        Valuation and Qualifying Accounts

All other  schedules for which  provision is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.


                                       32

<PAGE>



AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

                                                          December 31,
                                                       1998          1997
                                                       ----          ----
Assets
Current assets:
    Cash and cash equivalents                          $3,453       $1,434
    Trade receivables, less allowances
      of $2,957 in 1998, and $3,461 in 1997            44,498       45,277
    Inventories                                        54,029       51,488
    Income taxes receivable                               989          896
    Deferred income taxes                               5,108        2,803
    Prepaid expenses                                    2,340        1,410
                                                    ---------     --------

Total current assets                                  110,417      103,308

Property and equipment, net                            74,665       72,943

Intangible assets, net:
    Goodwill                                           68,446       68,978
    Other                                               3,365        4,258
                                                    ---------     --------
                                                       71,811       73,236

Prepaid pension cost and other                          6,004        4,594
                                                    ---------     --------

Total assets                                         $262,897     $254,081
                                                    =========     ========

Liabilities and stockholders' equity
Current liabilities:
    Accounts payable                                  $14,269      $15,704
    Accrued expenses                                   12,009       10,772
    Payroll and related liabilities                     3,727        5,720
    Accrued interest                                    4,232        4,269
    Current maturities of long-term obligations         3,852        2,107
                                                    ---------     --------

Total current liabilities                              38,089       38,572

Long-term obligations                                 123,481      121,505
Retiree health and insurance benefits                  23,802       22,966
Pension and other liabilities                           1,361        2,017
Deferred income taxes                                   6,610        9,582
                                                    ---------     --------

Total liabilities                                     193,343      194,642
                                                    ---------     --------

Contingent liabilities and commitments

Stockholders' equity:
    Common stock, $.01 par value, 25,000,000
        shares authorized; 12,110,049 shares issued and
        outstanding in 1998, 12,098,049 in 1997           121          121
    Additional paid-in capital                         65,905       65,801
    Retained earnings (accumulated deficit)             4,457       (5,645)
    Accumulated other comprehensive loss                 (929)        (838)
                                                     --------     --------
                                                       69,554       59,439

Total liabilities and stockholders' equity           $262,897     $254,081
                                                     ========     ========
See accompanying notes.

                                       33

<PAGE>



AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)


                                               Year ended December 31,
                                          1998          1997         1996   
                                       ----------    ----------   ----------

Net sales                               $297,488      $296,607     $260,636
Cost of sales                            201,978       196,991      169,949
                                       ---------     ---------    ---------

Gross profit                              95,510        99,616       90,687

Selling, general and
  administrative expenses                 63,516        60,206       54,867
Amortization of intangible assets          2,543         2,501        2,503
Special charges                            3,003             -            -
                                      ----------   ----------- ------------

Operating income                          26,448        36,909       33,317
Interest expense                          12,270        12,270       11,719
                                       ---------     ---------    ---------

Income before income taxes                14,178        24,639       21,598
Income taxes                               4,076         9,570        8,425
                                       ---------     ---------   ----------

Net income                              $ 10,102      $ 15,069    $  13,173
                                        ========      ========    =========

Basic earnings per share:

    Net income                             $0.83         $1.25        $1.09
                                           =====         =====        =====

    Weighted average number
      of shares outstanding               12,107        12,094       12,093
                                          ======        ======       ======

Diluted earnings per share:

    Net income                             $0.83         $1.23        $1.09
                                           =====         =====        =====

    Weighted average number
      of shares outstanding               12,223        12,255       12,139
                                          ======        ======       ======


See accompanying notes.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
                                              Year ended December 31,
                                         1998          1997         1996   
                                      ----------    ----------   ----------


Net income                              $10,102       $15,069      $13,173
Other comprehensive income:
    Foreign currency
      translation adjustments               (91)         (198)         452
                                      ---------     ---------     --------

Comprehensive income                    $10,011       $14,871      $13,625
                                        =======       =======      =======



See accompanying notes.

                                       34

<PAGE>

AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

                                                   Year ended December 31,
                                                 1998       1997      1996    
                                               --------   --------  --------


Operating activities
Net income                                      $10,102    $15,069    $13,173
Adjustments to reconcile net
    income to net cash provided by
    operating activities:
        Depreciation                              9,634      8,624      8,081
        Amortization                              2,543      2,501      2,503
        Interest and financing costs                553        540        727
        Deferred income taxes                      (381)     1,834        273
        Retiree health and insurance benefits       836        674        684
        Pension and other                        (2,126)    (2,023)       254
        Changes in operating assets
        and liabilities
        net of effects of acquisitions:
            Trade receivables                     1,186     (7,685)    (1,213)
            Inventories                          (2,186)    (3,619)      (171)
            Income taxes receivable                 (93)      (896)         -
            Prepaid expenses                       (927)       423       (119)
            Accounts payable                     (1,671)     1,492        666
            Accrued and other expenses           (1,328)       (70)       998
            Income taxes payable                 (3,601)    (4,827)      (343)
                                                -------    -------   --------

Net cash provided by operating activities        12,541     12,037     25,513
                                                -------    -------    -------

Investing activities
Capital expenditures                            (11,375)   (13,714)   (11,269)
Acquisitions, net of cash acquired                 (571)   (10,300)   (16,673)
Other, net                                         (663)        (3)        62
                                               --------  ---------  ---------

Net cash used in investing activities           (12,609)   (24,017)   (27,880)
                                                -------    -------    -------

Financing activities
Repayment of long-term obligations               (1,397)      (553)   (11,225)
Proceeds from borrowings                          3,380     11,943     13,424
Proceeds from exercise of stock options             104         45          -
                                              ---------   -------- ----------

Net cash provided from financing activities       2,087     11,435      2,199
                                               --------    -------   --------

Net increase (decrease) in
  cash and cash equivalents                       2,019       (545)      (168)
Cash and cash equivalents,
  beginning of period                             1,434      1,979      2,147
                                               --------   --------   --------

Cash and cash equivalents, end of period        $ 3,453    $ 1,434    $ 1,979
                                                =======    =======    =======


See accompanying notes.

                                       35

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company
American Safety Razor Company and its subsidiaries  (the "Company") is a leading
manufacturer  of high-quality  private label and value brand consumer  products.
The Company's  principal products consist of consumer shaving razors and blades,
blades and bladed hand tools,  specialty  industrial and medical blades,  cotton
and foot care products,  and custom bar soaps principally sold to the retail and
professional trades in the United States and in selected international markets.

Basis of Presentation
The  consolidated  financial  statements  have been prepared in accordance  with
generally  accepted  accounting  principles  which  require  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and disclosure of contingent  assets and liabilities at the dates of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the  reporting  periods.  Accordingly,  actual  results could differ from
those estimates.

Certain  prior year  amounts  have been  reclassified  to conform  with the 1998
presentation.

Principles of Consolidation
The consolidated  financial  statements  include the accounts of American Safety
Razor  Company  and  its  subsidiaries,  all of  which  are  wholly  owned.  The
consolidated  financial  statements  also  include  the  accounts  of The Cotton
Division of American White Cross,  Inc.,  ("AWC"),  Bond-America  Israel Blades,
Ltd., and its wholly owned U.S.  subsidiary,  A.I. Blades,  Inc.  (collectively,
"Bond") and Wolco Holland B.V. ("Wolco") since their acquisition dates (See Note
12). All significant intercompany accounts and transactions have been eliminated
in consolidation.

Inventories
Inventories are stated at the lower of cost or market. Cost for approximately 59
percent  and 61  percent  of  inventories  for 1998 and 1997,  respectively,  is
determined  by the last-in,  first-out  ("LIFO")  method.  Cost of the remaining
inventories,  operating supplies and inventories of foreign and certain domestic
subsidiaries, is determined by the first-in, first-out method.

Long-Lived Assets
Property  and  equipment  are  stated  on the  basis of cost.  Expenditures  for
renewals and  betterments  are  capitalized,  and  expenditures  for repairs and
maintenance   are  expensed  as  incurred.   Depreciation  is  computed  by  the
straight-line  method over the  estimated  useful  lives of the related  assets,
which are as follows:

         Land improvements                          5-20 years
         Buildings and improvements                15-40 years
         Machinery and equipment                    3-15 years

Intangible  assets are stated on the basis of cost.  Goodwill is being amortized
on a  straight-line  basis over a forty-year  period.  The Company  periodically
reviews its long-lived  assets to assess  recoverability  or impairment based on
expectations of undiscounted  cash flows and the assets'  carrying  amount.  Any
impairment  in carrying  value would be  recognized  in  operating  results if a
permanent  decline  in value  were to  occur.  Noncompete  agreements  are being
amortized  using  the  straight-line  method  over  the  terms  of  the  related
agreements.  Deferred loan costs are amortized  using the  straight-line  method
over the term of the related long-term obligations.

Advertising Expenses
Advertising costs are expensed when incurred and approximated  $912,000 in 1998,
$2,318,000 in 1997, and $732,000 in 1996.

Foreign Currency Translation
The accounts of the Company's foreign  subsidiaries are generally measured using
local currency as the functional currency.  Accordingly,  assets and liabilities
are translated into U.S.  dollars at period-end  exchange rates,  and income and
expense are translated at average monthly  exchange rates. Net exchange gains or
losses  resulting  from such  translations  are  excluded  from net earnings and
accumulated as a separate component of accumulated other comprehensive loss. The
Company does not provide  income taxes on such gains and losses  because  income
taxes are not provided on the undistributed  earnings of foreign subsidiaries as
it is the  intent  of the  Company  to  support  these  subsidiaries  with  such
earnings. Gains and losses from foreign currency

                                       36

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


transactions are included in net earnings and are not significant in amount. The
effect of exchange rate changes on cash flows is not material.

Financial Instruments
The Company's financial instruments include cash and cash equivalents,  accounts
receivable,  accounts  payable,  debt  obligations,   foreign  currency  forward
contracts and foreign  currency  options.  Because of their short maturity,  the
carrying amount of cash and cash equivalents,  accounts  receivable and accounts
payable  approximates  fair value.  Fair value of debt  obligations  is based on
quoted  market  prices  for the same or  similar  issues.  Fair value of foreign
currency  forward  contracts  and foreign  currency  options are based on quoted
market prices.

The Company  periodically  hedges certain foreign currency exposures through the
use of foreign currency forward contracts and foreign currency options.  Certain
of these contracts,  although intended and economically  effective as a hedge of
certain of the Company's  foreign currency  exposures,  do not qualify for hedge
accounting.  Gains  and  losses on  contracts  qualifying  for hedge  accounting
treatment are deferred and offset  against  foreign  exchange gains or losses on
the  underlying  transaction.  Gains and losses on contracts not  qualifying for
hedge  accounting  treatment are included in current  income.  Premiums paid are
amortized on a straight-line basis over the term of the related contract.

Concentration of Credit Risk
Financial  instruments that potentially  subject the Company to concentration of
credit  risk  consist   primarily  of  cash  and  cash   equivalents  and  trade
receivables.  The Company  restricts its cash and cash  equivalents to financial
institutions  with high credit  ratings and credit risk on trade  receivables is
minimized  due  to  the  diverse  geographic  areas  covered  by  the  Company's
operations and its diverse customer base.

Earnings Per Share
Basic earnings per share excludes any dilutive effects of options,  warrants and
convertible securities. Diluted earnings per share includes the dilutive effects
of options,  warrants and  convertible  securities.  The difference  between the
weighted  average number of shares  outstanding for computing basic earnings per
share and diluted  earnings per share  relates to the Company's  employee  stock
options  outstanding  which are assumed to be converted for the diluted earnings
per share  calculation  when the average  market price of the  Company's  common
stock for the period  exceeds the exercise  price of the employee  stock options
which are outstanding.

Statement of Cash Flows
The Company  considers  all highly liquid  investments  with a maturity of three
months or less at the time of purchase to be cash equivalents.  The Company paid
income taxes of $9,994,000 in 1998, $13,516,000 in 1997, and $8,750,000 in 1996.
The Company paid  interest of  $11,802,000  in 1998,  $11,706,000  in 1997,  and
$11,123,000 in 1996.

Supplemental  non-cash  investing and financing  activities related to the Wolco
acquisition consist of (in thousands):

      Fair value of assets acquired, net of cash                $2,626
      Liabilities assumed                                         (877)
      Seller financing                                          (1,178)
                                                                -------
      Cash paid                                                 $ (571)
                                                                =======

Liabilities assumed include acquired debt of $506,000.

Stock Options
The Company follows Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related  interpretations in accounting
for its employee stock options.  Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of  grant,  no  compensation  expense  is  recognized.  The  Company
provides  additional pro forma  disclosures  of the  fair-value  based method in
accordance with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (See Note 9).

Retirement Plans and Other Postretirement Benefits
FAS No. 132,  "Employers'  Disclosures  about Pensions and Other  Postretirement
Benefits" was issued in 1998 as an amendment

                                       37

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


to FAS Nos.  87, 88 and 106.  The  Company has  conformed  its pension and other
postretirement disclosures to comply with FAS No. 132.

Income Taxes
Income taxes are determined based on FAS No. 109, "Accounting for Income Taxes."
Deferred tax  liabilities  and assets are recognized for the expected future tax
consequences  of events that have been included in the  financial  statements or
tax  returns.  Deferred  tax  liabilities  and  assets are  determined  based on
differences between financial statement carrying amounts and tax bases of assets
and  liabilities  using  enacted  tax  rates in effect in the years in which the
differences are expected to reverse.

Segment Reporting
The Company provides segment disclosures  pursuant to FAS No. 131,  "Disclosures
About Segments of an Enterprise and Related Information" (See Note 10).

New Accounting Standards
In June 1998,  the  Financial  Accounting  Standards  Board  issued FAS No. 133,
"Accounting for Derivative  Instruments and Hedging Activities" ("FAS 133"). FAS
133   establishes   standards  for   accounting  and  disclosure  of  derivative
instruments.  This new standard is effective for fiscal quarters of fiscal years
beginning  after June 15, 1999. The  implementation  of this new standard is not
expected to have a material  effect on the  Company's  results of  operations or
financial position.


2. INVENTORIES

     Inventories consisted of:            
                                                      December 31,
                                                   1998         1997   
                                                   ----         ----   
                                                     (In thousands)

     Raw materials                                $18,797       $20,352
     Work in process                                6,612         5,596
     Finished goods                                25,070        23,128
     Operating supplies                             3,475         3,107
                                                 --------      --------
                                                   53,954        52,183
     Excess of current cost over
       (under) LIFO inventory value                   (75)          695
                                                ---------      --------
                                                  $54,029       $51,488
                                                =========      ========

3. PROPERTY AND EQUIPMENT

     Property and equipment consisted of:
                                                      December 31,
                                                   1998         1997   
                                                   ----         ----   
                                                     (In thousands)

     Land and land improvements                  $  1,872     $  1,872
     Buildings and improvements                    10,235        9,959
     Machinery and equipment                      104,334       92,965
     Construction in progress                       8,373        9,853
                                                 --------     --------
                                                  124,814      114,649
     Less accumulated depreciation                (50,149)     (41,706)
                                                  -------      -------
                                                  $74,665      $72,943
                                                =========     ========


                                       38

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4. INTANGIBLE ASSETS                         

     Intangible assets consisted of:             
                                                      December 31,
                                                   1998         1997   
                                                   ----         ----   
                                                     (In thousands)

     Goodwill                                     $86,013      $84,396
     Noncompete agreements                          2,522        2,522
     Deferred loan costs and other                  4,256        4,256
                                                  -------      -------
                                                   92,791       91,174
     Less accumulated amortization                (20,980)     (17,938)
                                                  -------      -------
                                                  $71,811      $73,236
                                                  =======      =======

5. LONG-TERM OBLIGATIONS

     Long-term obligations consist
     of the following:
                                                      December 31,
                                                   1998         1997   
                                                   ----         ----   
                                                     (In thousands)

     Revolving loans, due August 2000            $  20,600    $  17,300

     9 7/8% Series B Senior Notes,
     due August 2005                               100,000      100,000

     9% subordinated note, due June 2000             2,500        2,500

     Other:
       3% Virginia Small Business Financing
       Authority Note, due March 30, 2002            1,448        1,767
       Other obligations                             2,785        2,045
                                                 ---------    ---------
                                                   127,333      123,612
     Less current maturities                         3,852        2,107
                                                 ---------    ---------
                                                  $123,481     $121,505
                                                  ========     ========

The Company's revolving credit facility requires payment of an annual commitment
fee of .31% on the average daily unborrowed amounts under the facility. Interest
is based on the  bank's  prime rate or the London  Interbank  Offered  Rate plus
1.25%. The weighted-average interest rate on the Company's outstanding revolving
loans was  approximately  6.9% at  December  31,  1998.  Borrowings  under  this
facility  mature on August 3, 2000.  At  December  31,  1998,  the  Company  had
approximately  $28,700,000 available for future borrowings and letters of credit
under its revolving credit facility. The weighted-average interest rate incurred
by the Company with respect to its debt obligations,  was approximately 9.3% and
9.5% during the years ended December 31, 1998 and 1997, respectively.

The 9 7/8% Series B Senior Notes require semi-annual interest payments on August
1 and February 1 of each year and a principal  payment of $100,000,000 on August
1, 2005.  The 9 7/8% Series B Senior Notes are  guaranteed  by certain  domestic
subsidiaries of the Company.

The 9% subordinated note was issued in connection with an acquisition and is due
in equal installments on June 10, 1999 and June 10, 2000.

The Virginia  Small  Business  Financing  Authority  note  requires  semi-annual
payments of $185,000 through September 2001 with a final payment of $435,000 due
March  2002.  Other  obligations  include  debt  obligations  of  several of the
Company's subsidiaries.

Maturities of long-term obligations subsequent to December 31, 1998, approximate
$3,852,000 in 1999,  $22,702,000 in 2000, $350,000 in 2001, $429,000 in 2002, $0
in 2003 and $100,000,000 thereafter.

                                       39

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The  Company's  trade  receivables,  inventories  and property and equipment are
pledged as collateral for the Virginia Small Business  Financing  Authority note
and  trade  receivables  and  inventories  are  pledged  as  collateral  for the
revolving  credit  facility.  The revolving  credit  facility  contains  certain
financial covenants which require the Company, among other requirements, to meet
certain  financial ratios relating to interest  coverage and  indebtedness.  The
indenture  related to the 9 7/8% Series B Senior Notes limits the ability of the
Company,  among  other  limitations,   to  pay  dividends,  make  certain  other
restricted  payments or incur certain additional  indebtedness unless it meets a
cash flow coverage ratio, as defined.  In addition,  the Company may be required
to offer to purchase Senior Notes equal to 100% of the principal amount thereof,
with the proceeds of certain asset sales, as defined.


6. FINANCIAL INSTRUMENTS

At December 31, 1998 and 1997,  the carrying  value of the  Company's  financial
instruments,  excluding foreign currency options,  approximate their fair values
except  for  the 9  7/8%  Series  B  Senior  Notes  which  had a fair  value  of
approximately  $102,000,000  and  $108,000,000  at  December  31, 1998 and 1997,
respectively.

At December 31, 1998 and 1997, there were no foreign exchange forward  contracts
outstanding.  At December 31, 1998, the Company held put options with a notional
amount of 36,000,000  French  Francs,  which expire in equal  quarterly  amounts
during  1999.  At December  31,  1998,  the  carrying  value of these  contracts
approximated their fair value.


7. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

The Company and certain subsidiaries have defined benefit pension plans covering
substantially  all employees.  Benefits are generally based on employee years of
service and  compensation.  The Company's  funding policy is to contribute  such
amounts as are necessary to provide assets sufficient to meet the benefits to be
paid to plan members.

The Company also sponsors  several  defined benefit  postretirement  medical and
life insurance plans providing  benefits to certain  employees who have worked a
minimum of five years and attained age 55 while in service with the Company. The
Company  requires  salaried  employees  retiring after April 1, 1993, to have 20
years of  service  after age 40 to receive  full  benefits  and has  implemented
maximum payments for certain of its hourly employees.  Salaried  employees hired
after May 1, 1991,  are not  eligible  to  participate  in these  postretirement
benefit plans. The plans are contributory,  with retiree contributions  adjusted
annually,  and contain  other  cost-sharing  features  such as  deductibles  and
coinsurance. The Company's policy is to fund the costs of these medical and life
insurance benefit plans as they become due.


                                       40

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The  following  tables  reconcile  the changes in benefit  obligations  and plan
assets in 1998 and 1997,  and  reconcile the funded status to prepaid or accrued
cost at December 31, 1998 and 1997:


<TABLE>
<CAPTION>
                                                                                      Other Post-
                                                           Pension Benefits       Retirement Benefits  
                                                           ----------------       -------------------  
                                                         1998         1997         1998         1997   
                                                         ----         ----         ----         ----   
                                                                          (In thousands)
<S>                                                    <C>          <C>          <C>          <C>
Change in benefit obligation:
     Benefit obligation, beginning of year             $ 96,685     $ 91,874     $ 24,815     $ 21,389
     Service cost                                         2,585        2,238          548          548
     Interest cost                                        6,794        6,662        1,714        1,739
     Employee contributions                                   -            -           71           71
     Effect of discount rate change                       3,231        2,678          590          594
     Effect of rate of compensation change              (3,015)            -          (76)           -
     Effect of health care cost trend rate change             -            -         (313)           -
     Actuarial (gain) loss                                1,934       (1,373)      (1,977)       1,673
     Benefits paid                                       (5,535)      (5,394)      (1,078)      (1,199)
                                                      ---------    ---------    ---------    ---------
     Benefit obligation, end of year                   $102,679     $ 96,685     $ 24,294     $ 24,815
                                                       ========     ========     ========     ========
Change in plan assets:
     Plan assets at fair value, beginning of year      $117,777     $102,059          n/a          n/a
     Actual return on plan assets                         9,944       20,977          n/a          n/a
     Employer contributions                                  36          135          n/a          n/a
     Benefits paid                                       (5,535)      (5,394)         n/a          n/a
                                                      ---------    ---------
     Plan assets at fair value, end of year            $122,222     $117,777          n/a          n/a
                                                       ========     ========
Reconciliation of prepaid (accrued) cost:
     Funded status of the plans                        $ 19,543     $ 21,092     $(24,294)    $(24,815)
     Unrecognized net transition
       (asset) obligation                                    (2)          (3)           -            -
     Unrecognized prior service cost                        580          685         (882)      (1,368)
     Unrecognized net (gain) loss                       (15,023)     (18,660)       1,374        3,217
                                                      ---------    ---------    ---------    ---------
     Prepaid (accrued) cost, end of year              $   5,098    $   3,114     $(23,802)    $(22,966)
                                                      =========    =========     ========     ========
</TABLE>


Assumptions used for financial reporting purposes to compute benefit obligations
and net benefit  income or cost,  and the  components  of net  periodic  benefit
income or cost, are as follows (in thousands, except percentages):

<TABLE>
<CAPTION>
                                                                                                         Other Post-
                                                                   Pension Benefits                 Retirement Benefits     
                                                                   ----------------                 -------------------     
                                                              1998       1997        1996       1998        1997       1996 
                                                             ------     ------      ------     ------      ------     ------
<S>                                                         <C>         <C>        <C>        <C>         <C>        <C>
Weighted-average assumptions for benefit obligations:
     Discount rate                                            7.00%      7.25%       7.50%      7.00%       7.25%      7.50%
     Rate of compensation increases                           4.00%      5.00%       5.00%      4.00%       5.00%      5.00%
     Expected return on plan assets                          11.00%     11.00%      11.00%        n/a         n/a        n/a

Weighted-average assumptions for net benefit income or cost:
     Discount rate                                            7.25%      7.50%       7.50%      7.25%       7.50%      7.50%
     Rate of compensation increases                           5.00%      5.00%       5.00%      5.00%       5.00%      5.00%
     Expected return on plan assets                          11.00%     11.00%      11.00%        n/a         n/a        n/a

Rate of increase in per capita cost
  of covered health care benefits                               n/a        n/a         n/a      7.50%       7.50%      8.00%
</TABLE>


                                       41

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                  Other Post-
                                                              Pension Benefits                Retirement Benefits     
                                                              ----------------                -------------------
                                                        1998       1997        1996       1998        1997       1996 
                                                       ------     ------      ------     ------      ------     ------
<S>                                                  <C>        <C>         <C>        <C>         <C>        <C>     
Components of net periodic benefit income (cost):
     Service cost                                    $(2,585)   $(2,238)    $(2,285)   $  (548)    $  (548)   $  (617)
     Interest cost                                    (6,794)    (6,662)     (6,309)    (1,714)     (1,739)    (1,533)
     Expected return on plan assets                   11,383     10,421       8,854          -           -          -
     Net amortization and deferral                       (94)      (114)       (133)       419         486        419
                                                    --------   --------    --------   --------    --------   --------
Net periodic benefit income (cost)                   $ 1,910    $ 1,407     $   127    $(1,843)    $(1,801)   $(1,731)
                                                     =======    =======     =======    =======     =======    =======
</TABLE>

Net benefit income or cost is determined  using  assumptions at the beginning of
each year.  Funded status is  determined  using  assumptions  at the end of each
year.  Changes in assumptions  for 1998 relating to the discount  rate,  rate of
compensation  increase  and the health care cost trend rate will reduce 1999 net
benefit cost by approximately $410,000.

The rates for the  per-capita  cost of covered health care benefits were assumed
to  decrease  gradually  to  5.25%  in year  2002,  and  remain  at  that  level
thereafter.  The health care cost trend rate assumption has a significant effect
on the amounts reported. An increase in the assumed health care cost trend rates
by  one  percentage   point  in  each  year  would   increase  the   accumulated
postretirement benefit obligation as of December 31, 1998, by $1,180,000 and the
aggregate  of  the  service  and  interest  cost   components  of  net  periodic
postretirement benefit cost for 1998 by $125,000.

The net pension  asset is comprised of a prepaid  pension asset of $5,483,000 in
1998 and $4,034,000 in 1997 and an accrued pension liability of $385,000 in 1998
and $920,000 in 1997.  Amortization of unrecognized  prior service cost is based
on the expected future service of active employees expected to receive benefits.
The  plan  assets  were  primarily  invested  in  listed  common  stocks,   cash
equivalents, corporate bonds and U.S. government debt securities.

The Company and certain  subsidiaries sponsor defined contribution benefit plans
for substantially all U.S.  employees.  The plans permit employees to contribute
up to 15% of their salary to the plan. The Company also makes  contributions  to
the plans which approximated  $136,000 in 1998, $173,000 in 1997 and $159,000 in
1996.


8. TAXES ON INCOME

The provision for taxes on income is comprised of the following:

                                                 Year Ended December 31,
                                             1998          1997        1996  
                                           --------      --------    --------
                                                     (In thousands)

Current:
  Federal                                   $4,541        $6,869      $6,784
  State and local                              319           493         393
  Foreign                                     (403)          374         975
                                           -------       -------     -------
Total current                                4,457         7,736       8,152
                                           -------       -------     -------

Deferred:
  Federal                                     (557)        1,708         277
  State and local                              (34)          233          26
  Foreign                                      210          (107)        (30)
                                           -------       -------     -------
Total deferred                                (381)        1,834         273
                                           -------       -------     -------
Total provision for income taxes            $4,076        $9,570      $8,425
                                            ======        ======      ======

The  Company  has  not  provided  taxes  of  approximately   $1,141,000  on  the
undistributed  pre-tax  earnings of $9,962,000 of foreign  subsidiaries as it is
the intent of the  Company to support  these  subsidiaries  with such  earnings.
Income before income taxes attributable to foreign operations for 1998, 1997 and
1996 was approximately $265,000, $1,134,000 and $2,818,000, respectively.

                                       42

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company's  effective income tax rate varies from the United States statutory
rate as follows:

                                                       Year Ended December 31,
                                                    1998       1997       1996
                                                    ----       ----       ----

United States rate                                   35%        35%        35%
Foreign taxes in excess of (less than) U.S. rate     (2)         -          3
State income taxes, net of federal tax benefit        2          2          4
Goodwill amortization                                 5          3          3
Interest on tax basis adjustments                     -          -         11
Tax liability adjustments                           (11)         -          -
Employee benefits and other provisions                -          -          4
Reduction of valuation allowance                      -          -        (23)
Other--net                                            -         (1)         2
                                                     ---         ---       ---
Effective income tax rate                            29%        39%        39%
                                                     ===        ===        ===

At December  31, 1998 and 1997,  the Company had deferred  tax  liabilities  and
assets which have been netted by tax jurisdiction for presentation purposes. The
significant  components  of these  amounts at December  31, 1998 and 1997 are as
follows:
                                             December 31,
                                         1998             1997  
                                         ----             ----  
                                             (In thousands)
Deferred tax liabilities:
Property and equipment                   $9,436           $7,636
Employee benefits                         2,420            1,967
Other                                     4,544            9,720
                                         ------           ------
Total deferred tax liabilities           16,400           19,323

Deferred tax assets:
Employee benefits                        10,286           10,143
Selling and promotion costs                 825              513
Inventories                               1,303            1,284
Restructuring costs                         684              134
Net operating loss carryforward              53              216
Interest                                  1,442                -
Other                                       305              254
                                        -------          -------
Total deferred tax assets                14,898           12,544
                                         ------           ------
Net deferred tax liabilities             $1,502           $6,779
                                         ======           ======

The  deferred  tax  liabilities  and assets are  disclosed  in the  consolidated
balance sheets at December 31, 1998 and 1997 as follows:

                                                    December 31,
                                               1998             1997  
                                               ----             ----  
                                                   (In thousands)

Noncurrent deferred income tax liabilities    $6,610           $9,582
Current deferred income tax assets             5,108            2,803
                                              ------           ------
Net deferred tax liabilities                  $1,502           $6,779
                                              ======           ======

During 1996,  management  determined,  based on the Company's  recent history of
earnings and its expectations  for future earnings,  that operating income would
more likely than not be sufficient to fully recognize the Company's deferred tax
assets.  Accordingly, in 1996 the Company reversed its valuation allowance of $5
million  relating to its  deferred  tax assets.  Included  in the  deferred  tax
liabilities-other  are the Company's estimated tax liabilities relating to other
tax issues.


                                       43

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The  Company's  federal  income  tax  returns  for 1989  through  1994 have been
examined  by the IRS and the  federal  income tax  return for 1996 is  currently
under examination by the IRS. During 1996, the Company provided additional taxes
related to its IRS examinations.  The Company acquired certain intangible assets
at the time of acquisition of the Company and of Ardell for $29 million,  and to
date the Company has claimed  federal  income tax  deductions of $29 million for
the  amortization  of those  assets.  In June 1997,  the IRS issued a  statutory
notice of deficiency disallowing substantially all of the Company's amortization
deductions  relating to the intangible  assets.  The Company  disagreed with the
IRS's  disallowances  and in September  1997,  petitioned  the U.S. Tax Court to
review and redetermine such disallowances.  In January 1999, the Company reached
agreement  with the IRS and signed a  stipulation  which was filed with the U.S.
Tax Court as final resolution of all outstanding  issues. The Company recognized
a $1,546,000 reduction in its provision for income taxes as a result of settling
these issues.  The settlement of these issues did not have a materially  adverse
impact on the  consolidated  financial  position or results of operations of the
Company.


9. STOCKHOLDERS' EQUITY

The Company has an incentive  stock option plan whereby  incentive stock options
may be granted to  directors,  officers  and other key  employees  to purchase a
specified  number of  shares  of common  stock at a price not less than the fair
market  value on the date of grant and for a term not to  exceed  10 years.  The
plan  provides for the  granting of options to purchase up to 750,000  shares of
common  stock.  Grants of options for 10,000  shares of common stock for each of
two new  directors  issued  in  June  1993  became  exercisable  in  five  equal
installments  commencing  one year  from the date of grant.  Grants  of  options
issued to key management  employees  become 40%  exercisable two years following
the date of grant and the remainder  are  exercisable  over the following  three
years in equal annual  installments.  The plan also provides for the granting of
stock  appreciation  rights ("SARs") to officers and key employees with terms of
ten  years.  The terms of the SARs are  determined  at the time of  grant.  Upon
exercise, holders of SARs are paid, at the option of the Company, cash or common
stock in an  amount  equal to the  appreciation  in market  value of such  stock
between the grant date and the exercise  date. At December 31, 1998,  there were
no SARs granted.

On February 22, 1996,  the  compensation  committee of the Board of Directors of
the Company  approved the repricing of all  outstanding  stock options under the
incentive  stock option plan based on the market price of the  Company's  Common
Stock at the close of  business on  February  22,  1996 of $8.63 per share.  The
stock  option  data below has been  updated for each  period  presented  to give
effect to the repricing.

Pro forma information regarding net income and earnings per share is required by
FAS Statement No. 123,  "Accounting for Stock- Based Compensation," and has been
determined as if the Company had accounted for its employee  stock options under
the fair value method of that  Statement.  The fair value for these  options was
estimated at the date of grant using the  Black-Scholes  option-  pricing model.
Significant  weighted-average  assumptions  used in the model for valuing  stock
options granted during 1997 and 1996 are as follows:

                                           1997             1996
                                           ----             ----

Risk-free interest rate                    6.9%             6.6%
Expected life of the option           7.9 years        8.0 years
Expected volatility of stock               .268             .261
Expected dividend yield                      0%               0%


                                       44

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options vesting period. The Company's pro forma
information follows (in thousands, except for earnings per share data):

                                    1998             1997            1996  
                                  --------         --------        --------
Net income
      As reported                  $10,102          $15,069         $13,173
      Pro forma                      9,600           14,608          12,955

Earnings per share
      As reported
        Basic                        $0.83            $1.25           $1.09
        Diluted                       0.83             1.23            1.09
      Pro forma
        Basic                        $0.79             1.21            1.07
        Diluted                      $0.79             1.19            1.07

Stock options  granted  during 1997 and 1996 (net of  forfeitures  and including
stock  options  issued prior to 1996 which were  repriced on February 22, 1996),
aggregated 120,500 and 361,400 shares, respectively,  and their weighted-average
estimated  fair  value  at the  date of grant is  $7.47  and  $4.54  per  share,
respectively. There were no stock options granted during 1998.

Stock option plan activity is summarized below:

                                                  Exercise Price Per Share  
                                                  ------------------------  
                                 Number of                         Weighted
                                 Shares           Range             Average
                                 ------           -----             -------

Outstanding at 12-31-95           216,000     $        8.63         $  8.63
Granted in 1996                   154,000        8.63-11.00           10.84
Cancelled in 1996                  (2,500)             8.63            8.63
                                 --------     -------------         -------
Outstanding at 12-31-96           367,500        8.63-11.00            9.56
Granted in 1997                   121,500             15.38           15.38
Exercised in 1997                  (5,200)             8.63            8.63
Cancelled in 1997                  (1,600)       8.63-11.00           10.11
                                 --------     -------------         -------
Outstanding at 12-31-97           482,200        8.63-15.38           11.03
Granted in 1998                         -
Exercised in 1998                 (12,000)             8.63            8.63
Cancelled in 1998                  (5,500)       8.63-15.38           10.93
                                 --------     -------------         -------
Outstanding at 12-31-98           464,700     $ 8.63-$15.38         $ 11.09
                                 ========     =============         =======

Stock options  outstanding at December 31, 1998,  aggregated  464,700 shares and
have  a  weighted-average   remaining  contractual  life  of  6.9  years  and  a
weighted-average  exercise price of $11.09 per share. Stock options  exercisable
at December 31, 1998, 1997 and 1996 totaled 232,600, 142,460 and 103,400 shares,
respectively.   Stock  options   exercisable  at  December  31,  1998,   have  a
weighted-average  exercise price of $9.20 per share.  Stock options reserved for
future grant at December 31, 1998 and 1997 totaled  268,100 and 262,600  shares,
respectively.


                                       45

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Changes in the components of stockholders' equity are as follows:

                                                                  
<TABLE>
<CAPTION>
                                                   Common Stock                  Retained         Accumulated
                                                   ------------                  Earnings            Other
                                                        Par     Additional     (Accumulated      Comprehensive
                                           Shares      Value     Capital          Deficit)            Loss        Total  
                                           ------      -----     -------          --------            ----        -----  
                                                                 (In thousands, except share data)

<S>                                       <C>           <C>       <C>             <C>                <C>          <C>    
Balance at December 31, 1995              12,092,849    $121      $65,756         $(33,887)          $(1,092)     $30,898
     Foreign currency translation                  -       -            -                -               452          452
     Net income                                    -       -            -           13,173                 -       13,173
                                         -----------  ------      -------         --------           -------     --------
Balance at December 31, 1996              12,092,849     121       65,756          (20,714)             (640)      44,523
     Exercise of stock options                 5,200       -           45                -                 -           45
     Foreign currency translation                  -       -            -                -              (198)        (198)
     Net income                                    -       -            -           15,069                 -       15,069
                                         -----------  ------      -------         --------           -------     --------
Balance at December 31, 1997              12,098,049     121       65,801           (5,645)             (838)      59,439
     Exercise of stock options                12,000       -          104                -                 -          104
     Foreign currency translation                  -       -            -                -               (91)         (91)
     Net income                                    -       -            -           10,102                 -       10,102
                                         -----------  ------      -------         --------           -------     --------
Balance at December 31, 1998              12,110,049    $121      $65,905         $  4,457           $  (929)     $69,554
                                         ===========  ======      =======         ========           =======     ========
</TABLE>

Accumulated  other  comprehensive  loss  consists  entirely of foreign  currency
translation  adjustments  at December 31, 1998 and 1997.  These amounts have not
been tax effected.


10. SEGMENT INFORMATION

The Company has three reportable  segments,  organized primarily on the basis of
differences  in products,  which  consist of Razors and Blades,  Cotton and Foot
Care and Custom Bar Soap. The razors and blades  segment  includes three product
lines,  consumer shaving razors and blades,  both store and value brand,  blades
and bladed hand tools, and specialty  industrial and medical blades.  The cotton
and foot care segment  includes cotton swabs,  cotton balls and puffs,  cosmetic
pads,  tissues,  pharmaceutical  and beauty coil,  and foot care  products.  The
custom bar soap segment includes  cosmetic/skin  care, bath,  pharmaceutical and
specialty custom bar soaps.

The Company evaluates  performance and allocates resources to its segments based
on operating  income.  The  accounting  policies of the segments are the same as
those described in the summary of significant accounting policies (See Note 1).


<TABLE>
<CAPTION>
                                         Net Sales                Operating Income          Year-End Assets
                                         ---------                ----------------          ---------------
                                 1998       1997     1996     1998      1997     1996    1998     1997     1996
                                 ----       ----     ----     ----      ----     ----    ----     ----     ----
                                                                  (In thousands)

<S>                             <C>       <C>      <C>        <C>      <C>      <C>     <C>      <C>      <C>     
Razors and Blades               $183,979  $182,615 $171,611   $20,969  $26,506  $26,474 $186,328 $178,331 $167,468
Cotton and Foot Care              87,339    80,350   55,856     4,111    6,278    4,074   50,940   49,366   36,126
Custom Bar Soap                   26,170    33,642   33,169     1,368    4,125    2,769   25,629   26,384   26,403
                                --------  -------- --------   -------  -------  ------- -------- -------- --------
                                $297,488  $296,607 $260,636    26,448   36,909   33,317 $262,897 $254,081 $229,997
                                ========  ======== ========                             ======== ======== ========

Interest expense                                               12,270   12,270   11,719
                                                              -------  -------  -------
Income before income taxes                                    $14,178  $24,639  $21,598
                                                              =======  =======  =======
</TABLE>


<TABLE>
<CAPTION>
                                                                     Additions to             Depreciation
                                                                  Long-Lived Assets         and Amortization
                                                                  -----------------         ----------------
                                                                1998     1997     1996     1998     1997     1996
                                                                ----     ----     ----     ----     ----     ----
<S>                                                           <C>      <C>      <C>      <C>      <C>      <C>    
Razors and Blades                                             $ 8,362  $11,467  $20,098  $ 8,162  $ 7,415  $ 7,503
Cotton and Foot Care                                            3,700    9,311      972    2,876    2,625    1,985
Custom Bar Soap                                                   964      957      999    1,139    1,085    1,096
                                                             -------- -------- -------- -------- --------  -------
                                                              $13,026  $21,735  $22,069  $12,177  $11,125  $10,584
                                                             ========  =======  =======  =======  =======  =======
</TABLE>


                                       46

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Operating income for 1998 for Razor and Blades and Cotton and Foot Care includes
special charges of $2,819,000 and $184,000, respectively.

The table below reports net sales and long-lived  assets  (including  intangible
assets) by  geographic  area.  Transfers  between  geographic  areas are made at
arms-length  pricing.  With the  exception  of the  United  States,  no  country
exceeded  10% of net  sales or  long-lived  assets in any  year.  Revenues  were
allocated  to  geographic  areas based on the  location to which the product was
shipped.

                                               Geographic Areas
                                                (In thousands)

                                          1998         1997          1996   
                                       ----------   ----------    ----------

Net sales:
   United States                         $243,660     $249,438      $218,688
   Foreign                                 53,828       47,169        41,948
                                        ---------    ---------     ---------
      Total                              $297,488     $296,607      $260,636
                                         ========     ========      ========

Long-lived assets
   United States                         $134,996     $135,382      $128,118
   Foreign                                 11,480       10,797         8,637
                                        ---------    ---------     ---------
      Total                              $146,476     $146,179      $136,755
                                         ========     ========      ========

The Company's foreign operations are located principally in Canada,  Mexico, the
United Kingdom, Europe, Israel, and the Caribbean.

Export sales from the Company's United States operations  aggregated  $5,793,000
in  1998,  $6,798,000  in 1997  and  $4,816,000  in  1996.  Sales  to one of the
Company's  customers in the Razors and Blades and Cotton and Foot Care  segments
in 1998 and 1997  amounted  to  approximately  11% and 10% of  consolidated  net
sales, respectively.


11. COMMITMENTS, CONTINGENCIES AND OTHER

Cotton Matters:
--------------

During 1998 the Company  purchased  bleached cotton from an outside supplier for
use in its pharmaceutical coil business.  The Company converted this cotton from
incoming bales into a coil, which was shipped to its pharmaceutical customers to
be used as filler in bottles of oral dosage forms of pharmaceutical  products to
prevent  breakage.  During the period from March through  November of 1998,  the
process by which the  Company's  supplier  bleached  this  cotton was changed by
introducing  an  expanded  hydrogen  peroxide   treatment.   Subsequent  testing
indicated  varying levels of residual  hydrogen peroxide in the cotton processed
during this time period and the supplier in November  1998 reduced the levels of
hydrogen peroxide in its bleaching process.  The Company,  to date, has received
complaints  from  approximately  10  customers  alleging  defects  in the cotton
supplied  them  during the period and  asserting  these  defects may have led to
changes  in their  products  pharmaceutical  appearance,  and with  respect to a
limited  number of  products,  potency.  As of March 26,  1999,  the Company has
received notice of 2 claims for damages in the aggregate amount of approximately
$1.7 million which the Company believes  primarily relates to alleged lost sales
and merchandise  damage,  and it is possible that additional damage claims might
be  forthcoming.  On  March  2,  1999,  at the  request  of the  Food  and  Drug
Administration,  the Company  notified all (numbering  approximately  85) of its
pharmaceutical  cotton coil  customers that it was  withdrawing  from the market
those  lots of  cotton  coil  which may  contain  elevated  levels  of  hydrogen
peroxide.

The Company has notified its supplier that, in the Company's  view, the supplier
is primarily responsible for damages, if any, that may arise out of this matter.
At this time, the Company's  supplier has agreed to be responsible  for the cost
of fiber,  bleaching and freight of returned  product,  but has not agreed to be
responsible  for any other  damages and has  expressed  an  intention  to assert
defenses  to our  claims.  The  Company's  insurance  carriers  have been timely
notified of the  existence of the claim and have agreed to provide  defense in a
reservation of rights letter,  but are continuing to evaluate  whether  coverage
would apply to all aspects of

                                       47

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


the claims.

The Company  has been  advised by its  general  counsel  that it has a number of
valid  defenses  to  potential  customer  claims as well as a third  party claim
against the  supplier  for damages,  if any,  incurred by the Company.  However,
management  is unable to make a  meaningful  estimate  of the amount or range of
loss that could  result from an  unfavorable  outcome  relating to this  overall
issue,  and  accordingly,  there can be no assurance that our exposure from this
matter might not exceed the combination of our insurance  coverage,  if any, and
our recourse to suppliers.  It is therefore  possible that the Company's results
of  operations  or cash flows in a particular  quarterly or annual period or its
financial  position could be significantly and adversely affected by an ultimate
unfavorable outcome of this matter.

Weston  Properties  Investments  III, Ltd. has filed a claim against the Company
for  damages  relating to delays in cost  overruns  attendant  to the  Company's
facility  expansion in  Cleveland,  Ohio in the amount of  $649,000.  Management
believes that the outcome of this matter will not have a material adverse effect
on the Company's consolidated financial position or results of operations.

Other Matters:
-------------

The  Company is subject to other  litigation  incidental  to the  conduct of its
business and is also subject to government  agency  regulations  relating to its
products,  environmental matters, taxes and other aspects of its business. While
the ultimate outcome of proceedings against the Company cannot be predicted with
certainty,  management does not expect that these matters will have a materially
adverse effect on the consolidated  financial  position or results of operations
of the Company.

Upon the  occurrence  of a  change  in  control  and in  certain  circumstances,
termination of employment, certain executives of the Company will be entitled to
receive payments of up to $1.875 million.

The Company leases  buildings,  office space and equipment under operating lease
agreements  which expire on various dates through 2013.  Certain  leases contain
renewal or purchase  options  which may be exercised  by the  Company.  Rent for
leases  amounted to  approximately  $3,918,000  in 1998,  $3,336,000 in 1997 and
$2,697,000 in 1996. Future minimum rental  commitments under all  noncancellable
operating leases at December 31, 1998 approximate $3,214,000 in 1999, $2,802,000
in 2000, $2,487,000 in 2001, $2,220,000 in 2002 and $1,823,000 in 2003.

At  December  31,  1998 and 1997,  outstanding  checks  less  amounts on deposit
amounted  to  $2,388,000  and  $1,690,000,  respectively,  which is  included in
accounts payable in the accompanying  consolidated  balance sheets. In addition,
at December 31, 1998 and 1997, incurred but not reported health insurance claims
amounted to $600,000,  which is included in accrued expenses in the accompanying
consolidated balance sheets.


12. ACQUISITIONS

On September 18, 1998,  the Company  purchased all of the capital stock of Wolco
Holland  B.V.  ("Wolco")  for  an  aggregate  purchase  price  of  approximately
$2,626,000 net of cash acquired,  including assumed  liabilities of $877,000 and
acquisition  related  expenses.  Wolco is a packager  and  distributor  of razor
products to private label accounts in certain European markets.  The acquisition
was  financed by  borrowings  under the  Company's  revolving  credit  facility,
internally  generated  funds and seller  financing  of  $1,178,000  and has been
accounted for under the purchase method of accounting.  Goodwill  resulting from
the acquisition of $1,847,000 is being amortized on a straight-line basis over a
forty-year period.

On April 22, 1997, the Company  purchased  certain assets of The Cotton Division
of American White Cross,  Inc.  ("AWC") for net  consideration  of approximately
$10,300,000,  including acquisition related expenses.  AWC is a manufacturer and
distributor  of store- brand and  value-brand  cotton  swabs,  cotton rounds and
squares,  cotton  balls and puffs,  pharmaceutical  coil and cotton  rolls.  The
acquisition  was  financed  by  borrowings  of  $9,800,000  under the  Company's
revolving  credit  facility and has been accounted for under the purchase method
of accounting. No goodwill was recorded relating to this acquisition.

On March 29,  1996,  the  Company  purchased  certain  assets  of  Israel  based
Bond-America  Israel Blades,  Ltd., and its wholly owned U.S.  subsidiary,  A.I.
Blades,  Inc.  (collectively,  "Bond") for net  consideration  of  approximately
$16,673,000,  net of  cash,  including  acquisition  related  expenses.  Bond is
engaged in the  manufacture  and  distribution  of store-brand  and  value-brand
shaving  razors and  blades.  The  acquisition  was  financed by  borrowings  of
$12,718,000  under  the  Company's  revolving  credit  facility  and  internally
generated  funds  and has been  accounted  for  under  the  purchase  method  of
accounting.  Goodwill of $2,786,000 is being amortized on a straight-line  basis
over a forty-year period.


                                       48

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Wolco's,  AWC's and  Bond's  results of  operations  have been  included  in the
consolidated statement of income since their respective dates of acquisition.

Pro forma results of operations for the years ended December 31, 1998,  1997 and
1996, as if the Wolco, AWC, and Bond  acquisitions  occurred as of the beginning
of the respective periods, are not presented as the effects are not material.


13. SPECIAL CHARGES

During  1998,  the  Company   recorded  an  aggregate  charge  of  approximately
$3,003,000,  which was  comprised  of  approximately  $1,000,000  related to the
Company's  decision  to  discontinue  one of its  product  lines,  approximately
$1,803,000  for  certain   severance  and  employee   benefits  related  to  the
termination of certain  employees,  and  approximately  $200,000  related to the
shutdown  of  the  Company's  cotton  operations  in  Sparks,  Nevada.  Employee
terminations  have resulted  primarily from the  consolidation  of the Company's
sales forces and the  termination  of certain other  management  employees.  The
following table provides information as to the components of the charge:

                                                                     Remaining
                                                                     Balance at
                                           Original     Charges to  December 31,
                                            Balance        Date         1998 
                                            -------        ----         ---- 
Discontinuation of product line:
   Contract termination                   $  500,000    $        -    $  500,000
   Excess inventory and deferred charges     500,000             -       500,000
Severance and employee benefits            1,803,000     1,200,000       603,000
Sparks, Nevada shutdown                      200,000       200,000             -
                                          ----------    ----------    ----------
                                          $3,003,000    $1,400,000    $1,603,000
                                          ==========    ==========    ==========

Amounts  remaining at December 31, 1998 are included in accrued  expenses in the
accompanying  consolidated  balance sheets.  Substantially  all of the remaining
payments and asset impairments are expected to occur during 1999.


14. SUBSEQUENT EVENT

On February 12, 1999, RSA Holdings Corporation and RSA Acquisition  Corporation,
which are affiliates of J.W. Childs Equity  Partners II, L.P.  ("J.W.  Childs"),
entered  into a  merger  agreement  with the  Company.  Pursuant  to the  merger
agreement,  RSA Acquisition has made an offer to purchase all of the outstanding
shares of common stock of the Company at a purchase  price of $14.125 per share,
upon the terms and subject to the  conditions set forth in the offer to purchase
("the Stock Tender Offer"). The aggregate purchase price,  excluding transaction
costs,  to be paid for the common stock  purchased  in the Stock  Tender  Offer,
assuming  all of the  common  stock  (on a fully  diluted  basis)  is  tendered,
including the redemption of stock options, is approximately  $172.6 million. The
Stock Tender Offer is  conditioned  upon,  among other  conditions,  there being
validly  tendered and not withdrawn,  prior to the expiration  date of the Stock
Tender Offer, a number of shares of common stock which constitutes more than 50%
of the voting  power  (determined  on a fully  diluted  basis) of all the equity
securities  of the Company  and  regulatory  approval.  The Stock  Tender  Offer
expires on April 2, 1999.

The merger agreement provides that, following the completion of the Stock Tender
Offer,  RSA Acquisition will be merged with and into the Company (the "Merger").
Following the Merger, the Company will continue as the surviving corporation and
will become a direct,  wholly owned  subsidiary of RSA  Holdings,  which will be
wholly owned by J.W. Childs, its affiliates and Company management.  Closing for
the Merger is expected to occur in April 1999.

In  connection  with the Merger,  the Company has made an offer to purchase (the
"Note Tender Offer") all $100.0 million aggregate principal amount of its 9 7/8%
Series B Senior Notes due August 1, 2005 (the "Existing Notes").  In conjunction
with the Note Tender Offer, the Company has also solicited consents to eliminate
substantially  all of the covenants  contained in the indenture  relating to the
Existing  Notes.  Any tender of Existing Notes pursuant to the Note Tender Offer
will also be a grant of consent with respect to such  Existing  Notes.  The Note
Tender Offer expires on April 6, 1999.

                                       49

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Upon  completion  of the above  transactions,  as  currently  contemplated,  the
Company expects it would have had  approximately  $226.2 million of indebtedness
outstanding  as of December  31, 1998 as  compared  to  historical  indebtedness
outstanding of $127.3 million.  The Company also expects that as a result of the
application  of  purchase  accounting  the  Company's  depreciation  expense and
amortization of intangible assets will increase.  In addition,  certain fees and
expenses to be incurred  relating to the above  transactions  will be  reflected
either as  components  of the cost of the  transactions  or as an expense in the
period in which the transactions are completed.

Upon  consummation  of  the  Merger,  The  Jordan  Company,  as  advisor  to the
transaction, will receive a fee of $2.5 million.


15. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

The  Company's  $100,000,000  of 9 7/8% Series B Senior Notes due 2005 have been
guaranteed, on a joint and several basis by certain domestic subsidiaries of the
Company, which guarantees are senior unsecured obligations of each guarantor and
will rank pari passu in right of  payment  with all other  indebtedness  of each
guarantor.  However,  the guarantee of one of the guarantor  subsidiaries  ranks
junior to its outstanding subordinated note.

The following condensed  consolidating  financial information presents condensed
consolidating financial statements as of December 31, 1998 and 1997, and for the
years ended December 31, 1998, 1997 and 1996, of American Safety Razor Company -
the parent  company,  the  guarantor  subsidiaries  (on a combined  basis),  the
non-guarantor  subsidiaries  (on a  combined  basis),  and  elimination  entries
necessary to present such entities on a consolidated basis.

During 1997, Ardell  Industries,  Inc., a non-guarantor  subsidiary,  was merged
into American Safety Razor Company - the parent company.

                                       50

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                     Condensed Consolidating Balance Sheets

                                December 31, 1998

<TABLE>
<CAPTION>
                                                                                       Non-
                                                                       Guarantor     guarantor
                                                             ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                             ---      ------------  ------------   ------------  ------------
                                                                                   (In thousands)
<S>                                                         <C>        <C>          <C>            <C>           <C>   
Assets
Current assets:
     Cash and cash equivalents                          $      (17)      $    106       $ 3,364     $        -     $   3,453
     Trade receivables, net                                 18,717         12,315        13,704           (238)       44,498
     Advances receivable--subsidiaries                      38,994              -         4,346        (43,340)            -
     Inventories                                            30,108         13,349        11,604         (1,032)       54,029
     Income taxes and prepaid expenses                       6,216          1,578           643              -         8,437
                                                         ---------       --------      --------    -----------     ---------

          Total current assets                              94,018         27,348        33,661        (44,610)      110,417

Property and equipment, net                                 41,656         24,068         8,941              -        74,665
Intangible assets, net                                      49,027         20,601         2,183              -        71,811
Prepaid pension cost and other                               1,133          4,850            21              -         6,004
Investment in subsidiaries                                  39,458              -         4,218        (43,676)            -
                                                         ---------     ----------      --------       --------   -----------

          Total assets                                    $225,292        $76,867       $49,024       $(88,286)     $262,897
                                                          ========        =======       =======       ========      ========

Liabilities and Stockholders' Equity
Current liabilities:
     Accounts payable, accrued expenses
       and other                                          $ 20,058        $ 9,611       $ 4,568     $        -      $ 34,237
     Advances payable--subsidiaries                              -         43,283             -        (43,283)            -
     Current maturities of long-term obligations             1,030          1,380         1,442              -         3,852
                                                         ---------       --------      --------    -----------     ---------

          Total current liabilities                         21,088         54,274         6,010        (43,283)       38,089

Long-term obligations                                      121,718          1,377           386              -       123,481
Retiree health and insurance benefits and other             15,169          9,994             -              -        25,163
Deferred income taxes                                        3,468          3,040           102              -         6,610
                                                         ---------       --------      --------    -----------     ---------

          Total liabilities                                161,443         68,685         6,498        (43,283)      193,343
                                                          --------       --------      --------       --------      --------

Stockholders' equity
     Common Stock                                              121            485            87           (572)          121
     Additional capital                                     65,905         15,662        27,173        (42,835)       65,905
     Retained earnings (accumulated deficit)                (5,092)        (7,965)       19,107         (1,593)        4,457
     Dividends                                               2,877              -        (2,877)             -             -
     Accumulated other comprehensive loss                       38              -          (964)            (3)         (929)
                                                        ----------     ----------     ---------    -----------    ----------
                                                            63,849          8,182        42,526        (45,003)       69,554
                                                         ---------       --------      --------      ---------     ---------
          Total liabilities and stockholders' equity      $225,292        $76,867       $49,024       $(88,286)     $262,897
                                                          ========        =======       =======       ========      ========
</TABLE>



                                       51

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                     Condensed Consolidating Balance Sheets

                                December 31, 1997

<TABLE>
<CAPTION>
                                                                                      Non-
                                                                       Guarantor    guarantor
                                                           ASR       Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                           ---       ------------  ------------   ------------  ------------
                                                                                  (In thousands)

<S>                                                       <C>            <C>           <C>           <C>           <C>    
Assets
Current assets:
     Cash and cash equivalents                        $      356      $     433     $     637    $         8     $   1,434
     Trade receivables, net                               20,172         13,283        11,822             -         45,277
     Advances receivable--subsidiaries                    33,608             -          4,299        (37,907)            -
     Inventories                                          29,106         12,603        10,724           (945)       51,488
     Income taxes and prepaid expenses                     5,730           (982)          361              -         5,109
                                                      ----------      ---------     ---------    -----------     ---------

          Total current assets                            88,972         25,337        27,843        (38,844)      103,308

Property and equipment, net                               39,836         23,135         9,972              -        72,943
Intangible assets, net                                    51,205         21,585           446              -        73,236
Prepaid pension cost and other                               297          4,277            20              -         4,594
Investment in subsidiaries                                34,757              -         4,038        (38,795)            -
                                                       ---------     ----------      --------       --------   -----------

          Total assets                                  $215,067        $74,334       $42,319       $(77,639)     $254,081
                                                        ========        =======       =======       ========      ========

Liabilities and Stockholders' Equity
Current liabilities:
     Accounts payable, accrued expenses
       and other                                        $ 19,540       $ 13,346      $  3,576     $        3      $ 36,465
     Advances payable--subsidiaries                            -         37,851             -        (37,851)            -
     Current maturities of long-term obligations           1,020            138           949              -         2,107
                                                       ---------      ---------     ---------    -----------     ---------

          Total current liabilities                       20,560         51,335         4,525        (37,848)       38,572

Long-term obligations                                    118,748          2,757             -              -       121,505
Retiree health and insurance benefits and other           14,988          9,995             -              -        24,983
Deferred income taxes                                      7,035          2,492            55              -         9,582
                                                        --------       --------      --------    -----------     ---------

          Total liabilities                              161,331         66,579         4,580        (37,848)      194,642
                                                        --------        -------       -------       --------      --------

Stockholders' equity
     Common Stock                                            121            485            85           (570)          121
     Additional capital                                   65,801         15,662        23,694        (39,356)       65,801
     Retained earnings (accumulated deficit)             (14,676)        (8,392)       17,285            138        (5,645)
     Dividends                                             2,452              -        (2,452)             -             -
     Accumulated other comprehensive loss                     38              -          (873)            (3)         (838)
                                                     -----------     ----------     ---------    -----------    ----------
                                                          53,736          7,755        37,739        (39,791)       59,439
                                                       ---------       --------      --------      ---------     ---------
          Total liabilities and stockholders' equity    $215,067        $74,334       $42,319       $(77,639)     $254,081
                                                        ========        =======       =======       ========      ========
</TABLE>



                                       52

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                  Condensed Consolidating Statements of Income
                          Year Ended December 31, 1998

<TABLE>
<CAPTION>
                                                                              Non-
                                                              Guarantor    guarantor
                                                   ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                   ---      ------------  ------------   ------------  ------------
                                                                         (In thousands)

<S>                                             <C>            <C>            <C>           <C>           <C>     
Net sales                                       $150,691       $114,126       $55,141       $(22,470)     $297,488
Cost of sales                                     85,002         96,508        42,607        (22,139)      201,978
                                                --------      ---------      --------       --------      --------

Gross profit                                      65,689         17,618        12,534           (331)       95,510

Selling, general and administrative expenses      40,840         11,822        10,854              -        63,516
Amortization of intangible assets                  1,477            984            82              -         2,543
Special charges                                    2,725            184            94              -         3,003
                                                --------     ----------     ---------     ----------     ---------

Operating income                                  20,647          4,628         1,504           (331)       26,448

Other income (expense):
   Equity in earnings of affiliates                1,645              -           180         (1,825)            -
   Interest expense                               (8,270)        (4,193)          193              -       (12,270)
                                                --------      ---------      --------     ----------     ---------
Income before income taxes                        14,022            435         1,877         (2,156)       14,178
Income taxes                                       3,589              8           479              -         4,076
                                                --------    -----------      --------     ----------     ---------

Net income                                      $ 10,433      $     427       $ 1,398       $ (2,156)     $ 10,102
                                                ========      =========       =======       ========      ========
</TABLE>




                  Condensed Consolidating Statements of Income
                          Year Ended December 31, 1997

<TABLE>
<CAPTION>
                                                                             Non-
                                                             Guarantor     guarantor
                                                  ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                              ---------    ------------  ------------   ------------  ------------
                                                                        (In thousands)

<S>                                            <C>            <C>            <C>           <C>           <C>     
Net sales                                      $152,784       $114,365       $48,467       $(19,009)     $296,607
Cost of sales                                    87,037         91,503        36,988        (18,537)      196,991
                                              ---------      ---------       -------       --------      --------

Gross profit                                     65,747         22,862        11,479           (472)       99,616

Selling, general and administrative expenses     37,853         12,269        10,084              -        60,206
Amortization of intangible assets                 1,456            990            55              -         2,501
                                              ---------     ----------     ---------    -----------     ---------

Operating income                                 26,438          9,603         1,340           (472)       36,909

Other income (expense):
   Equity in earnings of affiliates               4,880              -         1,680         (6,560)            -
   Interest expense                              (9,387)        (3,923)        1,040              -       (12,270)
                                              ---------      ---------      --------     ----------      --------
Income before income taxes                       21,931          5,680         4,060         (7,032)       24,639
Income taxes                                      6,390          2,158         1,022              -         9,570
                                              ---------      ---------      --------     ----------     ---------

Net income                                     $ 15,541      $   3,522       $ 3,038       $ (7,032)     $ 15,069
                                               ========      =========       =======       ========      ========
</TABLE>



                                       53

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                  Condensed Consolidating Statements of Income
                          Year Ended December 31, 1996

<TABLE>
<CAPTION>
                                                                              Non-
                                                              Guarantor     guarantor
                                                   ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                ---------   ------------  ------------   ------------  ------------
                                                                         (In thousands)

<S>                                             <C>             <C>            <C>          <C>           <C>     
Net sales                                       $138,685        $89,025        $52,710      $(19,784)     $260,636
Cost of sales                                     79,920         70,313         39,309       (19,593)      169,949
                                               ---------        -------        -------      --------      --------

Gross profit                                      58,765         18,712         13,401          (191)       90,687

Selling, general and administrative expenses      33,153         11,447         10,267             -        54,867
Amortization of intangible assets                  1,481            980             42             -         2,503
                                               ---------       --------      ---------   -----------     ---------

Operating income                                  24,131          6,285          3,092          (191)       33,317

Other income (expense):
   Equity in earnings of affiliates                3,799              -           745         (4,544)            -
   Interest expense                               (8,477)        (3,622)          380              -       (11,719)
                                               ---------       --------       -------    -----------     ---------
Income before income taxes                        19,453          2,663         4,217         (4,735)       21,598
Income taxes                                       6,089          1,105         1,231              -         8,425
                                               ---------       --------       -------    -----------     ---------

Net income                                      $ 13,364        $ 1,558       $ 2,986       $ (4,735)     $ 13,173
                                                ========        =======       =======       ========      ========
</TABLE>



                                       54

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


           Condensed Consolidating Statements of Comprehensive Income
                          Year Ended December 31, 1998

<TABLE>
<CAPTION>
                                                                              Non-
                                                              Guarantor     guarantor
                                                   ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                   ---      ------------  ------------   ------------  ------------
                                                                         (In thousands)

<S>                                               <C>               <C>        <C>           <C>           <C>    
Net income                                        $10,433           $427       $1,398        $(2,156)      $10,102
Other comprehensive income:
     Foreign currency translation adjustments           -              -          (91)             -           (91)
                                                 --------         ------      -------      ---------      --------
Comprehensive income                              $10,433           $427       $1,307        $(2,156)      $10,011
                                                 ========         ======      =======       ========       =======
</TABLE>


           Condensed Consolidating Statements of Comprehensive Income
                          Year Ended December 31, 1997

<TABLE>
<CAPTION>
                                                                               Non-
                                                               Guarantor    guarantor
                                                    ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                    ---      ------------  ------------   ------------  ------------
                                                                           (In thousands)

<S>                                                <C>             <C>          <C>           <C>           <C>    
Net income                                         $15,541         $3,522       $3,038        $(7,032)      $15,069
Other comprehensive income:
     Foreign currency translation adjustments            -              -         (198)             -          (198)
                                                ----------       --------      -------      ---------      --------
Comprehensive income                               $15,541         $3,522       $2,840        $(7,032)      $14,871
                                                   =======         ======       ======        =======       =======
</TABLE>




           Condensed Consolidating Statements of Comprehensive Income
                          Year Ended December 31, 1996


<TABLE>
<CAPTION>
                                                                            Non-
                                                            Guarantor     guarantor
                                                 ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                 ---      ------------  ------------   ------------  ------------
                                                                          (In thousands)

<S>                                             <C>             <C>           <C>          <C>            <C>    
Net income                                      $13,364         $1,558        $2,986       $(4,735)       $13,173
Other comprehensive income:
     Foreign currency translation adjustments         -              -           453            (1)           452
                                               --------       --------       -------     ---------       --------
Comprehensive income                            $13,364         $1,558        $3,439       $(4,736)       $13,625
                                                =======         ======        ======       =======        =======
</TABLE>



                                       55

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                Condensed Consolidating Statements of Cash Flows

                          Year Ended December 31, 1998

<TABLE>
<CAPTION>
                                                                                          Non-
                                                                          Guarantor     guarantor
                                                               ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                               ---      ------------  ------------   ------------  ------------
                                                                                      (In thousands)
<S>                                                          <C>            <C>            <C>           <C>           <C>    
Operating activities
Net cash (used in) provided by operating activities          $13,760        $(1,593)       $  383        $    (9)      $12,541
                                                             -------        -------        ------        -------       -------

Investing activities
Capital expenditures                                          (7,205)        (3,976)         (194)             -       (11,375)
Purchase of Wolco, net of cash acquired                            -              -          (571)             -          (571)
Other                                                           (719)             -            56              -          (663)
Investment in subsidiaries                                    (3,481)             -         3,481              -             -
Advances from (to) subsidiaries                               (5,812)             -             -          5,812             -
                                                            --------      ---------      --------         ------     ---------

     Net cash (used in) provided from investing activities   (17,217)        (3,976)        2,772          5,812       (12,609)
                                                             -------        -------        ------         ------       -------

Financing activities
Repayment of long-term obligations                              (320)          (192)         (885)             -        (1,397)
Proceeds from borrowings                                       3,300              -            80              -         3,380
Proceeds for exercise of stock options                           104              -             -              -           104
Advances from (to) subsidiaries                                    -          5,434           377         (5,811)            -
                                                          ----------        -------       -------         ------     ---------

     Net cash provided from (used in) financing activities     3,084          5,242          (428)        (5,811)        2,087
                                                            --------        -------       -------         ------       -------

Net increase (decrease) in cash and cash
   equivalents                                                  (373)          (327)        2,727             (8)        2,019
Cash and cash equivalents, beginning of
  period                                                         356            433           637              8         1,434
                                                            --------       --------       -------        -------       -------
     Cash and cash equivalents, end of
        period                                              $    (17)       $   106        $3,364        $     -       $ 3,453
                                                            ========        =======        ======        =======       =======
</TABLE>


                                       56

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                Condensed Consolidating Statements of Cash Flows

                          Year Ended December 31, 1997

<TABLE>
<CAPTION>
                                                                                          Non-
                                                                          Guarantor     guarantor
                                                               ASR      Subsidiaries  Subsidiaries   Eliminations  Consolidated
                                                               ---      ------------  ------------   ------------  ------------
                                                                                     (In thousands)

<S>                                                         <C>             <C>            <C>            <C>          <C>    
Operating activities
Net cash (used in) provided by operating activities         $   (199)       $ 9,941        $2,308         $  (13)      $12,037
                                                            --------        -------        ------         ------       -------

Investing activities
Capital expenditures                                          (8,115)        (2,724)       (2,875)             -       (13,714)
Purchase of AWC, net of cash acquired                              -        (10,300)            -              -       (10,300)
Other                                                              -             (3)            -              -            (3)
Investment in subsidiaries                                    (9,445)             -         9,445              -             -
Advances from (to) subsidiaries                                6,979              -             -         (6,979)            -
                                                            --------      ---------      --------         ------    ----------

     Net cash (used in) provided from investing activities   (10,581)       (13,027)        6,570         (6,979)      (24,017)
                                                             -------        -------        ------         ------       -------

Financing activities
Repayment of long-term obligations                              (310)          (243)            -              -          (553)
Proceeds from borrowings                                      11,200              -           743              -        11,943
Proceeds for exercise of stock options                            45              -             -              -            45
Advances from (to) subsidiaries                                    -          3,750       (10,750)         7,000             -
                                                           ---------       --------       -------          -----    ----------

     Net cash provided from (used in) financing activities    10,935          3,507       (10,007)         7,000        11,435
                                                             -------       --------       -------          -----       -------

Net increase (decrease) in cash and cash
   equivalents                                                   155            421        (1,129)             8          (545)
Cash and cash equivalents, beginning of
  period                                                         201             12         1,766              -         1,979
                                                            --------       --------        ------        -------       -------
     Cash and cash equivalents, end of
        period                                               $   356        $   433        $  637         $    8       $ 1,434
                                                             =======        =======        ======         ======       =======
</TABLE>



                                       57

<PAGE>


AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




                Condensed Consolidating Statements of Cash Flows

                          Year Ended December 31, 1996

<TABLE>
<CAPTION>
                                                                         Non-
                                                         Guarantor     guarantor
                                              ASR      Subsidiaries   Subsidiaries  Eliminations  Consolidated
                                              ---      ------------   ------------  ------------  ------------
                                                                       (In thousands)
<S>                                         <C>             <C>           <C>          <C>            <C>    
Operating activities
Net cash (used in) provided by
  operating activities                      $18,172         $7,822        $ (483)      $      2       $25,513
                                            -------         ------        ------       --------       -------

Investing activities
Capital expenditures                         (8,711)        (1,912)         (646)             -       (11,269)
Purchase of Bond, net of cash acquired      (16,673)             -             -              -       (16,673)
Other                                            62              -             -              -            62
Investment in subsidiaries                   (2,301)             -             -          2,301             -
Advances from (to) subsidiaries               7,037              -             -         (7,037)            -
                                           --------       --------      --------        -------    ----------

     Net cash used in investing activities  (20,586)        (1,912)         (646)        (4,736)      (27,880)
                                            -------         ------        ------         ------       -------

Financing activities
Repayment of long-term obligations          (10,949)          (276)            -              -       (11,225)
Proceeds from borrowings                     13,218              -           206              -        13,424
Advances from (to) subsidiaries                   -         (5,672)          938          4,734             -
                                          ---------         ------        ------        -------    ----------

     Net cash provided from (used in)
     financing activities                     2,269         (5,948)        1,144          4,734         2,199
                                           --------         ------        ------        -------      --------

Net increase (decrease) in cash and cash
   equivalents                                 (145)           (38)           15              -          (168)
Cash and cash equivalents, beginning of
  period                                        346             50         1,751              -         2,147
                                           --------        -------        ------      ---------      --------
     Cash and cash equivalents, end of
        period                              $   201         $   12        $1,766       $      -       $ 1,979
                                            =======         ======        ======       ========       =======
</TABLE>



                                       58

<PAGE>

Report of Independent Accountants


To the Board of Directors
of American Safety Razor Company


In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing  under  Item  14(a)(1)  on page 32  present  fairly,  in all  material
respects,  the  financial  position of  American  Safety  Razor  Company and its
subsidiaries  (the  "Company") at December 31, 1998 and 1997, and the results of
their operations, and their cash flows for each of the three years in the period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles. In addition, in our opinion, the financial statement schedule listed
in the index  appearing under Item 14(a)(2) on page 32 presents  fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and  financial  statement  schedule  are  the  responsibility  of the  Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedule based on our audits.  We conducted
our audits of these  statements in accordance with generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.



                                         PricewaterhouseCoopers LLP





Richmond, Virginia
February  12,  1999,  except  as to the  information  entitled
"Cotton  Matters" presented in Note 11, for which the
date is March 26, 1999


                                       59

<PAGE>



                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                          AMERICAN SAFETY RAZOR COMPANY

                                 (IN THOUSANDS)

                                                            
<TABLE>
<CAPTION>
                                                                                    Additions                   
                                                                                    ---------                   
                                                                Balance       Charged to   Charged                      Balance
                                                               Beginning      Costs and   to Other                      End of
Description                                                    of Period      Expenses    Accounts      Deductions      Period 
-----------                                                    ---------      --------    --------      ----------      ------ 
<S>                                                              <C>           <C>         <C>            <C>           <C>   
Year ended 12-31-98

     Reserves and allowances deducted from asset accounts:
          Allowance for doubtful accounts                        $1,363        $  212      $    -         $  609 (2)    $  966
          Allowance for discounts and other deductions            2,098         5,209           -          5,316 (3)     1,991
                                                                -------       -------     -------        -------        ------
                                                                 $3,461        $5,421      $    -         $5,925        $2,957
                                                                 ======        ======      ======         ======        ======

Year ended 12-31-97

     Reserves and allowances deducted from asset accounts:
          Allowance for doubtful accounts                        $1,252       $   595       $   -         $  484 (2)    $1,363
          Allowance for discounts and other deductions            1,306         4,820           -          4,028 (3)     2,098
                                                                -------       -------      ------         ------        ------
                                                                 $2,558        $5,415       $   -         $4,512        $3,461
                                                                 ======        ======       =====         ======        ======

Year ended 12-31-96

     Reserves and allowances deducted from asset accounts:
          Allowance for doubtful accounts                        $1,026        $  593        $  3 (1)     $  370 (2)    $1,252
          Allowance for discounts and other deductions              986         3,223          32 (1)      2,935 (3)     1,306
                                                                -------       -------        ----        -------       -------
                                                                 $2,012        $3,816         $35         $3,305        $2,558
                                                                 ======        ======         ===         ======        ======
</TABLE>


(1) Allowance  balance of subsidiary at  acquisition  date
(2) Accounts  written off, net of recoveries
(3) Discounts taken by customers

                                       60

<PAGE>



                                INDEX TO EXHIBITS
                                                                 Sequentially
Exhibit                                                            Numbered
Number   Description                                                 Page 
------   -----------                                                 ---- 

2.1      Stock Sale and Purchase Agreement for the Registrant,
         dated April 12, 1989, by, between,  and among J. Gray
         Ferguson,  Arthur J.  Gajarsa,  Joseph F. Hackett and
         William  L.  Robbins,  III,  the  Registrant  and ASR
         Acquisition Corp. (1)....................................     **

2.2      Agreement for Purchase and Sale of Stock, dated April
         17,  1989,  by and  among  Howard  E.  Strauss,  Bert
         Ghavami, and Ardell Acquisition Corp.(1).................     **

2.3      Amendment No. 1 to Agreement for Purchase and Sale of
         Stock,  dated April 28, 1989,  by and among Howard E.
         Strauss,   Bert  Ghavami,   and  Ardell   Acquisition
         Corp.....................................................     **

2.4      Agreement  for  Purchase  and  Sale of Stock of Megas
         Beauty Care,  Inc.  dated May 16, 1994 between  Megas
         Holdings, Inc. and Robert Bender(1)......................     ***

2.5      Stock Purchase  Agreement  dated February 7, 1995, by
         and among Sterile Products  Holdings,  Inc. and C. C.
         (Jack) Van Noy, George P. Goemans, Tamalpais Capital,
         and Newtek Venture(1)....................................     ****

2.6      Asset Purchase Agreement,  dated as of March 6, 1996,
         by  and   among  MLO  Razor   Company   (1996)   Ltd.
         ("Purchaser"),  and  Bond-America  Israel Blades Ltd.
         ("Seller"), Nostrum Establishment and Kaftor VePerach
         Ltd., the stockholders of Seller  (individually  each
         an "Owner" and collectively, the "Owners") and Robert
         Mandel,  Daniel  Mandel,  Alfred  Mernone,   Shulamit
         Weiman, Noam Weiman, Efrat Gershoni and Ayin Mor Ltd.
         (individually   each   a   "Beneficial   Owner"   and
         collectively  the  "Beneficial  Owners" and  together
         with the Owners, the "Stockholders").(1).................    *******

2.7      Amendment  No. 1 to  Asset  Purchase  Agreement  (the
         "Amendment"),  dated as of  March  25,  1996,  by and
         among Bond Blades  International Ltd. (formerly known
         as MLO Razor Company (1996) Ltd.), ("Purchaser"), and
         Bond-America Israel Blades Ltd., ("Seller"),  Nostrum
         Establishment   and   Kaftor   VePerach   Ltd.,   the
         stockholders of Seller  (individually each an "Owner"
         and  collectively,  the "Owners") and Robert  Mandel,
         Daniel Mandel, Alfred Mernone,  Shulamit Weiman, Noam
         Weiman,    Efrat   Gershoni   and   Ayin   Mor   Ltd.
         (individually   each   a   "Beneficial   Owner"   and
         collectively  the  "Beneficial  Owners" and  together
         with the Owners, the "Stockholders").....................    *******

2.8      Asset Purchase Agreement,  dated as of March 6, 1996,
         by  and   among   American   Safety   Razor   Company
         ("Purchaser"),  and A.I. Blades,  Inc. ("Seller") and
         Bond-America   Israel   Blades,    Ltd.,   the   sole
         stockholder of Seller ("Bond"), Nostrum Establishment
         and  Kaftor  VePerach  Ltd.,  Robert  Mandel,  Daniel
         Mandel, Alfred Mernone, Shulmait Weiman, Noam Weiman,
         Efrat Gershoni and Ayin Mor Ltd. (individually each a
         "Beneficial  Owner" and  collectively the "Beneficial
         Owners" and together with Bond, the  "Stockholders").
         (1)......................................................    *******


                                       61

<PAGE>

                                                                 Sequentially
Exhibit                                                            Numbered
Number   Description                                                 Page 
------   -----------                                                 ---- 

2.9      Amendment  No. 1 to  Asset  Purchase  Agreement  (the
         "Amendment"),  dated as of  March  25,  1996,  by and
         among  American  Safety Razor Company  ("Purchaser"),
         and A.I.  Blades,  Inc.  ("Seller") and  Bond-America
         Israel Blades Ltd.,  the sole  stockholder  of Seller
         ("Bond"),  Nostrum  Establishment and Kaftor VePerach
         Ltd., Robert Mandel,  Daniel Mandel,  Alfred Mernone,
         Shulamit Weiman, Noam Weiman, Efrat Gershoni and Ayin
         Mor Ltd.  (individually each a "Beneficial Owner" and
         collectively  the  "Beneficial  Owners" and  together
         with Bond, the "Stockholders")...........................    *******

2.10     Agreement  and Plan of Merger,  dated as of  February
         12, 1999 by and among American  Safety Razor Company,
         RSA  Acquisition  Corp.  and RSA  Holdings  Corp.  of
         Delaware.(1).............................................   *********

2.11     Offer to Purchase for Cash all Outstanding  Shares of
         Common Stock of American Safety Razor Company,  dated
         February 22, 1999........................................   *********

3.1      Amended and Restated  Certificate of Incorporation of 
         the Registrant...........................................       *
 
3.2      Amended and Restated By-laws of the Registrant...........       *

4.1      Specimen of Stock Certificate............................       **

4.2      Recapitalization Agreement, dated May 24, 1993, among
         the Registrant and its Stockholders......................       *

4.3      Subscription Agreement,  dated April 28, 1989, by and
         among the Registrant, JZCC and Allsop....................       **

4.4      Registration Rights Agreement,  dated as of August 3,
         1995,  among the  Registrant,  the Guarantors and the
         Initial   Purchasers,    relating   to   the   Senior
         Notes....................................................     ******

4.5      Indenture  governing  the Senior  Notes,  dated as of
         August 3,  1995,  by and among  the  Registrant,  the
         Guarantors and the Trustees..............................      *****

4.6      Preferred  Stock Exchange  Agreement,  dated June 14,
         1993,   among  the  Registrant  and  the  holders  of
         Preferred Stock..........................................        *

4.7      Common  Stock  Conversion  Agreement,  dated  May 24,
         1993,  among the Registrant and the holders of Common
         Stock....................................................        *

4.8(a)   Stockholders Agreement, dated April 14, 1989, between
         the Registrant and its Stockholders......................        **

4.8(b)   Shareholder's  Agreement,  dated  February  12, 1999,
         among   the   Parent,    Purchaser,   and   Principal
         Holders..................................................   **********

4.9      First Amendment to the Stockholders Agreement,  dated
         April  28,  1989,  between  the  Registrant  and  its
         Stockholders.............................................       **

4.10     Second Amendment to the Stockholders Agreement, dated
         December 29,  1992,  between the  Registrant  and its
         Stockholders.............................................       **


                                       62

<PAGE>

                                                                 Sequentially
Exhibit                                                            Numbered
Number   Description                                                 Page 
------   -----------                                                 ---- 

4.11     Third Amendment to the Stockholders Agreement,  dated
         June 15, 1993,  among the  Registrant  and certain of
         its Stockholders.........................................     *

4.12     $2,500,000  Subordinated  Secured Note,  due June 10,
         2000,  executed by Megas  Holdings,  Inc. in favor of
         Robert
         Bender...................................................    ***

4.13     Junior  Security  Agreement,  dated June 10, 1994, by
         Megas Beauty Care,  Inc.  (formerly  Megas  Holdings,
         Inc.) in favor of Robert Bender..........................    ****

4.14     Multicurrency Credit Agreement, dated as of August 3,
         1995, among the Registrant,  the Guarantors and First
         National  Bank  of  Chicago,   as  agent,   including
         exhibits.................................................    *****

4.15     Guarantees   of  the   Guarantors   pursuant  to  the
         Multicurrency Credit Agreement...........................    ******

4.16     Security Agreement, dated August 3, 1995, between the
         Registrant  and First  National  Bank of Chicago,  as
         agent, including schedules...............................     ******

4.17     Guarantor Security Agreements,  dated August 3, 1995,
         by and among the  Guarantors  and First National Bank
         of Chicago, as agent, including schedules................     ******

10.1(a)  Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993,   between   the   Registrant   and  William  C.
         Weathersby(2)............................................        *

10.1(b)  Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993,  between the  Registrant and William L. Robbins
         (2)......................................................        *

10.1(c)  Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993,  between  the  Registrant  and  George L. Pineo(2).        *

10.1(d)  Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993, between the Registrant and Gary S. Wade(2).........        *

10.1(e)  Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993, between the Registrant and Joseph F. Hackett(2)....        *

10.1(f)  Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993, between the Registrant and Thomas G. Kasvin(2).....        *

10.1(g)  Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993, between the Registrant and Thomas B. Boyd(2).......        *

10.1.(h) Non-Disclosure/Non-Compete  Agreement, dated June 15,
         1993, between the Registrant and Bruce L. Stichter(2)....        *

10.2(a)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and Thomas H. Quinn(2)............        *

10.2(b)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and William C. Weathersby(2)......        *

10.2(c)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and Jonathan F. Boucher(2)........        *



                                       63

<PAGE>

                                                                 Sequentially
Exhibit                                                            Numbered
Number   Description                                                 Page 
------   -----------                                                 ---- 

10.2(d)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and John  W. Jordan, II(2)........      *

10.2(e)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and David W. Zalaznick(2).........      *

10.2(f)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and John R. Lowden(2).............      *

10.2(g)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and Paul D. Rhines(2).............      *

10.2(h)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and D. Patrick Curran(2)..........      *

10.2(i)  Indemnification   Agreement,  dated  June  15,  1993,
         between the Registrant and William C. Ballard, Jr.(2)....      *

10.3(a)  Financial  Advisory  Agreement,  dated July 12, 1995,
         between the Registrant and TJC Management Corp...........    ******

10.3(b)  Amended and Restated  Financial  Advisory  Agreement,
         dated  February 12, 1999,  between the Registrant and
         TJC Management Corp.

10.4     Settlement  Agreement,  dated  June 5,  1992,  by and
         between Warner-Lambert Company and the Registrant........      **

10.5     Administrative  Consent Order,  dated March 13, 1989,
         between the Registrant and the New Jersey  Department
         of Environmental Protection and Energy...................      **

10.6(a)  Employment  Agreement,  dated  March 3, 1995,  by and
         between  Sterile  Products   Holdings,   and  Sterile
         Products Corporation and C.C. Van Noy(2).................     ****

10.6(b)  Employment  Protection  Agreement,  dated December 8,
         1997,  by and between the  Registrant  and William C.
         Weathersby(2)............................................    ********

10.6(c)  Employment Protection Agreement, dated December 8, 1997,
         by and between the Registrant and James V. Heim (2)......    ********

10.6(d)  Employment  Protection  Agreement,  dated December 8,
         1997,  by and  between the  Registrant  and Thomas G.
         Kasvin(2)................................................    ********

10.7     The American Safety Razor Company Stock Option Plan......        *

10.8     Confidentiality  Agreement  dated as of  December  4,
         1997  between  PaineWebber  Incorporated  and  J.  W.
         Childs Associates, L.P...................................   **********


                                       64

<PAGE>



                                                                 Sequentially
Exhibit                                                            Numbered
Number   Description                                                 Page 
------   -----------                                                 ---- 

10.9     Confidentiality  Agreement  dated as of  January  12,
         1999  between  PaineWebber  Incorporated  and  J.  W.
         Childs Associates, L.P...................................   **********

16       Letter re Change in Certifying Accountant................      ****

21       List of Subsidiaries of the Registrant

23       Consent of PricewaterhouseCoopers LLP

27       Financial Data Schedule

-------------

*           Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Form 10-K for the fiscal year ended December 31, 1993.

**          Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Form S-1 Registration Statement (No. 33-60298).

***         Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's  Form  8-K/A,  dated  June  10,  1994  relating  to the
            acquisition of Megas Beauty Care, Inc.

****        Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Form 10-K for the fiscal year ended December 31, 1994.

*****       Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Form 8-K, dated August 15, 1995.

******      Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Form S-4 Registration Statement (No. 33-96046).

*******     Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Form 10-Q for the quarter ended March 31, 1996.

********    Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's  Form  10-K/A for the fiscal  year ended  December  31,
            1997.

*********   Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Form 8-K, dated February 22, 1999.

**********  Incorporated   by  reference   to  the   exhibits   filed  with  the
            Registrant's Schedule 14D-9, dated February 22, 1999.

(1)         Disclosure  schedules relating to the representations and warranties
            have not been filed;  such  schedules  will be filed  supplementally
            upon the request of the Securities and Exchange Commission.

(2)         This  exhibit  is a  management  contract  or  compensatory  plan or
            arrangement  required to be identified in this Form 10-K pursuant to
            Item 14(c) of this Report.

                                       65