SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
          (Mark One)                  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

                         For the transition period from _____ to _____
                             
                        Commission file number    1-7276

                               EXOLON-ESK COMPANY
                               ------------------
                        (Exact name of registrant as
                          specified in its charter)

                   Delaware                              16-0427000
                  ----------                             ----------
               (State or other                        (I.R.S. Employer
               jurisdiction of                      Identification No.)
               incorporation or
                organization)

                  1000 East Niagara Street, Tonawanda, NY 14150
                        ------------------------------------
                      (Address of Principal Executive Offices)

                                 (716) 693-4550
                                 -------------- 
                (Registrant's telephone number, including area code)

                                                          Name of each
                                                      exchange on which
           Title of each class                             registered
           ------------------                              ----------
           Common stock $1 par                            Boston Stock
                  value                                     Exchange

          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. ( )

          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    

          At March 18, 1999 the aggregate market value of the publicly
          traded voting stock held by nonaffiliates of the Registrant was 
          $2,804,963 based upon the closing price of the Registrant's
          Common Stock on that date as reported by the Boston Stock
          Exchange.  Solely for the purposes of this calculation all
          persons who are or may be Officers or Directors of the Registrant
          and all persons or groups that have filed Schedules 13D with
          respect to the Registrant's stock have been deemed to be
          affiliates.

          As of March 18, 1999, the Registrant had outstanding 481,995
          shares of $1 par value Common Stock.

          Documents Incorporated by Reference
          None.


                                       PART I

          Item 1.  Business

                                 EXOLON-ESK COMPANY

          (a)  General Development of the Business

               The Exolon Company was founded in 1914 as a Massachusetts
          corporation and reincorporated as a Delaware corporation in 1976. 
          On April 27, 1984, ESK Corporation merged into the Exolon Company
          and the resulting company was renamed Exolon-ESK Company.  (As
          used herein, the  Company  refers to Exolon-ESK Company and its
          wholly owned Canadian Subsidiary.)  The Company issued 499,219
          shares of its Class A Common Stock and 31,523 shares of its
          Series B Convertible Preferred Stock to Wacker Chemical
          Corporation as a result of the merger.  In December of 1995,
          Wacker Chemical Corporation transferred all of its Company stock
          to Wacker Chemicals (USA), Inc. ( Wacker USA ).

               The Company is engaged in the business of manufacturing and
          selling products which are used principally for abrasive,
          refractory and metallurgical applications.  The primary products
          of the Company are fused aluminum oxide and silicon carbide. 
          Other product lines include fused specialty products sold to the
          refractory industry.

               Effective at the time of the merger, the Company entered
          into a Restated Patent License Agreement with Elektroschmelzwerk
          Kempten GmbH ("Kempten").  Both Kempten and Wacker USA are wholly
          owned subsidiaries of Wacker Chemie GmbH.  At the time of the
          merger, the Company also entered into an exclusive
          distributorship and sales representation agreement with Kempten
          for the United States and Canada relating to silicon carbide
          products which was set to expire on December 31, 1997.  In July
          1997, Kempten and the Company entered into a new two-year
          distributorship and sales representation agreement for silicon
          carbide products for the years 1998 and 1999.  In addition, the
          Company represents Kempten as a distributor of boron carbide
          grains to selected markets.

          (b)  Financial Information about Industry Segments

               The Company has only one business segment, the manufacture
          of abrasive materials and products for abrasive, metallurgical
          and refractory uses.  The Company regards its principal business
          as being in a single industry segment.

          (c)  Narrative Description of Business

               The Company's crude silicon carbide is produced at the
          Company's plant in Hennepin, Illinois.  The Company produces
          crude aluminum oxide and certain other products at its plant in
          Thorold, Canada owned by Exolon-ESK Company of Canada, Ltd.
          ("Exolon Ltd."), its wholly owned subsidiary.  Some of the crude
          products are sold directly to customers, but most of the crude
          products are shipped to the Company's plant in Tonawanda, New
          York, where the Company crushes, grades and formulates the crude
          products into granular products for sale to customers.

               Methods of distribution.  While most of the Company's
          products are sold directly to its customers by sales
          representatives employed by the Company, a portion of the sales
          are made through industrial distributors located throughout the
          United States and Canada.  Export sales are made on a direct
          basis and through agents.

               Raw materials.  The principal raw materials used by the
          Company are abrasive grade bauxite, petroleum coke, silica sand
          and cast iron borings.

               The Company purchases many other products such as fiber
          drums, wood pallets, bags, oil, natural gas, chemicals,
          electrodes and carbon products.

               The abrasive grade bauxite used by the Company presently
          comes from the Republic of Guinea in West Africa, Australia and
          The People's Republic of China.  Petroleum coke and silica sand
          originate from United States sources.

               Large quantities of electric power are purchased from
          Ontario Hydro for use by the Company's Canadian furnace plant and
          from the Illinois Power Company for use in its Hennepin plant. 
          The Company believes that adequate supplies of power will
          continue to be available.  Adequate supplies of raw materials
          have in general been available to the Company at competitive
          prices.

               Employees.  As of December 31, 1998, the Company had 256
          employees. 

               Major Customers.  Sales to no one customer accounted for 10%
          or more of consolidated net sales of the Company for the years
          ended December 31, 1998, 1997 and 1996.  In management's opinion,
          the loss of any one customer would not have a material adverse
          effect on the Company.

               Competition.  The industry in which the Company is engaged
          is highly competitive.  Principal North American competition is
          from three well-established North American companies.  In
          addition, substantial quantities of grain are imported and sold
          in North America by foreign based producers of abrasive grain. 
          Each of the North American competitors, in addition to the
          Company, have silicon carbide grain processing facilities.  Two
          of the three also have aluminum oxide crude and grain production
          operations, and one has silicon carbide crude production
          facilities.

               Competition in the industry is based upon pricing, service,
          and product performance.  The Company's products are sold to
          other manufacturers and, as a result, the distribution to the
          industry markets is highly competitive.  Major customers are
          continually striving to remain competitive by controlling the
          costs for raw materials purchased from the Company.  In order to
          meet customer demand and for competitive purposes, the Company
          maintains substantial inventories.  In addition, it has been
          Company policy to confine its primary operations to the electric
          furnace production and processing of grain products.

               Backlog.  As of December 31, 1998, the Company had a
          consolidated backlog of $4,560,000 as compared to $5,792,000 a
          year earlier.  The decrease in the Company's backlog in 1998 is
          primarily due to the decrease in demand that we experienced in
          the fourth quarter.  All of this backlog is expected to be
          shipped in 1999. 
           
               Seasonal Effect.  The Company's business is generally not
          seasonal. However, vacation shutdowns by a number of its
          customers can influence third quarter sales.

               Pollution Control.  The Company is involved in operations in
          which there is a continued risk that the environment could be
          adversely affected.  The Company is in frequent contact with the
          various environmental agencies in the jurisdictions in which it
          operates in an attempt to maintain environmental compliance. 

               Reference is made to Note 13 of the Notes to Consolidated
          Financial Statements beginning on page 31, which is incorporated
          herein by reference.

               Management believes all necessary pollution control
          equipment at the Company's plants in Tonawanda, New York and
          Thorold, Ontario are in place, and all current pollution control
          requirements are being met at both plants.

          (d)  Financial Information about Foreign and Domestic Operations
          and Export Sales

               The Company's wholly owned subsidiary, Norsk Exolon AS, is a
          limited partner in a Norwegian partnership Orkla Exolon KS.  See
          information contained in Note 1.(c). of Notes to Financial
          Statements on page 19.  The Company's interest in the Norwegian
          partnership is subject to the usual risks of foreign investment,
          including currency fluctuations.  

               Currency fluctuation is also a risk associated with the
          Company's Canadian plant operations. 

          Item 2.  Properties

               The Company's main office and grain processing plant are
          located in Tonawanda, New York.  The plant and office buildings,
          which are owned by the Company, contain 273,000 square feet of
          space, and occupy 6 of 34 acres owned by the Company at this
          site.  The facilities were originally completed in 1943, and
          substantial additions to the plant have been made since that
          date.

               The Company has an electric furnace plant situated in
          Thorold, Ontario, Canada.  All plant and office buildings at the
          plant are owned by the Company, as well as the 43 acres of land
          on which the facilities are located.  In total, the buildings
          consist of 251,000 square feet of space.  The plant was
          originally built in 1914.  Substantial additions have been made
          in subsequent years, including the construction of a new furnace
          in 1996.

               The Company's Hennepin, Illinois plant includes four outdoor
          furnace groups and buildings of 47,800 square feet, located on a
          78 acre site which is owned by the Company.  Construction began
          in late 1977 and was completed in the Spring of 1979 for three
          furnace groups.  The expansion to a fourth furnace group was
          completed in 1989.  The Company purchased an additional 20 acre
          parcel adjacent its property in 1995 and has completed
          construction of a desulfurization facility as outlined in Note
          13(a)(i) on page 31.

               The Company has operations in Norway conducted through a
          joint venture, as outlined in Note 1(c) on page 19.  The office
          and plant of the Norwegian joint venture are located in Gjolme,
          Norway.  The plant and office building, and the land upon which
          it is situated, are owned by the joint venture.  In total, the
          plant and office consist of 154,000 square feet of space, on 88
          acres of land.  The plant and office were constructed from
          1961-1963, with substantial additions made thereafter.

               The Company believes that all of these plants are in good
          condition and suited for the purposes for which they are
          operated.

          Item 3.  Legal Proceedings

               Reference is made to the information included in Note 13 to
          the Consolidated Financial Statements, which is incorporated
          herein by reference.

          Item 4.  Submission of Matters to a Vote of Security Holders
               None.

                                       PART II

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

               The Company's Common Stock is traded on the Boston Stock
          Exchange.  The quarterly Common Stock price ranges are as
          follows:


                            Price Range of Common Stock Boston Stock
                                            Exchange
                                             Quarter

                          1               2              3              4

    High-Low 1998   $33-1/2-$38     $38-$35-1/2   $36-1/2-$28     $33-$29-1/2
    High-Low 1997   $29 - $26        $31 - $27    $31 -$29-1/2     $37 - $32


               Information concerning limitations on the payment of
          dividends on the Company's Common Stock is hereby incorporated by
          reference to Notes 7 and 9 to Notes to Consolidated Financial
          Statements beginning on pages 23  and 26, respectively.

               The number of  stockholder accounts of record of the
          Company's Common Stock, $1 par value, was 159 as of March 11,
          1999.  The Company did not pay any dividends on its Common Stock
          in 1998 or 1997.

               The shares of the Company's Class A Common Stock, all of
          which are owned by Wacker Chemical (USA), Inc., are not publicly
          traded.

       Item 6.   Selected Financial Data


       Selected Financial Information         Years Ended December 31,

                                        1998    1997    1996    1995    1994
                                    (thousands of dollars except share amounts)
       Statement of Operations:
       Net Sales                      $65,578 $78,096 $77,459 $68,592 $59,494

       Gross profit before             10,961  17,286  17,839  15,380  12,863
       depreciation

       Operating Income                 2,124   9,355   9,358   7,527   3,186

       Income before Cumulative
         Effective of Accounting Change    22   5,254   6,080   3,964   1,516

       Cumulative Effect of  Accounting
       Change -

         Net of Income Tax Benefit          -       -       -    (502)      -
                                       --------------------------------------
       Net Income                     $    22 $ 5,254 $ 6,080 $ 3,462 $ 1,516
                                       ======================================
       Basic Earnings (Loss) per share of
       Common Stock:
         Income before Cumulative
          Effect of Accounting Change  $(0.02)   $5.41   $6.27   $4.06   $1.53

           Cumulative Effect of Accounting
            Change -

              Net of Tax Benefit             -       -       -  (0.52)       -
                                       ---------------------------------------
       Net Income (Loss) per share     $(0.02)   $5.41   $6.27   $3.54   $1.53
                                       =======================================
       Basic Earnings (Loss) per share of
       Class A Common Stock:

         Income before Cumulative
          Effect of Accounting Change  $(0.02)   $5.08   $5.90   $3.81   $1.44

         Cumulative Effect of  Accounting
           Change -

            Net of Tax Benefit               -       -       -  (0.49)       -
                                       ---------------------------------------
       Net Income (Loss) per share     $(0.02)   $5.08   $5.90   $3.32   $1.44
                                       =======================================


       Selected Financial Information         Years Ended December 31,
       - Continued
                                        1998    1997    1996    1995    1994
                                   (thousands of dollars except share amounts)

       Diluted Earnings per share of
       Common Stock:
        Income before Cumulative
         Effect of  Accounting Change $ (0.02)$  5.21 $  6.03 $  3.93 $  1.50 

           Cumulative Effect of Accounting
             Change - 

             Net of Tax Benefit             -      -       -  $ (0.49)      - 

                                      ---------------------------------------
       Net Income per share           $ (0.02)$  5.21 $  6.03 $  3.44 $  1.50 
                                      =======================================
       Diluted Earnings per share of Class A
       Common Stock:

         Income before Cumulative
          Effect of Accounting Change $ (0.02)$  4.91 $  5.69 $  3.71 $  1.42 
         Cumulative Effect of  Accounting
          Change -
  
           Net of Tax Benefit               -       -       - $ (0.47)      - 
                                      ---------------------------------------  
       Net Income per share           $ (0.02)$  4.91 $  5.69 $  3.24 $  1.42 
                                      =======================================
       Dividends per share:
         Series A Cumulative          $1.1250 $1.1250 $0.8437 $1.1250 $0.8437
          Preferred Stock

         Series B Cumulative          $1.1250 $1.1250 $0.8437 $1.1250 $0.8437
          Preferred Stock

         Common Stock                       -       -       -       -       -
         Class A Common Stock               -       -       -       -       -

       Summary Balance Sheet                     
       Information:                                 December 31,
                                         1998    1997    1996    1995    1994
                                               (thousands of dollars)

       Current Assets                 $34,594 $29,260 $28,301 $29,395 $25,441
       Current Liabilities              6,728   6,082   8,818   7,981   7,387
                                       --------------------------------------
       Working Capital                 27,866  23,178  19,483  21,414  18,054
       Total Assets                    71,286  63,277  61,483  50,215  45,309
       Long-Term Debt                  27,643  20,033  20,433  15,350  14,900
       Stockholders' Equity            32,576  32,789  28,258  22,298  18,628

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

       Forward-Looking Statements
            Statements included in this Management Discussion and Analysis of
       Financial Condition and Results of Operations and elsewhere in this
       document that do not relate to present or historical conditions are
       "forward-looking statements" within the meaning of that term in
       Section 27A of the Securities Act of 1933, as amended, and in Section
       21F of the Securities Exchange Act of 1934, as amended.  Additional
       oral or written statements may be made by the Company from time to
       time, and such statements may be included in documents filed with the
       Securities and Exchange Commission.  Such forward-looking statements
       involve known and unknown risks, uncertainties and other factors,
       which may cause the actual results, performance or achievements of the
       Company to be materially different from those expressed or implied by
       such forward-looking statements.  Such factors include economic
       slowdowns and recessions; the availability and pricing of raw
       materials used in the manufacture of the Company's products; the
       reliable operation of the Company's manufacturing facilities and
       equipment; the Company's ability to effectively compete in the
       industries in which it does business; the Company's ability to
       successfully negotiate new labor agreements and otherwise maintain
       favorable relations with its employees, a majority of whom are
       unionized; the Company's ability to comply with existing and future
       environmental laws and regulations, the accuracy of its current
       estimates of existing environmental liabilities and the possibility
       that currently unknown environmental liabilities may be discovered.

            The table presented below sets forth the following: (i)
       percentages which certain items presented in the financial statements
       bear to net sales of the Company and (ii) change of such items as
       compared to the indicated prior year.

                                                             Period to
                                                              Period
                                                             Increase
                                                            (Decrease)
                                                          in Relationship
                             Relationship to Net Sales          to 
                                                             Net Sales
                              Years Ended December 31,      Years Ended
                              1998      1997     1996     1997-98    1996-97


       Net Sales              100.0 %  100.0 %  100.0  %    0   %    0    %
       Cost of Goods Sold,
        excluding Depreciation 83.3     77.9     77.0       5.4      0.9
       Depreciation             5.0      3.5      3.6       1.5     (0.1)
       Selling, General and 
         Administrative
         Expense                8.3      6.6      7.3       1.8     (0.7)
       Research and
         Development            0.2      -        -         0.2      -
                               ------------------------------------------
                               96.8     88.0     87.9       8.8      0.1
                               ------------------------------------------
       Operating Income         3.2     12.0     12.1      (8.8)    (0.1)

       Other (Income) Expense:

       Equity in  Loss
         (Income) of Norwegian 
         Joint Venture         (0.6)    (0.6)    (0.9)      0.0      0.3
       Interest Expense         1.8      1.2      1.5       0.6     (0.3)
       Other                    1.3      0.3     (0.4)      1.0      0.7
                                ----------------------------------------
                                2.5      0.9      0.2       1.6      0.7
                                ----------------------------------------

       Income Before Income
        Taxes and Cumulative
        Effect of 
        Accounting Change       0.7     11.1     11.9     (10.4)    (0.8)

       Income Tax Expense       0.7      4.4      4.1      (3.7)    (0.3)
                                -----------------------------------------
       Net Income               0.0 %    6.7 %    7.8  %   (6.7)%   (1.1) %
                                =========================================


            The following discussion and analysis reviews certain factors
       which produced significant changes in the Company's results of
       operations during the three years ended December 31, 1998.


       Results of Operations 1998 Compared to 1997

            In 1998, the Company's net sales decreased $12,518,000 to
       $65,578,000, a decrease of 16% compared to net sales of $78,096,000 in
       1997.  The decline in sales was due to volume decreases caused by a
       decrease in demand combined with an increase in foreign competition.

            Consolidated net income was $22,000 for the year ended December
       31, 1998.  This compares to consolidated net income of $5,254,000 for
       1997.  The decrease in net income is primarily due to the loss in
       sales volume and increased manufacturing costs.

            Cost of sales, excluding depreciation, as a percentage of sales
       increased to 83% in 1998, when compared to 78% in 1997 primarily as a
       result of increased costs in silicon carbide production related to the
       startup of our pollution abatement facility in Illinois.
        
            Total operating expenses including depreciation were $8,837,000
       during 1998 versus $7,931,000 during 1997.   The 1998 increase in
       operating expenses is primarily a result of increased depreciation
       expense related to the startup of the pollution abatement facility in
       Illinois and increased general and administrative expenses related to
       year 2000 compliance efforts.

            Depreciation, as a percent of sales, was 5.0% for 1998 compared
       to 3.5% for 1997.  The 1998 increase was due to the mid-year startup
       of the pollution abatement facility in Illinois.

            Selling, general and administrative expenses increased by
       $331,000 in 1998, due primarily to increased expenditures related to
       year 2000 compliance efforts and increased selling costs.

            Interest expense from continuing operations increased to
       $1,179,000 in 1998 versus $938,000 in 1997.  The increase in interest
       expense is primarily due to the interest costs incurred relative to
       the startup of the pollution abatement facility in July.

            The Company's 50% share of the pre-tax earnings of its Norwegian
       joint venture, Orkla Exolon KS, was $385,000 for 1998 versus $437,000
       for 1997.  The joint venture's gross margin, prior to depreciation,
       was 19% for both 1998 and 1997. 

            The 1998 income tax provision was $430,000, representing an
       effective rate of 95%. This is due to $662,000 of foreign currency
       translation losses, which are not deductible for income tax
       calculations.  Net of these losses the income tax provision would
       represent 38.5% of taxable income.  The 1997 income tax provision was
       $3,432,000 which represented an effective rate of 39.5%.

       Results of Operations 1997 Compared to 1996
            In 1997, the Company's net sales increased $637,000 to
       $78,096,000, an increase of 1% compared to net sales of $77,459,000 in
       1996. 

            Consolidated net income was $5,254,000 for the year ended
       December 31, 1997.  This compares to consolidated net income of
       $6,080,000 for 1996.  The reduction in earnings is primarily due to a
       decrease in earnings of $236,000 related to the Norwegian joint
       venture, increased expenses related to foreign currency translations
       and a one-time insurance settlement recorded in 1996.

            Cost of sales, excluding depreciation, as a percentage of sales
       increased to 78% in 1997, when compared to 77% in 1996 as a result of
       increased costs in raw materials and utilities; therefore gross
       margins, as a percent of sales decreased to 22% in 1997 compared to
       23% in 1996.
        
            Total operating expenses including depreciation were $7,931,000
       during 1997 versus $8,481,000 during 1996.   The 1997 decrease in
       operating expenses of $550,000 is primarily a result of decreases in
       selling and general and administrative expenses. 

            Depreciation, as a percent of sales, was 3.5% for 1997 compared
       to 3.6% for 1996.

            Selling, general and administrative expenses decreased by
       $550,000 in 1997, due primarily to decreases in consulting fees, legal
       fees, sales salaries and incentives, and general and administrative
       salaries.  As a percent of net sales, selling and general and
       administrative expense decreased to 6.6% in 1997, from 7.3% for the
       1996 year.

            Interest expense from continuing operations declined to $938,000
       in 1997 from $1,136,000 in 1996.  The reduction in interest expense is
       primarily due to lower debt levels in 1997 versus 1996, exclusive of
       debt used to finance construction of the desulfurization facility at
       the Company's Hennepin, Illinois facility, for which interest totaling
       $346,000 was capitalized during 1997 ($114,000 for 1996).

            During 1998, the company decided to discontinue its pursuit of
       the purchase of a foreign company.  Costs of $408,000 related to this
       activity were expenses in the third quarter.

            The Company's 50% share of the pre-tax earnings of its Norwegian
       joint venture, Orkla Exolon KS, was $437,000 for 1997 versus $673,000
       for 1996.  The joint venture's gross margins, prior to depreciation,
       decreased to 19% for the 1997 year versus 21% for 1996, principally
       due to increased operational costs. 

            The 1997 income tax provision was $3,432,000, representing an
       effective rate of 39.5%. The 1996 income tax provision was $3,145,000
       which represented an effective rate of 34%.

       Liquidity and Capital Resources
            As of December 31, 1998, working capital (current assets less
       current liabilities) increased to $27,866,000, when compared to
       $23,178,000 as of December 31, 1997.  Accounts receivable decreased by
       $2,257,000 as of December 31, 1998 versus December 31, 1997. 
       Inventory increased by $3,583,000 at December 31, 1998 when compared
       to December 31, 1997.  Accounts payable increased $452,000 as of
       December 31, 1998 versus December 31, 1997.  Long-term debt increased
       by $7,610,000 versus December 31, 1997.

            For the year ended December 31, 1998, net cash provided by
       operating activities was $623,000.  Outstanding bank indebtedness
       increased by $7,610,000 at December 31, 1998 compared to December 31,
       1997.  Capital expenditures of $4,040,000 were funded by bank
       indebtedness.

            The Company's current ratio increased to 5.1 to 1.0 at December
       31, 1998 from 4.8 to 1.0 as of December 31, 1997.  The ratio of total
       liabilities to stockholder's equity was 1.2 to 1.0 as of December 31,
       1998 and .9 to 1.0 as of December 31, 1997. 

            Current financial resources including the availability of the
       revolving line of credit financing and anticipated funds from
       operations are expected to be adequate to meet normal requirements for
       the year ahead.  The Company currently has lines of credit with
       borrowing capacities of $10,000,000 in the U.S. and $1,000,000
       (Canadian funds) in Canada.

             The Company in its long-term cash planning normally covers
       capital expenditures with funds generated internally.  Where
       abnormally large capital expenditure programs are involved, long-term
       financing vehicles are sometimes used.  Total 1999 normal capital
       expenditures are forecasted at $3,000,000 to maintain and upgrade
       production facilities.  The Company believes that funds generated
       internally should be sufficient to finance normal capital expenditure
       requirements in 1999.

            Reference is made to the information included in Note 13 to the
       Consolidated Financial Statements beginning on page 31 which is
       incorporated herein by reference.

       Employees
            As of December 31, 1998, the Company employed 256 persons.  Of
       these, approximately 177 (or 69%) work under three collective
       bargaining agreements.  During 1998, the Company and the hourly
       workers at its Tonawanda, New York facility reached agreement on a new
       three-year collective bargaining agreement.  This agreement covers 72
       production and maintenance workers represented by the local branch of
       the United Steelworkers of America, Local 4447, AFL-CIO and expires on
       October 31, 2001.

       Impact of Year 2000

            The Year 2000 (Y2K) Issue is the result of computer programs
       being written using two digits rather than four to define the
       applicable year.  Any of the Company's computer programs or hardware
       that have date-sensitive software or embedded chips 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 of operations, including, among other things, a temporary
       inability to process transactions, send invoices, or engage in similar
       normal business activities.

            The Company's plan to resolve the Year 2000 Issue involves the
       following four phases: assessment, remediation, testing/reassessment,
       and implementation.  To date, the Company has fully completed its
       assessment of all major and secondary systems that could be
       significantly affected by the Year 2000.  The completed assessment
       indicated that most of the Company's significant information
       technology systems could be affected.  That assessment has also
       indicated that there was two manufacturing systems also affected. It
       was determined that there is little, if any, risk associated with the
       remaining production and manufacturing systems.  Further, the Company
       has determined that there is no risk with respect to the products it
       has sold and continues to sell.  In addition, the Company has gathered
       information about the Year 2000 compliance status of its significant
       suppliers and continues to monitor their compliance.

            For its information technology exposures, the Company has decided
       to completely replace the existing software and associated hardware. 
       To date, the Company has installed the new information systems at its
       Tonawanda, New York facility, which includes the corporate
       headquarters.  The process is completed to the extent that both
       critical and daily processing is active and is Y2K compliant.  

            Of the two manufacturing systems affected, only one (a control
       room) represents a significant concern.  Upgrade of the affected
       technology has been assessed, a specific solution specified, and the
       project approved. Completion of this project is to occur in 1999.  The
       other system is a mix station and is non-critical with respect to
       compliance.  This equipment is not required until December 2000.  An
       assessment and action plan has been developed but will not be
       implemented until first Quarter, 2000.  

            Secondary systems have been evaluated and are either currently in
       compliance or are expected to be in compliance by March 31, 1999.

            The Company has queried its significant suppliers that do not
       share information systems with the Company (external agents).  To
       date, the Company is not aware of any external agent with a Year 2000
       issue that would materially impact the Company's results of
       operations, liquidity, or capital resources.  However, the Company has
       no means of ensuring that external agents will be Year 2000 ready. 
       The inability of external agents to complete their Year 2000
       resolution process in a timely fashion could materially impact the
       Company.  The effect of non-compliance by external agents is not
       determinable. 

            The Company has, and will continue to utilize both internal and
       external resources to replace, test, and implement the software and
       certain hardware for Year 2000 modifications.  The total cost of the
       Year 2000 project is estimated at $1,935,000, which includes $723,000
       for the purchase of new software and hardware that will be
       capitalized, $985,000 for the control room, and $227,000 that will be
       expensed and incurred.  To date, the Company has incurred
       approximately $900,000 related to all phases of the Year 2000 project.

            Management of the Company believes that it has an effective
       program in place to resolve the Year 2000 issue in a timely manner. 
       As noted above, the Company has not yet completed all necessary phases
       of the Year 2000 program.  In the event that the Company does not
       complete any additional phases, the Company reasonably expects it
       would be able to take customer orders, manufacture and ship products,
       invoice customers, and collect payments.  In addition, disruptions in
       the economy generally resulting from Year 2000 issues could also
       materially adversely affect the Company.  The amount of potential
       liability and lost revenue cannot be reasonably estimated at this
       time.

            The Company currently is developing contingency plans in place in
       the event it, its customers, or vendors, do not complete all phases of
       the Year 2000 program.  Currently the plan has addressed staffing, to
       ensure availability of technical, support, and managerial staff into
       January 2000.

       Item 7A. Quantitative and Qualitative Disclosures About Market Risk

            The Company is exposed to various market risks, including changes
       in foreign currency exchange rates and interest rates.  Market risk is
       the potential loss arising from adverse changes in market rates and
       prices, such as foreign currency exchange and interest rates.  The
       Company does not enter into derivatives or other financial instruments
       for trading or speculative purposes.  The Company has entered into
       financial instruments to manage and reduce the impact of changes in
       interest rates.

            A portion of the Company's operations consists of manufacturing
       and sales activities in foreign jurisdictions, principally Canada and
       Norway.  As a result, the Company's financial results could be
       significantly affected by factors such as changes in foreign currency
       exchange rates or weak economic conditions in the foreign markets in
       which the Company distributes its products.  The Company's operating
       results are exposed to changes in exchange rates between U.S. dollar
       and the Canadian dollar and between the U.S. dollar and the Norwegian
       Kroner.  Had the U.S. dollar been 10% stronger relative to the
       Canadian dollar and the Norwegian Kroner during 1998, net income would
       have been lower by $1.2 million.

            The Company has various long-term indebtedness outstanding at
       December 31, 1998.  The interest impact of an increase in interest
       rates of 100 basis points (1%) would be as follows (in thousands):


            Instrument             Interest Rate      Impact on Earnings
            ----------             -------------      ------------------
            Revolving credit and   LIBOR plus 250     $      (76)
             term loan agreement    points or
                                    Prime plus 25
                                    points

            Village of Hennepin,   Fixed                       -
             Illinois Industrial                            -------
             Revenue Bonds

            Upper Illinois River   Variable (a)                -
             Valley Development
             Authority Industrial
             Revenue Bonds

            Net income reduction                             (76)
             before tax

            Less tax benefit                                  29
                                                            -------

            Net income reduction                      $      (47)

       (a)  The Company has entered into interest rate swap agreements to
            manage its interest rate market risk exposure with respect to
            this financial instrument.  Under the swap agreement, the Company
            has effectively fixed the interest rate on the related
            obligations at a weighted average of 4.85% and either pays to, or
            receives from a counter-party an amount equal to the difference
            between the fixed rate and the current  variable rate.  The
            weighted average variable rate at December 31, 1998 was 4.55%. 
            The interest rate swap agreements mature in December 2001.

       Item 8.   Financial Statements and Supplementary Data

            The Consolidated Financial Statements, together with the report
       thereon of Ernst & Young LLP dated January 16, 1999, appear on pages
       14 through 36 to follow.


                           Report of Independent Auditors



       Board of Directors
       Exolon-ESK Company

       We have audited the accompanying consolidated balance sheets of
       Exolon-ESK Company and subsidiaries as of December 31, 1998 and 1997,
       and the related consolidated statements of operations, stockholders'
       equity, and cash flows for each of the three years in the period ended
       December 31, 1998.  Our audits also included the financial statement
       schedule listed in the Index at Item 14(a).  These financial
       statements and schedule are the responsibility of the Company's
       management.  Our responsibility is to express an opinion on these
       financial statements and schedule based on our audits. 

       We conducted our audits in accordance with generally accepted auditing
       standards.  Those standards 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.  An audit also includes assessing the accounting
       principles used and significant estimates made by management, as well
       as evaluating the overall financial statement presentation.  We
       believe that our audits provide a reasonable basis for our opinion.

       In our opinion, the financial statements referred to above present
       fairly, in all material respects, the consolidated financial position
       of Exolon-ESK Company and subsidiaries 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.  Also, in our opinion,
       the related financial statement schedule, when considered in relation
       to the basic financial statements taken as a whole, presents fairly in
       all material respects the information set  forth therein.




                                                         S/ Ernst & Young LLP

       Buffalo, New York
       January 16, 1999 




                         Exolon-ESK Company and Subsidiaries
                        Consolidated Statements of Operations
                      (In thousands, except per share amounts)



                                                    Year Ended December 31,
                                                  1998       1997      1996  

       Net Sales                             $   65,578 $   78,096 $  77,459
       Cost of Goods Sold                        54,617     60,810    59,620
                                                 ---------------------------
       Gross Profit Before Depreciation          10,961     17,286    17,839
       Depreciation                               3,252      2,734     2,826
       Selling, General & Administrative          5,479      5,148     5,621
        Expenses
       Research and Development                     106         49        34
                                                  --------------------------   
       Operating Income                           2,124      9,355     9,358

       Other Income (Expense):
           Interest Expense                      (1,179)      (938)   (1,136)
           Equity in Income of Norwegian            385        437       673
            Joint Venture
           Abandoned Acquistion Costs              (408)         -         -
           Other                                   (470)      (168)      330
                                                  --------------------------
       Income before Income Taxes                   452      8,686     9,225
       Income Tax Expense                           430      3,432     3,145
                                                  -------------------------- 
       Net Income                            $       22 $    5,254 $   6,080
                                                  ==========================
       Basic (Loss) Income Per Share:
           Per Common Share                  $   (0.02) $     5.41 $    6.27 
                                                  ==========================
           Per Class A Common Share          $   (0.02) $     5.08 $    5.90 
                                                  ==========================
       Diluted (Loss) Income Per Share:
           Per Common Share                  $   (0.02) $     5.21 $    6.03 
                                                  ==========================
           Per Class A Common                $   (0.02) $     4.91 $    5.69 
                                                  ==========================

       See accompanying notes to the consolidated financial statements.


                       Exolon-ESK Company and Subsidiaries
                           Consolidated Balance Sheets
                       (In thousands, except share amounts)

                                                           December 31,       
       Assets                                            1998        1997  
       Current assets:

         Cash                                      $    5,289  $    2,503
         Accounts receivable (less allowance for
          doubtful accounts of $249 in 1998 and 
          $350 in 1997)                                 7,325       9,582
         Income taxes recoverable                       1,124           -
         Inventories                                   20,219      16,636
         Prepaid expenses                                  96         183
         Deferred income taxes                            541         356
                                                       ------------------
       Total Current Assets                            34,594      29,260
       Investment in Norwegian joint venture            5,594       5,505
       Property, plant and equipment                   27,078      26,290
       Bond sinking fund                                2,422         885
       Other assets                                     1,598       1,337
                                                       ------------------ 
       Total Assets                                $   71,286  $   63,277
                                                       ==================
       Liabilities and Stockholders' Equity

       Current liabilities:
         Note payable                              $      503    $      -
         Current maturities of long-term debt and
          sinking fund requirements                       967       1,367
         Accounts payable                               3,113       2,661
         Accrued expenses                               2,145       1,858
         Income taxes payable                               -         196
                                                        -----------------
       Total Current Liabilities                        6,728       6,082
       Deferred income taxes                            1,979       1,834
       Long-term debt                                  27,643      20,033
       Other long-term liabilities                      2,360       2,539
                                                       ------------------
       Total liabilities                               38,710      30,488
                                                       ------------------
       Commitments and Contingencies
       Stockholders' equity:

         Preferred stock
           Series A (liquidation preference - $484)       276         276
           Series B (liquidation preference - $484)       166         166

         Common stock, issued 512,897,
          outstanding 481,995 ($1 par value)              513         513
         Class A common stock, issued 512,897 
          ($1 par value)                                  513         513
         Additional paid-in capital                     4,345       4,345
         Retained earnings                             28,188      28,209
         Accumulated other comprehensive income        (1,057)       (865)
         Treasury stock, at cost                         (368)       (368)
                                                       ------------------ 
       Total Stockholders' Equity                      32,576      32,789
                                                       ------------------
       Total Liabilities and Stockholders' Equity  $   71,286  $   63,277
                                                       ==================
       See accompanying notes to the consolidated financial statements.

                       Exolon-ESK Company and Subsidiaries
                      Consolidated Statements of Cash Flows
                                  (In thousands)

                                                   Year Ended December 31,
       Cash Flow from Operating Activities:          1998    1997    1996

         Net income                               $    22  $5,254  $6,080

         Adjustments to reconcile net income to
          cash provided by operating activities:

             Depreciation                           3,252   2,734   2,826
             Equity in income of Norwegian joint 
              venture                                (385)   (437)   (673)
            (Gain) loss on fixed asset disposals        -     (23)     29
             Deferred income taxes                    (40)     47      26
             Foreign currency adjustments               -      10       4
         Change in Assets and Liabilities:
             Accounts receivable                    2,257    (521)   (165)
             Income taxes recoverable              (1,124)      -       -
             Inventories                           (3,583)  1,803   1,261
             Prepaid expenses                          87     343    (167)
             Other assets                            (261)    (37)    (98)
             Cash overdraft                             -  (1,413)  1,413
             Accounts payable                         452    (562)     (6)
             Accrued expenses                         287      78      67
             Income taxes payable                    (196)   (270)   (863)
             Other liabilities and accrued      
              postretirement benefit costs           (179)      1    (748)
             Other                                     34       -       -
                                                    ---------------------
       Net Cash Provided by Operating Activities      623   7,007   8,986
                                                    ---------------------
       Cash Flow from Investing Activities:
             Capital expenditures                  (4,040) (10,617)(6,170)
             Proceeds from (purchases of)             
              restricted cash equivalents               -   7,996  (7,996)
             Proceeds from fixed asset disposals        -       1     123
                                                    ---------------------
       Net Cash Used for Investing Activities      (4,040) (2,620)(14,043)
                                                    ---------------------
       Cash Flow from Financing Activities:
         Payments to bond sinking fund             (1,467)   (867)      -
         Net (payments of) proceeds from         
          long-term debt                            7,210    (700) (7,800)
         Proceeds from issuance of long-term debt       -       -  13,000
         Deferred financing fees                        -    (329)   (494)
         Net proceeds from (payments of) notes      
          payable                                     503    (219)    219
         Dividends paid                               (43)    (44)    (33)
                                                    ---------------------
       Net Cash Provided by (Used for) Financing  
         Activities                                 6,203  (2,159)  4,892
                                                    ---------------------
       Net (Decrease) Increase in Cash              2,786   2,228    (165)
       Cash at Beginning of Year                    2,503     275     440
                                                    --------------------- 
       Cash at End of Year                        $ 5,289  $2,503  $  275
                                                    ===================== 
       Supplemental Disclosures of Cash Flow Information:
       Cash paid during the year for:

         Interest                                  $1,399  $1,261  $1,171
         Income Taxes                              $1,789  $3,710  $3,983

       See accompanying notes to the consolidated financial statements.

                         Exolon-ESK Company and Subsidiaries
                   Consolidated Statements of Stockholders' Equity
                         (In thousands, except share amount)

                      Series           Addi-          
                        A/B            tional            Other  
                       Pref.   Common  Paid-in  Retained Comp.   Treas.  
                       Stock   Stock   Capital  Earnings Income  Stock  Total
                       -----   -----   -------  -------  ------  -----  -----
   Balance -
      Jan. 1, 1996   $    442 $ 1,026 $  4,345  $16,952  $ (99) $ (368) $22,298
     Net income             -       -        -    6,080      -       -    6,080
     Foreign currency
      translation adj.      -       -        -        -    (87)      -      (87)
                                                                          -----
     Comprehensive
      income                -       -        -        -      -       -    5,993
     Preferred stock                                                      -----
      dividends -          
      $0.8438/share         -       -        -      (33)     -       -      (33)
                       --------------------------------------------------------
     Balance - 
       Dec. 31, 1996      442   1,026    4,345   22,999   (186)   (368)  28,258
     Net income             -       -        -    5,254      -       -    5,254
     Foreign currency
      transation adj.       -       -        -        -   (679)      -     (679)
                                                                          -----
     Comprehensive
      income                -       -        -        -      -       -    4,575
                                                                          -----
     Preferred
      stock dividends
      $1.125/share          -       -        -      (44)     -       -      (44)
                       --------------------------------------------------------
     Balance -
      Dec. 31, 1997       442   1,026    4,345   28,209   (865)   (368)  32,789
     Net income             -       -        -       22      -       -       22
     Foreign currency
      transation adj.       -       -        -        -   (192)      -     (192)
                                                                         ------
     Comprehensive loss     -       -        -        -      -       -     (170)
                                                                         ------
     Preferred stock
      dividends - 
      $1.125/share          -       -        -      (43)     -       -      (43)
                       --------------------------------------------------------
     Balance -
      December 31, 1998  $442  $1,026   $4,345  $28,188 $(1,057) $(368) $32,576
                       ======================================================== 
       See accompanying notes to the consolidated financial statements.



                         EXOLON-ESK COMPANY AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 1998, 1997 and 1996


       1.   Summary of Significant Accounting Policies

            a.   Revenue recognition

            The Company recognizes revenue at the time of shipment to the
       customer.  Provision is made for anticipated losses at the time the
       loss is known.

            b.   Principles of consolidation

            The accompanying consolidated financial statements include the
       accounts of the Exolon-ESK Company and its wholly-owned subsidiaries
       Exolon-ESK Company of Canada, Ltd., Norsk Exolon AS, and Exolon-ESK
       International Sales Corporation (the "Company").  All significant
       intercompany balances and transactions have been eliminated.

            c.   Investment in Norwegian joint venture

            The Company's wholly-owned subsidiary, Norsk Exolon AS is a
       limited partner in a Norwegian partnership, Orkla Exolon KS (the
       "Partnership"), which is engaged in the manufacture and sale of
       silicon carbide crude and grain products.  Norsk Exolon AS has a 50%
       interest in the Partnership, with another Norwegian company, Orkla AS,
       owning the balance.  The furnace plant, processing plant and other
       facilities of the Partnership were constructed in the early 1960's
       under the guidance and technical direction of the Company.  The
       partnership began manufacturing operations during 1963.  The
       investment is stated at cost plus the Company's share of undistributed
       earnings and translation adjustments since acquisition.  The earnings
       of the joint venture are reportable for Norwegian tax purposes by the
       partners.  Taxes attributable to Norsk Exolon AS's share of earnings
       from the joint venture are included as a component of income taxes
       (Note 8).

            d.   Inventories

            Inventories are stated at the lower of cost or market. 
       Approximately 65% of the dollar value of inventories is stated at
       last-in, first-out (LIFO) cost at December 31, 1998 and 1997, with the
       balance being stated at average cost.

            e.   Property, plant and equipment

            Property, plant and equipment is stated at cost.  Maintenance and
       repairs are charged to expense as incurred and renewals and
       betterments are capitalized.  Depreciation is computed for financial
       reporting purposes using straight-line and declining balance methods
       over the estimated useful lives of the assets as follows: buildings,
       15-50 years; machinery and equipment, 3-20 years.

            f.   Deferred financing fees

            Deferred financing fees are being amortized on a straight-line
       basis over the life of the related debt.

            g.   Foreign currency translation

            The Company has determined that the United States dollar is the
       functional currency of the Canadian subsidiary and that the Norwegian
       krone is the functional currency of the Norwegian subsidiary and the
       joint venture.

            Inventories and property, plant and equipment of the Canadian
       subsidiary are translated at historical exchange rates and all other
       assets and liabilities are translated at year-end exchange rates. 
       Income statements of the Canadian subsidiary are translated at average
       rates for the year, except for depreciation, which is translated at
       historical rates.  Gains and losses arising as a result of the
       translation of the financial statements of the Canadian subsidiary are
       reflected directly in the results of operations.

            Assets and liabilities of the Norwegian subsidiary and joint
       venture are translated at year-end exchange rates and the income
       statements are translated at the average exchange rates for the year. 
       Resulting translation adjustments are recorded as a separate component
       of equity.

            Net gains (losses) arising as a result of the remeasurement of
       the Canadian subsidiary's financial statements into the United States
       dollar and from other foreign currency transactions amounted to
       ($662,000), ($317,000), and $42,000 in 1998, 1997, and 1996,
       respectively.

            h.   Income taxes

            Deferred income taxes are determined based on differences between
       financial reporting and tax bases of assets and liabilities as
       measured using the enacted tax rates and laws that will be in effect
       when the differences are expected to reverse.

            The Company does not provide U.S. Federal income taxes on the
       entire balance of the undistributed earnings of foreign subsidiaries
       as these earnings are considered to be permanently reinvested.  In
       1995, the Company decided to repatriate up to $3,100,000 of
       undistributed earnings from its Canadian subsidiary through a future
       stock redemption and has provided for all applicable income taxes in
       the 1995 statement of operations.  At December 31, 1998, undistributed
       earnings of the Canadian and Norwegian foreign subsidiaries combined
       were $12,985,000.

            Investment tax credits are accounted for using the flow-through
       method.

            i.   Currency forward contracts

            From time to time, the Company enters into currency forward
       contracts in management of foreign currency transaction exposure. 
       Forward foreign currency exchange contracts are purchased to reduce
       the impact of foreign currency fluctuations on operating results. 
       Realized and unrealized gains and losses on these contracts are
       recorded in net income currently, with the exception of gains and
       losses on contracts designated to hedge specific foreign currency
       commitments which are deferred and recognized in net income in the
       period of the commitment transaction.  The discount or premium of the
       forward contract is recognized over the life of the contract. 

            j.   Environmental remediation and compliance

            Environmental expenditures that relate to current operations are
       expensed or capitalized as appropriate.  Expenditures that relate to
       an existing condition caused by past operations, and which do not
       contribute to current or future revenue generation, are expensed. 
       Liabilities are recorded when environmental assessments and/or
       remedial efforts are probable, and the cost can be reasonably
       estimated.

            k.   Long-lived assets

            In March 1995, the Financial Accounting Standards Board issued
       Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
       and for Long-Lived Assets to be Disposed Of", which requires
       impairment losses to be recorded on long-lived assets used in
       operations when indicators of impairment are present and the
       undiscounted cash flows estimated to be generated by those assets are
       less than the assets' carrying amount.  Statement No. 121 also
       addresses the  accounting for long-lived assets that are expected to
       be disposed of.  The Company adopted Statement No. 121 in 1996.  The
       effect of this adoption was not material.

       l.   Use of estimates

            The preparation of financial statements in conformity with
       generally accepted accounting principles requires management to make
       estimates and assumptions that affect the amounts reported in the
       financial statements and accompanying notes.  Actual results could
       differ from those estimates.

       2.   Inventories

            If the average cost method, which would approximate current or
       replacement costs, had been used for valuing all inventories of the
       Company, inventories would have been $3,237,000 and $3,351,000 higher
       than reported at December 31, 1998 and 1997, respectively.

            The following are the major classes of inventories as of December
       31 (in thousands):

                                                  1998       1997
                                                  ----       ---- 
               Raw Materials                  $  1,669   $  2,839
               Semi-Finished and Finished      
                Goods                           20,822     16,183
               Supplies and Other                  965        965
                                                ------     ------
                                                23,456     19,987
               Less:  LIFO Reserve              (3,237)    (3,351)
                                                ------     ------
                                              $ 20,219   $ 16,636
                                                ======     ======

       3.   Property, Plant and Equipment

                  Property, plant and equipment consists of (in thousands):

                                                     1998     1997
                                                     ----     ----
                  Land                            $   283  $   283
                  Buildings                         7,903    7,860
                  Machinery & equipment            66,352   49,614
                  Construction in progress            729   13,605
                                                   ------   ------
                                                   75,267   71,362
                                                   ------   ------
                  Less - accumulated               48,189   45,072
                   depreciation                    ------   ------

                                                  $27,078  $26,290
                                                  =======  =======
            During 1998 and 1997, the Company capitalized interest costs
       totaling $262,000 and $346,000, respectively.

       4.   Business Segment Information

            The Company manufactures abrasive materials and products for
       abrasive, metallurgical and refractory uses. The Company regards its
       principal business as being in a single industry segment.  The Company
       conducts operations through its manufacturing facilities in the United
       States and Canada, and its equity interest in a Norwegian joint
       venture.

            No one customer accounted for 10% or more of net sales in 1998 or
       1997. 

       5.   Investment in Norwegian Joint Venture

            The Company's 50% share of the results of operations of the
       Norwegian joint venture has been determined after adjustments to
       reflect the application of United States generally accepted accounting
       principles relating principally to the recording of depreciation and
       pension expenses and adjustments to the carrying values of the
       ventures's year-end inventories.  The Company's share of the venture's
       assets, liabilities, and results of operations is set forth in the
       following condensed financial information (in thousands):


                                                             December 31,
          Balance Sheet Data                                  1998    1997

            Current assets                                  $4,521  $4,563
            Non-current assets                               3,095   2,599
            Current liabilities                              1,503   1,332
            Non-current liabilities                            207     246


          Statement of Operations                      1998   1997    1996

            Net sales                                $7,498 $8,037  $8,195
            Gross profit                              1,483  1,551   1,709
            Income before income taxes                  385    437     673

            The Company does not provide U.S. Federal income taxes on the
       undistributed earnings of the Norwegian joint venture as these
       earnings are permanently reinvested.  At December 31, 1998 and 1997,
       undistributed earnings of the joint venture were $5,334,000 and
       $5,044,000, respectively.

       6.   Notes Payable

            The Company's Canadian subsidiary has a $1,000,000 (Canadian
       funds) operating demand loan available as part of a credit facility
       provided by a Canadian bank.   The demand loan had a balance of
       $503,000 (US funds), $0 and $219,000 (US Funds) as of December 31,
       1998, 1997 and 1996, respectively. 

            The Canadian agreement requires the subsidiary to maintain
       specified financial ratios and minimum net worth levels.  The
       maintenance of financial covenants may preclude the Canadian
       subsidiary's transfer of funds, by dividend or otherwise, to the U.S.
       parent company.  All borrowings under the Canadian agreement are
       guaranteed by the Company and the Canadian bank has a security
       interest in the Canadian accounts receivable, inventory and machinery
       and equipment.  Interest on the borrowings is based upon the Canadian
       prime rate.

       7.   Long-Term Debt


            Long-term debt consists of (in thousands):

                                                         1998    1997

            Revolving credit and term loan            $ 7,610  $  400
            agreement with a U.S. Bank.  Interest      
            at prime rate plus 1/4% or LIBOR plus 
            2-1/2% (7-3/4% at December 31, 1998).

            Industrial revenue bond held by an          8,000   8,000
            insurance company.  Interest is at a
            fixed rate of 8.875%.  Bond maturity is
            January 1, 2018.

            Industrial revenue bond.  Interest is      13,000  13,000
            variable (4.90% at December 31, 1998). 
            The bonds are payable annually through
            December 1, 2021.
                                                      ------- -------
                                                      $28,610 $21,400

            Less - current maturities                     967   1,367
                                                      ------- -------
                                                      $27,643 $20,033
                                                      ======= =======

       U.S. Credit Agreement

            The Company's Credit Agreement dated December 22, 1992 with a
       U.S. bank provides for borrowings up to $10,000,000 under the
       revolving credit facility.

            At December 31, 1998 borrowings of $7,610,000  were outstanding
       under the revolving portion of the Credit Agreement.  The revolving
       portion converts, in whole or any portion, to a term note on January
       2, 2000.  Any principal balance of the revolver which is not converted
       is required to be repaid by the conversion date.  Upon conversion, the
       term loan is payable in sixteen quarterly principal installments as
       follows:  fifteen equal quarterly installments, each equal to the
       lesser of $250,000 or 2.5% of the principal balance of the revolver
       converted on the conversion date beginning April 1, 1999 and
       continuing to October 1, 2002 and one final payment on January 1, 2003
       in an amount equal to the remaining balance of the term note.  The
       Company must pay a commitment fee equal to 0.15% per annum on the
       unused portion of the revolving credit facility.

            Borrowings under the Credit Agreement bear interest at either a
       defined base rate, contingent upon the bank's prime lending rate, or a
       rate based on the London Interbank Offered Rate (LIBOR).  The Company
       has the option to convert the interest rate on all or a portion of the
       principal of its borrowings from the base rate to the rate based on
       LIBOR.  Interest is payable monthly.

            The U.S. Credit Agreement requires the Company to maintain
       certain financial covenants.  In addition, the agreement sets forth
       limits on capital expenditures and dividends and contains certain
       other covenants including restriction on mergers, consolidations and
       sales of assets.  The Company is precluded from paying or declaring
       any dividends or other distributions on its Common Stock without
       written consent from its U.S. bank.  The Company may declare Preferred
       Stock dividends not to exceed $100,000 in the aggregate in any fiscal
       year.

            As collateral for the U.S. Credit Agreement, the bank has
       security interest in all U.S. accounts receivable and inventory as
       well as certain additional assets of the Tonawanda, New York facility.

       Industrial Revenue Bonds

            The Company is liable for making payments with respect to
       $8,000,000 of Industrial Revenue Bonds issued by the Village of
       Hennepin, Illinois and purchased by an insurance company.  The bonds
       bear interest, payable to a bank as trustee at a fixed rate of 8.875%. 
       Amortization of principal commences in January, 1999 until maturity in
       the year 2018.  The bond agreement contains certain restrictive
       covenants which are consistent with the covenants contained in the
       U.S. Credit Agreement.

            The Company is also liable for making payments with respect to
       $13,000,000 of Industrial Revenue Bonds issued by the Upper Illinois
       River Valley Development Authority for the construction of a
       desulfurization plant at the Company's Hennepin, Illinois facility. 
       Bonds totaling $8,405,000 are tax-enhanced and mature December 1,
       2021.  The remaining bonds mature December 1, 2011.  The bonds bear
       interest, which is payable periodically, in arrears, to a bank as
       trustee, at a variable rate determined by market rates for similar
       instruments at the time of adjustment.  The bond agreement contains
       certain restrictive covenants which are consistent with the covenants
       contained in the U.S. Credit Agreement.

            In support of the $13,000,000 bond issue, the Company obtained a
       $13,000,000 letter of credit from its principal U.S. bank for the
       benefit of the trustee of the bonds.  A letter of credit fee equal to
       0.75% per annum is payable to the bank periodically, in arrears.  The
       letter of credit expires in December, 2001 and is renewable annually
       thereafter.  The letter of credit agreement requires the Company to
       make voluntary quarterly contributions to a sinking fund in an amount
       which would be sufficient to provide for the redemption of all of the
       bonds within 15 years.  The letter of credit agreement also requires
       the Company to contribute to the sinking fund, an amount equal to the
       Company's excess cash flow, up to a maximum of $4,333,333 in the
       aggregate.  At December 31, 1998, the Company was not required to
       include an amount under this provision.  At December 31, 1997, the
       amount required under this provision was $500,000 and has been
       included in current maturities of long-term debt.

            The bond sinking fund had a balance of $2,422,000 and $885,000 at
       December 31, 1998 and 1997, respectively.  The sinking fund monies are
       invested in certificates of deposit with the bond trustee.

            Aggregate annual maturities of long-term debt and scheduled
       sinking fund requirements are as follows: 


                                 1999        $967,000   
                                 2000      $1,537,000
                                 2001      $1,728,000
                                 2002      $1,728,000
                                 2003      $6,484,000

                               Thereafter $13,833,000


       8.   Income Taxes

            The components of income before income taxes are as follows (in
       thousands):

                                           1998       1997       1996
                                          ---------------------------
                    Domestic              $ 250    $ 5,142    $ 5,711
                    Foreign                 202      3,544      3,514
                                          --------------------------- 
                         Total             $452     $8,686     $9,225
                                          ===========================
            The components of income tax expense are as follows (in
       thousands):

                                          1998       1997       1996
                                          --------------------------
               Current provision
                (benefit):
                 United States
                    Federal              $ 171    $ 1,540    $ 1,850
                    State                   16        339        271
                 Foreign                   281      1,506        995
                                          --------------------------
                         Total           $ 468    $ 3,385    $ 3,116
                                          --------------------------
              Current
                Deferred provision
                (benefit):
                 United States
                    Federal              $ (84)  $     13   $    (45)
                    State                   (9)         7          6

                 Foreign                    55         27         68
                                         ---------------------------
                    Total Deferred      $  (38)  $     47   $     29
                                         ---------------------------
                             Total      $  430   $  3,432   $  3,145
                                         ===========================

            The actual tax expense differs from the expected tax expense
       computed by applying the U.S. Federal corporate tax rate of 34% to
       earnings before income taxes as follows (in thousands):

                                                  1998    1997   1996
                                                  -------------------
       Computed expected tax expense            $  154  $2,954 $3,137
       Effect of differing tax rates
         applicable to foreign
         subsidiary income                        (14)   (317)  (407)
       Effect of permanent differences              9      15     47
       State and Provincial taxes, net of         127     797    486
        Federal benefit
       Effect of foreign currency                 146      70     (9)
        remeasurement
       Other                                        8     (87)  (109)
                                                  -------------------
       Total income tax expense                $  430  $3,432 $3,145
                                                  ===================
       Effective tax rate                        95.1%   39.5%  34.1%

            Deferred income tax liabilities and assets include the following
       (in thousands):


                                                 1998     1997  
                                                 ------------- 
              Deferred tax liabilities:
                 Excess tax depreciation       $ 1,804   $1,732
                Taxes on foreign earnings
                 expected to be repatriated        571      571
                Pension and payroll accruals       191      210
                 Other                              50       51
                                                 -----    -----
              Gross deferred tax liabilities     2,616    2,564
                                                 -----    -----             

              Deferred tax assets:

                 Inventory accounting methods      (24)     (29)
                 Accounts receivable and other     (76)    (112)
                  asset reserves
                 Post retirement accrual          (935)    (945)
                 Other, net                       (143)       -
                                                 -----     ----
              Gross deferred tax assets         (1,178)  (1,086)
                                                 -----    -----
              Net deferred tax liability at    $ 1,438   $1,478
                end of year                      =====    =====


       9.   Capital Stock

            The Company has two classes of Common Stock.  At December 31,
       1998 there were 600,000 shares of $1 par value Common Stock
       authorized, of which 512,897 shares were issued and 481,995 shares
       were outstanding.  At the same date there were 600,000 shares of $1
       par value Class A Common Stock, of which 512,897 shares were issued
       and outstanding.

            Additionally, there were 100,000 shares of no par value Preferred
       Stock authorized.  At December 31, 1998 there were 19,364 shares of
       Series A and 19,364 shares of Series B Preferred Stock outstanding.

            At December 31, 1998, the shares of Series A and Series B
       Preferred Stock are entitled to receive, when declared by the Board of
       Directors, cumulative annual cash dividends at the rate of $1.125 per
       share.  The Series A and Series B Preferred Stock have a preference
       upon liquidation of $25.00 each per share.  Each share of Series A and
       Series B Preferred Stock is convertible into 1.125 shares of Common
       Stock and Class A Common Stock, respectively.  The shares of Common
       Stock, voting with the shares of the Series A Preferred Stock, have
       the right to elect one-half of the members of the Board of Directors
       and the shares of Class A Common Stock voting with the Series B
       Preferred Stock, owned by Wacker Chemical (USA), Inc. ("Wacker USA"),
       have the right to elect the remaining one-half of the members of the
       Board of Directors.

       10.  Pension and Other Retirement Benefits

            The Company sponsors contributory and non-contributory pension
       plans in the United States and Canada covering substantially all
       hourly and salaried employees with the exception of union employees at
       the Company's Hennepin plant, who are covered by a union-sponsored
       pension plan.  The Company's U.S. defined contribution plan, which
       covers all of its domestic salaried employees, and its Canadian
       defined contribution plan covering substantially all Canadian
       employees, provide for the Company to make regular contributions based
       on salaries of eligible employees.  Payments upon retirement or
       termination of employment are based on vested amounts credited to
       individual accounts.  Contributions to the U.S. defined contribution
       plan totaled $204,000 in 1998, $200,000 in 1997, and $176,000 in 1996. 
       Contributions to the Canadian defined contribution plan were $62,000
       in 1998, $56,000 in 1997, and $78,000 in 1996.  The Company also
       provides a defined benefit plan for hourly employees at the Tonawanda
       plant.  Benefits are based primarily on years of service.  The
       Company's policy for this plan is to contribute annually at least the
       minimum amount required by the Employee Retirement Income Security Act
       of 1974, as amended.

            The Company also participates in a collectively bargained, union-
       sponsored multiemployer pension plan which benefits employees of the
       Company's Hennepin, Illinois facility who are union members.  Company
       contributions to this plan were $180,000, $180,000 and $139,000 for
       1998, 1997 and 1996, respectively.  This plan is not administered by
       the Company.  Contributions are determined in accordance with the
       provisions of the negotiated labor contract.

            Total pension expense for all plans amounted to $400,000,
       $454,000, and $393,000  in 1998, 1997 and 1996, respectively.

            The following tables summarize certain information with respect
       to the Company's Tonawanda hourly employees defined benefit plan:
                                                              
                                                    December 31,

        Change in Benefit Obligation              1998        1997
        ----------------------------------------------------------
          Benefit obligation at beginning       $1,658      $1,540
            of year
          Service cost                              60          59
          Interest cost                            132         123
          Plan amendments                          259           -
          Actuarial loss                           309          36
          Benefits paid                          (256)       (100)
                                                 -----       -----
          Benefit obligation at end of year      2,162       1,658
                                                 -----       -----
        Change in Plan Assets

          Fair value of plan assets at           3,082       2,421
            beginning of year
          Actual return on plan assets             673         761
          Benefits paid                          (256)       (100)
                                                 -----       -----
          Fair value of plan assets at end       3,499       3,082
           of year                               -----       -----
          Funded status                          1,337       1,424
          Unrecognized net loss at
           transition, being amortized
           over approximately 17 years              86         103
          Unrecognized prior service cost          385         138
          Unrecognized actuarial gains         (1,254)     (1,155)
                                               -------     -------
          Prepaid pension cost                    $554        $510
                                               =======     =======
                      
        Components of Net Periodic Pension Cost   1998        1997       1996
        ---------------------------------------------------------------------
           Service cost                            $60         $59        $57
           Interest cost                           132         123        118
           Expected return on plan assets        (215)       (169)      (146)
           Amortization of transition               17          17         17
            obligation
           Amortization of prior service            12          12         12
            cost 
           Recognized net actuarial gains         (49)        (24)       (15)
                                                  ----        ----       ----
           Net periodic pension expense          $(43)         $18        $43
                                                  ====        ====       ==== 
          Weighted Average Assumptions as of December 31

           Discount rate                            8%          8%         8%
           Expected return on plan assets           7%          7%         7%

       Unrecognized gains and prior service costs are amortized on a straight-
       line  basis over a period  approximating the average remaining  service
       period for active employees.

            In  addition to providing  pension benefits, the Company  provides
       certain  health care  and life insurance  benefits to eligible  retired
       employees and their spouses.  Participants generally become eligible for
       these  benefits  after  achieving certain  age  and  years  of  service
       requirements.   For  certain retirees,  these benefits  are subject  to
       deductibles, co-payment provisions and other limitations.   The Company
       may amend or change the plan  periodically.  The Company's policy is to
       fund these benefits on a pay-as-you-go basis.

            The following tables summarize certain information with respect to
       the Company's postretirement  benefit plans:

                                                       December 31,
                                                     1998       1997
                                                     ---------------
            Change in Benefit Obligation
              Benefit obligation at beginning       
               of year                             $2,551     $2,728
              Service cost                             26         33
              Interest cost                           194        210
              Actuarial gain                         (72)       (99)
              Benefits paid                         (210)      (274)
              Effect of changes in foreign
               currency exchange rates               (68)       (47)
                                                     ----       ----
              Benefit obligation at end of          2,421      2,551
              Unrecognized prior service cost        (21)       (24)
              Unrecognized actuarial gains            111         23
                                                     ----       ----
              Accrued postretirement benefit       $2,511     $2,550
               obligation                           =====      =====
                                                                           
            Components of Net Periodic          
            Post Retirement Benefit Cost             1998       1997      1996
            ------------------------------------------------------------------  
              Service cost                            $26        $33       $20
              Interest cost                           194        210       144
              Amortization of prior service cost        2          2         -
              Recognized net actuarial losses (gains)   7         20       (50)
              Net periodic postretirement             ---        ---       ---
               benefit cost                          $229       $265      $114
                                                     ====       ====      ====
            Weighted Average Assumptions as of December 31
            Discount Rate                              8%         8%         8%

            Unrecognized gains and losses and prior service costs are amortized
       on  a  straight-line  basis over  a  period approximating  the  average<PAGE>
       remaining service period for active employees.

            For measuring the postretirement benefit obligation as of
       December 31, 1998 an 8% annual rate of increase in health care rates
       was assumed, decreasing to 6% per year in 2002 and thereafter.  It was
       also assumed that reimbursable expenses for post-1990 U.S. retirees
       would be at least equal to the dollar reimbursement limitation.  

            Assumed health care cost trend rates have a significant effect on
       the amounts reported for the health care plans.  A one percentage
       point change in assumed health care cost trend rates would have the
       following effect:

                                                                     
                                                     One              One
                                                  Percentage       Percentage
                                                    Point            Point
                                                  Increase          Decrease
             Effect on total of service
              and interest cost components            $15             ($13)

             Effect on postretirement
              benefit obligation                      116             (121)

            11.  Related Party Transactions

                 The Company purchased combined totals of $2,854,000,
       $3,130,000 and $3,740,000 of products from  its affiliates,
       Elektroschmelzwerk Kempten GmbH, and its Norwegian joint venture
       during 1998, 1997 and 1996, respectively.

                 The Company has a royalty agreement with an affiliate of a
       shareholder of the Company as described in Note 12(b).

            12.  Commitments

                 a.   Lease agreements

                 The Company leases certain machinery and equipment under
       operating leases.  Amounts charged to expense for the years ended
       December 31, 1998, 1997 and 1996 were $295,000, $366,000 and $428,000,
       respectively.  Total minimum lease payments, at December 31, 1998,
       under operating leases are summarized as follows (in thousands):

                                       1999       $90,000

                                       2000        22,000
                                                  -------
                                                 $112,000


                 b.   Royalty agreements

                 The Company was party to a royalty agreement which expired
       in 1996 and covered production of crude aluminum oxide at its Thorold,
       Ontario plant using process technology acquired as part of the
       construction and completion of a new furnace plant.  The Company was
       also party to a separate Royalty Agreement which covered production of
       specialty product for the refractory market, and expires April 30,
       2001.  Royalty expense in U.S. dollars amounted $73,000, $0, and
       $419,000 in years ended December 31, 1998, 1997 and 1996,
       respectively. The Royalty Agreement was terminated and all causes of
       action related to it were terminated in March 1999 for $500,000 Cdn.


            13.  Contingencies

                 a.   Environmental issues

                      (i)  Hennepin, Illinois Plant

                      On October 6, 1994, the Company entered into a Consent
                      Order (the  Consent Order ) with the Illinois Attorney
                      General and the Illinois Environmental Protection
                      Agency ( IEPA ) in complete settlement of a complaint
                      brought by them which alleged that the Company had
                      violated certain air quality requirements in the
                      operating permit for its Hennepin, Illinois plant.  The
                      Consent Order provides a schedule for the Company to
                      install a Continuous Emissions Monitoring System
                      ( CEMS ) and to implement the required Best Available
                      Control Technology ( BACT ) for air emissions, pursuant
                      to an IEPA approved construction and operating permit. 
                      The Company obtained final approval for a construction
                      permit to implement the BACT during 1996.

                      During 1998, the Company completed installation of the
                      CEMS and implementation of the BACT as required by the
                      Consent Order.  The Company incurred capital costs of
                      $13,517,000 in connection with the project.  The cost
                      of these required capital improvements was financed
                      principally with the $13,000,000 of proceeds from long-
                      term bonds, a portion of which are tax-exempt, issued
                      by the Upper Illinois River Valley Development
                      Authority.

                      (ii) Norwegian Joint Venture

                      The Government of Norway held discussions with certain
                      Norwegian industries including the abrasive industry
                      concerning the implementation of reduced gaseous
                      emission standards.  The Company's joint venture is
                      participating in these discussions to help achieve the
                      Norwegian Government's objectives as well as assuring
                      long term economic viability for the joint venture. 

                      The Norwegian State Pollution Control Authority has
                      issued limits regarding dust emissions and Sulfur
                      Dioxide emissions that will apply to all Norwegian
                      silicon carbide producers.  Specific target emission
                      limits have been set, and a compliance timetable
                      ranging from the present until January 1, 2001 has been
                      established.  The costs associated with achieving
                      compliance with these limits are uncertain as a result
                      of various alternatives presently being considered by
                      the Norwegian joint venture.  Management believes the
                      joint venture can meet the sulfur requirements with
                      changes in production techniques and raw material
                      procurement including low sulfur coke.  Based upon
                      current known information the Company estimates the
                      future costs associated with achieving  compliance with
                      these limits would approximate $2 million.   

                 b.   Legal Matters

                      (i) Federal Proceedings and Related Matters

                      On October 18, 1994, a lawsuit was commenced in the
                      U.S. District Court for the Eastern District of
                      Pennsylvania (No. 94-CV-6332) under the title "General
                      Refractories Company v. Washington Mills Electro
                      Minerals Corporation and Exolon-ESK Company."  The suit
                      purports to be a class action seeking treble damages
                      from the defendants for allegedly conspiring with
                      unnamed co-conspirators during the period from January
                      1, 1985 through the date of the complaint to fix,
                      raise, maintain and stabilize the price of artificial
                      abrasive grains and to allocate among themselves their
                      major customers or accounts for purchases of artificial
                      grains.  The plaintiffs allegedly paid more for
                      abrasive grain products than they would have paid in
                      the absence of such anti-trust violations and were
                      allegedly damaged in an amount that they are presently
                      unable to determine. On or about July 17, 1995, a
                      lawsuit captioned  Arden Architectural Specialties,
                      Inc. v. Washington Mills Electro Minerals Corporation
                      and Exolon-ESK Company,  (95-CV-05745(m)), was
                      commenced in the United States District Court for the
                      Western District of New York.  The Arden Architectural
                      Specialties complaint purports to be a class action
                      that is based on the same matters alleged in the
                      General Refractories complaint.  In October 1997, the
                      Norton Company was named an additional defendant in
                      both cases.  The ultimate liability, if any, that could
                      result from these lawsuits cannot presently be
                      determined, although the Company believes that it has
                      meritorious defenses to the allegations, and it intends
                      to vigorously defend against the charges.

                      (ii)  Exolon-ESK Company of Canada, Ltd.

                      An action for damages was brought against Exolon-ESK
                      Company and Exolon-ESK Company of Canada, Ltd. by
                      International Oxide Fusion Inc. of Niagara Falls,
                      Ontario in December, 1996.  This action alleged that
                      the Thorold, Ontario facility was in the possession of
                      technology that was provided in 1990 to Exolon-ESK
                      Company to produce MagChrome and Fused Magnesium Oxide
                      and had refused to pay further royalty payments. 
                      International Oxide Fusion Inc. claimed  damages for
                      loss of royalty payments from the number 4 furnace.  A
                      separate, unrelated lawsuit was commenced by The
                      Exolon-ESK Company of Canada, Ltd. against Theeb, Ltd.
                      and Edward J. Bielawski in August, 1997.  The action
                      arose out of a 1985 contract in connection with a crane
                      and its runway system.   A Settlement and Full Release
                      was reached by the parties in March 1999 for $500,000
                      Cdn. for both of these matters collectively.

                      In June 1993, the Company commenced a civil legal
                      action in Ontario, Canada Court (General Division)
                      against one of its former officers and certain former
                      employees of Exolon-ESK Company of Canada, Ltd.
                      (Exolon-Canada) ( the "Defendants") on various charges
                      related to allegations that they defrauded the Company
                      and Exolon-Canada of money, property and services over
                      many years (the  Perrotto Case ). Summary Judgment was
                      granted on the issue of liability against Paul Perrotto
                      and Michael Perrotto on July 16, 1997 with a Reference
                      (hearing) directed in Toronto on the issue of damages. 
                      The hearing is scheduled for May 1999.  The action
                      remains ongoing against various other Defendants.


            14.  Fair Value Of Financial Instruments

            At December 31, 1998 and 1997, the carrying amount and the fair
       value of the Company's financial instruments were as follows (in
       thousands). Bracketed amounts in the carrying amount column represent
       liabilities for potential cash outflows. Bracketed amounts in the fair
       value column represent estimated cash outflows required to currently
       settle the financial instrument at current market rates.



                                                          December 31,
                                                   1998               1997

                                           Carrying    Fair    Carrying   Fair
                                            Amount    Value     Amount    Value
                                           -------    -----     ------    -----
        Assets:

             Cash                           $5,289    $5,289    $2,503  $2,503
        Liabilities:

             Note Payable                     (503)     (503)        -       -
             Revolving credit and term      (7,610)   (7,610)     (400)   (400)
              loan agreement
             Variable rate industrial      (13,000)  (13,000)  (13,000)(13,000)
              revenue bonds                  
             Fixed rate industrial          (8,000)  (10,793)   (8,000)(10,918)
              revenue bonds                


       The following methods and assumptions were used by the Company in
       estimating the fair values of financial instruments. The carrying
       amount reported in the balance sheet for cash approximates fair value. 
       The fair value of the Company's note payable, revolving credit and
       term loan agreement, and variable rate industrial revenue bonds
       approximate carrying amounts, as the underlying debt instruments are
       comprised of notes that are re-priced on a short-term basis.  The fair
       value of the fixed rate industrial revenue bonds has been estimated
       using the discounted cash flow method.

       During 1998, the Company entered into an interest rate swap agreement
       with a bank to manage its exposure to interest rate movements by
       effectively fixing the interest rates on its variable rate industrial
       revenue bonds ($13,000,000 face amount) through December 17, 2001.   
       The fixed interest payments are at a weighted average 4.85%.  Interest
       rate differentials paid or received under these agreements are
       recognized as adjustments to interest expense in the period paid or
       received.

       15.  Earnings Per Share
            The following table sets forth the computation of basic and
       diluted earnings per share (in thousands except share and per share
       information):

        Numerator:                                     1998     1997     1996
                                                       ----------------------
                         Net income               $      22 $  5,254  $ 6,080

            Preferred stock dividends                  (44)     (44)     (32)
                                                       ----     ----    -----
            Net income available to common        $    (22) $  5,210  $ 6,048
             stockholders                              ====    =====    =====

        Numerator for basic earnings per share:
        
            Common Stockholders (50%)             $    (11)    2,605    3,024

            Class A common stockholders (50%)          (11)    2,605    3,024
                                                       ----    -----    -----
                                                       (22)    5,210    6,048
            Effect of diluted securities -            
              preferred stock dividends                   -       44       32
                                                       ----     ----      ---
        Net income available to common                  
        stockholders after assumed
        conversion of preferred stock             $    (22) $  5,254  $ 6,080
                                                       ====    =====    =====
        Numerator for diluted earnings per
        share:

            Common stockholders (50%)             $    (11) $  2,627  $ 3,040
            Class A common stockholders (50%)          (11)    2,627    3,040
                                                       ----    -----    -----
                                                  $    (22) $  5,254  $ 6,080
                                                       ====    =====    =====
        Denominator:
          Common stock:

            Denominator for basic earnings per
             share - weighted average shares        481,995  481,995  481,995
            Effect of dilutive securities -             
             convertible preferred stock                  -   21,785   21,785
                                                    -------  -------  -------
            Denominator for diluted earnings per
             share - adjusted weighted average 
             shares and assumed conversions         481,995  503,780  503,780
                                                    =======  =======  =======
          Class A common stock:

            Denominator for basic earnings per
             share - weighted averages shares       512,897  512,897  512,897
            Effect of dilutive securities - 
             convertible preferred stock                  -   21,785   21,785
                                                    -------  -------  -------
            Denominator for diluted earnings per
             share - adjusted weighted average       
             shares and assumed conversions         512,897  534,682  534,682   
                                                    =======  =======  =======
        Basic earnings per share:                          
          Common stock                              ($0.02)    $5.41    $6.27
          Class A common stock                      ($0.02)    $5.08    $5.90

        Diluted earnings per share:                        
          Common stock                              ($0.02)    $5.21    $6.03
          Class A common stock                      ($0.02)    $4.91    $5.69

       The effect of the convertible preferred stock was not considered for
       1998 because their effort would have been antidilutive.

       16.  Quarterly Financial Data (unaudited)

            Summarized quarterly financial data for 1998 and 1997 is as
       follows:


                                                       Quarter
      (thousands of dollars except per      First   Second  Third   Fourth
          share amounts)                                                  
      ---------------------------------------------------------------------
          Year Ended December 31, 1998
      --------------------------------
          Net Sales                        $20,351  $17,718 $14,598 $12,911

          Gross Profit Before Depreciation   4,394    3,564   1,941   1,062

          Abandoned Acquisition Costs            -        -   (408)       -
          Net Income (Loss)                  1,197      831   (774)  (1,232)

          Basic Earnings Per Common Share     1.23     0.85  (0.83)   (1.27)
          Basic Earnings  Per Class A Common  1.16     0.80  (0.78)   (1.20)
           Share

          ----------------------------
          Year Ended December 31, 1997
          ----------------------------
          Net Sales                        $20,193  $20,034 $19,166 $18,703

          Gross Profit Before Depreciation   4,583    4,889   4,549   3,265
          Net Income (Loss)                  1,348    1,492   1,378   1,036

          Basic Earnings Per Common Share     1.39     1.54    1.42    1.06  

          Basic Earnings  Per Class A Common  1.30     1.45    1.33    1.00  
           Share

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

            None.

                                      PART III


       Item 10.  Directors and Executive Officers of the Registrant

            See the information relating to directors and officers of the
       Company under the captions "Election of Directors", contained in the
       Company's definitive Proxy Statement dated March 19, 1999 relating to
       the Annual Meeting of Shareholders to be held on April 28, 1999, which
       is hereby incorporated by reference.

       Item 11.  Executive Compensation

            See the information relating to "Compensation of Executive
       Officers" presented in the Company's definitive Proxy Statement dated
       March 19, 1999 relating to the Annual Meeting of Shareholders to be
       held on April 28, 1999, which is incorporated herein by reference,
       except that information appearing under the headings "Report of the
       Executive Committee on Executive Compensation" and "Summary Share
       Performance Graph" is not incorporated herein and should not be deemed
       to be included in this document for any purpose.

       Item 12.  Security Ownership of Certain Beneficial Owners and
                 Management

            See the information relating to directors and officers of the
       Company under the captions "Security Ownership of Certain Beneficial
       Owners and Management", contained in the Company's definitive Proxy
       Statement dated March 19, 1999 relating to the Annual Meeting of
       Shareholders to be held on April 28, 1999, which is hereby
       incorporated by reference.

       Item 13.  Certain Relationships and Related Transactions

            See the information relating to directors and officers of the
       Company under the captions "Certain Related Party Transactions",
       contained in the Company's definitive Proxy Statement dated March 19,
       1999 relating to the Annual Meeting of Shareholders to be held on
       April 28, 1999, which is hereby incorporated by reference.

                                        PART IV
          Item 14.  Exhibits, Financial Statement Schedules and
          Reports on Form 8-K

            (a)  The following documents are filed as part of this
                 report
                                                             Page In
                                                            Form 10-K

             1)  Report of Independent Auditors                 14

                 Financial Statements:
                      Consolidated Statements of
                       Operations, three years 
                       ended December 31, 1998                  15
                      Consolidated Balance Sheets at
                       December 31, 1998 and 1997               16
                      Consolidated Statements of Cash
                       Flows, three years  ended 
                       December 31, 1998                        17
                      Consolidated Statements of Changes
                       in Stockholders' Equity, three 
                       years ended December 31, 1998            18
                      Notes to Consolidated Financial           
                       Statements                               19

             2)  Financial Statement Schedule for three
                 years ended December 31, 1998:
              
                 II   Valuation and qualifying accounts         40

                 All other required schedules have been
                 omitted because they do not apply to the
                 Company, or the information is presented
                 in the consolidated financial statements
                 or the notes thereto.

        Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                  ON FORM 8-K (Continued)

        (a) (3) Exhibits

        Exhibit           Description                  Reference
           No.
        3A        Certificate of Amendment of  Exhibit 3A to the Report
                  Restated Certificate of      on Form 10-K for the
                  Incorporation dated April    year ended December 31,
                  30, 1997                     1996*

        3A(1)     Certificate of Merger        Exhibit 3A(1) to the
                                               Report on Form 10-K for
                                               the year ended December
                                               31, 1995*

        3F        Certificate of Amendment of  Exhibit 3F to the Report
                  Restated Certificate of      on Form 10-K for the
                  Incorporation dated April    year ended December 31,
                  23, 1986                     1994*

        3G        Certificate of Amendment of  Exhibit 3G to the Report
                  Restated Certificate of      on Form 10-K for the
                  Incorporation dated May 4,   year ended December 31,
                  1987                         1994*

        3I        Restated Bylaws containing   Exhibit 3I to the Report
                  all previous amendments      on Form 10-K for the
                  adopted                      year ended December 31,
                                               1996*

        4         Instruments Defining Rights  Articles of
                  of Security Holders          Incorporation, Exhibits
                                               3A, and Exhibits  3F and
                                               3G to the Report on Form
                                               10-K for the year ended
                                               December 31, 1994*

        10D(23)A  Amendment Credit Agreement   Exhibit 10D(23)A to the
                  dated December 1, 1996       Report on Form 10-K for
                                               the year ended December
                                               31, 1996*

        10D(24)   Industrial Revenue Bond      Exhibit 10D(24) to the
                  Agreement dated January 1,   report on Form 10-K for
                  1993.                        the year ended December
                                               31, 1997*

        10D(25)   Industrial Revenue Bond      Exhibit 10D(25) to the
                  Loan Agreement dated         Report on Form 10-K for
                  December 1, 1996             the year ended December
                                               31, 1996*

        10D(26)   Building Loan Agreement      Exhibit 10D(26) to the
                  dated December 1, 1996       Report on Form 10-K for
                                               the year ended December
                                               31, 1996*

        10F       Stockholder's Agreement      Exhibit 10F to the
                  dated as of April 26, 1984   Report on Form 10-K for
                  between the Registrant and   the year ended December
                  Wacker Chemical Corporation  31, 1995*

        Exhibit           Description                  Reference
           No.

        10G       Restated License Agreement   Exhibit 10G to the
                  dated as of April 26, 1984   Report on Form 10-K for
                  among Elektroschmelzwerk     the year ended December
                  Kempten GmbH, ESK            31, 1995*
                  Corporation and the
                  Registrant

        10H       Distributorship Agreement    Exhibit 10H to the
                  dated July 30, 1997 between  report on Form 10-K for
                  Elektroschmelzwerk Kempten   the year ended December
                  GmbH, and the Registrant     31, 1997*

        10I       Indemnification Agreement    Exhibit 10I to the
                  dated as of December 15,     Report on Form 10-K for
                  1984 between Wacker          the year ended December
                  Chemical Corporation and     31, 1995*
                  the Registrant 

        22        Subsidiaries of the          Exhibit 22
                  registrant 

        27        Financial Data Schedule      Exhibit 27

        (b)       Reports on Form 8-K:

                  None.

        (c)       All exhibits required by Item 601 of Regulation S-K
                  are included in Item 14(a)(3).

        * Incorporated herein by reference.

                        Exolon-ESK Company and Subsidiaries
                         Valuation and Qualifying Accounts
                       Three Years Ended December 31, 1998
                                (thousands of dollars)

                               Balance at Additions
                               Beginning  Charged to                Balance
                                   of     Costs and                 at End
         Description              Year    Expenses    Adjustments   of Year
    ----------------------------------------------------------------------- 
    Deducted from assets -
       Allowance for
        doubtful accounts

    Year ended December 31, 1998  $350        -        ($101)(a)      $249
    Year ended December 31, 1997  $502      $10        ($162)(a)      $350
    Year ended December 31, 1996  $419      $70          $13 (b)      $502


       Allowance for
        slow-moving and
        obsolete inventory

    Year ended December 31, 1998  $196     $120         ($59)        $257
    Year ended December 31, 1997  $297     $101           --         $196
    Year ended December 31, 1996  $136     $161           --         $297

       (a) Uncollectible accounts written off, net of recoveries.
       (b) Bad debt recoveries.

       Pursuant to the requirements of Section 13 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.


       March 15, 1999           EXOLON-ESK COMPANY


                                By:  S/ J. Fred Silver                        
                                   
                                      J. Fred Silver, President and
                                      Chief Executive Officer


       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 and on the dates indicated.



        S/ J. Fred Silver             S/ Michael H. Bieger
        -----------------             --------------------
        J. Fred Silver,               Michael H. Bieger,
        President and Chief           Vice President -
        Executive Officer             Finance and Chief
                                      Financial Officer

        S/Theodore E. Dann, Jr.
        -----------------------   
        Theodore E. Dann, Jr.   Chairman of the Board   March 15, 1999


        S/Brent D. Baird
        ----------------
        Brent D. Baird                 Director         March 15, 1999


        S/Craig A. Rogerson
        -------------------
        Craig A. Rogerson              Director         March 15, 1999


        S/Dr. Fritz Petersen
        --------------------
        Dr. Fritz Petersen             Director         March 15, 1999


        S/David A. Shellabarger
        -----------------------
        David A. Shellabarger          Director         March 15, 1999


        S/Patrick W.E. Hodgson
        ----------------------
        Patrick W.E. Hodgson           Director         March 15, 1999



                                 EXHIBIT INDEX



        Exhibit           Description                  Reference
          No.

        3A       Certificate of Amendment of   Exhibit 3A to the report
                 Restated Certificate of       on Form 10-K for the
                 Incorporation dated April     year ended December 31,
                 30, 1997                      1996* 

        3A(1)    Certificate of Merger         Exhibit 3A(1) to the
                                               report on Form 10-K for
                                               the year ended December
                                               31, 1995*

        3F       Certificate of Amendment of   Exhibit 3F to the report
                 Restated Certificate of       on Form 10-K for the
                 Incorporation dated April     year ended December 31,
                 23, 1986                      1994*

        3G       Certificate of Amendment of   Exhibit 3G to the report
                 Restated Certificate of       on Form 10-K for the
                 Incorporation dated May 4,    year ended December 31,
                 1987                          1994*

        3I       Restated Bylaws containing    Exhibit 3I to the Report
                 all previous amendments       on Form 10-K for the
                 adopted                       year ended December 31,
                                               1996*

        4        Instruments Defining Rights   Articles of
                 of Security Holders           Incorporation, Exhibits
                                               3A, and Exhibits 3F and
                                               3G to the Report on Form
                                               10-K for the year ended
                                               December 31, 1994*

        10D(23)  Amendment Credit Agreement    Exhibit 10D(23)A to the
        A        dated December 1, 1996        Report on Form 10-K for
                                               the year ended December
                                               31, 1996*

        10D(24)  Industrial Revenue Bond       Exhibit 10D(24) to the
                 Agreement dated January 1,    report on Form 10-K for
                 1993.                         the year ended December
                                               31, 1997*

        10D(25)  Industrial Revenue Bond Loan  Exhibit 10D(25) to the
                 Agreement dated December 1,   Report on Form 10-K for
                 1996                          the year ended December
                                               31, 1996*

        10D(26)  Building Loan Agreement       Exhibit 10D(26) to the
                 dated December 1, 1996        Report on Form 10-K for
                                               the year ended December
                                               31, 1996*

        10F      Stockholder's Agreement       Exhibit 10F to the
                 dated as of April 26, 1984    report on Form 10-K for
                 between the Registrant and    the year ended December
                 Wacker Chemical Corporation   31, 1995*

        Exhibit           Description                  Reference
          No.

        10G      Restated License Agreement    Exhibit 10G to the
                 dated as of April 26, 1984    report on Form 10-K for
                 among Elektroschmelzwerk      the year ended December
                 Kempten GmbH, ESK             31, 1995*
                 Corporation and the
                 Registrant 

        10H      Distributorship Agreement     Exhibit 10H to the
                 dated July 30, 1997 between   report on Form 10-K for
                 Elektroschmelzwerk Kempten    the year ended December
                 GmbH and the Registrant       31, 1997*

        10I      Indemnification Agreement     Exhibit 10I to the
                 dated as of December 15,      report on Form 10-K for
                 1984 between Wacker Chemical  the year ended December
                 Corporation and the           31, 1995*
                 Registrant 

        22       Subsidiaries of the           Exhibit 22
                 Registrant

        27       Financial Data Schedule       Submitted electronically 

        * Incorporated herein by reference.