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, 1997

                                         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
           Title of each class                         exchange on which
                                                           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 February 4, 1998 the aggregate market value of the publicly traded
       voting stock held by nonaffiliates of the Registrant was  $2,681,708
       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 February 4, 1998, 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, 1997, the Company had 277
       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, 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, 1997, the Company had a
       consolidated backlog of $5,792,000 as compared to $3,686,000 a year
       earlier.  The increase in the Company backlog in 1997 is primarily
       a result of the increase in foreign sales orders and recording
       blanket orders for 1998.  All of this backlog is expected to be
       shipped in 1998.  

            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 32, 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 18.  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.  The Company reduces Canadian
       currency exposure with the use of foreign currency forward
       contracts as hedges against certain commitments in Canadian
       dollars.

       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 commenced construction of a
       desulfurization facility as outlined in Note 13(a)(i) on page 32.

            The Company has operations in Norway conducted through a joint
       venture, as outlined in Note 1(c) on page 18.  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      $29 - $26     $31 - $27         $31 -$29 1/2  $37 - $32
        1997                                                  

        High-Low      $22 - $17  $25 3/4-$17 7/8  $25 3/4 -$20 1/4  $32 - $26
        1996                                                     


            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 active stockholder accounts of record of the
       Company's Common Stock, $1 par value, was  168 as of February 4,
       1998.  The Company did not pay any dividends on its Common Stock in
       1997 or 1996.

            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

            The "Selected Financial Information" for the five years ended
       December 31, 1997 appears on pages 6 and 7.


       Selected Financial Information        Years Ended December 31,
                                          1997   1996  1995   1994   1993
                                    (thousands of dollars except share amounts)

       Statement of Operations:
       Net Sales                        78,096 77,459 68,592 59,494 58,225    $
       Gross profit before depreciation 17,286 17,839 15,380 12,863 12,365
       Operating Income                  9,355  9,358  7,527  3,186  3,623


       Income before Cumulative Effective of 
         Accounting Change               5,254  6,080  3,964  1,516  1,206
       Cumulative Effect of  Accounting Change
       - Net of Income Tax Benefit           -      -   (502)     - (1,173)

       Net Income                       $5,254 $6,080 $3,462 $1,516  $  33
       Basic Earnings (Loss) per share of
       Common Stock:
           Income before Cumulative Effect
             of Accounting Change       $ 5.41 $ 6.27 $ 4.06  $1.53  $1.21 

           Cumulative Effect of Accounting
       Change -  Net of Tax Benefit          -      - $(0.52)     - $(1.22)
       Net Income (Loss) per share      $ 5.41 $ 6.27 $ 3.54  $1.53 $(0.01)

       Basic Earnings (Loss) per share of
       Class A Common Stock:
         Income before Cumulative Effect of
           Accounting Change            $ 5.08 $ 5.90 $ 3.81  $1.44  $1.14 
         Cumulative Effect of  Accounting
       Change -  Net of Tax Benefit          -      - $(0.49)     - $(1.15)
       Net Income (Loss) per share      $ 5.08 $ 5.90 $ 3.32  $1.44 $(0.01)


       Selected Financial Information -      Years Ended December 31,
       Continued
                                          1997   1996  1995   1994   1993
                                           (thousands of dollars except
                                                  share amounts)

       Diluted Earnings per share of
       Common Stock:
           Income before Cumulative Effect
             of  Accounting Change      $ 5.21 $ 6.03 $ 3.93 $1.50   $1.20 
           Cumulative Effect of Accounting
       Change - Net of Tax Benefit           -      - $(0.49)    -  $(1.17)

       Net Income per share             $ 5.21 $ 6.03 $ 3.44 $1.50   $0.03 

       Diluted Earnings per share of Class A
       Common Stock:
         Income before Cumulative
          Effect of Accounting Change   $ 4.91 $ 5.69 $ 3.71 $1.42  $ 1.13 

         Cumulative Effect of  Accounting
       Change - Net of Tax Benefit           -      - $(0.47)    -  $(1.10)
       Net Income per share             $ 4.91 $ 5.69 $ 3.24 $1.42  $ 0.03 

       Dividends per share:

         Series A Cumulative 
          Preferred Stock             $1.1090 $0.8437 $1.1250 $0.8437 $1.1250
                                         
         Series B Cumulative 
          Preferred Stock             $1.1090 $0.8437 $1.1250 $0.8437 $1.0517
                                    
         Common Stock                       -       -       -       -       -
         Class A Common Stock               -       -       -       -       -


       Summary Balance Sheet                       December 31,
       Information:
                                          1997   1996  1995   1994   1993
                                              (thousands of dollars)
       Current Assets                   29,260 28,301 29,395 25,441 25,434     
       Current Liabilities               6,082  8,818  7,981  7,387  8,660
       Working Capital                  23,178 19,483 21,414 18,054 16,774
       Total Assets                     63,277 61,483 50,215 45,309 45,834
       Long-Term Debt                   20,033 20,433 15,350 14,900 16,900

       Stockholders' Equity             32,789 28,258 22,298 18,628 16,770

       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 to Net       Relationship
                                    Sales                  to 
                                                        Net Sales
                             Years Ended December      Years Ended
                                     31,

                            1997     1996    1995    1996-97   1995-96
                                                     

       Net Sales           100.0 %  100.0 %  100.0%    0   %    0    %
       Cost of Goods Sold,
        excluding          
        Depreciation        77.9     77.0     77.6     0.9     (0.6)

       Depreciation          3.5      3.6      4.2    (0.1)    (0.6)
       Selling, General and
        Administrative       
        Expense              6.6      7.3      7.2    (0.7)     0.1 
       Research and       
        Development           -        -        -       -        -
                            88.0     87.9     89.0     0.1     (1.1)
       Operating Income     12.0     12.1     11.0    (0.1)     1.1

       Other (Income)Expense:
        Equity in  Loss
        (Income) of Norwegian 
        Joint Venture       (0.6)    (0.9)    (1.2)     0.3      0.3
     
       Interest Expense      1.2      1.5      2.2     (0.3)    (0.7)

       Other                 0.3     (0.4)     -        0.7     (0.4)

                             0.9      0.2      1.0      0.7     (0.8)
       Income Before
        Income Taxes and
        Cumulative Effect of
        Accounting Change   11.1     11.9     10.0     (0.8)     1.9
     
       Income Tax Expense   4.4      4.1      4.2     (0.3)    (0.1)
       Income Before
        Cumulative Effect of
        Accounting Change   6.7      7.8      5.8     (1.1)     2.0
       
       Cumulative Effect
       of Accounting Change  -        -      (0.8)      -       0.8
   
       Net Income           6.7  %   7.8  %   5.0 %   (1.1)%    2.8  %

            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, 1997.

       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).

            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%.

       Results of Operations 1996 Compared to 1995
            In 1996, the Company's net sales increased $8,867,000 to
       $77,459,000, an increase of 13% compared to net sales of
       $68,592,000 in 1995.  The 1996 increase was primarily a result of a
       22% increase in the Company's shipment volume of its principal
       manufactured and purchased products due to a strong demand for
       abrasive products during 1996, when compared to 1995.  Average
       selling prices for the Company's principal manufactured and
       purchased products decreased by approximately 8% during 1996, when
       compared to 1995.

            Consolidated net income was $6,080,000 for the year ended
       December 31, 1996.  This compares to consolidated net income of
       $3,462,000 for 1995. 

            Cost of sales, excluding depreciation, as a percentage of
       sales declined to 77% in 1996, when compared to 77.6% in 1995;
       therefore gross margins, as a percent of sales increased to 23% in
       1996 compared to 22.4% in 1995. 

            Total operating expenses including depreciation were
       $8,481,000 during 1996 versus $7,853,000 during 1995.   The 1996
       increase in operating expenses of $628,000 is primarily a result of
       increases in selling and general and administrative expenses.  

            As a result of the above, operating income increased to
       $9,358,000 in 1996 compared to $7,527,000 for the 1995 year.

            Depreciation, as a percent of sales, was 3.6% for 1996
       compared to 4.2% for 1995.

            Selling, general and administrative expenses increased by
       $663,000 in 1996, due primarily to increases in advertising,
       commissions, sales salaries and incentives, and general and
       administrative salaries and incentives. As a percent of net sales,
       selling and general and administrative expense increased to 7.3% in
       1996, from 7.2% for the 1995 year.

            Interest expense from continuing operations declined to
       $1,136,000 in 1996 from $1,469,000 in 1995.  The reduction in
       interest expense is primarily due to lower average debt levels in
       1996 versus 1995.  The average interest rate on the U.S. revolving
       and demand lines of credit was 8.1% during 1996 compared to 8.4% in
       1995.  The Company recorded lower average borrowing levels in 1996
       on its U.S. and Canadian revolving and demand lines of credit and
       its U.S. term loan.  The average total borrowing outstanding for
       the three revolving lines of credit combined with the terms loan
       was $6.2 million for 1996, when compared to $8.9 million for the
       1995 year. 

            The Company's 50% share of the pre-tax earnings of its
       Norwegian joint venture, Orkla Exolon KS, was $673,000 for 1996
       versus $793,000 for 1995.  The joint venture's gross margins, prior
       to depreciation, decreased to 21% for the 1996 year versus 24% for
       1995, principally due to increased operational costs. 

            The 1996 income tax provision was $3,145,000, representing an
       effective rate of 34%. The 1995 income tax provision was $2,893,000
       which represented an effective rate of 42%.

       Liquidity and Capital Resources
            As of December 31, 1997, working capital (current assets less
       current liabilities) increased to $23,178,000, when compared to
       $19,483,000 as of December 31, 1996.  Accounts receivable increased
       by $521,000 as of December 31, 1997 versus December 31, 1996. 
       Inventory decreased by $1,803,000 at December 31, 1997 when
       compared to December 31, 1996.  Income taxes payable decreased by
       $270,000 and accounts payable decreased $562,000 as of December 31,
       1997 versus December 31, 1996. Notes payable and current maturities
       of long-term debt and sinking fund requirements decreased by
       $300,000 versus December 31, 1996.

            For the year ended December 31, 1997, net cash provided by
       operating activities was $7,007,000.  Outstanding bank indebtedness
       decreased by $700,000, and restricted cash equivalents decreased by
       $7,996,000 at December 31, 1997 compared to December 31, 1996. 
       Capital expenditures of $10,617,000 were provided both from net
       cash provided by operating activities and the use of $7,996,000 of
       cash restricted for capital additions.

            The Company's current ratio increased to 4.8 to 1.0 at
       December 31, 1997 from 3.2 to 1.0 as of December 31, 1996.  The
       ratio of total liabilities to stockholder's equity was .9 to 1.0 as
       of December 31, 1997 and 1.2 to 1.0 as of December 31, 1996. 

            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 1998 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 1998.

            Reference is made to the information included in Note 13 to
       the Consolidated Financial Statements beginning on page 32 which is
       incorporated herein by reference.

       Employees
            As of December 31, 1997, the Company employed 277 persons.  Of
       these, approximately 198 (or 71.5%) work under three collective
       bargaining agreements.  During 1997, the Company and the hourly
       workers at its Hennepin, Illinois facility reached agreement on a
       new five-year collective bargaining agreement.  This agreement
       covers 71 production and maintenance workers represented by the
       local branch of the International Union of Operating Engineers
       Local 399, AFL-CIO and expires on May 14, 2002.  Also during 1997,
       the Company and the hourly workers at its Thorold, Ontario facility
       reached agreement on a new three-year collective bargaining
       agreement.  This agreement covers 33 production and maintenance
       workers represented by the local branch of the Chemical Energy &
       Paper Workers Union and expires in April 2000.  The labor agreement
       with the hourly workers at the Company's Tonawanda, New York
       facility, which covers 94 production and maintenance workers
       represented by the local branch of the United Steel Workers of
       America, expires in October 1998.

       Impact of Year 2000
            Some of the Company's older computer programs were written
       using two digits rather than four to define the applicable year. 
       As a result, those computer programs have time-sensitive software
       that recognize a date using "00" as the year 1900 rather than the
       year 2000.  This could cause 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 has completed an assessment and will have to
       modify or replace portions of its software so that its computer
       systems will function properly with respect to dates in the year
       2000 and thereafter.  The total Year 2000 project cost  is
       estimated at approximately $783,000, which includes $723,000 for
       the purchase of new software and computer equipment that will be
       capitalized and $60,000 that will be expensed as incurred.  To
       date, the Company has incurred  approximately $279,000 ($264,000
       capitalized), primarily for assessment of the Year 2000 issue and
       the development of a modification plan and purchase of new
       software.

            The project is estimated to be completed not later than
       December 31, 1998, which is prior to any anticipated impact on its
       operating systems.  The Company believes that with modifications to
       existing software and conversions to new software, the Year 2000
       Issue will not pose significant operational problems for its
       computer systems.  However, if such modifications and conversions
       are not made, or are not completed timely, the Year 2000 Issue
       could have a material impact on the operations of the Company.

            The costs of the project and the date on which the Company
       believes it will complete the Year 2000 modifications are based on
       management's best estimates, which were derived utilizing numerous
       assumptions of future events, including the continued availability
       of certain resources and other factors.  However, there can be no
       guarantee that these estimates will be achieved and actual results
       could differ materially from those anticipated.  Specific factors
       that might cause such material differences include, but are not
       limited to, the availability and cost of personnel trained in this
       area, the ability to locate and correct all relevant computer
       codes, and similar uncertainties.

       Impact of New Accounting Standards
            In June 1997, the Financial Accounting Standards Board issued
       Statement 130, "Reporting Comprehensive Income."  Statement 130
       establishes new rules for the reporting and display of
       comprehensive income and its components; however, adoption in 1998
       will have no impact on the Company's net income or stockholders'
       equity.  Statement 130 requires the foreign currency translation
       adjustments, which currently are reported in stockholders' equity,
       to be included in other comprehensive income and the disclosure of
       total comprehensive income.  If the Company adopted Statement 130
       for the year ended December 31, 1997, the total of other
       comprehensive income items, reported as a component of
       stockholders' equity and comprehensive income (which includes net
       income) would be $(865,000) and $4,575,000 respectively, and would
       be displayed separately.

            In June 1997, the Financial Accounting Standards Board issued
       Statement 131, "Disclosure About Segments of an Enterprise and
       Related Information," which is effective for years beginning after
       December 15,1997.  Statement 131 establishes standards for the way
       that public business enterprises report information about operating
       segments in annual financial statements and requires that those
       enterprises report selected information about operating segments in
       interim financial reports.  It also establishes standards for
       related disclosures about products and services, geographic areas,
       and major customers.  The Company will adopt the new requirements
       retroactively during 1998.  Management has not completed its review
       of Statement 131, but currently does not anticipate that the
       adoption of this statement will result in the Company reporting
       additional segments. 

       Item 8.   Financial Statements and Supplementary Data

            The Consolidated Financial Statements, together with the
       report thereon of Ernst & Young LLP dated January 14, 1998, appear
       on pages 13 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, 1997 and
       1996, and the related consolidated statements of operations,
       stockholders' equity, and cash flows for each of the three years in
       the period ended December 31, 1997.  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,
       1997 and 1996, and the results of their operations and their cash
       flows for each of the three years in the period ended December 31,
       1997 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.

       As discussed in Note 10 to the financial statements, in 1995 the
       Company changed its method of accounting for postretirement
       benefits other than pensions for its Canadian subsidiary.


                                                   /s/Ernst & Young LLP



       Buffalo, New York
       January 14, 1998



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

                                                     Year Ended
                                                    December 31

                                              1997     1996     1995  
       Net Sales                            $78,096  $77,459 $ 68,592
       Cost of Goods Sold                    60,810   59,620   53,212
       Gross Profit Before Depreciation      17,286   17,839   15,380
       Depreciation                           2,734    2,826    2,873
       Selling, General & Administrative     
        Expenses                              5,148    5,621    4,958
       Research and Development                  49       34       22
       Operating Income                       9,355    9,358    7,527

       Other (Income) Expenses:
           Interest Expense                     938    1,136    1,469
           Equity in Income of Norwegian      
            Joint Venture                      (437)    (673)    (793)
           Other                                168     (330)      (6)
       Income before Income Taxes and Cumulative
        Effect of Accounting Change           8,686    9,225    6,857
       Income Tax Expense                     3,432    3,145    2,893
       Income before Cumulative Effect of  
        Accounting Change                     5,254    6,080    3,964
       Cumulative Effect of Accounting Change-
        Net of Income Tax Benefit of $282         -        -     (502)
       Net Income                            $5,254  $ 6,080 $  3,462
       Basic Earnings Per Common Share:
        Income before Cumulative Effect 
         of Accounting Change                $ 5.41  $  6.27 $   4.06 
        Cumulative Effect of Accounting  
         Change                                   -        -    (0.52)
        Net Income                           $ 5.41  $  6.27 $   3.54 
       Basic Earnings Per Class A Common Share:
        Income before Cumulative Effect 
         of Accounting Change                $ 5.08  $  5.90 $   3.81 
        Cumulative Effect of Accounting Change    -        -    (0.49)
        Net Income                           $ 5.08  $  5.90 $   3.32 
       Diluted Earnings Per Common Share:
        Income before Cumulative Effect 
         of Accounting Change                $ 5.21  $  6.03 $   3.93 
        Cumulative Effect of Accounting Change    -        -    (0.49)
        Net Income                           $ 5.21  $  6.03 $   3.44 
       Diluted Earnings Per Class A Common Share:
        Income before Cumulative Effect 
         of Accounting Change                $ 4.91  $  5.69 $   3.71 
        Cumulative Effect of Accounting Change    -        -    (0.47)
        Net Income                           $ 4.91  $  5.69 $   3.24 

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


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

                                                        December 31      

       Assets                                          1997     1996  
       Current assets:
         Cash and cash equivalents                   $2,503     $275
         Accounts receivable (less allowance for
          doubtful accounts of $350 in 1997 and 
          $502 in 1996)                               9,582    9,061
         Inventories                                 16,636   18,439
         Prepaid expenses                               183      526
         Deferred income taxes                          356        -
       Total Current Assets                          29,260   28,301
       Investment in Norwegian joint venture          5,505    5,812
       Property, plant and equipment                 26,290   18,385
       Bond sinking fund                                885        -
       Cash equivalents restricted for capital additions  -    7,996
       Other assets                                   1,337      989
       Total Assets                                 $63,277  $61,483
       Liabilities and Stockholders' Equity
       Current liabilities:

         Cash overdraft                             $     -   $1,413
         Notes payable                                    -      219
         Current maturities of long-term debt and
          sinking fund requirements                   1,367    1,667
         Accounts payable                             2,661    3,223
         Accrued expenses                             1,858    1,780
         Income taxes payable                           196      466
         Deferred income taxes                            -       50
       Total Current Liabilities                      6,082    8,818
       Deferred income taxes                          1,834    1,436
       Long-term debt                                20,033   20,433
       Other long-term liabilities                    2,539    2,538
       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/outstanding       
          512,897 ($1 par value)                        513      513
         Additional paid-in capital                   4,345    4,345
         Retained earnings                           28,209   22,999
         Cumulative translation adjustment             (865)    (186)
         Treasury stock, at cost                       (368)    (368)
       Total Stockholders' Equity                    32,789   28,258
       Total Liabilities and Stockholders' Equity   $63,277  $61,483

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


                      Exolon-ESK Company and Subsidiaries
                     Consolidated Statements of Cash Flows
                                (In thousands)
                                                  Year Ended December 31

                                                   1997    1996    1995
       Cash Flow from Operating Activities:
         Net income                              $5,254  $6,080  $3,462
         Adjustments to reconcile net income to cash 
           provided by operating activities:
             Depreciation                         2,734   2,826   2,873
             Cumulative effect of change in                           
              accounting for 
              post-retirement benefits                -       -     502
             Equity in income of Norwegian joint
              venture                              (437)   (673)   (793)
            (Gain) loss on fixed asset disposals    (23)     29      16
             Deferred income taxes                   47      26     729
             Foreign currency adjustments            10       4      (2)
         Change in Assets and Liabilities:
             Accounts receivable                   (521)   (165) (1,960)
             Inventories                          1,803   1,261  (2,596)
             Prepaid expenses                       343    (167)     40
             Other assets                           (37)    (98)    (97)
             Cash overdraft                      (1,413)  1,413       -
             Accounts payable                      (562)     (6)    424
             Accrued expenses                        78      67      91
             Income taxes payable                  (270)   (863)  1,194
             Other liabilities and accrued  
              postretirement benefit costs            1    (748)   (344)
          Net Cash Provided by Operating 
           Activities                             7,007   8,986   3,539
       Cash Flow from Investing Activities:
             Capital expenditures               (10,617) (6,170) (2,695)
             Purchases of restricted cash
              equivalents                         7,996  (7,996)      -
             Proceeds from fixed asset disposals      1     123       8
       Net Cash Used for Investing Activities    (2,620)(14,043) (2,687)
       Cash Flow from Financing Activities:
         Payments to bond sinking fund             (867)      -       -
         Net (repayments of) proceeds from
          long-term debt                           (700) (7,800)  1,200
         Proceeds from issuance of long-term debt     -  13,000       -
         Deferred financing fees                   (329)   (494)      -
         Net proceeds from (repayments of) notes
          payable                                  (219)    219  (2,000)
         Dividends paid                             (44)    (33)    (54)
         Principal payments under capital lease
          obligations                                 -       -     (25)
         Net Cash Provided by (Used for)
          Financing Activities                   (2,159)  4,892    (879)
         Net (Decrease) Increase in Cash and 
          Cash Equivalents                        2,228    (165)    (27)
        Cash and Cash Equivalents at Beginning 
         of Year                                    275     440     467
        Cash and Cash Equivalents at End of Year $2,503  $  275  $  440
       Supplemental Disclosures of Cash Flow
        Information:
       Cash paid during the year for:
         Interest                                $1,261  $1,171  $1,493
         Income Taxes                            $3,710  $3,983  $  991

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


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

                                                      Year ended December 31   

                                                      1997   1996    1995  

        Series A preferred stock                     $ 276  $ 276   $ 276
        Series B preferred stock                       166    166     166

        Total preferred stock                        $ 442  $ 442   $ 442   

        Common stockholders' equity:

           Common stock                              $ 513  $ 513   $ 513
           Class A common stock                        513    513     513
           Additional paid-in capital                4,345  4,345   4,345
           Retained earnings:

              Balance, beginning of year            22,999 16,952  13,545
                                                
                 Net income                          5,254  6,080   3,462
                 Preferred stock dividends - 
                    1997 - $1.109 per share; 
                    1996 - $0.8438 per share;          (44)   (33)    (55)
                    1995 - $1.4062 per share
              Balance, end of year                  28,209 22,999  16,952
                                                    
           Cumulative translation adjustment:

              Balance, beginning of year              (186)   (99)   (362)

              Change in cumulative translation  
               adjustment                             (679)   (87)    263
  
              Balance, end of year                    (865)  (186)    (99)

           Treasury stock, at cost                    (368)  (368)   (368)
        Total common stockholders' equity, 
         end of year                               $32,347 $27,816 $21,856
        Total Stockholders' equity, end of year    $32,789 $28,258 $22,298
                                           
        The accompanying notes to consolidated financial statements are
        an integral part of these statements.


                       EXOLON-ESK COMPANY AND SUBSIDIARIES

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         DECEMBER 31, 1997, 1996 and 1995


       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 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% and 60% of the dollar value of inventories is stated
       at last-in, first-out (LIFO) cost at December 31, 1997 and 1996,
       respectively, 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.   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
       ($317,000), $42,000, and ($30,000) in 1997, 1996, and 1995,
       respectively.

            g.   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, 1997, undistributed
       earnings of the Canadian and Norwegian foreign subsidiaries combined
       were $13,120,000.

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

            h.   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.

            i.   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. 

            j.   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.

            k.   Cash equivalents

            The Company considers all highly liquid investments with an
       original maturity of three months or less to be cash equivalents.

            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.

            m.   Earnings per share

            In 1997, the Financial Accounting Standards Board issued
       Statement No. 128, "Earnings per Share".  Statement No. 128 replaced
       primary and fully diluted earnings per share with basic and diluted
       earnings per share.  Statement No. 128 had no effect on the Company's
       reported earnings per share.

       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 $3,351,000 and $2,361,000 higher
       than reported at December 31, 1997 and 1996, respectively.

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

                                                1997    1996  
               Raw Materials                   $2,839  $3,581

               Semi-Finished and Finished
                Goods                          16,183  16,294
               Supplies and Other                 965     925
                                               19,987  20,800
               Less:  LIFO Reserve             (3,351) (2,361)

                                              $16,636 $18,439

       3.   Property, Plant and Equipment


                   Property, plant and equipment consists of (in
                   thousands):
                                                     1997    1996

                   Land                            $  283  $  283

                   Buildings                        7,860   7,804
                   Machinery & equipment           49,614  47,941

                   Construction in progress        13,605   5,129

                                                   71,362  61,157
                   Less - accumulated
                    depreciation                   45,072  42,772
                                                  $26,290 $18,385

            During 1997 and 1996, the Company capitalized interest costs
       totaling $346,000 and $114,000, 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 1997,
       1996 or 1995.  Sales between Canada and the United States are made at
       cost plus a margin which approximates the gross profit generally
       received for sales of similar products by the Canadian entity.  


       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                                  1997    1996
            Current assets                                  $4,563  $5,081
            Non-current assets                               2,599   2,752
            Current liabilities                              1,332   1,391
            Non-current Liabilities                            246     319



          Statement of Operations                      1997   1996    1995
            Net Sales                                $8,037 $8,195  $8,140
            Gross profit                              1,551  1,709   2,097
            Income before income taxes                  437    673     793

            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, 1997 and 1996,
       undistributed earnings of the joint venture were $5,044,000 and
       $4,791,000, 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 zero balance as
       of December 31, 1997 and 1995 and a balance of $219,000 as of December
       31, 1996.

            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):
                                                        1997    1996

            Revolving credit and term loan              $400    $300
            agreement with a U.S. Bank.  Interest        
            at prime rate plus /% or LIBOR plus 2-1/2%
            (8.5% at December 31, 1997 and 1996).

            Term loan agreement with a U.S. Bank.          -     800

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

            Industrial revenue bond.  Interest is     13,000  13,000
            variable (4.9% at December 31, 1997 and
            1996 ).
                                                     ------- -------
                                                     $21,400 $22,100
                                            
            Less - current maturities and sinking      1,367   1,667
            fund requirements                        ------- -------
                                                     $20,033 $20,433



       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 a revolving
       credit facility.

            At December 31, 1997 borrowings of $400,000  were outstanding
       under the revolving portion of the Credit Agreement.  The revolving
       portion converts, in whole or any portion, to a term note on March 31,
       1999.  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 prime 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.  At December 31, 1997 the Company was in compliance with such
       requirements.

            As collateral for the U.S. Credit Agreement, the bank has a
       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 quarterly to a bank as trustee at a fixed rate
       of 8 %.  Amortization of principal commences in January, 1999.  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, as defined, up to a maximum of $4,333,333
       in the aggregate.  At December 31, 1997, the amount required under
       this provision was $500,000 and has been included in current
       maturities of long-term debt. 

            At December 31, 1997 the bond sinking fund had a balance of
       $885,000. 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: 


                                     1998      1,367,000
                                     1999        997,000
                                     2000      1,006,000
                                     2001      1,006,000
                                     2002      1,006,000
                                     2003   $ 16,018,000
                                      and
                                   beyond


       8.   Income Taxes

            The components of income before income taxes and cumulative
       effect of accounting change are as follows (in thousands):

                                          1997       1996       1995


               Domestic                 $5,142     $5,711     $3,815

               Foreign                   3,544      3,514      3,042
                              Total     $8,686    $ 9,225    $ 6,857



            The components of income tax expense are as follows (in
       thousands):


                                           1997       1996       1995
               Current provision (benefit):
                 United States
                    Federal            $ 1,540    $ 1,850    $ 1,226
                    State                  339        271        178
                 Foreign                 1,506        995        768
                         Total Current   3,385      3,116      2,172
         
               Deferred provision (benefit):
                 United States
                    Federal                 13        (45)       494
                    State                    7          6        (36)
                 Foreign                    27         68        263
                         Total Deferred     47         29        721
             
                              Total    $ 3,432    $ 3,145    $ 2,893

            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):


                                                  1997    1996   1995

       Computed expected tax expense           $2,954  $3,137  $ 2,332
       Effect of differing tax rates 
        applicable to foreign subsidiary income  (317)   (407)   (267)
       Effect of permanent differences             15      47       9
       State and Provincial taxes, net of
        Federal benefit                           797     486     465
       U.S. reserve for dividend repatriation       -       -     571
       Other                                      (17)   (118)   (217)
       Total income tax expense                $3,432  $3,145  $2,893

       Effective tax rate                        39.5%   34.1%   42.2%


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

                                                     1997     1996  
              Deferred tax liabilities:

                 Excess tax depreciation          $ 1,732   $2,044
                 Norwegian tax assessment reserve      51       59
                 Dividend repatriation reserve        571      571
                 Pension and payroll accruals         210      114
              Gross deferred tax liabilities      $ 2,564   $2,788

              Deferred tax assets:
                 Norwegian NOL                          -      (53)
                 Inventory accounting methods         (29)     (38)
                 Accounts receivable and other
                  asset reserves                     (112)     (47)
                 Post retirement accrual             (945)  (1,039)
                 Other, net                             -     (125)
              Gross deferred tax assets           $(1,086) $(1,302)
              Net deferred tax liability at
               end of year                        $ 1,478   $1,486
        

       9.   Capital Stock

            The Company has two classes of Common Stock, each of which is
       entitled to 50% of the Company's earnings, regardless of the actual
       shares outstanding.  At December 31, 1997 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, 1997 there were 19,364 shares of
       Series A and 19,364 shares of Series B Preferred Stock outstanding.

            At December 31, 1997, 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 $200,000 in 1997, $176,000 in 1996, and $146,000 in 1995. 
       Contributions to the Canadian defined contribution plan were $56,000
       in 1997, $78,000 in 1996 and $66,000 in 1995.  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, $139,000 and $125,000 for
       1997, 1996 and 1995, 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 $454,000,
       $393,000, and $361,000  in 1997, 1996 and 1995, respectively

            The following table summarizes the funded status of the Company's
       Tonawanda hourly employees defined benefit plan and the related
       amounts recognized in the Company's consolidated balance sheets as of
       December 31, 1997 and 1996 (in thousands):


                                                  December 31       
                                                            
                                                     1997   1996
       Actuarial present value of accumulated
        benefit obligations, including vested 
        benefit obligations of $1,653 at 
        December 31, 1997 and $1,539 at 
        December 31, 1996                        ($1,658)  ($1,540)
       Projected benefit obligations             ($1,658)  ($1,540)
       Plan assets at fair value, primarily         3,082    2,421
        equity securities
       Plan assets in excess of plan obligations    1,424      881
       Unrecognized net loss at transition, being
         amortized over approximately 17 years        103      120
       Unrecognized prior service cost                138      150
       Unrecognized gain arising since transition  (1,155)    (623)
       Prepaid pension expense                       $510     $528

       The actuarially computed pension cost for 1997, 1996 and 1995
       included the following components (in thousands):

                                                                    
                                                     1997   1996     1995

       Service costs                                 $ 59   $ 57     $ 54
       Interest on projected benefit obligation       123    118      106
       Actual return on plan assets                  (761)  (464)    (404)
       Amortization of transition liability and       597    332      324
         deferrals
       Net periodic pension expense                  $ 18   $ 43     $ 80

            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.

            An assumed discount rate of 8% has been used in determining the
       actuarial present value of the projected benefit obligation.  The
       expected long-term rate of return on plan assets is 7%.

            Benefits under the Canadian subsidiary's pension plans are based
       on employee and employer matching contributions for defined
       contribution plan and years of service for the defined benefit plan. 
       The Company has applied for the termination of the Canadian defined
       benefit plan with the Pension Commission of Ontario.  Upon formal
       procedural approval by the Pension Commission of Ontario, the defined
       benefit plan will be terminated and a projection of the employees
       benefits at retirement age will be calculated and subsequently rolled
       over into the defined contribution plan.  The defined benefit plan had
       a surplus of approximately $120,000 (Canadian) as of December 31,
       1993, the date of the most recent actuarial valuation.  Assets of the
       plan at December 31, 1997 and 1996 included 26,000 shares of the
       Common Stock of Exolon-ESK Company valued at approximately $1.3
       million (Canadian) at December 31, 1997.

            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.  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 amounts recognized in the Company's December 31, 1997 and
       1996 balance sheets for its U.S. operations were as follows (in
       thousands):


                                                December 31
                                             1997         1996
        Accumulated postretirement
        benefits obligation:
             Retirees                     $1,004        $1,044
             Fully eligible active
              participants                   415           435
             Terminated participants not
              yet receiving benefits          65            40
        Total accumulated postretirement          
         benefits obligation              $1,484        $1,520
        Unrecognized prior service cost      (24)          (25)
        Unrecognized gain                    305           302
        Accrued postretirement benefit 
         obligation                       $1,765        $1,797

        Net periodic postretirement benefit costs for 1997, 1996
        and 1995 included the following components (in thousands):

                                            1997   1996   1995

        Service cost - benefits earned      $ 11   $ 11   $ 12
        Interest cost                        117     98     92
        Amortization                          (8)   (33)   (42)
        Net periodic postretirement
         benefit cost                      $ 120   $ 76   $ 62

            For measuring the postretirement benefit obligation as of
       December 31, 1997 an 8% annual rate of increase in health care rates
       was assumed for the next 4 years and 6% per year thereafter.  It was
       also assumed that reimbursable expenses for post-1990 retirees would
       be at least equal to the dollar reimbursement limitation.  Increasing
       the annual rate of increase in health care rates by one percentage
       point would increase the accumulated post-retirement obligation by
       $47,000 and would increase the periodic post-retirement cost by
       $8,000.  Group life insurance premiums and limitations on dollar
       reimbursements (applicable to post-1990 retirees) are not assumed to
       be subject to increases.  An assumed discount rate of 8% has been used
       to determine the actuarial present value of the projected benefit
       obligation.  

            Unrecognized gains and losses are amortized on a straight-line
       basis over the average remaining service period of active
       participants.

            The Company's Canadian subsidiary also 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.  The Company's policy is to fund these benefits on a
       pay-as-you-go basis. 

            The Company adopted SFAS No. 106, "Employers' Accounting for
       Postretirement Benefits Other Than Pensions," effective January 1,
       1995 for its Canadian subsidiary and recognized the initial obligation
       as a one-time, after-tax charge to earnings of $502,000 (net of income
       tax effect of $282,000) in the year ended December 31, 1995.

            The amounts recognized in the December 31, 1997 and 1996 balance
       sheets for Canadian operations were as follows (in thousands):


                                                         December 31
                                                                         
                                                     1997           1996 
        Accumulated postretirement benefits
         obligation:
             Retirees                                $825           $885
        Fully eligible active participants            242            323
        Total accumulated postretirement benefits
         obligation                                 1,067          1,208
        Unrecognized net loss                        (282)          (446)
        Accrued postretirement benefit obligation    $785           $762  


        Net periodic postretirement benefit costs  for Canadian operations
        for  1997, 1996  and 1995  included the  following components  (in
        thousands):

                                                      1997   1996    1995
        Service cost - benefits earned during 
         the period                                   $ 22   $ 10    $ 13
        Interest cost                                   93     45      61
        Amortization of gain (loss)                     30    (17)      -
        Net periodic postretirement benefit cost     $ 145   $ 38    $ 74


            For measuring the post-retirement benefits obligation, an 8%
       annual rate of increase in the health care rates was assumed for the
       next 3 years and 6% per year thereafter.  Increasing the annual rate
       of increase in the health care rates by one percentage point in each
       year would increase the accumulated post-retirement benefits
       obligation by $97,000 and would increase the periodic post-retirement
       benefits cost by $22,000.  The group life insurance premiums are not
       assumed to be subject to increase.  An assumed discount rate of 8% was
       used.

            Unrecognized gains and losses are amortized on a straight-line
       basis over the average remaining service period of active
       participants.

            The accrued postretirement benefits obligation has been recorded
       in the Company's balance sheet as follows (in thousands):


                                                   December 31
                                                   1997    1996

                    Accrued expenses               $138    $130  

                    Accrued postretirement        2,412   2,429
                                                 $2,550  $2,559


       11.  Related Party Transactions

            The Company purchased combined totals of $3,130,000, $3,740,000
       and $4,320,000 of products from  its affiliates, Elektroschmelzwerk
       Kempten GmbH, and its Norwegian joint venture during 1997, 1996 and
       1995, 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, 1997, 1996 and 1995 were $366,000, $428,000 and $370,000,
       respectively.  Total minimum lease payments, at December 31, 1997,
       under operating leases are summarized as follows (in thousands):


                               1998         278,000
                               1999          90,000
                               2000           7,500

                                           $375,500


            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 is
       also party to a separate royalty agreement which covers production of
       specialty product for the refractory market, and expires April 30,
       2001.  Royalty expense in U.S. dollars amounted $0, $419,000 and
       $725,000 in years ended December 31, 1997, 1996 and 1995,
       respectively. 

       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.

                 In order to comply with the Consent Order and complete
                 facility improvements, the Company expects to incur capital
                 costs of up to $14,000,000.  As of December 31, 1997, the
                 Company has incurred approximately $13,064,000 of capital
                 costs related to the facility improvements.  The remaining
                 costs are expected to be incurred in the first quarter of
                 1998.   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 rather than capital expenditures.  Based
                 upon current known information the Company estimates the
                 costs associated with achieving  compliance with these
                 limits would range from $4 to $5 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 Company believes that it has meritorious defenses to the
                 allegations, and it intends to vigorously defend against the
                 charges.

                 In 1994, the U.S. Defense Logistics Agency (the "DLA")
                 temporarily suspended the Company from contracting with the
                 U.S. Government under procurement or non-procurement
                 programs.  During 1997, the Company and the DLA entered into
                 a two-year Administrative Agreement which lifted the
                 suspension.

                 (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 alleges that the Thorold, Ontario
                 facility is in the possession of technology that was
                 provided in 1990 to Exolon-ESK Company to produce MagChrome
                 and Fused Magnesium Oxide and has refused to pay further
                 royalty payments.  International Oxide Fusion Inc. claims
                 damages for loss of royalty payments from the number 4
                 furnace.  Further, International Oxide Fusion alleges that
                 number  6 furnace, which was designed in 1996, utilizes the
                 International Oxide Fusion's 1990 furnace design technology
                 and seeks royalty payment.  Exolon-ESK Company and Exolon-
                 ESK Company of Canada, Ltd. have filed a Statement of
                 Defense and Counterclaim against International Oxide Fusion
                 Inc., Edward J. Bielawski, Robert Thiel (the principals of
                 International Oxide Fusion Inc.), Thomas Farr and Fusion
                 Unlimited (Niagara) Inc. which was issued in January, 1997
                 in Toronto, Ontario.  The Plaintiffs originally sought $182
                 million as damages, which management considers to be beyond
                 any reasonable understanding.  The Company's counterclaim is
                 in the amount of approximately $ 10 million.  A motion for
                 summary judgment on royalty payments for furnace number 4
                 was decided against the Company in December 1997 and the
                 Company must now pay back royalties of approximately
                 $220,000 which the Company has accrued at December 31, 1997. 
                 A further expedited trial was ordered on the remaining
                 claims and counterclaim.  It is the opinion of management
                 that the number 6 furnace does not use the same technology
                 as 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 arises out of a
                 1985 contract in connection with a crane and its runway
                 system.  The Company is seeking $2 million in damages for
                 negligence and punitive damages.  A Statement of Defense has
                 been filed by the defendants.

                 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 expected to be held in early 1998. 
                 The action remains ongoing against various other Defendants.

       14.  Fair Value of Financial Instruments

            The carrying amounts reported in the Company's balance sheets for
       cash and restricted cash equivalents approximate fair value.  The
       carrying amounts reported in the Company's balance sheets for long-
       term debt, including current portion, approximate fair value, as the
       underlying long-term debt instruments are comprised of notes that are
       repriced on a short-term basis, except for a fixed rate industrial
       revenue bond for which the interest rate approximates current interest
       rates for similar borrowings.  

            At December 31, 1997 the Company had open currency forward
       contracts to purchase Canadian dollars with a stated, or notional,
       value of approximately $1,700,000.  The fair value of the underlying
       currency based upon the December 31, 1997 exchange rate was
       approximately $1,650,000.

       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):

                                                     1997     1996     1995
        Numerator:
            Net income                             $  5,254 $  6,080  $3,462

            Preferred stock dividends                  (44)     (32)    (54)
            Net income available to common         $  5,210 $  6,048  $3,408
             stockholders

        Numerator for basic earnings per share:

            Common stockholders (50%)                 2,605    3,024   1,704
            Class A common stockholders (50%)         2,605    3,024   1,704

                                                      5,210    6,048   3,408
            Effect of diluted securities -               44       32      54
              preferred stock dividends

        Net income available to common
         stockholders after assumed                $  5,254 $  6,080  $3,462
         conversion of preferred stock
        Numerator for diluted earnings per share:

            Common stockholders (50%)              $  2,627 $  3,040  $1,731
            Class A common stockholders (50%)         2,627    3,040   1,731

                                                   $  5,254 $  6,080  $3,462
        Denominator:
          Common stock:
            Denominator for basic earnings per
             share - weighted average shares        481,995  481,995 481,995
            Effect of dilutive securities -          21,785   21,785  21,785
             convertible preferred stock
            Denominator for diluted earnings per
             share - adjusted weighted average 
             shares and assumed conversions         503,780  503,780 503,780

          Class A common stock:
            Denominator for basic earnings per
        share - weighted average shares             512,897  512,897 512,897

            Effect of dilutive securities -          21,785   21,785  21,785
             convertible preferred stock

            Denominator for diluted earnings per
             share - adjusted weighted average 
             shares and assumed conversions         534,682  534,682 534,682
        Basic earnings per share:
          Common stock                                $5.41    $6.27   $3.54
          Class A common stock                        $5.08    $5.90   $3.32
        Diluted earnings per share:
          Common stock                                $5.21    $6.03   $3.44
          Class A common stock                        $4.91    $5.69   $3.24


       16.  Quarterly Financial Data (unaudited)

            Summarized quarterly financial data for 1997 and 1996 is as
       follows:

                                                          Quarter

          (thousands of dollars except per      First   Second  Third   Fourth
          share amounts)                                    

          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                           $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 Share                         $1.30    $1.45   $1.33   $1.00 

          Year Ended December 31, 1996

          Net Sales                           $19,846  $19,739 $18,903 $18,971
          Gross Profit Before Depreciation      4,543    4,695   4,274   4,327
          Net Income                          $ 1,410  $ 1,604 $ 1,074  $1,992

          Basic Earnings Per Common Share       $1.45    $1.65   $1.10   $2.07 

          Basic Earnings  Per Class A 
           Common Share                         $1.36    $1.55   $1.04   $1.95 


       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

            The Board of Directors consists of six members, three of whom are
       elected by the outstanding shares of Common Stock and Series A
       Preferred Stock voting as a class, and three of whom are elected by
       the outstanding shares of Class A Common Stock and Series B Preferred
       Stock voting as a class.

            The Directors currently elected by the shares of Common Stock and
       of the Series A Preferred Stock are Brent D. Baird, Theodore E. Dann,
       Jr. and Patrick W.E. Hodgson (such persons are hereinafter referred to
       as  Common Directors,  and the individuals currently elected by the
       shares of Class A Common Stock and Series B Preferred Stock are
       hereinafter referred to as  Wacker Directors ).  The Wacker Directors
       are Craig Rogerson, Dr. Bernhard Frank and Dr. Hans Herrmann.

            The following table contains information relating to the
       Company's Directors.  Such information and the information with regard
       to beneficial ownership of securities have been furnished to the
       Company by the respective directors.
                                                Shares of        Shares of
                                                the              the 
                                                Company's        Company's
                                                Common           Series A 
        Name and Principal                      Stock Owned      Preffered
        Occupation                              Benefi-          Stock Owned 
                                       Year     cially           Benefi-
                                       First    as of            cially as  
                                       Became   March 16,  % of  of March   % of
                                  Age  Director 1998      Class  16, 1998  Class
                                                              
        Theodore E. Dann, Jr.      44  1986     90,800(1)  18.8     --      --
          Chairman of the                      
        Company's Board of
        Directors since June 1,
        1992; Corporate Secretary
        of the Company from
        January 1, 1987 through
        June 1, 1992; Chairman 
        of Buffalo Technologies
        Corp., from April 11,
        1994 to June 1997;
        President of Buffalo
        Technologies Corp. since
        June 1997;
        Secretary/Treasurer,
        Director and Corporate
        Attorney for Ferro Alloys
        Services, Inc., since
        1985; Director of First
        Carolina Investors, Inc.

        Brent D Baird              59   1994    96,900(2)  20.1     --      --
          Private investor,                    
        Chairman of First
        Carolina Investors, Inc.;
        Director of First Empire
        State Corporation (bank
        holding company),
        Merchants Group, Inc.,
        Oglebay Norton Company
        and Todd Shipyards
        Corporation; Prior to
        1992 was a limited
        partner of Trubee,
        Collins & Co., a member
        of the New York Stock
        Exchange, Inc.


        (1)  See footnote (3) under table of more than 5%
             stockholders, under Item 12.

        (2)  See footnote (2) under table of more than 5%
             stockholders, under Item 12.  Includes 1,300
             shares owned by Mr. Baird, 14,000 shares owned
             by Aries Hill Corp., 18,800 shares owned by
             members of Mr. Baird's immediate family who
             share his household but as to which he has no
             voting or investment power, 5,700 shares owned
             by The Cameron Baird Foundation and 57,100
             shares owned by First Carolina Investors, Inc.

        Patrick W.E. Hodgson       57  1991    77,270(3)  27.9   18,334    94.7
          President, Cinnamon             
        Investments, London,
        Ontario, investment firm,
        since 1989; Chairman of
        Todd Shipyards, Inc.,
        since Feb. 1993; Chairman
        Scotts Hospitality 1994-
        1996; Director, First
        Empire State Corp., First
        Carolina Investors, Inc.,
        Versacold, Inc., and
        Scott's Restaurants, Inc.


        Craig A. Rogerson          41  1997    --       --      --      --
          President, Wacker
        Silicones Corporation
        since April 1997; Vice
        President and General
        Manager of Fibers
        Division, Hercules
        Chemical Specialties
        Company, Hercules, Inc.
        from 1996-1997; Sales
        Director, Americas, for
        the Paper Technology
        Division of the Hercules
        Chemical Specialties Co.
        from 1995-1996; Business
        Director, Absorbents &
        Textile Products Group
        from 1992-1995;
        Operations Director,
        Absorbents & Textile
        Products Group from 1991-
        1992.  Director, Wacker
        Silicones Corp., Wacker
        Chemical Holding Corp.,
        Wacker Chemical U.S.A.,
        and Wacker Biochem Co.

        (3)  Includes 77,270 shares owned by Cinnamon Investments
             which Mr. Hodgson is a director.  See footnote (2) under
             table of more than 5% stockholders, under Item 12.


        Dr. Hans Herrmann          62  1986    --       --      --      --
          A Managing Director of
        Elektroschmelzwerk
        Kempten GmbH of Germany
        since 1986; Vice
        President of Wacker-
        Chemitronic GmbH, a
        wholly-owned subsidiary
        of Wacker Chemie GmbH,
        1982-86; Executive Vice
        President and General
        Manager of Wacker
        Siltronic Corporation, a
        wholly-owned subsidiary
        of Wacker Chemical
        Corporation, 1978-82.
                                      

        Dr. Bernhard Frank         54  1997    --       --      --      --
          Vice President Finance
        and Administration Wacker
        Silicones Corporation
        since 1997; Vice
        President Administration
        of Wacker-Chemie GmbH,
        Cologne Plant, West
        Germany Chemicals from
        1990-1996.


       Item 11.  Executive Compensation

            The Company's directors, other than the Chairman, receive from
       the Company an annual retainer fee of $5,000, and $1,500 for each
       meeting of the Board or meeting of a committee of the Board they
       attend, but not to exceed $1,500 for any one day. Director fees
       payable to Wacker Directors for 1997 were paid to Wacker Chemical
       Corporation.  The Chairman, Mr. Dann, receives an annual retainer fee
       of $50,000, plus the meeting fees received by the other directors. 

       Compliance with Section 16 of the Securities Exchange Act

            Under Section 16 of the Securities Exchange Act of 1934, as
       amended, directors, executive officers and persons who own more than
       10% of the Company's Common Stock are required to report their
       ownership of equity securities of the Company, and any changes in that
       ownership to the Securities Exchange Commission and to the Company. 
       Based solely upon a review of reports furnished to the Company (the
       "Section 16(a) Reports") by such persons on Forms 3, 4 or 5 for the
       year ended December 31, 1997, there were no omissions from or late
       filings of Section 16(a) Reports. 
        


       Executive Officers 

            The executive officers of Exolon-ESK Company for 1998 are as

       follows:


               J. Fred Silver  ....     President and Chief Executive
                                        Officer (January 1997-August 1997)
               Robert Rieger .....      President and Chief Executive
                                        Officer (September 1997 - present)
               Michael H. Bieger ...    Chief Finance Officer and Vice
                                        President-Finance
               Kersi Dordi ......       Vice President Aluminum Oxide
                                        & Specialty Products
               Armand Ladage .....      Vice President Silicon Carbide
               John L. Redshaw ....     Vice President of Sales & Marketing
               Nancy E. Gates, Esq.     Secretary

            The business backgrounds of the Company's executive officers are
       as follows:  

            Mr. Rieger, age 47, has been the President and Chief Executive
       Officer since September, 1997.  He served as Managing Director of
       Zircon Worldwide, for Cookson Matthey Ceramics plc, London, England, 
       from 1994 to 1997, and as President of TAM Ceramics, Inc., a
       subsidiary of Cookson Group plc, Niagara Falls, New York from 1985 to
       1994.  From 1979 to 1985 he served TAM Ceramics in various vice
       presidential and other managerial positions.

            Mr. Silver, age 52, was the President and Chief Executive Officer
       from February 15, 1996 through August 15, 1997.  From April 26, 1995
       to February 15, 1996 he was a member of the Company's Board of
       Directors.  He served as President of Carborundum Abrasives Co. from
       1981 through 1992 and President of Time Release Sciences, Inc., a foam
       manufacturer since January, 1993.

            Mr. Bieger, age 41, has been the Chief Financial Officer of the
       Company since August, 1996.  He served as President and Chief
       Financial Officer of Perry's Ice Cream in Akron, New York from 1990-
       1994 and as a management consultant for SiGMA Consulting from March of
       1994 through July 1996.  He is a Certified Public Accountant in the
       State of New York.

            Mr. Dordi, age 49, has served as a Vice President of Aluminum
       Oxide & Specialty Products Manufacturing since October 1995 and has
       served as the General Manager of the Company's Canadian subsidiary,
       Exolon-ESK Company of Canada, Ltd., since September 1992.  In January
       1995, he became a member of the Company's Operating Committee and in
       March 1995 was appointed as an executive officer on the Operating
       Committee.  From November 1990 to September 1992, he served as the
       Plant Manager for the Company's Thorold, Ontario plant, and from 1986
       to November of 1990, he served the Company in various technical and
       managerial capacities.

            Mr. Ladage, age 44, has served as a Vice President Silicon
       Carbide since October 1995.  In January 1995, he became a member of
       the Company's Operating Committee and in March 1995 was appointed as
       an executive officer on the Operating Committee.  He served as the
       Plant Manager of the Company's Hennepin, Illinois operations since
       1978.

            Mr. Redshaw, age 43, has served as Vice President of Sales and
       Marketing since October 1995.  In January 1995, he became a member of
       the Company's Operating Committee, and in March 1995 was appointed as
       an executive officer on the Operating Committee.  He has served as
       Metallurgical Sales and Marketing Manager for the Company since 1989.

            Ms. Gates, age 33, has been the Corporate Secretary since
       February 29, 1996.  Since February 29, 1996, she has been employed as
       the Company's in-house counsel.  From 1990 to 1996, Ms. Gates was a
       corporate attorney at the law firm of Magavern, Magavern, & Grimm,
       LLP, Buffalo, New York.

       Compensation of Executive Officers 

            The following Summary Compensation Table sets forth information
       concerning compensation for services in all capacities for the Company
       and its subsidiaries for the fiscal years ended December 31, 1997,
       1996, and 1995 of those persons who were, at December 31, 1997, (i)
       the chief executive officer of the Company and (ii) executive officers
       of the Company and its subsidiaries during 1997 whose annual base
       salary and bonus compensation exceeded $100,000, (collectively, the
       "Named Officers"). 

       Summary Compensation Table 


                                   Annual Compensation

           Name and
           Principal                                            All Other
           Position            Year     Salary       Bonus    Compensation
                                                                    (1)
           Robert Rieger       1997     $55,576     28,334         $6,053
           President and
           Chief Executive
           Officer
           (effective
           September 1,
           1997)

           J. Fred Silver      1997    $103,000    $76,125        $11,543
           President and
           Chief Executive
           Officer
           (effective
           2/15/96 through
           August 15, 1997)

           Kersi Dordi         1997     $97,000    $47,530        $15,270
           Vice President
           Aluminum Oxide &    1996     $91,000    $45,500        $13,166
           Specialty
           Products            1995     $80,000    $45,000         $8,216



           Armand Ladage       1997     $90,000    $45,000        $15,085
           Vice President
           Silicon Carbide     1996     $85,000    $42,500        $13,738

                               1995     $80,000    $45,000         $7,545


           John L. Redshaw     1997     $97,000    $48,500        $14,531
           Vice President of
           Sales & Marketing   1996     $91,000    $45,500        $13,858

                               1995     $85,000    $45,000         $5,077



           Michael H. Bieger   1997     $93,000    $46,500        $14,251
           Chief Financial
           Officer             1996     $36,125    $18,750         $4,383



            (1) Includes matching contributions made by the Company under the
       Company's Retirement and Savings Plan for U.S. Salaried Employees (the
       "401(k) Plan").  Also includes premiums paid by the Company on term
       life insurance, amounts accrued under the Company's Retirement Plan
       for U.S. Salaried Employees and amounts paid under a car allowance
       policy.

       Compensation (Executive) Committee Interlocks and Insider
       Participation 

            Elektroschmelzwerk Kempten GmbH ("Kempten") is a subsidiary of
       Wacker Chemie GmbH ("Wacker Chemie"), which is the owner of all of the
       outstanding stock of Wacker Chemicals (USA),  Inc. ("Wacker"), and
       Wacker is the owner of all of the Company's outstanding Class A Common
       Stock and Series B Preferred Stock.  The Company is the successor to a
       merger of ESK Corporation (wholly owned subsidiary of Wacker) into The
       Exolon Company which was effected on April 27, 1984. Pursuant to an
       exclusive distributorship and sales representation agreement which was
       entered into with Kempten at the time of the merger, the Company
       purchased $1,989,000 and $2,778,000 of certain products from Kempten,
       during 1997 and 1996, respectively. 

            The Company and Kempten maintain a joint patent covering certain
       technology developed and implemented at the Company's Hennepin
       facility and are joint applicants with respect to another such patent. 
       The patent and patent application relate to joint ownership rights in
       the subject technology. 

            Dr. Hans Herrmann, who is Managing Director of Kempten, and Craig
       Rogerson, who is the President of Wacker Chemicals (USA), Inc.
       (another wholly owned subsidiary of Wacker Chemie), serve on the
       Executive Committee.

       Item 12.  Security Ownership of Certain Beneficial Owners and
                 Management

            Common Stock and Series A Preferred.  The stock ownership of the
       only persons known to the Company to be the beneficial owners of more
       than 5% of the outstanding shares of the Common Stock and of the
       Series A Preferred Stock as of March 16, 1998, and such stock
       ownership of all directors  and officers of the Company as a group as
       of that date are as follows: 


                                                           
                                       Shares                          Percent
                                         of                Shares of     of
              Name & Address           Common    Percent   Series A    Outstand
               of Beneficial            Stock      of      Preffered     ing
                   Owner              Benefi-   Outstand-  Stock       Series A
                                       cially      ing     Benefi-    Preferr-
                                        Owned     Common   cially         ed
                                         (1)      Stock    Owned (1)    Stock

      Patrick W.E. Hodgson, et al.    196,430(2)   40.8       18,334    94.7
      60 Bedford Road - 2nd Floor           
      Toronto, Ont., Canada M5R 2K2

      Ferro Alloys Services, Inc. .   90,800(3)     18.8          ---     ---
      Suite 463                              
      Carborundum Center
      Niagara Falls, NY 14303

      The Exolon-ESK Company of         25,000      5.2          ---     ---
      Canada Ltd. .........
      Consolidated Pension Plan
      Reg. No. C-6808
      181 Queen Street
      Thorold, Ont., Canada L2V 5A9

      Edward J. Bielawski, et al. .   30,600(4)     6.4          ---     ---
      5150 Dorchester Rd., Unit 15           
      Niagara Falls, Ont., Canada
      L2E 6Z3

      William J. Burke, III, et al.   30,370(5)     6.3          ---     ---
      111 Devonshire Street                  
      Boston, MA 02109
  
      All Directors and Officers as   287,230(6)   59.6       18,334    94.7
      a group (12 persons)

       (1)  The beneficial ownership information presented is based upon
            information furnished by each person or contained in filings made
            with the Securities and Exchange Commission. 
       (2)  Beneficially owned by a group composed of:  Patrick W.E. Hodgson
            (77,270); William J. Magavern II and James L. Magavern, as co-
            executors of the Estate of Samuel D. Magavern (15,260); Brent D.
            Baird (1,300); Aries Hill Corp. (a private holding company whose
            controlling shareholders include Brent D. Baird, Bruce C. Baird,
            Brian D. Baird and Bridget B. Baird) (14,000); Bridget B. Baird,
            as trustee of a family trust (9,800); Jane D. Baird (9,000); The
            Cameron Baird Foundation (a charitable foundation whose trustees
            include Jane D. Baird, Bridget B. Baird, Brian D. Baird, Bruce C.
            Baird and Brenda B. Senturia) (5,700); First Carolina Investors,
            Inc. (a Delaware corporation whose directors include Brent D. 
            Baird, Bruce C. Baird, Patrick W.E. Hodgson, Theodore E. Dann,
            Jr. and H. Thomas Webb) (57,100); William J. Magavern II (5,000);
            and, James L. Magavern (2,000).  Members of the group had sole 
            voting and investment power with respect to 168,706 shares 
            and shared voting and investment power with respect to 27,724 
            shares, and reported that they had agreed to evaluate jointly 
            any proposal presented to the Company's shareholders pursuant 
            to which Wacker Chemical Corporation may acquire all or 
            substantially all of the assets of the Company.
        (3) Owned by Ferro Alloys Services, Inc., a corporation of which
            Theodore E. Dann, Jr., who is Chairman of the Board of the
            Company, is a director, officer and corporate attorney.  Includes
            2,000 shares held in the name of the Estate of Theodore E. Dann
            that are beneficially owned by Ferro Alloys Services, Inc.
        (4) Includes 20,600 shares owned by Theeb, Ltd. ("Theeb") 4,000
            shares owned by Robert C. Thiel, 3,000 shares owned by Mr.
            Bielawski's sister and 3,000 shares owned by his brother all of
            which he has the power to vote.  Theeb is a company organized
            under the laws of Ontario which is controlled by Messrs. Thiel
            and Bielawski (each of whom owns, indirectly, 50% of its
            outstanding stock). 
       (5)  Includes 25,500 shares owned by May and Gannon, Inc., a
            Massachusetts corporation whose directors are  William J. Burke,
            III (who is the President), Ellen Burke Ryan and Helen D. Burke.
       (6)  Except as otherwise indicated above, members of the group have
            sole voting and investment power with respect to such shares. 

            Beneficial Owner of Class A Common Stock and Series B Preferred
       Stock.  The stock ownership of the only beneficial owner of the
       Class A Common Stock and Series B Preferred Stock of the Company as of
       March 16, 1998 is as follows: 


                                                                    Shares of
                                                                     Series B
                                                     Shares of      Preferred
                                                  Class A Common      Stock
                                                       Stock          Benefi-
                                                   Beneficially       cially
                                                       Owned          Owned
                    Name and Address                  (Percent       (Percent
                    of Beneficial                     of Class       of Class
                        Owner                        Outstanding)   Outstanding)

        Wacker Chemicals (USA), Inc........        512,897 (100%)  19,364 (100%)
        c/o Wacker Chemical Holding                                   
        Corporation
        3301 Sutton Road
        Adrian, MI  49221-9397

       Item 13.  Certain Relationships and Related Transactions

            A  royalty agreement with International Oxide Fusion, Inc.
       ("IOF") which covers the production of specialty product for
       refractory markets exists until April 30, 2001, but is currently being
       litigated in Ontario, Canada for breach of contract.  No royalties
       were paid by the Company under the agreement in 1997.  Royalties
       amounted to  and $419,000 in the twelve months ended December 31,
       1996. 

            Edward J. Bielawski, who beneficially owns 6.4% of the Company's
       Common Stock, is the President of IOF.  Theeb is a holding company
       formed under the laws of the Province of Ontario, which is controlled
       by Mr. Bielawski and Robert C. Thiel (each of whom owns, indirectly,
       50% of Theeb's outstanding stock).  Theeb and Messrs. Bielawski and
       Thiel beneficially own in the aggregate 30,600 shares of the Company's
       Common Stock as reported in Item 12. 


                                         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               13

                   Financial Statements:                        14
                        Consolidated Statements of
                         Operations, three years ended
                         December 31, 1997
                        Consolidated Balance Sheets at          15
                         December 31, 1997   and 1996

                        Consolidated Statements of Cash         16
                         Flows, three years  ended December
                         31, 1997

                        Consolidated Statements of              17
                         Changes in Stockholders'
                         Equity, three years ended 
                         December 31, 1997

                        Notes to Consolidated Financial       18-36
                         Statements

                2) Financial Statement Schedule for
                   three years ended 
                   December 31, 1997:

                   II   Valuation and qualifying                51
                   accounts


                   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)  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)
                 Agreement dated January 1,
                 1993.

        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
                 dated July 30, 1997 between
                 Elektroschmelzwerk Kempten
                 GmbH, and the Registrant

        * Incorporated herein by reference.

        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 

        10M      Federal Indictments dated     Exhibit 10M to the
                 February 11, 1994             Report on Form 10-K for
                                               the year ended December
                                               31, 1993*

        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, 1997
                            (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, 1997    $502      $10      ($162)(a)     $350

        Year ended December 31, 1996    $419      $70        $13 (b)     $502

        Year ended December 31, 1995    $309      $110        --         $419

             Allowance for
             slow-moving and
             obsolete inventory

        Year ended December 31, 1997    $297      $101        --         $196

        Year ended December 31, 1996    $136      $161        --         $297

        Year ended December 31, 1995    $136       --         --         $136

       (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 20, 1998           EXOLON-ESK COMPANY


                                By   s/Robert A. Rieger                    
                
                                      Robert A. Rieger, 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/Robert A. Rieger            s/Michael H. Bieger
        Robert A. Rieger,             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 20, 1998


        s/Brent D. Baird
        Brent D. Baird                 Director         March 20, 1998



        s/Craig A. Rogerson
        Craig A. Rogerson              Director         March 20, 1998



        s/Dr. Bernhard G. Frank
        Dr. Bernhard G. Frank          Director         March 20, 1998


        s/Dr. Hans Herrmann
        Dr. Hans Herrmann              Director         March 20, 1998



        s/Patrick W.E. Hodgson
        Patrick W.E. Hodgson           Director         March 20, 1998




                                 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*

        3H       Amendment of Certificate of   Exhibit 3H to the Report
                 Incorporation dated October   on Form 10-Q for the
                 28, 1992                      quarter ended September
                                               30, 1992*

        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)
                 Agreement dated January 1,
                 1993.

        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*

        Exhibit           Description                  Reference
          No.

        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*
        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 

        * Incorporated herein by reference.

        10H      Distributorship Agreement     Exhibit 10H
                 dated July 30, 1997 between
                 Elektroschmelzwerk Kempten
                 GmbH and the Registrant

        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 

        10M      Federal Indictments dated     Exhibit 10M to the
                 February 11, 1994             Report on Form 10-K for
                                               the year ended December
                                               31, 1993*

        22       Subsidiaries of the           Exhibit 22
                 Registrant

        27       Financial Data Schedule       Submitted electronically 

        * Incorporated herein by reference.