REPORT ON FORM 10-Q
                      For the quarter ended January 2, 1999




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





                              SAFELITE GLASS CORP.
                      (Exact name as specified in charter)




         DELAWARE                                                13-3386709
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)

                1105 SCHROCK ROAD, COLUMBUS, OHIO 43229 (Address,
               including zip code of principal executive offices)

                                 (614) 842-3000
                     (Telephone number, including area code)

        As of January 2, 1999 there were  3,414,345  shares  outstanding  of the
Company's  Class  A  Common  Stock  ($.01  par  value)  and  10,412,638   shares
outstanding of the Company's Class B Common Stock ($.01 par value).






<PAGE>



                      SAFELITE GLASS CORP. AND SUBSIDIARIES

                                      INDEX

                                                                        Page No.

Part I.        Financial Information
               
Item 1.        Financial Statements

               Consolidated Condensed Balance Sheets -
               January 2, 1999 and April 4, 1998.....................      3

               Consolidated Condensed Statements of Operations -
               Three Months Ended January 2, 1999 and January 3, 1998      4

               Consolidated Condensed Statements of Operations -
               Nine Months Ended January 2, 1999 and January 3, 1998       5

               Consolidated Condensed Statements of Cash Flows -
               Nine Months Ended January 2, 1999 and January 3, 1998       6

               Notes to Consolidated Condensed Financial Statements      7 - 8

Item 2.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations....................   9 - 13

Part II.       Other Information

Item 6.        Exhibits and Reports on Form 8-K.......................    14










<PAGE>



                                     PART I.
ITEM 1.        Financial Statements

                      SAFELITE GLASS CORP. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                    (In thousands, except per share amounts)

                                                       January 2,     April 4,
                                                         1999          1998
                                                       ---------     ---------
ASSETS                                                (Unaudited)
CURRENT ASSETS:
    Cash ..........................................   $  7,808       $ 10,254
    Accounts receivable, net of allowance for
      doubtful accounts of $6,119 and $12,622 .....     62,128         62,000
    Inventories ...................................     53,011         50,535
    Other current assets ..........................     26,023         29,798
                                                      --------       --------
           Total current assets ...................    148,970        152,587
PROPERTY, PLANT AND EQUIPMENT - net of accumulated
    depreciation of $62,580 and $72,094 ...........     62,008         61,994
INTANGIBLE ASSETS - net of accumulated amortization
    of $18,484 and $10,933 ........................    290,983        292,325
RESTRICTED CASH - collateralizing bonds closed
    into escrow ...................................     46,400           --
OTHER ASSETS ......................................     19,725         24,873
DEFERRED INCOME TAXES .............................     52,054         44,576
                                                      --------       --------
TOTAL ASSETS ......................................  $ 620,140      $ 576,355
                                                      ========       ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
    Accounts payable ..............................  $  43,127      $  43,480
    Current portion - long term debt ..............     15,542          5,941
    Accrued expenses
        Payroll and related items .................      9,138          9,669
        Self-insurance reserves ...................      7,482          7,018
        Restructuring reserves ....................      7,548         22,390
        Accrued interest ..........................      2,802          8,695
        Other .....................................     12,105         15,075
                                                      --------       --------
           Total current liabilities ..............     97,744        112,268
BONDS CLOSED INTO ESCROW - collateralized by
     restricted cash ..............................     50,447           --
LONG-TERM DEBT - LESS CURRENT PORTION .............    521,618        497,645
OTHER LONG-TERM LIABILITIES .......................      8,831         14,853
STOCKHOLDERS' EQUITY (DEFICIT):
    Preferred stock issued, 8%, $0.01 par value ...          1              1
    Class A common stock issued, $0.01 par value ..         38             38
    Class B common stock issued, $0.01 par value ..        104            104
    Additional paid-in capital ....................    324,878        324,878
    Accumulated deficit ...........................   (372,166)
    Other .........................................    (11,355)       (11,355)
                                                       --------       --------
           Total stockholders' deficit ............    (58,500)       (48,411)
                                                       --------       --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT .......  $ 620,140      $ 576,355
                                                      ========       ========

            See notes to consolidated condensed financial statements.


<PAGE>



                      SAFELITE GLASS CORP. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                 (In thousands)


                                                         Three Months Ended    
                                                     January 2,     April 4,
                                                       1999          1998
                                                     ----------    ---------
                                                    (Unaudited)   (Unaudited)
SALES:
    Installation and related services ............    $ 175,179    $ 108,415
    Wholesale ....................................       10,858       11,654
                                                      ---------    ---------
        Total sales ..............................      186,037      120,069
COST OF SALES ....................................      146,267       85,406
                                                      ---------    ---------
GROSS PROFIT .....................................       39,770       34,663
SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES .....................................       44,926       29,482
RESTRUCTURING EXPENSES ...........................         --          2,865
OTHER OPERATING EXPENSES .........................         --          5,704
                                                      ---------    ---------
OPERATING LOSS ...................................       (5,156)      (3,388)
INTEREST EXPENSE .................................      (11,832)      (7,920)
INTEREST INCOME ..................................          172          385
                                                      ---------    ---------
LOSS BEFORE INCOME TAX BENEFIT ...................      (16,816)     (10,923)
INCOME TAX BENEFIT ...............................        5,610       13,429
                                                      ---------    ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ..........      (11,206)       2,506
EXTRAORDINARY ITEM - Early extinguishment of debt,
    net of tax benefit ...........................         --         (2,835)
                                                      ---------    ---------

NET LOSS .........................................    $ (11,206)   $    (329)
                                                      =========    =========













            See notes to consolidated condensed financial statements.

<PAGE>



                      SAFELITE GLASS CORP. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                 (In thousands)


                                                       Nine Months Ended      
                                                     January 2,     April 4,
                                                       1999          1998
                                                     ----------    ---------
                                                    (Unaudited)   (Unaudited)
SALES:
    Installation and related services ............   $ 621,684    $ 335,041
    Wholesale ....................................      37,372       40,470
                                                     ---------    ---------
        Total sales ..............................     659,056      375,511
COST OF SALES ....................................     488,529      255,900
                                                     ---------    ---------
GROSS PROFIT .....................................     170,527      119,611
SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES .....................................     140,725       85,822
LOSS ON SALE OF SUBSIDIARY .......................        --          5,418
RESTRUCTURING EXPENSES ...........................       4,222        2,865
OTHER OPERATING EXPENSES .........................       3,613        5,704
                                                     ---------    ---------
OPERATING INCOME .................................      21,967       19,802
INTEREST EXPENSE .................................     (34,292)     (21,160)
INTEREST INCOME ..................................         384          975
                                                     ---------    ---------
LOSS BEFORE INCOME TAX BENEFIT ...................     (11,941)        (383)
INCOME TAX BENEFIT ...............................       1,852        6,901
                                                     ---------    ---------
INCOME (LOSS)BEFORE EXTRAORDINARY ITEM ...........     (10,089)       6,518
EXTRAORDINARY ITEM - Early extinguishment of debt,
    net of tax benefit ...........................        --         (2,835)
                                                     ---------    ---------

NET INCOME (LOSS) ................................   $ (10,089)   $   3,683
                                                     =========    =========











            See notes to consolidated condensed financial statements.

<PAGE>



                      SAFELITE GLASS CORP. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                                         Three Months Ended    
                                                     January 2,     April 4,
                                                       1999          1998
                                                     ----------    ---------
                                                    (Unaudited)   (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................   $ (10,089)   $   3,683
Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
   Extraordinary item-early extinguishment of debt         --          2,835
   Depreciation and amortization ..................      17,152        6,697
   Loss on sale of subsidiary .....................        --          5,418
   Change in equity from exercise of stock options         --          2,976
   Deferred income taxes ..........................      (3,055)      (6,946)
   (Gain) loss on disposition of assets ...........         (92)         324
   Changes in operating assets and liabilities:
    Accounts receivable ...........................        (128)       1,777
    Inventories ...................................      (2,476)         545
    Accounts payable ..............................        (196)       5,789
    Restructuring reserves ........................     (13,625)      19,499
    Accrued expenses ..............................      (3,037)      (9,072)
    Accrued interest ..............................      (5,893)      (2,072)
    Other .........................................         313      (20,232)
   Cash flows provided by discontinued operations .        --          7,915
                                                      ---------    ---------
    Net cash flows provided by (used in) operating
     activities ...................................     (21,126)      19,136
                                                      ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures ...........................     (17,142)      (9,623)
   Proceeds from sale of fixed assets .............         323           82
   Net cash transferred upon sale of subsidiary ...        --         (3,407)
   Cash paid in Vistar transaction (net of cash
     acquired) ....................................        --        (68,224)
                                                      ---------    ---------
    Net cash flows used in investing activities ...     (16,819)     (81,172)
                                                      ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of treasury stock .....................        --            (11)
   Payments on long-term debt .....................      (4,176)    (165,680)
   Proceeds on long-term borrowings ...............        --        350,000
   Proceeds from bond issuance ....................      50,447         --
   Bonds closed into escrow collateralized by
     restricted cash ..............................     (46,400)        --
   Borrowings (payments) on revolver, net .........      37,750        7,768
   Capitalized debt issuance costs ................      (2,122)     (11,206)
   Exercise of stock options ......................        --          2,292
   Dividends paid .................................        --        (71,988)
   Redemption of preferred stock ..................        --        (58,250)
                                                      ---------    ---------
    Net cash flows provided by financing activities      35,499       52,925
                                                      ---------    ---------
NET DECREASE IN CASH ..............................      (2,446)      (9,111)
CASH AT BEGINNING OF PERIOD .......................      10,254       16,515
                                                      ---------    ---------
CASH AT END OF PERIOD .............................   $   7,808    $   7,404
                                                      =========    =========
SUPPLEMENTAL DISCLOSURES:
   Cash paid for interest .........................   $  38,362    $  26,614
                                                      =========    =========
   Cash paid for income taxes .....................   $     438    $     289
                                                      =========    =========
   Common and preferred stock issued in merger ....   $ 204,434
                                                                   =========



            See notes to consolidated condensed financial statements.

<PAGE>



                      SAFELITE GLASS CORP. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 1.        General

               The  accompanying   unaudited  consolidated  condensed  financial
               statements include the accounts of Safelite consolidated with the
               accounts of all its subsidiaries.  Financial  information in this
               Quarterly  Report is unaudited but, in the opinion of management,
               reflects any  adjustments  (consisting  only of normal  recurring
               adjustments) that are necessary to fairly present results for the
               interim periods in accordance with generally accepted  accounting
               principles.   Reference  is  made  to   Safelite's   Registration
               Statement on Form S-4, file number  333-21949,  as amended,  that
               includes   information   necessary  or  useful  to  understanding
               Safelite's  business and financial  statement  presentations.  In
               particular,   Safelite's   significant  accounting  policies  and
               practices are presented as Note 1 to the  Consolidated  Financial
               Statements included in that Registration Statement.

               Safelite's   results  for  interim   periods  are  not   normally
               indicative  of  results  to be  expected  for  the  fiscal  year.
               Safelite's  business  is  somewhat  seasonal,  with the first and
               fourth  calendar  quarters of each year  traditionally  being its
               slowest periods of activity. This reduced level of sales combined
               with the Company's  operating leverage has historically  resulted
               in a  disproportionate  decline in  operating  income  during the
               first and fourth calendar  quarters of each year. The severity of
               weather  also has an impact  on  Safelite's  sales and  operating
               income, with severe winter weather generating increased sales and
               income and mild winters generating lower sales and income.

Note 2.        Comprehensive Income

               The Company  adopted  SFAS No. 130  "Reporting  of  Comprehensive
               Income",  as of the  beginning of its fiscal year 1999.  SFAS No.
               130  establishes  standards  for the  reporting  and  display  of
               comprehensive  income  and its  components.  Other  comprehensive
               income of the Company  consists of the change in minimum  pension
               liability net of income tax effect.  SFAS No. 130 does not affect
               the  measurement  of the items  included  in other  comprehensive
               income;  it affects only where those items are  displayed and how
               they are described.

               Comprehensive  income  (loss) was equal to net income  (loss) for
               the  three  months  and nine  months  ended  January  2, 1999 and
               January 3, 1998.



<PAGE>



Note 3.        Bond Issuance and Sale of Qualified Capital Stock

               On  December  18,  1998,  Safelite  completed  an offering of $55
               million  aggregate  principal  amount of  9-7/8%  Series C Senior
               Subordinated Notes due 2006 (the "Notes").  The Notes were issued
               at an offering  price of 91.649% plus accrued  interest  from the
               date of original issuance. One of the terms of the Notes was that
               the net proceeds from the Notes would be held in escrow until the
               Company  received $50 million in net cash  proceeds from the sale
               of Qualified  Capital  Stock (as defined in the Note  Indenture),
               which was to be completed by January 29, 1999.  Accordingly,  the
               net Note  proceeds  were  deposited  into escrow on December  18,
               1998,  pending  completion of the sale of the  Qualified  Capital
               Stock.  These  funds  are  reflected  in  restricted  cash on the
               accompanying balance sheet as of January 2, 1999.

               On December 18, 1998, Safelite also completed an amendment to its
               Bank  Credit  Agreement.  The  amendment  changed  certain of the
               covenants  within  the Bank  Credit  Agreement  to make them less
               restrictive and provided for the use of proceeds from the sale of
               the   Qualified   Capital   Stock  and  the  Notes  to  pay  down
               approximately  $61.4  million in term loans and $35.0  million in
               revolving  credit  borrowings  with no reduction to the revolving
               credit  facility.  One of the terms of the  amendment was that it
               would cease to be effective  after  February 3, 1999, if the sale
               of $50 million of Qualified  Capital  Stock was not  completed by
               January 29, 1999.

               On January 29, 1999,  Safelite  completed the sale of $50 million
               in  Series  A  Convertible  Participating  Preferred  Stock  (the
               "Series A Convertible Preferred Stock"). The Series A Convertible
               Preferred  Stock met the  definition  of Qualified  Capital Stock
               under the Note Indenture.  Accordingly,  on January 29, 1999, the
               proceeds  of the  Notes  were  released  from  escrow  and  these
               proceeds  along with the  proceeds  from the sale of the Series A
               Convertible  Preferred  Stock  were used to repay  the  revolving
               credit borrowing and term loans as described above. Safelite will
               record an extraordinary charge of approximately $4.1 million, net
               of tax benefit of $2.8 million in its quarter ended April 3, 1999
               from the write off of  unamortized  debt issue  costs  related to
               this  amendment  to its Bank Credit  Agreement  and related  debt
               repayments.

               The above transactions  significantly increase Safelite's ability
               to make revolving  credit  borrowings and also reduce fiscal 2000
               and 2001  mandatory term loan  repayments.  Detail of the amended
               term loan  amortization  schedule  can be found in the  Company's
               Current Report on Form 8-K dated December 21, 1998.

Note 4.        Non-Voting 8% Preferred Stock

               At January 2, 1999,  cumulative  undeclared,  unpaid dividends on
               the Company's Non-Voting 8% Preferred Stock were $3.4 million.



<PAGE>



ITEM 2.        Management's Discussion and Analysis of Financial Condition and
               Results of Operations

Vistar Merger and Current Operating Performance

On December 19, 1997,  Safelite acquired Vistar,  the second largest  automotive
glass replacement and repair company in the United States (the "Vistar Merger").
Accordingly, Safelite's results of operations for the three month and nine month
periods ended January 2, 1999 are not directly comparable to results recorded in
prior periods.

As part of the Vistar Merger,  management  went through a process to consolidate
redundant overhead in both field and corporate operations, eliminate overlapping
service center locations and eliminate redundant sales and marketing activities.
As of January  2, 1999 all  actions  required  to  achieve  merger-related  cost
savings have been  completed.  These  consolidation  activities,  however,  took
longer,  and  were  more  disruptive  to  the  business,   than  was  originally
anticipated.  This disruption and delay,  combined with lower overall automotive
glass replacement  volumes, has had an adverse impact on the Company's sales and
operations, particularly in the six months ended January 2, 1999.

Management  continues to devote  substantial  time and attention in an effort to
address  these  issues  and to improve  Safelite's  sales  growth and  operating
efficiencies  to expected  levels.  Many actions were taken in the third quarter
including  continued  training of former Vistar field operations and call center
associates  on  Safelite   systems  and   market-based   operating   strategies,
re-energizing  the field  sales  force  around  specific  plans to grow sales in
targeted customer segments,  and aligning service center and warehouse headcount
with  current  unit  volumes.  In  addition,  certain  changes  were made to key
leadership   positions  in  field  operations,   field  sales  and  call  center
management.  While management believes that these actions will improve sales and
operating  performance,  there can be no assurances  regarding the timing within
which  these  actions may have impact or that the  actions  will  ultimately  be
successful.

Results of Operations

Sales. Sales for the quarter ended January 2, 1999,  increased $66.0 million, or
55% to $186.0 million,  from $120.0 million in the corresponding  quarter of the
prior year.  Installation  and related services for the third quarter grew $66.8
million,  or  62% to  $175.2  million.  Approximately  68% of  this  growth  was
attributable  to service  center  sales  while the  remainder  was  provided  by
increased  network  sales.   Service  center  sales  consist  of  sales  through
company-owned  service centers,  DCC/CTUs and mobile vans. Network sales consist
of sales derived from the Company's  network of independent auto glass providers
which replace or repair auto glass for Safelite under subcontracting agreements.


<PAGE>



Most of the sales growth in installation and related services is attributable to
the Vistar Merger, with improved customer mix also contributing to the increase.
While  sales  have  increased  substantially  over last  year due to the  Vistar
Merger, the Company's focus on the complexities of merger integration activities
has had an adverse impact on post-merger sales growth.  Overall installation and
related  services  unit volumes for the three  months ended  January 3, 1999 are
down 9% from the combined  pre-merger  unit sales volumes of Safelite and Vistar
in the comparable prior year period.

Wholesale  sales for the quarter ended January 2, 1999, fell 7% to $10.9 million
as a result of a 1% decline  in unit sales  further  impacted  by lower  prices.
These  results are  reflective  of the soft market  conditions  currently  being
experienced  in the auto  glass  replacement  market,  and  excess  capacity  in
replacement autoglass production.

For the nine months ended January 2, 1999,  sales increased  $283.6 million,  or
76% to $659.1 million from $375.5  million.  Installation  and related  services
rose  $286.6  million,  or 86% to $621.7  million,  primarily  due to the Vistar
Merger,  higher pricing and improved  customer mix.  Wholesale  sales fell 8% to
$37.4 million for the reasons discussed above.

Gross  Profit.  Gross profit for the quarter  ended  January 2, 1999,  increased
14.7% to $39.8  million,  from $34.7  million in the  comparable  quarter of the
prior year, mainly as a result of increased sales volume from the Vistar Merger.
Gross  profit  margin  decreased to 21% as compared to 29% in the same period of
the prior year as improved  customer mix was more than offset by the higher rate
of growth of network  business  relative to total sales. The gross profit margin
on network sales is substantially  lower than on work performed through Safelite
owned service centers.  Additional gross margin compression occurred as a result
of  decreased  productivity  in  service  center  operations  during  the merger
integration period.

For the nine months  ended  January 2, 1999,  gross  profit was $170.5  million,
reflecting an increase of $50.9 million,  or 43% over the comparable  prior year
period.  Gross profit margin decreased to 26% in the first nine months of fiscal
1999, from 32% in the comparable prior year period,  primarily due to the higher
relative  growth  rate of network  business  and the  decreased  service  center
productivity discussed above.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  rose 52% in the third  quarter of fiscal 1999 to $44.9
million, as compared to $29.5 million in the corresponding  quarter in the prior
year,  mainly as a result of the Vistar Merger. As a percentage of sales for the
quarter  ended January 2, 1999,  selling,  general and  administrative  expenses
remained  flat  at 24% as  merger  synergies  achieved  by  the  elimination  of
overlapping  general and  administrative  functions offset the effects of slower
post-merger sales growth.

For the nine months ended January 2, 1999,  selling,  general and administrative
expenses rose 64% to $140.7 million from $85.8 million in the corresponding nine
months of the prior year.  As a  percentage  of sales for the nine months  ended
January 2, 1999, selling,  general and administrative  expenses decreased to 21%
from the  corresponding  prior year  percentage of 23% due to the achievement of
merger synergies.


<PAGE>



Loss Before Income Taxes.  Loss before income taxes increased to a loss of $16.8
million in the third  quarter of fiscal 1999 from a loss of $10.9 million in the
comparable quarter of the prior year. For the nine months ended January 2, 1999,
loss  before  taxes  increased  to a loss of $11.9  million  from a loss of $0.4
million in the comparable prior year period. In addition to the impact of merger
integration on sales and gross profit described above,  loss before income taxes
in the first nine months of fiscal 1999 was adversely  affected by $13.1 million
in  increased  interest  costs and $7.8  million in  restructuring  and one-time
integration  costs  associated with the Vistar Merger.  Loss before income taxes
for the nine months ended  January 3, 1998  included a $5.4 million loss on sale
of  the  Company's  former   subsidiary,   Lear  Siegler  and  $8.6  million  in
restructuring and one-time integration costs associated with the Vistar Merger.

Income  Taxes.  In the three months and nine months ended  January 2, 1999,  the
Company's  credit  provisions  for income  taxes were  significantly  lower than
income taxes computed using  statutory  rates due to permanent  differences,  of
which the principal item is non-deductible amortization of goodwill.

Net Income  (Loss).  Net loss for the quarter ended  January 2, 1999,  was $11.2
million,  compared with a loss of $0.3 million in the comparable  quarter of the
prior  year.  For the nine  months  ended  January 2,  1999,  net loss was $10.1
million,  down from net income of $3.7 million in the  corresponding  prior year
period.  The  decreases in net income from the prior year were  primarily due to
the  changes  in  loss  before  income  taxes  described  above,  offset  by  an
extraordinary  charge of $2.8 million in the quarter  ended  January 3, 1998 for
early extinguishment of debt.

Liquidity and Capital Resources

Net cash used in operating  activities for the nine months ended January 2, 1999
was  $21.1  million,  an  increase  in cash  usage  of  $40.3  million  from the
corresponding  prior year period.  Excluding the cash flows associated with Lear
Siegler  discontinued  operations  during the nine month period ended January 3,
1998,  the  increase  in cash  usage  of  $32.3  million  was  primarily  due to
restructuring cash payments and higher interest costs associated with the Vistar
Merger.

The Company's  investing  activities consist mainly of capital  expenditures for
new and existing service center and warehouse locations, capacity and efficiency
upgrades to  manufacturing  facilities,  and information  technology  equipment.
Capital  expenditures totaled $17.1 million and $9.6 million for the nine months
ended January 2, 1999 and January 3, 1998, respectively.

Management expects post-integration capital spending levels to approximate $22.0
million annually after the Vistar Merger, which includes maintenance spending of
approximately   $10.0   million   to   $12.0   million   annually.    Additional
integration-related capital expenditures of $3.0 million to $5.0 million in both
fiscal  years 1999 and 2000 are  expected as a result of (i)  converting  Vistar
service  centers  and  mobile  vans to the  Safelite  logo and  format  and (ii)
expansion of certain centralized telephone/dispatch center locations.


<PAGE>



As a result of the Vistar  Merger,  Safelite has  significantly  increased  cash
requirements  for debt service related to the Company's credit  facilities.  The
Company will rely on internally generated funds and, to the extent necessary, on
borrowings  under its revolving  credit facility to meet its liquidity needs. As
of January 2, 1999,  the Company had long-term  borrowings of $537.2 million and
$21.0 million of  availability  under its revolving  credit facility (less $16.4
million in letters of credit outstanding ).

As discussed in Item 1, Note 3 of this  Quarterly  Report,  on January 29, 1999,
Safelite  completed  the sale of $50 million in Series A  Convertible  Preferred
Stock and the net proceeds from the sale of the Notes were released from escrow.
These  funds were used to repay  approximately  $61.4  million in term loans and
$35.0 million in revolving credit borrowings, with no reduction to the revolving
credit  facility.  These  transactions  significantly  increased  the  Company's
ability to make borrowings  under its revolving credit facility and also reduced
fiscal year 2000 and 2001  mandatory term loan  principal  repayments.  Safelite
does not  currently  have plans that would  anticipate  the need to increase its
current credit facilities.

The  ability of the Company to operate its  business,  service its debt  service
obligations  and  reduce  its  total  debt  will  be  dependent  on  the  future
performance of the Company,  which in turn, will be subject to general  economic
conditions  and to financial,  business,  and other factors,  including  factors
beyond  Safelite's  control.  A portion of  Safelite's  debt bears  interest  at
floating rates;  therefore,  its financial  condition is and will continue to be
affected by changes in prevailing interest rates.

Impact of Year 2000

Safelite  has   initiated  a  program  to  prepare  its  computer   systems  and
applications  for the Year 2000 change ("Year 2000").  As part of this program a
team has been assigned to evaluate the nature and extent of the work required to
make  the  Company's  systems,  products,  electronic  linkages  with  insurance
companies and other customers and infrastructure  Year 2000 compliant.  Included
in the scope of the project are computer,  network and communications  hardware,
systems  and  applications   software,   telecommunication  and  point  of  sale
equipment,  "embedded chip" issues within manufacturing and other facilities, as
well as  verification  with key suppliers  and customers as to their  compliance
with the Year 2000 issue.

The assessment phase of the Year 2000 project is approximately 90% complete with
final completion of the assessment  phase scheduled for March 1999.  Remediation
and  implementation  for Year  2000  compliance  is  currently  estimated  to be
approximately  35%  complete  with final  completion  expected  by August  1999.
Completion  of  remediation  testing is  scheduled  for  September  1999,  while
contingency planning is anticipated to be finished by March 1999.

Remediation of systems and  applications  software is being performed by outside
consultants,  "factory  support",  in-house  staff  and  in  some  cases  by the
replacement of packages. Safelite is building an isolated test environment where
systems  will be tested by  resetting  dates to various  points  beyond the year
2000.

<PAGE>



Based on the Company's latest assessments, the total cost of addressing the Year
2000 issue is estimated to be in the range of approximately $2.0 to $3.0 million
with the  majority of these costs  representing  incremental  business  costs to
outside  vendors  and  consultants.  As of  January 2, 1999  approximately  $0.6
million of external  costs have been  incurred.  The Company does not separately
track the  internal  costs  for the Year 2000  project,  with such  costs  being
principally  the related  payroll costs for the Management  Information  Systems
staff.

Surveys of critical  suppliers and vendors are  currently  underway to determine
whether  their  systems  will be  timely  converted.  However,  there  can be no
assurance  that the systems of other  companies on which the Company relies will
be timely converted or that any such failure to convert by another company would
not have an adverse effect on the Company's systems.  Furthermore,  no assurance
can be given that any or all of the  Company's  systems are or will be Year 2000
compliant,  or that the ultimate costs required to address the Year 2000 project
or the impact of any  failure to achieve  Year 2000  compliance  will not have a
material adverse effect on the Company's financial condition.

Forward-Looking Statements

Investors  are cautioned  that certain  statements  contained in this  document,
including but not limited to those under the caption Year 2000 Issues as well as
some  statements  by the  Company  in  periodic  press  releases  and some  oral
statements of Company  officials  during  presentations  about the Company,  are
"forward-looking"  statements  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995 (the "Act").  Forward-looking  statements  include
statements which are predictive in nature,  which depend upon or refer to future
events or  conditions,  which include  words such as  "expects",  "anticipates",
"intends",   "plans",  "believes",   "estimates",  or  similar  expressions.  In
addition,  any statements  concerning  future financial  performance  (including
future  revenues,  earnings or growth  rates),  ongoing  business  strategies or
prospects,  and  possible  future  Company  actions,  which may be  provided  by
management  are  also   forward-looking   statements  as  defined  by  the  Act.
Forward-looking  statements are based on current  expectations  and  projections
about future  events and are subject to risks,  uncertainties,  and  assumptions
about the Company,  economic and market  factors and the industries in which the
Company does business,  among other things.  These statements are not guaranties
of future  performance and the Company has no specific intention to update these
statements.

These forward-looking statements,  like any forward-looking statements,  involve
risks and  uncertainties  that could cause actual  results to differ  materially
from  those  projected  or  anticipated.  Such risks and  uncertainties  include
product demand, regulatory uncertainties, the effect of economic conditions, the
impact of  competitive  products and  pricing,  changes in  customers'  ordering
patterns and costs and expenses  associated with any Year 2000 issues associated
with the Company,  including updating software and hardware and potential system
interruptions. The foregoing list should not be construed as exhaustive.

<PAGE>


                                    PART II.

ITEM 6.        Exhibits and Reports on Form 8-K

               a.     Exhibits

                      Exhibit 3(i) -- Restated Certificate of Incorporation
                      Exhibit 27 -- Financial Data Schedule

               b.     Reports on Form 8-K

                      The  Company  filed a Current  Report  on Form 8-K,  dated
                      December  2,  1998  which  reported  an  extension  of the
                      exchange offer for the Company's senior subordinated notes
                      and that the Company had  initiated  discussions  with its
                      lenders to obtain a Bank Credit Agreement Amendment.

                      The  Company  filed a  Current  Report  on Form 8-K  dated
                      December  21,  1998 which  reported  an  extension  of the
                      exchange  offer  for  the  Company's  senior  subordinated
                      notes,  the  completion of the offering of  $55,000,000 in
                      new senior  subordinated notes and the obtaining of a Bank
                      Credit Agreement Amendment.



<PAGE>