United States
                      Securities and Exchange Commission
                            Washington, D.C. 20549


                                  FORM 10-Q


   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
           Act of 1934 For the Quarterly Period ended March 31, 1999
                    
                        Commission File Number 333-34323


                   HYDROCHEM INDUSTRIAL SERVICES, INC. (*)
            (Exact name of registrant as specified in its charter)


                            Delaware                          75-2503906
                (State or other jurisdiction of            (I.R.S. Employer
                    incorporation or organizatio       Identification Number)

                   900 Georgia Avenue
                     Deer Park, Texas                             77536
           (Address of principal executive offices)             (Zip Code)

                                 (713) 393-5600
              (Registrant's telephone number, including area code)


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that the
     Registrant was required to file such reports),  and (2) has been subject to
     such filing requirements for the past 90 days.

                                    Yes X       No


     The  number  of shares of Common  Stock of the  Registrant  outstanding  on
     February  28, 1999 was 100 shares.  The  Registrant's  Common  Stock is not
     registered under the Securities Act of 1933, as amended,  or the Securities
     Exchange Act of 1934, as amended.



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


     * HydroChem  International,  Inc., a wholly owned  subsidiary  of HydroChem
Industrial Services, Inc., is a Co-Registrant. It is incorporated under the laws
of  the  State  of  Delaware.  Its  I.R.S.  Employer  Identification  Number  is
75-2512100.


<PAGE>



                              TABLE OF CONTENTS


Part IFinancial Information

      Item 1Financial Statements

            Consolidated Balance Sheets as of December 31, 1998 and
               March 31, 1999 (unaudited)............................    3

            Consolidated  Statements of  Operations  for each of the three month
               periods ended March 31, 1998 and 1999 (unaudited).....    4

            Consolidated Statement of Stockholder's Equity for the three
               month period ended March 31, 1999 (unaudited).........    5

            Consolidated  Statements  of Cash Flows for each of the three  month
               periods ended March 31, 1998 and 1999 (unaudited).....    6

            Notes to Consolidated Financial Statements (unaudited)...    7

      Item 2Management's Discussion and Analysis of Financial Condition
                 and Results of Operations...........................   11

      Item 3Quantitative and Qualitative Disclosures About Market Risk  16

Part IOther Information

      Item 1Legal Proceedings........................................   17

      Item 6Exhibits and Reports on Form 8-K.........................   17

Signatures...........................................................   21

Exhibit Index........................................................   22






                                       2


<PAGE>



                     HYDROCHEM INDUSTRIAL SERVICES, INC.
                               AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share data)

<TABLE>
<CAPTION>


                                                     December 31,    March 31,
                                                          1998         1999        
                                                     ------------    ----------
   <S>                                              <C>             <C>    
                                   ASSETS
   Current assets:
      Cash and cash equivalents...................  $ 33,775        $    884
      Receivables, less allowance of
          $536 and $833, respectively.............    23,941          38,008
      Inventories.................................     3,902           4,848
      Prepaid expenses and other current assets...     1,714           2,291
      Income taxes receivable.....................       243             243
      Deferred income taxes.......................     1,467           1,837
         Total current assets.....................    65,042          48,111

   Property and equipment, at cost................    81,459          90,716
      Accumulated depreciation....................   (33,322)        (36,032)
                                                     -------         -------
                                                      48,137          54,684

   Intangible assets, net.........................    43,246          70,475
                                                     -------         -------

         Total assets.............................  $156,425        $173,270
                                                     =======         =======

                     LIABILITIES AND STOCKHOLDER'S EQUITY
   Current liabilities:
      Accounts payable............................  $  4,973        $  8,408
      Accrued liabilities.........................    13,193          15,150
      Current portion of long-term debt (Note 3)..       121             162
                                                     -------         -------
         Total current liabilities................    18,287          23,720

   Long-term debt (Note 3)........................   115,996         125,669
   Deferred income taxes..........................     8,626           8,996
   Commitments and contingencies (Note 6)

   Stockholder's equity:
      Common stock, $.01 par value:
         1,000 shares authorized, 100 shares
           outstanding                                     1               1
      Additional paid-in capital..................    16,558          16,558
      Retained deficit............................    (3,043)         (1,674)
      Total stockholder's equity..................    13,516          14,885

         Total liabilities and stockholder's equity $156,425        $173,270
                                                    ========        ========

</TABLE>



                            See accompanying notes.


                                       3


<PAGE>




                     HYDROCHEM INDUSTRIAL SERVICES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                (in thousands)


<TABLE>
<CAPTION>
                                              Three months ended
                                                    March 31,             
                                                    ---------             
                                               1998          1999    
                                               ----          ----    
<S>                                           <C>           <C>
Revenue................................       $40,888       $50,905
Cost of revenue........................        24,885        30,263
                                               ------        ------
   Gross profit........................        16,003        20,642

Selling, general and administrative expense    10,787        12,500
Depreciation...........................         2,193         2,913
                                               ------        ------
   Operating income....................         3,023         5,229

Other (income) expense:
   Interest expense, net...............         2,517         3,268
   Other (income) expense, net.........             3           (42)
   Amortization of intangibles.........           376           634
                                               ------        ------

Income before taxes....................           127         1,369

   Income tax provision (Note 4).......            75            - 
                                               ------        ------

Net income.............................       $    52       $ 1,369
                                               ======        ======
</TABLE>

















                           See accompanying notes.


                                       4


<PAGE>



                     HYDROCHEM INDUSTRIAL SERVICES, INC.
                               AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                                (in thousands)


<TABLE>
<CAPTION>
                                              Additional
                                    Common     Paid-in     Retained
                                     Stock     Capital      Deficit   Total   
                                     -----     -------      -------   -----   
<S>                                   <C>       <C>        <C>       <C> 
Balance at December 31, 1998 ....     $    1    $16,558    $(3,043)  $13,516

   Net income....................          -         -       1,369     1,369
                                       --------  ------     ------    ------

Balance at March 31, 1999 .......     $       1 $16,558    $(1,674)  $14,885
                                       ========  ======     ======    ======

</TABLE>



























                           See accompanying notes.


                                       5


<PAGE>



                     HYDROCHEM INDUSTRIAL SERVICES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
<TABLE>
<CAPTION>
                                                     Three months ended
                                                           March 31,          
                                                           ---------          
                                                      1998         1999  
                                                      ----         ----  
<S>                                                 <C>          <C> 
Operating activities:
   Net income...................................    $    52      $ 1,369
   Adjustments to reconcile net income
       to net cash provided by (used in)
       operating activities:
      Depreciation..............................      2,193        2,913
      Amortization..............................        376          634
      Amortization of deferred financing costs..         85          105
      Deferred income tax provision.............        (63)         -
      Gain on sale of property and equipment....        (26)         (26)
   Changes in operating assets and liabilities,
      net of effects of acquisition:
      Restricted cash...........................      2,858          -
      Receivables, net..........................     (1,187)      (9,027)
      Inventories...............................       (501)        (946)
      Prepaid expenses and other current assets.     (1,223)          66
      Accounts payable..........................      2,808        2,686
      Income taxes payable......................        (34)         -
      Accrued liabilities.......................     (4,052)      (1,764)
                                                     ------       ------
         Net cash provided by (used in)
         operating activities...................      1,286       (3,990)
                                                     ------       ------

Investing activities:
   Expenditures for property and equipment......     (5,781)      (2,021)
   Proceeds from sale of property and equipment.         96           40
   Purchase of assets, net of cash..............          -      (30,867)
                                                     ------       ------
         Net cash used in investing activities..     (5,685)     (32,848)

Financing activities:
   Proceeds from long-term debt, net............          -        4,006
   Debt financing costs.........................       (124)         (59)
                                                     ------       ------
         Net cash provided by (used in)
         financing activities ..................       (124)       3,947
                                                     ------       ------

Net decrease in cash............................     (4,523)     (32,891)
Cash at beginning of period.....................     33,862       33,775
                                                     ------       ------

Cash at end of period...........................    $29,339      $   884
                                                     ======       ======
</TABLE>






                            See accompanying notes.


                                       6


<PAGE>



                     HYDROCHEM INDUSTRIAL SERVICES, INC.
                               AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                March 31, 1999



1. Organization, Formation and Basis of Presentation

      The  consolidated  financial statements  include the accounts of HydroChem
   Industrial  Services, Inc. ("HydroChem") and its  wholly-owned  subsidiaries,
   including   HydroChem   International,   Inc.  ("International").   HydroChem
   generally   conducts   business   outside   the    United    States   through
   International.  (HydroChem  and its subsidiaries  are  hereinafter  sometimes
   referred to either separately  or collectively  as the "Company.")  HydroChem
   is a wholly-owned subsidiary of HydroChem Holding, Inc. ("Holding").

      The Company is engaged in the  business of providing  industrial  cleaning
   services to a wide range of processing  industries,  including  petrochemical
   plants,  oil refineries,  electric  utilities,  pulp and paper mills,  rubber
   plants,  and  aluminum  plants.  This  type of work  is  typically  recurring
   maintenance to improve or sustain the operating  efficiencies  and extend the
   useful lives of process  equipment and facilities.  Services provided include
   high-pressure water cleaning (hydroblasting),  chemical cleaning,  industrial
   vacuuming,  mechanical  services,  waste minimization,  and commissioning and
   other specialized services.

      The accompanying  unaudited  consolidated  financial  statements presented
   herein have been prepared in accordance  with generally  accepted  accounting
   principles for interim financial information and the rules and regulations of
   the Securities and Exchange Commission.  Accordingly, they do not include all
   of the information and disclosures  required by generally accepted accounting
   principles  for  complete  financial  statements.   Certain  information  and
   disclosures  normally included in financial statements prepared in accordance
   with generally accepted accounting principles have been condensed or omitted.
   In the opinion of management,  the accompanying  unaudited  interim financial
   statements  include all  adjustments,  consisting  of only  normal  recurring
   accruals,  necessary  for a fair  presentation  of the results of the interim
   periods. Operating results for the three month interim period ended March 31,
   1999 are not  necessarily  indicative of the results that may be expected for
   the year ending  December 31, 1999.  These unaudited  consolidated  financial
   statements   should  be  read  in  conjunction  with  the  Company's  audited
   consolidated  financial statements included in the Company's Annual Report on
   Form 10-K for the year ended December 31, 1998.

2. Derivative Financial Instruments

      HydroChem has entered into an interest rate swap agreement  dated July 17,
   1998 (the  "Interest  Rate Swap") with a financial  institution to manage the
   interest  rate  exposure of the  $7,500,000  Term Loan (as defined in Note 3)
   with  the  same  financial   institution.   Under  the  Interest  Rate  Swap,
   HydroChem's  effective  fixed  borrowing  rate for the Term Loan is 7.82% per
   annum. The Company is exposed to credit loss in the event of  non-performance
   by  the  financial  institution;  however,  management  does  not  anticipate
   non-performance and, in the event of non-performance,  no material loss would
   be expected.  The Company does not hold or issue  financial  instruments  for
   trading purposes. See Note 3.



                                       7


<PAGE>


3. Long-term Debt

      Long-term  debt at December  31, 1998 and March 31, 1999  consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                                     1998              1999
                                                     ----              ----
      <S>                                          <C>               <C>
      Senior subordinated notes..............      $110,000          $110,000
      Construction loan......................         6,117               -
      Term loan..............................           -               7,500
      Credit facility........................           -               8,331
                                                     -----              -----
      Total long-term debt...................       116,117           125,831
         Less current portion of long-term debt        (121)             (162)
                                                       ----              ---- 
                                                   $115,996          $125,669
                                                   ========          ========
</TABLE>

      HydroChem has outstanding  $110,000,000 of Senior  Subordinated Notes (the
   "Notes"). The Notes mature on August 1, 2007 and bear interest at 10 3/8% per
   annum which is payable semi-annually in arrears on February 1 and August 1 of
   each year. The Notes are  redeemable at the option of HydroChem,  in whole or
   in part,  on or after  August  1, 2002 at  specified  redemption  prices.  In
   addition,  until August 4, 2000, up to 35% of the Notes are redeemable at the
   option of HydroChem with the proceeds from one or more equity  offerings at a
   redemption price of 109.375% of the principal  amount thereof.  All HydroChem
   subsidiaries, including International, are guarantors of the Notes.

      HydroChem is a party to a credit  agreement  dated  December 31, 1997,  as
   amended,  with a financial  institution  for a credit facility which provides
   for unsecured  borrowings  of up to  $25,000,000,  subject to borrowing  base
   limitations (the "Credit Facility"). The term of the Credit Facility is three
   years  and  any  borrowings   thereunder  bear  interest  at  rates  adjusted
   quarterly. At the discretion of HydroChem,  interest rates are based on (i) a
   range from LIBOR plus 1.75% to LIBOR plus  3.00%,  or, (ii) the higher of (a)
   the prime rate, or (b) the Federal Funds Rate plus 0.50%,  plus an applicable
   margin of up to 1.00%.  In addition,  a commitment  fee of 0.25% to 0.50% per
   annum is payable quarterly on the unborrowed  portion of the Credit Facility.
   The  specific  rate within each range  depends upon the  Company's  operating
   performance.  The  Credit  Facility  requires  the  Company  to meet  certain
   customary financial ratios and covenants, and generally restricts the Company
   from pledging its assets. At March 31, 1999, HydroChem's borrowing base under
   the Credit Facility was  $25,000,000,  of which  $3,192,000 had been drawn in
   the form of standby letters of credit,  principally issued in connection with
   the  Company's  property and casualty  insurance  program.  Also at March 31,
   1999,  there  was  $8,331,000  outstanding  under  the  Credit  Facility  and
   available borrowings of $13,477,000.

      For the purpose of financing the land purchase and  construction  costs of
   the Company's new headquarters and operating  facility in the Houston,  Texas
   area,  HydroChem  is a party to a loan  agreement  dated  July 17,  1998,  as
   amended,  with a financial  institution (the  "Construction Loan Agreement").
   The Construction  Loan Agreement  provides for an interim  construction  loan
   (the "Interim  Loan") of up to $7,500,000  which was converted to a term loan
   as of March 31, 1999,  (the "Term Loan").  As with the Interim Loan, the Term
   Loan is  collateralized by first priority liens on the land and improvements.
   Interest  on the  Interim  Loan,  which  was  payable  quarterly,  was at the
   lender's  commercial loan rate less 0.50%. The Term Loan matures on September
   30,  2006.  Under the Term  Loan,  principal  and  interest  are  payable  in
   quarterly  installments  with a final payment of $5,977,000  due at maturity.
   Pursuant to the Interest Rate Swap,  HydroChem's  effective  fixed  borrowing
   rate for the Term Loan is 7.82% per annum.  The  Construction  Loan Agreement
   requires the Company to meet certain customary financial ratios and covenants
   and  generally  restricts the Company from  transferring  or pledging the new
   facility's  assets.  The Company obtained a waiver with respect to one of the
   ratios  for   non-compliance   resulting  from  the  Company's   special  and
   restructuring charges recorded during the quarter ended December 31, 1998. At
   March 31, 1999, HydroChem had borrowed $7,500,000 under the Term Loan and was
   in  compliance  with the  financial  ratios and  covenants  contained  in the
   Construction Loan Agreement.

                                       8

<PAGE>


4. Income Taxes

      The Company files a  consolidated  tax return with Holding.  The Company's
   effective  income  tax rate for the  interim  periods  presented  is based on
   management's  estimate of the Company's effective tax rate for the applicable
   year and differs from the federal  statutory income tax rate primarily due to
   nondeductible  permanent  differences,  state income taxes and changes in the
   valuation allowance of deferred tax assets.

5. Summary Financial Information

      Summary  financial  information for  International  as  consolidated  with
HydroChem is as follows (in thousands):

<TABLE>
<CAPTION>
                                            As of           As of
                                         December 31,      March 31,
                                             1998            1999        
                                        -------------   -------------
      <S>                                  <C>          <C>    
      Current assets...................    $ 1,377      $ 1,712
      Noncurrent assets................        103          175
      Current liabilities..............         68          312
      Noncurrent liabilities...........        -            -
</TABLE>

<TABLE>
<CAPTION>
                                                  Three months ended
                                                        March 31,       
                                                        ---------       
                                                    1998        1999  
                                                    ----        ----  
      <S>                                          <C>        <C>    
      Revenue..........................            $ 567      $ 1,110
      Gross profit.....................              208          422
      Net income (loss)................              (61)         163
</TABLE>

6. Commitments and Contingencies

      The  Company  is a  defendant  in various  lawsuits  arising in the normal
   course of business.  Substantially  all of these suits are being  defended by
   the Company's insurance  carriers.  While the results of litigation cannot be
   predicted with certainty,  management  believes  adequate  provision has been
   made for such claims and the final outcome of such litigation will not have a
   material effect on the Company's consolidated financial position.

      Also, the Company is a defendant in approximately  70 lawsuits  originally
   filed in the 18th  Judicial  District  Court  for the  Parish  of  Iberville,
   Louisiana against Georgia Gulf Corporation  ("Georgia Gulf"), the Company and
   other defendants,  which arose from a chemical exposure incident at a Georgia
   Gulf facility in  Plaquemine,  Louisiana in September  1996.  The suits cover
   claims by approximately 640 non-Company employees present at the facility and
   by  approximately  1,400  persons  who  are  related  to  or  live  with  the
   non-Company  employees.  All of the plaintiffs seek damages for alleged toxic
   exposure resulting from this incident.  All but a few of these suits has been
   removed to the  United  States  District  Court for the  Middle  District  of
   Louisiana.

      Virtually all of the  plaintiffs and each of the defendants in the actions
   pending in federal  court have  agreed upon a  settlement  in  principal.  In
   response,  the court has dismissed these actions subject to  reinstatement if
   the  settlement is not  consummated  by August 18, 1999.  Under this proposed
   agreement,  the Company would pay its share of the settlement in exchange for
   a release from each participating plaintiff or the dismissal, with prejudice,
   of the claims of any plaintiff who does not participate.  Separately, Georgia
   Gulf would indemnify the Company against the claims of  approximately  twenty
   plaintiffs  who are not parties to the agreement in principal and against any
   future claims which may arise in connection with this incident.

      All payments by the Company under this  settlement  in principal  would be
   covered  by  insurance.  Accordingly,  subject to the  consummation  thereof,
   management  believes  that the  resolution of these matters will not have any
   material adverse effect upon the Company's consolidated financial position.
                                       9

<PAGE>


7. Acquisition

      On January 5, 1999, the Company acquired  substantially  all of the assets
   and assumed certain liabilities of Valley Systems, Inc. and Valley Systems of
   Ohio, Inc. (collectively  "Valley"), a regional industrial services provider.
   The  acquisition,  which was effective as of January 1, 1999, was pursuant to
   the terms and  conditions  of a Second  Amended and Restated  Asset  Purchase
   Agreement  dated as of  September  8,  1998.  The assets  acquired  consisted
   primarily of (i) accounts  receivable,  (ii)  property,  plant and equipment,
   (iii)  intangibles,  and (iv) other operating  assets.  The adjusted purchase
   price for the  acquired  assets  was  $30,857,000,  of which  $4,000,000  was
   deposited into escrow.  As part of the transaction,  the Company also assumed
   $2,493,000  in capital lease  obligations  and  $5,594,000 in bank debt.  The
   Company has converted the capital leases to operating  leases and retired the
   bank  debt.  The source of funds for the  purchase  price and  retirement  of
   Valley's bank debt was a combination of cash on hand and borrowings under the
   Credit Facility.

      The acquisition of Valley assets has been accounted for using the purchase
   method  of  accounting.   The  Company's   financial   statements  reflect  a
   preliminary allocation of the purchase price based upon the Company's initial
   valuation.  The excess of the  purchase  price over the fair value of the net
   assets  acquired is being  amortized over periods ranging from 10 to 25 years
   and is estimated as follows (in thousands):

<TABLE>
<CAPTION>
         <S>                                           <C>
         Purchase price (as adjusted).......           $30,857
         Transaction and acquisition costs..             2,101
                                                         -----
                                                        32,958
         Fair value of net assets acquired..             5,048
                                                         -----
         Excess of purchase price over fair value      $27,910
                                                       =======
</TABLE>

      The book value of net assets  acquired was determined to approximate  fair
   value at the date of acquisition. Transaction costs consist primarily of fees
   to attorneys,  accountants and other outside service providers,  and costs of
   transferring  ownership of the acquired assets.  Acquisition  costs primarily
   represent (i) severance and relocation  costs for certain  Valley  employees,
   (ii) expenses  incurred in connection  with the closing or  consolidation  of
   certain Valley facilities, and (iii) certain other costs incurred directly in
   connection with the acquisition.

      The results of  operations  derived from assets  acquired  from Valley are
   included in the Company's  financial  statements  from the effective  date of
   acquisition. Unaudited pro forma consolidated results of operations have been
   prepared as if the  acquisition  of the Valley assets had occurred on January
   1, 1998 and include (in thousands):

<TABLE>
<CAPTION>
                                               Three Months
                                              Ended March 31,
                                                   1998          
                                                   ----          
         <S>                                   <C>       
         Revenue.......................        $   46,753
         Net income....................               114
</TABLE>

      The unaudited pro forma consolidated results of operations presented above
   do not purport to be  indicative  of results that would have occurred had the
   acquisition been in effect for the period  presented,  nor do they purport to
   be indicative of results that will be obtained in the future.


                                       10


<PAGE>

                     HYDROCHEM INDUSTRIAL SERVICES, INC.
                               AND SUBSIDIARIES

                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statement Regarding Forward-Looking Information

      Management's  Discussion  and Analysis  and other items in this  Quarterly
Report on Form 10-Q contain forward- looking statements and information that are
based on management's  beliefs,  as well as assumptions made by, and information
currently  available  to,  management.  When  used in this  document,  the words
"believe", "anticipate", "estimate", "expect", "intend", and similar expressions
are  intended  to  identify  forward-looking  statements.   Although  management
believes that the expectations reflected in such forward-looking  statements are
reasonable,  it can give no assurance that such  expectations will prove to have
been correct.  Such statements are subject to certain risks,  uncertainties  and
assumptions.  Should one or more of these risks or uncertainties materialize, or
should  underlying   assumptions  prove  incorrect,   actual  results  may  vary
materially  from those  anticipated.  The Company  undertakes  no  obligation to
release publicly the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances  after the date hereof or to
reflect the occurrence of unanticipated events.

   For supplemental  information,  it is suggested that "Management's Discussion
and  Analysis  of  Financial  Condition  and Results of  Operations"  be read in
conjunction  with the  corresponding  sections  included in the Company's Annual
Report on Form 10-K for the year ended  December  31,  1998.  The Form 10-K also
includes the Company's  Consolidated  Financial Statements and the Notes thereto
for certain prior  periods,  as well as other  relevant  financial and operating
information.

Results of Operations

   The  following  table sets  forth,  for the  periods  indicated,  information
derived from the Company's consolidated statements of operations, expressed as a
percentage  of revenue.  There can be no assurance  that the trends in operating
results will continue in the future.

<TABLE>
<CAPTION>
                                                   Three months ended
                                                       March 31,         
                                                       ---------         
                                                     1998      1999 
                                                     ----      ---- 
      <S>                                          <C>        <C> 
      Revenue.............................         100.0%     100.0%
      Cost of revenue.....................          60.9       59.4
                                                  ------     ------
         Gross profit.....................          39.1       40.6
      SG&A expense........................          26.3       24.6
      Depreciation........................           5.4        5.8
                                                 -------    -------
         Operating income.................           7.4       10.2
      Other (income) expense:
         Interest expense, net............           6.2        6.4
         Other (income) expense, net......           -         (0.1)
         Amortization of intangibles......           0.9        1.2
                                                 -------     -------
      Income before taxes.................           0.3        2.7
          Income tax provision............           0.2         - 
                                                 -------     -------
      Net income..........................           0.1%       2.7%
                                                 =======     =======

      EBITDA (1)..........................          12.8%      16.0%
</TABLE>
-------
(1)EBITDA is defined as net income plus income tax provision,  interest expense,
depreciation,  amortization,  and other  income  and  expense  reflected  in the
determination of net income.  EBITDA should not be construed as a substitute for
operating  income,  as an indicator of liquidity or as a substitute for net cash
provided by  operating  activities,  which are  determined  in  accordance  with
generally accepted accounting principles.  EBITDA is included because management
believes  that  certain  readers  may find it to be a useful  tool in  analyzing
operating performance,  leverage,  liquidity, and a company's ability to service
debt.
                                       11
<PAGE>


Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
-------------------------------------------------------------------------------
   Revenue.  Revenue increased $10.0 million, or 24.5%, to $50.9 million for the
three months  ended March 31, 1999 from $40.9  million in the prior year period.
The increase in revenue resulted from increases in all service lines,  including
industrial  vacuuming  revenue of $4.0 million,  or 75.9%,  from $5.3 million to
$9.3  million;  hydroblasting  revenue  of $3.6  million,  or 16.4%,  from $22.0
million to $25.7 million; other services revenue of $1.4 million, or 96.0%, from
$1.5 million to $2.9  million;  and chemical  cleaning  revenue of $958,000,  or
7.9%, from $12.1 million to $13.0 million.  The increase in industrial vacuuming
revenue resulted from additional  vacuum trucks placed in service by the Company
in 1998 and  1999,  and the  acquisition  of the  Valley  assets.  Hydroblasting
revenue  increased  primarily  as a result of  certain  large  projects  and the
acquisition  of the  Valley  assets.  The  increase  in other  services  revenue
principally resulted from mechanical services projects,  which the Company began
performing  in April 1998,  and an increased  volume of  commissioning  services
projects. The increase in chemical cleaning revenue principally resulted from an
increase in the volume of projects.

   Gross profit. Gross profit increased $4.6 million, or 29.0%, to $20.6 million
in 1999 from $16.0  million  in the prior  year  period.  Gross  profit  margins
increased from 39.1% to 40.6%. Cost of revenue increased $5.4 million, or 21.6%,
to $30.3 million for 1999 from $24.9 million in the prior year period  primarily
due to the revenue increases described above. Gross profit margins improved,  in
part,  as a result of a cost  reduction  program  which  included,  among  other
things, a reduction in work force that was implemented in late 1998.

   SG&A expense. SG&A expense increased $1.7 million, or 15.9%, to $12.5 million
in 1999 from $10.8  million in the prior year period.  This  increase  primarily
resulted from the  acquisition of the Valley assets and was partially  offset by
the cost  reduction  program  described  above.  SG&A expense as a percentage of
revenue decreased to 24.6% in 1999 from 26.3% in the prior year period.

   EBITDA.  Increased gross profit,  partially offset by increased SG&A expense,
resulted in a $2.9 million, or 56.1%, increase in EBITDA to $8.1 million in 1999
from $5.2 million in the prior year period.  As a percentage of revenue,  EBITDA
increased to 16.0% in 1999, compared to 12.8% in the prior year period.

   Depreciation.  Depreciation  expense  increased  $720,000,  or 32.8%, to $2.9
million in 1999 from $2.2 million in the prior year period and was 5.8% and 5.4%
of revenue,  respectively.  The  increase in  depreciation  expense  principally
resulted from the acquisition of Valley assets and capital  expenditures in 1998
for vacuum trucks and other operating equipment.

   Operating income.  Increased gross profit, partially offset by increased SG&A
and  depreciation  expense,  resulted in an increase in operating income of $2.2
million,  or 73.0%,  to $5.2 million in 1999 from $3.0 million in the prior year
period. As a percentage of revenue, operating income increased to 10.2% in 1999,
compared to 7.4% in the prior year period.

   Interest expense, net. Interest expense, net increased $751,000, or 29.8%, to
$3.3  million  in 1999 from $2.5  million in the prior  year  period.  Increased
interest  expense,  net resulted  from (i) an increase in debt due to borrowings
under the  Construction  Loan  Agreement  beginning in July 1998 and  borrowings
under the Credit  Facility in January  1999 to finance a portion of the purchase
price of the Valley assets,  and (ii) a decrease in interest income due to lower
invested cash balances.

   Amortization.  Amortization expense increased $258,000, or 68.6%, to $634,000
in 1999 from $376,000 in the prior year period.  Increased  amortization expense
resulted from goodwill  incurred in connection  with the  acquisition  of Valley
assets.

   Income before taxes.  For the reasons  described  above,  income before taxes
increased to $1.4 million in 1999 from  $127,000 in the prior year period.  As a
percentage of revenue, income before taxes was 2.7% in 1999, compared to 0.3% in
the prior year period.



                                       12


<PAGE>


   Income tax  provision.  The effective tax rate decreased to zero in 1999 from
59.1% of income before taxes in the prior year period. This decrease principally
resulted from changes in the valuation allowance of deferred tax assets.

   Net  income.  For the  reasons  described  above,  the  Company's  net income
increased  $1.3  million to $1.4  million in 1999 from $52,000 in the prior year
period.


Liquidity and Capital Resources

   The Company principally has financed its operations through net cash provided
by operating  activities,  existing cash balances,  available credit facilities,
and capital  contributions  from  Holdings.  HydroChem  has  outstanding  $110.0
million of Senior  Subordinated Notes (the "Notes").  The Notes mature on August
1, 2007 and bear interest at 10 3/8% per annum which is payable semi-annually in
arrears on February 1 and August 1 of each year. The Notes are redeemable at the
option  of  HydroChem,  in whole  or in part,  on or  after  August  1,  2002 at
specified redemption prices. In addition, until August 4, 2000, up to 35% of the
Notes are  redeemable  at the option of HydroChem  with the proceeds from one or
more equity  offerings at a redemption price of 109.375% of the principal amount
thereof. All HydroChem subsidiaries,  including International, are guarantors of
the Notes.

   HydroChem  is a party to a credit  agreement  dated  December  31,  1997,  as
amended,  with a  financial  institution  for a  credit  facility  (the  "Credit
Facility")  which  provides for  unsecured  borrowings  of up to $25.0  million,
subject to borrowing base limitations.  The term of the Credit Facility is three
years and any borrowings  thereunder bear interest at rates adjusted  quarterly.
At the  discretion  of HydroChem,  interest  rates are based on (i) a range from
LIBOR plus 1.75% to LIBOR plus 3.00%, or, (ii) the higher of (a) the prime rate,
or (b) the Federal  Funds Rate plus 0.50%,  plus an  applicable  margin of up to
1.00%.  In  addition,  a  commitment  fee of 0.25% to 0.50% per annum is payable
quarterly on the unborrowed  portion of the Credit  Facility.  The specific rate
within each range depends upon the Company's operating  performance.  The Credit
Facility  requires the Company to meet certain  customary  financial  ratios and
covenants,  and generally  restricts  the Company from  pledging its assets.  At
March 31, 1999,  HydroChem's  borrowing base under the Credit Facility was $25.0
million,  of which $3.2 million had been drawn in the form of standby letters of
credit,  principally  issued  in  connection  with the  Company's  property  and
casualty  insurance  program.  Also at March 31,  1999,  there was $8.3  million
outstanding under the Credit Facility and available borrowings of $13.5 million.

   For the purpose of financing the land purchase and construction  costs of the
Company's new  headquarters and operating  facility in the Houston,  Texas area,
HydroChem is a party to a loan agreement dated July 17, 1998, as amended, with a
financial institution (the "Construction Loan Agreement"). The Construction Loan
Agreement  provides for an interim  construction loan (the "Interim Loan") of up
to $7.5 million  which was  converted to a term loan as of March 31, 1999,  (the
"Term Loan"). As with the Interim Loan, the Term Loan is collateralized by first
priority liens on the land and improvements. Interest on the Interim Loan, which
was payable quarterly,  was at the lender's commercial loan rate less 0.50%. The
Term Loan matures on  September  30, 2006.  Under the Term Loan,  principal  and
interest  are payable in  quarterly  installments  with a final  payment of $5.9
million  due at  maturity.  Pursuant  to the  Interest  Rate  Swap,  HydroChem's
effective  fixed  borrowing  rate for the  Term  Loan is 7.82%  per  annum.  The
Construction  Loan  Agreement  requires  the Company to meet  certain  customary
financial  ratios  and  covenants  and  generally  restricts  the  Company  from
transferring  or pledging  the new  facility's  assets.  The Company  obtained a
waiver with respect to one of the ratios for  non-compliance  resulting from the
Company's  special and  restructuring  charges recorded during the quarter ended
December 31, 1998. At March 31, 1999,  HydroChem had borrowed $7.5 million under
the Term Loan and was in  compliance  with the  financial  ratios and  covenants
contained in the Construction Loan Agreement.

   For the three months ended March 31, 1999, the Company used net cash of $36.8
million in operating and investing  activities,  which consisted of $4.0 million
used in operating activities and $32.8 million used in investing activities. For
the three  months  ended March 31,  1998,  $4.4  million of net cash was used in
operating and investing activities,  which consisted of $1.3 million provided by
operating activities and $5.7 million used in investing  activities.  Except for
the purchase of the assets of Valley in the current period, investing activities
for both periods consisted primarily of expenditures for property and equipment.



                                       13

<PAGE>


   Expenditures  for property and equipment for the three months ended March 31,
1999 were $2.0  million.  Of this  amount,  $852,000  was used  principally  for
purchases of operating equipment,  $731,000 to implement new field and corporate
information  software and hardware systems,  and $438,000 in connection with the
construction of the new headquarters and operating facility.

   On January 5, 1999, the Company acquired  substantially all of the assets and
assumed certain  liabilities of Valley. The assets acquired consisted  primarily
of  (i)  accounts  receivable,   (ii)  property,  plant  and  equipment,   (iii)
intangibles,  and (iv) other operating  assets.  The adjusted purchase price for
the acquired  assets was $30.9  million,  of which $4 million was deposited into
escrow.  As part of the  transaction,  the Company  also assumed $2.5 million in
capital  lease  obligations  and $5.6  million in bank  debt.  The  Company  has
converted the capital leases to operating  leases and retired the bank debt. The
source of funds for the purchase  price and retirement of Valley's bank debt was
a combination of cash on hand and borrowings under the Credit Facility.

   Management  believes that cash and cash  equivalents  at March 31, 1999,  net
cash expected to be provided by operating  activities  and funds  available from
its existing credit  facilities will be sufficient to meet its cash requirements
for operations and  expenditures  for property and equipment for the next twelve
months and the foreseeable future thereafter.


Impact of Year 2000

   The Year 2000 issue is the result of computer  programs  being  written using
two digits  rather than four digits to define the  applicable  year.  This could
result in a system failure or miscalculation if, for example, a computer program
recognizes  a date of "00" as the year  1900  instead  of 2000.  Management  has
assessed the Year 2000 issue with regard to the Company's internal financial and
operating  systems as well as certain  third  parties with which the Company has
material relationships.

   With  regard to the  Company's  internal  financial  and  operating  systems,
HydroChem has acquired new software and hardware systems which it believes to be
Year 2000 compliant.  These systems recently have been  implemented.  Management
intends to test the new systems for  compliance  by the end of the second fiscal
quarter of 1999.  Although  the  Company has not yet  developed a  comprehensive
contingency plan to address  situations that may result if the Company is unable
to achieve Year 2000 readiness,  the Company's Year 2000  compliance  program is
ongoing and its ultimate  scope,  as well as the  consideration  of  contingency
plans, will continue to be evaluated as new information becomes available. As of
March 31, 1999,  $2.0  million had been  expended in  connection  with these new
software and hardware  systems.  Management  estimates it will ultimately  incur
approximately $2.2 million in connection with these systems.

   As part of its  Year  2000  compliance  program,  management  has  identified
certain third parties with which the Company has material  relationships.  These
parties  are  primarily  large  financial,   telecommunication  and  information
processing entities, vendors, and other third party suppliers.  Certain of these
third  parties have reported to the Company that they are on schedule with their
projects to remediate Year 2000 issues, and that they anticipate being Year 2000
compliant  on a timely  basis.  Management  intends to  continue  to monitor the
progress of these third parties and will develop  contingency  plans during 1999
in the event one or more of these third  parties  fail to  remediate  their Year
2000 issues in such a way as to materially affect the operations of the Company.
Although there can be no assurance, management has no reason to believe that any
Year 2000 issues the  Company  may  experience  with third  parties  will have a
material impact on its operations.

   The Year 2000 issue  involves  significant  risks.  There can be no assurance
that the Company will succeed in implementing its Year 2000 program, potentially
as a result of factors  which are beyond the  Company's  control.  The following
describes  the Company's  most  reasonably  likely  worst-case  scenario,  given
current  uncertainties:  if the Company's  newly acquired  software and hardware
fail the testing phase, or any software application or embedded  microprocessors
central  to  the  Company's  operations  are  overlooked  in the  assessment  or
implementation  phases,  significant  problems could occur  including  delays in
accounting  and financial  reporting.  It is also  possible,  given the numerous
other  uncertainties  that  could  occur,  the  Company's  business,   financial
condition and results of operations


                                       14


<PAGE>


could be adversely  affected.  Management is unable to assess the  likelihood of
such events occurring or the extent of their effect.

   The foregoing Year 2000 discussion contains forward-looking  statements. Such
statements,  including  without  limitation  anticipated  costs and the dates by
which management expects to complete certain actions,  are based on management's
best current estimates,  which were derived utilizing numerous assumptions about
future  events,  including  the  continued  availability  of certain  resources,
representations  received from third parties, 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 ability to
identify and remediate all relevant  information  technology and non-information
technology  systems,  results of Year 2000 testing,  adequate resolution of Year
2000 issues by  businesses  and other third  parties who are service  providers,
suppliers or customers of the Company,  unanticipated system costs, the adequacy
of  and  ability  to  develop  and  implement  contingency  plans,  and  similar
uncertainties.  The forward  looking  statements made in the foregoing Year 2000
discussion  speak only as of the date on which such statements are made, and the
Company  undertakes no obligation  to update any  forward-looking  statements to
reflect events or circumstances after the date on which such statements are made
or to reflect the occurrence of unanticipated events.



                                       15


<PAGE>


                     HYDROCHEM INDUSTRIAL SERVICES, INC.
                               AND SUBSIDIARIES

                   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                              ABOUT MARKET RISK


   The  following  discussion  regarding  the  Company's  market  risk  includes
forward-looking  statements that involve risk and uncertainties.  Actual results
could differ materially from those projected in the forward-looking statements.

   The  Company is  exposed to certain  market  risks  which  include  financial
instruments such as short-term  investments,  trade  receivables,  and long-term
debt.  The  adverse  effects  of  potential  changes in these  market  risks are
discussed below. The sensitivity  analyses  discussed below do not reflect:  (i)
the effects that such adverse changes may have on overall economic activity; or,
(ii) additional  actions  management may take to mitigate the Company's exposure
to such changes.  The Company does not engage in  speculative  transactions  and
does not use derivative instruments or engage in hedging activities,  except for
the Interest Rate Swap which is being utilized in connection with the Term Loan.

   The  Company  provides  industrial  cleaning  services  to a  wide  range  of
processing industries including  petrochemical plants, oil refineries,  electric
utilities,  pulp and paper mills, rubber plants, and aluminum plants. Management
believes the Company's portfolio of accounts receivable is well diversified and,
as  a  result,   its  credit  risks  are  minimal.   Management   evaluates  the
creditworthiness  of the Company's customers and monitors accounts on a periodic
basis,  but  typically  does  not  require   collateral.   The  Company's  trade
receivables  are  primarily  denominated  in U.S.  dollars and are generally due
within 30 days. In general,  trade receivables are collected in a timely manner,
and  historically  bad  debts  have  been  immaterial  and  within  management's
expectations.  Management believes that diversification and timely collection of
accounts receivable reduces associated credit risk.

   The  Company's  surplus cash is placed in overnight  investments  with a high
quality financial institution, in accordance with investment guidelines relative
to  diversification  and maturity to reduce risk and increase  liquidity.  As of
March 31, 1999, the Company had overnight investment deposits in a cash reserves
money market mutual fund totaling $1.5 million.  Due to the short-term nature of
these  investments,  the  carrying  value  equals the market  value.  Management
expects to continue to invest surplus cash amounts in overnight  deposits during
1999 and, as a result, a decrease of 1.0% over current average  investment rates
would have an immaterial effect on interest income.

   As of March 31, 1999, the Company's  outstanding  long-term debt consisted of
the Credit  Facility,  the Term Loan,  and the Notes.  The Notes totaled  $110.0
million,  are due August 1, 2007,  and bear  interest at a fixed rate of 10 3/8%
per annum. As of March 31, 1999, the fair value of the Notes was estimated to be
$94.6 million.

   At the same date,  outstanding  borrowings  under the Credit Facility and the
Term Loan totaled  $15.8  million and  approximated  their fair  values.  At the
discretion of HydroChem,  interest rates under the Credit  Facility are based on
(i) a range from LIBOR  plus 1.75% to LIBOR plus  3.00%,  (ii) the higher of (a)
the prime rate and (b) the  Federal  Funds Rate plus 0.50%,  plus an  applicable
margin of up to 1.00%.  The Term Loan bears  interest  at LIBOR rates plus 1.75%
adjusted quarterly. To protect the Term Loan against interest rate fluctuations,
the Company  entered into the  Interest  Rate Swap which  effectively  fixes the
interest rate at 7.82% per annum.

   Market  risk,  estimated  as a  potential  increase  in  fair  value  of debt
instruments  resulting from a hypothetical  1.0% decrease in interest  rates, is
estimated to not be material to the Company during 1999.




                                       16


<PAGE>


Part II.  Other Information

   Item 1Legal Proceedings

         The  Company is a defendant  in  approximately  70 lawsuits  originally
   filed in the 18th  Judicial  District  Court  for the  Parish  of  Iberville,
   Louisiana against Georgia Gulf Corporation  ("Georgia Gulf"), the Company and
   other defendants,  which arose from a chemical exposure incident at a Georgia
   Gulf facility in  Plaquemine,  Louisiana in September  1996.  The suits cover
   claims by approximately 640 non-Company employees present at the facility and
   by  approximately  1,400  persons  who  are  related  to  or  live  with  the
   non-Company  employees.  All of the plaintiffs seek damages for alleged toxic
   exposure resulting from this incident.  All but a few of these suits has been
   removed to the  United  States  District  Court for the  Middle  District  of
   Louisiana.

         Virtually  all of the  plaintiffs  and  each of the  defendants  in the
   actions  pending in federal court have agreed upon a settlement in principal.
   In response,  the court has dismissed these actions subject to  reinstatement
   if the settlement is not consummated by August 18, 1999.  Under this proposed
   agreement,  the Company would pay its share of the settlement in exchange for
   a release from each participating plaintiff or the dismissal, with prejudice,
   of the claims of any plaintiff who does not participate.  Separately, Georgia
   Gulf would indemnify the Company against the claims of  approximately  twenty
   plaintiffs  who are not parties to the agreement in principal and against any
   future claims which may arise in connection with this incident.

         All payments by the Company under this settlement in principal would be
   covered  by  insurance.  Accordingly,  subject to the  consummation  thereof,
   management  believes  that the  resolution of these matters will not have any
   material adverse effect upon the Company's consolidated financial position.


   Item 6Exhibits and Reports on Form 8-K
         (a)Exhibits

            Exhibit
            Number   Description

            3.1      Certificate  of  Incorporation   of  HydroChem   Industrial
                     Services,  Inc. as amended.  (Exhibit 3.1 to the  Company's
                     Registration  Statement on Form S-4, filed August 25, 1997,
                     is hereby incorporated by reference.)

            3.2      Certificate of  Incorporation  of HydroChem  International,
                     Inc.,   as   amended.   (Exhibit   3.2  to  the   Company's
                     Registration  Statement on Form S-4, filed August 25, 1997,
                     is hereby incorporated by reference.)

            3.3      By-Laws of HydroChem Industrial Services, Inc. (Exhibit 3.3
                     to the Company's  Registration Statement on Form S-4, filed
                     August 25, 1997, is hereby incorporated by reference.)

            3.4      By-Laws of HydroChem  International,  Inc.  (Exhibit 3.4 to
                     the  Company's  Registration  Statement on Form S-4,  filed
                     August 25, 1997, is hereby incorporated by reference.)

            4.1      Purchase Agreement, dated as of July 30, 1997, by and among
                     HydroChem    Industrial    Services,     Inc.,    HydroChem
                     International,   Inc.  and  Donaldson,  Lufkin  &  Jenrette
                     Securities Corporation,  as Initial Purchaser,  relating to
                     the  103/8%  Series A Senior  Subordinated  Notes due 2007.
                     (Exhibit  4.1 to the  Company's  Registration  Statement on
                     Form S-4, filed August 25, 1997, is hereby  incorporated by
                     reference.)

            4.2      Indenture,  dated as of August  1,  1997,  among  HydroChem
                     Industrial Services, Inc., HydroChem  International,  Inc.,
                     as Guarantor, and Norwest Bank, Minnesota, N.A., as


                                       17


<PAGE>


                     Trustee.  (Exhibit  4.2  to  the   Company's   Registration
                     Statement on Form S-4,  filed  August 25,  1997,  is hereby
                     incorporated by reference.)

            4.3      Registration  Rights Agreement dated August 4, 1997, by and
                     among  HydroChem  Industrial   Services,   Inc.,  HydroChem
                     International,   Inc.  and  Donaldson,  Lufkin  &  Jenrette
                     Securities Corporation, as Initial Purchaser.  (Exhibit 4.3
                     to the Company's  Registration Statement on Form S-4, filed
                     August 25, 1997, is hereby incorporated by reference.)

            10.1     HydroChem  Holding, Inc. 1994 Stock  Option  Plan. (Exhibit
                     10.1 to the Company's Registration  Statement on  Form S-4,
                     filed August 25, 1997,is hereby incorporated by reference.)

            10.2     Employment  Agreement  dated December 15, 1993 by and among
                     HydroChem Holding,  Inc.,  HydroChem  Industrial  Services,
                     Inc. and B. Tom Carter, Jr., as amended through December 9,
                     1996. (Exhibit 10.5 to the Company's Registration Statement
                     on Form S- 4, filed August 25, 1997, is hereby incorporated
                     by reference.)

            10.3     Fourth  Amendment to  Employment  Agreement  dated April 9,
                     1998  by  and  among  HydroChem  Holding,  Inc.,  HydroChem
                     Industrial  Services,  Inc. and B. Tom Carter, Jr. (Exhibit
                     10.8 to the  Company's  Form 10-Q,  filed May 14, 1998,  is
                     hereby incorporated by reference.)

            10.4     Secured  Promissory  Note dated  April 30, 1999 from B. Tom
                     Carter, Jr. to  HydroChem  Holding, Inc.  (Filed herewith.)

            10.5     Pledge  Agreement  dated  April 30, 1999  between HydroChem
                     Holding, Inc. and B. Tom Carter, Jr.  (Filed herewith.)

            10.6     Employment   Agreement   dated  November  1,  1992  between
                     HydroChem Industrial Services, Inc. and Gary Noto. (Exhibit
                     10.3 to the Company's  Registration  Statement on Form S-4,
                     filed  August  25,   1997,   is  hereby   incorporated   by
                     reference.)

            10.7     Amendment  dated January 27, 1999 to  Employment  Agreement
                     dated  November  1,  1992  between   HydroChem   Industrial
                     Services,  Inc.  and  Gary D.  Noto.  (Exhibit  10.8 to the
                     Company's  Form  10-K,  filed  March  29,  1999,  is hereby
                     incorporated by reference.)

            10.8     Employment   Agreement   dated  November  1,  1992  between
                     HydroChem  Industrial  Services,  Inc.  and J. Pat  DeBusk.
                     (Exhibit  10.2 to the Company's  Registration  Statement on
                     Form S-4, filed August 25, 1997, is hereby  incorporated by
                     reference.)

            10.9     Employment  Agreement  dated  September  26,  1997  between
                     HydroChem  Industrial  Services,  Inc. and Donovan W. Boyd.
                     (Exhibit 10.10 to the Company's Form 10-K,  filed March 29,
                     1999, is hereby incorporated by reference.)

            10.10    Employment  Offer Letter dated June 3, 1996 from  HydroChem
                     Industrial Services, Inc. to Selby F. Little, III. (Exhibit
                     10.6 to the Company's  Registration  Statement on Form S-4,
                     filed  August  25,   1997,   is  hereby   incorporated   by
                     reference.)

            10.11    Letter  Agreement  regarding  severance compensation dated
                     October 31, 1997 between HydroChem Industrial Services,Inc.
                     and Pelham H. A. Smith. (Exhibit 10.7 to the Company's Form
                     10-Q, filed November 14, 1997,  is  hereby  incorporated by
                     reference.)



                                       18


<PAGE>


            10.12    Form  of   Indemnification   Agreement  entered  into  with
                     directors  and  officers.  (Exhibit  10.8 to the  Company's
                     Amendment No. 1 to the Registration  Statement on Form S-4,
                     filed   October  3,  1997,   is  hereby   incorporated   by
                     reference.)

            10.13    Lease  Agreement  dated December 4, 1979 between  HydroChem
                     Industrial  Services,  Inc.  and  Gracey  Corporation,   as
                     amended  through  May  29,  1996.   (Exhibit  10.7  to  the
                     Company's  Registration Statement on Form S-4, filed August
                     25, 1997, is hereby incorporated by reference.)

            10.14    Credit  Agreement  dated December 31, 1997 among  HydroChem
                     Industrial  Services,  Inc.  and  NationsBank,  N.  A.  and
                     financial  institutions  named  in  the  Credit  Agreement.
                     (Exhibit 10.10 to the Company's Form 10-K,  filed March 30,
                     1998, is hereby incorporated by reference.)

            10.15    Letter  Agreement  dated  March 6,  1998  regarding  Credit
                     Agreement   dated  December  31,  1997  between   HydroChem
                     Industrial  Services,  Inc. and NationsBank,  N.A. (Exhibit
                     10.11 to the Company's Form 10-K,  filed March 30, 1998, is
                     hereby incorporated by reference.)

            10.16    Letter  Agreement  dated August 14, 1998  regarding  Credit
                     Agreement   dated  December  31,  1997  between   HydroChem
                     Industrial  Services,  Inc. and NationsBank,  N.A. (Exhibit
                     10.15 to the Company's Form 10-Q,  filed November 16, 1998,
                     is hereby incorporated by reference.)

            10.17    Amendment  No. 1 dated as of  September  30, 1998 to Credit
                     Agreement  dated as of December 31, 1997 between  HydroChem
                     Industrial Services, Inc., NationsBank,  N.A. and financial
                     institutions named in the Credit Agreement.  (Exhibit 10.16
                     to the  Company's  Form 10-Q,  filed  November 16, 1998, is
                     hereby incorporated by reference.)

            10.18    Amendment  No. 2 dated as of  December  31,  1998 to Credit
                     Agreement  dated as of December 31, 1997 between  HydroChem
                     Industrial Services, Inc., NationsBank,  N.A. and financial
                     institutions named in the Credit Agreement.  (Exhibit 10.19
                     to the Company's Form 10-K, filed March 29, 1999, is hereby
                     incorporated by reference.)

            10.19    Loan  Agreement  dated  July  17,  1998  between  HydroChem
                     Industrial  Services,  Inc. and Bank One,  Texas,  National
                     Association.  (Exhibit  10.15 to the  Company's  Form 10-Q,
                     filed  August  14,   1998,   is  hereby   incorporated   by
                     reference.)

            10.20    Amendment  No.  1  dated  as of  February  2,  1999 to Loan
                     Agreement dated July 17, 1998 between HydroChem  Industrial
                     Services,  Inc. and Bank One, Texas  National  Association.
                     (Exhibit 10.21 to the Company's Form 10-K,  filed March 29,
                     1999, is hereby incorporated by reference.)

            10.21    Extension  Agreement  dated as of February 2, 1999  between
                     HydroChem  Industrial  Services,  Inc. and Bank One, Texas,
                     National Association.  (Exhibit 10.22 to the Company's Form
                     10-K,  filed  March 29,  1999,  is hereby  incorporated  by
                     reference.)

            10.22    International   Swap  Dealers   Association,   Inc.  Master
                     Agreement   and  Schedule   dated  July  17,  1998  between
                     HydroChem  Industrial  Services,  Inc. and Bank One, Texas,
                     National Association.  (Exhibit 10.16 to the Company's Form
                     10-Q,  filed August 14,  1998,  is hereby  incorporated  by
                     reference.)

            10.23    Amended and Restated Asset Purchase Agreement  by and among
                     HydroChem  Industrial  Services, Inc.,  Valley  Systems  of
                     Ohio, Inc. and Valley Systems, Inc. dated


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<PAGE>


                     as of September  8, 1998.  (Exhibit  10.1 to the  Company's
                     Form 8-K, filed January 20, 1999, is hereby incorporated by
                     reference.)

            27.1     Financial Data Schedule.  (Filed herewith.)

   (b)   Reports on Form 8-K.

         The  following  reports  on Form 8-K or 8-K/A  were  filed  during  the
quarter ended March 31, 1999:

            January 20, 1999 - Item 2.  Acquisition or Disposition of Assets

            March 22, 1999 - Item 7.  Financial Statements and Exhibits




                                       20


<PAGE>




                                  SIGNATURES


   Pursuant to the  requirements  of the Securities  Exchange Act of 1934,  each
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                    HYDROCHEM INDUSTRIAL SERVICES, INC.


   Date: May 11, 1999               By:   /s/ Selby F. Little, III   
                                          -------------------------------------
                                          Selby F. Little, III, Executive Vice
                                          President and Chief Financial Officer






                                    HYDROCHEM INTERNATIONAL, INC.


   Date: May 11, 1999               By:   /s/ Selby F. Little, III 
                                          ------------------------------------
                                          Selby F. Little, III, Executive Vice
                                          President and Chief Financial Officer




                                       21


<PAGE>


                                 EXHIBIT INDEX




      10.4  Secured Promissory Note dated April 30, 1999 from B. Tom Carter, Jr.
            to HydroChem Holding, Inc.

      10.5  Pledge Agreement dated April 30,1999 between HydroChem Holding, Inc.
            and B. Tom Carter, Jr.

      27.1  Financial Data Schedule





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