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, 2001

                        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 organization)           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 May
     1, 2001 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
<TABLE>
<CAPTION>


<S>                                                                                                        <C>
Part I.  Financial Information

         Item 1.  Financial Statements

                  Consolidated Balance Sheets as of December 31, 2000 and
                      March 31, 2001 (unaudited).....................................................      3

                  Consolidated Statements of Operations for each of the three
                      month periods ended March 31, 2000 and 2001 (unaudited)........................      4

                  Consolidated Statement of Stockholder's Equity for the three
                      month period ended March 31, 2001 (unaudited)..................................      5

                  Consolidated Statements of Cash Flows for each of the three
                      month periods ended March 31, 2000 and 2001 (unaudited)........................      6

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

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

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk  .......................     12

Part II.      Other Information

         Item 1.  Legal Proceedings..................................................................     13

         Item 6.  Exhibits and Reports on Form 8-K...................................................     13

Signatures...........................................................................................     16

Exhibit Index........................................................................................     17
</TABLE>




                                       2
<PAGE>


                       HYDROCHEM INDUSTRIAL SERVICES, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)


<TABLE>
<CAPTION>
                                                                     December 31,    March 31,
                                                                         2000          2001
                                                                         ----          ----
                                     ASSETS
     <S>                                                              <C>          <C>
     Current assets:
         Cash and cash equivalents ................................   $   6,380    $     953
         Receivables, less allowance of $723 and $954, respectively      39,781       46,818
         Inventories ..............................................       4,467        4,391
         Prepaid expenses and other current assets ................       2,224        2,920
         Income taxes receivable ..................................         328           79
         Deferred income taxes ....................................       1,536        1,263
                                                                      ---------    ---------
              Total current assets ................................      54,716       56,424

     Property and equipment, at cost ..............................     100,419      101,243
         Accumulated depreciation .................................     (53,721)     (55,815)
                                                                      ---------    ---------
                                                                         46,698       45,428

     Intangible assets, net .......................................      96,931       95,741
                                                                      ---------    ---------

              Total assets ........................................   $ 198,345    $ 197,593
                                                                      =========    =========

                      LIABILITIES AND STOCKHOLDER'S EQUITY
     Current liabilities:
         Accounts payable .........................................   $   9,455    $  11,687
         Accrued liabilities ......................................      15,595       11,440
         Current portion of long-term debt (Note 3) ...............       7,858        8,362
                                                                      ---------    ---------
              Total current liabilities ...........................      32,908       31,489

     Long-term debt (Note 3) ......................................     140,350      140,553
     Deferred income taxes ........................................       8,365        8,498
     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
         Accumulated other comprehensive loss .....................          --         (145)
         Retained earnings ........................................         163          639
                                                                      ---------    ---------
         Total stockholder's equity ...............................      16,722       17,053
                                                                      ---------    ---------

              Total liabilities and stockholder's equity ..........   $ 198,345    $ 197,593
                                                                      =========    =========
</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,
                                                             2000         2001
                                                             ----         ----
<S>                                                         <C>          <C>
Revenue ..............................................      $53,439      $59,390
Cost of revenue ......................................       32,264       37,331
                                                            -------      -------
      Gross profit ...................................       21,175       22,059

Selling, general and administrative expense ..........       12,801       13,457
Depreciation .........................................        2,933        2,701
                                                            -------      -------
      Operating income ...............................        5,441        5,901

Other expense:
      Interest expense, net ..........................        4,014        3,930
      Other expense, net .............................           27            5
      Amortization of intangibles ....................          983          995
                                                            -------      -------

Income before taxes ..................................          417          971

      Income tax expense (Note 4) ....................           --          495
                                                            -------      -------

Net income ...........................................      $   417      $   476
                                                            =======      =======
</TABLE>
















                             See accompanying notes.



                                       4
<PAGE>


                       HYDROCHEM INDUSTRIAL SERVICES, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                                 (in thousands)



<TABLE>
<CAPTION>

                                                                    Accumulated
                                                    Additional         Other
                                          Common     Paid-in       Comprehensive   Retained
                                          Stock      Capital           Loss        Earnings      Total
                                          -----      -------           ----        --------      -----

<S>                                    <C>           <C>           <C>             <C>         <C>
Balance at December 31, 2000 .......   $      1      $ 16,558      $     -         $  163      $ 16,722

    Other comprehensive loss .......          -             -         (145)             -          (145)
    Net income .....................          -             -            -            476           476
                                       --------      --------      -------         ------      --------
    Total other comprehensive income                                                                331
                                                                                               --------

Balance at March 31, 20001 .........   $      1      $ 16,558      $  (145)        $  639      $ 17,053
                                       ========      ========      =======         ======      ========
</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,
                                                                              2000             2001
                                                                           ---------         --------
<S>                                                                         <C>             <C>
Operating activities:
     Net income........................................................     $   417         $   476
     Adjustments to reconcile net income
         to net cash used in operating activities:
         Depreciation..................................................       2,933           2,701
         Amortization..................................................         983             995
         Amortization of deferred financing costs......................         188             195
         Deferred income tax provision.................................           -             495
         Loss on sale of property and equipment........................          35               -
     Changes in operating assets and liabilities:
         Receivables, net..............................................      (6,945)         (7,037)
         Inventories...................................................         (60)             76
         Prepaid expenses and other current assets.....................        (711)           (696)
         Income taxes receivable.......................................           -             249
         Accounts payable..............................................         846           2,232
         Accrued liabilities...........................................      (5,205)         (4,389)
                                                                            -------         -------
              Net cash used in operating activities....................      (7,519)         (4,703)
                                                                            -------         -------

Investing activities:
     Expenditures for property and equipment...........................      (1,345)         (1,740)
     Proceeds from sale of property and equipment......................          64             309
     Acquisitions, net of cash.........................................        (351)              -
                                                                            -------         -------
              Net cash used in investing activities....................      (1,632)         (1,431)
                                                                            -------         -------

Financing activities:
     Proceeds from long-term debt, net.................................       7,460             707
     Debt financing costs..............................................         (50)              -
                                                                            -------         -------
              Net cash provided by financing activities................       7,410             707
                                                                            -------         -------

Net decrease in cash...................................................      (1,741)         (5,427)
Cash at beginning of period............................................       4,140           6,380
                                                                            -------         -------

Cash at end of period..................................................     $ 2,399         $   953
                                                                            =======         =======
</TABLE>





                             See accompanying notes.



                                       6
<PAGE>


                       HYDROCHEM INDUSTRIAL SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001



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.
     (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,  steel
     mills, and aluminum plants.  Services  provided include  high-pressure  and
     ultra-high pressure  water  cleaning  (hydroblasting),  chemical  cleaning,
     industrial   vacuuming,   tank   cleaning,   mechanical   services,   waste
     minimization, commissioning and other specialized services. The majority of
     these  services  involve recurring  maintenance  to improve or sustain  the
     operating  efficiencies  and  extend  the useful lives of process equipment
     and facilities.

         The accompanying unaudited consolidated financial statements  presented
     herein  have  been  prepared  in   accordance  with  accounting  principles
     generally accepted  in  the United States 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 accounting principles generally accepted in  the  United States
     for complete financial  statements.  Certain  information  and  disclosures
     normally  included  in  financial  statements  prepared  in accordance with
     accounting  principles generally accepted  in the  United States  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,  2001 are not necessarily indicative of the
     results that may be expected for the year ending December 31,  2001.  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,
     2000.

2.       Adoption of New Accounting Principle

         On  January  1,  2001,  the  Company  adopted  Statement  of  Financial
     Accounting  Standards  (SFAS)  133,  as  amended  by  SFAS 138, "Accounting
     Derivative Instruments and Hedging Activities".  SFAS 133 requires that all
     derivatives be  recorded  on  the consolidated  balance sheet at their fair
     value. Changes in the fair value of derivatives are recorded each period in
     earnings or  other comprehensive income  (loss)  depending  on  the type of
     hedging instrument and  the effectiveness of those hedges.  All derivatives
     are  adjusted  to  their  fair  market  values  at the end of each quarter.
     Unrealized  net gains and losses for cash flow hedges are recorded in other
     comprehensive income (loss).

         The Company  uses an  interest  rate swap to fix the interest rate on a
     variable  rate  term loan.  This derivative, which was designated as a cash
     flow hedge at the time of adoption of  SFAS  133,  qualifies for evaluation
     using the short cut method for assessing  effectiveness  and  is considered
     highly effective as defined by SFAS 133.  In accordance with the transition
     provisions of  SFAS 133,  the Company recorded a cumulative loss adjustment
     to other comprehensive loss of $39,000,  after taxes, to recognize the fair
     value of this derivative at January 1, 200l. During the quarter ended March
     31, 2001, unrealized net losses totaling $145,000 after taxes were recorded
     in  other comprehensive  loss,  including  the  $39,000  cumulative  effect
     adjustment as of January 1, 2001.

                                       7
<PAGE>

3.   Long-term Debt

         Long-term debt at December 31, 2000 and March 31, 2001 consisted of the
following (in thousands):
<TABLE>
<CAPTION>

                                                           2000         2001
                                                           ----         ----
         <S>                                           <C>          <C>
         Senior Subordinated Notes .................   $ 110,000    $ 110,000
         Term Loan .................................      29,000       27,750
         Mortgage Loan .............................       7,208        7,165
         Revolver ..................................          --        2,000
         Seller Notes ..............................       2,000        2,000
                                                       ---------    ---------
              Total long-term debt .................     148,208      148,915
              Less current portion of long-term debt      (7,858)      (8,362)
                                                       ---------    ---------
                                                       $ 140,350    $ 140,553
                                                       =========    =========
</TABLE>

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,   including
     nondeductible goodwill amortization,  state income taxes and changes in the
     valuation allowance for deferred tax assets.

5.   Summary Financial Information

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

<TABLE>
<CAPTION>
                                                               As of           As of
                                                            December 31,      March 31,
                                                               2000             2001
                                                               ----             ----
        <S>                                                <C>               <C>
        Current assets.................................    $  4,682          $  3,943
        Noncurrent assets..............................         189               199
        Current liabilities............................         801               389
        Noncurrent liabilities.........................           -                 -
</TABLE>

<TABLE>
<CAPTION>
                                                               Three months ended
                                                                     March 31,
                                                                     ---------
                                                               2000             2001
                                                               ----             ----
        <S>                                                <C>               <C>
        Revenue........................................    $  1,458          $  1,229
        Gross profit...................................         657               320
        Net income (loss)..............................         133              (317)
</TABLE>

6.   Commitments and Contingencies

         The  Company  is  a defendant in various lawsuits arising in the normal
     course of business and certain other lawsuits.  Substantially  all of these
     suits are being defended  by the Company's  insurance carriers.  Management
     believes  that  any  material  contingent  liability  associated  with this
     litigation  will  not exceed the limits of applicable insurance policies or
     other indemnities.   While  the  results of  litigation cannot be predicted
     with certainty,  management believes adequate provision has  been  made for
     all of the foregoing claims and the final outcome of any pending litigation
     will not  have  a  material  adverse  effect on the Company's  consolidated
     financial position or results of operations.

                                       8
<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 of Financial Condition and Results of
Operations  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 these  forward-looking  statements are  reasonable,  it can give no
assurance  that  these  expectations  will  prove to have  been  correct.  These
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  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,  2000.  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,
                                                                   ---------
                                                               2000        2001
                                                               ----        ----
      <S>                                                     <C>         <C>
      Revenue ..........................................      100.0%      100.0%
      Cost of revenue ..................................       60.4        62.9
                                                               ----        ----
            Gross profit ...............................       39.6        37.1
      SG&A expense .....................................       23.9        22.7
      Depreciation .....................................        5.5         4.5
                                                                ---         ---
            Operating income ...........................       10.2         9.9
      Other expense:
            Interest expense, net ......................        7.5         6.6
            Other expense, net .........................        0.1           -
            Amortization of intangibles ................        1.8         1.7
                                                                ---         ---
      Income before taxes ..............................        0.8         1.6
            Income tax provision .......................          -         0.8
                                                                ---         ---
      Net income .......................................        0.8%        0.8%
                                                                ===         ===
      EBITDA (1) .......................................       15.7%       14.5%
                                                               ====        ====
</TABLE>
----------
(1) EBITDA for any relevant period  presented above represents gross profit less
selling, general and administrative expense. 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 accounting  principles  generally accepted in the United States.
EBITDA  is  included  because  management  believes  it to be a useful  tool for
analyzing operating performance,  leverage, liquidity and a company's ability to
service debt.

                                       9
<PAGE>


Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
--------------------------------------------------------------------------------
     Revenue. Revenue increased $6.0 million, or 11.1%, to $59.4 million for the
three months  ended March 31, 2001 from $53.4  million in the prior year period.
The increase resulted from an increase in hydroblasting revenue of $4.7 million,
or 22.9%,  from $20.8  million to $25.5  million and an  increase in  industrial
vacuuming  revenue  of $2.5  million,  or 23.9%,  from  $10.6  million  to $13.1
million.  These  increases  were  partially  offset by a  decrease  in  chemical
cleaning  revenue of $685,000,  or 4.8%, from $14.4 million to $13.7 million,  a
decrease in tank cleaning revenue of $78,000, or 2.4%, from $3.3 million to $3.2
million and a decrease in revenue  from other  services of  $562,000,  or 12.7%,
from $4.4  million  to $3.9  million.  The  increase  in  hydroblasting  revenue
resulted  principally from increased turnaround activity in the first quarter of
2001.  The increase in industrial  vacuuming  revenue  resulted from  additional
vacuum trucks placed in service by the Company in 2000. The decrease in chemical
cleaning  revenue and in revenue from other  services  primarily  resulted  from
fewer chemical cleaning and mechanical services projects.

     Gross profit. Gross profit increased $884,000, or 4.2%, to $22.1 million in
2001 from $21.2 million in the prior year period.  Gross profit margin decreased
from 39.6% to 37.1%. Cost of revenue increased $5.1 million,  or 15.7%, to $37.3
million in 2001 from $32.3  million in the prior year period,  primarily  due to
increases in compensation, operating supplies and equipment rental expense.

     SG&A expense. SG&A expense increased $656,000, or 5.1%, to $13.5 million in
2001 from $12.8  million  in the prior  year  period.  This  increase  primarily
resulted from an increase in compensation and other  employee-related  expenses.
SG&A expense as a percentage of revenue decreased to 22.7% in 2001 from 23.9% in
the prior year period.

     EBITDA. Increased gross profit, partially offset by increased SG&A expense,
resulted in a $228,000, or 2.7%, increase in EBITDA to $8.6 million in 2001 from
$8.4  million in the prior year  period.  As a  percentage  of  revenue,  EBITDA
decreased to 14.5% in 2001 from 15.7% in the prior year period.

     Depreciation.  Depreciation  expense decreased  $232,000,  or 7.9%, to $2.7
million in  2001from  $2.9  million in the prior year  period.  The  decrease in
depreciation   expense   principally   resulted  from  assets   becoming   fully
depreciated. As a percentage of revenue,  depreciation expense decreased to 4.5%
in 2001 from 5.5% in the prior year period.

     Operating income.  Increased gross profit and reduced depreciation expense,
partially offset by increased SG&A expense, resulted in an increase in operating
income of  $460,000,  or 8.5%,  to $5.9 million in 2001 from $5.4 million in the
prior year period.  As a percentage of revenue,  operating  income  decreased to
9.9% in 2001 from 10.2% in the prior year period.

     Interest expense, net. Interest expense, net decreased $84,000, or 2.1%, to
$3.9  million  in 2001 from $4.0  million in the prior  year  period.  Decreased
interest expense,  net resulted from a reduction of outstanding debt in the last
three  quarters  of 2000.  Interest  expense,  net as a  percentage  of  revenue
decreased to 6.6% in 2001 from 7.5% in the prior year period.

     Amortization.   Amortization  expense  was  relatively  unchanged  with  an
increase of  $12,000,  or 1.2%,  to $995,000 in 2001 from  $983,000 in the prior
year period.  Amortization  expense as a percentage of revenue decreased to 1.7%
in 2001 from 1.8% in the prior year period.

     Income before taxes. For the reasons  described above, the Company's income
before taxes  increased  $554,000 to $971,000 in 2001 from $417,000 in the prior
year period.  As a percentage  of revenue,  income before taxes was 1.6% in 2001
compared to 0.8% in the prior year period.

     Income  tax  expense.  The  effective  income  tax rate  increased  in 2001
primarily as a result of changes in the valuation of deferred tax assets in 2001
as  compared  to 2000.  Additionally,  the higher  effective  income tax rate is
principally due to certain  nondeductible  operating  expenses and nondeductible
goodwill amortization.

     Net income.  For the reasons  described  above,  the  Company's  net income
increased  $59,000 to $476,000 in 2001 from  $417,000 in the prior year  period.
Net income,  as a percentage  of revenue,  was 0.8% in 2001 which was  unchanged
from the prior year period.

                                       10
<PAGE>
Liquidity and Capital Resources

     The Company  historically  has  financed  its  operations  through net cash
provided by operating  activities,  existing  cash  balances,  available  credit
facilities  and capital  contributions  from Holding.  On November 19, 1999, the
Company entered into a credit  agreement with six financial  institutions  which
provided for secured  borrowings of up to $60.0  million,  consisting of a $30.0
million term loan (the "Term  Loan"),  and a $30.0 million  revolving  loan (the
"Revolver") which is subject to borrowing base limitations.  The credit facility
expires on December  31, 2004 and requires  HydroChem to meet certain  customary
financial ratios and covenants.

     As of March 31, 2001, $27.8 million was outstanding under the Term Loan. As
of March 31, 2001, there was $2.0 million of funded debt  outstanding  under the
Revolver  and $1.5  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.  The Company  had  available  borrowings  of $16.2
million, net of covenant test limitations.

     For the three  months  ended March 31,  2001,  the Company used net cash of
$6.1 million for  operating  and investing  activities  which  consisted of $4.7
million  used in  operating  activities  and  $1.4  million  used  in  investing
activities.  For the three months ended March 31, 2000, $9.1 million of net cash
was used in operating and investing  activities  which consisted of $7.5 million
used in operating  activities  and $1.6  million  used in investing  activities.
Expenditures  for  property and  equipment  for the three months ended March 31,
2001  and  2000  were  $1.7  million  and  $1.4  million,  respectively.   These
expenditures were principally for operating equipment.

     Management  believes that cash and cash  equivalents at March 31, 2001, net
cash  expected  to be  provided  by  operating  activities  and  borrowings,  if
necessary,  under the Revolver will be  sufficient  to meet the  Company's  cash
requirements  for operations and expenditures for property and equipment for the
next twelve months and the foreseeable future thereafter. From time to time, the
Company  reviews  acquisition  opportunities  as they  arise,  and  may  require
additional financing if it decides to make additional acquisitions. There can be
no assurance,  however, that any such acquisition opportunities will arise, that
any such acquisitions will be consummated, or that any related financing will be
available when required on terms satisfactory to the Company.

                                       11
<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  risks  and  uncertainties.  Actual
results could differ  materially from those  projected in these  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 presented do not consider the effects
that such  adverse  changes may have on overall  economic  activity  nor do they
consider  additional  actions  management  may take to  mitigate  the  Company's
exposure to such changes. The Notes to Consolidated  Financial Statements herein
and in the Company's  Annual Report on Form 10-K for the year ended December 31,
2000  provide a  description  of the  Company's  accounting  policies  and other
information related to these financial instruments.  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 was entered into
during 1998 in connection with the Mortgage Loan.

     As of March 31, 2001, the Company's outstanding long-term debt consisted of
the Senior  Subordinated  Notes, the Term Loan, the Mortgage Loan, the Revolver,
and the Seller Notes. The Senior Subordinated Notes totaled $110.0 million,  are
due in the year 2007,  and bear interest at a fixed rate of 10 3/8%. As of March
31, 2001, their fair value was estimated to be $79.0 million.  At the same date,
the Term Loan,  the Mortgage  Loan,  the Revolver,  and the Seller Notes totaled
$27.8 million, $7.2 million, $2.0 million, and $2.0 million,  respectively,  and
approximated their fair value. The Term Loan and Revolver mature on December 31,
2004.  The interest  rates for the Term Loan and Revolver,  at the discretion of
the Company,  are at Base Rate or LIBOR, plus applicable margins.  Margins range
from 0.00% to 3.00%,  depending upon which interest rate option is in effect and
the Company's leverage ratio as determined  quarterly.  The Company periodically
reviews  various  alternatives to protect  long-term debt against  interest rate
fluctuations.  The  Mortgage  Loan bears  interest  at LIBOR  rates plus  1.75%,
adjusted  quarterly.   To  protect  the  Mortgage  Loan  against  interest  rate
fluctuations,  the Company  utilizes  the  Interest  Rate Swap,  which fixes the
interest rate at 7.82% per annum.  The Seller Notes are due in two  installments
with the final  installment due on November 19, 2001, and bear interest at 8.00%
per annum. The market risk,  estimated as a potential  increase in fair value of
these debt instruments  resulting from a hypothetical  1.0% decrease in interest
rates is estimated not to be material to the Company during 2001.


                                       12
<PAGE>


Part II.      Other Information

     Item 1.  Legal Proceedings

              There have been no material changes to  the proceedings previously
     reported in the Registrant's  Annual Report on Form 10-K for the year ended
     December 31, 2000.

     Item 6.  Exhibits 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 10 3/8% 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 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        Deferred Bonus Plan of HydroChem  Industrial  Services,  Inc.
                   effective May 1, 1999.  (Exhibit 10.14 to the Company's  Form
                   10-Q  filed  August  10,  1999,  is  hereby  incorporated  by
                   reference.)

       10.3        First  Amendment  to  Deferred   Bonus   Plan  of   HydroChem
                   Industrial Services,  Inc. dated as of May 1, 2000.  (Exhibit
                   10.3 to  the  Company's  Form 10-Q, filed August 11, 2000, is
                   hereby incorporated by reference.)
                                       13
<PAGE>

       10.4        Second   Amendment  to   Deferred  Bonus  Plan  of  HydroChem
                   Industrial  Services,  Inc.  dated as of May 1, 2001.  (Filed
                   herewith.)

       10.5        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.)

       10.6        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.)

       10.7        Secured Promissory Note dated  February  9, 2001 from  B. Tom
                   Carter, Jr. to HydroChem Holding, Inc.  (Exhibit 10.6  to the
                   Company   Form   10-K   filed  March  21,  2001,   is  hereby
                   incorporated by reference.)

       10.8        Pledge Agreement dated February 9, 2001 between B.Tom Carter,
                   Jr. and  HydroChem  Holding,   Inc.   (Exhibit  10.7  to  the
                   Company's  Form  10-K   filed  March  21,  2001,   is  hereby
                   incorporated by reference.)

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

       10.10       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.)

       10.11       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.)

       10.12       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.)

       10.13       First Amendment to Employment  Agreement dated as of June 28,
                   1999 to Employment  Agreement dated as of September 26,  1997
                   between  HydroChem  Industrial  Services, Inc. and Donovan W.
                   Boyd.   (Exhibit  10.10  to the  Company's  Form  10-Q  filed
                   August  10,  1999,  is  hereby incorporated by reference.)

       10.14       Second Amendment to Employment Agreement dated as  of January
                   17,  2001  to Employment Agreement dated as of  September 26,
                   1997 between HydroChem Industrial Services, Inc. and  Donovan
                   W. Boyd.  (Exhibit  10.13  to the Company's  Form 10-K  filed
                   March 21, 2001, is hereby incorporated by reference.)

       10.15       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.)

       10.16       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.)
                                       14
<PAGE>

       10.17       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.)

       10.18       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.)

       10.19       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.)

       10.20       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.)

       10.21       Credit Agreement dated  November  19,  1999  among  HydroChem
                   Holding, Inc., HydroChem Industrial Services,  Inc.,  various
                   lenders and Bank of America,  N.A., as administrative  agent.
                   (Exhibit 2.2 to the Company's  Form  8-K  filed  December  3,
                   1999,  is  hereby incorporated by reference.)

       10.22       First  Amendment  dated  as  of  December 17, 1999  to Credit
                   Agreement dated  November 19, 1999  among  HydroChem Holding,
                   Inc., HydroChem  Industrial  Services,  Inc., various lenders
                   and   Bank  of  America,   N.A.,   as  administrative  agent.
                   (Exhibit  10.20  to  the  Company's Form 10-K filed March 24,
                   2000, is hereby incorporated by reference.)

       10.23       Second  Amendment  dated  as  of  June  30,  2000  to  Credit
                   Agreement  dated  November  19,1999  among HydroChem Holding,
                   Inc., HydroChem  Industrial  Services,  Inc., various lenders
                   and Bank of America, N.A., as administrative  agent. (Exhibit
                   10.24 to the Company's  Form 10-Q  filed  August 11, 2000, is
                   hereby incorporated by reference.)

       10.24       Amended  and  Restated  Asset Purchase Agreement by and among
                   HydroChem Industrial Services, Inc., Valley  Systems of Ohio,
                   Inc. and Valley Systems, Inc. dated as of September 8,  1998.
                   (Exhibit 10.1 to the Company's Form 8-K,  filed  January  20,
                   1999,  is  hereby incorporated by reference.)

       10.25       Stock Purchase Agreement dated November 19, 1999 by and among
                   HydroChem Industrial Services,  Inc. and each stockholder  of
                   Landry  Service Co.,  Inc.  including  Kenneth  C. Landry and
                   Charles A. Landry,  Jr.   (Exhibit 2.1  to the Company's Form
                   8-K  filed  December  3,  1999,  is  hereby  incorporated  by
                   reference.)

       (b)    Reports on Form 8-K.

              None.

                                       15
<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, 2001             By: /s/ Pelham H. A. Smith
                                    ---------------------------------------
                                    Pelham H. A. Smith, Executive Vice President
                                    and Chief Financial Officer





                               HYDROCHEM INTERNATIONAL, INC.


     Date: May 11, 2001             By: /s/ Pelham H. A. Smith
                                    ---------------------------------------
                                    Pelham H. A. Smith, Executive Vice President
                                    and Chief Financial Officer






                                       16
<PAGE>



                                  EXHIBIT INDEX



           10.4             Second Amendment to Deferred Bonus Plan of HydroChem
                            Industrial  Services,  Inc. dated as of May 1, 2001.














                                       17