<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

   [X]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934

                For the quarterly period ended September 30, 1998

                                       OR

   [ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934

        For the transition period from _____________ to ________________

                         Commission file number 0-22726

                              SAFESKIN CORPORATION
                              --------------------
             (Exact name of registrant as specified in its charter)

               Florida                                       59-2617525
               -------                                       ----------
    (State or other jurisdiction                        (IRS Employer ID No.)
  of incorporation or organization)

               12671 High Bluff Drive, San Diego, California 92130
               ---------------------------------------------------
                    (Address of principal executive offices)

                                 (619) 794-8111
                                 --------------
              (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  [ ]

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

                Class                           Outstanding at October 31, 1998
Common Stock, par value $0.01 per share                      54,558,517


<PAGE>   2
                              SAFESKIN CORPORATION

                                      INDEX


<TABLE>
<CAPTION>
                                                                            Page Number
                                                                            -----------
<S>                                                                         <C>
PART I:  Financial Information............................................      1

ITEM 1.  Financial Statements.............................................      1

         Condensed Consolidated Balance Sheets at September 30, 1998 and
         December 31, 1997................................................      2

         Condensed Consolidated Statements of Operations for the three
         months ended September 30, 1998 and 1997.........................      3

         Condensed Consolidated Statements of Operations for the nine
         months ended September 30, 1998 and 1997.........................      4

         Condensed Consolidated Statements of Cash Flows for the nine
         months ended September 30, 1998 and 1997.........................      5

         Consolidated Statements of Comprehensive Income for the three
         months ended September 30, 1998 and 1997.........................      6

         Consolidated Statements of Comprehensive Income for
         the nine months ended September 30, 1998 and 1997 ...............      7

         Notes to Condensed Consolidated Financial Statements.............      8

ITEM 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations............................................      10


PART II: Other Information................................................      23

ITEM 6.  Exhibits and Reports on Form 8-K.................................      23

         SIGNATURES.......................................................      24
</TABLE>


<PAGE>   3
                          PART I: FINANCIAL INFORMATION




ITEM 1.  Financial Statements


<TABLE>
<CAPTION>
         INDEX                                                                  PAGE
         -----                                                                  ----
<S>                                                                             <C>
         Condensed Consolidated Balance Sheets at September 30, 1998
         and December 31, 1997................................................    2

         Condensed Consolidated Statements of Operations for
         the three months ended September 30, 1998 and 1997...................    3

         Condensed Consolidated Statements of Operations for
         the nine months ended September 30, 1998 and 1997....................    4

         Condensed Consolidated Statements of Cash Flows for the
         nine months ended September 30, 1998 and 1997........................    5

         Consolidated Statements of Comprehensive Income for the
         three months ended September 30, 1998 and 1997 ......................    6

         Consolidated Statements of Comprehensive Income for the
         nine months ended September 30, 1998 and 1997 .......................    7

         Notes to Condensed Consolidated Financial Statements.................    8
</TABLE>


<PAGE>   4
                              SAFESKIN CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 1998 AND DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,          DECEMBER 31,
                                                                   1998                   1997
                                                                (UNAUDITED)
                                                                -------------         -------------
<S>                                                             <C>                   <C>
ASSETS

Current assets:
      Cash and cash equivalents ........................        $  39,198,332         $  23,916,959
      Accounts receivable, net .........................           40,070,349            22,195,828
      Inventory ........................................           34,836,237            21,242,732
      Other current assets .............................            8,953,165             5,692,369
                                                                -------------         -------------

             Total current assets ......................          123,058,083            73,047,888

Property, plant and equipment, net .....................          101,186,324            52,904,271
Intangibles and other assets ...........................           34,648,776            12,568,245
                                                                -------------         -------------

             Total assets ..............................        $ 258,893,183         $ 138,520,404
                                                                =============         =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
      Accounts payable .................................        $  11,098,686         $   6,922,540
      Accrued liabilities ..............................           15,150,327            22,924,623
                                                                -------------         -------------

             Total current liabilities .................           26,249,013            29,847,163

Long-term debt .........................................          122,350,959                    --
Deferred income taxes and other liabilities ............            7,558,832             2,094,928
                                                                -------------         -------------

             Total liabilities .........................          156,158,804            31,942,091

Commitments and contingencies

Shareholders' equity:
      Preferred stock; $.01 par value; 10,000,000 shares
           authorized and no shares outstanding ........                   --                    --
      Common stock; $.01 par value; 80,000,000 shares
            authorized; 54,551,567 shares
            and 52,964,224 shares outstanding ..........              545,516               529,642
      Additional paid-in-capital .......................           56,085,319            47,517,453
      Treasury stock; 1,869,900 and 0 shares held ......          (70,432,858)                   --
      Accumulated other comprehensive loss .............          (32,145,562)          (45,687,717)
      Retained earnings ................................          148,681,964           104,218,935
                                                                -------------         -------------

            Total shareholders' equity .................          102,734,379           106,578,313
                                                                -------------         -------------

            Total liabilities and shareholders' 
            equity .....................................        $ 258,893,183         $ 138,520,404
                                                                =============         =============
</TABLE>


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



                                       -2-

<PAGE>   5
                              SAFESKIN CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                              1998                  1997
                                                           ------------         ------------
<S>                                                        <C>                  <C>         
Net sales .........................................        $ 61,567,870         $ 46,897,491

Cost of goods sold ................................          29,595,838           26,632,198
                                                           ------------         ------------

          Gross profit ............................          31,972,032           20,265,293
                                                           ------------         ------------

Operating expenses:
    Selling .......................................           6,737,474            4,313,133
    Research and development ......................           1,371,922              934,394
    General and administrative ....................           7,498,105            4,077,681
                                                           ------------         ------------

          Total operating expenses ................          15,607,501            9,325,208
                                                           ------------         ------------

          Income from operations ..................          16,364,531           10,940,085

Interest expense (income), net ....................             758,145             (211,726)

Other income, net .................................            (875,781)          (1,842,999)
                                                           ------------         ------------

Income before income tax provision ................          16,482,167           12,994,810

Income tax provision ..............................             329,644            1,435,168
                                                           ------------         ------------

Net income ........................................        $ 16,152,523         $ 11,559,642
                                                           ============         ============
Per share amounts:
Earnings per share of common stock
    and common stock equivalents outstanding:
        Basic .....................................        $        .30         $        .22
        Diluted ...................................                 .27                  .20

Weighted average number of shares of common
    stock and common stock equivalents outstanding:
        Basic .....................................          53,534,207           52,360,730
        Diluted ...................................          60,528,350           59,077,039
</TABLE>



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



                                       -3-
<PAGE>   6
                              SAFESKIN CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               1998                  1997
                                                           -------------         -------------
<S>                                                        <C>                   <C>          
Net sales .........................................        $ 173,506,301         $ 133,013,441

Cost of goods sold ................................           82,940,251            74,477,935
                                                           -------------         -------------

          Gross profit ............................           90,566,050            58,535,506
                                                           -------------         -------------

Operating expenses:
    Selling .......................................           18,509,596            13,505,623
    Research and development ......................            4,886,141             2,519,819
    General and administrative ....................           19,549,313            11,350,084
                                                           -------------         -------------

          Total operating expenses ................           42,945,050            27,375,526
                                                           -------------         -------------

          Income from operations ..................           47,621,000            31,159,980

Interest expense (income), net ....................              598,479              (544,901)

Other income, net .................................             (915,763)           (1,217,468)
                                                           -------------         -------------

Income before income tax provision ................           47,938,284            32,922,349

Income tax provision ..............................            3,475,255             3,669,099
                                                           -------------         -------------

Net income ........................................        $  44,463,029         $  29,253,250
                                                           =============         =============

Per share amounts:
Earnings per share of common stock
    and common stock equivalents outstanding:
        Basic .....................................        $         .83         $         .56
        Diluted ...................................                  .74                   .50

Weighted average number of shares of common
    stock and common stock equivalents outstanding:
        Basic .....................................           53,274,056            52,088,524
        Diluted ...................................           60,451,759            58,050,467
</TABLE>


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



                                       -4-
<PAGE>   7
                              SAFESKIN CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    1998                  1997
                                                                -------------         -------------
<S>                                                             <C>                   <C>          
Cash flows from operating activities:
      Net income .......................................        $  44,463,029         $  29,253,250
      Adjustments to reconcile net income to cash
          provided by operating activities:
           Depreciation and amortization ...............            8,795,714             5,198,523
           Exchange gain ...............................             (453,193)           (8,517,860)
           Loss on disposal of equipment ...............               14,501                39,450
      Changes in operating assets and liabilities:
                Accounts receivable, net ...............          (15,368,251)             (619,228)
                Inventory ..............................          (12,040,695)             (608,819)
                Other assets ...........................           (7,572,955)            1,174,512
                Accounts payable and accrued liabilities           (4,314,071)           16,465,820
                                                                -------------         -------------
           Net cash provided by operating activities ...           13,524,079            42,385,648
                                                                -------------         -------------

Cash flows from investing activities:
      Payments for acquisitions ........................          (14,346,460)          (14,463,092)
      Proceeds from sale of subsidiary .................              574,703                    --
      Purchase of property, plant and equipment ........          (44,465,409)          (25,807,033)
      Proceeds from sale of equipment ..................                   --                24,654
                                                                -------------         -------------
           Net cash used by investing activities .......          (58,237,166)          (40,245,471)
                                                                -------------         -------------

Cash flows from financing activities:
      Increase in long-term debt .......................          122,350,959                    --
      Proceeds from issuance of common stock ...........            7,019,739             3,368,621
      Repurchase of common stock .......................          (70,432,858)                   --
                                                                -------------         -------------
           Net cash provided by financing activities ...           58,937,840             3,368,621
                                                                -------------         -------------

Effect of exchange rate changes on cash ................            1,056,620            (1,556,215)
                                                                -------------         -------------
Net increase in cash and cash equivalents ..............           15,281,373             3,952,583
Cash and cash equivalents at beginning of period .......           23,916,959            16,265,468
                                                                -------------         -------------
Cash and cash equivalents at end of period .............        $  39,198,332         $  20,218,051
                                                                =============         =============
</TABLE>

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



                                       -5-
<PAGE>   8
                              SAFESKIN CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         1998                 1997
                                                      ------------        ------------
<S>                                                   <C>                 <C>
Net income ...................................        $ 16,152,523        $ 11,559,642

Other comprehensive income (loss), net of tax:

    Foreign currency translation adjustments..           7,294,106         (27,630,996)
                                                      ------------        ------------

Comprehensive income (loss) ..................        $ 23,446,629        $(16,071,354)
                                                      ============        ============
</TABLE>



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



                                       -6-


<PAGE>   9
                              SAFESKIN CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          1998                1997
                                                      ------------        ------------
<S>                                                   <C>                 <C>         
Net income ...................................        $ 44,463,029        $ 29,253,250

Other comprehensive income (loss), net of tax:

    Foreign currency translation adjustments..          13,142,155         (25,970,478)
                                                      ------------        ------------

Comprehensive income .........................        $ 57,605,184        $  3,282,772
                                                      ============        ============
</TABLE>



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



                                       -7-
<PAGE>   10
                              SAFESKIN CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.      In the opinion of the Company, the accompanying unaudited condensed
        consolidated financial statements contain all adjustments, which consist
        only of normal and recurring adjustments, necessary for a fair
        presentation of results for the periods indicated. The results of any
        interim period are not necessarily indicative of results for the full
        year. Certain information and footnote disclosures normally included in
        financial statements prepared in accordance with generally accepted
        accounting principles have been condensed or omitted. These condensed
        consolidated financial statements should be read in conjunction with the
        consolidated financial statements and related notes thereto for the year
        ended December 31, 1997. The December 31, 1997 condensed consolidated
        balance sheet was derived from audited financial statements, but does
        not include all disclosures required by generally accepted accounting
        principles. Certain amounts have been reclassified in the prior periods 
        to conform with the current year presentation.

2.      Inventories at September 30, 1998 consisted of $2,124,000, $1,879,000
        and $30,833,000 for raw materials, work in process and finished goods,
        respectively. At December 31, 1997, inventories consisted of $2,701,000,
        $690,000 and $17,852,000 for raw materials, work in process and finished
        goods, respectively.

3.      On February 17, 1998, the Company authorized a two-for-one stock split
        of its common stock to be effective in the form of a stock dividend
        distributed on April 1, 1998 to shareholders of record at the close of
        business on February 27, 1998. The holders of the Company's common stock
        received a stock dividend at the rate of one share of common stock for
        each share of common stock owned. The stated par value of each share was
        not changed from $.01. A total of $264,821 was reclassified from the
        Company's additional paid-in capital account to the Company's common
        stock account for the period ended December 31, 1997. All share and per
        share amounts have been retroactively restated to reflect the stock
        split.

4.      The Company is exposed to exchange rate risk when it and certain of its
        subsidiaries enter into transactions denominated in currencies other
        than their functional currency. Certain firmly committed transactions
        are hedged with forward foreign exchange contracts. As exchange rates
        change, gains and losses on the exposed transactions may be partially
        offset by gains and losses related to the hedging contracts. Both the
        exposed transactions and the hedging contracts are translated at current
        spot rates, with gains and losses included in earnings. There were no
        material forward foreign exchange contracts as of September 30, 1998.

        The forward foreign exchange contracts generally require the Company to
        exchange U.S. dollars for foreign currencies based on pre-established
        exchange rates at the contracts' maturity dates. If the counterparties
        to the exchange contracts (primarily AA rated international
        institutions) do not fulfill their obligations to deliver the contacted
        currencies, the Company could be at risk for currency related
        fluctuations (generally limited to unrealized gains). 



                                      -8-
<PAGE>   11

        Management believes that the high credit worthiness of the
        counterparties to the hedging contracts minimizes the risk of
        non-performance.

5.      The Company has adopted Statement of Financial Accounting Standards No.
        130 "Reporting Comprehensive Income" in the first quarter of 1998. This
        standard expands or modifies disclosures, and accordingly, has no impact
        on the Company's financial position, results of operations or cash
        flows.



                                      -9-
<PAGE>   12
ITEM 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

The following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and related notes thereto.

GENERAL

The Company's net sales have grown substantially over the past several years.
The Company attributes the growth in net sales during this period principally to
increased market penetration due to the implementation of sales and marketing
programs, the introduction of new products and growth in markets for its
products. The Company introduced lightly powdered medical gloves, powder-free
medical gloves, HypoClean(R) powder-free gloves, powder-free latex surgical
gloves and high technology and scientific nitrile gloves, and Safeskin 2000(TM)
powder-free latex surgical gloves, in 1989, 1990, 1992, 1994, 1995, and 1996,
respectively. In 1997, the Company began selling a medical examination glove
made of a non-latex material called nitrile. In addition, as a result of its
acquisition of the synthetic glove business of Tactyl Technologies, Inc.
("Tactyl"), the Company began selling Tactylon(R) synthetic examination and
surgical gloves. In February 1998, as a result of its acquisition of Absolute
Quality Leadership, Inc. ("AQL"), the Company expanded its current product line
associated with the high-technology and scientific markets to include a broad
line of proprietary latex and synthetic glove products, specifically designed
for the microelectronics, health technologies and general laboratory and safety
market segments. Although the Company has continued to develop new products and
expects to do so in the future, no assurance can be given that the new products
will be accepted in the marketplace or will have similar growth rates.

The Company's net sales are derived from the sale of finished products, net of
contractual allowable rebates and fees provided to distributors and group
purchasing organizations for the resale of the Company's products in specific
volumes to specified end user customers. The Company estimates allowable rebates
on a monthly basis through the analysis of actual sales information from
customers, contractual arrangements and historical trends related to actual
rebates issued. Cost of goods sold includes all costs to manufacture the
finished product plus related costs associated with ocean freight, customs duty,
warehousing and product delivery expenses. Selling expenses include salaries for
sales and marketing staffs and other related expenses such as sales commissions,
and costs associated with travel, trade show participation and advertising.
Research and development expenses include salaries for research and development
staffs and related expenses for consulting, product testing and travel. General
and administrative expenses include salaries for administrative and information
technology staffs and related expenses for travel, insurance, facilities,
consulting and professional fees. The income tax provision is substantially less
than statutory rates as a result of the tax-free status of the Company's foreign
manufacturing operations. The Company's existing Thailand manufacturing
facilities have been granted tax-free status through 2003 and have been granted
a reduced tax rate through 2007. As the Company begins to build new production
facilities in Thailand, it has 



                                      -10-
<PAGE>   13
applied for and received similar tax-free status for these operations. The
Company's Malaysian manufacturing operations were granted five years of tax-free
status which expired on September 30, 1998. The expiration of this tax-free
status is not expected to have a material adverse effect upon the Company's
operations. During the third quarter of 1998, the Company and two of its
subsidiaries implemented a new organizational plan that qualified under Section
351 of the Internal Revenue Code. As a result of this organizational plan, the
Company anticipates that its provision for U.S. income taxes for the next three
to five years could be lower than it would have been had the organizational plan
not qualified under Section 351 of the Code. 

The Company's medical glove distributor customers do not bill third-party
reimbursement sources separately for purchases of the Company's gloves.
Consequently, the timing and effect of third-party payments to hospitals and
clinics do not have a material effect on the Company's operations or liquidity.

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1997

Net sales for the three months ended September 30, 1998 were $61,568,000 which
represents a 31.3% increase over net sales of $46,897,000 for the same period in
1997. The predominant causes for the sales growth were an increase in unit
volumes sold and the shift in product mix to higher priced powder-free gloves in
the 1998 period as compared to the 1997 period.

Cost of goods sold increased 11.1% from $26,632,000 for the three month period
ended September 30, 1997 to $29,596,000 for the three months ended September 30,
1998. As a percentage of net sales, cost of goods sold decreased from 56.8% for
the three months ended September 30, 1997 to 48.1% for the same period in 1998.
The Company's gross profit margin was favorably impacted in 1998 due to the
positive effects of the devaluation of the currencies in Malaysia and Thailand.
In the prior year, the positive effects of the devaluation of the currencies in
Malaysia and Thailand did not begin to have a significant favorable impact on
the Company's gross profit margin until the fourth quarter 1997. In addition,
the decrease in cost of goods sold as a percentage of net sales was attributable
to the continued shift of production to Thailand's lower-cost manufacturing
facility and to the shift of product mix to higher margin powder-free gloves in
1998. As a result of the above factors, gross profits increased 57.8% from
$20,265,000 for the three months ended September 30, 1997 to $31,972,000 for the
three months ended September 30, 1998.

Selling expenses increased 56.2% from $4,313,000 for the three months ended
September 30, 1997 to $6,738,000 for the three months ended September 30, 1998.
As a percentage of net sales, selling expenses increased slightly from 9.2% for
the three months ended September 30, 1997 to 10.9% for the same period in 1998.
The increase in selling expenses as a percentage of net sales pertains primarily
to increased costs and expenses related to the Company's efforts to expand its
business in high-technology and scientific markets.



                                      -11-
<PAGE>   14
Research and development expenses increased 46.8% from $934,000 for the three
months ended September 30, 1997 to $1,372,000 for the three months ended
September 30, 1998. As a percentage of net sales, these expenses increased
slightly from 2.0% for the three months ended September 30, 1997 to 2.2% for the
three months ended September 30, 1998.

General and administrative expenses increased 83.9% from $4,077,000 for the
three months ended September 30, 1997 to $7,498,000 for the three months ended
September 30, 1998. As a percentage of net sales, general and administrative
expenses increased from 8.7% for the 1997 period to 12.2% for the 1998 period.
The increase in general and administrative expenses as a percentage of net sales
was caused primarily by increased costs associated with the Company's efforts to
improve and streamline its information technology systems and services.
Additional factors include increased product liability costs and related legal
expenses associated with the Company's pending product liability lawsuits,
increased compensation costs and increased costs associated with the Company's
acquisition of AQL.

Income from operations increased 49.6% from $10,941,000 for the three months
ended September 30, 1997 to $16,364,000 for the three months ended September 30,
1998. Operating margins increased from 23.3% in the 1997 period to 26.7% in the
1998 period.

Interest expense (income), net, changed from $211,000 of net interest income for
the three months ended September 30, 1997 to $758,000 of net interest expense
for the three months ended September 30, 1998, primarily due to the fact that in
1998 the Company had incurred interest expense on debt outstanding during the
period. In 1997, the Company had no debt outstanding and generated investment
returns on its cash balances.

Other income, net, decreased from $1,843,000 for the three months ended
September 30, 1997 to $875,000 for the three months ended September 30, 1998.
The Company experienced significant foreign currency transaction gains, net of
hedging contracts, in the Company's Malaysian and Thailand subsidiaries for the
three months ended September 30, 1997, due primarily to the significant
devaluation of both the ringgit and baht in the prior year period. In 1998, the
Company experienced foreign currency transaction gains, net of hedging
contracts, primarily in its European and Thailand subsidiaries. The gains
experienced from foreign currency transactions, net of hedging contracts, in
1998 were not as significant as in the prior year.

Income taxes decreased from $1,435,000 for the three months ended September 30,
1997 to $329,000 for the three months ended September 30, 1998. The income tax
provisions recorded in both 1997 and 1998 remain less than statutory rates due
primarily to the tax-free status of the Company's foreign manufacturing 
operations.

Net income increased 39.7% from $11,560,000 for the three months ended September
30, 1997 to $16,152,000 for the three months ended September 30, 1998 due to the
foregoing factors.



                                      -12-
<PAGE>   15
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997

Net sales for the nine months ended September 30, 1998 were $173,506,000 which
represents a 30.4% increase over net sales of $133,013,000 for the same period
in 1997. The predominant causes for the sales growth were an increase in unit
volumes sold and the shift in product mix to higher priced powder-free gloves in
the 1998 period as compared to the 1997 period.

Cost of goods sold increased 11.4% from $74,478,000 for the nine month period
ended September 30, 1997 to $82,940,000 for the nine months ended September 30,
1998. As a percentage of net sales, cost of goods sold decreased from 56.0% for
the nine months ended September 30, 1997 to 47.8% for the same period in 1998.
The Company's gross profit margin was favorably impacted in 1998 due to the
positive effects of the devaluation of the currencies in Malaysia and Thailand.
In the prior year, the positive effects of the devaluation of the currencies in
Malaysia and Thailand did not begin to have a significant favorable impact on
the Company's gross profit margin until the fourth quarter 1997. In addition,
the decrease in cost of goods sold as a percentage of net sales was attributable
to the continued shift of production to Thailand's lower-cost manufacturing
facility and to the shift of product mix to higher margin powder-free gloves in
1998. As a result of the above, gross profits increased 54.7% from $58,535,000
for the nine months ended September 30, 1997 to $90,566,000 for the nine months
ended September 30, 1998.

Selling expenses increased 37.1% from $13,505,000 for the nine months ended
September 30, 1997 to $18,510,000 for the nine months ended September 30, 1998.
As a percentage of net sales, selling expenses increased from 10.2% for the nine
months ended September 30, 1997 to 10.7% for the same period in 1998. The
increase in selling expenses as a percentage of net sales pertains primarily to
increased costs and expenses related to the Company's efforts to expand its
business in high-technology and scientific markets.

Research and development expenses increased 93.9% from $2,520,000 for the nine
months ended September 30, 1997 to $4,886,000 for the nine months ended
September 30, 1998. As a percentage of net sales, these expenses increased from
1.9% for the nine months ended September 30, 1997 to 2.8% for the nine months
ended September 30, 1998. The increase in research and development expenses as a
percentage of net sales is primarily due to an increase in the number of
research and development personnel, an increase in other compensation expenses
and costs totaling approximately $600,000 associated with research related to
the Company's outstanding product liability claims.

General and administrative expenses increased 72.2% from $11,350,000 for the
nine months ended September 30, 1997 to $19,549,000 for the nine months ended
September 30, 1998. As a percentage of net sales, general and administrative
expenses increased from 8.5% for the 1997 period to 11.3% for the 1998 period.
The increase in general and administrative expenses as a percentage of net sales
pertains primarily to increased costs associated with the Company's efforts to
improve and streamline its information technology systems and services.
Additional factors 



                                      -13-
<PAGE>   16

include increased compensation costs, increased legal and other related costs
associated with product liability lawsuits and costs and expenses associated
with the Company's acquisition of AQL.

Income from operations increased 52.8% from $31,160,000 for the nine months
ended September 30, 1997 to $47,621,000 for the nine months ended September 30,
1998. Operating margins increased from 23.4% in the 1997 period to 27.5% in the
1998 period.

Interest expense (income), net, changed from $545,000 of net interest income for
the nine months ended September 30, 1997 to $599,000 of net interest expense for
the nine months ended September 30, 1998, and is primarily due to the fact that
in 1998 the Company had incurred interest expense on debt outstanding during the
period. In 1997, the Company had no debt outstanding and generated investment
returns on its cash balances.

Other income, net, decreased from $1,217,000 of other income for the nine months
ended September 30, 1997 to $916,000 of other income for the nine months ended
September 30, 1998. The Company experienced significant foreign currency
transaction gains, net of hedging contracts, in the Company's Malaysian and
Thailand subsidiaries for the nine months ended September 30, 1997. In 1998, the
Company experienced foreign currency transaction gains, net of hedging
contracts, primarily in its European subsidiaries. The gains experienced from
foreign currency transactions, net of hedging contracts, in 1998 were not as
significant as in the prior year.

Income taxes decreased from $3,669,000 for the nine months ended September 30,
1997 to $3,475,000 for the nine months ended September 30, 1998. The income tax
provisions recorded in both 1997 and 1998 remain less than statutory rates due
primarily to the tax-free status of the Company's foreign manufacturing 
operations.
 
Net income increased 52.0% from $29,253,000 for the nine months ended September
30, 1997 to $44,463,000 for the nine months ended September 30, 1998 due to the
foregoing factors.



                                      -14-
<PAGE>   17
LIQUIDITY AND CAPITAL RESOURCES

The Company's operations generated approximately $13,524,000 and $42,386,000 of
cash during the nine months ended September 30, 1998 and 1997, respectively.
During the nine months ended September 30, 1998, the Company experienced
increased accounts receivable and inventory levels compared to the prior year.
In 1998, the Company has expanded its production capacity by approximately 57
percent which has enabled the Company to eliminate customer allocation caused by
capacity constraints during 1997 and the first half of 1998. While the Company's
products were being allocated to certain customers, the Company's sales force
was engaged in maintaining customer relationships and was not focused on
generating new business. At the end of the second quarter of 1998, the Company's
sales force resumed its focus on generating new business as well as
re-establishing its relationships with former customers who did not receive
product during this allocation period. As a result of the sales cycle time
associated with generating this new business, much of the Company's sales growth
occurred late in the third quarter of 1998 and was a primary factor associated
with the significant increase in the Company's accounts receivable levels as
compared to the prior year. During the month of October 1998, collections on
accounts receivable were strong; considerably reducing the Company's outstanding
accounts receivable.

Further, during the nine months ended September 30, 1998 and 1997, the Company
acquired or constructed capital assets of approximately $44,465,000 and
$25,807,000, respectively, primarily for the expansion of the Company's foreign
manufacturing operations.

During 1997, the Company completed construction and began operating the first of
its three new production lines located in its Thailand facility, referred to by
the Company as the "Grand Master(TM)." The two additional production lines began
operating in the first quarter of 1998. The Company's management believes that a
single "Grand Master(TM)" production line has the highest capacity of any glove
production line in the world, equivalent in capacity to approximately eight of
the existing production lines in this facility. The construction of these
production lines has been funded with internally generated cash.

In addition, the Company is currently building a latex concentrate plant in
Thailand. The Company began initial production of latex concentrate at this
plant in the third quarter of 1997 and expects the final phase of construction
to be completed in 1999. The output of the plant currently supplies
approximately 70% of the latex concentrate required by the Company's factories
in Thailand and Malaysia for the manufacture of its disposable latex gloves.
This plant allows the Company to integrate its manufacturing processes to gain
better control over the quality, cost and reliability of latex supplies. The
Company anticipates that this construction will be funded with internally
generated funds and borrowings under the credit facilities.

In April 1997, the Company announced plans for the expansion of its Southeast
Asian manufacturing operations in order to meet the continued strong demand and
anticipated future demand for its latex and synthetic medical examination,
surgical and high-technology and scientific gloves. In conjunction with these
plans, the Company completed construction of an additional building and 22 high
speed machines at the Company's existing Thai facility in September 1998.
Additionally, the Company plans to construct a second manufacturing facility to
be located in southern Thailand that is expected to produce latex and synthetic
surgical, high-technology and scientific and examination gloves. Construction of
this site began in the second half of 1997 after approval by the Thailand Board
of Investment. Four production buildings are expected to be constructed on this
site. One of these buildings will house the expansion of the Company's
Tactylon(R) synthetic examination and surgical glove and the Company's nitrile
glove production. Production of nitrile gloves in this building began in the
fourth quarter of 1998, while production of the Tactylon(R) gloves is expected
to begin in the next few months. The first machine in this building is expected
to increase by over 200 



                                      -15-
<PAGE>   18
percent the production capacity of the Tactylon(R) product line in comparison to
the existing facility which is located in Vista, California. The second building
will be constructed to provide additional capacity for the production of the
Company's surgical and clean-room glove products. Production of the second
building is scheduled to begin in the fourth quarter of 1998. In the interim,
these products will continue to be manufactured at the Company's Malaysia and
Vista, California facilities. An additional two buildings will be constructed to
house the Company's increased capacity for latex examination, scientific,
synthetic and surgical gloves. Production of buildings three and four is
scheduled to begin in 1999. The new buildings, machines and supporting
infrastructure are expected to cost approximately $80 million in the aggregate.
The significant investment by the Company in its manufacturing operations is
expected to increase the Company's annualized production capacity from
approximately 3.5 billion gloves to approximately 5.5 billion gloves. Financing
for the total capital expenditures for the two-year period is projected to come
from internally generated funds, with any shortfalls to be financed through
borrowings from the credit facilities.

In the fourth quarter of 1998, the Company intends to begin construction of a
facility in southern Thailand designed to manufacture boxes and ceramic hand
formers. This facility will allow the Company to further integrate its
manufacturing operations to gain better control over the quality, cost and
reliability of these products. This facility is expected to commence production
in May 1999 and is expected to produce approximately eighty percent of the
Company's supplies requirements for these products. The total expected costs for
the construction of these facilities will be approximately $7 million.

In February 1998, the Company completed the acquisition of AQL, a
California-based marketer of glove products for the high-technology and
scientific markets. The Company paid for this acquisition with internally
generated cash. The Company has changed the name of AQL to Safeskin Scientific
Corporation.

The Company has an unsecured two-year credit facility for financing general
working capital needs, up to a maximum of $40,000,000 in borrowings (the "Credit
Facility"). As of September 30, 1998, there was approximately $22,000,000
outstanding under the Credit Facility. On July 30, 1998, the Company , through
its subsidiary Safeskin (B.V.I.) Limited ("Safeskin BVI"), entered into and
closed a credit agreement for a $100 million term loan facility (the "BVI
Facility") with Union Bank of California, N.A., as Agent. The BVI Facility is
secured by a first priority lien on the Common Stock of the Company purchased by
Safeskin BVI, a first priority lien on all the assets of Safeskin BVI and a
first priority pledge of the capital stock and beneficial interest in Safeskin
Corporation (Thailand) Limited. Safeskin BVI may elect for interest on the BVI
Facility to accrue at a rate per annum equal to either (i) the base rate plus
0.25% or (ii) LIBOR plus 1.75%. The BVI Facility matures six months after
closing, with all principal and interest due on such date. During the third
quarter of 1998, the Company used a majority of the funds from the BVI Facility
to repurchase approximately two million shares of its Common Stock. The total
cost of the treasury stock acquired related to this share buyback totaled
approximately $70,400,000 for the year-to-date period ending September 30, 1998.
Borrowings above the cost of the Company's share buyback are being used to
finance (i) the Company's ongoing investment in its Thailand facilities where
its production capacity is expanding by nearly 60 percent above 1997 levels,
(ii) the Company's working capital requirements and (iii) other general
corporate purposes.



                                      -16-
<PAGE>   19
In addition, on July 30, 1998, the Company signed an additional credit agreement
with Union Bank of California, N.A., as Agent, for a five-year, $100 million
term loan and $40 million revolving line of credit facility, the closing of
which is subject to numerous conditions. The Company currently intends to close
this credit facility prior to the maturity of the BVI Facility. If this facility
is closed, the Company will use the proceeds to repay the BVI Facility and the
Credit Facility. 

The Company's foreign manufacturing subsidiaries have revolving lines of credit
for financing general working capital needs up to approximately $9,100,000. As
of September 30, 1998, there were no borrowings outstanding under these credit
facilities. These borrowings are collateralized by all assets of the
subsidiaries and are further supported by a guarantee of the Company.

In July 1997, the Thai baht and Malaysian ringgit were permitted to float
against the U.S. dollar and other currencies, and as a result, the baht and
ringgit have devalued from approximately 24.7 bahts/dollar and 2.52
ringgits/dollar, as of June 30, 1997 to approximately 48.15 bahts/dollar and
3.89 ringgits/dollar as of December 31, 1997, respectively. The significant
devaluation in both the Thailand and Malaysian currencies has resulted in an
increased amount of foreign currency transaction net gains, which are included
in other income, and an increased amount of foreign currency translation
adjustments, which are recorded as other comprehensive income. As of September
30, 1998, the Thailand baht and Malaysian ringgit were approximately 39.0
bahts/dollar and 3.8 ringgits/dollar, respectively. The Company has not
experienced significant foreign currency transaction net gains and losses in
1998. The Company has, however, experienced significant foreign currency
translation adjustments in 1998. The devaluation of the baht and ringgit may
cause the Company's competitive environment to improve. It is not possible at
this time to determine what effect the devaluation will have upon pricing or
costs, but management believes the devaluation will not have a material adverse
effect on the Company's operating results for 1998.



                                      -17-
<PAGE>   20
LEGAL PROCEEDINGS

Since May 1995, 184 actively pending product liability lawsuits seeking monetary
damages have been filed in federal and state courts against the Company, and
other manufacturers of latex gloves. On February 26, 1997, the Judicial Panel on
Multi-District Litigation entered an order transferring all latex allergy
lawsuits brought by healthcare workers against the Company and other latex glove
manufacturers in the Federal courts to the Federal district court in
Philadelphia, consolidating those cases, and other pending and future Federal
court latex allergy lawsuits, for discovery management and other pre-trial
proceedings.

The Company's tax returns for the years ended December 31, 1995 and 1996 are 
currently being audited by the Internal Revenue Service.

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This report and the documents incorporated by reference herein contain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements include, among others, statements
concerning the Company's outlook for 1998 and beyond, the effect of currency
fluctuations in Thailand and Malaysia on the operating results of the Company,
the Company's liquidity and working capital, the Company's ability to complete
construction of new facilities as scheduled, the production capacity and the
Company's ability to achieve additional efficiencies in its manufacturing
facilities and other statements of expectations, beliefs, future plans and
strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. The forward-looking statements in this
report are subject to risks and uncertainties that could cause the assumptions
underlying such forward-looking statements and the actual results to differ
materially from those expressed in or implied by the statements.

The most important factors that could prevent the Company from achieving its
goals--and cause the assumptions underlying forward-looking statements and the
actual results of the Company to differ materially from those expressed in or
implied by those forward-looking statements--include, but are not limited to,
the following:

        -       the competitive nature of the industry and the ability of the
                Company to continue to distinguish its products on the basis of
                quality, reliability and value; possible obsolescence of the
                Company's primary product due to the development by competitors
                of new products, manufacturing processes or technologies
                including latex alternatives; the ability of the Company to
                maintain strong distributor relationships; and the ability of
                the Company to maintain selling prices and anticipated volumes;

        -       the ability of the Company to meet existing or future FDA
                regulations regarding the manufacture and sale of the Company's
                gloves;



                                      -18-
<PAGE>   21
        -       the Company's ability to successfully develop and introduce new 
                products to the market;

        -       risks associated with investments and operations in foreign
                countries, particularly Thailand and Malaysia, including
                exchange rate fluctuations, local economic conditions,
                governmental policies regarding foreign ownership of
                manufacturing facilities, local regulatory requirements, tax
                holidays and political factors; 

        -       the consistent availability, at budgeted prices, of raw rubber
                from independent growers and latex concentrate from plant
                operators in Thailand and Malaysia and the available of nitrile;

        -       adverse outcomes regarding product liability lawsuits or the
                ability to obtain sufficient product liability insurance
                coverage at reasonable rates;

        -       delays in the completion of the construction of the Company's
                new production facilities in Thailand or the failure of these
                production facilities to generate anticipated productivity and
                efficiencies;

        -       delays in the completion of the final phase of the Company's
                construction of its latex concentrate plant in Thailand or the
                failure of this plant to generate anticipated productivity and
                efficiencies;

        -       economic conditions in the healthcare industry, including the
                potential impact of industry consolidation and cost constraints
                on the end-user;

        -       changes in significant government regulations affecting the
                healthcare industry;

        -       the ability of the Company to protect its proprietary products,
                know-how and manufacturing processes;

        -       changes in the Company's rates or basis of income taxation,
                including applicable U.S. tax laws and policies governing
                foreign operations and Section 351 Transactions;

        -       the ability of the Company to complete its Year 2000 project and
                remediate its Year 2000 Issues within the specified time frames
                or within currently estimated costs; and

        -       rapid levels of inflation which could have a significant effect
                on the Company's net sales and profitability.

These and other risks and uncertainties affecting the Company are discussed in
greater detail in this report and in other filings by the Company with the
Securities and Exchange Commission.



                                      -19-
<PAGE>   22
RISKS ASSOCIATED WITH YEAR 2000

OVERVIEW

        The Year 2000 Issue is the issue of whether information and
non-information technology systems will be able to recognize and process
date-sensitive information in the year 2000. The Company relies, directly and
indirectly, on information technology systems, such as desktop computers,
network hardware equipment and applications software, to manage its business
data and to perform a variety of administrative services including, accounting,
financial reporting, payroll and invoicing. The Company also relies on
non-information technology systems including office equipment, security systems,
telephone systems and process controllers, to control its manufacturing systems
and carry out its day-to-day operations. In addition, third parties material to
the Company's operations, such as suppliers, vendors and customers, rely on
information and non-information technology systems to manage their businesses.
All of these technology systems could potentially be affected by the Year 2000
Issue.

        In order to minimize the risk of Year 2000 related losses, the Company
is conducting a comprehensive assessment of its Year 2000 Issue. Perot Systems
Corporation has been retained to help the Company (i) identify and update or
replace non-Year 2000 compliant information and non-information technology
systems that are material to the Company's operations and (ii) develop
contingency and business continuation plans in the event that the Company is
unable to timely address its Year 2000 Issue.

        The Company's Year 2000 assessment is focusing primarily on four areas:
information technology equipment; applications software; non-information
technology systems; and third party suppliers and customers. The assessment
involves the testing and analyzing of all information technology equipment,
applications software and non-information technology systems used by the
Company, and the evaluation of the Year 2000 preparedness of third parties
critical to the Company's operations. As of October 30, 1998, the Company's Year
2000 assessment in each of these areas was over 90% complete. To date, the
assessment has revealed that two of the material applications software on which
the Company relies are not Year 2000 compliant. Both of these applications will
be replaced in 1999. In early 1998, the Company began to implement a Year 2000
compliant enterprise-wide business systems application. Although the Company
installed the application in order to improve the management of its business
data, the application will also have the effect of ensuring that a significant
percentage of the Company's information technology systems are Year 2000
compliant. The Company expects that this application will be online at the
Company's U.S. facilities by January 1999 and at the Southeast Asian
manufacturing facilities by the end of the second quarter of 1999.

        The Company has developed preliminary remediation plans for each of the
four areas targeted by the Year 2000 assessment. Specifically, non-Year 2000
compliant information technology equipment, including obsolete hardware
components and outdated operating systems, BIOS or chip codes, will be updated
or replaced, applications software that is not Year 2000 compliant will be
converted or replaced by the end of the second quarter of 1999 and any non-
information technology systems or processors that are either non-Year 2000
compliant or suspect


                                      -20-


<PAGE>   23
due to lack of information from the vendor will be replaced. In addition, the
Company is currently requesting confirmation that all suppliers and customers
material to its operations are, or in within a short period of time are planning
to become, Year 2000 compliant.

        The Company expects to approve and begin implementing a final
remediation plan for addressing all known Year 2000 Issues by the end of the
fourth quarter of 1998. The Company's remediation plan will give priority to
those non-Year 2000 compliant technology systems which are material to the
Company's operations. Perot Systems Corporation will be handling all remediation
efforts, including, if necessary, the replacement of any information technology
hardware or software, the upgrading of manufacturing systems and the changing of
BIOS or chip codes. Perot Systems will coordinate its remediation efforts with
the Company in order to avoid, to the extent possible, disruption of the
Company's manufacturing capacity. Contingency plans for all of the Company's
known Year 2000 Issues will be finalized by mid-1999.

        The Company will also examine the Year 2000 readiness of any information
or non-information technology systems acquired in the future and develop
remediation and contingency plans as necessary.

COSTS

        Although the total costs associated with becoming Year 2000 compliant
have not been fully identified, the Company does not currently expect the costs
of remediating its Year 2000 Issues to be material to its operations, results of
operations or financial condition. As of October 30, 1998, the Company has spent
approximately $300,000 on Year 2000 Issues, primarily attributable to the cost
of conducting the Year 2000 assessment and developing a remediation plan.

        The future cost of identifying and remediating Year 2000 Issues is
expected to be at least $800,000. Costs for replacements or modifications that
would have been necessary independent of Year 2000 Issues, including the $1.2
million that will be spent to install the new enterprise-wide business
applications software at the Company's Asian operation sites, have not included
in the Company's Year 2000 cost estimates.

RISKS

        The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations of the Company. Such failures could materially and adversely affect
the Company's results of operations and financial condition. In addition, the
costs associated with the remediation of the Year 2000 Issues may be
significantly higher than Company estimates, depending upon the availability and
cost of personnel trained in the remediation of Year 2000 Issues, the ability to
locate and correct all relevant computer codes, the ability to obtain timely
responses to and corrections by third-parties and suppliers, the ability to
implement interfaces between the new systems and the systems not being replaced
and similar uncertainties. Due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year 2000 readiness
of third party suppliers and customers and of the infrastructure in those
countries in which the Company operates, there can be no assurance that Year
2000 Issues will not have a material impact


                                      -21-


<PAGE>   24
on the Company's results of operations or financial condition. However, the
Company's Year 2000 remediation efforts are expected to significantly reduce the
Company's level of uncertainty about the Year 2000 Issue and, in particular,
about the Year 2000 compliance and readiness of its material third party
suppliers, customers and vendors. Furthermore, the Company believes that, with
the implementation of new business systems and the completion of its Year 2000
remediation plan as scheduled, the possibility of significant interruptions of
normal operations will be minimal.


                                      -22-

<PAGE>   25
                           PART II: OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits


<TABLE>
<CAPTION>
         EXHIBIT      DESCRIPTION
         -------      -----------
<S>                   <C>  
         10.44        Loan Agreement dated as of July 30, 1998 among Safeskin 
                      (B.V.I.) Limited and Union Bank of California, N.A.
         10.45        Revolving/Term Loan Agreement dated as of July 30, 1998
                      among Safeskin Corporation and Union Bank of California, N.A.
         11           Statement re: Computation of per share earnings
         27           Financial Data Schedule
</TABLE>

(b)      Reports on Form 8-K

         None.



                                      -23-
<PAGE>   26
                                   SIGNATURES


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


                                       SAFESKIN CORPORATION


Date: November 16, 1998                By: /s/ David L. Morash        
                                           ------------------------------------
                                       David L. Morash, Executive Vice-
                                       President, Chief Financial Officer



                                      -24-