<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 June 30, 1999

                                       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.
<TABLE>
<CAPTION>
                 Class                                            Outstanding at July 31, 1999
                 ----                                             ----------------------------
<S>                                                              <C>
Common Stock, par value $0.01 per share                                    55,503,709
</TABLE>


<PAGE>   2



                              SAFESKIN CORPORATION

                                      INDEX

<TABLE>
<CAPTION>

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

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

                  Condensed Consolidated Balance Sheets at June 30, 1999 and
                  December 31, 1998................................................                 2

                  Condensed Consolidated Statements of Operations for the three
                  months ended June 30, 1999 and 1998..............................                 3

                  Condensed Consolidated Statements of Operations for the six months
                  ended June 30, 1999 and 1998.....................................                 4

                  Consolidated Statements of Comprehensive Income for the three
                  months ended June 30, 1999 and 1998 .............................                 5

                  Consolidated Statements of Comprehensive Income for
                  the six months ended June 30, 1999 and 1998 .....................                 6

                  Condensed Consolidated Statements of Cash Flows for the six months
                  ended June 30, 1999 and 1998.....................................                 7

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

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


PART II:          Other Information................................................                 25

ITEM 6.  Exhibits and Reports on Form 8-K                                                           25

                  SIGNATURES.......................................................                 26
</TABLE>


<PAGE>   3

                          PART I: FINANCIAL INFORMATION




ITEM 1.  Financial Statements

<TABLE>
<CAPTION>
         INDEX                                                                  PAGE
         -----                                                                  ----
<S>                                                                             <C>
         Condensed Consolidated Balance Sheets at June 30, 1999
         and December 31, 1998.....................................................2

         Condensed Consolidated Statements of Operations for
         the three months ended June 30, 1999 and 1998.............................3

         Condensed Consolidated Statements of Operations for
         the six months ended June 30, 1999 and 1998...............................4

         Consolidated Statements of Comprehensive Income for the
         three months ended June 30, 1999 and 1998 ................................5

         Consolidated Statements of Comprehensive Income for the
         six months ended June 30, 1999 and 1998 ..................................6

         Condensed Consolidated Statements of Cash Flows for the
         six months ended June 30, 1999 and 1998...................................7

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

<PAGE>   4



                              SAFESKIN CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 1999 AND DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                               1999         DECEMBER 31,
                                                            (UNAUDITED)        1998
                                                          -------------   -------------
<S>                                                       <C>             <C>
ASSETS
Current assets:
      Cash and cash equivalents ........................  $  11,146,926   $   9,416,802
      Accounts receivable, net .........................     34,112,727      32,511,412
      Inventory ........................................     41,240,010      37,056,821
      Other current assets .............................     12,558,563       9,829,335
                                                          -------------   -------------

             Total current assets ......................     99,058,226      88,814,370

Property, plant and equipment, net .....................    142,502,530     119,456,352
Deferred taxes and other assets ........................     41,963,724      40,690,386
                                                          -------------   -------------

             Total assets ..............................  $ 283,524,480   $ 248,961,108
                                                          =============   =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
      Accounts payable .................................  $   8,778,094   $   8,661,602
      Accrued liabilities ..............................     19,574,287      24,515,378
      Current portion of long-term debt ................      6,750,000       4,500,000
                                                          -------------   -------------

             Total current liabilities .................     35,102,381      37,676,980

Long-term debt .........................................    111,044,050      87,731,158
Other long-term liabilities ............................      4,224,217       2,140,682
                                                          -------------   -------------

             Total liabilities .........................    150,370,648     127,548,820

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; 55,124,709 shares
            and 54,600,399 shares outstanding ..........        551,247         546,004
      Additional paid-in-capital .......................     77,421,573      75,360,306
      Treasury stock, at cost; 1,999,900 shares in
            1999 and 1998 ..............................    (73,880,836)    (73,589,169)
      Accumulated other comprehensive loss .............    (26,871,042)    (26,993,003)
      Retained earnings ................................    155,932,890     146,088,150
                                                          -------------   -------------

            Total shareholders' equity .................    133,153,832     121,412,288
                                                          -------------   -------------

            Total liabilities and shareholders' equity .  $ 283,524,480   $ 248,961,108
                                                          =============   =============

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


</TABLE>



                                       -2-
<PAGE>   5

                              SAFESKIN CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)
                                    <TABLE>
<CAPTION>
                                                            1999                      1998
                                                         -----------               -----------
<S>                                                      <C>                       <C>
Net sales...........................................     $59,072,653               $58,642,596

Cost of goods sold..................................      31,306,200                27,890,151
                                                         -----------               -----------

          Gross profit..............................      27,766,453                30,752,445
                                                         -----------               -----------

Operating expenses:
    Selling.........................................       8,654,808                 6,141,030
    Research and development........................       1,533,235                 1,679,546
    General and administrative......................       7,062,596                 6,130,258
                                                         -----------               -----------

          Total operating expenses..................      17,250,639                13,950,834
                                                         -----------               -----------

          Income from operations....................      10,515,814                16,801,611

Interest expense, net...............................       1,975,822                   123,070

Other expense (income), net.........................        (947,473)                   16,160
                                                         -----------               -----------

Income before income tax provision..................       9,487,465                16,662,381

Income tax provision................................         602,382                 1,666,237
                                                         -----------               -----------

Net income..........................................     $ 8,885,083               $14,996,144
                                                         ===========               ===========

Per share amounts:
Earnings per share of common stock
    and common stock equivalents:
        Basic                                           $       0.17               $      0.28
        Diluted                                                 0.16                      0.25

Weighted average number of shares of common
    stock and common stock equivalents outstanding:
        Basic                                             53,008,409                53,849,094
        Diluted                                           56,311,915                61,120,471

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

</TABLE>

                                        -3-
<PAGE>   6

                              SAFESKIN CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                       1999                     1998
                                                                                    -----------              -----------
<S>                                                                                <C>                      <C>
          Net sales........................................................        $100,835,568             $111,938,431

          Cost of goods sold...............................................          52,719,506               53,344,413
                                                                                    -----------              -----------

                    Gross profit...........................................          48,116,062               58,594,018
                                                                                    -----------              -----------

          Operating expenses:
              Selling......................................................          15,743,366               11,772,122
              Research and development.....................................           3,199,237                3,514,219
              General and administrative...................................          14,088,579               12,051,208
                                                                                    -----------              -----------

                    Total operating expenses...............................          33,031,182               27,337,549
                                                                                    -----------              -----------

                    Income from operations.................................          15,084,880               31,256,469

          Interest expense (income), net...................................           3,698,734                 (159,666)

          Other expense (income), net......................................             664,338                  (39,982)
                                                                                    -----------              -----------

          Income before income tax provision...............................          10,721,808               31,456,117

          Income tax provision.............................................             877,068                3,145,611
                                                                                    -----------              -----------

          Net income.......................................................         $ 9,844,740              $28,310,506
                                                                                    ===========              ===========

          Per share amounts:
          Earnings per share of common stock
              and common stock equivalents:
                  Basic                                                             $      0.19              $      0.53
                  Diluted                                                                  0.17                     0.47

          Weighted average number of shares of common
              stock and common stock equivalents outstanding:
                  Basic                                                              53,106,576               53,319,341
                  Diluted                                                            56,854,530               60,878,216


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

</TABLE>

                                      -4-
<PAGE>   7

                              SAFESKIN CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                               1999                     1998
                                                                           -----------              -----------
<S>                                                                       <C>                       <C>
Net income......................................................          $  8,885,083              $14,996,144

Other comprehensive income (loss), net of tax:

     Foreign currency translation adjustments...................             2,109,626               (7,114,749)
                                                                           -----------              -----------
Comprehensive income............................................           $10,994,709              $ 7,881,395
                                                                           ===========              ===========


 The accompanying notes are an integral part of these condensed financial statements.
</TABLE>


                                      -5-
<PAGE>   8

                              SAFESKIN CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                 FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                               1999                     1998
                                                                            ----------              -----------
<S>                                                                         <C>                     <C>
Net income......................................................            $9,844,740              $28,310,506

Other comprehensive income, net of tax:

     Foreign currency translation adjustments...................               121,961                6,248,049
                                                                            ----------              -----------
Comprehensive income.............................................           $9,966,701              $34,558,555
                                                                            ==========              ===========





 The accompanying notes are an integral part of these condensed financial statements.
</TABLE>


                                      -6-
<PAGE>   9
                              SAFESKIN CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                               1999           1998
                                                          -------------   -------------
<S>                                                       <C>             <C>
Cash flows from operating activities:
      Net income .......................................  $   9,844,740   $  28,310,506
      Adjustments to reconcile net income to cash
          provided by operating activities:
           Depreciation and amortization ...............      7,335,199       5,360,857
           Exchange loss ...............................        702,146         301,451
           Loss on disposal of equipment ...............         14,042          14,049
      Changes in operating assets and liabilities:
                Accounts receivable ....................     (1,869,000)       (365,083)
                Inventory ..............................     (4,562,855)     (8,745,872)
                Other assets ...........................     (5,030,683)     (6,909,165)
                Accounts payable and accrued liabilities     (2,566,530)     (3,151,072)
                                                          -------------   -------------
           Net cash provided by operating activities ...      3,867,059      14,815,671
                                                          -------------   -------------

Cash flows from investing activities:
      Payments for acquisitions ........................             --     (14,346,460)
      Purchase of property, plant and equipment ........    (30,158,567)    (26,664,206)
      Proceeds from sale of equipment ..................          3,066              --
                                                          -------------   -------------
           Net cash used in investing activities .......    (30,155,501)    (41,010,666)
                                                          -------------   -------------

Cash flows from financing activities:

      Proceeds from issuance of common stock ...........      2,066,510       5,420,911
      Repurchase of common stock .......................       (291,667)     (7,223,304)
      Borrowings of debt ...............................    163,685,227      25,000,000
      Repayments of debt ...............................   (138,122,335)     (9,000,000)
                                                          -------------   -------------
           Net cash provided by financing activities ...     27,337,735      14,197,607
                                                          -------------   -------------

Effect of exchange rate changes on cash ................        680,831          42,886
                                                          -------------   -------------
Net increase (decrease) in cash and cash equivalents ...      1,730,124     (11,954,502)
Cash and cash equivalents at beginning of period .......      9,416,802      23,916,959
                                                          -------------   -------------
Cash and cash equivalents at end of period .............  $  11,146,926   $  11,962,457
                                                          =============   =============

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

</TABLE>


                                      -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, 1998. The December 31, 1998 condensed consolidated balance sheet was
     derived from audited financial statements, but does not include all
     disclosures required by generally accepted accounting principles. Certain
     reclassifications have been made to prior periods to conform to the current
     period's presentation.

2.   Inventories at June 30, 1999 consisted of $6,096,000, $525,000 and
     $34,619,000 for raw materials, work in process and finished goods,
     respectively. At December 31, 1998, inventories consisted of $5,587,000,
     $909,000 and $30,561,000 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 par value of each share was not changed
     from $.01. 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. The Company's derivative activities, all of
     which consist of forward foreign exchange contracts as of June 30, 1999,
     are initiated primarily to hedge intercompany receivables and payables.

     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 A2 rated international institutions) do
     not fulfill their obligations to deliver the contracted currencies, the
     Company could be at risk for currency related fluctuations (generally
     limited to unrealized gains). Management believes using A2 rated
     international institutions as counterparties to the hedging contracts
     minimizes the risk of non-performance.

5.   As of March 5, 1999, the Company entered into a seven-year lease for a new
     corporate headquarters campus facility ("the Lease"). As of June 30, 1999,
     the Lease was modified such that the new maturity date is March 31, 2000.
     As of June 30, 1999, the lessor's maximum loan commitment was reduced from
     $60 million to $17.5 million. In connection with these modifications, the
     Company has also elected to exercise its option to purchase the land and
     land improvements up to a maximum of $17.5 million on or before March 31,
     2000. Further disclosure relating to the Company's commitments is included
     in Notes 9 and 13 in the Notes to the 1998 Consolidated Financial
     Statements.

                                      -8-
<PAGE>   11


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

Safeskin attributes its current sales levels 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.
Safeskin introduced lightly powdered medical gloves in 1989, powder-free medical
gloves in 1990, HypoClean(R) powder-free gloves in 1992, powder-free latex
surgical gloves in 1994 and various high technology and scientific nitrile
gloves in 1995. In 1997, Safeskin began selling a medical examination glove made
of nitrile, a non-latex material. Additionally, in 1997, as a result of its
acquisition of the synthetic glove business of Tactyl Technologies, Inc.
("Tactyl"), Safeskin began selling Tactylon(R) synthetic examination and
surgical gloves. In February 1998, as a result of its acquisition of Absolute
Quality Leadership, Inc. ("AQL"), Safeskin 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 Safeskin 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.

Safeskin's net sales are derived from the sale of finished products, net of
contractual allowable rebates, incentives, fees and allowance for estimated
returns. These rebates are provided to distributors for the resale of Safeskin's
products in specific volumes to specified end user customers and fees are
provided to group purchasing organizations based on sales made to their member
organizations. Safeskin estimates allowable rebates, on a monthly basis, through
the analysis of actual sales information from distributors, Safeskin's
projections of distributor inventories, contractual arrangements and historical
and projected trends related to actual rebates issued. Safeskin establishes an
allowance for estimated returns based on historical return patterns and
estimated future returns. 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 primarily as a result of the tax-free
status of Safeskin's foreign manufacturing operations. Safeskin's existing
Thailand manufacturing facilities have been granted tax-free status through 2003
and have been granted a reduced tax rate through 2007. In 1998, Safeskin built
new production facilities in Thailand, and applied for and received similar
tax-free status for these operations. These


                                      -9-
<PAGE>   12

new facilities in Thailand have been granted tax-free status through 2006 and
were granted a reduced tax rate through 2010. Safeskin'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 will not have a material
adverse effect upon Safeskin's operations as substantially all of the Malaysian
manufacturing operations were transferred to Thailand during the first quarter
of 1999.

Restructuring

During 1996, Safeskin announced plans to move all of its remaining latex
examination glove production from its Malaysian facility to its Thailand
facility. Safeskin also announced that the Malaysian facility would continue to
operate as Safeskin's manufacturing source of higher-value synthetic, surgical,
and scientific products. At December 31, 1996, the Malaysian facility was
considered held for sale. During 1997, Safeskin extended the planned use of the
Malaysian facility due to existing production requirements and the timing of
bringing new production capacity on-line in Thailand. During 1998, Safeskin
successfully increased its examination glove production capacity at its existing
Thailand facility and in 1998, Safeskin commenced operations at its new 54-acre
manufacturing facility in Thailand. This facility was constructed to provide
additional capacity for the production of Safeskin's synthetic, surgical, and
scientific products. As a result of this increased production capacity in
Thailand for specialized gloves, during 1998 Safeskin decided to move all of its
remaining examination, surgical, and synthetic glove production from its Ipoh,
Malaysia and Vista, California production facilities to Safeskin's manufacturing
facilities in Thailand by the end of the first quarter of 1999. In addition,
Safeskin completed the integration of AQL in the fourth quarter of 1998 by
relocating AQL's offices from Santa Maria, California to Safeskin's corporate
headquarters in San Diego, California. In connection with the closure of
Safeskin's facilities in Ipoh, Malaysia and Vista and Santa Maria, California,
(the "closed facilities"), Safeskin recognized an expense of $14,331,000 in the
fourth quarter of 1998. This expense consists of approximately $5,134,000
related to fixed assets written down to estimated fair value, $3,883,000 related
to employee termination costs, $3,335,000 related to impairment of goodwill
associated with the Tactyl acquisition, $1,535,000 related to the write-off of
leased equipment and the costs to renovate a leased facility, and approximately
$444,000 associated with various other unusual charges. All remaining assets of
the closed facilities were assumed to be scrapped. The net book value of assets
expected to be disposed of totaled approximately $14 million as of December 31,
1998. As of June 30, 1999, Safeskin had not yet disposed of a significant
portion of its fixed assets at the closed facilities (primarily those at its
Ipoh, Malaysia facility), which were written down to estimated fair value.
Safeskin intends to dispose of these assets in 1999. There have been no
significant changes to the carrying amount of fixed assets held for disposal. In
connection with the restructuring activities related to the closure of
Safeskin's facilities in Ipoh, Malaysia and Vista and Santa Maria, California,
Safeskin accrued restructuring charges totaling $5,158,889 at December 31, 1998.
As of June 30, 1999, there have been no significant changes in Safeskin's
previous estimates of accrued restructuring charges. These charges related
primarily to liabilities associated with anticipated employee termination costs
totaling $3,809,545 and costs associated with the write-off of an equipment
lease and costs to renovate a leased facility totaling $1,349,344. As a result
of the restructuring activities, Safeskin terminated approximately 1,800
employees primarily in Malaysia, in the first and second quarters of 1999.

                                      -10-
<PAGE>   13

THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998

Net sales for the three months ended June 30, 1999 were $59,073,000 which
represents a 0.7% increase over net sales of $58,642,000 for the same period in
1998. The predominant causes for the increase in sales were an increase in unit
volumes sold and the shift in product mix to higher priced powder-free gloves in
the 1999 period as compared to the 1998 period, offset by lower average selling
prices.

Cost of goods sold increased 12.2% from $27,890,000 for the three months ended
June 30, 1998 to $31,307,000 for the three months ended June 30, 1999. As a
percentage of net sales, cost of goods sold increased from 47.6% for the three
months ended June 30, 1998 to 53.0% for the same period in 1999. This increase
in cost of goods sold as a percentage of net sales was primarily attributable to
lower average selling prices and the negative effects of foreign currency in the
current period due to the strengthening of the Thai baht. In addition, cost of
goods sold has been adversely affected by start-up production costs associated
with Safeskin's new plant in Thailand and wind-down production costs associated
with relocating significant glove capacity from Malaysia to Thailand. These
factors were partially offset by an increased mix of higher-margin powder-free
gloves, lower costs associated with the shift of production from Malaysia to
Thailand and lower latex costs. As a result of the above factors, gross profits
decreased 9.7% from $30,752,000 for the three months ended June 30, 1998 to
$27,766,000 for the three months ended June 30, 1999.

Selling expenses increased 40.9% from $6,141,000 for the three months ended June
30, 1998 to $8,655,000 for the three months ended June 30, 1999. As a percentage
of net sales, selling expenses increased from 10.5% for the three months ended
June 30, 1998 to 14.7% for the same period in 1999. The increase in selling
expenses as a percentage of net sales is primarily attributed to expansion of
Safeskin's scientific and international sales force and related efforts to
expand its business in these markets.

Research and development expenses decreased 8.7% from $1,679,000 for the three
months ended June 30, 1998 to $1,533,000 for the three months ended June 30,
1999. As a percentage of net sales, these expenses decreased slightly from 2.9%
for the three months ended June 30, 1998 to 2.6% for the three months ended June
30, 1999.

General and administrative expenses increased 15.2% from $6,130,000 for the
three months ended June 30, 1998 to $7,062,000 for the three months ended June
30, 1999. As a percentage of net sales, general and administrative expenses
increased from 10.5% for the 1998 period to 12.0% for the 1999 period. The
increase in general and administrative expenses as a percentage of net sales was
caused primarily by increased costs associated with Safeskin's efforts to
improve and streamline its information technology systems and services as well
as increased legal and related expenses associated with product liability and
other lawsuits. Safeskin's legal expenses were favorably offset by approximately
$1,016,000 in the second quarter 1999 due to a refund anticipated from one of
its primary insurance carriers of overpaid product liability insurance costs.
This refund was received by Safeskin in July 1999.

                                      -11-
<PAGE>   14

Income from operations decreased 37.4% from $16,802,000 for the three months
ended June 30, 1998 to $10,516,000 for the three months ended June 30, 1999.
Operating margins decreased from 28.7% in the 1998 period to 17.8% in the 1999
period.

Interest expense, net, increased from $123,000 of interest expense for the three
months ended June 30, 1998 to $1,976,000 of interest expense for the three
months ended June 30, 1999, primarily due to the fact that in 1999 Safeskin had
incurred interest expense on average debt outstanding during the period
totalling approximately $114,400,000. In 1998, Safeskin had incurred interest
expense on average debt outstanding totaling approximately $8,000,000.

Other expense (income), net, changed from $16,000 of other expense for the three
months ended June 30, 1998 to $948,000 of other income for the three months
ended June 30, 1999. The change in other expense (income), net, was due
substantially to net foreign currency transaction gains in Safeskin's Thailand
subsidiaries due to the strengthening of the Thai baht in the three month period
ended June 30, 1999. In 1998, Safeskin was not significantly impacted by net
foreign currency transaction gains or losses.

Provision for income taxes decreased from $1,666,000 for the three months ended
June 30, 1998 to $602,000 for the three months ended June 30, 1999. The income
tax provision recorded in 1998 was less than United States statutory rates due
primarily to the tax-free status of a significant portion of Safeskin's foreign
manufacturing operations. In 1999, the income tax provision was less than United
States statutory rates due primarily to the tax-free status of a significant
portion of Safeskin's foreign manufacturing operations and the effect of a
transaction entered into by two of Safeskin's subsidiaries, during the third
quarter of 1998, that qualified as a Section 351 Exchange, as defined in Section
351 of the Internal Revenue Code.

Net income decreased 40.8% from $14,997,000 for the three months ended June 30,
1998 to $8,886,000 for the three months ended June 30, 1999. Due to the
foregoing factors, net income as a percentage of net sales decreased from 25.6%
in 1998 to 15.0% in 1999.


                                      -12-
<PAGE>   15

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

Net sales for the six months ended June 30, 1999 were $100,836,000 which
represents a 9.9% decrease over net sales of $111,938,000 for the same period in
1998. The predominant causes for the sales decline were a decrease in unit
volumes sold and lower average selling prices by the medical division in the
1999 period as compared to the 1998 period. Safeskin began operating certain of
its new manufacturing facilities in the second half of 1998, which enabled
Safeskin to increase its production capacity during 1998. From July 1997 to June
1998, Safeskin operated with its customers on an allocation of product basis, as
Safeskin was only able to fill a portion of each distributor's orders. As
Safeskin increased production capacity, Safeskin's sales personnel began a new
and increased sales program directed at new and current end-user customers. As
part of this sales program, Safeskin, its distributors and certain end-users
entered into new three-way contracts providing for the pricing and supply of
Safeskin products to such end-users. During the third quarter and the fourth
quarter of 1998, Safeskin's distributors increased their orders to enable them
to fulfill new sales they anticipated would be placed pursuant to these
contracts. Safeskin expected these trends to continue into the first quarter of
1999. However, end-users did not purchase products under the new contracts as
quickly as anticipated and Safeskin discovered that its major distributors had
higher inventory levels than anticipated. In addition, during the first quarter
of 1999, Safeskin experienced a longer than anticipated sales cycle for signing
new contracts. As a result, in March 1999, Safeskin publicly announced its
expectation that sales and earnings for the first quarter and full year 1999
would be lower than anticipated.

Cost of goods sold decreased 1.2% from $53,344,000 for the six month period
ended June 30, 1998 to $52,720,000 for the six months ended June 30, 1999. As a
percentage of net sales, cost of goods sold increased from 47.8% for the six
months ended June 30, 1998 to 52.3% for the same period in 1999. This increase
in cost of goods sold as a percentage of net sales was attributable to lower
average selling prices and the negative effects of foreign currency in the
current period due to the strengthening of the Thai baht. These factors were
partially offset by an increased mix of higher-margin powder-free gloves and
lower costs associated with the shift of production from Malaysia to Thailand.
As a result of the above factors, gross profits decreased 17.9% from $58,594,000
for the three months ended June 30, 1998 to $48,116,000 for the three months
ended June 30, 1999. For the remainder of fiscal 1999, Safeskin anticipates that
gross profit margins will be negatively affected by startup production costs
associated with transferring operations to the new Thailand facility, wind-down
production costs associated with the closing of the Malaysian manufacturing
facility and continued pricing pressures in the industry.

Selling expenses increased 33.7% from $11,772,000 for the six months ended June
30, 1998 to $15,743,000 for the six months ended June 30, 1999. As a percentage
of net sales, selling expenses increased from 10.5% for the six months ended
June 30, 1998 to 15.6% for the same period in 1999. The increase in selling
expenses as a percentage of net sales can be attributed to lower sales levels
for the six months ended June 30, 1999 and increased selling expenses related to
its efforts to expand its business in scientific and international markets.

Research and development expenses decreased 9.0% from $3,514,000 for the six
months ended June 30, 1998 to $3,199,000 for the six months ended June 30, 1999.
As a percentage of net sales, these expenses increased from 3.1% for the six
months ended June 30, 1998 to 3.2% for the six months


                                      -13-
<PAGE>   16

ended June 30, 1999. During the remaining quarters of fiscal 1999, Safeskin
expects research and development expenses to increase due to costs associated
with developing and testing new products scheduled for introduction in 1999.

General and administrative expenses increased 16.9% from $12,051,000 for the six
months ended June 30, 1998 to $14,089,000 for the six months ended June 30,
1999. As a percentage of net sales, general and administrative expenses
increased from 10.8% for the 1998 period to 14.0% for the 1999 period. The
increase in general and administrative expenses as a percentage of net sales can
be attributed to lower sales levels for the six months ended June 30, 1999 and
increased costs associated with its efforts to improve and streamline its
information technology systems and services as well as increased legal and
related expenses associated with product liability and other lawsuits.

Income from operations decreased 51.7% from $31,257,000 for the six months ended
June 30, 1998 to $15,085,000 for the six months ended June 30, 1999. Operating
margins decreased from 27.9% in the 1998 period to 15.0% in the 1999 period.

Interest expense (income), net, changed from $160,000 of interest income for the
six months ended June 30, 1998 to $3,699,000 of interest expense for the six
months ended June 30, 1999, and is primarily due to the fact that in 1999
Safeskin had incurred interest expense on debt outstanding during the period. In
1998, Safeskin did not incur debt until the beginning of the second quarter
1998, and generated investment returns on its cash balances. The average debt
outstanding in 1998 was substantially less than the average debt outstanding in
1999.

Other expense, (income) net, changed from $40,000 of other income for the six
months ended June 30, 1998 to $664,000 of other expense for the six months ended
June 30, 1999. The change in other expense (income), net, was due substantially
to net foreign currency transaction losses in Safeskin's Thailand subsidiaries
in the six months ended June 30, 1999. In 1998, Safeskin was not significantly
impacted by net foreign currency transaction gains or losses.

Provision for income taxes decreased from $3,146,000 for the six months ended
June 30, 1998 to $877,000 for the six months ended June 30, 1999. The income tax
provision recorded in 1998 was less than United States statutory rates due
primarily to the tax-free status of a significant portion of Safeskin's foreign
manufacturing operations. In 1999, the income tax provision was less than United
States statutory rates due primarily to the tax-free status of a significant
portion of Safeskin's foreign manufacturing operations and the effect of a
transaction entered into by two of Safeskin's subsidiaries, during the third
quarter of 1998, that qualified as a Section 351 Exchange, as defined in Section
351 of the Internal Revenue Code.

Net income decreased 65.2% from $28,311,000 for the six months ended June 30,
1998 to $9,845,000 for the six months ended June 30, 1999. Due to the foregoing
factors, net income as a percentage of net sales decreased from 25.3% to 9.8% in
1999.

                                      -14-
<PAGE>   17



LIQUIDITY AND CAPITAL RESOURCES

Safeskin began operating certain of its new manufacturing facilities in the
second half of 1998, which enabled Safeskin to increase its production capacity
during 1998. From July 1997 to June 1998, Safeskin operated with its customers
on an allocation of product basis, as Safeskin was only able to fill a portion
of each distributor's orders. As Safeskin increased production capacity,
Safeskin's sales personnel began a new and increased sales program directed at
new and current end-user customers. As part of this sales program, Safeskin, its
distributors and certain end-users entered into new three-way contracts
providing for the pricing and supply of Safeskin products to such end-users.
During the third quarter and the fourth quarter of 1998, Safeskin's distributors
increased their orders from Safeskin to enable them to fulfill new sales they
anticipated would be placed pursuant to these contracts. Safeskin expected these
trends to continue into the first quarter of 1999. However, end-users did not
purchase products under the new contracts as quickly as anticipated and Safeskin
discovered that its major distributors had higher inventory levels than
anticipated. In addition, during the first quarter of 1999, Safeskin experienced
a longer than anticipated sales cycle for signing new contracts. As a result,
Safeskin's inventory levels as of March 31, 1999 increased significantly from
$37,057,000 at December 31, 1998 to $44,798,000 at March 31, 1999. As of June
30, 1999, Safeskin's inventory levels declined to $41,240,000.

During the six months ended June 30, 1999 and 1998, Safeskin added capital
assets of approximately $30,159,000 and $26,664,000, respectively, primarily for
the expansion of Safeskin's foreign manufacturing operations.

In 1997, Safeskin built a latex concentrate plant in Thailand. The output of the
plant currently supplies approximately 70% of the latex concentrate required by
Safeskin's factories in Thailand for the manufacture of its disposable latex
gloves. Safeskin believes that this plant allows it to integrate its
manufacturing processes to gain better control over the quality, cost and
reliability of latex supplies.

Safeskin is expanding its Thailand manufacturing operations and has transferred
manufacturing capacity from California and Malaysia to capitalize on the
increased production efficiencies and lower operating costs in Thailand that
Safeskin expects to realize. Safeskin completed construction of a fifth building
and related machinery at Safeskin's existing Hat Yai, Thailand facility in 1998.
This building houses 22 high-speed and product-flexible dipping production lines
which were commissioned throughout 1998, beginning in the second quarter, and
increased production capacity by an additional 1.5 billion gloves annually as of
the end of 1998. During 1999, Safeskin's expansion plans include the
construction of a second manufacturing facility in Sadao, Thailand that is
expected to produce latex and synthetic surgical, high-technology and scientific
and medical examination gloves. Construction of the new manufacturing facility
in Sadao, Thailand began in the second half of 1997 after approval by the
Thailand Board of Investment. Four production buildings have been constructed on
this site. The first building provides additional capacity for the production of
Safeskin's surgical and cleanroom glove products and was completed in the fourth
quarter of 1998. The second building is expected to house the expansion of
Safeskin's Tactylon(R) synthetic medical examination and surgical glove products
and Safeskin's nitrile glove production. This building is

                                      -15-
<PAGE>   18

expected to increase by over 200 percent the production capacity of the
Tactylon(R) product line in comparison to the previous facility located in
Vista, California. Finally, the additional two buildings are expected to provide
Safeskin increased capacity for latex and synthetic medical examination,
surgical and scientific glove production. The new buildings, machines and
supporting infrastructure at the new Sadao manufacturing facility and the fifth
building at the Hat Yai facility are currently expected to cost approximately
$80 million in the aggregate, approximately $70 million of which has been
expended as of June 30, 1999. Safeskin believes that its significant investment
in its manufacturing operations has increased Safeskin's annualized production
capacity from approximately 3.5 billion gloves to approximately 5.5 billion
gloves as of December 31, 1998. Financing for the total capital expenditures is
projected to come from internally generated funds and borrowings from the credit
facilities.

In the fourth quarter of 1998, Safeskin began construction of a facility in
southern Thailand designed to manufacture boxes and ceramic gloveformers for its
own use. This facility is expected to allow Safeskin to further integrate its
manufacturing operations to gain better control over the quality, timeliness,
cost and reliability of these products. This facility is expected to commence
production in September 1999 and is expected to produce approximately 80% of
Safeskin's requirements when fully operational. The total expected costs for the
construction of these facilities is approximately $8 million, approximately $4
million of which has been expended as of June 30, 1999. This construction
is expected to be funded through internally generated cash and borrowings under
Safeskin's credit facilities.

During 1998, Safeskin had an unsecured two-year credit facility for financing
general working capital needs, up to a maximum of $40,000,000 in borrowings (the
"Revolving Credit Facility"). As of December 31, 1998, there was approximately
$12,000,000 outstanding under the Revolving Credit Facility. On July 30, 1998,
Safeskin, through its subsidiary Safeskin (B.V.I.) Limited ("Safeskin BVI"),
entered into and closed a credit agreement for a $100 million loan facility (the
"BVI Facility") with Union Bank of California, N.A., as Agent. The BVI Facility
was secured by a first priority lien on the Common Stock of Safeskin 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 had the option to accrue interest
on the BVI Facility at an annual rate equal to either (i) the base rate plus
0.25% or (ii) LIBOR plus 1.75%. As of December 31, 1998, there was approximately
$80,000,000 outstanding under the BVI Facility. During the second half of 1998,
Safeskin used a majority of the funds from the BVI Facility to repurchase
approximately two million shares of its Common Stock. The cost of the treasury
stock acquired in this share buyback was approximately $73,600,000 for the year
ended December 31, 1998. As of June 30, 1999, additional costs of approximately
$300,000 had been incurred in conjunction with this share buyback. Borrowings
above the cost of Safeskin's share buyback were used to finance (i) Safeskin's
ongoing investment in its Thailand facilities (ii) Safeskin's working capital
requirements and (iii) other general corporate purposes.

On March 5, 1999, Safeskin entered into a $100 million loan agreement, including
a $60 million term loan (the "Term Loan") and a $40 million revolving credit
facility (the "Revolver") both maturing in 2004. The Term Loan and the Revolver
bear interest at approximately LIBOR plus 1.625%, however, the rate may vary
according to certain financial ratios. Concurrently, Safeskin also closed a
private placement of $40 million of senior secured notes due 2009 (the "Notes")
with a final


                                      -16-
<PAGE>   19
maturity of ten years and an average life of seven-years. The Notes bear
interest at an annual fixed rate of 6.89%. The Notes constitute senior debt of
Safeskin, ranking pari passu with Safeskin's other senior bank indebtedness. The
proceeds of the Term Loan, the Revolver and the Notes were used to repay amounts
outstanding under the Revolving Credit Facility and BVI Facility, which were
subsequently canceled. The Term Loan, Revolver, and the Notes are secured by
certain assets of Safeskin as well as a guarantee of all current and future
significant domestic subsidiaries. As of June 30, 1999, there was $118,000,000
outstanding under these credit facilities. As of June 30, 1998, the Company had
$16,000,000 outstanding under its 1998 Revolving Credit Facility. As of June 30,
1999, Safeskin amended certain of its covenants related to the Term Loan and
Revolver.

On March 5, 1999, Safeskin also entered into a seven year lease for a new
corporate headquarters campus facility ("the Lease"). As of June 30, 1999, the
Lease was modified such that the new maturity date is March 31, 2000. As of June
30, 1999, the lessor's maximum loan commitment was reduced from $60 million to
$17.5 million. In connection  with these modifications, Safeskin has also
elected to exercise its option to purchase the land and land improvements up to
a maximum of $17.5 million on or before March 31, 2000.

YEAR 2000 READINESS DISCLOSURE

Overview

The Year 2000 Issue is the issue of whether information and non-information
technology systems will be able to accurately recognize and process
date-sensitive information involving dates in and beyond the Year 2000. Safeskin
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. Safeskin 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 Safeskin'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, Safeskin has
completed a comprehensive assessment of its Year 2000 Issue. Perot Systems
Corporation has been retained to provide resources to help Safeskin in
Safeskin's efforts to (i) identify and update or replace non-Year 2000 compliant
information and non-information technology systems that are material to
Safeskin's operations and (ii) develop contingency and business continuation
plans in the event that Safeskin is unable to timely address its Year 2000
Issue.

Safeskin's Year 2000 assessment involves the testing and analyzing of all
information technology equipment, applications software and non-information
technology systems used by Safeskin, and the evaluation of the Year 2000
preparedness of third parties critical to Safeskin's operations. As of June 30,
1999, Safeskin's Year 2000 assessment in each of these areas was over 90%
complete. To


                                      -17-
<PAGE>   20

date, the assessment has revealed that two of the material applications software
on which Safeskin relies are not Year 2000 compliant. Safeskin plans to replace
both of these applications in 1999. In early 1998, Safeskin began to implement a
Year 2000 compliant enterprise-wide business systems application. Although
Safeskin installed the application in order to improve the management of its
business data, the application is also expected to have the effect of ensuring
that a significant percentage of Safeskin's information technology systems are
Year 2000 compliant. This application was online at Safeskin's U.S. facilities
in January 1999 and Safeskin expects it to be online at the Southeast Asian
manufacturing facilities by the end of the fourth quarter of 1999.

Safeskin has developed preliminary remediation plans for each of the 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 are expected to be
converted or replaced by the end of the fourth quarter of 1999 and any
non-information technology systems or processors that are either non-Year 2000
compliant or suspect due to lack of information from the vendor are expected to
be replaced or upgraded to a compliant version.

In addition, Safeskin is currently requesting confirmation that all suppliers
and customers material to its operations are, or within a short period of time
are planning to become, Year 2000 compliant.

Safeskin approved and began implementing a final remediation plan for addressing
all known Year 2000 Issues in the fourth quarter of 1998. Safeskin's remediation
plan will give priority to those non-Year 2000 compliant technology systems
which are material to Safeskin's operations. Safeskin anticipates acquiring
resources from Perot Systems Corporation to assist Safeskin in 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. Safeskin will work with Perot Systems
Corporation in connection with Safeskin's remediation efforts in order to avoid,
to the extent possible, disruption of Safeskin's manufacturing capacity.
Safeskin expects that contingency plans for all known Year 2000 Issues will be
finalized by the third quarter of 1999.

Safeskin also plans to 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.

Safeskin is also preparing contingency plans in the event that there is a
disruption to the business caused by Year 2000 data processing problems.
Although Safeskin anticipates complete remediation by late 1999, it is possible
that delays in the remediation process or Year 2000 issues caused by third party
trading partners could arise. Safeskin is assessing these issues and is
developing contingency plans that would provide for uninterrupted business
operations. Safeskin expects these contingency plans will be fully developed by
the end of the third quarter in 1999.


                                      -18-
<PAGE>   21
Costs

Although the total costs associated with becoming Year 2000 compliant have not
been fully identified, Safeskin 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 June 30, 1999, Safeskin has spent
approximately $222,000 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 $81,000. Costs for replacements or modifications that would have
been necessary independent of Year 2000 Issues, including the approximately $1.0
million that will be spent to install the new enterprise-wide business
applications software at Safeskin's Asian operation sites, have not been
included in Safeskin'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 Safeskin. Such failures could materially and adversely affect
Safeskin'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 Safeskin 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 Safeskin operates, there can be no assurance that Year 2000 Issues will
not have a material impact on Safeskin's results of operations or financial
condition. However, Safeskin's Year 2000 remediation efforts are expected to
significantly reduce Safeskin'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, Safeskin 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of Safeskin. Safeskin,
in the normal course of doing business, is exposed to the risks associated with
foreign currency exchange rates, changes in interest rates, and certain
commodity prices. Safeskin employs established policies and procedures governing
the use of financial instruments to manage its exposure to such risks. These
financial exposures are monitored and managed by Safeskin as an integral part of
Safeskin's overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on Safeskin's results.

                                      -19-
<PAGE>   22

Foreign Currency Exchange Rate Risk

Safeskin is exposed to exchange rate risk when its U.S. and non-U.S.
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 are 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. Safeskin's derivative activities, all of which consist of forward
foreign exchange contracts, are initiated primarily to hedge intercompany
receivables and payables.

The forward foreign exchange contracts generally require Safeskin 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 A2 rated international institutions) do not fulfill their obligations
to deliver the contracted currencies, Safeskin could be at risk for currency
related fluctuations (generally limited to unrealized gains). Management
believes using A2 rated international institutions as counterparties to the
hedging contracts minimizes the risk of non-performance. As of June 30, 1999,
Safeskin had forward foreign exchange contracts to purchase Thai baht in the
aggregate amount of $15,000,000 outstanding, with a weighted average exchange
rate of 36.75 Thai baht to 1 U.S. dollar. For the six months ended June 30,
1999, Safeskin recorded an unrealized loss of approximately $40,000 in
connection with these contracts. Further disclosure relating to forward foreign
exchange contracts is included in Note 2 in the Notes to the 1998 Consolidated
Financial Statements.

Interest Rate Risk

Except for indebtedness under Safeskin's Note Agreement which is fixed rate
financing, the balance of Safeskin's indebtedness is variable rate financing.
Safeskin believes that its exposure to market risk relating to interest rate
risk is not material. Safeskin does not expect changes in interest rates to have
a material effect on income or cash flows in fiscal 1999, although there can be
no assurances that interest rates will not significantly change. Further
disclosure relating to financial instruments is included in Note 6 and Note 13
in the Notes to the 1998 Consolidated Financial Statements.

Commodity Price and Availability Risk

Safeskin is subject to risk associated with the consistent availability, at
budgeted prices, of raw rubber from independent growers and latex concentrate
from plant operators in Malaysia and Thailand and the availability of nitrile.
Safeskin enters into commodity forward contracts with suppliers. Such contracts
are executed to offset Safeskin's exposure to the potential change in supply
mainly for raw rubber and latex concentrate used in the manufacturing of
Safeskin's gloves.

                                      -20-
<PAGE>   23

LEGAL PROCEEDINGS

Approximately 229 product liability lawsuits seeking monetary damages, in most
cases of an unspecified amount, were pending in federal and state courts against
Safeskin. Other manufacturers of latex gloves are codefendants with Safeskin in
the majority of these cases. These lawsuits allege injuries ranging from
dermatitis to severe allergic reactions caused by the residual chemicals or
latex proteins in gloves worn by medical workers while performing their duties.
Safeskin has referred the defense of these lawsuits to its insurance carriers.
In 1997, the U.S. Judicial Panel on Multi-District Litigation entered an order
transferring all latex allergy lawsuits brought on behalf of healthcare workers
in the Federal courts to the United States District Court for the Eastern
District of Pennsylvania, consolidating those cases for discovery management and
other pre-trial proceedings.

Since March 11, 1999, numerous lawsuits (collectively the "Securities Actions")
have been filed in the U.S. District Court for the Southern District of
California against Safeskin and certain officers and directors alleging
violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of
1934, and Rule 10b-5 promulgated thereunder. The Securities Actions were brought
by plaintiffs in their individual capacity and on behalf of a purported class of
persons who purchased or otherwise acquired Safeskin publicly traded securities
during various periods occurring between October 23, 1997 and March 11, 1999.
The suits allege that plaintiffs purchased Safeskin securities at prices
artificially inflated by defendants' misrepresentations and omissions concerning
Safeskin's financial condition and prospects and seek an unspecified amount of
damages. In addition, a shareholder derivative action has been filed against
certain of Safeskin's directors, and Safeskin as a nominal defendant, in the
Supreme Court of the State of California, San Diego County (the "Derivative
Action"). The Derivative Action alleges breach of fiduciary duty, waste of
corporate assets and gross negligence in connection with Safeskin's stock
repurchase program and seeks an unspecified amount of damages. Defendants' time
to respond to the allegations made in the Securities Actions and the Derivative
Action has not yet expired, however, Safeskin believes that these claims are
without merit and intends to contest the claims vigorously.

From time to time, Safeskin is involved in other litigation relating to claims
arising out of its operations in the normal course of business. As of the date
hereof, Safeskin is not a party to any other legal proceedings, the adverse
outcome of which, in management's opinion, individually or in the aggregate,
would have a material adverse effect on Safeskin's business, results of
operation or financial condition.

Safeskin's tax returns for the years ended December 31, 1995, 1996 and 1997 are
currently being audited by the Internal Revenue Service.

                                      -21-
<PAGE>   24

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, the
following statements included in Management's Discussion and Analysis:

o    statements regarding Safeskin's estimates with respect to sales, revenues,
     cost of goods sold and operating margins;

o    the financial effect of the expiration of the tax-free status of the
     Malaysian manufacturing operations;

o    the ability of Safeskin to dispose of its Malaysian and Vista, California
     assets in 1999 and to realize estimated fair values;

o    the effect on gross profit margins of start-up production costs associated
     with transferring operations to the new Thailand facility, wind-down
     production costs associated with the closing of the Malaysian manufacturing
     facility and increased pricing pressures;

o    the effect of currency fluctuations in Thailand on the cost of goods sold
     and upon Safeskin's operating results;

o    statements concerning Safeskin's outlook for 1999 and beyond including the
     ability of Safeskin to retain and increase sales under GPO, end-user and
     distributor contracts;

o    Safeskin's liquidity and working capital;

o    Safeskin's ability to complete construction of new facilities as scheduled;

o    Safeskin's ability to achieve anticipated production capacity in the new
     manufacturing facilities and recognize certain operating efficiencies and
     savings in Thailand; and

o    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 Safeskin from achieving its goals
-- and cause the assumptions underlying forward-looking statements and the
actual results of Safeskin to differ materially from those expressed in or
implied by those forward-looking statements -- include, but are not limited to,
the following:

                                      -22-
<PAGE>   25

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

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

o    Safeskin's ability to successfully develop and introduce new products to
     the market through record or even combined internal investments into
     product development or research and development;

o    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;

o    Safeskin's ability to successfully integrate the operations of acquired
     businesses in a timely and efficient manner and to realize the anticipated
     benefits of such acquisitions;

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

o    adverse outcomes or excessive legal expenses in connection with lawsuits or
     the ability to obtain and maintain sufficient insurance coverage at
     reasonable rates;

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

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

o    Safeskin's ability to make the necessary capital investments, which are
     required to expand its manufacturing operations and capacity;

o    the non-linearity of Safeskin's sales throughout the quarter which limits
     Safeskin's ability to accurately monitor and predict net sales and
     profitability;

o    Safeskin's ability to monitor inventories of products held by third-party
     distributors and to predict sales trends given Safeskin's limited
     visibility of sales to end user customers;

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

                                      -23-
<PAGE>   26

o    changes in significant government regulations affecting the healthcare
     industry;

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

o    the ability to attract and retain key personnel;

o    Safeskin's ability to develop, maintain and improve information systems
     that provide the Company with accurate and timely information;

o    changes in Safeskin's rates or basis of income taxation, including
     applicable U.S. tax laws and policies governing foreign operations and
     Section 351 transactions;

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

o    rapid levels of inflation which could have a significant effect on
     Safeskin's net sales and profitability.

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



                                      -24-
<PAGE>   27

                           PART II: OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits
<TABLE>
<CAPTION>

      EXHIBIT                      DESCRIPTION OF DOCUMENT
      -------                      -----------------------
<S>          <C>
     10.54   Second Amendment to Amended and Restated Revolving/Term Loan Agreement dated
             June 30, 1999
     10.55   Amendment Agreement dated June 30, 1999
     11      Statement Re: Computation of per share earnings
     27      Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K

    None.


                                      -25-
<PAGE>   28

                                   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:  August 13, 1999         By:    /s/   David L. Morash
                                  -------------------------------------------
                                    David L. Morash, Executive Vice-
                                    President, Chief Financial Officer



                                      -26-