<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    ---------
                                    FORM 10-Q
(MARK ONE)
   /X/    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934, AS AMENDED

                 For the quarterly period ended October 2, 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 1-333-36675
                                 -------------
                             BURKE INDUSTRIES, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              CALIFORNIA                                94-3081144
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                  Identification No.)

           2250 SOUTH TENTH STREET
             SAN JOSE, CALIFORNIA                          95112
       (Address of Principal Executive                   (Zip Code)
                  Offices)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 297-3500
                                 -------------
         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, as amended, 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    .
                                                       ----   ----
         As of November 13, 1998, the number of shares outstanding of the
Registrant's Common Stock was 3,857,000.


<PAGE>


                                       
                            BURKE INDUSTRIES, INC.

                        QUARTERLY REPORT ON FORM 10-Q

                                     INDEX

                                                                          PAGE
PART I     FINANCIAL INFORMATION                                         NUMBER

    Item 1  Condensed Consolidated Financial Statements

              Condensed Consolidated Statements of Operations for 
                the three and nine months ended October 2, 1998 and 
                October 3, 1997 (unaudited)                                 3

              Condensed Consolidated Balance Sheets as of 
                October 2, 1998 (unaudited) and January 2, 1998             4

              Condensed Consolidated Statements of Cash Flows for 
                the nine months ended October 2, 1998 and 
                October 3, 1997 (unaudited)                                 5

              Notes to Condensed Consolidated Financial Statements       
                (unaudited)                                               6-8

    Item 2  Management's Discussion and Analysis of Financial 
              Condition and Results of Operations                        9-12

PART II    OTHER INFORMATION

    Item 1  Legal Proceedings                                              14
    Item 5  Other Information                                              14
    Item 6  Exhibits and Reports on Form 8-K                               14

Signature                                                                  15

                                      
                                    Page 2
<PAGE>



PART I   FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS


                     BURKE INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                        For the Three Month Period Ended       For the Nine Month Period Ended
                                      -------------------------------------- -------------------------------------
                                       October 2, 1998    October 3, 1997     October 2, 1998    October 3, 1997
                                      ------------------ ------------------- ------------------ ------------------
<S>                                   <C>                <C>                 <C>                <C>
Net sales........................     $         30,879   $         22,774    $         81,067   $         68,785
Costs and expenses:
     Cost of sales...............               21,977             15,956              57,825             48,423
     Selling, general and
     administrative..............                3,903              3,422              10,651              9,520
     Amortization of goodwill....                  504                 16                 907                 34
     Transaction expenses........                   --              1,174                  --              1,174
     Stock option purchase.......                   --             14,105                  --             14,105
                                      ----------------   ----------------    ----------------   ----------------
Income (loss) from
     operations..................                4,495            (11,899)             11,684             (4,471)
Interest expense, net............                3,756              1,612              10,063              2,625
                                      ----------------   ----------------    ----------------   ----------------
Income (loss) before
     income tax provision
     (benefit)...................                  739            (13,511)              1,621             (7,096)
Income tax provision
     (benefit)...................                  296             (5,120)                648             (2,555)
                                      ----------------   ----------------    ----------------   ----------------
Net income (loss)................     $            443   $         (8,391)   $            973   $         (4,541)
                                      ----------------   ----------------    ----------------   ----------------
                                      ----------------   ----------------    ----------------   ----------------
</TABLE>

      The Accompanying Notes to Condensed Consolidated Financial Statements
                   are an integral part of these statements.
                                     Page 3

<PAGE>
                     BURKE INDUSTRIES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                               January 2, 1998
                                                                                                (Derived from
                                                                                                   audited
                                                                           October 2, 1998        financial
                                                                             (Unaudited)         statements)
                                                                           ---------------      --------------
<S>                                                                        <C>                  <C>
                                                    ASSETS
Current assets:
   Cash and cash equivalents...........................................        $     920         $  11,563
   Restricted cash.....................................................               --             1,070
   Trade accounts receivable, less allowance of
     $870 as of 10/2/98 and $334 as of 1/2/98..........................           15,353            11,186
   Inventories.........................................................           15,231            11,187
   Other current assets................................................            4,486             5,540
                                                                               ---------         ---------
     Total current assets..............................................           35,990            40,546
                                                                               ---------         ---------
Property, plant and equipment..........................................           31,923            25,556
Accumulated depreciation and amortization..............................           11,788            10,536
                                                                               ---------         ---------
Net property, plant and equipment......................................           20,135            15,020
Goodwill, net..........................................................           30,239             1,465
Deferred financing costs, net..........................................            6,747             5,210
Other assets...........................................................              616               596
                                                                               ---------         ---------
     Total assets......................................................        $  93,727         $  62,837
                                                                               ---------         ---------
                                                                               ---------         ---------

                                LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Trade accounts payable and accrued expenses............................      $    8,472          $   5,489
Payable to Shareholders................................................           1,125              5,882
Other current liabilities..............................................           6,171              7,497
                                                                               ---------         ---------
Total current liabilities..............................................          15,768             18,868

Fixed-Rate Senior Notes................................................         110,000            110,000
Floating-Rate Senior Notes.............................................          30,000                 --
Other noncurrent liabilities...........................................           4,328              4,311
Preferred stock, no par value; 50,000 shares authorized; 
   30,000 Redeemable Series A shares designated; 
   16,000 Redeemable Series A shares issued and outstanding; 
   5,000 Redeemable Series B shares designated; 
   2,000 Redeemable Series B shares issued and outstanding; 
   (aggregate liquidation and redemption preference of $18,000)........          17,657             16,148
Shareholders' equity (deficit):
   Convertible Preferred Stock, no par value: 3,000 Series C shares
     designated, issued and outstanding (liquidation preference $3,000)           3,000                 --
   Class A common stock, no par value:.................................
     Authorized shares - 20,000,000....................................
     Issued and outstanding shares - 3,857,000.........................          25,464             25,464
   Accumulated deficit.................................................        (112,490)          (111,954)
                                                                               ---------         ---------
   Total shareholders' equity (deficit)................................         (84,026)           (86,490)
                                                                               ---------         ---------
     Total liabilities and shareholders' equity (deficit)..............       $  93,727          $  62,837
                                                                               ---------         ---------
                                                                               ---------         ---------
</TABLE>

      The Accompanying Notes to Condensed Consolidated Financial Statements
                   are an integral part of these statements.
                                     Page 4
<PAGE>

                     BURKE INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              For the Nine Month Period Ended
                                                                            ---------------------------------
                                                                            October 2, 1998    October 3, 1997
                                                                            ----------------------------------
                                                                                        (Unaudited)
<S>                                                                          <C>                <C>
OPERATING ACTIVITIES
Net Income (loss)........................................................       $    973          $  (4,541)
Adjustments to reconcile net income (loss) to net cash (used in)
   provided by operating activities:
   Depreciation and amortization:
      Property, plant and equipment......................................          1,252              1,025
      Debt financing costs...............................................            547                 66
      Goodwill...........................................................            907                 34
      Other..............................................................             --                147
   Other adjustments to reconcile net income to net cash (used in)
      provided by operating activities:..................................         (1,647)            (8,451)
                                                                                --------          ---------
Net cash (used in) provided by operating activities......................          2,032            (11,720)

INVESTING ACTIVITIES
Acquisition of Mercer Products Company, Inc. less cash of $34............        (38,440)                --
Purchases of property, plant and equipment...............................         (1,464)              (727)
Note receivable from an affiliate of the principal shareholders..........             --              4,306
                                                                                --------          ---------
Net cash (used in) provided by investing activities......................        (39,904)             3,579

FINANCING ACTIVITIES
Checks outstanding in excess of funds deposited..........................             --               (828)
Restricted cash..........................................................          1,070                 --
Repayments and settlement of long-term debt and capital lease obligations             --            (18,869)
Payable to shareholders..................................................         (4,757)             5,882
Deferred financing costs.................................................         (2,084)            (4,943)
Issuance of Floating Interest Rate Senior Notes..........................         30,000                 --
Issuance of Series C Convertible Preferred Stock.........................          3,000                 --
Proceeds from sales of shares through employee stock plans...............             --                 10
Repayment of subordinated debt...........................................             --             (1,750)
Net recapitalization consideration.......................................             --           (107,310)
Issuance of senior notes.................................................             --            110,000
Issuance of preferred stock, net of issuance costs.......................             --             17,895
Issuance of common stock, net of issuance costs..........................             --             18,724
                                                                                --------          ---------
Net cash provided by financing activities................................         27,229             18,811
                                                                                --------          ---------

(Decrease) Increase in cash..............................................        (10,643)            10,670
Cash at beginning of period..............................................         11,563                 --
                                                                                --------          ---------
Cash at end of period....................................................           $920            $10,670
                                                                                --------          ---------
                                                                                --------          ---------
</TABLE>

      The Accompanying Notes to Condensed Consolidated Financial Statements
                   are an integral part of these statements.
                                     Page 5
<PAGE>
                     BURKE INDUSTRIES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       BASIS OF PRESENTATION

         The accompanying condensed consolidated financial statements of the 
Company have been prepared without audit, pursuant to the rules and 
regulations of the Securities and Exchange Commission. Certain information 
and footnote disclosures normally included in financial statements prepared 
in accordance with generally accepted accounting principles have been 
condensed or omitted pursuant to such rules and regulations. The condensed 
consolidated balance sheet as of January 2, 1998 was derived from audited 
financial statements. The accompanying condensed consolidated financial 
statements should be read in conjunction with the audited consolidated 
financial statements and notes thereto included in the Company's Annual 
Report on Form 10-K for the fiscal year ended January 2, 1998.

         The financial information included herein reflects all adjustments 
(consisting of normal recurring adjustments) which are, in the opinion of 
management, necessary for a fair presentation of the results for the interim 
period. The results of operations for the nine months ended October 2, 1998 
are not necessarily indicative of the results to be expected for the full 
year.

         The Company uses a 52 to 53-week fiscal year ending on the Friday 
closest to December 31. The Company also follows a thirteen week quarterly 
cycle. The nine-month periods ended on October 3, 1997 and October 2, 1998.

2.       INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                           October 2, 1998   January 2, 1998
                                                                          ----------------------------------
                                                                           (In thousands)
                  <S>                                                         <C>                <C>
                  Raw materials                                               $   6,177         $   4,626
                  Work-in-process                                                 2,137             1,593
                  Finished goods                                                  6,917             4,968
                                                                          ------------------ ---------------
                                                                              $  15,231         $  11,187
                                                                          ------------------ ---------------
                                                                          ------------------ ---------------
</TABLE>

3.       ACQUISITION OF MERCER PRODUCTS COMPANY, INC.

         On April 21, 1998, the Company acquired all of the issued and 
outstanding capital stock of Mercer Products Company, Inc. ("Mercer"), from 
Sovereign Specialty Chemicals, Inc., for an aggregate purchase price of 
$38,474,000 (including acquisition costs of $2,280,000). The acquisition was 
accounted for under the purchase method of accounting.

                                       
                                    Page 6

<PAGE>
                                       
                     BURKE INDUSTRIES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
                                   (UNAUDITED)

         The total purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values as follows:
<TABLE>
<CAPTION>
                                                                            (in thousands)
   <S>                                                                      <C>
   Current assets:.....................................................     $     5,269
   Plant and equipment.................................................           4,903
   Excess of purchase price over net assets acquired...................          29,681
   Accounts payable and accrued expenses...............................          (1,379)
                                                                            ------------
     Total purchase price..............................................     $    38,474
                                                                            ------------
                                                                            ------------
</TABLE>

         Financing for this acquisition and related expenses was provided, in 
large part, from the sale of $30 million principal amount of Floating 
Interest Rate Senior Notes Due 2007 (the "Floating-Rate Notes"). The balance 
of the financing was provided with $3.0 million from the sale of 3,000 shares 
of the Company's 6% Series C Cumulative Convertible Preferred Stock and cash 
on hand.

         The Floating-Rate Notes mature on August 15, 2007, with interest on 
the notes payable semi-annually on February 15 and August 15, commencing 
August 15, 1998. The Floating-Rate Notes bear interest at a rate per annum 
equal to LIBOR plus 400 basis points, with the interest rate reset 
semiannually. The Floating-Rate Notes are unconditionally guaranteed on a 
joint and several basis by each of the Company's subsidiaries, including 
Mercer. Upon a change of control of the Company, the Company will be required 
to make an offer to repurchase all outstanding Floating-Rate Notes at 101% of 
the aggregate principal amount thereof plus accrued and unpaid interest 
thereon at the date of repurchase.

         The Company also amended its existing bank credit facility to 
increase the revolving credit facility from $15 million to $25 million and 
revise certain of its restrictive covenants.

         The Series C Convertible Preferred Stock ranks junior to the 
Redeemable Preferred Stock and dividends accrue at an annual rate per share 
of 6% times the sum of $1,000 and accrued but unpaid dividends. Dividends are 
cumulative and are payable semi-annually in arrears on April 15 and October 
15. The holders of Series C Convertible Preferred Stock are entitled to 
receive a stated liquidation value of $1,000 per share plus accrued but 
unpaid dividends in the event of any liquidation, dissolution or winding up 
of the Company. After payment of the liquidation preference, the holders of 
Series C Convertible Preferred Stock are not entitled to further 
participation in any distribution of assets of the Company. The holders of 
Series C Convertible Preferred Stock are not entitled to any voting rights; 
however, without the consent of 51% of the holders of Series C Convertible 
Preferred Stock, the Company may not adversely alter the rights and 
preferences of the Series C Convertible Preferred Stock.

         Upon the occurrence of a triggering event, holders of Series C 
Convertible Preferred Stock have the option to convert such shares into 
common stock at a conversion price of $10 per share, subject to anti-dilution 
provisions. A triggering event includes a change of control, an initial 
public offering, notice by the Company of an intent to redeem the Convertible 
Preferred Stock or the fifth anniversary of the issuance of the Convertible 
Preferred Stock.

         The Company may, at its option, redeem all or a portion of the 
Convertible Preferred Stock at a redemption value equal to the liquidation 
value plus accrued but unpaid dividends. Upon a change in control and subject 
to limitations under the Redeemable Preferred Stock and Floating-Rate Note 
and Fixed-Rate Note (defined below) agreements, the holders of Convertible 
Preferred Stock may redeem such shares at a redemption value equal to the 
liquidation value plus accrued but unpaid dividends.

                                       
                                     Page 7

<PAGE>


ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                  AND RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with the 
Company's Unaudited Condensed Consolidated Financial Statements and Notes 
thereto included elsewhere in this Quarterly Report on Form 10-Q.

         This Report contains certain forward-looking statements and 
information relating to the Company that are based on the beliefs of 
management as well as assumptions made by and information currently available 
to management. The words "anticipates," "believes," "estimates," "expects," 
"plans," "intends" and similar expressions, as they relate to the Company or 
its management, are intended to identify forward-looking statements. Such 
statements reflect the current views of the Company, with respect to future 
events and are subject to certain risks, uncertainties and assumptions, that 
could cause actual results to differ materially from those expressed in any 
forward-looking statement, including, without limitation: competition from 
other manufacturers in the Company's aerospace, flooring or commercial 
product lines, loss of key employees, general economic conditions and adverse 
factors impacting the aerospace industry such as changes in government 
procurement policies. Should one or more of these risks or uncertainties 
materialize, or should underlying assumptions prove incorrect, actual results 
may vary materially from those described herein as anticipated, believed, 
estimated or expected. The Company does not intend to update these 
forward-looking statements.

RESULTS OF OPERATIONS

         The Company operates within two industry segments, organic 
rubber/vinyl products and silicone rubber products, and is organized into 
three product groups: (i) aerospace products, which produces precision 
silicone seals and other products used on commercial and military aircraft; 
(ii) flooring products, which produces and distributes rubber and vinyl cove 
base and other floor covering accessory products; and (iii) commercial 
products, which produces various intermediate and finished silicone and 
organic rubber products.

         The following table sets forth certain income statement information 
for the Company for the three and nine month periods ended October 2, 1998 
compared to the same periods in 1997:


<TABLE>
<CAPTION>
                                                             FISCAL THIRD QUARTER
                                          ---------------------------------------------------------
                                                       PERCENTAGE OF                  PERCENTAGE OF
                                             1998        NET SALES        1997          NET SALES
                                          ----------   ------------     ----------    -------------
                                                           (dollars in thousands)
<S>                                       <C>          <C>              <C>            <C>
Net sales:
     Aerospace Products.............       $  8,127        26.3%         $7,481           32.8%
     Flooring Products..............         13,439        43.5           6,627           29.1
     Commercial Products............          9,313        30.2           8,666           38.1
                                          ---------        ----          -------          ----
Net sales...........................         30,879       100.0          22,774          100.0
Cost of sales.......................         21,977        71.2          15,956           70.1
                                          ---------        ----          -------          ----
Gross profit........................          8,902        28.8           6,818           29.9

Selling, general and
  administrative expenses...........          3,903        12.6           3,422           15.0
Transaction expenses................                                      1,174            5.2
Stock option purchase...............                                     14,105           61.9
Amortization of goodwill............            504         1.6              16            0.1
                                          ---------        ----          -------          ----
Income (loss) from operations.......          4,495        14.6         (11,899)         (52.3)
Interest expense....................          3,756        12.2           1,612            7.1
                                          ---------        ----          -------          ----
Income before income tax provision
  (benefit).........................            739         2.4         (13,511)         (59.4)
Income tax provision (benefit)......            296         1.0          (5,120)         (22.5)
                                          ---------        ----          -------          ----
Net income (loss)...................      $     443         1.4%        ($8,391)         (36.9)%
                                          ---------        ----          -------          ----
                                          ---------        ----          -------          ----
</TABLE>
                                       
                                   Page 8
<PAGE>

<TABLE>
<CAPTION>
                                                                FISCAL NINE MONTHS
                                       --------------------------------------------------------------------
                                                        PERCENTAGE OF                        PERCENTAGE OF
                                          1998            NET SALES             1997           NET SALES
                                       ---------       ---------------        ---------     ---------------
                                                             (dollars in thousands)
<S>                                    <C>               <C>                 <C>                <C> 
Net sales:
     Aerospace Products.............   $ 26,097              32.2%             $23,387             34.0%  
     Flooring Products..............     30,505              37.6               17,886             26.0
     Commercial Products............     24,465              30.2               27,512             40.0
                                      ---------              ----              -------             ----
Net sales...........................     81,067             100.0               68,785            100.0
Cost of sales.......................     57,825              71.3               48,423             70.4
                                      ---------              ----              -------             ----
Gross profit........................     23,242              28.7               20,362             29.6

Selling, general and
  administrative expenses...........     10,651              13.1                9,520             13.8
Transaction expenses................                                             1,174              1.7
Stock option purchase...............                                            14,105             20.5
Amortization of goodwill............        907               1.1                   34              0.0
Income (loss) from operations.......     11,684              14.5               (4,471)           (6.4)
Interest expense....................     10,063              12.4                2,625             3.8
                                      ---------            ------               -------            ----
Income before income tax provision
  (benefit).........................      1,621               2.1               (7,096)          (10.2)
Income tax provision (benefit)......        648               0.8               (2,555)           (3.7)
                                      ---------              ----              -------             ----
Net income (loss)...................  $     973               1.3%             ($4,541)           (6.5)%
                                      ---------              ----              -------             ----
</TABLE>

COMPARISON OF THE THREE MONTH PERIOD ENDED OCTOBER 2, 1998 VERSUS THE THREE 
MONTH PERIOD ENDED OCTOBER 3, 1997

         NET SALES. Total net sales increased 35.6%, from $22.8 million in 
1997 to $30.9 million in 1998. Aerospace Products sales grew 8.6%, reflecting 
increased demand for military products. Flooring Products sales increased 
102.8%, due to the acquisition of Mercer. Commercial Products sales increased 
7.5% because of strong demand for the company's roofing products and volume 
associated with new silicone hose products introduced late in the second 
quarter of 1998.

         COST OF SALES. Cost of sales increased 37.7%, from $16.0 million in 
1997 to $22.0 million in 1998. As a percentage of net sales, gross profit 
decreased from 29.9% to 28.8%. The decrease in profit percentage was 
primarily due to temporary operating inefficiencies, both in connection with 
new product ramp-up and the July 1998 silicone products facility expansion.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and 
administrative expenses increased 14.1%, from $3.4 million in 1997 to $3.9 
million in 1998. As a percentage of net sales, selling, general and 
administrative expenses decreased from 15.0% to 12.6%. The decrease in 
percentage was due to improved operating leverage, primarily as the result of 
the acquisition of Mercer.

         TRANSACTION EXPENSES AND STOCK OPTION purchase. Transaction expenses 
and stock option purchase were one-time expenses associated with the 
leveraged recapitalization in August, 1997.

         AMORTIZATION OF GOODWILL. Amortization of goodwill increased to $0.5 
million in 1998. The increase was due to the acquisition of Mercer.

         INCOME FROM OPERATIONS. As a result of the above factors, income 
from operations increased from a loss of $11.9 million in 1997 to income of 
$4.5 million in 1998.

         INTEREST EXPENSE. Interest expense increased 133.0%, from $1.6 
million in 1997 to $3.8 million in 1998. The increase was due to the issuance 
of $110.0 million principal amount of 10% Fixed Interest Rate Notes due 2007 
(the "Fixed-Rate Notes") on August 20, 1997 and the Floating-Rate Notes on 
April 21, 1998.

                                       
                                    Page 9
<PAGE>


         NET INCOME.  As a result of the above factors,  net income  
increased from a loss of  $8.4 million in 1997 to net income of $0.4 million 
in 1998.

COMPARISON OF THE NINE MONTH PERIOD ENDED OCTOBER 2, 1998 VERSUS 
 THE NINE MONTH PERIOD ENDED OCTOBER 3, 1997

         NET SALES. Total net sales increased 17.9%, from $68.8 million in 
1997 to $81.1 million in 1998. Aerospace Products sales grew 11.6%, due 
primarily to increased demand for military products. Flooring Products sales 
increased 70.6%, due primarily to the acquisition of Mercer. Commercial 
Products sales decreased 11.1%, primarily because the first six months of 
1997 included a liner project order that favorably affected results for that 
period, partially offset by volume associated with new products introduced 
late in the second quarter of 1998 by the silicone hose portion of this 
product group.

         COST OF SALES. Cost of sales increased 19.4%, from $48.4 million in 
1997 to $57.8 million in 1998. As a percentage of net sales, gross profit 
decreased from 29.6% to 28.7%. The decrease in profit percentage was 
primarily due to temporary operating inefficiencies, both in connection with 
new product ramp-up, and also in connection with the silicone products' 
facility expansion which occurred in July, 1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and 
administrative expenses increased 11.9%, from $9.5 million in 1997 to $10.7 
million in 1998. As a percentage of net sales, selling, general and 
administrative expenses decreased from 13.8% to 13.1%. The decrease in 
percentage was due to improved operating leverage, primarily as the result of 
the acquisition of Mercer.

         TRANSACTION EXPENSES AND STOCK OPTION PURCHASE. Transaction expenses 
and stock option purchase were one-time expenses associated with the 
leveraged recapitalization in August, 1997.

         AMORTIZATION OF GOODWILL. Amortization of goodwill increased to $0.9 
million in 1998. The increase was due to the acquisition of Mercer.

         INCOME FROM OPERATIONS. As a result of the above factors, income 
from operations increased from a loss of $4.5 million in 1997 to income of 
$11.7 million in 1998.

         INTEREST EXPENSE. Interest expense increased 283.4%, from $2.6 
million in 1997 to $10.1 million in 1998. The increase was due to the 
issuance of the Fixed-Rate Notes on August 20, 1997 and the Floating-Rate 
Notes on April 21, 1998.

         NET INCOME.  As a result of the above factors,  net income  
increased from a loss of  $4.5 million in 1997 to income of $1.0 million in 
1998.

INCOME TAX PROVISION

         For the three month and nine month periods ended October 2, 1998, 
the Company recorded an income tax provision of 40.0%, which represents the 
effective tax rate projected for the full fiscal year 1998. This effective 
tax rate differs from the federal statutory rate primarily due to state 
income taxes (net of federal benefit). For the nine months ended October 3, 
1997, the Company recorded an income tax benefit of 36% which differs from 
the federal statutory rate primarily due to state income taxes (net of 
federal benefit).

LIQUIDITY AND CAPITAL RESOURCES

         CASH FLOW. The Company's principal uses of cash are to finance working
capital and capital expenditures related to asset acquisitions and internal
growth.

                                   Page 10

<PAGE>

         CAPITAL REQUIREMENTS. On a consolidated basis, the Company expects 
to spend approximately $2.0 million during fiscal 1998 on capital 
expenditures not directly related to information technology systems or 
acquisitions. Approximately $1.5 million was spent through the first nine 
months of 1998. Cash flow from operations, to the extent available, may also 
be used to fund a portion of any acquisition expenditures.

         SOURCES OF CAPITAL. On April 21, 1998, the Company acquired all of 
the issued and outstanding capital stock of Mercer, from Sovereign Specialty 
Chemicals, Inc., for an aggregate purchase price of $38,474,000 (including 
acquisition costs of $2,280,000).

         Financing for this acquisition and related expenses was provided, in 
large part, from the sale of (the "Offering") $30 million principal amount of 
Floating Interest Rate Senior Notes Due 2007 (the "Floating-Rate Notes"). The 
balance of the financing was provided with $3.0 million from the sale of 
3,000 shares of the Company's 6% Series C Cumulative Convertible Preferred 
Stock and cash on hand.

         The Floating-Rate Notes mature on August 15, 2007, with interest on 
the notes payable semi-annually on February 15 and August 15, commencing 
August 15, 1998. The Floating-Rate Notes bear interest at a rate per annum 
equal to LIBOR plus 400 basis points, with the interest rate reset 
semiannually. The Floating-Rate Notes are unconditionally guaranteed on a 
joint and several basis by each of the Company's subsidiaries, including 
Mercer. Upon a change of control of the Company, the Company will be required 
to make an offer to repurchase all outstanding Floating-Rate Notes at 101% of 
the aggregate principal amount thereof plus accrued and unpaid interest 
thereon at the date of repurchase.

         Contemporaneously with the acquisition of Mercer, the Company 
amended its existing Loan and Security Agreement, as amended from time to 
time, with NationsBank, N.A., as administrative agent, and other lending 
institutions party thereto (the "Credit Agreement") to, among other things, 
(i) increase the Company's borrowing capacity from $15.0 million to $25.0 
million (as amended, the "Credit Facility") (ii) add Mercer as a Borrowing 
Subsidiary (as defined in the Credit Agreement), (iii) increase certain of 
the baskets contained in the restrictive covenants to reflect the increased 
size of the Company after the closing of the acquisition of Mercer (the 
"Mercer Acquisition") and (iv) waive any default or event of default that may 
otherwise result from the consummation of the Offering and the Mercer 
Acquisition.

         The Credit Facility matures in August 2002. Interest on loans under 
the Credit Facility bear interest at rates based upon either, at the 
Company's option, Eurodollar Rates plus a margin of 2.5% or upon the Prime 
Rate. Loans under the Credit Facility are secured by security interests in 
substantially all of the assets of the Company and are guaranteed by any and 
all current or future subsidiaries of the Company, which guarantees are 
secured by substantially all of the assets of such subsidiaries. The Credit 
Facility contains customary covenants restricting the Company's ability to, 
among other things, incur additional indebtedness, create liens or other 
encumbrances, pay dividends or make other restricted payments, make 
investments, loans and guarantees or sell or otherwise dispose of a 
substantial portion of assets to, or merge or consolidate with, another 
entity. The Credit Facility also contains a number of financial covenants 
that will require the Company to meet certain financial ratios and tests and 
provide that a change of control of the Company (as defined in the Credit 
Facility) will constitute an event of default.

         The Company anticipates that its principal use of cash on a going 
forward basis will be working capital requirements, debt service requirements 
and capital expenditures. Based upon current and anticipated levels of 
operations, the Company believes that its cash flow from operations, together 
with amounts available under the Credit Facility, will be adequate to meet 
its anticipated requirements for the foreseeable future for working capital, 
capital expenditures and interest payments.


                                  Page 11

<PAGE>

YEAR 2000 ISSUE

         GENERAL  DESCRIPTION  OF THE YEAR 2000 ISSUE AND THE NATURE  AND  
EFFECTS OF THE YEAR 2000 ON  INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS

         The year 2000 issue ("Year 2000 Issue") is the result of computer 
programs being written using two digits rather than four to define the 
applicable year. Any of the Company's computer programs or hardware that have 
date-sensitive software or embedded chips may recognize a date using "00" as 
the year 1900 rather than the year 2000. This could result in a system 
failure or miscalculations causing disruptions of operations, including, 
among other things, a temporary inability to process transactions, send 
invoices, or engage in similar normal business activities.

         Based on recent assessments, the Company has determined that it will 
be required to modify or replace significant portions of its software and 
certain hardware so that those systems will properly utilize dates beyond 
December 31, 1999. The Company presently believes that with modifications or 
replacements of existing software and certain hardware, the Year 2000 Issue 
can be mitigated. However, if such modifications and replacements are not 
made, or are not timely completed, the Year 2000 Issue could have a material 
impact on the operations of the Company.

         The Company's plan to resolve the Year 2000 Issue involves the 
following three phases: assessment, remediation, and testing. To date, the 
Company has fully completed its assessment of all systems that could be 
significantly affected by the Year 2000 Issue. The completed assessment 
indicated that most of the Company's significant information technology 
systems could be affected, particularly the general ledger, billing, and 
inventory systems. That assessment also indicated that software and hardware 
(embedded chips) used in production and manufacturing systems do not 
represent significant risks. The Company does not believe that the Year 2000 
presents a material exposure as it relates to the Company's products.

         STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT

         With respect to its information technology, the Company is 25% 
complete on the remediation phase and expects to complete software and 
hardware replacement no later than May 31, 1999. Completion of the testing 
phase for all significant systems is expected by June 30, 1999.

         The Company is utilizing both internal and external resources to 
replace and test the software and hardware for resolution of the Year 2000 
Issue. In conjunction with the Company's current $2.0 million information 
technology systems re-engineering effort, approximately 50% of the total cost 
is estimated to be related to the Year 2000 project. Most of the cost of the 
new system is expected to be funded through a lease.

         NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE 
TO THE YEAR 2000 ISSUE

         The Company has no significant systems which interface directly with 
third party vendors. To date, the Company is not aware of any external agent 
with a Year 2000 Issue that would materially impact the Company's results of 
operations, liquidity, or capital resources. The Company plans to send out 
questionnaires to external agents during the first quarter of 1999 in an 
effort to verify the external agents' Year 2000 readiness. However, the 
Company has no means of ensuring that external agents will be Year 2000 
ready. The inability of external agents to complete their Year 2000 
resolution process in a timely fashion could materially impact the Company. 
The effect of non-compliance by external agents is not determinable.

         RISKS

         Management believes it has an effective program in place to resolve 
the Year 2000 issue in a timely manner. As noted above, the Company has not 
yet completed all necessary phases of its Year 2000 program. In the event 
that the Company does not complete any additional phases, the Company might 
be unable to take customer orders, manufacture and ship products, invoice 
customers or collect payments. In addition, disruptions in the economy 
generally resulting from Year 2000 issues could also 

                                  Page 12

<PAGE>

materially adversely affect the Company. The amount of potential liability 
and lost revenue cannot be reasonably estimated at this time.

         CONTINGENCY PLANS

         The Company currently has no contingency plans in place in the event 
it does not complete all phases of the Year 2000 program. The Company plans 
to evaluate the status of completion in the first quarter of 1999 and 
determine whether such a plan is necessary.

                                  Page 13
<PAGE>

PART II       OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS.

         Legal proceedings filed against the Company were reported in the
Company's report on Form 10-Q for the quarterly period ended July 3, 1998.

ITEM 5.       OTHER INFORMATION.

         Mercer was merged with and into the Company, effective August 12, 1998.
The Company has qualified to do business in New Jersey and Florida, where Mercer
has its business operations. The merger was undertaken for purely administrative
reasons and Burke intends to continue to operate Mercer's business throughout
the nation under the name Mercer Products Company.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K.

              (a)   Exhibits.

                EXHIBIT NO.       DESCRIPTION
                -----------       -----------
                *3.1              Articles of Incorporation of the Company
                *3.2              By-laws of the Company
              **10.20             Stock Purchase Agreement between the Company,
                                    Mercer Products Company, Inc. and 
                                    Sovereign Specialty Chemicals, Inc., 
                                    dated March 5, 1998
                27                Financial Data Schedule

               *    Previously filed as an exhibit to the Company's Registration
                    Statement on Form S-4, File No. 333-36675, and incorporated
                    herein by reference.

               **   Previously filed as an exhibit to the Company's Annual
                    Report on Form 10-K for the year ended January 2, 1998 and
                    incorporated herein by reference.

              (b)   REPORTS ON FORM 8-K

              There were no reports filed on Form 8-K during the three months
              ended October 2, 1998.

                                  Page 14

<PAGE>

                                    SIGNATURE

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


                                         BURKE INDUSTRIES, INC.

Dated:  November 13, 1998                By:   /s/ DAVID E. WORTHINGTON
                                               ------------------------
                                               David E. Worthington
                                               Vice President-Finance


                                  Page 15