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

For the quarterly period ended September 30, 1998
                                                      OR

[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 .

                         Commission file number 33-64450
                             AMERICAN STANDARD INC.
             (Exact name of Registrant as specified in its charter)

   Delaware 25-0900465
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                             Identification No.)

One Centennial Avenue, P.O. Box 6820, Piscataway, NJ           08855-6820
(Address of principal executive offices)                        (Zip Code)


Registrant's telephone number, including area code            (732) 980-6000


           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.



                                                                      X Yes No

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

           Common stock, $.01 par value, outstanding at

               October 30, 1998                                          1,000
                                                                       (shares)









<PAGE>

                          PART 1. FINANCIAL INFORMATION

 Item 1.  Financial Statements

      The  following  consolidated  summary  statement of operations of American
Standard Inc. (the  "Company")  and  subsidiaries  for the three months and nine
months ended  September 30, 1998 and 1997 has not been audited,  but  management
believes that all adjustments,  consisting of normal recurring items,  necessary
for a fair  representation  of  financial  data  for  those  periods  have  been
included.  Results  for the  three-  and  nine-month  periods  of  1998  are not
necessarily indicative of results for the entire year.
<TABLE>

                     AMERICAN STANDARD INC. AND SUBSIDIARIES
                    UNAUDITED SUMMARY STATEMENT OF OPERATIONS
<CAPTION>

                                  (In millions)

                                          Three Months Ended  Nine Months Ended
                                             September 30,        September 30,
                                             1998       1997     1998      1997
                                            -----      -----    -----     -----
<S>                                      <C>       <C>        <C>       <C>   

SALES                                      $1,728   $ 1,519    $5,016   $ 4,469 
                                           -------  -------    -------  -------

COST AND EXPENSES
  Cost of sales                             1,298     1,138     3,737     3,319 
  Selling and administrative expenses         282       236       829       730 
  Restructuring charge                         35         -        35         - 
  Write-off of purchased research and
    development                                 -        90         -        90 
  Other expense (income)                       (1)        9         7        21 
  Interest expense                             43        48       145       144 
                                           -------  -------    -------  -------
                                                       
                                            1,657     1,521     4,753     4,304 
INCOME (LOSS) BEFORE INCOME TAXES
    AND EXTRAORDINARY ITEM                     71        (2)      263       165 
Income taxes                                   35        31       113        91 
                                           -------  -------    -------  ------- 

INCOME (LOSS) BEFORE
    EXTRAORDINARY ITEM                         36       (33)      150       74  
Extraordinary loss on retirement of debt,                    
    net of tax                                  -         -        50       24  
                                           -------  -------    -------  -------
                                                

NET INCOME (LOSS)                          $   36    $  (33)    $ 100   $   50  
                                           =======   ======     ======  ======
<FN>

                             See accompanying notes
</FN>
</TABLE>


<PAGE>


Item 1.  Financial Statements (continued)
<TABLE>

                     AMERICAN STANDARD INC. AND SUBSIDIARIES
                         UNAUDITED SUMMARY BALANCE SHEET
                     (Dollars in millions except share data)

<CAPTION>
                                                   September 30,   December 31,
                                                         1998          1997 
                                                       ------        ------
<S>                                                  <C>            <C>    

CURRENT ASSETS
Cash and cash equivalents                              $   57        $   29 
Accounts receivable                                     1,032           831 
Inventories
    Finished products                                     298           255 
    Products in process                                   102            87 
    Raw materials                                         104            89
                                                       ------        ------   
                                                          504           431 
Other current assets                                      115           103
                                                       ------        ------   
TOTAL CURRENT ASSETS                                    1,708         1,394 

FACILITIES, less accumulated depreciation;
    Sept. 1998 - $683; Dec. 1997 - $578                 1,210         1,139 
GOODWILL                                                  875           844 
OTHER ASSETS                                              709           603
                                                       ------        ------   
TOTAL ASSETS                                           $4,502        $3,980
                                                       =======       ======

CURRENT LIABILITIES
Loans payable to banks                                  $ 742         $ 718 
Current maturities of long-term debt                      170            30 
Accounts payable                                          488           466 
Accrued payrolls                                          225           180 
Other accrued liabilities                                 599           456
                                                       ------        ------   
TOTAL CURRENT LIABILITIES                               2,224         1,850 

LONG-TERM DEBT                                          1,549         1,551 
RESERVE FOR POSTRETIREMENT BENEFITS                       470           438 
OTHER LIABILITIES                                         477           468
                                                       ------        ------   
TOTAL LIABILITIES                                       4,720         4,307 

STOCKHOLDER'S DEFICIT
Preferred stock, Series A, par
   value $.01, 1000 shares
       issued and outstanding                               -             -
Common stock $.01 par value, 1,000 shares
    issued and outstanding                                  -             - 
Capital surplus                                           572           561 
Accumulated deficit                                      (575)         (675)
Foreign currency translation effects                     (215)         (213)
                                                       ------        ------   

TOTAL STOCKHOLDER'S DEFICIT                              (218)         (327)
                                                       ------        ------   
                                                       $4,502        $3,980
                                                       ======        ======
<FN>

                             See accompanying notes
</FN>
</TABLE>


<PAGE>


Item    1.  Financial Statements (continued)
<TABLE>

                     AMERICAN STANDARD INC. AND SUBSIDIARIES
             UNAUDITED CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS
                                  (In millions)
<CAPTION>
                                                          Nine Months Ended
                                                            September 30,
                                                           1998      1997
                                                           ----      ----
<S>                                                     <C>        <C>    
CASH PROVIDED (USED) BY:
  OPERATING ACTIVITIES:
    Income before extraordinary item                      $150      $ 74 
    Write-off of purchased in-process
      research and development                               -        90 
    Depreciation                                            98        94 
    Amortization of goodwill                                40        27 
    Restructuring charges                                   35         - 
    Non-cash interest                                       30        44 
    Non-cash stock compensation                              4        10 
    Changes in assets and liabilities:
      Accounts receivable                                 (177)      (92)
      Inventories                                          (64)      (84)
      Accounts payable and other accruals                  140        54 
      Other assets and liabilities                         (22)        9
                                                          ----      ----
  Net cash provided by operating activities                234       226
                                                          ----      ---- 

  INVESTING ACTIVITIES:
    Purchases of property, plant and equipment            (156)     (157)
    Investments in affiliated companies                    (16)       (1)
    Acquisition of medical diagnostic businesses             -      (212)
    Other                                                   (3)        5
                                                          ----      ---- 
  Net cash used by investing activities                   (175)     (365)
                                                          ----      ----

  FINANCING ACTIVITIES:
    Net loan (to) from Parent                              (35)     (286)
    Proceeds from issuance of long-term debt             1,011       399 
    Repayments of long-term debt,
      including redemption premimums                      (971)     (626)
    Net change in revolving credit facility                (10)      640 
    Net change in other short-term debt                      8        11 
    Other                                                  (34)      (16)
                                                          ----      ----  
  Net cash provided (used) by financing activities         (31)      122
                                                          ----      ---- 

Effect of exchange rate changes on cash and
  cash equivalents                                           -        (4)
                                                          ----      ----   
Net increase (decrease) in cash and cash equivalents        28       (21)
Cash and cash equivalents at beginning of period            29        60
                                                          ----      ----  
Cash and cash equivalents at end of period                $ 57      $ 39
                                                          ====      ====
<FN>

                             See accompanying notes
</FN>
</TABLE>


<PAGE>



                     AMERICAN STANDARD INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


   Note 1.  Restructuring Charges

   In connection  with a previously  announced plan for a  restructuring  of its
   European  and  North  American  plumbing  operations,  results  for the third
   quarter of 1998  include a  restructuring  charge of $35 million ($29 million
   net of tax) related to the planned closure of two Plumbing  Products'  plants
   in  Europe.   This  charge  includes  $17  million  of  severance  costs  for
   approximately  425  employees  to  be  terminated  and  $18  million  related
   primarily to facility  write-downs and lease  cancellation.  Closure of these
   two  facilities  is expected to be completed by the end of 1998.  The overall
   restructuring  program,  which is designed to achieve lower product costs and
   improve efficiency, is expected to result in charges of approximately $160 to
   $185 million related to employee  severance and  consolidation  of production
   facilities. The Company expects to record the remaining charges in the fourth
   quarter of 1998.

   Note 2.  Public Offering of Debt

   In the first half of 1998,  the  Company  completed  public  offerings  of $1
   billion  principal  amount of Senior Notes with  interest  rates ranging from
   7-1/8% to 7-5/8% and maturity  dates from 2003 to 2010. On June 1, 1998,  the
   Company used the net proceeds of these offerings (approximately $963 million,
   net of underwriting  discounts and interest rate hedge termination  costs) to
   redeem its 10-1/2% Senior Subordinated  Discount Debentures and 9-7/8% Senior
   Subordinated  Notes. The total amount required to complete these redemptions,
   including  call  premiums,  was  $954  million,  net  of  the  effect  of the
   settlement of certain interest rate swap  transactions  related to the Senior
   Subordinated Discount Debentures. As a result of the redemptions, results for
   the nine months ended September 30, 1998 include an  extraordinary  charge of
   approximately $50 million (net of taxes), consisting of call premiums and the
   write-off of unamortized debt issuance costs.

   Note 3.  Comprehensive Income

   In the first  quarter of 1998,  the Company  adopted  Statement  of Financial
   Accounting   Standards  No.  130,  Reporting   Comprehensive   Income.  Total
   comprehensive  income  (loss),  consisting  of net income or loss and foreign
   currency  translation  effects,  for the three  months and nine months  ended
   September 30, 1998 was $26 million and $98 million, respectively, and for the
   three months and nine months ended  September  30, 1997 was $(37) million and
   $11 million, respectively.

   Note 4.  Tax Matters

   As described in Note 6 of Notes to Consolidated  Financial  Statements in the
   Company's  Annual  Report on Form 10-K for the year ended  December 31, 1997,
   there are  pending  German tax issues for the years 1984  through  1990.  See
   "Management's  Discussion and Analysis of Financial  Condition and Results of
   Operations -- Liquidity and Capital Resources."


<PAGE>




   Note 5.  Impact of Recently Issued Accounting Standards

   In June 1998, the Financial  Accounting  Standards Board issued Statement No.
   133, Accounting for Derivative  Instruments and Hedging Activities,  which is
   required to be adopted in years  beginning after June 15, 1999. The Company's
   use  of  derivative  instruments  and  hedging  activities  is  minimal,  and
   therefore management believes that the adoption of Statement No. 133 will not
   have a significant effect on the Company's results of operations or financial
   position.



<PAGE>


                          PART 1. FINANCIAL INFORMATION

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

Overview

         The  Company's  sales in the third  quarter  of 1998  increased  14% to
$1,728 million and operating  income  increased 4% to $162 million  (excluding a
$35 million restructuring charge in the 1998 quarter and a $90 million write-off
of purchased in-process research and development in the 1997 quarter). Operating
income  for the  first  nine  months  of 1998 was $489  million  (excluding  the
restructuring  charge),  an  increase of 8% over the $452  million of  operating
income in the first nine months of 1997  (excluding  the  write-off of purchased
in-process research and development).
<TABLE>

                         SUMMARY SEGMENT AND INCOME DATA
                              (Dollars in millions)
                                   (Unaudited)
<CAPTION>

                                              Three Months Ended   Nine Months Ended
                                                 September 30,       September 30,
                                                  1998    1997        1998    1997
                                                  ----    ----        ----    ----
<S>                                           <C>       <C>        <C>     <C>   

Sales:
    Air Conditioning Products                   $1,053   $ 919      $3,003  $2,684 
    Plumbing Products                              387     352       1,129   1,062 
    Automotive Products                            265     224         811     699 
    Medical Systems                                 23      24          73      24 
                                                  ----    ----        ----     ---  

    Total  sales                                $1,728  $1,519      $5,016  $4,469 
                                                ======  ======      ======  ======

Operating income (loss) before restructuring
    charges and write-off of purchased
    research and development:
     Air Conditioning Products                   $108     $ 98        $308    $285 
     Plumbing Products                             27       31          79      86 
     Automotive Products                           33       31         117      94 
     Medical Systems                               (6)      (5)        (15)    (13)
                                                  ----    ----        ----     ---  
                                                  162      155         489     452 
Restructuring charges and write-off of
    purchased research and development:
     Plumbing Products restructuring charges      (35)       -         (35)      - 
     Medical Systems write-off of purchased
      research and development                      -      (90)          -     (90)
                                                  ----    ----        ----     ---
                                                  (35)     (90)        (35)    (90)
                                                  ----    ----        ----     ---
    Total operating income                        127       65         454     362 
Equity in net income of
    unconsolidated joint ventures                   9        3          21       9 
Interest expense                                  (43)     (48)       (145)   (144)
Corporate and other expenses                      (22)     (22)        (67)    (62)
                                                  ----    ----        ----     ---

Income (loss) before income taxes
    and extraordinary item                       $ 71     $ (2)       $263    $165 
                                                 ====     =====       ====    ====
</TABLE>


<PAGE>

Results  of  Operations  for the Third  Quarter  and First  Nine  Months of 1998
Compared with the Third Quarter and First Nine Months of 1997

         The Company's  sales in the third quarter of 1998 were $1,728  million,
an increase of $209 million,  or 14% (with little effect from foreign exchange),
from $1,519  million in the third quarter of 1997.  Sales  increased 15% for Air
Conditioning  Products,  10% for Plumbing  Products and 18% Automotive  Products
compared with the third quarter of 1997.  Medical Systems  contributed  sales of
$23  million in the 1998 third  quarter  compared  with $24 million in the prior
year period.

         Operating income for the third quarter of 1998, excluding restructuring
charges of $35 million, was $162 million, an increase of $7 million, or 4% (with
little effect from foreign exchange),  from $155 million in the third quarter of
1997 (excluding the $90 million write-off of purchased  in-process  research and
development).  Operating income increased 10% for Air Conditioning  Products and
6% for Automotive  Products,  and decreased 13% for Plumbing  Products.  Medical
Systems  incurred an  operating  loss of $6 million  compared  with a loss of $5
million in the year-earlier quarter.

         Sales  for the  first  nine  months of 1998  were  $5,016  million,  an
increase of $547  million,  or 12% (15%  excluding  the  unfavorable  effects of
foreign  exchange),  from $4,469  million in the first nine months of 1997.  The
increase reflected gains of 12% for Air Conditioning  Products,  6% for Plumbing
Products,  16% for  Automotive  Products  and sales for  Medical  Systems of $73
million  for nine months in 1998  (compared  with sales of $24 million for three
months  in  1997  following  the  June  30,  1997  acquisition  of  the  medical
diagnostics  business).  Operating  income was $489  million  for the first nine
months of 1998 (excluding the restructuring  charges previously  mentioned),  an
increase of 8% (11%  excluding  the  unfavorable  effects of foreign  exchange),
compared  with $452  million in the first  nine  months of 1997  (excluding  the
write-off of purchased  in-process  research and development).  Operating income
increased 8% for Air Conditioning  Products and 24% for Automotive  Products but
declined 9% for Plumbing  Products (1% excluding  unfavorable  foreign  exchange
effects).  Medical  Systems  incurred an  operating  loss of $15 million for the
first nine months of 1998 compared with an operating loss of $13 million for the
first nine months of 1997.

         The following  discussion of sales and  operating  income  excludes the
effects of the  restructuring  charges  for  Plumbing  Products  in 1998 and the
write-off of purchased  in-process  research and development for Medical Systems
in 1997, as applicable.

         Sales for Air  Conditioning  Products were $1,053 million for the third
quarter of 1998, an increase of 15% (16%  excluding the  unfavorable  effects of
foreign  exchange)  from $919  million  for the  third  quarter  of 1997.  Sales
increased 19% in the U.S. and 7% in  international  markets  (excluding  foreign
exchange  effects).  The U.S gain reflected a strong 26% increase in residential
product sales due to the effect of hotter than normal weather on the replacement
market as well as strong  new  construction.  U.S.  sales  also  benefited  from
continued  strength in commercial  applied and unitary  businesses and expanding
sales and service operations.  International sales for the third quarter of 1998
increased  principally  because of higher  volumes in Europe and Latin  America,
offset  partly by  declines in China and other Far East  countries.  The applied
systems  business was weakened by  curtailments  of large overseas  construction
projects and competitive pricing pressures worldwide. Sales for Air Conditioning
Products for the first nine months of 1998  increased  by 12% to $3,003  million
from $2,684 million in the first nine months of 1997,  primarily for the reasons
cited for the third quarter increase,  offset somewhat by the adverse effects of
a four-week strike in the first quarter of 1998 at the Lexington,  Kentucky, air
handling facility.
<PAGE>

         Operating  income for Air  Conditioning  Products  increased  10% (with
little  effect from foreign  exchange)  to $108 million in the third  quarter of
1998 from $98 million in the 1997 third quarter.  This  primarily  reflected the
effects of hotter than normal weather on U.S. residential products and increased
volumes in the U.S  commercial  unitary  business and in Latin  America.  Partly
offsetting  these  gains were  declines  in the  applied  business,  principally
because  of margin  declines  in  Europe,  a drop in Far East  sales  volume and
pricing pressures in the U.S. and Far East.  Operating income for the first nine
months of 1998 increased 8% (9% excluding  unfavorable foreign exchange effects)
to $308 million  from $285  million in the first nine months of 1997.  This gain
resulted  essentially for the reasons  mentioned for the third quarter increase,
except  that  operating  income  for  the  applied  business  increased  for the
nine-month  period, as first-half gains exceeded the third-quarter  decline.  In
addition,  the first nine  months of 1998 were  adversely  affected by the first
quarter strike at Lexington.

         Sales for Plumbing  Products  increased 10% (11% excluding  unfavorable
foreign exchange effects) to $387 million in the third quarter of 1998 from $352
million in the third quarter of 1997.  The gain  reflected an increase of 18% in
the U.S. and 8% in international  sales excluding  unfavorable  foreign exchange
effects.  Sales in the U.S.  increased as a result of higher  volume,  primarily
through  expanding  major  retailers,  and  continued  gains  in  market  share.
International sales increased primarily from moderate volume increases in Europe
and Latin  America,  and from the effect of including  operations  in China on a
consolidated basis since the fourth quarter of 1997 following the acquisition of
a majority  interest in those  operations.  The gain in international  sales was
partly  offset by lower sales in the Far East  (excluding  China) as a result of
the economic  adversity in the region.  Sales of Plumbing Products for the first
nine months of 1998 increased 6% (11%  excluding  foreign  exchange  effects) to
$1,129  million  from  $1,062  million  in the  first  nine  months  of 1997 due
principally to the same factors affecting the third quarter results.

         Operating income for Plumbing Products decreased 13% (10% excluding the
unfavorable effects of foreign exchange) to $27 million for the third quarter of
1998  from  $31  million  for  the  third   quarter  of  1997,  as  declines  in
international  operations  more than offset gains in the U.S. For  international
operations,  operating  income  decreased  primarily  because of the  effects of
economic  weakness in Asia (excluding  China) and transitional  costs associated
with implementing the low-cost sourcing program in Europe.  Those decreases were
offset partly by higher volume in Latin America and the effect of  consolidating
the China plumbing operations. In the U.S., operating income improved because of
higher  sales  volume.  Operating  income  for the  first  nine  months  of 1998
decreased by 8% (1% excluding  foreign  exchange  effects) from the 1997 period,
primarily for the reasons mentioned for the third quarter.

         Sales for  Automotive  Products for the third quarter of 1998 increased
18% (16%  excluding the favorable  effects of foreign  exchange) to $265 million
from $224 million in the third quarter of 1997. This increase resulted primarily
from higher volume, as unit volume of truck and bus production in Western Europe
increased  21% over the third  quarter of 1997.  In  addition,  sales  increased
because  of higher  product  content  per  vehicle  on new  model  introductions
launched in 1997,  increased shipments of anti-lock braking systems (ABS) to the
Company's  U.S.  joint  venture and  improved  trailer  business in Europe.  The
increased sales in the U.S. reflected the phase-in of regulations  requiring ABS
on all new heavy-duty  trucks and trailers,  together with an increased level of
heavy truck  production.  These gains were partly offset by a volume  decline in
Brazil. Sales of Automotive Products for the first nine months of 1998 increased
16% (19% excluding the unfavorable  effects of foreign exchange) to $811 million
from $699  million in the first nine months of 1997,  primarily  for the reasons
cited for the third quarter.

         Operating income for Automotive  Products for the third quarter of 1998
was $33  million,  an  increase of 6% (3%  excluding  the  favorable  effects of
foreign  exchange) from $31 million in the third quarter of 1997.  This increase
reflected  the higher sales volume in Europe and to the U.S.,  offset  partly by
weaker  results in Brazil  and  increased  development  and  maintenance  costs.
Operating  income for Automotive  Products for the first nine months of 1998 was
$117  million,  an increase of 24% (29%  excluding  the  unfavorable  effects of
foreign exchange) from $94 million in the first nine months of 1997, principally
from the increased sales volume.
<PAGE>

         Medical Systems sales decreased $1 million in the third quarter of 1998
to $23 million,  reflecting declining markets. The operating loss was $6 million
in the third  quarter of 1998  compared with a $5 million loss in the 1997 third
quarter,  primarily  reflecting the declining markets and increased  development
activity,  including efforts to obtain U.S. and European regulatory approvals of
new diagnostic  products and tests. Sales for Medical Systems for the first nine
months of 1998 were $73 million compared with $24 million for the nine months of
1997,  primarily  reflecting the acquisition of the medical diagnostics business
in June  1997.  The  operating  loss for the first  nine  months of 1998 was $15
million  compared  with an  operating  loss of $13 million for the 1997  period,
primarily for the reasons cited for the third quarter.


Financial Review

         The higher equity in earnings of  unconsolidated  joint ventures in the
third quarter of 1998  principally  reflects the growth of Automotive  Products'
U.S.  joint venture with Meritor  Automotive  Inc.  Corporate and other expenses
were essentially  unchanged.  Interest expense decreased $5 million in the third
quarter  of 1998  compared  to the  year-earlier  quarter  as a result  of lower
overall interest rates achieved through refinancings completed in the first half
of 1998 as described below.

         Income  taxes for the nine months ended  September  30, 1998 reflect an
estimated  effective  income  tax  rate  of  40%  of  pretax  income  (excluding
restructuring  charges)  compared with an effective  rate for the 1997 period of
36% of pretax income (excluding the write-off of purchased  in-process  research
and  development).  The  lower  effective  tax  rate in 1997  resulted  from the
utilization of certain previously unrecognized tax benefits. No similar benefits
are  available in 1998.  The income tax  provision for the third quarter of 1998
was $41 million,  or 39.1% of pretax  income  excluding  restructuring  charges,
compared  with an  effective  rate of  35.3% of  pretax  income  (excluding  the
write-off of purchased in-process research and development) in the third quarter
of  1997.  The  effective  rate  in the  third  quarter  of  1998  reflects  the
year-to-date adjustment to 40% from the 40.5% rate used in the first half of the
year.

         On June 1, 1998, the Company  redeemed its 10-1/2% Senior  Subordinated
Discount  Debentures and its 9-7/8% Senior  Subordinated Notes with the proceeds
of offerings of $1 billion  principal amount of Senior Notes as described below.
As a result of these  redemptions,  results for the nine months ended  September
30, 1998 included an extraordinary  charge of $50 million,  net of income taxes,
attributable  to related call  premiums and the  write-off of  unamortized  debt
issuance  costs.  The nine months ended  September  30, 1997,  also  included an
extraordinary  charge  of $24  million,  net of  income  taxes,  related  to the
redemption of the Company's  11-3/8%  Senior  Debentures  and retirement of debt
upon completion of the Company's 1997 Credit Agreement.

<PAGE>

Liquidity and Capital Resources


         Net cash provided by operating activities,  after cash interest paid of
$98 million,  was $234 million for the first nine months of 1998,  compared with
net cash provided of $226 million for the similar period of 1997. The $8 million
increase  resulted  primarily from higher earnings  (excluding the restructuring
charges from 1998 and the write-off of purchased  research and development  from
1997). The Company made capital  expenditures of $172 million for the first nine
months of 1998,  including $16 million of investments  in affiliated  companies,
compared with capital  expenditures  of $158 million in the first nine months of
1997, including $1 million of investments in affiliated companies (excluding the
acquisition of the medical diagnostics business).

         In the first half of 1998, the Company completed public offerings of $1
billion principal amount of Senior Notes with interest rates ranging from 7-1/8%
to 7-5/8% and  maturity  dates from 2003 to 2010.  On June 1, 1998,  the Company
used the net proceeds of these  offerings  (approximately  $963 million,  net of
underwriting  discounts  and  interest  rate hedge  costs) to redeem its 10-1/2%
Senior  Subordinated  Discount  Debentures and 9-7/8% Senior Subordinated Notes.
The  total  amount  required  to  complete  these  redemptions,  including  call
premiums,  was $954  million,  net of the  effect of the  settlement  of certain
interest  rate swap  transactions  related to the Senior  Subordinated  Discount
Debentures.  As a result of the  redemptions,  the Company expects to reduce its
annual net interest expense on the debt refinanced by approximately  $20 million
before taxes.

         On  July 9,  1998,  the  Company's  Board  of  Directors  approved  the
repurchase by the Company's parent (American  Standard Companies Inc.), of up to
$300 million of its common  stock,  not to exceed $100 million per year,  during
the three year period  ending  July 2001.  During the first nine months of 1998,
the parent  company  repurchased  1.4 million shares of its common stock for $48
million, of which 1.2 million shares were purchased for $40 million in the third
quarter pursuant to this plan.

         In January  1997 the Company  entered  into the 1997 Credit  Agreement.
This agreement, which requires no repayment of principal prior to its expiration
in 2002, provides the Company senior secured credit facilities aggregating $1.75
billion as follows: (a) a $750 million U.S. dollar revolving credit facility and
a  $625  million  multi-currency   revolving  credit  facility  (the  "Revolving
Facilities"),  which by their  nature  are  short-term,  and (b) a $375  million
multi-currency  periodic  access  credit  facility.  Up to $500  million  of the
Revolving  Facilities  may be used to issue  letters of credit.  The 1997 Credit
Agreement and certain other  American  Standard  Inc. debt  instruments  contain
restrictive  covenants and other requirements with which the Company believes it
is currently in compliance.

         At  September  30,  1998,  the Company had  borrowings  of $688 million
outstanding  under the Revolving  Facilities.  There was $626 million  available
under the  Revolving  Facilities  after  reduction  for  borrowings  and for $61
million of letters of credit usage. The Company's  foreign  subsidiaries had $75
million available at September 30, 1998, under overdraft  facilities that can be
withdrawn by the banks at any time.  In addition,  the  Company's  operations in
China have $36 million  available under bank credit  facilities  after reduction
for borrowings of $10 million and letters of credit usage of $11 million.

         The Company has  previously  disclosed  that the  restructuring  of its
European and North American plumbing operations would entail a special charge of
approximately   $160  to  $185  million   related  to  employee   severance  and
consolidation of production facilities. In the third quarter of 1998 the Company
recorded a restructuring  charge of $35 million ($29 million net of tax) related
to the  announced  closure of two European  Plumbing  Products  facilities.  The
Company expects to record the remaining charges in the fourth quarter of 1998.
<PAGE>

         As described in Note 6 of Notes to Consolidated Financial Statements in
the Company's  Annual Report on Form 10-K for the year ended  December 31, 1997,
there are pending  German Tax issues for the years 1984 through 1990.  There has
been no change in the status of these issues since that report was filed.

Year 2000 Readiness Disclosure

         The following is a Year 2000  Readiness  Disclosure in accordance  with
the Year 2000 Information and Readiness Disclosure Act.

         For the past  several  years the  Company  has been in the  process  of
converting  most of its computer  applications  and systems  worldwide to client
server technology and in conjunction therewith has been installing software that
is Year 2000 compliant. For other systems,  software that is Year 2000 compliant
is being  installed.  Most of  these  initiatives  would  have  been  undertaken
irrespective of any Year 2000 considerations. Substantial progress has been made
on these  installations and many of the individual projects have been completed.
Total completion of these initiatives is expected by mid-1999.

         The Company  has  established  a  comprehensive  Year 2000  initiative,
having appointed teams for each operating group worldwide, coordinated by a team
leader  reporting  directly  to the  business  group  leader,  and in some cases
employing third-party experts. These teams are responsible for assuring that all
core  business  systems will be fully  functional  for the year 2000,  including
transactions with customers,  suppliers,  financial institutions and other third
parties.  This  evaluation  includes  the  software  installed  in the  projects
referred to above that were undertaken for business reasons other than Year 2000
considerations.  In  general,  a  coordinated  approach  was  undertaken  by the
Company's operating groups worldwide, with "best practices" shared among groups.
The principal phases of the initiative include: inventorying affected technology
and  systems,  including  third-party  relationships  and  imbedded  software in
manufacturing systems; assessing the impact of Year 2000 issues and prioritizing
tasks  based  on  size  and  perceived  risk;  replacement  or  modification  of
non-compliant technology; testing; and developing contingency plans. The Company
is  also  reviewing  its new  and  previously  sold  products  that  incorporate
equipment  controls to identify and resolve any problems  that such products may
have as a result of the arrival of the year 2000.

         The Company has initiated  communications  with significant  suppliers,
customers  and other third parties to identify and assess Year 2000 risks and to
develop solutions that will minimize the impact on the Company.  This process is
incomplete, but the Company expects timely to resolve any problems with critical
third parties or to develop  contingency  plans, and management does not believe
that  third-party  problems will have a material adverse effect on the Company's
operations.  However,  no assurance  can be given that third party  suppliers or
others on whom the Company relies will address such issues successfully.

         The several phases of the project are in varying degrees of completion,
and management believes that substantial and satisfactory progress has been made
towards the  objective  of having all business  systems  Year 2000  compliant by
mid-1999.  Overall,  management  estimates that the project is 70% complete.  In
circumstances where there is substantial risk that any important objectives will
not be met,  the  Company  will  dedicate  additional  resources  or develop and
implement appropriate contingency plans.
<PAGE>

         The  Company's   estimated  cost  to  become  Year  2000  compliant  is
approximately  $17  million,  of which $7  million  had  been  expended  through
September 30, 1998. The costs of implementing client server technology and other
software  changes  referred to in the first  paragraph  of this  section are not
included in these cost  estimates.  In addition,  these costs are  generally not
incremental to existing  information  technology  budgets,  as existing internal
resources were redeployed.  All costs are being funded from operating cash flows
or other resources available to the Company. Total costs, anticipated impact and
the expected  dates to complete  the various  phases of the project are based on
management's  best estimates using information  currently  available and certain
assumptions about future events.  However, no assurance can be given that actual
results will be consistent  with such  estimates and,  therefore,  actual costs,
impacts and completion  dates could differ  materially  from those plans.  Based
upon information currently available and current estimates,  management does not
believe  that the  Company's  costs to become  Year 2000  compliant  will have a
material  adverse  effect  on  the  Company's  financial  position,  results  of
operations or cash flows in future periods.

         Comments  in  this  Quarterly  Report  on  Form  10-Q  contain  certain
forward-looking   statements   that  are  based  on   management's   good  faith
expectations  and belief  concerning  future  developments.  Actual  results may
differ materially from these expectations as a result of many factors,  relevant
examples of which are set forth in the Company's 1997 Annual Report on Form 10-K
and in the "Management's  Discussion and Analysis" section of the Company's 1997
Annual Report to Shareholders and Quarterly Reports on Form 10-Q.

                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings.

                  For a  discussion  of  German  tax  issues  see  "Management's
           Discussion  and  Analysis  of  Financial  Condition  and  Results  of
           Operations  --  Liquidity  and Capital  Resources"  in Part I of this
           report which is incorporated herein by reference.


Item 6.  Exhibits and Reports on Form 8-K

           (a)  Exhibits.  The  exhibits  listed  on the  accompanying  Index to
           Exhibits are filed as part of this quarterly report on Form 10-Q.

           (b) Reports on Form 8-K. During the quarter ended September 30, 1998,
           the Company filed no Current Reports on Form 8-K.

           .



<PAGE>


                                    SIGNATURE

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







                                                             By: G. Ronald Simon
                                                   Vice President and Controller
                                                  (Principal Accounting Officer)









November 13, 1998



<PAGE>

<TABLE>

                             AMERICAN STANDARD INC.

                                INDEX TO EXHIBITS
<CAPTION>

     (The File Number of the Registrant, American Standard Inc. is 33-64450)


<S>         <C>   

Exhibit No.  Description
   3 (i)     Restated Certificate of Incorporation of American Standard
             Inc.
     (ii)    Amended By-laws of American Standard Inc.

    4.1      Indenture, dated as of Jan. 15, 1998, among American Standard,
             Inc., American Standard Companies Inc. and
             The Bank of New York, Trustee

    4.2      Third Supplemental Indenture dated as of April 13, 1998 to
             the Indenture dated as of January 15, 1998 among
             American Standard Inc., American Standard Companies
             Inc. and The Bank of New York relating to the 7-3/8%
             Senior Notes due 2005.

    4.3      Third Amendment dated as of August 7,
             1998  to  the  Amended  and  Restated
             Credit  Agreement dated as of January
             31,  1997  among  American   Standard
             Companies  Inc.,   American  Standard
             Inc.,    certain    subsidiaries   of
             American Standard Inc., the financial
             institutions  party  thereto  and the
             Chase      Manhattan     Bank,     as
             Administrative Agent.

   (27)     Financial Data Schedule
</TABLE>