SECURITIES AND EXCHANGE COMMISSION

                     Washington, DC 20549


                          FORM 10-Q


 (X)  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998

                               OR

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

      For the transition period from _________to _________


                Commission File Number 1-3410  

                 AMERICAN BANKNOTE CORPORATION
     (Exact name of Registrant as specified in its charter)

          A Delaware               I.R.S. Employer
          Corporation               No. 13-0460520

         410 Park Avenue, New York, New York   10022-4407

              Telephone - Area Code   212-593-5700-9100

         200 Park Avenue, New York, New York   10166-4999
          (Former Address, if Changed From Last Report)


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 for the
past 90 days. Yes X No

At November 9, 1998 - 20,524,442 shares of common stock were outstanding.

<PAGE>




                   AMERICAN BANKNOTE CORPORATION

                            FORM 10-Q

                            I N D E X

                                                             PAGE
                                                              NO.

PART I - FINANCIAL INFORMATION

 Item 1.  Financial Statements 

   Unaudited Condensed Consolidated Balance Sheets
      September 30, 1998 and December 31, 1997. . . . . . .      3

   Unaudited Condensed Consolidated Statements of Income
      For the Nine and Three Months Ended September 30, 1998 
      and 1997. . . . . . . . . . . . . . . . . . . . . . .      4

   Unaudited Condensed Consolidated Statements of Cash Flows
      For the Nine Months Ended September 30, 1998 and 1997      5

   Unaudited Condensed Consolidated Statement of Stockholders'
      Equity For the Nine Months Ended September 30, 1998 .      6

   Notes to Unaudited Condensed Consolidated 
      Financial Statements. . . . . . . . . . . . . . . . .      7

 Item 2. Management's Discussion and Analysis of
      Financial Condition and Results of Operations . . . .     14

 Item 3. Quantitative and Qualitative Disclosures 
      about Market Risks. . . . . . . . . . . . . . . . . .     24

PART II - OTHER INFORMATION 

 Item 1. Legal Proceedings. . . . . . . . . . . . . . . . .     24

 Item 2. Changes in Securities and Use of Proceeds. . . . .     24

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

<PAGE>



PART I - Financial Information      
ITEM 1.  Financial Statements
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)

                                                          September    December
                                                          30, 1998     31, 1997
ASSETS                                                   (Unaudited)
Current assets
  Cash and cash equivalents . . . . . . . . . . . . .     $106,592     $ 17,323
  Accounts receivable, net of allowance for
    doubtful accounts of $1,630 and $986. . . . . . .       45,476       57,422
  Costs in excess of billings, of $14,001 and 
    $2,848, on uncompleted contracts. . . . . . . . .        1,069        5,442
  Inventories . . . . . . . . . . . . . . . . . . . .       31,192       41,686
  Deferred income taxes . . . . . . . . . . . . . . .        6,399        3,046
  Prepaid expenses and other. . . . . . . . . . . . .       14,188       11,371
      Total current assets  . . . . . . . . . . . . .      204,916      136,290
Property, plant and equipment, at cost, 
  net of accumulated depreciation and 
  amortization of $119,798 and $113,939 . . . . . . .      226,946      258,724
Other assets  . . . . . . . . . . . . . . . . . . . .       25,447       25,918
Excess of cost of investment in subsidiaries 
  over net assets acquired, net of accumulated 
  amortization of $9,039 and $8,863 . . . . . . . . .       66,119       82,604
                                                          $523,428     $503,536
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Revolving credit facilities . . . . . . . . . . . .     $  3,494     $  7,523
  Current portion of long-term debt . . . . . . . . .       82,572       17,886
  Accounts payable and accrued expenses . . . . . . .       59,670       54,761
      Total current liabilities . . . . . . . . . . .      145,736       80,170
Long-term debt  . . . . . . . . . . . . . . . . . . .      223,149      293,215
Other liabilities . . . . . . . . . . . . . . . . . .       25,784       21,466
Deferred income taxes . . . . . . . . . . . . . . . .       56,686       32,808
Minority interest . . . . . . . . . . . . . . . . . .       18,607       20,836
                                                           469,962      448,495
Commitments and Contingencies

Stockholders' equity
  Preferred Stock, authorized 2,500,000 shares, 
    no shares issued or outstanding . . . . . . . . .            -            -
  Zero Coupon Convertible Subordinated Debentures . .        7,325        8,326
  Preferred Stock, Series B, par value $.01 per share,  
   authorized 2,500,000 shares, issued and outstanding
    1,704,845 shares in 1998. . . . . . . . . . . . .           17            -
  Common Stock, par value $.01 per share,
    authorized 50,000,000 shares; issued 
    22,370,787 shares and 21,134,769 shares . . . . .          224          211
  Capital surplus . . . . . . . . . . . . . . . . . .       79,162       74,713
  Retained-earnings (deficit) . . . . . . . . . . . .      (21,171)     (23,282)
  Unearned compensation . . . . . . . . . . . . . . .       (1,335)
  Treasury stock, at cost (1,985,845 shares 
    and 281,000 shares) . . . . . . . . . . . . . . .       (1,253)      (1,253)
  Cumulative currency translation adjustment  . . . .       (9,503)      (3,674)
      Total stockholders' equity  . . . . . . . . . .       53,466       55,041
                                                          $523,428     $503,536


See Notes to Condensed Consolidated Financial Statements.

<PAGE>



AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(Amounts in thousands, except per share data)


                                      Nine Months Ended    Three Months Ended
                                        September 30          September 30
                                        1998     1997        1998       1997 

Sales . . . . . . . . . . . . . . .  $239,804  $248,416    $75,798    $88,152

Costs and expenses:
  Cost of goods sold. . . . . . . .   182,477   166,263     62,044     58,435
  Selling and administrative. . . .    44,624    34,881     18,004     11,962
  Severance and asset impairments .    20,791               20,791
  Depreciation and amortization . .    18,045    17,799      6,228      6,346
                                      265,937   218,943    107,067     76,743
                                      (26,133)   29,473    (31,269)    11,409
Other (expense) income:
  Interest expense. . . . . . . . .   (27,316)  (24,353)    (9,766)    (8,451)
  Gain on sale of subsidiary. . . .    79,518               79,518
  Other, net. . . . . . . . . . . .       463     2,397        263        845
                                       52,665   (21,956)    70,015     (7,606)

Income before taxes on income
    and minority interest . . . . .    26,532     7,517     38,746      3,803

Taxes on income . . . . . . . . . .    19,303       371     23,131        807

  Income before minority interest .     7,229     7,146     15,615      2,996

Minority interest . . . . . . . . .       760     2,458        450        564

  Income before cumulative effect
    of change in accounting principle   6,469     4,688     15,165      2,432
Cumulative effect of change in 
    accounting principle. . . . . .    (2,290)        -          -          -

  Net income. . . . . . . . . . . .  $  4,179   $ 4,688    $15,165    $ 2,432


  Net income per share - Basic: 
    Before cumulative effect of change
      in accounting principle        $    .29   $   .23    $   .70    $   .12
    Cumulative effect of change in
      accounting principle . . . .       (.11)        -          -          -
                                     $    .18   $   .23    $   .70    $   .12

  Net income per share - Diluted: 
    Before cumulative effect of change
      in accounting principle        $    .23   $   .22    $   .55    $   .11
    Cumulative effect of change in
      accounting principle . . . .       (.08)        -          -          -
                                     $    .15   $   .22    $   .55    $   .11




See Notes to Condensed Consolidated Financial Statements.

<PAGE>



AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)
                                                         Nine Months Ended
                                                           September 30
                                                         1998        1997  

Operating Activities:                               
  Net cash from operations, after adjustments to
    reconcile income (loss) to net cash 
        provided by operating activities. . . . . . .   $(5,241)   $ 21,829 
  Changes in operating assets and liabilities,       
    net of effects from acquisitions: 
    Marketable securities.  . . . . . . . . . . . . .         -       2,077
    Accounts receivables. . . . . . . . . . . . . . .     8,826      (3,075)
    Inventories . . . . . . . . . . . . . . . . . . .    (8,276)     (7,021)
    Prepaid and other assets. . . . . . . . . . . . .      (421)     (5,757)
    Accounts payable and accrued expenses . . . . . .    (4,199)     (5,198)
    Other . . . . . . . . . . . . . . . . . . . . . .     2,712        (975)
Net cash provided by (used in)
    operating activities  . . . . . . . . . . . . . .    (6,599)      1,880 

Investing Activities:
  Net Proceeds from sale of subsidiary. . . . . . . .   105,637
  Acquisitions of subsidiaries. . . . . . . . . . . .    (1,169)     (5,546)
  Capital expenditures. . . . . . . . . . . . . . . .    (4,338)     (7,491)
Net cash provided by (used in) investing activities .   100,130     (13,037)

Financing Activities:
  Long-term borrowings (net of related
    expenses in 1998 of $1,503) . . . . . . . . . . .    54,223       6,280
  Zero Coupon Convertible Subordinated Debenture. . .                 4,700
  Payment of long-term debt . . . . . . . . . . . . .   (59,224)     (8,813)
  Revolving credit facilities, net. . . . . . . . . .     1,686          88
  Dividend to minority shareholder. . . . . . . . . .    (1,295)     (2,587)
  Proceeds from exercise of options and warrants. . .       100         626
  Other . . . . . . . . . . . . . . . . . . . . . . .        53           - 
Net cash provided by (used in)
  financing activities  . . . . . . . . . . . . . . .    (4,457)        294 

Effect of foreign currency exchange rate 
  changes on cash and cash equivalents. . . . . . . .       195         218 

Increase (decrease) in cash and cash equivalents  . .    89,269     (10,645)
Cash and cash equivalents beginning of period . . . .    17,323      14,256

Cash and cash equivalents end of period . . . . . . .  $106,592     $ 3,611

Supplemental cash payments:
  Taxes . . . . . . . . . . . . . . . . . . . . . . .   $ 6,400     $ 3,400
  Interest  . . . . . . . . . . . . . . . . . . . . .   $18,100     $20,400


See Notes to Condensed Consolidated Financial Statements.

<PAGE>



AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30, 1998
(Amounts in thousands)

<TABLE>
<CAPTION>

                     Zero Coupon                                                         Cumulative
                     Convertible  Series B                  Retained                      Currency
                     Subordinated Preferred Common Capital  Earnings  Unearned  Treasury   Transl.   Total
                     Debentures    Stock    Stock  Surplus  (Deficit)   Comp.     Stock    Adjust.   Equity
<S>                  <C>           <C>      <C>    <C>      <C>        <C>       <C>      <C>        <C>
Balance-
  January 1, 1998       $8,326              $211   $74,713  $(23,282)            $(1,253)  $(3,674)  $55,041

Exchange of Series B         
  Preferred Stock for 
  Common Stock                     $  17               (17)

Issuances in 
  connection with:  
  Options exercised                            1        99                                               100
  Compensation 
    plans                                      6     2,306              $(1,335)                         977
  Acquisitions                                 2       651                                               653

Zero coupon convertible 
subordinated debentures:
  Accreted interest        413                                  (413)
  Conversion            (1,414)                4     1,410

Foreign 
  currency     
  translation    
  adjustments                                                 (1,655)                       (5,829)   (7,484)

Net income                                                     4,179                                   4,179

Balance-
  September 30, 1998    $7,325    $  17     $224   $79,162  $(21,171)   $(1,335) $(1,253)  $(9,503)  $53,466
</TABLE>


See Notes to Condensed Consolidated Financial Statements.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED   

Note A - Basis of Presentation

The accompanying  unaudited condensed  consolidated  financial statements do not
contain all disclosures  required by generally accepted  accounting  principles.
Reference  should be made to the  Company's  Annual  Report on Form 10-K for the
year ended December 31, 1997. The accompanying  unaudited condensed consolidated
financial  statements  reflect all adjustments  (consisting of normal  recurring
adjustments)  which are,  in the  opinion of  management,  necessary  for a fair
statement  of  the  results  of  the  interim  periods  presented  and  are  not
necessarily indicative of the results which may be expected for a full year.

Note B - Cumulative Effect of Accounting Change

The  AICPA  Accounting  Standards  Executive  Committee  issued  in April  1998,
Statement  of  Position  ("SOP")  98-5,  "Reporting  on the  Costs  of  Start-Up
Activities." SOP 98-5 provides  guidance on the financial  reporting of start-up
costs and  organization  costs and requires the cost of start-up  activities and
organization  costs  to be  expensed  as  incurred.  The  Company  adopted  this
pronouncement  in the third quarter of 1998 effective as of the beginning of the
year. The cumulative effect of this change in accounting principle resulted in a
charge to net income of $2.3 million net of applicable tax benefit. In addition,
previously  reported  cost of goods  sold for the first  six  months of 1998 was
retroactively  adjusted to eliminate  the net  amortization  of startup costs of
approximately  $0.9  million  which  decreased  previously  reported net loss by
approximately $0.6 million.

Note C - Severance and Asset Impairments 

During the third  quarter of 1998,  the Company:  (a)  implemented  a program of
certain cost saving  measures in Australia  (b) was notified by a long  standing
customer that a contract at the  Company's  domestic  operations  will expire on
December 31, 1998 and would not be renewed and (c) received  renewals of certain
multi-year contracts at anticipated lower production volumes. As a result of the
foregoing,  the  Company  will in the  near  term  terminate  approximately  210
employees  and will not renew the  contracts of certain  other  employees all of
which will result in the payment of severance.  Additionally, as a result of the
aforementioned  contract and reduced volume in certain  product lines,  specific
owned and leased  property and equipment will no longer be used and is therefore
impaired, and certain inventories, primarily raw materials and spare parts, will
no longer be  utilized.  Accordingly,  during  the third  quarter  of 1998,  the
Company provided charges for asset impairments and severance,

<PAGE>



AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED 

Note C - Severance and Asset Impairments - Continued

which are included in the following categories in the 1998
Consolidated Statements of Income (in thousands): 

        Cost of goods sold                                     $ 5,511
        Selling, general and administrative expense                283
        Severance and asset impairments                         20,791
                                                               $26,585

These charges consisted of the following (in thousands):

     Write-downs:
        Inventory on hand                                      $ 5,247
        Fixed assets not in use                                  7,630
        Fixed assets currently in use                            4,403
                                                                17,280
     Accruals:
        Employee severance pay and fringe benefits               3,679
        Present value of lease payments and related
          exit costs                                             5,343
                                                                 9,022
     Other related costs incurred:
        Management consultants                                     283

                                                               $26,585


In addition to the above, the Company incurred  severance  charges in the normal
course of business of $0.4 million.

The Company has determined that a substantial  portion of the impaired  property
and  equipment  does not have a net  realizable  value  due to  excess  industry
capacity, the age of the equipment and the cost of dismantling and removal.

Approximately $1.1 million and $3.4 million of the above charge will require the
utilization  of cash  during  the  fourth  quarter  of 1998 and  calendar  1999,
respectively.  At September 30, 1998,  accrued expenses include $6.0 million for
severance  and related  costs and the  present  value of lease  payments.  Other
long-term  liabilities  include  $2.8 million  primarily  related to the present
value of lease  payments.  During the third  quarter  1998,  approximately  $0.5
million was expended for severance  payments.  The Company estimates that all of
the above activities will be completed by September 30, 1999.


<PAGE>



AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

Note D - Gain on Sale of Subsidiary

Effective July 20, 1998, the Company  completed its previously  announced public
offering ("the Offering") of all of the shares of its  wholly-owned  subsidiary,
American  Bank  Note   Holographics,   Inc.   ("ABNH").   The  Company  received
approximately  $107 million in proceeds from the offering  before taxes,  legal,
accounting,  printing  and related  expenses.  The pre-tax  gain on the sale was
approximately $79.5 million.

The  following  operations  of ABNH are included in the  Condensed  Consolidated
Statement of Income:
                                Nine Months Ended
                                  September 30
                                   1998* 1997

    Sales. . . . . . . . . . . . . . . . . .    $16,803  $19,641
    Costs and expenses:
      Cost of goods sold . . . . . . . . . .      6,554    7,837
      Selling and administrative . . . . . .      2,805    3,861
      Depreciation and amortization  . . . .        594      869
                                                  9,953   12,567
    Operating income . . . . . . . . . . . .      6,850    7,074
    Other income, net. . . . . . . . . . . .         77      109
    Intercompany interest income . . . . . .        163      228
    Interest expense . . . . . . . . . . . .       (261)       -
      Income before taxes on income  . . . .      6,829    7,491
    Taxes on income . . . . . .. . . . . . .      2,744    3,057
          Net income . . . . . . . . . . . .    $ 4,085  $ 4,354

    *Through July 20, 1998


The financial statements reflect both allocated and, where readily determinable,
actual  expenses  for  services  provided by the  Company to ABNH to  affiliates
through the Offering.  Where  allocations  have been  utilized,  the Company and
affiliates and ABNH recorded  transactions  based upon systematic and reasonable
methods, including but not limited to, sales, asset values, and headcount all as
a percent of total.

In addition  to the above,  the Company and  affiliates  had  purchases  of $1.4
million and $0.2 million in the nine months ended  September  30, 1998 and 1997,
respectively, from ABNH in the normal course of business. There were no sales by
the Company  and  affiliates  to ABNH in the nine months of 1998 or 1997.  Trade
accounts  payable to ABNH were $1.1 million and $0.7  million at  September  30,
1998 and December 31, 1997,  respectively.  There were no trade receivables from
ABNH at September 30, 1998 or December 31, 1997.

<PAGE>



AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED   

Note D - Gain on Sale of Subsidiary - Continued

The amounts by major  category of historical  transactions  with ABNH follow for
the period from January 1, 1998 to July 20, 1998 (in thousands):

Due from (to) ABNH:
   Balance at beginning of period (3). . . . . . . .     $(22,996)
     Income tax liability receivable from ABNH . . .        2,422
     Tax payments received from ABNH . . . . . . . .       (2,422)
     Cash advances from ABNH. . .  . . . . . . . . .       (8,233)
     Offering costs from ABNH. . . . . . . . . . . .         (182)
     Allocation of employee benefits (1) . . . . . .          402
     Allocation of security services . . . . . . . .          100
     Sales and administration expenses (2). . . . . ..        244
     Intercompany interest (3) . . . . . . . . . . .         (156)
     Executive benefits (4). . . . . . . . . . . . .           13
   Balance at July 20, 1998. . . . . . . . . . . . .     $(30,808)


  (1) Primarily medical,  life and disability  insurance premiums.  (2) Includes
  legal fees and  allocated  portion of audit fees.  (3) Includes a $5.3 million
  note receivable to ABNH bearing
      interest at 5.75% per annum.
  (4) Includes value of restricted stock of the Company.

The amounts due to ABNH have been canceled and deemed to be a dividend as of the
Offering date.

The Company and ABNH have entered into several agreements in connection with the
Offering  pursuant to which certain  administrative  services may continue to be
performed by the Company for ABNH following the Offering, and the companies will
continue to maintain  certain  business  ties. No services have been provided to
ABNH since the date of the  Offering.  The Company and ABNH have also  exchanged
certain releases and indemnification agreements. Following the date of the sale,
ABNH is longer be a member of the Company's consolidated group for tax purposes.

As a result  of the sale of ABNH,  the  Company  determined  that  undistributed
retained  earnings of ABNB could no longer be considered  permanently  invested.
Accordingly, during the third quarter of 1998, the Company provided $7.1 million
for this tax adjustment.


<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED   

Note E - Changes in Common Stock Issued 

Changes in Common Stock issued: 

   Balance January 1, 1998                     21,135
     Stock options exercised                       54
     Restricted stock compensation plans          595
     Acquisitions                                 156
     Conversion of zero coupon convertible
       subordinated debentures                    431
   Balance September 30, 1998                  22,371

In March 1998 and September  1998, a total of  approximately  595,000  shares of
restricted stock was awarded to various  employees under the Company's Long Term
Performance  Plan.  Restrictions  on the  shares  lapse over  three  years.  The
aggregate  market value of the shares on the date of issuance  ($2.2 million) is
being charged to operations over the period that the restrictions lapse.

Note F - Series B Preferred Stock 

On July 22, 1998, the Board of Directors adopted a resolution  creating a series
of 2,500,000  shares of preferred stock  designated as Series B Preferred Stock.
The  shares  of the  Series B  Preferred  Stock are  generally  non  voting  and
otherwise are substantially  similar to the Company's Common Stock. The Series B
Preferred  Stock is convertible  into Common Stock on a share for share basis at
the option of the Series B Preferred Stock  stockholder or the Company.  In July
1998, the Company exchanged 1,704,845 shares of the Series B Preferred Stock for
an equal number of its outstanding shares of Common Stock. Such shares of Common
Stock exchanged are held by the Company as treasury stock.

Note G - Net Income Per Share

In the fourth  quarter of 1997,  the  Company  adopted  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 128,  "Earnings Per Share." All prior period
earnings per share data have been restated to conform to the  provisions of this
statement.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED   

Note G - Net Income Per Share - Continued

Computations  used in the  calculation  of basic and  diluted  income  per share
follow:
<TABLE>
<CAPTION>
                                      Nine Months Ended    Three Months Ended
                                        September 30          September 30
                                        1998     1997        1998       1997 
<S>                                   <C>       <C>        <C>        <C> 
Basic Income Per Share
Income before cumulative effect
  of change in accounting principle   $ 6,469   $ 4,688    $15,165    $ 2,432
Accretion of zero coupon convertible
  subordinated debentures . . . . .      (413)      (65)      (132)       (65)
Numerator for basic income per share
  before cumulative effect
  of change in accounting principle   $ 6,056   $ 4,623    $15,033    $ 2,367

Denominator for basic income per share Weighted average of shares of:
    Common Stock. . . . . . . . . .    20,851    19,950     20,316     19,910
    Series B Preferred Stock. . . .       379         -      1,134          -
    Denominator for basic income
      per share . . . . . . . . . .    21,230    19,950     21,450     19,910

Diluted Income Per Share
Income before cumulative effect
  of change in accounting principle   $ 6,469   $ 4,688    $15,165    $ 2,432
Accretion of zero coupon convertible
  subordinated debentures converted       (23)      (65)         -        (65) 
Numerator for diluted income per
  share before cumulative effect
  of change in accounting principle   $ 6,446   $ 4,623    $15,165    $ 2,367 

Denominator for diluted income per share Weighted average of shares of:
    Common Stock. . . . . . . . . .    20,851    19,950     20,316     19,910
    Series B Preferred Stock. . . .       379         -      1,134          -
    Weighted average shares . . . .    21,230    19,950     21,450     19,910
  Effect of dilutive:
    Zero coupon convertible 
    subordinated debentures . . . .     5,635         -      5,635
    Employee stock options and 
    non-vested share issuances. . .       705       880        545      1,020
  Denominator for diluted income per 
    share - weighted average shares 
    and assumed conversions. . . . .   27,570    20,830     27,630     20,930
</TABLE>
The 1998 denominator for computing diluted income per share excludes
approximately 2.1 million shares of Common Stock that are reserved for
the exercise of warrants to purchase approximately 1.6 million shares
of Common Stock and the exercise of approximately 0.5 million stock
options.  The exercise prices of these securities are greater than the
average market price of the common shares and their inclusion would be
antidilutive to diluted income per share.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

Note H - Translation of ABNB's Financial Statements 
         Change in Accounting

As a result of the reduced inflation rate in Brazil,  effective January 1, 1998,
the method of translating the financial  statements of the Company's  subsidiary
in Brazil,  American Bank Note Grafica e Servicos Ltda. ("ABNB"), was changed to
reflect translation gains and losses as a separate component of equity. Prior to
1998, ABNB's financial statements were translated using the method applicable to
hyperinflationary economies in which gains and losses resulting from translation
and  transactions  were determined using a combination of current and historical
rates and were  reflected in  earnings.  Such charge  included in the  condensed
consolidated  statement of  operations  for the nine months ended  September 30,
1997 was  approximately  $107,000.  As a result  of this  change  in  accounting
method,   the  Company  adjusted  its  deferred  income  tax  liability  with  a
corresponding charge of approximately $1.7 million to stockholders' equity as of
the beginning of 1998.

Note I - Acquisitions

As of March 31,  1998,  the  Company  acquired  check  and card  personalization
businesses in France.  The  acquisition  purchase  price of  approximately  $3.3
million was financed with  approximately $1.6 million of non-recourse term loans
in France,  $1.0  million  of cash and the  issuance  of  155,503  shares of the
Company's  Common Stock valued at approximately  $0.7 million.  The acquisitions
were accounted for by the purchase method of accounting.  The purchase price was
allocated on a preliminary  basis as follows:  assets  acquired  $14.4  million;
liabilities assumed $11.7 million; and excess cost of investment in subsidiaries
over net assets acquired $0.6 million.

Note J - Accounting Pronouncements 

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting  Comprehensive Income." The comprehensive
loss for the nine  months  ended  September  30,  1998  was  approximately  $3.3
million,  inclusive  of the foreign  currency  translation  adjustments  of $7.5
million.

SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities,"
issued in June 1998, is effective for periods beginning after June 15, 1999. The
Company is currently evaluating the effect of this standard.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED   

Note K - Inventories
                               September December
                                30, 1998 31, 1997
                                 (in thousands)

   Finished goods. . . . . . . . . . . . .    $ 5,642    $ 6,454
   Work in process . . . . . . . . . . . .     10,450     17,356
   Raw materials and supplies. . . . . . .     16,169     17,876
                                              $32,261    $41,686

Note L - Commitments and Contingencies

The Company is involved in various litigation, reference is made to
"Part II - Other Information, Item 1. Legal Proceedings." 

On June 10, 1998, the Company  reached  agreement with De La Rue, plc concerning
the  settlement of the three pending  lawsuits with De La Rue and its affiliated
companies.  Such  actions  have  been  dismissed  with  prejudice.  Terms of the
settlement are subject to a confidentiality agreement and the amounts previously
provided are sufficient to cover the settlement.

The Company and its subsidiaries are parties to various additional  lawsuits (as
both plaintiff and defendant) related to various matters in the normal course of
business,  which in the opinion of  management,  are not  anticipated  to have a
material  adverse impact on its  consolidated  financial  position or results of
operations.

Note M - Subsequent Events

In October 1998,  pursuant to a tender offer  commenced on August 27, 1998,  the
Company  redeemed  for  cash  $70  million  aggregate  principal  amount  of its
outstanding 10 3/8% Senior Notes due June 1, 2002 (the "Notes"), for 101% of the
principal amount, plus accrued interest.

In  connection  with the above  purchase of the Notes,  the  Company  incurred a
pre-tax  extraordinary loss on their early  extinguishment of approximately $1.8
million  consisting  of  approximately  $0.8  million  for  the 1%  premium  and
approximately  $1.0 million of a non-cash write off of previously  deferred debt
issue expense.

As  of  November  11,  1998,  the  Company  received   conversion  requests  for
approximately  $2.6  million  principal  amount of the zero  coupon  convertible
debentures at an average conversion price of $1.26 per share. The Company may at
its option redeem for cash all or a portion of these securities.


<PAGE>

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

RESULTS OF OPERATIONS

General

Consolidated  operations in 1998 include the  operations of ABNH to the July 20,
1998 date of sale. The  acquisition  of the Sati Group's check  personalization,
electronic printing and document management  business,  acquired in August 1997,
and the Menno plastic card business,  acquired in May 1997, are reflected in the
results of  operations  for the entire 1998 period.  In  addition,  on March 31,
1998, the Company acquired check and card personalization  businesses in France.
The  acquisitions  were  accounted  for  as  purchase   transactions  and  their
operations are included since that date.

The Company operates in both Brazil and Australia which had significant  foreign
exchange rate  fluctuations in 1998 and 1997. The comparison  below reflects the
effect of changes in foreign exchange rates.

COMPARISON OF RESULTS OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 WITH
THE NINE MONTHS ENDED SEPTEMBER 30, 1997

The Company  operates in a single industry,  secured products and systems,  with
three principal  product lines. The following table presents these product lines
for the nine-months ended September 30 (dollars in millions):
                                         1998            1997 
                                        $      %        $      % 
Transaction Cards & Systems . . . .   68.2   28.5     83.3   33.5
Printing Services 
  & Document Management . . . . . .   64.3   26.8     43.6   17.6
Security Printing Solutions . . . .  107.3   44.7    121.5   48.9
                                     239.8  100.0    248.4  100.0

Sales decreased by $8.6 million or 3.5% from 1997 after giving effect to a $19.4
million  reduction in sales  resulting from changes in foreign  exchange  rates.
Transaction  Cards & Systems  ("TCS") sales decreased $15.1 million or 18.1% and
Security  Printing  Solutions  ("SPS") sales  decreased  $14.3 million or 11.8%.
These  decreases were partially  offset by an increase in Printing  Services and
Document Management sales of $20.7 million or 47.5%.

The decrease in TCS sales was principally due to lower volume  requirements  for
stored-value telephone cards in Brazil($14.8 million), decreased sales resulting
from the sale of ABNH ($2.3  million),  and lower equipment sales ($2.1 million)
in Australia.  These  decreases  were partially  offset by a stronger  demand in
Brazil for  transaction  cards and the acquisition in May 1997 of the Menno card
business ($2.2 million), increased card personalization sales resulting from the
March 1998 acquisition of CPS in France ($2.4 million) and increased transaction
processing revenues ($1.1 million) from the Company's domestic merchant services
operation.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

RESULTS OF OPERATIONS - CONTINUED

The increase in PSDM sales is primarily due to the acquisition of Sati in France
($17.1  million)  and the award of a new  outsourcing  contract in Brazil  ($5.8
million).

The decrease in SPS sales ($14.3 million) is principally due to reduced customer
volumes at American Bank Note Company ("ABN"), for travelers checks, foreign and
domestic government  products and other secure documents,  and lower volumes for
bank documents in Australia and Brazil. These decreases were partially offset by
increased  currency  sales at ABN,  passport  sales in  Australia  and  driver's
license systems in Brazil.

Sales  by  foreign  subsidiaries  represented  75%  and  71%  of  the  Company's
consolidated sales in 1998 and 1997, respectively.

Cost of goods sold  increased  $16.2  million or 9.7%,  after giving effect to a
$14.4  million  reduction in costs  resulting  from changes in foreign  exchange
rates.  As a  percentage  of  sales,  cost of goods  sold  was  76.1% in 1998 as
compared  to  66.9% in 1997.  This  increase  is  primarily  attributable  to an
inventory  write-down of $5.5 million  resulting  primarily  from a reduction in
domestic  business  (see Note C - Severance  and Asset  Impairments),  decreased
margins due to the sale of ABNH and a change in product mix  primarily in Brazil
and  Australia.  In Brazil,  lower  volumes on the  higher  margin  stored-value
telephone cards was partially offset with lower margin PSDM sales. In Australia,
higher costs  associated  with new customer  contracts and products  resulted in
lower  margins.  The product mix in any given  period is not  indicative  of the
expected product mix in any future period.

Selling and  administrative  expenses  increased $9.7 million  (27.9%) from 1997
after  giving  effect to a $2.0  million  reduction  resulting  from  changes in
foreign exchange rates. The increase was principally due to the inclusion of the
Sati Group's  operations in 1998 ($2.0  million),  higher charges for restricted
stock  grants,  severance  payments  and  employee  incentive  provisions  ($3.6
million),  a reversal of pre-tax  liabilities  no longer  required in 1997 ($0.8
million),  higher  commissionable  sales ($1.2 million),  an increase in the bad
debt provision ($0.8 million), and higher consulting and professional fees ($0.7
million).  As  a  percentage  of  sales,  selling  and  administrative  expenses
increased to 18.6% in 1998 from 14.0% in 1997.

The charge for severance and asset impairments of $20.8 million results from the
implementation  of certain cost  savings  measures in  Australia,  the loss of a
customer  contract,  and reduced levels of production in certain  product lines,
(as further described in Note C Severance and Asset Impairments).


<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

RESULTS OF OPERATIONS - CONTINUED

Depreciation  expense increased by $0.2 million from 1997 principally due to the
inclusion of the Sati group in 1998.

Interest  expense  increased  $3.0  million  in 1998,  primarily  due to  higher
incremental  borrowings  resulting  from the sale of $95  million 11 1/4% Senior
Subordinated Notes in December 1997.

Other income,  net decreased by $1.9 million primarily due to decreased interest
and investment income when compared to 1997.

Effective  July 20, 1998, the Company  completed its public  offering of all the
shares of its wholly-owned  subsidiary,  ABNH resulting in a pre-tax gain on the
sale of approximately $79.5 million (See Note C Gain on Sale of Subsidiary).

Taxes on income  (benefit) are calculated  using an estimated  annual  effective
income tax rate at the end of each  reporting  period.  The rate is reviewed and
adjusted  periodically to reflect changes in estimates by tax  jurisdictions  in
regulations,  rates,  deductibility  of  expenses,  utilization  of tax credits,
potential tax exposures,  and state and local taxes. In addition, as a result of
the sale of ABNH, the Company determined that undistributed retained earnings of
ABNB could no longer be considered permanently invested. Accordingly, during the
third  quarter  of  1998,  the  Company  provided  $7.1  million  for  this  tax
adjustment.

The  cumulative  effect  adjustment of a change in accounting  principle of $2.3
million,  net of tax,  is the  result  of the  Company's  adoption  of SOP  98-5
"Reporting on the Costs of Start-Up  Activities," in the third quarter effective
as of the beginning of the year.

COMPARISON OF RESULTS OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998
WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1997

The following table presents the three product lines for the three-month periods
ended September 30 (dollars in millions):

                                             1998            1997 
                                        $      %        $      % 
Transaction Cards & Systems . . . .   22.3   29.4     27.9   31.6
Printing Services 
  & Document Management . . . . . .   22.8   30.1     17.0   19.3
Security Printing Solutions . . . .   30.7   40.5     43.3   49.1
                                      75.8  100.0     88.2  100.0

Sales  decreased by $12.4  million or 14.1% from 1997 after  giving  effect to a
$7.3 million  reduction  in sales  resulting  from  changes in foreign  exchange
rates.  Transaction  Cards & Systems  sales  decreased  $5.6  million  or 20.1%.
Printing  Services & Document  Management  sales increased $5.8 million or 34.1%
and Security Printing Solutions sales decreased $12.6 million or 29.1%.


<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

RESULTS OF OPERATIONS - CONTINUED

The decrease in TCS sales mainly resulted from the elimination of hologram sales
due to the sale of ABNH.

The increase in PSDM sales is primarily due to the acquisition of Sati in France
($4.7 million) and the award of a new outsourcing  bank contract in Brazil ($1.9
million).

The decrease in SPS sales ($12.6 million) is principally due to reduced customer
volumes at ABN for travelers checks,  foreign and domestic  government  products
and other secure  documents,  and lower volumes for bank  documents in Australia
and Brazil.  The decreases were partially offset by increased  passport sales in
Australia and drivers license systems in Brazil.

Sales  by  foreign  subsidiaries  represented  87%  and  69%  of  the  Company's
consolidated sales in 1998 and 1997, respectively.

Cost of goods sold increased $3.6 million or 6.2%, after giving effect to a $5.1
million  reduction in costs resulting from changes in foreign exchange rates. As
a percentage of sales, cost of goods sold was 81.9% in 1998 as compared to 66.3%
in 1997. This increase is primarily  attributable to an inventory  write-down of
$5.5 million resulting primarily from a reduction in domestic business (see Note
C Severance and Asset  Impairments),  decreased margins due to the sale of ABNH,
and a change in product mix primarily in Brazil and Australia.  In Brazil, lower
volumes on the higher margin  stored-value  telephone cards was partially offset
with lower margin PSDM sales.  In Australia,  higher costs  associated  with new
customer  contracts and products  resulted in lower margins.  The product mix in
any given period is not  indicative  of the  expected  product mix in any future
period.

Selling and  administrative  expenses  increased $6.1 million  (50.6%) from 1997
after  giving  effect to a $0.2  million  reduction  resulting  from  changes in
foreign exchange rates. The increase was principally due to the inclusion of the
Sati Group's  operations in 1998 ($0.6  million),  higher charges for restricted
stock  grants,  severance  payments  and  employee  incentive  provisions  ($3.2
million),  higher  commissionable  sales  ($0.8  million),  an  increase  in the
provision for bad debts ($0.8 million) and higher  consulting  and  professional
fees ($0.7  million).  As a  percentage  of sales,  selling  and  administrative
expenses increased to 23.8% in 1998 from 13.6% in 1997.

The charge for severance and asset impairments of $20.8 million results from the
implementation  of certain cost  savings  measures in  Australia,  the loss of a
customer  contract,  reduced levels of production in certain product lines,  and
impaired  owned  and  lease  property  and  equipment  which  will no  longer be
utilized. (See Note C - Severance and Asset Impairments).


<PAGE>

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

RESULTS OF OPERATIONS - CONTINUED

Depreciation expense was approximately the same compared to the prior year.

Interest  expense  increased  $1.3  million  in 1998,  primarily  due to  higher
incremental  borrowings  resulting  from the sale of $95  million 11 1/4% Senior
Subordinated Notes in December 1997.

Other income,  net decreased by $0.6 million primarily due to lower interest and
investment income when compared to 1997.

Effective  July 20, 1998, the Company  completed its public  offering of all the
shares of its wholly-owned  subsidiary,  ABNH resulting in a pre-tax gain on the
sale of approximately $79.5 million (See Note D Gain on Sale of Subsidiary).

Taxes on income are calculated  using an estimated  annual  effective income tax
rate at the end of each  reporting  period.  The rate is reviewed  and  adjusted
periodically   to  reflect  changes  in  estimates  by  tax   jurisdictions   in
regulations,  rates,  deductibility  of  expenses,  utilization  of tax credits,
potential tax exposures,  and state and local taxes. In addition, as a result of
the sale of ABNH, the Company determined that undistributed retained earnings of
ABNB could no longer be considered permanently invested. Accordingly, during the
third  quarter  of  1998,  the  Company  provided  $7.1  million  for  this  tax
adjustment.

LIQUIDITY AND CAPITAL RESOURCES 

Operating cash flows decreased $27.0 million for the nine months ended September
30, 1998 as compared to the same  period in 1997  (before  changes in  operating
assets  and  liabilities)  primarily  as a result  of  decreased  earnings  when
adjusted  for the gain on the sale of ABNH and the  charges  for  severance  and
asset impairment in the third quarter.

Operating  assets and liabilities  also affected cash flows. The net increase in
operating  cash flows from such changes of $18.6  million in 1998 as compared to
1997 is primarily  due to the timing of payments of prepaid  expenses,  accounts
receivable collections and payments of accounts payable offset by an increase in
inventories.

Investing activities for 1998 included $1.2 million for an acquisition in France
as compared to $5.5 million during 1997 in Brazil of a leading  manufacturer  of
personalized financial transaction cards and in France of a leading manufacturer
of electronically  printed personalized  documents.  The acquisition in 1998 did
not have a  significant  effect on the  Company's  results  of  operations.  The
reduction in the level of capital expenditures to $4.3 million in 1998 from $7.5
million in 1997 reflected the substantial completion of the expansion of certain
manufacturing  capacity  in Brazil  in 1997.  The  $105.6  million  of  proceeds
reflects  the  $115.9  million  IPO of ABNH net of  underwriting  discounts  and
expenses related to the transaction.


<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES - CONTINUED

Financing  activities for the nine months ended  September 30, 1998 included the
refinancing  of the  Leigh-Mardon  ("LM") debt in Australia,  increased  working
capital  revolver  borrowings and reduced  dividend  payments to ABNB's minority
shareholder.  The LM refinancing  included a five-year $55.3 million  amortizing
revolving credit  facility.  The revolving credit facility expires in March 2003
with semi-annual  commitment step downs and is initially priced at the bank bill
rate  plus  1.75%.  On March  26,  1998,  in  connection  with the  refinancing,
Leigh-Mardon entered into a three-year floating-to-fixed interest rate swap with
two of the syndicate banks.  The notional  principal amount of the swap is equal
to 75% of the initial  borrowings  under the facilities or  approximately  $37.3
million.  The notional  principal  amount of the swap will amortize in line with
the  semi-annual  commitment  reductions  under the five-year  revolving  credit
facility.  Under  the  terms of the swap  agreement,  Leigh-Mardon  will pay the
counterparty  an average fixed rate of 5.62% and will receive an amount equal to
the 90-day bank bill rate (approximately 5.0% at September 30, 1998).

At September 30, 1998, the Company had approximately  $106.6 million in cash and
cash equivalents including the net proceeds from the IPO of ABNH.

The  Company's  subsidiary,  ABN,  is party to a  three-year,  revolving  credit
facility for general  working  capital  purposes and letters of credit which was
amended to a $10 million  commitment  to reflect the sale of ABNH through an IPO
in July and which was  originally  scheduled  to expire on October  30,1998.  In
October,  the current lender,  Chase  Manhattan  Bank,  extended the $10 million
revolving  credit's  maturity to December 31, 1998 to allow  additional  time to
negotiate a new multi-year committed facility.

At  September  30,  1998,  the  Company  had   approximately   $4.9  million  of
availability  under its Credit  Facility  before  reductions for $3.5 million of
outstanding  letters of credit and $1.4 million of borrowings.  In addition,  LM
and the Sati Group had available  unused lines of credit of  approximately  $2.0
million and $1.0 million, respectively.

In October 1998, the Sati Group entered into a three-year floating-to-fixed rate
interest  rate swap  agreement  with  Societe  Generale on 65% of the  principal
amount  (approximately  $8.0 million) of its amortizing term loans.  The swap is
priced  at a fixed  rate of 3.8% plus the 1.75%  spread  applicable  to the Sati
Group's PIBOR (Paris  Interbank  Offer Rate) loans.  This hedging  agreement was
required under the terms of the Sati Group bank loan agreements.


<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES - CONTINUED

The Company  completed a tender offer for $70 million principal amount of the 10
3/8% Senior  Notes on  September  25, 1998. A total of $70 million face value of
bonds were  redeemed  for a total use of funds of $73.2  million  including a 1%
tender premium and accrued interest.  Currently $20.1 million of proceeds of the
Offering  remain after  deducting  all fees,  expenses and taxes  related to the
offering of ABNH and reinvested capital expenditures to date. These proceeds can
be reinvested in the current businesses or related  acquisitions for a period of
up to 180 days from the  Offering's  effective  date,  July 20,  1998 or used to
Tender for additional 10 3/8% Senior Notes.

The  Company's  long-term  debt  included  $56.5 million of 10 3/8% Senior Notes
(after the above completed tender offer),  $95.0 million  principal amount of 11
1/4% Senior  Subordinated  Notes,  $8.0 million of 11 5/8% Senior  Notes,  $46.2
million of LM revolving credit  facility,  $4.1 million of borrowings in Brazil,
$11.4 million of the Sati Group debt and $1.9 million of other debt.

Management  believes that cash flows from operations together with cash balances
and availability of funds under the Company's and subsidiaries credit facilities
and asset sales will be sufficient to service debt and fund capital expenditures
for  the  foreseeable  future.  The  Company  also  believes  that  it  and  its
subsidiaries  possess  sufficient  unused debt  capacity  and access to debt and
equity  markets  to  pursue  additional   acquisition   opportunities  and  meet
extraordinary working capital needs as they arise.

Reference is made to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 "Liquidity and Capital Resources."

IMPACT OF INFLATION

Reference  is made to the  Company's  Form 10-K for the year ended  December 31,
1997 "Impact of Inflation."

Effective  January 1, 1998,  as a result of  substantial  decrease in  inflation
rates in Brazil,  the method of  translating  ABNB's  financial  statements  was
changed to reflect  gains and losses as a separate  component  of  stockholders'
equity.  Prior to 1998, the Company translated ABNB's financial statements as if
ABNB were  operating in a  hyperinflationary  economy.  In prior years gains and
losses  resulting from  translation and  transactions  were  determined  using a
combination of current and historical  rates and are reflected in earnings.  The
effect of the change reduced  stockholders' equity by approximately $1.7 million
with a corresponding credit to deferred income taxes.

<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES - CONTINUED

The Company's  domestic,  Australian,  New Zealand and French operations are not
significantly  affected by inflation.  ABNB's sales  represented  42% and 43% of
consolidated sales in 1998 and 1997, respectively.

YEAR 2000 ISSUE

The Year 2000 issue involves the risk that computer systems using two-digit date
fields  will fail to properly  recognize  the Year 2000,  resulting  in computer
system failures for businesses,  government agencies, service providers, vendors
and customers.  If not  corrected,  these  computer  applications  could fail or
create erroneous results.  The global extent of the potential impact of the Year
2000  problem is not yet known,  and if not timely  corrected,  could affect the
economy and the  Company.  The Company  uses  computer  information  systems and
manufacturing equipment,  which may be affected. It also relies on suppliers and
customers  who are also  dependent  on  systems  and  equipment,  which use date
sensitive software. The Company recognizes the importance of the Year 2000 issue
and it has been given high priority.

In 1997 the  Company  began  to  review  the  production  equipment  used in the
manufacture of its products as well as the systems related to the infrastructure
of the Company's manufacturing and office facilities.  The Company is continuing
to inventory and verify Year 2000 readiness of computer controlled manufacturing
equipment and computer  controls for its  manufacturing  and office  facilities.
This effort is  approximately  50 percent  complete and requires  validation  of
equipment from the equipment manufacturer.

In  1998  the  Company  began  evaluating  and  testing  its  internal  computer
information  systems.  This effort  involves  plans for  creating or  purchasing
replacement  systems for those computer  information systems that were developed
internally  as well as  obtaining  versions  of  software  purchased  from third
parties that are Year 2000 compliant.  The Company expects to have substantially
converted  or replaced  computer  information  systems  for its entire  business
operations  by the end of the third  quarter of 1999.  Also, in 1998 the Company
began to assess  the Year 2000  problem  remediation  efforts  of the  Company's
suppliers,  including  providers of services  such as  utilities,  and customers
where  there is a  significant  business  relationship.  These  efforts  however
provide no  assurances  that the  Company  will not be affected by the Year 2000
problems of other organizations.



<PAGE>



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

LIQUIDITY AND CAPITAL RESOURCES - CONTINUED

YEAR 2000 ISSUE - CONTINUED

The costs associated with the Company's Year 2000 remediation are being expensed
as  incurred.  The Company  estimates  that it has expended  approximately  $0.4
million  to date and that an  additional  $0.8  million  may be  required  to be
expended. The foregoing amounts are estimates and may include amounts that would
have been incurred in normal upgrading of equipment and software.

The  Company's  current  estimates of the amount of costs and time  necessary to
remediate and test its computer systems are based on the facts and circumstances
existing and known at this time. These estimates were made using  assumptions of
future  events  including  the  continued  availability  of  certain  resources,
implementation success by key third parties and other factors.

If  the  Company  is  unsuccessful  or if the  remediation  efforts  of its  key
suppliers or customers are  unsuccessful  with regard to Year 2000  remediation,
there may be a material  adverse  impact on the Company's  results and financial
condition.   The  Company's  contingency  plan  is  currently  limited  to  such
precautionary  measures as an anticipated  increased level of finished goods and
raw materials to minimize the potential  disruption in the Company's  ability to
manufacture  and distribute  products and also the  identification  of alternate
suppliers.  At this  time,  however,  the  Company  is  unable to  quantify  any
potential  adverse  impact  but  will  continue  to  monitor  and  evaluate  the
situation.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain  statements in this Form 10-Q and in certain  documents  incorporated by
reference herein constitute  "forward-looking"  statements within the meaning of
the Private  Securities  Litigation  Reform Act of 1995 (the "Reform Act"). Such
"forward-looking"  statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance,   or   achievements   expressed   or   implied  by  such
"forward-looking"  statements.  Such  factors  are more fully  described  in the
Company's  Annual Report on Form 10-K for the year ended December 31, 1997 which
should be considered in connection with a review of this report.

<PAGE>



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

As  required  by the  Company's  Australian  and French  subsidiary's  financing
agreements,  separate  three-year  floating-to-fixed  rate swap  agreements were
entered into, on approximately  $43.3 million principal amount of debt. The debt
arrangements are discussed in greater detail in Liquidity and Capital  Resources
in included in Item 2 hereof.

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On June 10, 1998, the Company  reached  agreement with De La Rue, plc concerning
the  settlement of the three pending  lawsuits with De La Rue and its affiliated
companies.  Such  actions  have  been  dismissed  with  prejudice.  Terms of the
settlement are subject to a confidentiality agreement and the amounts previously
provided are sufficient to cover the settlement.

Reference is made to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On July 22, 1998, the Board of Directors adopted a resolution  creating a series
of 2,500,000  shares of Preferred stock  designated as Series B Preferred Stock.
The  shares  of the  Series B  Preferred  Stock are  generally  non  voting  and
otherwise are substantially  similar to the Company's Common Stock. The Series B
Preferred  Stock is convertible  into Common Stock on a share for share basis at
the option of the Series B Preferred Stock  stockholder or the Company.  In July
1998, the Company  exchanged  1,704,845  shares of a newly  authorized  Series B
Preferred Stock for an equal number of its  outstanding  shares of Common Stock.
Such shares are held by the Company as treasury stock.


<PAGE>



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:
Exhibit
Number
 3.1  Certificate of Designations of Series B Preferred Stock of
      American Banknote Corporation **
 4.1  Amending  Agreement to the Senior Debt Facility Agreement dated August 10,
      1998  between  ABN  Australasia  Limited  ("Borrower")  American  Banknote
      Corporation and Chase Securities  Australia Limited ("Agent"),  for itself
      and as Agent of the Participants. **
 4.2  Registration Rights Agreement Entered into as of  July 30,
      1998, Between American Banknote Corporation and Bay Harbour
      Management, L.c., for its Managed Accounts **
27          Article  5  Financial  Data  Schedule  **  **  Filed  electronically
            herewith

(b)      Report on Form 8-K - Form 8-K filed August 3, 1998
           Items 2 and 7

                             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 Banknote Corporation


By s/ Patrick J. Gentile             
   ------------------------ 
   Patrick J. Gentile
   Senior Vice President and
   Chief Accounting Officer
   Date: November 16, 1998

<PAGE>



                           Exhibit Index



List of Exhibits Pursuant to Item 601 of Regulation S-K:
Exhibit

 3.1  Certificate of Designations of Series B Preferred Stock of
      American Banknote Corporation
 4.1  Amending  Agreement to the Senior Debt Facility Agreement dated August 10,
      1998  between  ABN  Australasia  Limited  ("Borrower")  American  Banknote
      Corporation and Chase Securities  Australia Limited ("Agent"),  for itself
      and as Agent of the Participants.
 4.2  Registration Rights Agreement Entered into as of  July 30,
      1998, Between American Banknote Corporation and Bay Harbour
      Management, L.c., for its Managed Accounts
27    Article 5 Financial Data Schedule