10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2005

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

Commission File Number 1-11415

AMERICAN STANDARD COMPANIES INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3465896
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Centennial Avenue, P.O. Box 6820, Piscataway, New Jersey	08855-6820
(Address of principal executive office)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 par value (and associated Common Stock Rights)	New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes  ¨    No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                                                                                                                          x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.

x  Large accelerated filer ¨  Accelerated filer ¨  Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

The aggregate market value of the voting stock (Common Stock) held by non-affiliates of the Registrant as of the close of business on June 30, 2005 was approximately $8.8 billion based on the closing sale price of the common stock on the New York Stock Exchange on that date. The company does not have any non-voting common equity.

Number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the close of business on February 21, 2006: Common Stock, $.01 par value, 204,876,656 shares.

Documents incorporated by reference:

Document (Portions only)	Part of the Form 10-K into which document is incorporated.
Definitive Proxy Statement used in connection with the Annual Meeting of Shareholders to be held on May 3, 2006	Part III

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	17
Item 3.	Legal Proceedings	18
Item 4.	Submission of Matters to a Vote of Security Holders	20
Item 4A.	Executive Officers of the Registrant	20
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	52
Item 8.	Financial Statements and Supplementary Data	53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	100
Item 9A.	Controls and Procedures	100
PART III
Item 10.	Directors and Executive Officers of the Registrant	104
Item 11.	Executive Compensation	104
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
Item 13.	Certain Relationships and Related Transactions	107
Item 14.	Principal Accounting Fees and Services	107
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	108
	Signatures	116

Important Information Concerning Forward-Looking Statements

Certain of the statements contained in this report (other than the historical financial data and other statements of historical fact), including, without limitation, statements as to management’s expectations and beliefs, are forward-looking statements. Forward-looking statements are made based upon management’s good faith expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with such expectations or that the effect of future developments on the Company will be those anticipated by management. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “anticipate,” “intends” and other words of similar meaning in connection with a discussion of future operating or financial performance. For further information as to important risks and factors that could cause actual results to differ materially from management’s expectations, see “Item 1. Business”, “Item 1A. Risk Factors”, “Item 3. Legal Proceedings”, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Information Concerning Forward-Looking Statements”, and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”.

PART I

ITEM 1. BUSINESS

American Standard Companies Inc. (the “Company”) is a Delaware corporation formed in 1988 to acquire all the outstanding common stock of American Standard Inc., a Delaware corporation (“American Standard Inc.”) incorporated in 1929. “American Standard” or the “Company” refers to the Company, or to the Company and American Standard Inc. or American Standard International Inc. (“ASII”), its wholly-owned subsidiary, including their subsidiaries, as the context requires.

Business Segments

American Standard is a global, diversified manufacturer of high-quality, brand-name products in three major business segments: air conditioning systems and services; bath and kitchen fixtures and fittings; and vehicle control systems. American Standard is one of the largest providers of products in each of its three major business segments. Each of the segments is discussed below.

Air Conditioning Systems and Services Segment (“Air Conditioning”)

Air Conditioning Systems and Services, the largest of the Company’s businesses, is a leading global manufacturer of commercial and residential heating, ventilation and air conditioning (“HVAC”) equipment, systems and controls:

• Trane products are in over half of all commercial buildings in North America.

• Every minute of every day on average, one of the Company’s residential air conditioning systems is installed in the U.S.

Air Conditioning also provides after-market parts to the HVAC industry, contracting for the installation and maintenance of commercial HVAC systems featuring its products, and service for its commercial products and those of other manufacturers. The business markets and sells its products and services globally under the TRANE^® name and, for U.S. residential and light commercial applications, under both the TRANE^® and AMERICAN STANDARD^® names.

Trane was founded in La Crosse, Wisconsin, in 1864 and became part of American Standard in 1984. The business strategy for the commercial market is to provide commercial customers with integrated systems and solutions including equipment, controls, parts and services that make their buildings – and therefore their businesses – perform better. The business strategy for the residential market is to provide homeowners with total home comfort solutions including equipment and controls to create an ideal home environment.

Air Conditioning, with revenues of $6.015 billion in 2005, accounted for 59 percent of the Company’s sales and 65 percent of its 2005 segment income.

Customers and key markets

Approximately 60 percent of Air Conditioning’s revenue in 2005 was from sales of equipment, parts and services to the replacement, renovation and repair market segment, and the remainder from new construction. Revenue from the commercial and residential markets accounted for approximately 70 percent and 30 percent, respectively, of Air Conditioning’s total revenue in 2005. Air Conditioning derived 26 percent of its 2005 revenue from sales outside the U.S.

Air Conditioning has operations in North America, Europe and Middle East, Asia, Australia and Central and South America. For sales by geographic region and end markets, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

1

Products and services

Products manufactured by Air Conditioning include:

• Large commercial systems consisting of chillers, air handlers and terminal devices such as variable air volume units and fan coils.

• Light and large commercial unitary systems.

• Split-system and packaged residential systems including condensing units, furnaces, air handlers, heat pumps, coils and air filtration devices.

Air Conditioning also produces a wide range of HVAC controls including:

• Thermostats that regulate room and building temperature.

• Unit controls to optimize and manage the performance of each unit.

• HVAC system controls that optimize the system’s performance.

• Integrated building automation systems that automatically control a building’s performance, including its energy consumption, air quality and comfort as well as lighting, fire, safety and security control systems.

The business offers high-energy efficiency system options for every commercial building type around the world. In addition, residential air conditioning is introducing two other home environment platforms in 2006 and 2007 including custom comfort controls and new high efficiency product solutions. Energy efficiency means greater comfort for building occupants and homeowners, lower energy and raw material use such as oil and natural gas, and less impact on other environmental factors. Examples of Trane’s energy efficient commercial systems include:

• EarthWise CenTraVac centrifugal chiller, which is up to 13.6 percent more efficient than the next available product.

• Energy recovery systems that use less energy to cool and heat during all seasons and provide free energy for the creation of hot water.

• The XL19i two stage split system air conditioner and heat pump that can save consumers more than 60 percent in operating cost compared with a 10-year-old existing unit.

• Variable speed indoor systems that are highly efficient to operate. In continuous fan mode, the operating cost can be up to 90 percent less than a standard model.

The residential business also launched the healthy air systems platform of new products to distributors and dealers at the end of 2005 with a major consumer marketing launch planned for 2006. The platform is based on investments in an exclusive indoor air filtration technology that removes up to 99.98 percent of all allergens and particles from the filtered air down to 0.3 microns in size. This filter efficiency is up to 100 times more effective than a standard one inch air filter used in most homes.

The Company sells a variety of commercial service agreements covering both its own and its competitors’ equipment and systems. It also sells optional extended warranties on its own equipment.

Marketing and sales

Air Conditioning has a broad global network of company-owned and independent sales offices, independent agents and wholesale distributors distributing its products primarily through two separate channels:

• A commercial channel.

• A dealer channel.

The commercial channel is served by 197 company-owned and independent commercial sales offices (“CSO”), 39% are in the U.S. and Canada and the remainder throughout Europe, the Middle East, Latin America and Asia Pacific regions. CSOs work with building owners or their agents, such as architects and consulting engineers, to design and apply state-of-the-art HVAC systems to various buildings and sell equipment, systems and controls primarily to mechanical contractors.

A growing area is sales direct to building owners or sales directed by owners, primarily through national account relationships with owners or operators who manage a distributed network of facilities such as retail and hospitality chains, federal, state and local governments and agencies and process manufacturers such as pharmaceutical or electronics companies.

2

In addition to selling original equipment, Trane CSOs manage a network of more than 140 parts centers serving the needs of Company-owned and independent HVAC service companies. The parts centers are either separate locations or part of the CSO locations. The CSOs also have an extensive network of service technicians and applications engineers who provide design, installation, consulting and maintenance services and controls contracting. Outside the U.S. and Canada, CSOs sell residential products to independent dealer/installers in addition to servicing the commercial channel.

The dealer channel in the U.S. and Canada is served by Company-owned sales offices and independent wholesale distributors. These sales offices and distributors have more than 500 stocking locations that sell Trane and American Standard residential and light commercial unitary products (up to 25 tons) to dealers and contractors who sell and install the equipment. TRANE^® brand residential products are well positioned in the retail sales channel through an arrangement with the Home Depot, the leading home improvement retailer in the U.S., to market certain central heating and air conditioning systems through the Company’s dealers to residential customers.

Competitors and competitive advantages

Air Conditioning competes in all of its markets on the basis of the breadth, quality and reliability of its products and services; innovation and technological leadership; energy efficiency; price; and value. Its major competitors are:

• Residential products in the U.S.: Carrier, Goodman Industries, Lennox, Rheem and York, recently acquired by Johnson Controls, Inc.

• Commercial equipment globally: Carrier, McQuay, Daiken and York, recently acquired by Johnson Controls, Inc.

• Control products in the U.S. and Canada: Honeywell International Inc., Johnson Controls and Siemens.

Organization

The business today employs approximately 27,100 people and had 29 production facilities worldwide. Its principal manufacturing operations are in Brazil, China, Egypt, France, Malaysia, Mexico, Taiwan, Thailand, the U.K. and the U.S. Its headquarters offices are in Piscataway, New Jersey and Tyler, Texas with its international headquarters in Brussels, Belgium and Shanghai, China. In 2005, the business opened a new factory in Zhongshan, China as part of its commitment to the growing commercial market in Asia.

For sales, segment income and assets by geographic region and end markets and a discussion of backlog, see “Management Discussion and Analysis of Financial Condition and Results of Operations” and Note 16. of Notes to Financial Statements.

Recent developments

In December 2005, Johnson Controls, Inc. (JCI) completed its acquisition of York International, a global supplier of HVAC equipment and services in an effort to broaden its offerings of products and services to the HVAC industry.

In U.S. residential markets, air conditioners and heat pumps manufactured after January 23, 2006 must meet the Department of Energy’s new minimum efficiency standard of 13 SEER (Seasonal Energy Efficiency Ratio). As a result, the business’ residential product lines and manufacturing facilities were totally redesigned to comply with the new standards and we are completely transitioned to 13 SEER. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the impact of this transition on results of operations.

Bath and Kitchen Segment (“Bath and Kitchen”)

The Company’s Bath and Kitchen business is the world’s largest global manufacturer of bath and kitchen products – including toilets, sinks, tubs, faucets, accessories and related products. Bath and Kitchen also has one of the longest histories in the industry, originating in 1875 as Standard Sanitary Manufacturing Company. Today, the business holds leading positions in key markets around the world.

3

Bath and Kitchen’s strategy is to make the most of its unique global capabilities to develop and deliver style and performance for customers and consumers. Total 2005 sales were $2.418 billion, which represented 23 percent of the Company’s total sales. In 2005, Bath and Kitchen contributed 10 percent of the Company’s segment income.

Customers and channels of distribution

The business manufactures and distributes products in Europe, the Americas (primarily the U.S., Canada, Mexico and Brazil) and Asia. For more information about sales by geographic region and end markets, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Bath and Kitchen’s products are sold through retail and wholesale sales channels for residential and commercial markets throughout the world. In 2005, residential sales (renovation and item replacement, new construction) represented 80 percent of the Americas market, 78 percent of the European market and 69 percent of the Asia market. The Americas and European markets are primarily driven by renovation, while the Asian market is driven somewhat more by sales from new construction. In 2005, sales to commercial markets represented 19 percent of Americas’ and Europe’s total sales and approximately 31 percent of total sales in Asia. The replacement and remodeling market (commercial and residential) alone accounted for about 60 percent of Bath and Kitchen’s sales in Europe and the Americas and about 20 percent of sales in Asia.

Bath and Kitchen’s products are often installed by plumbers and contractors. Sales also continue to expand through do-it-yourself (“DIY”) retail home centers such as Home Depot and Lowe’s in the U.S., B&Q in Europe and Asia and Castorama in Europe. In 2005, sales through DIY retail home centers represented approximately 45 percent of Bath and Kitchen’s sales in the Americas, less than 5 percent of Bath and Kitchen’s sales in Europe and approximately 8 percent of Bath and Kitchen’s sales in Asia.

Within the wholesale channel, Bath and Kitchen serves global customers such as Wolsley and Saint-Gobain. The showroom business has also developed within the wholesale channel for consumers, designers and architects who want to see products in a higher service environment.

Key markets

Bath and Kitchen conducts business primarily in three regions of the world: Europe, the Americas and Asia.

• Sales from the European region represented 53 percent of 2005 Bath and Kitchen sales.

• Sales from the Americas region represented 40 percent of 2005 Bath and Kitchen sales.

• Sales from the Asia-Pacific region represented 7 percent of 2005 Bath and Kitchen sales.

Products and services

Bath and Kitchen produces three broad types of products:

• Fixtures, which are toilets, sinks, tubs and bidets, represented 50 percent of 2005 Bath and Kitchen sales.

• Fittings, which are faucets, showerheads and showering systems, represented 26 percent of 2005 Bath and Kitchen sales.

• Acrylic and wellness products, which are specialty tubs, whirlpools, showering enclosures and “super showers.” These represented 13 percent of 2005 Bath and Kitchen sales.

Bath and Kitchen also produces Americast^® tubs and sells accessories for the kitchen sink and bathroom including towel racks, mirrors, soap dispensers and soap holders. The business also produces and markets an array of furniture systems and vanities for the bathroom. Sales for these accessories and other products accounted for 11 percent of 2005 Bath and Kitchen sales.

4

Marketing and brands

Bath and Kitchen has a strong portfolio of well-known brands to address a variety of market segments in each region:

	Brand portfolio
Market segment	Americas	Asia	Europe
Premium	JADO/Porcher	JADO	JADO
Mass Market	American Standard	American Standard	Ideal Standard
Value			Armitage Shanks Ceramica Dolomite

Competitors and competitive advantages

Bath and Kitchen competes with a number of global, regional and local companies. In Europe, the major competitors are:

• Fittings: Hansgrohe (Masco) and Grohe

• Fixtures: Kohler, Sanitec, Roca/Laufen and Villeroy & Boch

• Whirlpools: Jacuzzi and Teuco

In the Americas, the major competitors are:

• Fittings: Delta (Masco), Moen (Fortune Brands), Price Pfister (Black and Decker) and Kohler

• Fixtures: Kohler, Crane, Eljer and TOTO

• Whirlpools: Jacuzzi

In Asia, TOTO, Kohler and a host of local brands are the prime competitors. All of the competitors globally have to compete with an array of low-cost suppliers in these markets.

One way that Bath and Kitchen competes is by developing new products with style and performance that are more valued by Bath and Kitchen’s customers and consumers. To deliver style, Bath and Kitchen continues to:

• Introduce bathroom suites by internationally known designers and architects to meet the tastes and styles of the marketplace.

• Offer “total bathroom” solutions that provide customers and consumers with fully coordinated and integrated suites of products, including sinks, toilets, faucets, tubs, showers, bathroom furniture and accessories.

• Expand its presence in customer- and company-owned high-quality showrooms and showplaces featuring its higher-end products in certain countries. These programs, along with expanded sales training activities, have enhanced the image of Bath and Kitchen’s products with interior designers, decorators, consumers and plumbers.

To deliver performance, Bath and Kitchen is introducing a variety of new products that consumers want and need in a variety of areas:

• Hygiene and other advanced features: New faucets with hygienic surface technologies, electronic controls, anti-leak and anti-scald features.

• Comfort: New flat jets have been designed for whirlpools that provide enhanced therapeutic treatment and comfort, and a line of super showers and luxury whirlpool features will be introduced in Europe in 2006.

• Water conservation: The Champion^® toilet, with America’s Best™ Flushing System, was launched in China, Korea and Thailand, following its successful U.S. launch in 2004. The 4.8 Liter FloWise™ toilet will launch in China with the 4 Liter model to follow shortly. FloWise™ technology is of interest to the Chinese market because of its ability to reduce water usage.

• Ease of use and installation: An easy-to-install faucet called SpeedConnect™ and an easy-to-clean faucet called EverClean™ will launch in the Americas in 2006.

5

Organization

Bath and Kitchen employs approximately 27,000 people and had 57 production facilities worldwide.

For sales, segment income and assets by geographic region and end markets and a discussion of backlog, see “Management Discussion and Analysis of Financial Condition and Results of Operations” and Note 16. of Notes to Financial Statements.

Recent developments

In January 2006, Home Depot announced plans to acquire Hughes Supply Inc. Both businesses are customers of American Standard’s Bath and Kitchen business.

Vehicle Control Systems Segment

Vehicle Control Systems (“VCS”), operating under the WABCO^® name, produces a variety of control systems that improve vehicle safety and reduce overall vehicle operating costs for the world’s leading commercial truck, trailer, bus and passenger car manufacturers. Specifically, VCS manufactures and sells advanced braking, stability, suspension and transmission control systems.

VCS is a worldwide technology leader in its field. VCS is responsible for many innovations including:

• First heavy-duty truck anti-lock braking system (ABS).

• First electronically controlled air suspension (ECAS) system for commercial vehicles.

• First commercial vehicle automatic transmission controls.

• First electronic stability control (ESC) system for commercial vehicles.

• First integrated vehicle tire pressure monitoring system (IVTM) for commercial vehicles, developed in partnership with Michelin.

VCS products are included in two out of three commercial vehicles with advanced vehicle control systems and increasingly are used in luxury and mid-sized cars and sport utility vehicles (“SUV”). The business’ strategy for growth is to provide more components and systems throughout the life of a vehicle, from design and development to the after-market, in more parts of the world.

Founded in the U.S. in 1869 as Westinghouse Air Brake Company (“WABCO”), VCS was acquired by American Standard in 1968. VCS’ 2005 sales of $1.831 billion represented 18 percent of American Standard Companies’ sales and 25 percent of its segment income. Sales in Europe represented 75 percent of VCS’ 2005 revenue.

Customers and key markets

VCS’ products are sold directly to vehicle and component manufacturers around the world. Replacement parts are sold through both original equipment manufacturers (“OEM’s”) and an independent after-market distribution network.

VCS has a strong reputation for technological innovation and is a leading systems development partner with several major vehicle manufacturers. Some of VCS’ largest customers are DaimlerChrysler (Mercedes and Freightliner), Fiat (IVECO), Ford, General Motors, Hino, Hyundai, ITE, MAN, Nissan, Paccar (DAF, Kenilworth, Leyland and Peterbuilt), Porsche, Scania, Volkswagen and Volvo (Mack and Renault).

In 2005, DaimlerChrysler’s global logistics organization and IVECO honored WABCO as a “supplier of the year,” and readers of three leading German trade magazines voted WABCO “best brand in brakes.”

The business manufactures and distributes products in the Americas (primarily the U.S. and Canada), Brazil, Asia and Europe. For sales by geographic region and end markets, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

6

Products and services

VCS manufactures and sells advanced braking, stability, suspension and transmission control systems primarily for commercial vehicles. The business is also a leader in improving highway safety, with products that help drivers avoid accidents by enhancing vehicle responsiveness and stability. For example, VCS offers a stability control system for trucks and buses that constantly monitors the vehicle’s motion and dynamic stability. If the system detects danger—such as the driver swerving to avoid another vehicle—it responds by applying the brakes at specific wheels, or slowing the vehicle down to prevent instability or a rollover.

VCS’ largest-selling products are pneumatic anti-lock braking systems (“ABS”), related electronic braking systems (“EBS”) and conventional components such as actuators, compressors and transmission automation products for heavy- and medium-sized trucks, trailers and buses. VCS also supplies advanced electronic suspension controls to the luxury car and SUV markets in Europe and North America.

The Company believes that automated transmission control will be increasingly important in the trucking and transport industry worldwide. Leading European truck manufacturers include VCS’ electronic controls for automated transmissions as standard or optional equipment for heavy- and medium-duty vehicles.

VCS has increased sales in recent years in part by developing additional integrated systems for vehicles including driver-assistance products such as adaptive cruise control and active safety systems such as stability control systems.

Other new products under development include further advancements in electronic braking, stability and safety controls, telematic systems that monitor vehicle system data and driveline-control and suspension-control systems.

In recent years, VCS has also increased sales by extending the geographic scope, product range and service offerings of its after-market activities. It has added new service centers, an increasing range of diagnostic software and advanced technical training to customers’ employees at distributors, fleets and maintenance workshops.

Competitors and competitive advantages

VCS’ principal competitor is Knorr/Bremse (Knorr’s U.S. subsidiary is Bendix Commercial Vehicle Systems). VCS competes primarily on the basis of customer service, quality and reliability of products, global technological leadership, vehicle life-cycle expertise, and price and value.

Organization

Headquartered in Brussels, Belgium, the business employs approximately 6,900 people and had 13 production facilities worldwide. Its primary manufacturing operations are in Brazil, China, France, Germany, Poland, the Netherlands, South Korea and the United Kingdom. In 2005, VCS opened a new factory and distribution center in Qingdao, People’s Republic of China.

In addition, VCS has the following joint ventures, partnerships and investments:

• In North America, WABCO markets ABS and other vehicle control products through its 50 percent-owned joint venture with Arvin Meritor Automotive Inc. (Meritor WABCO).

• A majority-owned partnership in the U.S. with Cummins Engine Co. (WABCO Compressor Manufacturing Co.), a manufacturing partnership formed to produce air compressors designed by WABCO.

• A majority-owned joint venture in China with Mingshui Automotive Fitting Factory (MAFF).

• Minority equity investments in joint ventures in India with TVS Group (Sundaram-Clayton Ltd.) and in South Africa (WABCO SA).

For sales, segment income and assets by geographic region and end markets, and a discussion of backlog, see “Management Discussion and Analysis of Financial Condition and Results of Operations” and Note 16. of Notes to Financial Statements.

7

Business Segment Data

Information concerning sales and segment income attributable to each of the Company’s business segments and geographic areas is set forth in Item 6, “Selected Financial Data,” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 16 of Notes to Financial Statements, all of which are incorporated herein by reference. Information concerning identifiable assets of each of the Company’s business segments is set forth in Note 16 of Notes to Financial Statements, which is incorporated herein by reference. Information on backlog and the seasonal aspects of the Company’s business are set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the captions “Results of Operations by Business Segment” and “Cyclical and Seasonal Nature of Business,” respectively.

Company Goals

American Standard has adopted the following performance goals:

• Sales growth, through:

• Delivering premier customer service,

• Technological leadership and product innovation based on knowledge to meet changing customer needs,

• Introducing new products, solutions and services,

• Expanding marketing efforts, building brand awareness and differentiation, and

• Geographic expansion.

• Productivity improvement through:

• Materials management programs,

• Quality and Six Sigma programs, and

• Inventory reduction/rationalization.

• Financial goals to improve asset utilization and return on capital, including:

• Improving earnings per share, margins and cash flow,

• Maintaining investment grade debt rating,

• Maintaining or lowering the effective tax rate, and

• Maintaining or increasing the Company’s stock buy-back program and dividend payment.

Materials Management

The materials management initiative is centered on leveraging collective buying power on a global basis to improve purchasing efficiency, reduce the number of suppliers and improve the supply chain. Materials management also involves working with suppliers to develop effective components with lower part counts and easier assembly, resulting in improved quality and reduced costs. It is also intended to identify opportunities to substitute lower-cost materials for higher-cost ones, without compromising quality, durability and safety. With material costs representing a significant portion of total costs, management believes that continued improvements realized through materials management could result in substantial savings.

Management continues to adopt challenging goals for continuous performance improvement. In 2005, improvements from materials management programs were able to partially offset increasing commodity costs related to the purchase of steel, copper, aluminum and energy, which negatively impacted the Company by $182 million. Incremental benefits from this program were approximately $79 million in 2005, $135 million in 2004 and $100 million in 2003.

8

Six Sigma

Six Sigma is a structured approach to achieving significant productivity improvements in business and manufacturing processes through data-driven decisions. Originally introduced to American Standard in 2000, more than 20,000 employees have been trained in Six Sigma tools that have contributed approximately $190 million in productivity gains.

The Company continues to develop and deploy technical experts (called Six Sigma Master Black Belts, Black Belts and Green Belts) through aggressive training and project deployment programs. By the end of 2005, the Company had 47 Master Black Belts, 716 Black Belts and 4,080 Green Belts who were certified or in training. To achieve such a designation, specific projects, timelines, milestones and savings must be achieved. In addition, approximately 15,200 employees have received training in Six Sigma fundamentals since the initiation of the program in 2000. Management is continually broadening the Six Sigma approach to cover functions beyond manufacturing. In the past two years it has provided specific Six Sigma training in safety, materials management, transactional analysis and design, deployment of new products, lean manufacturing, sales/marketing, maintenance and administrative processes.

Linkage of Goals with Incentive Compensation Plans

Management has adopted incentive compensation plans that are directly linked to achievement of the company-wide goals described above. Management believes the attainment of these goals will result in improved financial performance and enhanced shareholder value.

Other Matters Relating to American Standard’s Business as a Whole

Raw Materials and Purchased Components

The Company purchases a broad range of materials and components throughout the world in connection with its manufacturing activities. Major items include steel, copper tubing, aluminum, ferrous and nonferrous castings, clays, motors, electronics and energy (primarily natural gas). The ability of the Company’s suppliers to meet performance and quality specifications and delivery schedules is important to the Company’s operations. Material costs represent a significant portion of total costs. As a result, the Company has integrated much of its raw materials and components procurement efforts into its materials management initiative, which the Company believes results in significant savings. The energy and materials required for its manufacturing operations have been readily available. Although the Company does not foresee any significant raw material shortages, it does expect to incur higher costs for certain commodity raw materials in 2006.

9

Patents, Licenses and Trademarks

The Company’s operations are not dependent to any significant extent upon any single or related group of patents, licenses, franchises or concessions. The Company’s operations also are not dependent upon any single trademark, although some trademarks are identified with a number of the Company’s products and services and are of importance in the sale and marketing of such products and services. Some of the Company’s trademarks are:

Business Segment	Trademark
Air Conditioning Systems and Services	TRANE®
	AMERICAN STANDARD®
Bath and Kitchen	AMERICAN STANDARD®
	IDEAL STANDARD®
	STANDARD®
	PORCHER®
	JADO®
	ARMITAGE SHANKS®
	DOLOMITE®
	AMERICAST®
	VENLO®
	BORMA®
	VENESTA®
	SOTTINI®
	SANGRA®
Vehicle Control Systems	WABCO®

The Company from time to time has granted patent licenses to, and has licensed technology from, other parties.

10

Research and Product Development

The Company made expenditures of $187 million in 2005, $165 million in 2004 and $152 million in 2003 for research and product development and for product engineering in its three business segments. The expenditures for research and product development alone were $114 million in 2005, $102 million in 2004 and $92 million in 2003 and were incurred primarily by Vehicle Control Systems and Air Conditioning Systems and Services. Vehicle Control Systems, which expended the largest amount, has conducted research and development in recent years on advanced electronic braking systems, stability control systems, electronically controlled air suspension systems, automated transmission controls, tire pressure monitoring, automatic climate-control and door-control systems for the commercial vehicle industry. Air Conditioning Systems and Services’ research and development expenditures were primarily related to alternative refrigerants, compressors, heat transfer surfaces, airflow technology, acoustics, clean air products for residential air conditioning, and micro-electronic controls. Expenditures made by Bath and Kitchen related primarily to enhancing the functionality, performance and design of its products.

Regulations and Environmental Matters

The Company’s U.S. operations are subject to federal, state and local environmental laws and regulations. The Company has a number of proactive programs under way to minimize its impact on the environment and believes that it is in substantial compliance with environmental laws and regulations. A number of the Company’s plants are undertaking responsive actions to address soil and groundwater issues. In addition, the Company is a party to a number of remedial actions under various federal and state environmental laws and regulations that impose liability on companies to clean up, or contribute to the cost of cleaning up, sites at which hazardous wastes or materials were disposed or released. Remedial actions to which the Company is a party include approximately 29 current proceedings under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund) and similar state statutes in which the Company has potential liability based either on a past or current ownership interest in the site requiring remedial actions or based on disposal or alleged disposal of waste products at the site requiring remedial actions. Expenditures in 2005, 2004 and 2003 to evaluate and remediate such sites were not material.

Additional sites may be identified for environmental remediation in the future, including properties previously transferred by the Company and with respect to which the Company may have contractual indemnification obligations. The Company cannot estimate at this time the ultimate aggregate costs of all remedial actions because of (a) uncertainties surrounding the nature and application of environmental regulations, (b) the Company’s lack of information about additional sites at which it may be listed as a potentially responsible party, (c) the level of cleanup that may be required at specific sites and choices concerning the technologies to be applied in corrective actions, (d) the number of contributors and the financial capacity of others to contribute to the cost of remediation at specific sites and (e) the time periods over which remediation may occur. On the basis of the Company’s historical experience and information currently available, these environmental actions should not have a material adverse effect on its financial condition, results of operations or liquidity.

The Company’s international operations are also subject to various environmental statutes and regulations. Generally, these requirements tend to be no more restrictive than those in effect in the U.S. Currently, 21 of the Company’s international operations have ISO 14001 certification, and the Company believes it is in substantial compliance with existing domestic and foreign environmental statutes and regulations. As in the U.S., a number of the Company’s facilities are undertaking responsive actions to address groundwater and soil issues. Expenditures in 2005, 2004 and 2003 to evaluate and remediate these sites were not material. On the basis of the Company’s historical experience and information currently available, these environmental actions should not have a material adverse effect on its financial condition, results of operations or liquidity.

The Company has derived significant revenues in recent years from sales of air conditioning equipment that uses refrigerants which contain chlorofluorocarbons (“CFCs”) or hydrochloroflurocarbons (“HCFCs”). Production and use in new equipment of certain CFCs, HCFCs and other chemicals with ozone-depletion potential are being phased out over various periods under laws and regulations that require use of substitute permitted refrigerants. Also, utilization of new refrigerants will encourage replacement or modification of existing air conditioning equipment. The Company believes that these regulations will have the effect of generating additional product sales and parts and

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service revenues, as existing air conditioning equipment utilizing CFCs or HCFCs, is converted to operate on other refrigerants or replaced. The Company is unable to estimate the magnitude or timing of these conversions or replacements. The Company has been working closely with refrigerant manufacturers that are developing refrigerant substitutes for CFCs and HCFCs, so that the Company’s products will be compatible with those substitutes. Although a significant percentage of the Company’s commercial air conditioning products will require modification for refrigerant substitutes, the Company believes that it will remain competitive and does not expect any significant problems in complying with this changing regulatory environment. In addition, the Company is a leader in developing energy-efficient products that meet or exceed certain federal and state efficiency standards. However, providing more energy-efficient products will require additional research and development expense and capital expenditures to continue to offer energy-efficient product choices to the customer. The Company believes it will remain competitive and that it has adequate financial resources to fund these efforts.

Employees

The Company employed approximately 61,200 people as of December 31, 2005 (excluding employees of unconsolidated joint venture companies). The Company has 16 major labor union contracts in the Americas (covering approximately 11,300 employees). Five of these contracts expired and were successfully renegotiated in 2005 (covering approximately 2,200 employees) as well as the national agreement covering the majority of unionized Air Conditioning Systems and Services sales offices in the United States (covering approximately 325 employees). Three contracts will expire in 2006 (covering approximately 2,800 employees); 2 contracts will expire in 2007 (covering approximately 1,100 employees); 4 contracts will expire in 2008 (covering approximately 2,900 employees). In addition, five contracts in Mexico (covering approximately 4,400 employees) are negotiated on an annual basis. There can be no assurance that the Company will negotiate the labor contracts expiring during 2006 without a work stoppage. However, the Company does not anticipate any problems in renegotiating these contracts that would materially affect operational results.

The Company also has 30 major labor contracts outside North America (covering approximately 21,000 employees). The Company does not anticipate any problems in renegotiating these contracts that would materially affect operational results.

There was a work stoppage involving 60 employees at a Bath & Kitchen plant in Cornwall, Canada from February 21, 2005 to March 24, 2005. A contract was subsequently ratified. Additionally, 140 French service technicians organized a work stoppage for 1.5 days across 16 Trane distribution offices in France beginning on June 6, 2005. The conflict was over dissatisfaction with the wage contract agreed to between the management and the elected representatives of the Société Trane employees in Epinal – and was resolved through direct communications with the service technicians once they had agreed to return to work. 700 hourly employees in the Golbey and Charmes manufacturing sites in France staged periodic 30 minute work stoppages over 3 days during the course of annual wage negotiations in May. These issues were fully resolved with the ratification of the contract with the works council in France and did not have a significant impact on the financial results of the Company.

Although the Company believes relations with its employees are good, there can be no assurance that the Company will not experience significant work stoppages in the future.

Customers

The business of the Company taken as a whole is not dependent upon any single customer or a few customers.

International Operations

The Company conducts operations through subsidiaries in most of the countries of Western Europe, Bulgaria, the Czech Republic, Poland, Brazil, Canada, Mexico, Central American countries, China, Indonesia, Japan, Malaysia, the Philippines, South Korea, Thailand, Taiwan, Vietnam and Egypt. In addition, the Company conducts business in some of these countries and in other countries through affiliated companies and partnerships in which the Company owns 50% or less of the stock or partnership interest. Because the Company has manufacturing operations

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in 27 countries, fluctuations in currency exchange rates may have a significant impact on its financial statements. Such fluctuations have much less effect on local operating results, because the Company to a significant extent sells its products within the countries in which they are manufactured. However, a growing portion of the Company’s products are manufactured in lower-cost locations such as Mexico and Brazil and sold in various countries, resulting in increased exposure to foreign exchange effects. The asset exposure of foreign operations to the effects of exchange volatility has also been partly mitigated by the denomination in foreign currencies of a portion of the Company’s borrowings. The Company is also subject to political risks related to its foreign operations.

Certain Corporate Governance Matters

Available Information

The Company’s Web site is www.americanstandard.com. Our periodic reports and all amendments to those reports required to be filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 are available free of charge through the Web site. During the period covered by this report, the Company posted its periodic reports on Form 10-K and 10-Q and its current reports on Form 8-K and any amendments to those documents to its Web site as soon as reasonably practicable after those reports were filed or furnished electronically with the Securities and Exchange Commission. The Company will continue to post to its Web site such reports and amendments to those reports as soon as reasonably practicable after those reports are filed with or furnished to the Securities and Exchange Commission.

Availability of Corporate Governance Principles and Board of Director Committee Charters

The Board of Directors has adopted charters for its Audit Committee, Management Development and Compensation Committee and Corporate Governance and Nominating Committee. The Board has also adopted Corporate Governance Principles, which include the Company’s Definition of Director Independence. The Corporate Governance Principles, the Code of Conduct and Ethics referenced below, and each of the charters are available on the Company’s Web site. These materials, together with the Code of Conduct and Ethics referenced below, are available in print to any shareholder who requests them in writing by contacting the Secretary of the Company at One Centennial Avenue, Piscataway, New Jersey 08855.

Code of Conduct and Ethics

The Company’s Code of Conduct and Ethics, which applies to all employees, including all executive officers and senior financial officers (including the Chief Financial Officer and the Controller) and directors, is posted on its Web site www.americanstandard.com. The Code of Conduct and Ethics is compliant with Item 406 of SEC Regulation S-K and the New York Stock Exchange corporate governance listing standards. Any changes to the Code of Conduct and Ethics that affect the provisions required by Item 406 of Regulation S-K will also be disclosed on the Web site. Any waivers of the Code of Conduct and Ethics for our executive officers, directors or senior financial officers must be approved by the Company’s Audit Committee and those waivers, if any are ever granted, would be disclosed on our Web site under the caption “Exemptions to the Code of Conduct and Ethics.” There have been no waivers to the Code of Conduct and Ethics.

New York Stock Exchange Annual Chief Executive Officer Certification

The Company’s Chief Executive Officer submitted to the New York Stock Exchange (“NYSE”) Annual CEO Certification as to the Company’s compliance with the NYSE’s corporate governance listing standards to the NYSE on May 23, 2005.

Sarbanes-Oxley Act Section 302 Certifications

The certification of the Chief Executive Officer and Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 have been filed as exhibits to this Form 10-K.

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ITEM 1A. RISK FACTORS

Any of the following factors could materially adversely affect our future operating results. Other factors are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Information Concerning Forward Looking Statements.”

The Company’s sales could decline due to macro-economic factors, weather and other factors outside of the Company’s control.

Changes in economic conditions and changes in the local economies of the countries or regions in which we sell our products, such as changes in consumer confidence, increases in interest rates and increases in unemployment, could affect consumer demand for our products, which could negatively affect our business and results of operations.

The Air Conditioning Systems and Services business performance is also influenced by weather conditions. Unexpected cool trends or unseasonably warm trends during the summer season could negatively or positively affect our business and results of operations.

In the U.S., much of the consumer demand for the Company’s products has been driven by the replacement, repair, remodeling and new construction markets. The replacement, repair, remodeling and new construction markets have shown substantial growth over the last few years. Both our Air Conditioning Systems and Services and Bath and Kitchen segments have benefited from the growth in the replacement, repair and remodeling markets and new residential construction markets in the U.S and the Air Conditioning Systems and Services business has benefited from recent increases in the commercial air conditioning markets. As sales to the U.S., through our Air Conditioning Systems and Services and Bath and Kitchen segments comprise approximately 51% of our total sales, a significant decline in any of the replacement, repair, remodeling, new residential construction or commercial air conditioning markets brought on by a downturn in the U.S. economy, or for any reason, could negatively affect our results of operations.

Similarly, in the last few years, the market for new heavy truck and bus production has increased in Western Europe, which is the leading market for the braking system products manufactured by the Company’s Vehicle Control Systems segment, which comprised 18% of 2005 sales. If economic conditions in Western Europe lead to a significant decline in the production of new trucks and buses our results of operations could be negatively affected. In addition, Vehicle Control Systems’ performance is influenced by the number of “miles driven” by users of commercial vehicles. As commercial truck and bus fleets continue to be used for longer periods of time, sales to OEM customers could soften as purchases of new vehicles for fleets are delayed.

The Company’s exposure to exchange rate fluctuations on cross border transactions and the translation of local currency results into U.S. dollars could negatively impact our results of operations.

The Company conducts business through subsidiaries in many different countries, and fluctuations in currency exchange rates could have a significant impact on the reported results of our operations, which are presented in U.S. dollars. In 2005, approximately 50% of our consolidated sales occurred outside of the United States. A significant and growing portion of our products are manufactured in lower-cost locations and sold in various countries. Cross border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. Accordingly, significant changes in currency exchange rates, particularly the EURO, Pound Sterling, Brazilian Real, Mexico Peso and the U.S. dollar, could cause fluctuations in the reported results of our operations that could negatively affect our results of operations. Additionally, the strengthening of certain currencies such as the EURO and U.S. dollar potentially exposes the Company to competitive threats from lower cost producers in other countries such as China. Lastly, the Company’s sales are translated into U.S. dollars for reporting purposes. The strengthening or weakening of the U.S. dollar could result in favorable or unfavorable translation effects as the results of foreign locations are translated into U.S. dollars.

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The Company is subject to general risks associated with our foreign operations.

In addition to the currency exchange risks inherent in operating in many different foreign countries, there are other risks inherent in our international operations.

The risks related to our foreign operations that we more often face in the normal course of business include:

• Changes in tax law, increases in tax rates and the amount of foreign earnings relative to total consolidated earnings could change and impact our consolidated tax rate.

• Foreign earnings may be subject to withholding requirements or the imposition of tariffs, price or exchange controls, or other restrictions, including restrictions on repatriation of earnings;

• General economic and political conditions in countries where we operate may have an adverse effect on our operations in those countries; and

• We may have difficulty complying with a variety of foreign laws and regulations, some of which may conflict with United States law, and the uncertainty created by this legal environment could limit our ability to effectively enforce our rights in certain markets.

The ability to manage these risks could be difficult and may limit our operations and make the manufacture and distribution of our products internationally more difficult, which could negatively affect our business and results of operations.

If the Company is unable to obtain certain raw materials and component parts at reasonable price levels, our ability to maintain existing sales margins may be affected.

We purchase a broad range of materials and components throughout the world in connection with our manufacturing activities. Major items include steel, copper tubing, aluminum, ferrous and nonferrous castings, clays, motors, electronics and energy. The cost of raw materials represents a significant portion of our total costs. In 2005, we incurred higher costs for certain raw materials, energy and logistics (transportation costs), which affected our earnings. Our future results of operations and profitability could be negatively affected if we cannot obtain our raw materials at a reasonable cost. While the Company was able to raise prices in 2005 to offset some of the impact of rising commodity costs, on a cumulative basis, commodity cost increases remain greater than price increases.

The Company may not be able to realize the estimated cost savings or productivity improvements from our materials management and Six Sigma initiatives, respectively.

Our materials management initiative is centered on leveraging collective buying power on a global basis to improve purchasing efficiency, reduce the number of suppliers and improve the supply chain. Materials management also involves working with suppliers to develop effective components with lower part counts and easier assembly, resulting in improved quality and reduced costs. Material costs represent a significant portion of total costs. Our inability to successfully execute the materials management initiative could negatively affect the Company’s business and results of operations.

Similarly, our Six Sigma initiative is structured to achieve significant productivity improvements in business and manufacturing processes through data driven decisions. Since 2000, more than 20,000 employees have been trained in Six Sigma tools that have contributed approximately $190 million in productivity gains. To the extent that we are not able to increase productivity at planned levels our results of operations could be adversely effected.

If there are changes in the environmental, health or other regulations that affect one or more of the Company’s current products or future products, it could have a negative impact on the Company’s business and results of operations.

We are currently governed by various environmental, health and other regulations in the U.S. and internationally. While we have a number of proactive programs underway to minimize the impact of our products on the environment and believe that we are in substantial compliance with environmental laws and regulations, we cannot predict whether there will be changes in the environmental regulations affecting our products. Currently, there are regulations which require the phasing out of certain refrigerants such as chlorofluorocarbons (“CFCs”) and

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hydrochlorofluorocarbons (“HCFCs”), which are used in the products manufactured and serviced by our Air Conditioning Systems and Services segment. If we are unsuccessful in modifying certain of our products to be compatible with the substitute refrigerants, it could have a negative impact on our business and results of operations. There are also federal and state statutes which impose energy efficiency standards for certain of our air conditioning systems. If we are unable to produce air conditioning systems that meet these statutory energy efficiency requirements, it could have a negative impact on our ability to compete.

Any changes in the environmental, health or other regulations which affect our current or future products could have a negative impact on our business if we are unable to adjust our product offering to comply with such regulatory changes. In addition, it is possible that we will incur increased costs as a result of complying with health and environmental regulations.

Changes to the Company’s asbestos liability or insurance receivable could impact our results of operations.

In the fourth quarter of 2004, we recorded a liability on our balance sheet for all pending and unasserted potential future asbestos indemnity claims. We also have recorded a receivable with respect to expected insurance recoveries related to such liability. The amounts that we recorded for asbestos-related liability and insurance-related receivables rely on assumptions that are based on currently known facts. Our actual expenses and insurance recoveries could be significantly higher or lower than those recorded if the assumptions that we used or relied upon vary significantly from actual results or if U.S. tort legislation governing asbestos claims is passed. We review these assumptions on a periodic basis to determine whether adjustments are required to our recorded asbestos-related liability and related insurance receivable. Adjustments, if any, to the estimate of our recorded asbestos-related liability and/or insurance receivable could negatively impact the results of operations for the period or periods in which such adjustments are made. See Note 14 of Notes to Financial Statements for additional information regarding asbestos.

If the Company is not able to maintain good relations with our unionized employees, we could suffer work stoppages that could negatively affect our business and results of operations.

Approximately 53% of our employees, as of December 31, 2005, are members of labor unions. We have 16 major labor union contracts in the Americas. We also have 30 major labor contracts outside of North America. At least 8 of our union contracts will expire in 2006, and we will be required to renegotiate those in the coming year. While we do not anticipate any problems in renegotiating the labor contracts that could negatively affect operational results, we cannot ensure that we will be able to reach an agreement with the unions. Any disputes with the labor unions could result in work stoppages or other labor protests which could disrupt our operations. Any such labor disputes could negatively affect our business and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

As of February 21, 2006, the Company conducted its manufacturing activities through 99 plants in 27 countries of which the principal facilities are:

Business Segment	Location	Major Products Manufactured at Location
Air Conditioning Systems and Services	Clarksville, TN	Commercial unitary air conditioning
	Fort Smith, AR	Unitary air conditioning
	La Crosse, WI	Applied air conditioning systems
	Lexington, KY	Air handling products
	Macon, GA	Commercial air conditioning systems
	Pueblo, CO	Applied air conditioning systems
	Lynn Haven, FL	Commercial unitary air conditioning
	Trenton, NJ	Residential gas furnaces and air handlers
	Tyler, TX	Residential air conditioning
	Vidalia, GA	Residential air handlers
	Sebastian County, AR	Package air conditioners, heat pumps and gas electrics
	Columbia, SC	Coils
	Monterrey, Mexico	Reciprocating and scroll compressors
	Charmes, France	Applied air conditioning systems
	Golbey, France	Unitary air conditioning systems
	Taicang, China	Applied and unitary air conditioning systems
	GuangDong, China	Coils and air systems
	Taipei, Taiwan	Unitary air conditioning systems
	Zhongshan, China	Unitary products and air handling units
Bath and Kitchen	Salem, OH	Enameled-steel fixtures and acrylic bathtubs
	Tiffin, OH	Vitreous china
	Jundai, Brazil	Vitreous china
	Sevlievo, Bulgaria	Vitreous china and brass fittings
	Teplice, Czech Republic	Vitreous china
	Hull, England	Vitreous china and acrylic bathtubs
	Rugeley, England	Vitreous china
	Valencia, Spain	Vitreous china
	Dole, France	Vitreous china
	Revin, France	Vitreous china and bathtubs
	Wittlich, Germany	Brass fittings
	Orcenico, Italy	Vitreous china
	Brescia, Italy	Vitreous china
	Roccassecca, Italy	Vitreous china
	Aguascalientes, Mexico	Vitreous china
	Monterrey, Mexico	Brass fittings
	Tlaxcala, Mexico	Vitreous china
	Mexico City, Mexico	Vitreous china
	West Java, Indonesia	Vitreous china
	Beijing, China	Enameled-steel fixtures
	Guangdong Province, China	Vitreous china, fittings and enameled-steel fixtures
	Shanghai, China	Vitreous china
	Tianjin, China	Vitreous china
	Seoul, South Korea	Brass fittings
	Pathumthani, Thailand	Vitreous china
	Ramadan City, Egypt	Acrylics
Vehicle Control Systems	Campinas, Brazil	Vehicle control systems
	Leeds, England	Vehicle control systems
	Claye-Souilly, France	Vehicle control systems
	Hanover, Germany	Vehicle control systems
	Mannheim, Germany	Foundation brakes
	Gronau, Germany	Compressors and hydraulics
	Wroclaw, Poland	Vehicle control systems
	Qingdao, China	Automated braking systems

All of the plants described above are owned by the Company or a subsidiary except for the properties located in Taipei, Taiwan; Monterrey, Mexico (Air Conditioning); and Claye-Souilly, France, which are leased. The Company considers that its properties are generally in good condition, are well maintained, and are generally suitable and adequate to carry on the Company’s business. In 2005, the Company’s manufacturing plants, taken as a whole, operated moderately below capacity.

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The Company also owns or leases warehouse and office space for administrative and sales staff. The Company headquarters, which is leased, is located in Piscataway, New Jersey.

ITEM 3. LEGAL PROCEEDINGS

The Haynes Litigation

As previously reported, in October 1999, in Haynes Trane Service Agency, Inc. and Frederick M. Haynes v. American Standard, Inc., d/b/a The Trane Company, in the United States District Court for the District of Colorado, verdicts were returned against the Company for a total of $18 million on the claim that it wrongfully terminated distribution agreements. On August 28, 2002, the appellate court ruled in favor of the Company and vacated the $18 million judgment. The appellate court also reinstated the Company’s counterclaims, including fraud, and remanded to the trial court limited portions of Haynes’ initial claims. On December 7, 2005, a jury in the United States District Court in Colorado returned a favorable verdict for the Company in its lawsuit alleging fraud by Haynes Trane Service Agency, Inc. (HTSA), a former distributor of the Company’s unitary air conditioning business. Damages will be determined by the court at a later date. The jury also returned an advisory verdict recommending that the court award Fred Haynes $4.78 million, because the jurors concluded that the Company had wrongfully terminated an agency agreement with Mr. Haynes, the owner of HTSA, after discovering HTSA’s fraudulent activities in 1995. The trial judge is now responsible for issuing a ruling on the merits of this claim.

The European Commission Investigation

In November 2004, the Company was contacted by the European Commission as part of an industry-wide investigation into alleged infringement of European Union competition regulations relating to the distribution of bath and kitchen fittings and fixtures in certain European countries. In November 2005, the European Commission sent the Company a written request for information. The company is cooperating fully with the investigation.

Bath & Kitchen Fixtures Antitrust Litigation and U.S. Department of Justice Competition Investigations

On February 23, 2005, the Company received a grand jury subpoena from the Antitrust Division of the U.S. Department of Justice seeking information primarily related to the sale and marketing of bathroom fittings by its European affiliates from January 1997 to the present. The Company is cooperating fully with this investigation. As previously reported, in February 2005, the Company was named as a defendant in several lawsuits filed in the United States District Court for the Eastern District of Pennsylvania and in various state courts in the State of California alleging that the Company and certain of its competitors conspired to fix prices for fittings and fixtures in the U.S. The federal cases have been consolidated (In re Bath & Kitchen Fixtures Antitrust Litigation, No. 05-cv-00510), and in June 2005 the plaintiffs filed an amended complaint in the federal action alleging that the Company conspired to fix prices for fixtures in the U.S. The amended complaint deletes reference to fittings and identifies a somewhat different group of alleged co-conspirator co-defendants. On September 22, 2005, the Company filed a motion to dismiss the complaint in the federal action, which was argued before the trial court on January 26, 2006. The other defendants in the federal action have also filed motions to dismiss. The California cases were coordinated in the San Francisco Superior Court (State Indirect Purchaser Bathroom Fittings Litigation, Cal. J.C.C.P. No. 4115), and in December 2005, the plaintiffs filed an amended complaint in the California action alleging that the Company had conspired to fix prices for fixtures and fittings in the U.S. The amended complaint identifies a somewhat different group of alleged co-conspirator co-defendants and purports to add a new and significantly larger class of plaintiffs. The Company removed the consolidated California action to the United States District Court for the Northern District of California on January 3, 2006. Currently pending is plaintiffs’ motion to remand the action back to San Francisco Superior Court, which the Company has opposed. None of these civil suits specify the amount of damages claimed. The Company believes that these lawsuits are the result of press reports about the European Commission’s investigation. The Company further believes that the lawsuits are without merit and will defend them vigorously.

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The French Competition Council’s Competition Claims

As previously reported, on February 16, 2005, the French Competition Council issued a statement of objections (“notification de griefs”) addressed to more than 100 separate enterprises, including a Bath and Kitchen subsidiary of the Company, and to various trade associations and purchasing organizations active in the sanitary, heating, air-conditioning and canalization equipment and installation sectors. The addressees of the statement of objections are alleged to have restricted the distribution of products to large “do-it-yourself” retailers and to small installer cooperatives in France in the period 1993 through 1998 in violation of French and European Union competition regulations. By November 2005, the Rapporteur General for the Competition Council recommended that the Competition Council dismiss all claims against the Company’s Bath and Kitchen subsidiary. The Company is vigorously defending itself against these allegations.

Asbestos Litigation

Over the years, the Company has been named as a defendant in numerous lawsuits alleging various asbestos-related personal injury claims arising primarily from its historical sales of boilers and railroad brake shoes.

In these asbestos-related lawsuits, the Company is usually named as one of a large group of defendants. Many of these lawsuits involve multiple claimants, do not specifically identify the injury or disease for which damages are sought and/or do not allege a connection between any Company product and a claimed injury or disease. As a result, numerous lawsuits have been placed, and may remain on, inactive or deferred dockets, which some jurisdictions have established.

Accounting for Asbestos Liability

As described in greater detail in “Note 14. Warranties, Guarantees, Commitments and Contingencies,” until the fourth quarter of 2004, the Company recorded a liability only for filed asbestos claims. Costs associated with claims that might be filed in the future were not recorded because the Company did not believe its history and experience with asbestos-related litigation was sufficient to allow it to make a reasonable estimate of this liability. However, in the fourth quarter of 2004, the Company believed that it had sufficient relevant and reliable information to reasonably estimate a total future liability for asbestos-related claims. Accordingly, in the fourth quarter of 2004, the Company retained an outside consultant to assist it in calculating an estimate of the Company’s total liability for pending and unasserted potential future asbestos-related claims. As a result, in the fourth quarter of 2004, the Company increased its recorded liability for asbestos claims by $616 million, from $83 million to $699 million, based upon the consultant’s analysis of the Company’s total estimated liability for pending and unasserted potential future claims through 2055, which was the consultant’s reasonable best estimate of the time it would take to resolve all of the Company’s asbestos-related claims. This amount was calculated on a pre-tax basis, was not discounted for the time value of money, and excluded legal fees. At December 31, 2005, the Company engaged the consultant to perform a comprehensive review of the updated claims data. As a result of this review, the Company concluded that the estimated liability for pending and unasserted potential future asbestos related claims from 2004 remains the best estimate as of December 31, 2005. The asbestos indemnity liability decreased by $13.4 million in 2005, from $699.4 million as of December 31, 2004 to $686.0 million as of December 31, 2005. This decrease is due to claims payments made during the year.

Asbestos Claims Activity

From receipt of its first asbestos claim more than twenty years ago to December 31, 2005, the Company has resolved 33,690 claims. The total amount of all settlements paid by the Company (excluding insurance recoveries) and by its insurance carriers is approximately $64.2 million, for an average payment per resolved claim of $1,905. During 2005, 10,544 new claims were filed against the Company, 5,044 claims were dismissed and 659 claims were settled. At December 31, 2005, there were 128,197 open claims pending against the Company. Because claims are frequently filed and settled in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period.

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Asbestos Insurance Recovery – The NJ Litigation

As previously disclosed, the Company is in litigation against certain carriers whose policies it believes provide coverage for asbestos claims. The insurance carriers named in this suit are challenging the Company’s right to recovery. The Company filed the action in April 1999 in the Superior Court of New Jersey, Middlesex County, against various of its primary and lower layer excess insurance carriers, seeking coverage for environmental claims (the “NJ Litigation”). The NJ Litigation was later expanded to also seek coverage for asbestos related liabilities from twenty-one primary and lower layer excess carriers and underwriting syndicates. On September 19, 2005, the court granted the Company’s motion to add to the NJ Litigation 16 additional insurers and 117 new insurance policies. The court also required the parties to submit all contested matters to mediation.

Asbestos Receivable – 2005 Insurance Settlements

The Company estimates and records an asbestos receivable for amounts due to the Company for previously settled and paid claims, the reimbursable portion of incurred legal expenses, and the probable reimbursements relating to its estimated liability for pending and future claims. At December 31, 2005, the asbestos receivable was $390.0 million, reduced from $405.6 million at December 31, 2004. The reduction was primarily the result of cash received from insurance companies of $23.7 million and refinements to solvency rates and settlements of $20.4 million. This reduction was partially offset by refinements to other data, including claims data, and policy information of $20.5 million and adjustments to reflect the recoverable portion of incurred legal expenses of $8.0 million. In February 2005, the Company settled with Equitas for $84.5 million to buy-out the participants of certain underwriters in pre-1993 Lloyd’s, London policies included in the Company’s insurance coverage. This settlement was the Company’s most significant settlement to date. During 2005, $14.4 million of this amount was received by the Company to cover asbestos and environmental costs, and $70.1 million remains in a trust expiring January 3, 2007. If, during the trust period, there is U.S. federal legislation that takes asbestos claims out of the courts and requires Equitas to make a duplicate payment to the asbestos trust, the remaining balance in the trust will be disbursed to Equitas minus some allowance to the Company for claim settlements that may be made or have been made in the period January 1, 2005 through January 3, 2008. If there is no such legislation by January 3, 2007, the balance of funds in the trust, including accrued interest, will be disbursed to the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of the Company’s shareholders during the fourth quarter of 2005.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information as of February 24, 2006 with respect to each person who is an executive officer of the Company:

Name	Age	Position with Company
Frederic M. Poses	63	Chairman and Chief Executive Officer
John M. Carroll	45	Vice President and General Auditor
Brad M. Cerepak	46	Vice President and Controller
Lawrence B. Costello	58	Senior Vice President, Human Resources
G. Peter D’Aloia	61	Senior Vice President and Chief Financial Officer
James E. Dwyer	47	Senior Vice President, and President, Bath and Kitchen
Jacques Esculier	46	Vice President, and President, Vehicle Control Systems
Mary Elizabeth Gustafsson	46	Senior Vice President, General Counsel and Secretary
W. Craig Kissel	54	Senior Vice President, and President, Trane Commercial Systems
David S. Kuhl	45	Vice President and Treasurer
R. Scott Massengill	43	Vice President and Chief Financial Officer, Residential Systems
David R. Pannier	55	Vice President, and President, Residential Systems
Richard S. Paradise	44	Vice President and Chief Financial Officer, Bath and Kitchen

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Each officer of the Company is elected by the Board of Directors to a term of office expiring on the date of the first Board meeting after the Annual Meeting of Shareholders next succeeding his or her election or such officer’s earlier resignation or removal.

Set forth below is the principal occupation of each of the executive officers named above during the past five years.

Mr. Poses was elected as a Director in October 1999 and as Chairman and Chief Executive Officer effective January 1, 2000. Prior to assuming that position, Mr. Poses was President and Chief Operating Officer at AlliedSignal Inc. (now known as Honeywell). Previously he was President of AlliedSignal’s Engineered Materials sector from 1988 to 1998 and served as a Director of that company from 1997 until 1999. Mr. Poses is a Director of Raytheon Company and Centex Corporation.

Mr. Carroll was elected vice president and general auditor in October 2005. He joined the Company in January 2002 as general auditor. Prior to joining the Company, Mr. Carroll worked for 12 years at Bristol-Myers Squibb. During his tenure, he held a variety of senior financial management positions, including assistant treasurer, vice president - finance, for the global pharmaceutical technical operations division, and vice president - financial analysis and reporting for the worldwide medicines group. He also held the position of general auditor of Bristol-Myers Squibb for five years.

Mr. Cerepak was elected Vice President and Controller in August 2005. He joined the Company in 2003 as vice president and chief financial officer for Bath and Kitchen. Prior to that, he spent nine years with Allied Signal, Honeywell International’s predecessor, where he held several finance leadership positions. From 2001 through 2003, he served as the vice president and chief financial officer for Honeywell’s Automation and Control Solutions business. From 1995 to 2001, he held various finance leadership positions for Allied Signal’s Consumer Products Group, Automotive Group and Friction Materials Group.

Mr. Costello was elected Senior Vice President, Human Resources, effective June 2000. From April 1994 until that date, he served in various capacities at Campbell Soup Company, including Senior Vice President, Global Human Resources.

Mr. D’Aloia was elected Senior Vice President and Chief Financial Officer effective February 2000. Prior to that he was employed by AlliedSignal Inc., most recently serving as Vice President-Business Development. He spent 27 years with AlliedSignal Inc. in diverse management positions, including Vice President-Taxes, Vice President and Treasurer, Vice President and Controller, and Vice President and Chief Financial Officer for the Engineered Materials sector. Mr. D’Aloia is a Director of FMC Corporation and AirTran Airways.

Mr. Dwyer was elected Senior Vice President of the Company and President, Bath and Kitchen effective September 2004. Prior to joining the Company, he spent a decade in senior executive roles with major consumer enterprises, including PepsiCo Inc., where he served as President of Tropicana Products, North America, Vice President of Merger Integration and Senior Vice President, Marketing North America during his career.

Mr. Esculier was elected President of Vehicle Control Systems effective January 1, 2004. He joined the company in June 2002 as Vice President of Trane’s International Commercial Systems business in Europe. Prior to that he spent more than six years in a variety of leadership positions with AlliedSignal Inc./Honeywell.

Ms. Gustafsson was elected Senior Vice President, General Counsel and Secretary of the Company effective January 2005. From January 2003 until January 2005, Ms. Gustafsson served as chief counsel for the Air Conditioning Systems and Services business of the Company. Upon joining the Company in September 2001 until January 2003, she served as chief corporate counsel with responsibility for corporate legal activities for the Company. Prior to joining the Company, Ms. Gustafsson spent five years with AlliedSignal Inc./Honeywell where she held positions of increasing responsibility including chief counsel to AlliedSignal Inc./Honeywell’s $1 billion electronic materials business.

Mr. Kissel was elected Senior Vice President of the Company in January 1998 and serves as President of Trane Commercial Systems, effective January 2004. From 1998 through December 2003 he served as President of

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Vehicle Control Systems. Before that he was Vice President of Air Conditioning Systems and Services’ Unitary Products Group, and later named Group Executive.

Mr. Kuhl was elected Vice President and Treasurer of the Company in November 2005. He joined the Company in March 2002 as an assistant treasurer. Prior to joining the Company, he worked for DuPont as chief financial officer of the Nutrition and Health business unit.

Mr. Massengill was elected Vice President and Chief Financial Officer, Residential Systems in December 2005. Prior to that, he was Vice President and Treasurer of the Company and responsible for Business Services Operations. He was Assistant Treasurer of Bristol-Myers Squibb Company from 1999 to March 2001 and before that he was with AlliedSignal Inc. and Exxon Corporation (now ExxonMobil) in various financial management positions.

Mr. Pannier was elected Vice President of the Company in January 1998, and since January 2002 has served as President, Residential Systems. From January 1998 until January 2002 he served as Group Executive, North American Unitary Products Group.

Mr. Paradise was elected Vice President of the Company and Chief Financial Officer of Bath and Kitchen in August 2005. From July 2002 until August 2005, he was Vice President and Controller of the Company. He joined the Company as Assistant Controller in February 2000. Prior to that he spent ten years with AlliedSignal Inc. in a variety of financial management positions, including Director of Six Sigma and Credit, after beginning his career with PricewaterhouseCoopers (formerly PriceWaterhouse) as an auditor.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The common stock of the Company is listed on NYSE under the symbol “ASD.” The common stock was first traded on the NYSE on February 3, 1995 concurrent with the underwritten initial public offering of shares of the Company’s common stock. Prior to the offering there was no established public trading market for the Company’s shares.

The Company’s Restated Certificate of Incorporation, as amended, authorizes the Company to issue up to 560,000,000 shares of common stock, par value $.01 per share, and 2,000,000 shares of preferred stock, par value $.01 per share, of which the Board of Directors designated 900,000 shares as a new series of Junior Participating Cumulative Preferred Stock. The Company also has a Rights Agreement. Each outstanding share of common stock has associated with it one right to purchase a specified amount of Junior Participating Cumulative Preferred Stock at a stipulated price in certain circumstances relating to changes in ownership of the common stock of the Company.

On May 27, 2004, the Company completed a three-for-one common stock split.

As of February 21, 2006, there were 734 holders of record of the Company’s common stock. A significant number of the outstanding shares of common stock which are beneficially owned by individuals or entities are registered in the name of a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms. The Company believes that there are approximately 62,446 beneficial owners of its common stock as of February 15, 2006.

The Company paid its first dividend in March 2005. The Company declared dividends of $126.4 million in 2005 on its common stock. In February 2006, the Board of Directors declared a first quarter 2006 dividend of $0.18 per share, an increase from $0.15 per share that was paid in each quarter of 2005.

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Set forth below are the high and low sales prices for shares of the Company’s common stock for each quarterly period in 2004 and 2005. The first and second quarter of 2004 prices have been adjusted for the Company’s three-for-one stock split. The split became effective May 27, 2004, for holders of record as of May 18, 2004.

	High		Low
2004
First quarter	$	38.33	$	33.10
Second quarter	$	40.93	$	33.60
Third quarter	$	40.55	$	36.22
Fourth quarter	$	41.82	$	34.41
2005
First quarter	$	48.39	$	38.56
Second quarter	$	47.29	$	40.82
Third quarter	$	47.93	$	41.35
Fourth quarter	$	47.76	$	35.01

On December 8, 2005, the Company’s Board of Directors approved an additional $500 million to purchase shares of the Company’s common stock in the open market. As of February 21, 2006, the unexpended authorization on the current program totaled $353,059,310. The Company plans to expend the majority of the remaining authorized but unexpended amount for share repurchases in 2006. No unexpended amounts remained on prior repurchase programs. A summary of the repurchase activity for 2005 follows. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources” for a description of the Company’s stock repurchase program.

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ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
December 31, 2004						$	62,446,908
January 1-January 31 (b)	1,010,699		$	39.77	885,700	$	27,219,801
February 1-February 28	988,900		$	45.05	988,900	$	382,669,756	(d)
March 1-March 31	1,478,200		$	47.05	1,478,200	$	313,125,967
Total first quarter	3,477,799		$	44.54	3,352,800
April 1-April 30	563,600		$	45.54	563,600	$	287,458,942
May 1-May 31	1,091,300		$	43.65	1,091,300	$	239,827,269
June 1- June 30	1,064,100		$	43.15	1,064,100	$	193,916,579
Total second quarter	2,719,000		$	43.84	2,719,000
July 1-July 31	368,635		$	43.71	368,635	$	177,802,731
August 1-August 31	806,335		$	44.47	806,335	$	141,941,454
September 1-September 30	427,864		$	46.28	427,864	$	122,141,837
Total third quarter	1,602,834		$	44.78	1,602,834
October 1-October 31	793,800		$	38.33	793,800	$	91,714,329
November 1-November 30	1,893,000		$	38.89	1,893,000	$	18,099,652
December 1-December 31	1,380,600		$	40.31	1,380,600	$	462,451,970	(e)
Total fourth quarter	4,067,400		$	39.26	4,067,400
Total through December 31	11,867,033	(c)			11,742,034	$	462,451,970	(a)

(a) As of February 21, 2006, the Company had an unexpended authorization by the Board of Directors under its share repurchase program and the majority of the unexpended balance of $353,059,310 under that authorization will be used to repurchase shares during 2006.

(b) Includes 124,999 shares that were returned to the Company by the Chief Executive Officer to satisfy his withholding tax liabilities upon the vesting of 250,000 shares of restricted stock.

(c) All share repurchases other than those described in note (b) were effected in accordance with the Safe Harbor Provisions of Rule 10b-18 of the Securities and Exchange Act.

(d) On February 3, 2005, the Board of Directors approved the purchase of up to an additional $400 million of common stock with no expiration date.

(e) The Board of Directors authorized on December 8, 2005, the purchase of additional shares in an amount not to exceed $500 million, with no expiration date.

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ITEM 6. SELECTED FINANCIAL DATA

	Year Ended December 31,
(Dollars in millions, except per share data)	2005			2004			2003			2002			2001
Segment and Income Statement Data:
Segment sales:
Air Conditioning Systems and Services	$	6,014.7		$	5,345.5		$	4,974.6		$	4,743.9		$	4,692.2
Bath and Kitchen		2,418.7			2,439.5			2,234.8			1,994.4			1,812.7
Vehicle Control Systems		1,831.0			1,723.8			1,358.2			1,057.1			960.4
Total sales	$	10,264.4		$	9,508.8		$	8,567.6		$	7,795.4		$	7,465.3
Segment income:
Air Conditioning Systems and Services	$	660.5		$	556.1		$	521.6		$	537.4		$	515.2
Bath and Kitchen		102.2			196.9			139.5			154.7			147.5
Vehicle Control Systems		249.8			231.3			176.6			138.7			124.4
Total segment income (a)		1,012.5			984.3			837.7			830.8			787.1
Equity in net income of unconsolidated joint ventures		34.8			28.2			25.9			26.6			18.5
Asbestos indemnity charge, net of recoveries (b)		—			(320.2	)		(10.0	)		(3.3	)		—
Interest expense		(118.3	)		(114.9	)		(117.0	)		(129.0	)		(168.7	)
Corporate and other expenses (a)		(203.1	)		(214.5	)		(187.4	)		(168.9	)		(160.6	)
Income from continuing operations before income taxes		725.9			362.9			549.2			556.2			476.3
Income taxes (a)		(169.6	)		(49.5	)		(144.0	)		(185.2	)		(181.3	)
Income from continuing operations	$	556.3		$	313.4		$	405.2		$	371.0		$	295.0
Per share:
Basic	$	2.63		$	1.46		$	1.87		$	1.71		$	1.38
Diluted	$	2.56		$	1.42		$	1.83		$	1.68		$	1.35
Average number of outstanding common shares:
Basic		211,290,498			214,835,002			216,809,658			217,049,925			214,359,657
Diluted		216,969,293			220,584,135			221,150,472			220,924,698			219,353,988
Balance Sheet Data (at end of period):
Total assets	$	6,867.8		$	6,841.8		$	5,878.7		$	5,143.8		$	4,831.4
Total debt	$	1,696.2		$	1,507.9		$	1,679.1		$	1,959.2		$	2,212.1
Cash dividends per common share	$	0.60		$	—		$	—		$	—		$	—

(a) In 2005 segment income includes $69.1 million and corporate and other expenses includes $0.1 million ($47.2 million after tax, or $.22 per diluted share) of expenses related to operational consolidation expenses, primarily for the elimination of 1,108 jobs and other charges associated with plans initiated throughout 2005 to streamline manufacturing and administrative processes as well as a facility shutdown, comprised of $25.7 million for Air Conditioning Systems and Services, $29.7 million for Bath and Kitchen and $13.7 million for Vehicle Control Systems. Income taxes include a tax benefit of $21.9 million related to those expenses. The income tax provision for 2005 also included benefits of $62 million from the resolution of tax audits, $16 million related to the impact of certain tax planning initiatives on prior tax years and $9 million related to the benefit recognized on other tax items. Partially offsetting these benefits was a charge of $23 million associated with remitting foreign earnings to the U.S. under Section 965 of the American Jobs Creation Act of 2004. The combined effect of the net tax benefits that occurred in 2005, together with other ongoing tax planning activities, reduced the effective income tax rate to 23.4% for the year. In 2004 segment income includes $46.1 million and corporate and other expenses includes $0.3 million ($32.0 million after tax, or $.15 per diluted share) of expenses related to operational consolidation expenses, primarily for the elimination of 1,695 jobs during 2004, comprised of $7.7 million for Air Conditioning Systems and Services, $33.0 million for Bath and Kitchen and $5.4 million for Vehicle Control Systems. Income taxes include a tax benefit of $14.4 million related to those expenses. Income taxes in 2004 includes a $39.2 million benefit ($.18 per diluted share) including an $18.5 million benefit for the resolution of tax audits, an $18.0 million benefit relating to a reduction in withholding tax liabilities due to a decision not to distribute the earnings of certain foreign subsidiaries and $2.7 million of other tax items. In 2003 segment income includes expenses of $38.9 million ($27.3 million after tax, or $.12 per diluted share) related to the elimination of 870 jobs in the fourth quarter, comprised of $8.4 million for Air Conditioning Systems and Services, $20.8 million for Bath and Kitchen and $9.7 million for Vehicle Control Systems. Income taxes include a tax benefit of $11.6 million related to those

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expenses. Income taxes in 2003 includes a $26.7 million benefit ($.12 per diluted share) principally because of the resolution of audits and approval of claims for research and development tax credits. In the fourth quarter of 2001 the Company recorded expenses of $53.1 million ($35.8 million after tax, or $.16 per diluted share) related to the elimination of approximately 1,700 salaried positions, comprised of $12.7 million for Air Conditioning Systems and Services, $14.7 million for Bath and Kitchen, $15.8 million for Vehicle Control Systems and $9.9 million for corporate headquarters. The presentation of total segment income is not in conformity with Generally Accepted Accounting Principles (“GAAP”). This measure may not be comparable to similar measures of other companies as not all companies calculate this measure in the same manner. In addition, the presentation of total segment income is not meant to be a substitute for measurements prepared in conformity with GAAP, nor to be considered in isolation. Please refer to the Overview section of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information. Net income applicable to common shares is the most directly comparable GAAP measure to total segment income.

(b) In the fourth quarter of 2004, the Company recorded a $307 million ($188 million, net of tax benefit, or $.85 per diluted share) charge covering estimated net payments for pending and future asbestos-related claims. For a detailed description of the asbestos indemnity charge, see Note 14 of Notes to Financial Statements.

For a comparative analysis of certain line items in the Segment and Income Statement Data section of this table, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which follows.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

The Company operates in three major business segments: Air Conditioning Systems and Services, Bath and Kitchen and Vehicle Control Systems. Air Conditioning Systems and Services is a global manufacturer of commercial and residential heating, ventilation and air conditioning (HVAC) equipment systems and controls. Bath and Kitchen is a producer of bathroom and kitchen fixtures and fittings in Europe, the Americas and Asia. Vehicle Control Systems designs, manufactures and sells braking and control systems primarily for the worldwide commercial vehicle industry. Company management analyzes the performance of the business using the following general framework and describes the performance of the business in this context throughout the remainder of this discussion and analysis of financial condition and results of operations.

Sales – The Company analyzes its sales activity based on the impacts of its pricing initiatives and the volume and mix of its products. The realization of price increases and the execution of the strategy to improve sales mix to more profitable new products are important to the Company in order to offset commodity and other cost escalations and grow profitability.

Productivity – The Company identifies the impact of key productivity programs in the areas of materials procurement, Six Sigma and labor.

Commodities – Each of the Company’s businesses use commodities such as steel, copper, aluminum and natural gas in the manufacturing process. The Company seeks to understand the impact of changing costs for these commodities on its performance. The Company expects to incur at least $100 million in higher raw material commodity costs in 2006 as compared to 2005, although commodity pricing in early 2006 continues to show an increasing trend above such levels.

Investments – The Company analyzes its ongoing costs for new products in each of its businesses and its investments in sales and marketing programs in support of sales growth. Investments in new products are important to sustaining organic growth and to improve the mix of products through innovation and new product launches.

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Total segment income as referred to in the Overview paragraph below and the first four paragraphs of Results of Operations for 2005 Compared with 2004 and 2004 Compared with 2003 represents the summation of segment income of the Company’s business segments: Air Conditioning Systems and Services, Bath and Kitchen and Vehicle Control Systems (see Note 16 of Notes to Financial Statements). The presentation of total segment income and total segment income as a percentage of sales is not in conformity with generally accepted accounting principles (“GAAP”). This measure may not be comparable to similar measures of other companies as not all companies calculate this measure in the same manner. In addition, the presentation of total segment income is not meant to be a substitute for measurements prepared in conformity with GAAP, nor to be considered in isolation. Management believes that presenting these measures is useful to shareholders because it enhances their understanding of how management assesses the performance of the Company’s businesses. The following table reconciles total segment income to net income applicable to common shares for the years ended 2005, 2004 and 2003, respectively. Net income applicable to common shares is the most directly comparable GAAP measure to total segment income.

	Year Ended December 31,
Segment Income:	2005			2004			2003
Air Conditioning Systems and Services	$	660.5		$	556.1		$	521.6
Bath and Kitchen		102.2			196.9			139.5
Vehicle Control Systems		249.8			231.3			176.6
Total segment income		1,012.5			984.3			837.7
Equity in net income of unconsolidated joint ventures		34.8			28.2			25.9
Interest expense		(118.3	)		(114.9	)		(117.0	)
Asbestos indemnity charge, net of recoveries		—			(320.2	)		(10.0	)
Corporate and other expenses		(203.1	)		(214.5	)		(187.4	)
Income taxes		(169.6	)		(49.5	)		(144.0	)
Net income applicable to common shares	$	556.3		$	313.4		$	405.2

See Note 16 of Notes to Financial Statements for a discussion of the amounts included in corporate and other expenses.

In addition, management reviews free cash flow when reviewing and assessing the performance of the business and refers to such measure in the Overview section that follows. The presentation of free cash flow is not in conformity with GAAP. This measure may not be comparable to similar measures of other companies as not all companies calculate this measure in the same manner. In addition, the presentation of free cash flow is not meant to be a substitute for measurements prepared in conformity with GAAP, nor to be considered in isolation. Cash flow from operating activities is the most directly comparable GAAP measure to free cash flow. Free cash flow is considered a liquidity measure by the Company and provides useful information to management about the amount of cash provided by operations adjusted for the acquisition of property, plant, equipment and computer software, the proceeds from the disposal of property, proceeds from sale and leasebacks and proceeds from the initial sale of receivables. Free cash flow is used by the Company for investing in affiliated companies and other businesses and financing activities (including paying down debt and repurchasing shares). Free cash flow is also one of several measures used to determine incentive compensation.

Overview

The Company achieved record sales, total segment income and net income for the full year of 2005. Sales were $10.264 billion, up 8% from $9.509 billion a year ago and total segment income was $1.013 billion up 3% from a year ago (see previous paragraph for a reconciliation of total segment income to net income applicable to common shares). Net income applicable to common shares increased 78% to $556.3 million in 2005 as compared to $313.4 million in 2004. Net income applicable to common shares in 2004 included a net charge of $307 million ($188 million net of a $119 million tax benefit) covering estimated net payments for pending and future asbestos-related claims. See Note 14 of Notes to Financial Statements

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for a detailed description of the 2004 asbestos charge. Net income was $2.56 per diluted share, up 80% from $1.42 per diluted share a year ago. The Company generated $820.4 million in net cash provided by operating activities and $512 million in free cash flow.

Management believes that the Company’s sales growth in Air Conditioning Systems and Services and Vehicle Control Systems outperformed or was in line with most of its markets in 2005. Bath and Kitchen was adversely impacted by reduced sales volume as compared to 2004 and other issues as more fully described later in Results of Operations by Business Segment.

The 3% increase in total segment income in 2005 as compared with 2004, was driven primarily by a 19% increase in Air Conditioning Systems and Services and a 8% increase in Vehicle Control Systems partially offset by a 48% decrease in Bath and Kitchen. The Company benefited from improved pricing, volume increases, productivity improvements and benefits from prior operational consolidation programs, which were partially offset by mix of sales to lower margin products, continued commodity, logistics and labor cost escalations and investments primarily in new product development and marketing. See Results of Operations by Business Segment on page 30 for the impact of these items on each segment’s 2005 performance. Total segment income for 2005 included $69.1 million ($47.2 million net of a $21.9 million tax benefit) of operational consolidation expenses, primarily for the elimination of 1,108 jobs and other charges to streamline manufacturing and administrative processes as well as a facility shutdown as compared with 2004 which included expenses of $46.1 million ($31.8 million net of a $14.3 million tax benefit) of operational consolidation expenses, primarily for the elimination of 1,695 jobs. The 2004 job eliminations contributed $26.2 million of savings in 2005. The 2005 actions are expected to result in approximately $35 million of savings in 2006.

The income tax provision for 2005 included benefits of $62 million from the resolution of tax audits, $21.9 million from operational consolidation expenses, $16 million related to the impact of certain tax planning initiatives on prior tax years and $9 million related to the benefit recognized on other tax items. Partially offsetting these benefits was a charge of $23 million associated with remitting foreign earnings to the U.S. under Section 965 of the American Jobs Creation Act of 2004. The combined effect of the net tax benefits that occurred in 2005, together with other ongoing tax planning activities, reduced the effective income tax rate to 23.4% for the year.

The following discussion and analysis addresses year-over-year changes in the line items shown in the Segment and Income Statement Data in Item 6, Selected Financial Data. Approximately half of the Company’s business is outside the U.S. Therefore, changes in exchange rates can have a significant effect on segment income and total segment income when presented in U.S. Dollars. Year-over-year changes in sales, segment income, total segment income and, in certain cases, segment income and total segment income as a percentage of sales, for 2005 compared with 2004 and 2004 compared with 2003 are presented both with and without the effects of foreign exchange translation. Presenting segment income excluding the translation effects of foreign exchange amounts is not in conformity with GAAP, but management analyzes the data in this manner because it is useful to them in understanding the operational performance of the business. Management also uses data adjusted in this manner for purposes of determining incentive compensation. Accordingly, management believes that presenting information in this manner is also useful to shareholders in understanding the performance of the business. Changes in sales and segment income excluding foreign exchange effects are calculated using current year sales and segment income translated at prior year exchange rates. The presentation of sales, segment income, total segment income and segment income as a percentage of sales with and without the effects of foreign currency translation are not meant to be a substitute for measurements prepared in conformity with GAAP, nor to be considered in isolation. Also, costs associated with shipping, handling, purchasing, receiving, inspecting, warehousing, internal transfer costs and other costs of distribution incurred on sales of products are included in the determination of segment income and total segment income and in the determination of cost of sales in the Consolidated Statements of Income. The Company’s measure of cost of sales may not be comparable to those of other companies as some companies exclude a portion of these costs from cost of sales and include them in another caption within their income statement.

For a five-year summary of segment sales and segment income and other income statement information, refer to Item 6. Selected Financial Data, and for additional data on segments refer to Note 16 of Notes to Financial Statements. The following discussion and analysis addresses year-to-year changes in certain line items shown in the

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Segment and Income Statement Data in the Selected Financial Data. The Geographic Distribution of Sales is presented based upon country of destination.

Results of Operations for 2005 Compared with 2004

and 2004 Compared with 2003

Consolidated sales for 2005 were $10.264 billion, an increase of $755 million or 8% (7% excluding favorable foreign exchange translation effects), from $9.509 billion in 2004. Sales increased 13% for Air Conditioning Systems and Services, 6% for Vehicle Control Systems and decreased 1% for Bath and Kitchen.

Net income applicable to common shares increased 78% to $556.3 million for the full year of 2005 as compared to $313.4 million for the full year 2004. Net income applicable to common shares in 2004 included a charge of $307 million ($188 million net of a $119 million tax benefit, or $.85 per diluted share) covering estimated net payments for pending and future asbestos-related claims. See Note 14 of Notes to Financial Statements for a detailed description of the 2004 asbestos charge. Net income applicable to common shares in 2005 included $86 million of income tax benefits as compared to $54 million of income tax benefits in 2004.

Total segment income for 2005 was $1.013 billion, an increase of $29 million, or 3% (1.7% excluding favorable foreign exchange translation effects), from $984.3 million in 2004. Segment income increased 19% for Air Conditioning Systems and Services, 8% for Vehicle Control Systems and decreased 48% for Bath and Kitchen. Total segment income for 2005 included $69.1 million of operational consolidation expenses, primarily for the elimination of 1,108 jobs and other charges to streamline manufacturing and administrative processes as well as a facility shutdown, comprised of $25.7 million for Air Conditioning Systems and Services, $29.7 million for Bath and Kitchen and $13.7 million for Vehicle Control Systems. Total segment income for 2004 included $46.1 million of operational consolidation expenses, primarily for the elimination of 1,695 jobs, comprised of $7.7 million for Air Conditioning Systems and Services, $33.0 million for Bath and Kitchen and $5.4 million for Vehicle Control Systems. See Executive Overview above for a reconciliation of total segment income to net income applicable to common shares.

Consolidated sales for 2004 were $9.509 billion, an increase of $941 million, or 11% (7% excluding favorable foreign exchange translation effects), from $8.568 billion in 2003. Sales increased 7% for Air Conditioning Systems and Services, 9% for Bath and Kitchen and 27% for Vehicle Control Systems.

Total segment income for 2004 was $984.3 million, an increase of $146.6 million, or 18% (14% excluding favorable foreign exchange translation effects), from $837.7 million in 2003. Segment income increased 7% for Air Conditioning Systems and Services, 41% for Bath and Kitchen and 31% for Vehicle Control Systems. Total segment income for 2004 included $46.1 million of operational consolidation expenses. Total segment income for 2003 included $38.9 million of operational consolidation expenses for the elimination of 870 jobs, comprised of $8.4 million for Air Conditioning Systems and Services, $20.8 million for Bath and Kitchen and $9.7 million for Vehicle Control Systems. See Executive Overview above for a reconciliation of total segment income to net income applicable to common shares.

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Following are tables showing the percentage of total sales and segment income for each of the Company’s business segments and the geographic distribution of sales and segment income.

Segment Percentages of Sales

	2005		2004		2003
Air Conditioning Systems and Services	59	%	56	%	58	%
Bath and Kitchen	23	%	26	%	26	%
Vehicle Control Systems	18	%	18	%	16	%
	100	%	100	%	100	%

Geographic Distribution of Sales

	2005		2004		2003
United States	53	%	50	%	53	%
Europe	30	%	33	%	31	%
Other	17	%	17	%	16	%
	100	%	100	%	100	%

Segment Percentages of Segment Income

	2005		2004		2003
Air Conditioning Systems and Services	65	%	56	%	62	%
Bath and Kitchen	10	%	20	%	17	%
Vehicle Control Systems	25	%	24	%	21	%
	100	%	100	%	100	%

Geographic Distribution of Segment Income

	2005		2004		2003
United States	64	%	49	%	53	%
Europe	22	%	33	%	30	%
Other	14	%	18	%	17	%
	100	%	100	%	100	%

Results of Operations by Business Segment

The Company refers to segment income as a percentage of sales throughout the following discussion of segment results. The following table represents segment income as a percentage of sales and net income applicable to common shares as a percentage of sales of the Company for 2005, 2004 and 2003, respectively.

	Year Ended December 31,
	2005			2004			2003
Sales	$	10,264.4		$	9,508.8		$	8,567.6
Total segment income		1,012.5			984.3			837.7
Total segment income as a percentage of sales		9.9	%		10.4	%		9.8	%
Net income applicable to common shares		556.3			313.4			405.2
Net income applicable to common shares as a percentage of sales		5.4	%		3.3	%		4.7	%

Air Conditioning Systems and Services Segment

	Year Ended December 31,
(Dollars in millions)	2005		2004		2003
Sales	$	6,014.7	$	5,345.5	$	4,974.6
Segment income	$	660.5	$	556.1	$	521.6

In 2005, sales of Air Conditioning Systems and Services increased 13% (12% excluding favorable foreign exchange translation effects).

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Following is an analysis of changes in sales, segment income and segment income as a percentage of sales from 2004 to 2005 showing the effect of foreign exchange translation.

				Year Ended December 31, 2005
									Excluding foreign exchange translation
(Dollars in millions)	2004 Reported			2005 Reported			Percentage Change Reported		2005 Adjusted Amount			Percentage Change Adjusted
Segment sales	$	5,345.5		$	6,014.7		12.5	%	$	5,983.1		11.9	%
Segment income	$	556.1		$	660.5		18.8	%	$	659.1		18.5	%
Segment income as a percentage of sales		10.4	%		11.0	%	0.6	pts.		11.0	%	0.6	pts.

Distribution of Air Conditioning Sales by Market and Geography

	2005		2004		2003
Commercial	70	%	72	%	73	%
Residential	30	%	28	%	27	%
	100	%	100	%	100	%
Replacement, Renovation and Repair	58	%	58	%	57	%
Commercial New Construction	31	%	32	%	34	%
Residential New Construction	11	%	10	%	9	%
	100	%	100	%	100	%
U.S.	74	%	73	%	75	%
Asia	9	%	10	%	10	%
Europe	7	%	8	%	7	%
Other	10	%	9	%	8	%
	100	%	100	%	100	%

Overall, sales benefited from growth in residential and commercial equipment sales and growing parts and services sales. Sales for the year benefited from price increases of approximately $190 million and volume and mix increases of approximately $124 million. Price increases have been put in place throughout 2005 in an attempt to offset significantly rising cost for commodities such as steel, copper and aluminum. Commercial equipment sales, which represent about 25% of total Company sales, increased 9% on a global basis. Within the commercial equipment segment, global unitary sales were up 13% and applied sales were up 4%. Sales increased 11% in the parts, services and solutions business.

The commercial equipment market in the U.S. was up an estimated 5% in 2005 (based upon preliminary Air-Conditioning & Refrigeration Institute (“ARI”) data for commercial unitary markets and the Company’s estimates for applied markets), following increases of 4% in 2004 and a drop of 5% in 2003. International equipment markets in Europe were flat to slightly down, the Middle East markets continue to be strong and Asia demand has softened. Overall, the global unitary market experienced growth in the mid to high single digit range, while the applied market experienced more modest growth at approximately 1- 2 percent. Globally, orders were up 12% (excluding favorable foreign exchange translation effects) in the fourth quarter of 2005 as compared to 2004. In the Americas, total orders were up 14% and international orders were up in the mid single digit range, including a 10% increase in Europe and the Middle East and a 2% increase in Asia.

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Sales of the Company’s U.S. residential products increased 21% in 2005 as compared with 2004. The Company estimates that the residential unitary market was up approximately 18% in 2005. The increase was driven by higher volume and improved mix, price increases (as discussed above) and a warm summer season during 2005 in the U.S. Favorable mix was driven by an increase in sales of higher efficiency models, including increases in sales of 13 SEER (Seasonal Energy Efficiency Ratio) models in advance of the government mandated transition to 13 SEER technologies, which is effective January 23, 2006. Sales growth in the second half of the year also reflected the benefits of increased sales of 10 SEER units in advance of the government mandated transition to 13 SEER. The Company does not expect 2006 sales growth to be negatively impacted as a result of the transition to 13 SEER technologies. At December 31, 2005, the Company’s residential inventories at both factories and distribution networks were down approximately 10% as compared to 2004.

Segment income of Air Conditioning Systems and Services in 2005 increased 18.8% (18.5% excluding favorable foreign exchange translation effects) to $660.5 million from $556.1 million in 2004. Segment income benefited from price increases on equipment systems and services of approximately $190 million, volume and mix increases of approximately $124 million, productivity improvements of approximately $56 million and $13 million of benefits from previously announced operational consolidation activities. These improvements were partially offset by commodity cost increases primarily associated with copper and steel of $147 million, higher logistics costs of $8 million, labor cost escalations of $63 million and incremental investments in new product development and marketing of $63 million. The Company expects to continue in 2006 to invest in marketing, especially in the residential business including investments in higher energy-efficient solutions and new product launches associated with indoor air quality innovative products. These investments are expected to improve product mix. Segment income as a percentage of sales increased to 11% in 2005 from 10.4% in 2004. Segment income for 2005 included $25.7 million of operational consolidation expenses that included the elimination of 458 jobs. $11.9 million of the charge related to the closure of the Rockingham, N.C. manufacturing facility and $13.8 million primarily related to severance and job elimination expenses associated with plans to improve the effectiveness and efficiency of the business on a global basis and the consolidation of administrative functions. Segment income for 2004 included $7.7 million of job elimination costs primarily from the elimination of 205 jobs.

Following is an analysis of changes in sales, segment income and segment income as a percentage of sales from 2003 to 2004 showing the effect of foreign exchange translation.

				Year Ended December 31, 2004
									Excluding foreign exchange translation
(Dollars in millions)	2003 Reported			2004 Reported			Percentage Change Reported		2004 Adjusted Amount			Percentage Change Adjusted
Segment sales	$	4,974.6		$	5,345.5		7	%	$	5,288.9		6	%
Segment income	$	521.6		$	556.1		7	%	$	554.1		6	%
Segment income as a percentage of sales		10.5	%		10.4	%	-0.1	pts.		10.5	%	0.0	pts.

The sales gain in 2004 was led by an 11% increase in residential air conditioning sales in the U.S., and a 13% (9% excluding favorable foreign exchange translation effects) increase in international commercial equipment sales. Sales in commercial parts, services and solutions were up 8% (6% excluding favorable foreign exchange translation effects), sales in North American unitary were up 5%, in line with North American unitary equipment markets and sales in North American applied equipment were down 6%. The commercial equipment market in the U.S. was up 5% in 2004 (based upon Air-Conditioning & Refrigeration Institute (“ARI”) data for commercial unitary markets and the Company’s estimates for applied markets), following drops of 5% in 2003 and 11% in 2002. 2004 was the first year that the commercial equipment markets increased since 2000. The North American unitary equipment market was up an estimated 5% and the North American applied equipment market was up an estimated 3% for the year. The increased demand for unitary products in the U.S. led to better pricing. The Company

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announced commercial equipment price increases of 2-3% in the second quarter of 2004 and additional price increases of 3-5% in the fourth quarter of 2004. International sales were led by strong sales in Latin America and Asia. Commercial Equipment markets in Europe and the Middle East continued to improve slowly, while Asia Pacific markets overall remained strong. Sales in China were stronger in the fourth quarter of 2004 than in the first three quarters. Equipment prices outside of the U.S. were down modestly for the year as markets continued to be more competitive.

Sales of the Company’s U.S. residential products increased 11% in 2004 as compared with 2003. The residential unitary markets were up an estimated 9% in 2004 based upon data published by ARI. Residential sales benefited from a strong demand for replacement units and a shift in demand towards high-efficiency units. The Company’s strong position in the premium, high-efficiency residential market was evidenced by an increase in sales of new, higher efficiency models. We implemented a price increase of up to 5%, effective December 1, 2004 following a 3% increase in the second quarter. Additionally, we strengthened residential distribution as we continued to upgrade the Company’s current dealer network and sign new dealers. The Company’s market share in the residential unitary market was essentially flat in 2004 as compared with 2003. Inventory levels at the Company’s distributors at the end of 2004 were slightly higher than they had been the past few years.

Segment income of Air Conditioning Systems and Services in 2004 increased 7% (6% excluding favorable foreign exchange translation effects) to $556.1 million from $521.6 million in 2003. Increases in volume and improved mix across Air Conditioning Systems and Services resulted in approximately $99 million more in segment income during 2004. Productivity initiatives during 2004 contributed to approximately $114 million of savings in segment income during 2004. The higher volume, improved mix and productivity savings were offset by higher commodity metal prices, which adversely impacted segment income by approximately $83 million, incremental investments in new products and technologies of $32 million and cost escalations which unfavorably impacted segment income by $57 million. Segment income as a percentage of sales decreased from 10.5% in 2003 to 10.4% in 2004. Segment income for 2004 included $7.7 million of operational consolidation expenses, primarily from the elimination of 205 jobs. Segment income for 2003 included $8.4 million of job elimination costs.

BACKLOG–The worldwide backlog for Air Conditioning Systems and Services as of December 31, 2005, was $719 million, an increase of 12.3% (13.9% excluding favorable foreign exchange translation effects) from December 31, 2004. This increase primarily reflected an increase in commercial equipment markets in the Americas and Europe and to a lesser extent Asia. Backlog is not necessarily predictive of future business as it relates only to some of the Company’s products and services. The Company believes the trends that underlie the favorable performance in 2005 will carry into 2006. The Company expects the commercial air conditioning market in the U.S., the Company’s largest market, to be up in the mid single digits based on external market forecasts.

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Bath and Kitchen Segment

	Year Ended December 31,
(Dollars in millions)	2005		2004		2003
Sales	$	2,418.7	$	2,439.5	$	2,234.8
Segment income	$	102.2	$	196.9	$	139.5

Following is an analysis of changes in sales, segment income and segment income as a percentage of sales from 2004 to 2005 showing the effect of foreign exchange translation.

				Year Ended December 31, 2005
									Excluding foreign exchange translation
(Dollars in millions)	2004 Reported			2005 Reported			Percentage Change Reported		2005 Adjusted Amount			Percentage Change Adjusted
Segment sales	$	2,439.5		$	2,418.7		(0.9	)%	$	2,401.5		(1.6	)%
Segment income	$	196.9		$	102.2		(48	)%	$	98.2		(50.1	)%
Segment income as a percentage of sales		8.1	%		4.2	%	-3.9	pts.		4.1	%	-4.0	pts.

Distribution of Bath and Kitchen Sales by Market and Geography

	2005		2004		2003
Residential	78	%	79	%	80	%
Commercial	22	%	21	%	20	%
	100	%	100	%	100	%
Replacement, Renovation and Repair	57	%	59	%	60	%
Residential New Construction	28	%	26	%	26	%
Commercial New Construction	15	%	15	%	14	%
	100	%	100	%	100	%
Europe and Middle East	53	%	53	%	50	%
U.S.	33	%	34	%	34	%
Other	14	%	13	%	16	%
	100	%	100	%	100	%

Sales of Bath and Kitchen were $2.419 billion in 2005, a decrease of 0.9% (down 1.6% excluding favorable foreign exchange translation effects), from $2.440 billion in 2004, as compared to 9% growth in 2004 (4% excluding favorable foreign exchange translation effects). Sales in the Americas decreased 1.5% (down 2.2% excluding favorable foreign exchange translation). Sales in the Americas in 2005 were unfavorably impacted by a shift to sales of economy products from luxury products and a reduction in inventory and lower volume at a major retail customer. Sales volumes in the Americas were also unfavorably impacted by reduced sales in the wholesale channel. In Europe, where the Company’s business is larger, sales decreased 1.5% (1.9% excluding favorable foreign exchange translation effects). In Europe, sales volumes were also adversely impacted by unfavorable mix, as sales migrated to economy products and product availability issues on various luxury product suites caused by manufacturing problems. In Asia, sales increased 7.9% (4.7% excluding favorable foreign exchange translation effects), off a small but growing base. Sales in Asia benefited from new product introductions, which offset market declines in China and Korea.

Segment income of Bath and Kitchen was $102.2 million for 2005, a decrease of 48% (50.1% excluding favorable foreign exchange translation effects) from $196.9 million for 2004. Segment income as a percentage of sales was 4.2%, down from 8.1% in 2004. Segment income was negatively impacted by unfavorable volume and mix of approximately $45 million partially driven by product availability issues on various luxury product suites caused by manufacturing problems in Europe, approximately $37 million for logistics and commodity cost increases primarily natural gas and fuel costs, unfavorable foreign exchange effects of approximately $13 million, investments in marketing and new products of $12 million and labor cost escalations of $13 million. These items were partially

35

offset by approximately $16 million in price gains and the benefits of previously announced operational consolidation programs of $20 million. In the fourth quarter of 2005, the Company began to take actions to improve manufacturing performance including ceramic inventory reductions of 10-15% globally, a 15% reduction in the number of models produced in Europe with another 10% planned in 2006, and a reduction in product movements among manufacturing facilities to improve manufacturing yields, operating costs and the availability of higher value products in Europe. These efforts to improve manufacturing and to ensure product availability will continue in the first half of 2006. Price increases in the first quarter of 2006 are planned to help offset ongoing commodity cost increases. In addition, new product introductions in the Americas such as the new Lifetime whirlpool tub, Cadet mainstream toilet aimed at Bath and Kitchen’s core product line and EverClean™ and Speed Connect™ faucets are expected to improve sales mix. The Company will also continue to look for opportunities to improve productivity through simplification of business processes and product lines. The Company is cautious about the timing of the improvement given the continued exposure to higher manufacturing input costs (commodities and logistics) and uncertain markets in Europe. These initiatives are expected to improve performance in 2006, increasing margins on a sequential basis beginning in the second quarter of 2006. The Company believes that Bath and Kitchen’s performance in the second half of 2006 will be better than the first half. Segment income in 2005 included $29.7 million of operational consolidation expenses primarily related to a program to reorganize fittings manufacturing operations in Europe that includes the elimination of 198 jobs, and other programs designed to streamline manufacturing operations and administrative processes related to 388 jobs. Segment income in 2004 included $33.0 million of operational consolidation expenses for the closure of the two facilities and the elimination of 1,338 jobs in the Americas and Europe.

Following is an analysis of changes in sales, segment income and segment income as a percentage of sales from 2003 to 2004 showing the effect of foreign exchange translation.

				Year Ended December 31, 2004
									Excluding foreign exchange translation
(Dollars in millions)	2003 Reported			2004 Reported			Percentage Change Reported		2004 Adjusted Amount			Percentage Change Adjusted
Segment sales	$	2,234.8		$	2,439.5		9	%	$	2,317.2		4	%
Segment income	$	139.5		$	196.9		41	%	$	187.8		35	%
Segment income as a percentage of sales		6.2	%		8.1	%	1.9	pts.		8.1	%	1.9	pts.

Sales by Bath and Kitchen were $2.440 billion in 2004, an increase of 9% (4% excluding favorable foreign exchange translation effects), from $2.235 billion in 2003. Sales in the Americas increased 5% (with little effect from foreign exchange translation), which came on top of 4% growth in 2003 (3% excluding favorable foreign exchange translation effects). Sales in 2004 benefited from sales of the Champion toilet, expanded marketing and promotional efforts and continued growth in the remodeling market in the U.S. Champion had a positive impact on sales and margins in both wholesale and retail channels in the U.S. Both Home Depot and Lowe’s featured the Champion product line in circulars, magazines and promotions and the Company featured Champion in television advertisements and public relations programs. We believe these programs not only benefited the Champion product line, but also helped create awareness and interest in all American Standard products. Sales in the retail channel grew, benefiting from Bath and Kitchen’s expanded luxury product offerings. In Europe, where Bath and Kitchen’s business was larger and margin structure was better, sales increased 12% (2% excluding favorable foreign exchange translation effects). In Europe, where economic growth was slow, we strengthened Bath and Kitchen’s market positions. We launched new suites and faucets and we introduced new products for the showering and wellness markets, which are the fastest growing segments in Europe. Additionally, we strengthened Bath and Kitchen’s position in Eastern Europe. In Asia, sales increased 11% (10% excluding favorable foreign exchange translation effects), off a small but growing base. The new residential market in China grew at a slower pace in 2004, and Bath

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and Kitchen’s sales were essentially in line with the market. We continued to work on the development of several new products, product extensions and technologies and increased investments in marketing and brand programs.

Segment income of Bath and Kitchen was $196.9 million for 2004, an increase of 41% (35% excluding favorable foreign exchange translation effects) from $139.5 million for 2003. Segment income as a percentage of sales was 8.1%, up from 6.2% in 2003. Segment income and margins for 2004 benefited from volume and price increases of $19 million and mix improvement of $13 million. In addition, job elimination programs resulted in savings of approximately $21 million during 2004. We decreased costs and improved productivity through materials management and Six Sigma initiatives. These programs contributed $39 million of savings in segment income during 2004. We invested in new products with better performance features, new suite introductions, and Bath and Kitchen’s “total bathroom” strategy. Incremental investments in new products, product suites and new technologies were approximately $19 million in 2004. Segment income in 2004 included $33 million of operational consolidation expenses for the closure of two facilities and the elimination of 1,338 jobs in the Americas, Europe and Asia. Segment income in 2003 included $20.8 million of expense for the elimination of 526 jobs in the Americas and Europe. Excluding the $33 million of operational consolidation expenses in 2004, the $20.8 million of job elimination expenses in 2003 and foreign exchange translation effects, segment income as a percentage of sales would have been up 240 basis points for 2004 as compared to 2003.

BACKLOG–Backlog is not an important indicator of future business in the plumbing industry, which typically has a short cycle between customer order and shipment.

Vehicle Control Systems Segment

	Year Ended December 31,
(Dollars in millions)	2005		2004		2003
Sales	$	1,831.0	$	1,723.8	$	1,358.2
Segment income	$	249.8	$	231.3	$	176.6

Following is an analysis of changes in sales, segment income and segment income as a percentage of sales from 2004 to 2005 showing the effect of foreign exchange translation.

				Year Ended December 31, 2005
									Excluding foreign exchange translation
(Dollars in millions)	2004 Reported			2005 Reported			Percentage Change Reported		2005 Adjusted Amount			Percentage Change Adjusted
Segment sales	$	1,723.8		$	1,831.0		6.2	%	$	1,811.2		5.1	%
Segment income	$	231.3		$	249.8		8.0	%	$	243.7		5.4	%
Segment income as a percentage of sales		13.4	%		13.6	%	0.2	pts.		13.5	%	0.1	pts.

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Distribution of Vehicle Control Systems Sales by Market and Geography

	2005		2004		2003
OEM Conventional	41	%	35	%	40	%
Electronic	38	%	45	%	36	%
After-market	21	%	20	%	24	%
	100	%	100	%	100	%
Europe	75	%	78	%	78	%
U.S.	12	%	11	%	11	%
Other	13	%	11	%	11	%
	100	%	100	%	100	%

Vehicle Control Systems’ sales for 2005 were $1.831 billion, an increase of 6% (5% excluding favorable foreign exchange translation effects), from $1.724 billion in 2004. The increase was attributable primarily to increased bus and truck production, expanded content per vehicle, including new applications and strong growth in VCS’ after-market business, partially offset by lower sales in passenger cars. Sales in Europe, VCS’ largest market, increased 3% with and without foreign exchange translation effects in 2005. This increase was partially offset by approximately 1% of price decreases. The impact of price and market growth declines was moderated by improved after-market sales, which increased 13%. Sales increased 11% in North America, underperforming a market that increased an estimated 20% due to a reduction in certain brake platforms which will be replaced with other platforms in 2006. In Asia and Latin America, VCS’ sales increased 22% and 37% (18% and 13% excluding favorable foreign exchange translation effects) outperforming truck and bus markets in the year. Overall, VCS’ sales continued to grow in line with or outpace the heavy vehicle manufacturing markets. We expect markets in Europe and North America to be roughly flat to down slightly in 2006, following the softening of growth in the Western European truck and bus production markets towards the second half of 2005.

Segment income in 2005 increased 8.0% (5.4% excluding favorable foreign exchange translation effects) to $249.8 million from $231.3 million in 2004. Segment income as a percentage of sales was 13.6%, up from 13.4% in 2004. Segment income benefited from volume and mix increases of approximately $23 million, productivity improvements of approximately $45 million, benefits from previously announced operational consolidation programs of approximately $10 million and favorable foreign exchange translation effects of approximately $16 million. These improvements were partially offset by price decreases of approximately $23 million, commodity cost increases of approximately $8 million, incremental investments primarily in new product development and marketing of approximately $18 million, labor cost escalations of approximately $13 million and approximately $8 million more of operational consolidation expenses. Segment income in 2005 included $13.7 million of operational consolidation expenses associated with the continued relocation of manufacturing activities to a lower cost location and other job elimination programs initiated during 2005 that included the elimination of 64 jobs. Segment income in 2004 included $5.4 million of operational consolidation expenses related to the transfer of production from a facility in Europe to a lower-cost facility and the associated elimination of 135 jobs.

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Following is an analysis of changes in sales, segment income and segment income as a percentage of sales from 2003 to 2004 showing the effect of foreign exchange translation.

				Year Ended December 31, 2004
									Excluding foreign exchange translation
(Dollars in millions)	2003 Reported			2004 Reported			Percentage Change Reported		2004 Adjusted Amount			Percentage Change Adjusted
Segment sales	$	1,358.2		$	1,723.8		27	%	$	1,579.7		16	%
Segment income	$	176.6		$	231.3		31	%	$	211.2		20	%
Segment income as a percentage of sales		13.0	%		13.4	%	0.4	pts.		13.4	%	0.4	pts.

Vehicle Control Systems’ sales for 2004 were $1.724 billion, an increase of 27% (16% excluding favorable foreign exchange translation effects), from $1.358 billion in 2003. The increase, exclusive of foreign exchange translation effects, was attributable primarily to increased bus and truck production, expanded content per vehicle, including new applications, continued globalization of VCS’ technology and strong growth in after-market business. Vehicle Control Systems had strong performance in truck and bus brake control systems, transmission control systems and compressors. New products accounted for approximately $132 million of sales for the year ended 2004. Sales in Europe, VCS’ largest market, increased 26% (14% excluding favorable foreign exchange translation effects) in 2004. Original equipment sales exceeded the European truck and bus market, which increased an estimated 17%. Sales increased 36% in North America, slightly outperforming a market that increased an estimated 34%. In Asia and Latin America, VCS’ sales also outperformed truck and bus markets in the year. VCS’ sales grew in line with or outpaced the heavy vehicle manufacturing markets through sales of new control systems, expanded penetration on other vehicle platforms, new applications with existing customers and geographic expansion in Asia.

Segment income in 2004 increased 31% (20% excluding favorable foreign exchange translation effects) to $231.3 million from $176.6 million in 2003. Segment income as a percentage of sales was 13.4%, up from 13.0% in 2003. Higher volumes and mix in 2004 contributed a net $58 million to segment income. In addition, materials management and Six Sigma initiatives resulted in $46 million of incremental savings in 2004, which offset price decreases of $19 million and incremental investments in new products and technologies of $9 million. Additionally, we settled a warranty issue with a customer in the second quarter of 2004 that contributed to the recognition of an additional $26 million of warranty expense. Segment income in 2004 included $5.4 million of operational consolidation expenses related to the transfer of production from a facility in Europe to a lower-cost facility and the associated elimination of 135 jobs. Segment income in 2003 included $9.7 million of expense for the elimination of 110 jobs in Europe.

BACKLOG–Vehicle Control Systems’ backlog as of December 31, 2005, was $717 million, essentially flat when compared to December 31, 2004, excluding foreign exchange translation effects. Backlog is not necessarily predictive of future business as it relates only to some of VCS’ products.

Other Income Statement Data (as summarized in Item 6. Selected Financial Data)

Equity in net income of unconsolidated joint ventures increased to $34.8 million in 2005 from $28.2 million in 2004. The $6.6 million increase primarily resulted from increased performance from the Company’s air conditioning Alliance compressor joint venture in the U.S. and the Company’s Meritor WABCO joint venture in the U.S. The $2.3 million increase in equity in net income of unconsolidated joint ventures for 2004 compared with 2003 primarily relates to improved earnings at the Company’s Air Conditioning Alliance compressor joint venture.

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Interest expense increased by $3.4 million in 2005 as compared to 2004 as the benefits of lower average debt balances were more than offset by higher interest rates. Interest expense decreased by $2.1 million in 2004 as compared to 2003, primarily driven by lower average debt balances, partially offset by higher interest rates and unfavorable foreign exchange translation effects.

In the fourth quarter of 2004, the Company recorded a $307 million ($188 million net of $119 million tax benefit or $.85 per diluted share) charge covering estimated net payments for pending and future asbestos-related claims. For a detailed description of the asbestos indemnity charge, see Note 14 of Notes to Financial Statements.

Corporate and other expenses as shown in the Segment and Income Statement Data table in Item 6, were $203.1 million for 2005, compared with $214.5 million for 2004. The decrease is substantially explained by the following items. Incentive compensation and pension and post-retirement costs were $9.1 million and $6.3 million lower in 2005 as compared to 2004 and foreign exchange gains of $4.0 million on short-term third party and intercompany debt in 2005 resulted in an $8.0 million favorable impact in 2005 when compared to $4.1 million of losses in 2004. These gains were partially offset by higher minority interest expense of $3.5 million and higher receivable discount fees of $8.0 million associated with the sale of more receivables on average in 2005 as compared to 2004 due to higher volume. Corporate and other expenses were $214.5 million for 2004, compared with $187.4 million for 2003. The increase is substantially explained by the following items. Incentive compensation costs were $8.8 million higher in 2004 as compared to 2003 and provisions for pension and post-retirement costs were $4.2 million higher in 2004 as compared to 2003. Further, foreign exchange losses in 2004 of $4.1 million resulted in an $11.1 million unfavorable impact to corporate and other expenses in 2004 when compared to $7.0 million of foreign exchange gains in 2003. Corporate and other expenses, shown in the Segment and Income Statement Data table in Item 6, primarily include some of the expenses classified as selling and administrative expenses in the Consolidated Statement of Income. Corporate and other expenses also include certain items classified in “Other expense” in the Consolidated Statement of Income (see Note 5 of Notes to Financial Statements). Year-to-year changes in the significant components of “Other expense” are explained by the comments in this paragraph on corporate expenses, or in the first paragraph of this section on equity in net income of unconsolidated joint ventures.

The income tax provisions for 2005, 2004 and 2003 were $169.6 million, $49.5 million and $144.0 million, respectively. The effective income tax rates were 23.4% of pre-tax income in 2005, 13.6% in 2004 and 26.2% in 2003. The income tax provision for 2005 included benefits of $62 million from the resolution of tax audits, $22 million from operational consolidation expenses, $16 million related to the impact of certain tax planning initiatives on prior tax years and $9 million related to the benefit recognized on other tax items. Partially offsetting these benefits was a charge of $23 million associated with remitting foreign earnings to the U.S. under Section 965 of the American Jobs Creation Act of 2004. The combined effect of the net tax benefits that occurred in 2005, together with other ongoing tax planning activities, reduced the effective income tax rate to 23.4% for the year. The income tax provision for 2004 included tax benefits of $119 million associated with the asbestos indemnity charge, $18.5 million from the resolution of tax audits, $18 million related to a reduction in withholding tax liabilities arising from a decision to not distribute the earnings of certain foreign subsidiaries, $14.3 million from operational consolidation expenses and $2.7 million related to the benefit recognized on other tax items. The income tax provision for 2003 included tax benefits principally from the resolution in the fourth quarter of 2003 of tax audit issues and approval of claims for research and development tax credits. The Company expects that its effective income tax rate in 2006 will be approximately 30% excluding matters such as tax audit settlements and current period benefits from operational consolidation expenses. See Note 7 of Notes to Financial Statements and Critical Accounting Policies and Estimates.

Liquidity and Capital Resources

Net cash provided by operating activities was $820.4 million for 2005. This compared with net cash provided by operating activities of $764.7 million for 2004. Major factors contributing to the increase in 2005 were higher net income (excluding the non-cash asbestos indemnity charge in the fourth quarter of 2004), improved receivables collection performance, improved inventory turnover and proceeds of $33 million on the sale of long-term receivables and a lease buyout by a customer. The Company expects to continue to improve inventory performance in 2006. These items were partially offset by lower accounts payable balances primarily due to the timing of payments and higher tax payments.

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In investing activities, the Company made capital expenditures of $364 million for 2005, including $294 million on plant and equipment, $27 million of investments in affiliated companies, and $43 million in computer software. This compared with capital expenditures of $264 million in 2004, including $216 million on plant and equipment, $2 million of investments in affiliated companies and other businesses, and $46 million in computer software. The year ended December 31, 2005 included the receipt of $12.2 million from the repayment of a loan from an unconsolidated joint venture partner.

Most of the excess of cash provided by operating activities over cash used for investing activities in 2005 was used to fund financing activities totaling $330.2 million. Total Company debt reflected on the balance sheet increased by a net $188.4 million during 2005, which includes a non cash decrease of $76.4 million largely due to foreign exchange. The Company in 2005 repatriated approximately $500 million of foreign subsidiary earnings to the U.S. under the American Jobs Creation Act of 2004 a portion of which was financed with borrowings. The Company estimates that it will realize a net tax benefit of approximately $40 million associated with the repatriation. Other financing activities included payment of $500.0 million for the purchase of 11.7 million shares of common stock pursuant to the Company’s share repurchase program. Share repurchases were partly offset by proceeds realized from the exercise of stock options of $35.6 million. The net effect of all operating, investing and financing activities for 2005 was an increase in cash and cash equivalents of $161.3 million. Most of the excess of cash provided by operating activities over cash used for investing activities in 2004 was used to fund financing activities totaling $404.6 million. This included net cash debt repayments of $204 million. Total Company debt reflected on the balance sheet was reduced by a net $171 million during 2004, as those cash repayments were partly offset by net non-cash increases of $33 million, including a $38 million foreign exchange translation effect. Other financing activities included payment of $253 million for the purchase of 7.0 million shares of common stock pursuant to the Company’s share repurchase program. Share purchases were partly offset by proceeds realized from the exercise of stock options of $37 million and cash proceeds of $8 million from the settlement of foreign exchange forward contracts. The net effect of all operating, investing and financing activities for 2004 was an increase in cash and cash equivalents of $118 million.

Over the past several years, the Company has reduced its debt outstanding. The Company believes that its debt net of cash is at an appropriate level. In 2006 the Company intends to use its excess cash generation to provide a cash return to its investors. This cash return will be in the form of a quarterly dividend and share repurchases. The Company’s Board of Directors has approved a quarterly dividend of $.18 per share of common stock, a 20% increase from prior period dividends. The dividend will be paid on March 20, 2006, to shareholders of record on March 1, 2006. During 2005, the Company distributed quarterly dividend payments to shareholders that in the aggregate totaled $126.4 million. The Company paid a dividend of $.15 per share each quarter in 2005 and expects to pay quarterly dividends of $0.18 per share in 2006. On December 8, 2005 the Company’s Board of Directors also approved an additional $500 million to purchase shares of the Company’s common stock in the open market. As of February 21, 2006, the unexpended authorization on the current program totaled $353,059,310. The Company plans to repurchase the majority of this unexpended authorization in 2006, which would result in total share repurchases for 2006 of approximately $400 million.

The Company has one primary bank credit agreement. The agreement was established on July 7, 2005 and replaced the bank credit agreement in existence for the first half of 2005. The new agreement reflects improved pricing and other modifications reflecting the Company’s investment grade credit rating. The agreement provides the Company and certain subsidiaries (the “Borrowers”) with a senior, unsecured, five-year $1 billion multi-currency revolving credit facility that expires in July 2010.

The aggregate borrowings of up to $1 billion available under the primary bank credit agreement can be used for general corporate purposes, of which up to $250 million may be used for issuing letters of credit and up to $150 million for same-day, short-term borrowings. Each loan outstanding under this agreement is due at the end of each interest period (a maximum of 12 months). The Company may, however, concurrently borrow equivalent amounts subject to compliance with certain conditions contained in the agreement.

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Under the primary credit agreement, the Company, American Standard Inc., and American Standard International Inc. guarantee the debt obligations.

The primary bank credit agreement contains various covenants that limit, among other things, liens, transactions, subsidiary indebtedness, and certain mergers and sales of assets. The covenants also require the Company to meet certain financial tests: ratio of consolidated debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and consolidated free cash flow to interest expense. The Company is currently in compliance with the covenants contained in the credit agreement. See Note 11 of Notes to Financial Statements.

At December 31, 2005, the Company’s total indebtedness was $1,696.2 million. Annual scheduled debt maturities of long-term debt were $20.1 million, $3.1 million, $323.7 million, $207.7 million and $901.9 million for the years 2006 through 2010, respectively and $239.7 million thereafter. The Company repaid $208 million of 7 3/8% Senior Notes that matured on April 15, 2005 with $200 million of Senior Notes, maturing on April 1, 2015. The Senior Notes were issued by American Standard Inc., and are unconditionally guaranteed by the Company and ASII. The Senior Notes bear interest at a rate of 5 1/2% payable semi-annually on April 1 and October 1 of each year. The Company had remaining availability under its primary bank credit agreement at December 31, 2005, of $572.5 million after reduction for borrowings of $349.8 million and $77.7 million of outstanding letters of credit. In addition, the Company had $274 million available at December 31, 2005, under other facilities that can be withdrawn by the banks at any time and outstanding letters of credit issued by other banks of $72 million as of December 31, 2005. See Note 11 of Notes to Financial Statements.

The Company’s improved cash flows, the reduction in total debt outstanding over the past few years and an improved credit rating have made alternative sources of financing more readily available to the Company. The Company believes that the amounts available from operating cash flows, funds available under its credit agreements and future borrowings under the remaining $540 million of a $1 billion shelf registration statement filed with the Securities and Exchange Commission in 1998 (the “1998 Shelf Registration”) and access to private debt markets will be sufficient to meet its expected operating needs and planned capital expenditures for the foreseeable future.

On June 1, 2006 the 7.125% Euro Senior Notes with a carrying amount of $288.8 million are due. The Company intends to repay this debt with borrowings from its primary bank credit agreement and therefore these notes have been classified as long term.

In January 2003, a European subsidiary of the Company issued €30 million ($36 million at December 31, 2005 exchange rates) of 7.59% Guaranteed Senior Bonds due 2013 in a private placement as part of certain changes in the financial structure and organization of its European subsidiaries. The proceeds were used to repay borrowings under bank credit agreements. The bonds are guaranteed by the Company.

Debt securities (Senior Notes) sold under the 1998 Shelf Registration are issued by American Standard Inc. and unconditionally guaranteed by American Standard Companies Inc. and ASII. These Senior Notes cannot be redeemed prior to their maturity date. The Company intends to use the net proceeds from any future sales of debt securities in the public debt markets for general corporate purposes, which may include refinancing existing debt as it matures, certain investments, acquisitions, additions to working capital or capital expenditures.

At December 31, 2005, the Company was restricted from remitting approximately $69 million from China largely due to the absence of locally accumulated statutory earnings. The Company does not believe that such restrictions or other similar restrictions which may affect certain of the Company’s foreign subsidiaries will materially affect the Company’s liquidity. The Company does not rely on its cash balance in existence at any point in time to fund operations, but rather its ongoing cash flows from operations.

Off-Balance Sheet Arrangements

The Company employs several means to manage its liquidity and is not dependent upon any one source of funding. In addition to funds available from operating cash flows, bank credit agreements and the public debt and

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equity markets as described above, the Company uses two principal off-balance-sheet techniques: operating leases and receivables financing arrangements. Operating leases are employed as an alternative to purchasing certain property, plant and equipment. Receivables financing arrangements are used to reduce borrowing costs. Future rental commitments under all non-cancelable operating leases in effect at December 31, 2005, total $577 million. That total represents the equivalent of approximately $475 million of off-balance sheet debt, discounted at an assumed rate of 6.0%. See the following table of Aggregate Contractual Obligations for a summary of amounts due under operating leases.

To reduce its borrowing cost, during 2002 the Company established new accounts receivable financing facilities in Europe and the U.S., and terminated a previously existing arrangement in the U.S. See Note 8 of Notes to Financial Statements. As part of these facilities, the Company formed special-purpose entities (the “SPEs”) that are included in the financial statements of the Company for the sole purpose of buying and selling receivables generated by the Company. Under these facilities, the Company, irrevocably and without recourse, transfers all eligible accounts receivable to the SPEs, which in turn, sell them, or undivided ownership interests in them, to conduits administered by banks. The assets of the SPEs are not available to pay the claims of the Company or any of its subsidiaries. The Company retains a subordinated interest in the receivables sold of approximately 8% in Europe and approximately 51% in the U.S. The conduits obtain the funds to purchase the receivables, other than the retained interest, by selling commercial paper to third-party investors. Advances from the conduits to the SPEs are limited to approximately $501.0 million (€275.0 million, or approximately $326.0 million at December 31, 2005 exchange rates, under the European facility, and $175.0 million under the U.S. facility). At December 31, 2005 advances from conduits were $306.4 million and $172.2 million under the European and U.S. facilities, respectively. The Company retains responsibilities for the collection and administration of receivables subject to these facilities. The receivables sold are removed from the balance sheet since the sales meet the applicable criteria of Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The Company’s retained interest is recorded at fair value in the Company’s Consolidated Balance Sheet. To the extent that the cash received and value of the retained interest is less than the net book value of the receivables sold, losses are recognized at the time of sale. Those losses amounted to $47.9 million for 2005, $40.2 million for 2004 and $41.7 million in 2003 and are included in other expense in the Consolidated Statement of Income. The European facility is subject to the maintenance of specified debt-rating levels, and for the U.S. facility, the maintenance of certain financial covenants. The Company is currently in compliance with these covenants. In addition, these facilities are subject to annual renewals. The European facility will require renewal in May 2006, and the U.S. facility in September 2006. The Company has the ability to renew these facilities and intends to renew them upon their expiration.

The Company has commitments and performance guarantees, including energy savings guarantees totaling $75.2 million extending from 2006 to 2022, under long-term service and maintenance contracts related to its Air Conditioning Systems and Services business. Through 2005 the Company has only experienced one insignificant loss under such arrangements and considers the probability of any significant future losses to be unlikely.

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Following is a summary of contractual obligations, both on and off the balance sheet as of December 31, 2005.

Aggregate Contractual Obligations

As of December 31, 2005

(Millions of dollars)

	Payments due by period (1)
Contractual Obligations	Total		2006		2007 and 2008		2009 and 2010		Beyond 2010
Long-term debt obligations (principal plus interest) (2)(3)	$	2,252	$	104	$	477	$	1,216	$	455
Operating lease obligations (4)		577		137		195		127		118
Purchase obligations (5)		700		686		14		—		—
Unfunded pension and post-retirement benefits (6)		712		127		119		127		339
Other long-term liabilities included on the balance sheet (7)		90		48		21		10		11
Total	$	4,331	$	1,102	$	826	$	1,480	$	923

Notes to table

(1) The amounts and timing of such obligations, as shown in the table may vary substantially from amounts that will actually be paid in future years. For example, the actual amount to be paid under long-term debt obligations under the Company’s primary credit agreement will depend on the amount of debt outstanding under the agreement in each year.

(2) Amounts shown for long-term debt obligations include the associated interest calculated at the December 31, 2005 rates applicable to each type of debt.

(3) Obligations under capital leases are not material (approximately $8 million) and are included in long-term debt obligations.

(4) Amounts include future rental commitments under all non-cancelable operating leases in effect at December 31, 2005. The present value of the $577 million total is equivalent to approximately $475 million, discounted at an assumed rate of 6.0%.

(5) In the normal course of business the Company expects to purchase approximately $5.2 billion in 2006 of materials and services, and estimates that on average no more than approximately $600 million is outstanding at any one time in the form of legally binding commitments. The Company spent approximately $5.0 billion, $4.2 billion and $4.0 billion on materials and services in 2005, 2004 and 2003. The Company also expects to spend approximately $250 million on capital expenditures for plant and equipment and $40 million for purchased computer software during 2006, and estimates that no more than $70 million is committed under legally binding agreements at any one time.

(6) Amounts represent undiscounted projected benefit payments to the Company’s unfunded plans over the next ten years, as well as expected contributions to funded pension plans for 2006. The expected benefit payments are estimated based on the same assumptions used to measure the Company’s accumulated benefit obligation at the end of 2005 and include benefits attributable to estimated future employee service of current employees.

(7) Other long-term liabilities include amounts payable under workers compensation and general liability claims.

Capital Expenditures

The Company’s capital expenditures for 2005 were $364 million (including $294 million on plant and equipment, $27 million of investments in affiliated companies and other businesses, and $43 million on computer software), compared with $264 million for 2004 (including $216 million on plant and equipment, $2 million of investments in affiliated companies and other businesses, and $46 million on computer software).

Capital expenditures for Air Conditioning Systems and Services for 2005 were $182 million (including $156 million on plant and equipment, $18 million for computer software and $8 million for investments in affiliated companies), an increase of 63% from 2004 expenditures of $112 million (including $97 million on plant and

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equipment, $1 million for investments in affiliated companies and $14 million for computer software). Major expenditures in 2005 primarily related to increased investments associated with the transition to 13 SEER technology in the residential air conditioning business and new product investments in the commercial air conditioning business.

Bath and Kitchen’s capital expenditures for 2005 were $103 million (including $73 million on plant and equipment, $18 million of investments in affiliated companies and $12 million on computer software), an increase of 34% from 2004 capital expenditures of $77 million (including $58 million on plant and equipment, $1 million of investments in affiliated companies and $18 million on computer software). Major expenditures on plant and equipment in 2005 included projects related to productivity (process improvements), new products, product improvements and plant automation. Increases in investments in affiliated companies and other businesses were primarily related to purchasing additional ownership in certain majority owned Bath and Kitchen ventures in Europe and Asia from minority shareholders.

Capital expenditures for Vehicle Control Systems in 2005 were $69 million (including $61 million on plant and equipment and $8 million for computer software) essentially flat with expenditures of $69 million in 2004 (including $58 million on plant and equipment and $11 million for computer software). Expenditures on plant and equipment in 2005 were primarily related to capital equipment for new products, cost reduction and capacity expansion.

Corporate headquarters incurred minor amounts of spending on leasehold improvements and computer software in each of the last two years.

The Company believes capital spending in recent years has been sufficient to maintain efficient production capacity, to implement important product and process redesigns, to expand capacity to meet increased demand and to make strategic investments and acquisitions. Six Sigma projects have freed up capacity in the Company’s manufacturing facilities and are expected to continue to do so. The Company expects to continue investing to expand and modernize its existing facilities and invest in its facilities to create capacity for new product development. The Company expects to make capital expenditures on plant and equipment in 2006 of approximately $250 million, excluding potential acquisitions and computer software.

Effect of Recently Issued Accounting Standards

The Financial Accounting Standards Board (“FASB”) has recently issued several new Statements and Interpretations. Statement of Financial Accounting Standard No. 151 (“FAS 151”), Inventory Costs, an Amendment of ARB No. 43, Chapter 4 and Statement No. 153 (“FAS 153”), Exchanges of Nonmonetary Assets an Amendment of APB Opinion No. 29 were issued in 2004. FAS 151 will be effective for the Company in 2006 and requires that the cost of inventory exclude costs associated with abnormal amounts of idle capacity and spoilage. The impact of adopting FAS 151 is not expected to be material to the Company. FAS 153 became effective for the Company in the third quarter of 2005 and did not materially impact the Company’s financial statements. FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”), was issued in March 2005. This interpretation became effective for the Company in the fourth quarter of 2005 and clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. The impact of this interpretation was not material to the Company’s financial statements. Statement No. 154 (“FAS 154”), Accounting Changes and Error Corrections was issued in the second quarter of 2005. Under FAS 154, entities will be required to report a change in accounting principle through retrospective application of the new accounting principle to all prior periods, unless impracticable to do so. A change in the method of applying an accounting principle is considered a change in accounting principle under the standard. In addition, errors in the financial statements of a prior period discovered subsequent to their issuance shall be reported as a prior period adjustment by restating the prior period financial statements. This standard will be effective in 2006.

Statement of Financial Accounting Standard No. 123 (Revised 2004) (“FAS 123”), Share Based Payments, was issued on December 16, 2004. The new standard requires companies to recognize in their financial statements

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the cost of employee services received in exchange for valuable equity instruments issued. Currently, the Company accounts for share based payments under APB 25. Under APB 25, compensation cost is not recorded for substantially all options granted because the option exercise price was equal to the market value of stock on the grant date. On April 14, 2005 the Securities Exchange Commission approved a rule delaying the effective date of FAS 123 for public companies. Under the rule, FAS 123 is now effective for annual periods beginning after June 15, 2005. The Company will adopt FAS 123 in the first quarter of 2006. The Company will begin to recognize the cost of unvested awards outstanding as of January 1, 2006 as well as the cost of any awards granted after January 1, 2006 in its financial statements. The Company will not restate prior period financial statements to reflect the impact of expensing share based payments, but rather continue to reflect the pro forma impact to historical financial statements using the amounts from Note 2 of Notes to Financial Statements. The impact of adopting FAS 123 for fiscal 2006 is expected to be approximately $0.10 per diluted share.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with those accounting principles requires management to make judgments and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Those judgments and estimates have a significant effect on the financial statements because they result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Actual results could differ from those estimates. The Company frequently re-evaluates its judgments and estimates that are based upon historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

The Company believes that of its significant accounting policies (see Note 2 of Notes to Financial Statements), the ones that may involve a higher degree of uncertainty, judgment and complexity are post-retirement benefits, warranties, income taxes, revenue recognition and commitments and contingencies. Management has reviewed the following disclosures with the Audit Committee of the Board of Directors.

Post-retirement benefits–The Company has significant pension and post-retirement benefit costs and liabilities that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected return on plan assets, mortality rates, merit and promotion increases and the health care cost trend rate. The Company is required to consider current market conditions, including changes in interest rates and health care costs, in making its assumptions. Changes in the related pension and post-retirement benefit costs or liabilities may occur in the future due to changes in the assumptions. The assumptions as to the expected long-term rates of return on plan assets are based upon the composition of plan assets, historical long-term rates of return on similar assets and current and expected market conditions. The discount rate used for U.S. plans reflects the market rate for high-quality fixed-income investments on the Company’s annual measurement date (December 31) and is subject to change each year. The discount rate was determined by matching, on an approximate basis, the coupons and maturities for a portfolio of corporate bonds (rated Aa or better by Moody’s Investor Services) to the expected plan benefit payments defined by the projected benefit obligation. The discount rates used for plans outside the U.S. are based on a combination of relevant indices regarding corporate and government securities, the duration of the liability and appropriate judgment. A decrease of one percentage point in the assumed rate of return on plan assets and a decrease of one percentage point in the discount rate applied to projected benefit obligations would increase annual pension expense by approximately $33.8 million. An increase of one percentage point in the assumed health care cost trend rate in each future year would increase annual health insurance costs by approximately $1 million. See the disclosures about pension and post-retirement obligations, the composition of plan assets, assumptions and other matters in Note 6 of Notes to Financial Statements.

Warranties–Products sold are generally covered by a warranty for periods ranging from one to ten years and for the lifetime of certain bath and kitchen faucets. At the time of sale the Company accrues a warranty reserve for estimated costs to provide equipment, parts or services to satisfy warranty obligations. The Company’s estimate of costs to service its warranty obligations is based on historical experience and expectations of future conditions.

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To the extent the Company experiences changes in warranty claim activity or costs associated with servicing those claims, its warranty accrual is adjusted accordingly. The Company also sells extended warranty contracts for up to 10 years on some of its products. Revenues from the sales of extended warranties are deferred and amortized on a straight-line basis over the terms of the contracts or based upon historical experience. Costs to satisfy obligations under extended warranty contracts are charged to cost of sales as incurred. Warranty accrual estimates are updated based upon the most current warranty claims information available. Such changes in estimates, including foreign exchange effects decreased warranty expense by a net $3 million in 2005, and increased warranty expense by $26 million in 2004, and $8 million in 2003. See Note 14 of Notes to Financial Statements for a three-year summary of warranty costs.

Income taxes–The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to decrease the net deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to increase the net deferred tax assets would increase income in the period such determination was made. Deferred tax assets have been reduced by a valuation allowance of $175 million. A decrease in that valuation allowance of 10% would increase net income by approximately $17.5 million. The Company also estimates its effective income tax rate periodically, considering all known factors and the estimated effects of future events or tax planning strategies that can cause that rate to vary from the statutory rate. Estimating the outcome of future events is inherently uncertain and final resolution of those events can cause the effective rate to vary significantly. For example, income taxes in the first quarter of 2005 included a tax benefit of $39 million ($.18 per diluted share) associated with the resolution of tax contingencies and the impact of certain non-U.S. tax planning initiatives on prior tax years; income taxes in the second quarter of 2005 included $36.4 million ($.17 per diluted share) of tax benefits primarily related to the resolution of tax audits; income taxes in the third quarter of 2005 included $9.0 million ($.04 per diluted share) of tax benefits primarily related to an adjustment to the 2004 tax provision to agree to the final U.S. tax return and income taxes in the fourth quarter included a tax expense of $20.6 million ($.10 per diluted share) primarily related to a charge of $23 million associated with remitting foreign earnings to the U.S. under Section 965 of the American Jobs Creation Act of 2004.

Revenue Recognition–The Company derives a portion of its revenues streams from multiple-element arrangements and arrangements for the sale of air conditioning equipment and related services under long-term construction-type contracts. Both of these sources of revenues require the application of judgment and estimates. Revenues from contracts with multiple-element arrangements, such as those that include Company products along with other third party products, are recognized for each separate unit of accounting based on the relative fair value. Revenues associated with long-term construction type contracts are recorded using the percentage-of-completion method. The Company recognizes revenue under percentage of completion accounting using the cost to cost method as the measure of progress. The application of percentage of completion accounting requires estimates of future revenues and contract costs over the full term of the contract. The long-term nature of these contracts and complexity of the projects can affect the Company’s ability to estimate revenues and costs expected from the project. Accordingly, the Company updates project cost estimates on a quarterly basis or, when changes in circumstances warrant, more frequently. Revenues associated with contracts accounted for under the percentage completion method of accounting amounted to approximately 4% of total company sales in 2005, 4% in 2004 and 5% in 2003.

The Company offers certain customers cooperative advertising allowances, rebates and other forms of sales incentives. The Company typically records cooperative advertising allowances, rebates and other forms of sales incentives as a reduction of revenue at the later of the date of the sale or the date the incentive is offered. However, where the Company receives an identifiable benefit for the consideration that is sufficiently separable from the associated sale and the Company can reasonably estimate the fair market value of the benefit received or if the consideration provided is non cash, the Company presents these costs in selling and administrative expenses in its consolidated statements of income. The recognition of the cost of these forms of sales incentives requires the application of judgments and estimates. The Company analyzes its history of paying such incentives, the terms of

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current and past incentives, as well as management’s assessment of current conditions and other facts and circumstances when recording an appropriate estimate for these items at the time of the related sale or date the incentive is offered.

Commitments and Contingencies–The Company is subject to proceedings, lawsuits and other claims related to environmental, asbestos, labor, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of liability to be recorded, if any, for these contingencies is made after careful analysis of each individual issue. The liability recorded may change in the future, possibly by significant amounts, due to new developments in any of the matters.

Asbestos—In addition to the liability arising out of pending claims, the Company has recorded a liability for its exposure to unasserted future asbestos-related claims as well. The Company has also recorded a receivable for probable asbestos-related insurance recoveries. Both the recorded asbestos liability and the related receivable are based upon the Company’s assumptions in consultation with outside advisors. As a result, both the recorded liability and the recorded receivable may change in the future, possibly by significant amounts, if new facts or developments require the Company to reassess such assumptions. These assumptions are described in greater detail below.

Prior to the fourth quarter of 2004, the Company recorded an asbestos liability and associated receivable only for filed asbestos claims. The liability was estimated based on claims resolved, the assessment of claims pending, the status of ongoing litigation, defense and settlement strategies and an assessment of other entities’ responsibilities for the claims. The receivable was based on an analysis of insurance coverage, the insurers’ financial strength and insurance payments made to date. Historically, costs associated with claims that might be filed against the Company in the future were not recorded because the Company did not believe its history and experience with asbestos-related litigation was sufficient to allow it to make a reasonable estimate of this liability.

The Company concluded in the fourth quarter of 2004, that a reasonable estimate of the liability and associated receivable for unasserted potential future asbestos-related claims could be made and accordingly the Company recorded this liability in its financial statements. The Company retained Dr. Francine F. Rabinovitz of Hamilton, Rabinovitz and Alschuler, Inc. (“HR&A”) to assist it in calculating an estimate of its total liability for pending and unasserted potential future asbestos-related claims. The following assumptions were used in determining this liability:

• HR&A’s interpretation of a widely accepted forecast of the population likely to have been exposed to asbestos;

• epidemiological studies estimating the number of people likely to develop asbestos-related diseases;

• HR&A’s analysis of the number of people likely to file an asbestos-related personal injury claim against the Company based on such epidemiological data and the Company’s most recent five-year claims history;

• an analysis of the Company’s pending cases, by type of injury claimed;

• an analysis of the Company’s most recent five-year history to determine the average settlement value of claims, by type of injury claimed;

• an adjustment for inflation in the future average settlement value of claims, at a 3% annual inflation rate; and

• an analysis of the period over which the Company has and is likely to resolve asbestos-related claims against it in the future.

The Company monitors the number and mix (disease type) of claims filed and paid each period against the estimates calculated by its asbestos liability model. The Company’s liability for both pending and unasserted claims could change significantly if actual experience related to these variables and/or information from the Company’s external advisors indicate that a change in the long-term assumptions regarding future claims is appropriate. For example, certain claim disease types are more costly to settle, which could impact the amount of the asbestos liability if actual experience and information regarding the current asbestos environment indicates that a change in the expected mix of future claims is warranted. In addition, the Company uses a rolling five year average of claim

48

settlement amounts by disease type as the basis for calculating the expected settlement amounts of future claims. The asbestos liability could change significantly as the claim settlement amounts continue to develop. To date, the mix of claims filed (disease type), settlement amounts and timing of payments has not indicated that a change in the assumptions outlined above is appropriate.

In addition to the abovementioned liability, the Company has recorded a receivable for probable asbestos-related insurance recoveries. This receivable represents amounts due to the Company for previously settled and paid claims, the reimbursable portion of incurred legal expenses and the probable reimbursements relating to its estimated liability for pending and future claims. In calculating the receivable the Company used the estimated asbestos liability for pending and projected future claims calculated by HR&A. It also considered the amount of insurance available, gaps in coverage, applicable deductibles, allocation methodologies, solvency ratings and credit-worthiness of the insurers, the published dividend rates of insolvent insurers, amounts already recovered from and the potential for settlements with insurers, and estimated annual legal fees. In addition, the Company and its advisors continually monitor the status of pending litigation that could impact the allocation of claims against the Company’s various insurance policies.

The Company is in litigation against certain carriers whose policies the Company believes provide coverage for asbestos-related claims. The insurance carriers named in this suit are challenging the Company’s right to recovery. The Company expects to enter into mediation or settlement negotiations with some of the insurers that are party to this suit in 2006.

Notwithstanding the fact that a portion of the Company’s insurance recovery receivable is the subject of litigation, the Company has concluded that its insurance receivable is probable of recovery because of the following factors:

• the success of other companies in collecting under their insurance policies in comparable circumstances. The Company has reviewed numerous situations involving other companies and concluded that the Company’s facts and circumstances support collection;

• the Company’s confidence in its right to recovery under the terms of its policies and pursuant to applicable law;

• the nature of the issues raised in the New Jersey coverage litigation, in which the insurer defenses have been primarily focused on which insurance company should pay, not whether the claims themselves are covered under the numerous policies. Disagreements among carriers concerning which one is responsible for which claim are not unique to the Company where, as here, the policy holder has multiple lines of coverage potentially available to it; and

• the Company’s recent experience in managing asbestos-related claims and insurance recoveries and settlements of such claims. The Company continues to receive payments on its remaining primary coverage and has reached several settlements with excess carriers. The Company’s settlements in the New Jersey litigation with various individual carriers and syndicates where the Company’s claims were the subject of litigation to date have reached approximately $98 million.

The Company reviews its estimates of the recorded asbestos-related liability and the related insurance receivables on a periodic basis to determine whether any adjustments are required. The Company may also adjust these estimates based upon the outcome of the court-ordered mediation referenced above and/or expected settlement discussions. For additional disclosures on asbestos and other contingent liabilities see Note 14 of Notes to Financial Statements for a description of the activity and related amounts that impacted the Company’s asbestos liability and related receivable for probable asbestos-related insurance recoveries.

Cyclical and Seasonal Nature of Business

Approximately 60% of Air Conditioning Systems and Services and Bath and Kitchen sales on a combined basis are to the replacement, remodeling and repair markets that tend to be less cyclical than other markets. The Company’s geographic diversity mitigates the effects of fluctuations in individual new construction markets. Vehicle

49

Control Systems’ sales are dependent to a large extent on production levels of medium-sized and heavy trucks and buses, particularly in Europe and the U.S., which have been cyclical. Vehicle Control Systems has generally outperformed the medium-sized and heavy vehicle markets, primarily from increased content per vehicle and improved market penetration.

Total Company sales and related segment income tend to be seasonally higher in the second and third quarters of the year because, in the U.S. and other Northern Hemisphere markets, summer is the peak season for sales of Air Conditioning Systems and Services. In addition, a significant percentage of Air Conditioning Systems and Services’ sales are related to U.S. residential and commercial construction activity, which is generally higher in the second and third quarters of the year.

Information Concerning Forward-Looking Statements

Certain of the statements contained in this report (other than the historical financial data and other statements of historical fact), including, without limitation, statements as to management’s expectations and beliefs, are forward-looking statements. Forward-looking statements are made based upon management’s good faith expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with such expectations or that the effect of future developments on the Company will be those anticipated by management. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “anticipate,” “intends” and other words of similar meaning in connection with a discussion of future operating or financial performance. This Report on Form 10-K includes important information as to risk factors in “Item 1. Business”, “Item 1A. Risk Factors”, and “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many important factors could cause actual results to differ materially from management’s expectations, including:

• the level of end market activity in the Company’s Air Conditioning Systems and Services’ and Bath and Kitchen businesses and the level of truck and bus production in the Company’s Vehicle Control Systems’ markets;

• weather conditions as unexpected cool trends or unseasonably warm trends during the summer season could negatively or positively affect business and results of operations in Air Conditioning Systems and Services;

• the extent to which the Company will be able to realize the estimated savings from materials management and Six Sigma initiatives;

• additional developments which may occur that could affect the Company’s estimate of asbestos liabilities and recoveries, such as the nature and number of future claims, the average cost of disposing of such claims, average annual defense costs, the amount of insurance recovery, legislation or legal decisions affecting claims criteria or payout;

• unpredictable difficulties or delays in the development of new product technology;

• changes in U.S. or international economic conditions, such as inflation, interest rate fluctuations, foreign exchange rate fluctuations or recessions in the Company’s markets;

• pricing changes to the Company’s supplies or products or those of its competitors, and other competitive pressures on pricing and sales;

• increased difficulties in obtaining a consistent supply of those basic materials at pricing levels which will not have an adverse effect on results of operations;

• labor relations; integration of acquired businesses;

50

• difficulties in obtaining or retaining the management and other human resource competencies that the Company needs to achieve its business objectives;

• the impact on the Company or a segment from the loss of a significant customer or a few customers;

• risks generally relating to the Company’s international operations, including governmental, regulatory or political changes;

• changes in environmental, health or other regulations that may affect one or more of the Company’s current products or future products;

• assumptions made related to post-retirement benefits, including rate of return on plan assets, the discount rate applied to projected benefit obligations and the rate of increase in the health care cost trend rate;

• changes in laws or different interpretations of laws that may affect the Company’s expected effective tax rate for 2006;

• periodic adjustments to litigation reserves;

• the outcome of lawsuits and other contingencies;

• transactions or other events affecting the need for, timing and extent of the Company’s capital expenditures; and

• adoption of new accounting pronouncements promulgated by the Financial Accounting Standards Board or other accounting standard setting agencies.

51

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The Company is exposed to fluctuations in the price of major raw material commodities used in the manufacturing process (such as copper, aluminum, steel and natural gas), foreign currency fluctuations and interest rate changes. From time to time the Company enters into hedge agreements to reduce its risks related to commodity price, foreign currency and interest rates. Such agreements hedge only specific transactions or commitments. To minimize the risk of counter-party nonperformance, such agreements are made only through major financial institutions with significant experience in such financial instruments.

To minimize the risk of fluctuations in the market price of major raw material commodities, such as copper and aluminum used in the manufacturing process, the Company may enter commodity-forward contracts to effectively fix the cost of the commodity. Maturity dates of the contracts are scheduled to coincide with market purchases of the commodity. Cash proceeds or payments between the Company and the counter-party at maturity of the contracts are recognized as an adjustment to the cost of the commodity purchased, to the extent the hedge is effective. Charges or credits resulting from ineffective hedges are recognized in income immediately. The Company generally does not enter commodity hedges extending beyond eighteen months. The notional value of commodity-forward contracts outstanding as of December 31, 2005 and 2004 was $128 million and $95 million, respectively. A 10% change in the price of commodities hedged would change the fair value of the hedge contracts by approximately $15 million as of December 31, 2005 and $11 million as of December 31, 2004.

The Company conducts operations through subsidiaries in most of the major countries of Western Europe, Canada, Brazil, Mexico, Bulgaria, the Czech Republic, Poland, Central American countries, China, Malaysia, the Philippines, Indonesia, South Korea, Thailand, Taiwan and Egypt. In addition, the Company conducts business in some of these countries through affiliated companies and partnerships in which the Company owns 50% or less of the stock or partnership interest. Because the Company has manufacturing operations in 27 countries, fluctuations in currency exchange rates may have a significant impact on its financial statements. Such fluctuations have much less effect on local operating results, however, because the Company to a significant extent sells its products within the countries in which they are manufactured. However, a significant and growing portion of the Company’s products are manufactured in lower-cost locations and sold in various countries, resulting in increased exposure to foreign exchange effects. The asset exposure of foreign operations to the effects of exchange volatility has also been partly mitigated by the denomination in foreign currencies of a portion of the Company’s borrowings. The Company is also subject to political risks in its foreign operations.

To manage the balance between floating interest rate debt and fixed interest rate debt, the Company has entered into interest rate swaps that effectively convert fixed-rate debt to variable-rate debt. The maturity date of these swap contracts coincides with the maturity date of the underlying debt. Under these swaps, the Company pays a specified variable interest rate and receives the fixed rate applicable to the underlying debt. The interest rate swaps are designated as fair value hedges of the underlying debt. The fair value of the hedges is recorded in other long-term assets or liabilities with a corresponding increase or decrease in the debt obligation. The change in fair values of the hedge instrument and the debt are recorded as equal and offsetting unrealized gains and losses. The existing fair value hedges are 100% effective and therefore there is no effect on current earnings from hedge ineffectiveness. The notional value (the value of the underlying debt) of interest rate swaps outstanding as of December 31, 2005, and December 31, 2004 was $225 million and $300 million, respectively. Including that $225 million, as of December 31, 2005, approximately $593 million of the Company’s $1.696 billion total debt bore interest at variable rates based upon the London Interbank Offered Rate (LIBOR). A 10% change in swap rates would change the fair value of the interest rate swaps by approximately $2 million and $3 million as of December 31, 2005 and 2004.

The Company has commitments and performance guarantees, including energy savings guarantees totaling $75.2 million as of December 31, 2005, extending from 2006 to 2022, under long-term contracts related to its air conditioning equipment and system controls. Through 2005 the Company has only experienced one insignificant loss under such arrangements and considers the probability of any significant future losses to be unlikely.

52

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of American Standard Companies Inc.

We have audited the accompanying consolidated balance sheet of American Standard Companies Inc. as of December 31, 2005 and 2004, and the related consolidated statements of income, consolidated statement of shareholders’ equity and comprehensive income, and consolidated statement of cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Standard Companies Inc. at December 31, 2005 and 2004, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of American Standard Companies Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York

February 21, 2006

53

CONSOLIDATED STATEMENT OF INCOME

AMERICAN STANDARD COMPANIES INC.

	Year Ended December 31,
(Amounts in millions, except share data)	2005		2004		2003
Sales	$	10,264.4	$	9,508.8	$	8,567.6
Costs, expenses and other income:
Cost of sales		7,523.6		6,952.3		6,477.5
Selling and administrative expenses		1,865.4		1,708.5		1,360.8
Other expense		31.2		50.0		53.1
Asbestos indemnity charge, net of recoveries		—		320.2		10.0
Interest expense		118.3		114.9		117.0
		9,538.5		9,145.9		8,018.4
Income before income taxes		725.9		362.9		549.2
Income taxes		169.6		49.5		144.0
Net income applicable to common shares	$	556.3	$	313.4	$	405.2
Net income per common share:
Basic	$	2.63	$	1.46	$	1.87
Diluted	$	2.56	$	1.42	$	1.83
Average outstanding common shares:
Basic		211,290,498		214,835,002		216,809,658
Diluted		216,969,293		220,584,135		221,150,472

See Notes to Financial Statements.

54

CONSOLIDATED BALANCE SHEET

AMERICAN STANDARD COMPANIES INC.

	Year Ended December 31,
(Amounts in millions, except share data)	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	390.7		$	229.4
Accounts receivable, less allowance for doubtful accounts–$46.9 in 2005; $46.2 in 2004		1,161.3			1,154.5
Inventories		1,078.2			1,087.2
Future income tax benefits		99.3			114.5
Retained interest in securitization program		208.4			174.5
Other current assets		128.3			129.7
Total current assets		3,066.2			2,889.8
Facilities, at cost, net of accumulated depreciation		1,622.2			1,620.0
Goodwill		1,152.9			1,267.7
Capitalized software costs, net of accumulated amortization–$321.8 in 2005; $274.5 in 2004		200.6			230.0
Debt issuance costs, net of accumulated amortization–$33.1 in 2005; $28.2 in 2004		13.9			15.4
Long-term asbestos receivable		384.0			399.6
Long-term future income tax benefits		93.5			78.4
Investment in associated companies		98.2			77.5
Other assets		236.3			263.4
TOTAL ASSETS	$	6,867.8		$	6,841.8
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Loans payable to banks	$	17.5		$	76.6
Current maturities of long-term debt		2.6			2.2
Accounts payable		844.5			887.2
Accrued payrolls		339.5			331.2
Current portion of warranties		181.9			155.1
Taxes on income		91.8			130.5
Other accrued liabilities		751.1			763.9
Total current liabilities		2,228.9			2,346.7
Long-term debt		1,676.1			1,429.1
Other long-term liabilities:
Post-retirement benefits		631.6			744.1
Long-term portion of asbestos liability		673.0			683.4
Warranties		246.7			242.4
Deferred tax liabilities		131.1			94.3
Other		357.9			371.5
Total liabilities		5,945.3			5,911.5
Commitments and contingencies
Shareholders’ equity:
Preferred stock, 2,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $.01 par value, 560,000,000 shares authorized; shares issued: 251,769,794 in 2005; 251,768,741 in 2004; and shares outstanding: 206,741,396 in 2005; 214,947,988 in 2004		2.5			2.5
Capital surplus		834.4			794.5
Treasury stock, at cost: 45,028,398 shares in 2005; 36,820,753 shares in 2004		(1,181.4	)		(760.1	)
Retained earnings		1,576.5			1,146.6
Accumulated other comprehensive income:
Deferred gain on hedge contracts, net of tax		20.9			9.3
Foreign currency translation effects		(212.6	)		(102.8	)
Minimum pension liability adjustment, net of tax		(117.8	)		(159.7	)
Total shareholders’ equity		922.5			930.3
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	6,867.8		$	6,841.8

See Notes to Financial Statements.

55

CONSOLIDATED STATEMENT OF CASH FLOWS

AMERICAN STANDARD COMPANIES INC.

	Year Ended December 31,
(Amounts in millions)	2005			2004			2003
Cash provided (used) by:
Operating activities:
Net income	$	556.3		$	313.4		$	405.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		180.4			171.0			161.8
Amortization of capitalized software and other intangibles		87.3			90.9			85.0
Equity in earnings of unconsolidated joint ventures, net of dividends received		(20.6	)		(15.8	)		(14.3	)
Non-cash stock compensation		64.5			60.9			60.4
Deferred income taxes		36.8			(156.1	)		31.5
Gain on sale of property, plant and equipment		(3.4	)		(3.7	)		(7.9	)
Changes in assets and liabilities:
Accounts receivable		(49.9	)		(86.1	)		(86.3	)
Inventories		(30.0	)		(138.4	)		(76.5	)
Accounts payable		(10.3	)		157.6			33.4
Other accrued liabilities and taxes		68.1			53.5			188.2
Post-retirement benefits		(13.0	)		(19.1	)		(9.4	)
Net asbestos indemnity liability		5.2			316.3			0.2
Other current and long-term assets		(74.6	)		(84.0	)		(102.8	)
Other long-term liabilities		23.6			77.2			(17.3	)
Net cash provided by operating activities before proceeds from initial sale of receivables		820.4			737.6			651.2
Proceeds from initial sale of receivables, net		—			27.1			—
Net cash provided by operating activities		820.4			764.7			651.2
Investing activities:
Purchases of property, plant and equipment		(293.8	)		(215.9	)		(170.7	)
Investments in affiliated companies and other businesses		(26.6	)		(1.5	)		(25.0	)
Investments in computer software		(43.3	)		(46.6	)		(44.9	)
Proceeds from repayment/loan to joint venture, net		12.2			(16.2	)		—
Proceeds from disposal of property, plant and equipment		28.2			29.4			23.2
Net cash used by investing activities		(323.3	)		(250.8	)		(217.4	)
Financing activities:
Proceeds from issuance of long-term debt		205.3			1.1			33.0
Repayments of long-term debt, including redemption premiums		(211.2	)		(2.8	)		(129.6	)
Net change in revolving credit facilities		319.8			(228.5	)		(276.4	)
Net change in other short-term debt		(57.8	)		26.6			1.8
Purchases of treasury stock		(500.0	)		(253.0	)		(149.5	)
Dividend payments		(126.4	)		—			—
Proceeds from exercise of stock options		35.6			36.9			54.9
Payments of/proceeds from foreign exchange forward contracts		(4.1	)		8.5			38.2
Other common stock issued or reacquired, net and other		8.6			6.6			7.5
Net cash used by financing activities		(330.2	)		(404.6	)		(420.1	)
Effect of exchange rate changes on cash and cash equivalents		(5.6	)		8.4			1.4
Net increase in cash and cash equivalents		161.3			117.7			15.1
Cash and cash equivalents at beginning of period		229.4			111.7			96.6
Cash and cash equivalents at end of period	$	390.7		$	229.4		$	111.7
Cash paid during the year for:
Interest	$	110.9		$	107.3		$	114.1
Taxes	$	185.3		$	160.0		$	40.9

See Notes to Financial Statements.

56

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

AMERICAN STANDARD COMPANIES INC.

															Accumulated Other Comprehensive Income
(Amounts in millions)	Common Stock		Capital Surplus			Unearned Compen- sation			Treasury Stock			Retained Earnings			Deferred Gain (Loss) on Hedge Contracts			Foreign Currency Translation Effects			Minimum Pension Liability Adjust- ment			Compre- hensive Income
Balance at December 31, 2002	$	2.5	$	722.6		$	(2.3	)	$	(534.6	)	$	428.0		$	(2.0	)	$	(309.2	)	$	(75.2	)
Net income		—		—			—			—			405.2			—			—			—		$	405.2
Foreign currency translation		—		—			—			—			—			—			104.7			(2.3	)		102.4
Deferred gain on hedge contracts, net of taxes		—		—			—			—			—			9.1			—			—			9.1
Minimum pension liability adjustment, net of taxes		—		—			—			—			—			—			—			(15.7	)		(15.7	)
Total comprehensive income																								$	501.0
Treasury stock purchased		—		—			—			(151.9	)		—			—			—			—
Stock options exercised		—		(7.1	)		—			61.9			—			—			—			—
Stock options tax benefit		—		14.2			—			—			—			—			—			—
Common stock issued to Employee Stock Ownership Plan		—		21.1			—			37.7			—			—			—			—
Common stock issued to Employee Stock Purchase Plan		—		1.6			—			5.6			—			—			—			—
Amortization of unearned compensation-restricted stock		—		—			1.6			—			—			—			—			—
Other common stock issued or reacquired		—		1.3			—			(3.0	)		—			—			—			—
Balance at December 31, 2003		2.5		753.7			(0.7	)		(584.3	)		833.2			7.1			(204.5	)		(93.2	)
Net income		—		—			—			—			313.4			—			—			—		$	313.4
Foreign currency translation		—		—			—			—			—			—			101.7			(2.3	)		99.4
Deferred gain on hedge contracts, net of taxes		—		—			—			—			—			2.2			—			—			2.2
Minimum pension liability adjustment, net of taxes		—		—			—			—			—			—			—			(64.2	)		(64.2	)
Total comprehensive income																								$	350.8
Treasury stock purchased		—		—			—			(250.6	)		—			—			—			—
Stock options exercised		—		(6.4	)		—			43.4			—			—			—			—
Stock options tax benefit		—		14.1			—			—			—			—			—			—
Common stock issued to Employee Stock Ownership Plan		—		28.7			—			31.4			—			—			—			—
Common stock issued to Employee Stock Purchase Plan		—		3.0			—			4.6			—			—			—			—
Amortization of unearned compensation-restricted stock		—		—			0.7			—			—			—			—			—
Compensation charge upon acceleration of option vesting		—		0.2			—			—			—			—			—			—
Other common stock issued or reacquired		—		1.2			—			(4.6	)		—			—			—			—
Balance at December 31, 2004		2.5		794.5			—			(760.1	)		1,146.6			9.3			(102.8	)		(159.7	)
Net income		—		—			—			—			556.3			—			—			—		$	556.3
Foreign currency translation		—		—			—			—			—			—			(109.8	)		9.5			(100.3	)
Deferred gain on hedge contracts, net of taxes		—		—			—			—			—			11.6			—			—			11.6
Minimum pension liability adjustment, net of taxes		—		—			—			—			—			—			—			32.4			32.4
Total comprehensive income																								$	500.0
Dividends Paid		—		—			—			—			(126.4	)		—			—			—
Treasury stock purchased		—		—			—			(500.0	)		—			—			—			—
Stock options exercised		—		(7.2	)		—			42.9			—			—			—			—
Stock options tax benefit		—		13.3			—			—			—			—			—			—
Common stock issued to Employee Stock Ownership Plan		—		29.1			—			35.3			—			—			—			—
Common stock issued to Employee Stock Purchase Plan		—		3.4			—			5.3			—			—			—			—
Other common stock issued or reacquired		—		1.3			—			(4.8	)		—			—			—			—
Balance at December 31, 2005	$	2.5	$	834.4		$	—		$	(1,181.4	)	$	1,576.5		$	20.9		$	(212.6	)	$	(117.8	)

See Notes to Financial Statements.

57

NOTES TO FINANCIAL STATEMENTS

AMERICAN STANDARD COMPANIES INC.

NOTE 1. Description of Company

American Standard Companies Inc. (the “Company”) is a Delaware corporation and owns all the outstanding common stock of American Standard Inc. and American Standard International Inc. (“ASII”), both Delaware corporations. In these notes, “American Standard” or “the Company” will refer to the Company, or to the Company and American Standard Inc. and ASII, including their subsidiaries, as the context requires.

American Standard is a global diversified manufacturer of high quality, brand-name products in three major business segments: air conditioning systems and services for commercial, institutional and residential buildings; fixtures and fittings for bathrooms and kitchens; and vehicle control systems for medium-sized and heavy trucks, buses and trailers.

NOTE 2. Accounting Policies

Financial Statement Presentation–The consolidated financial statements include the accounts of majority-owned subsidiaries; intercompany transactions are eliminated. Investments in unconsolidated joint ventures (generally a 20% to 50% ownership interest) are included at cost plus the Company’s equity in undistributed earnings in accordance with the equity method of accounting and reflected as investments in associated companies in the consolidated balance sheet. Certain reclassifications of amounts reported in prior years have been made to conform to the 2005 classifications.

Use of Estimates–The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Some of the most significant estimates included in the preparation of the financial statements are related to post-retirement benefits, warranties, income taxes, revenue recognition, insurance recoveries, asbestos indemnity liabilities and commitments and contingencies.

Foreign Currency Translation–In accordance with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation, adjustments resulting from translating foreign functional currency assets and liabilities into U.S. dollars are recorded in a separate component of shareholders’ equity. Gains or losses resulting from transactions in other than the functional currency are reflected in the Consolidated Statement of Income, except for transactions which hedge net investments in a foreign entity and intercompany transactions of a long-term investment nature. For operations in countries that have hyper-inflationary economies, net income includes gains and losses from translating assets and liabilities at year-end rates of exchange, except for inventories and facilities, which are translated at historical rates.

Revenue Recognition–In accordance with Securities and Exchange Commission’s, Staff Accounting Bulletin No. 104, sales of manufactured products are principally recorded when shipment occurs and title passes to a customer, persuasive evidence of an arrangement exists with the customer, the sales price is fixed and determinable and the collectibility of the sales price is reasonably assured. A portion of the Company’s revenue stream is derived from the sale of services. Revenue under long-term service contracts for the maintenance of air conditioning equipment is recorded over the term of the contract. Other service revenues are recorded as the service is performed. Shipping and handling costs are generally billed to customers and are included in sales. The Company derives a portion of its revenues streams from multiple element-arrangements. Revenues from contracts with multiple-element arrangements, such as those that include Company products along with other third party products, are recognized for each separate unit of accounting based on the relative fair value. Revenues from air conditioning equipment and the related installation sold under construction-type contracts are recorded using the percentage-of-completion method in accordance with Statement of Position No. 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts and related guidance. The Company recognizes revenue under percentage of completion accounting using the cost to cost method as the measure of progress. Revenues associated with contracts accounted for under the percentage of completion method of accounting amounted to approximately 4% of total Company sales in 2005, 4% in 2004 and 5% in 2003.

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In accordance with EITF 01-9, Accounting for Consideration Given By a Vendor to a Customer, the Company typically records cooperative advertising allowances, rebates and other forms of sales incentives as a reduction of revenue at the later of the date of the sale or the date the incentive is offered. However, where the Company receives an identifiable benefit for the consideration that is sufficiently separable from the associated sale and the Company can reasonably estimate the fair market value of the benefit received or if the consideration provided is non cash, the Company presents these costs in selling and administrative expenses in its consolidated statements of income. For the years ended December 31, 2005, 2004 and 2003, respectively, $39.6 million, $31.8 million and $35.1 million of consideration provided to customers has been reflected in selling and administrative expenses in the consolidated statements of income.

Shipping and Handling Costs–Shipping, handling, purchasing, receiving, inspecting, warehousing, internal transfer and other costs of distribution are presented in cost of sales in the consolidated statements of income.

Cash Equivalents–Cash equivalents include all highly liquid investments with maturity of three months or less when purchased.

Allowance for Doubtful Accounts–In determining the allowance for doubtful accounts the Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends. The Company provides for estimates of product returns at the time of sale.

Transfers of Financial Instruments- Sales and transfers of financial instruments are accounted for under Statement of Financial Accounting Standard No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“FAS 140”). The Company sells interests in accounts receivables to special purpose entities created as part of accounts receivable financing facilities established by the Company in Europe and the U.S. with major international banks (see Note 8 of Notes to Financial Statements). Receivables sold under such arrangements are removed from the balance sheet at the time they are sold since the transactions meet the sale criteria per FAS 140. Specifically, the receivables are legally isolated from the Company, the purchasers have the right to pledge or exchange the receivables and the purchasers obtain effective control over the receivables. Any retained interests in receivables sold are recorded by the Company at fair value and recorded in other current assets.

Inventories–Inventory costs are determined principally by the use of the last-in, first-out (LIFO) method, and are stated at the lower of such cost or realizable value.

Facilities– Property plant and equipment balances are stated at cost less accumulated depreciation. The Company capitalizes costs, including interest during construction, of fixed asset additions, improvements, and betterments that add to productive capacity or extend the asset life. The Company assesses facilities for impairment when events or circumstances indicate that the carrying amount of these assets may not be recoverable. Maintenance and repair expenditures are expensed as incurred. The Company capitalized $0.5 million, $0.2 million and $0.9 million of interest related to construction of facilities for the years ended December 31, 2005, 2004 and 2003.

Depreciation–Depreciation and amortization are computed on the straight-line method based on the estimated useful life of the asset or asset group, which is 40 years for buildings and 5 to 15 years for machinery and equipment.

Computer Software–In accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, the Company capitalizes the costs of obtaining or developing internal-use computer software, including directly related payroll costs. The Company amortizes those costs over periods up to seven years, beginning when the software is ready for its intended use.

Goodwill and Intangible Assets–In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized but is subject to annual impairment tests as of each October 1 of each fiscal year or more often when events or circumstances indicate that the carrying amount of goodwill may not be recoverable. A goodwill impairment loss is recognized to the extent the carrying amount of goodwill exceeds the implied fair value of goodwill. In accordance with Statement of Financial Accounting Standard

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No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company assesses long-lived assets, including intangible assets subject to amortization, for impairment on an annual basis, or when events or circumstances indicate that the carrying amount of those assets may not be recoverable. Impairments of intangible assets are recognized when the carrying value of the assets are less than the expected cash flows of the assets on an undiscounted basis. All amortizable assets are amortized over their useful lives. See Note 15 of Notes to Financial Statements.

Debt Issuance Costs–The costs related to the issuance of debt are capitalized and amortized to interest expense using the effective interest method over the life of the related debt.

Warranties–The Company provides for estimated warranty costs at the time of sale of products sold with a limited warranty. The Company also sells extended warranty contracts on certain products, and the revenues from them are deferred and amortized on a straight-line basis over the terms of the contracts or based upon historical experience. Costs to satisfy extended warranty obligations are charged to cost of sales as incurred. See Note 14 for a summary of warranties.

Post-retirement Benefits–Post-retirement benefits are provided for substantially all employees of the Company, both in the U.S. and abroad. In the U.S. the Company also provides various post-retirement health care and life insurance benefits for certain of its employees. Such benefits are accounted for on an accrual basis using actuarial assumptions in accordance with Statement of Financial Accounting Standards No. 87, Employers’ Accounting for Pensions and No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions and related guidance. See Note 6 of Notes to Financial Statements.

Asbestos Indemnity Liability and related Insurance Recoveries – The Company records a liability for all probable and estimable asbestos claims incurred as well as claims incurred but not yet reported to the Company. The Company engaged an expert to assist it in calculating the total asbestos indemnity liability. In addition, the Company estimates and records an asbestos receivable for amounts due to the Company for previously settled and paid claims, the reimbursable portion of incurred legal expenses, and the probable reimbursements relating to its estimated liability for pending and future claims. See Note 14 of Notes to Financial Statements.

Research and Development Expenses–Research and development costs are expensed as incurred. The Company expended approximately $187 million in 2005, $165 million in 2004 and $152 million in 2003 for research activities, product development and for product engineering. Expenditures for research and product development only were $114 million, $102 million and $92 million in the respective years.

Income Taxes–In accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, deferred income taxes are determined on the asset and liability method, and are recognized for all temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. No provision is made for U.S. income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested.

Advertising Expense–The cost of advertising is expensed as incurred or in the case of sales literature as distributed. The Company incurred $136 million, $126 million and $128 million of advertising costs in 2005, 2004 and 2003, respectively.

Earnings per Share–Basic earnings per share have been computed using the weighted-average number of common shares outstanding. The average number of outstanding common shares used in computing diluted earnings per share included average incremental shares of 5,678,796 in 2005, 5,749,133 in 2004 and 4,340,814 in 2003, primarily from the assumed exercise of stock options issued under the Company’s stock option plans (see Note 12). The average number of outstanding shares of common stock used in computing diluted earnings per share for the years ended December 31, 2005, 2004 and 2003 excluded 869,849, 46,554 and 163,168 shares associated with options to purchase shares of the Company’s stock, respectively, due to their antidilutive effect.

Comprehensive Income–Comprehensive income consists of net income, deferred gains or losses on hedge contracts, foreign currency translation adjustments and minimum pension liability adjustments, and is presented in the Consolidated Statement of Shareholders’ Equity and Comprehensive Income. The Company’s investments in its

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foreign subsidiaries are considered to be permanently invested and no provision for income taxes on the related foreign exchange translation adjustments of those subsidiaries has been recorded.

Financial Instruments with Off Balance Sheet Risk–The Company from time to time enters into agreements to reduce its risk related to foreign currency, commodity prices and interest rates. Gains and losses from underlying rate or price changes are included in income unless the contract hedges a net investment in a foreign entity, a firm commitment, or related debt instrument, in which case gains and losses are included as a component of foreign currency translation effects in shareholders’ equity or included as a component of the transaction.

Stock-Based Compensation–The Company has three stock-based compensation plans–the 2002 Omnibus Incentive Plan, the Stock Incentive Plan and the Employee Stock Purchase Plan (“ESPP”), which are described in Note 12. Under the first two plans, the Company has granted options to employees and directors to acquire a fixed number of shares of the Company’s common stock at a specified price, and also has made grants of restricted shares. Under the ESPP, employees are entitled to purchase shares of the Company’s common stock at a discount of 15% from the market price on the date of purchase. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related Interpretations. Compensation cost is not recorded for substantially all options granted because the option exercise price was equal to the market value of the underlying common stock on the date of grant. Compensation cost is not recorded for the 15% discount on shares purchased under the ESPP, which is not considered compensation under APB 25. Compensation cost is recorded for the value of restricted share awards, amortized over the vesting period of the award.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	Year Ended December 31,
(Dollars in millions)	2005			2004			2003
Net income, as reported	$	556.3		$	313.4		$	405.2
Deduct: Total stock-based compensation expense determined under fair value based method for all stock option awards, net of tax, and discounts under the ESPP		(20.0	)		(17.4	)		(19.9	)
Pro forma net income	$	536.3		$	296.0		$	385.3
Earnings per share:
Basic–as reported	$	2.63		$	1.46		$	1.87
Basic–pro forma	$	2.54		$	1.38		$	1.78
Diluted–as reported	$	2.56		$	1.42		$	1.83
Diluted–pro forma	$	2.48		$	1.34		$	1.74

The fair value of the stock options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of 4.30% in 2005, 3.09% in 2004 and 3.08% in 2003; volatility of 26% in 2005, 28% in 2004 and 28% in 2003; an expected average life of 5 years in 2005, 2004 and 2003; and a dividend yield of 1.40% in 2005 and zero in 2004 and 2003.

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NOTE 3. Effect of Recently Issued Accounting Standards

The Financial Accounting Standards Board (“FASB”) has recently issued several new Statements and Interpretations. Statement of Financial Accounting Standard No. 151 (“FAS 151”), Inventory Costs, an Amendment of ARB No. 43, Chapter 4 and Statement No. 153 (“FAS 153”), Exchanges of Nonmonetary Assets an Amendment of APB Opinion No. 29 were issued in 2004. FAS 151 will be effective for the Company in 2006 and requires that the cost of inventory exclude costs associated with abnormal amounts of idle capacity and spoilage. The impact of adopting FAS 151 is not expected to be material to the Company. FAS 153 became effective for the Company in the third quarter of 2005 and did not materially impact the Company’s financial statements. FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”), was issued in March 2005. This interpretation became effective for the Company in the fourth quarter of 2005 and clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. The impact of this interpretation was not material to the Company’s financial statements. Statement No. 154 (“FAS 154”), Accounting Changes and Error Corrections was issued in the second quarter of 2005. Under FAS 154, entities will be required to report a change in accounting principle through retrospective application of the new accounting principle to all prior periods, unless impracticable to do so. A change in the method of applying an accounting principle is considered a change in accounting principle under the standard. In addition, errors in the financial statements of a prior period discovered subsequent to their issuance shall be reported as a prior period adjustment by restating the prior period financial statements. This standard will be effective in 2006.

Statement of Financial Accounting Standard No. 123 (Revised 2004) (“FAS 123r”), Share Based Payments, was issued on December 16, 2004. The new standard requires companies to recognize in their financial statements the cost of employee services received in exchange for valuable equity instruments issued. Currently, the Company accounts for share based payments under APB 25. Under APB 25, compensation cost is not recorded for substantially all options granted because the option exercise price was equal to the market value of stock on the grant date. On April 14, 2005 the Securities Exchange Commission approved a rule delaying the effective date of FAS 123r for public companies. Under the rule, FAS 123r is now effective for annual periods beginning after June 15, 2005. The Company will adopt FAS 123r in the first quarter of 2006. The Company will begin to recognize the cost of unvested awards outstanding as of January 1, 2006 as well as the cost of any awards granted after January 1, 2006 in its financial statements. The Company will not restate prior period financial statements to reflect the impact of expensing share based payments, but rather continue to reflect the pro forma impact to historical financial statements using the amounts from Note 2 of Notes to Financial Statements. The impact of adopting FAS 123r for fiscal 2006 is expected to be approximately $0.10 per diluted share.

NOTE 4. Operational Consolidation Charges

During 2005 the Company incurred charges related to operational consolidation activities in each of its businesses as more fully described below. The total cost of these actions was $69.2 million ($47.2 million net of taxes) of which $41 million is included in cost of sales and $28.2 million is included in selling and administrative expenses. These actions included the elimination of 1,108 jobs. Included in the $69.2 million of operational consolidation expenses was $62.4 million related to 2005 and $6.8 million related to 2004 carryover actions.

Air Conditioning Systems and Services incurred $25.7 million of operational consolidation expenses related to the following initiatives:

(i) $12.0 million of charges primarily related to severance and job elimination expenses associated with a plan designed to improve the effectiveness and efficiency of the business on a global basis that included the elimination of 340 jobs and the consolidation of administrative functions,

(ii) $10.8 million of charges for the impairment of goodwill and other long-lived assets and $1.1 million of charges for severance, associated with the closure of its Rockingham, NC manufacturing facility that included the elimination of 118 jobs,

(iii) $1.8 million of charges associated with a plan to transfer production to a lower cost production facility in North America and salaried severance.

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Air Conditioning Systems and Services expects to incur an additional $1.8 million during 2006 to complete the ongoing actions at December 31, 2005.

Bath and Kitchen incurred $29.7 million of operational consolidation expenses related to the following 2005 initiatives.

(i) $12.7 million of severance and employee costs and asset impairment charges to reorganize fittings manufacturing operations in Europe that included the elimination of 198 jobs,

(ii) $7.0 million related to streamlining manufacturing and distribution operations in Europe and Asia that included the elimination of 330 jobs,

(iii) $5.7 million related to streamlining administrative processes in Europe that included the elimination of 50 jobs, and

(iv) $4.3 million related to streamlining administrative processes in the Americas that included the elimination of 8 jobs.

Bath and Kitchen expects to incur an additional $5.2 million during 2006 to complete the plans outstanding as of December 31, 2005.

Vehicle Controls Systems incurred $13.7 million of operational consolidation expenses of which $6.9 million related to 2005 plans and $6.8 million related to 2004 carryover actions and included the elimination of 64 jobs. The 2005 charges relate to plans associated with job elimination programs designed to streamline processes. The charges associated with 2004 carryover actions pertain to the continued execution of a plan to transfer production of certain products from a manufacturing facility in Leeds, UK to a facility in Poland. Vehicle Control Systems expects to incur an additional $3.9 million during 2006 to complete the actions outstanding as of December 31, 2005.

Following is a summary of the 2005 operational consolidation programs and asset impairment charges (dollars in millions):

	2005 Program Charges		Cash Payments			Non-Cash Write-Off			Balance Dec. 31, 2005
Termination payments and other employee costs	$	41.8	$	(27.6	)	$	(0.5	)	$	13.7
Asset impairments		16.1		—			(16.1	)		—
Other		4.5		(3.1	)		—			1.4
	$	62.4	$	(30.7	)	$	(16.6	)	$	15.1

The Company expects that substantially all of the $15.1 million balance as of December 31, 2005 will be utilized by the end of 2006. The accrued termination payments and other employee costs are for severance and other related payments expected to be made after termination. The facilities being closed will be sold and manufacturing equipment will be transferred to other facilities or scrapped.

During 2004 the Company incurred charges related to operational consolidation activities in each of its businesses as more fully described below. The total cost of these actions was $46.4 million ($32.0 million net of taxes). These actions included the elimination of 1,695 jobs.

Air Conditioning Systems and Services incurred $7.7 million of operational consolidation expenses related to the elimination of jobs globally and the transfer of production to a lower cost facility in North America.

Bath and Kitchen incurred $33.0 million of operational consolidation expenses, comprised of the following:

(i) $6.0 million related to the closure of a manufacturing facility in the Philippines owned by Sanitarywares Manufacturing Corp., a public Philippine company in which American Standard Inc. has a majority ownership interest;

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(ii) $17.5 million of operational consolidation costs in Europe relating to the closure and sale of a facility, the transfer of production to lower cost facilities and the centralization of administrative work; and

(iii) $9.5 million of operational consolidation expenses in the Americas, related to the transfer of production to lower cost facilities and the consolidation and restructuring of administrative functions.

As part of an effort to remain cost-competitive and optimize its manufacturing capabilities, the Vehicle Control Systems decided to transfer production of certain products from its manufacturing facility in Leeds, UK to a facility in Poland. This action resulted in a charge of approximately $3.4 million, including costs for job elimination expenses, post-employment benefits for employees and non-cash asset impairment charges. Vehicle Control Systems incurred an additional $2.0 million of expenses related to other job eliminations in Europe.

Following is a summary of the 2004 operational consolidation programs and asset impairment charges (dollars in millions):

			Cash Payments
	2004 Program Charges (i)		2004			2005			Non-Cash Write-Off (ii)			Balance at Dec. 31, 2005
Termination payments and other employee costs	$	40.8	$	(18.8	)	$	(18.3	)	$	(3.6	)	$	0.1
Asset impairments		6.1		—			—			(6.1	)		—
Other		6.3		(2.7	)		(1.8	)		—			1.8
	$	53.2	$	(21.5	)	$	(20.1	)	$	(9.7	)	$	1.9

(i) Includes $6.8 million of carryover charges expensed in 2005.

(ii) Includes $(0.6) million of carryover write-offs made in 2005.

The Company expects that substantially all of the $1.9 million balance as of December 31, 2005 will be utilized by the end of 2006.

In the fourth quarter of 2003 the Company incurred charges related to job eliminations in each of its businesses. The total cost of these actions was $38.9 million ($27.3 million net of taxes) and was included in cost of sales. Air Conditioning incurred $8.4 million of job elimination charges related to consolidation and restructuring of administrative functions globally. Bath and Kitchen incurred $20.8 million of job elimination charges related to manufacturing and distribution actions and the consolidation of administrative functions. Vehicle Control Systems incurred $9.7 million of job elimination charges primarily related to the consolidation and restructuring of administrative functions. These actions included the elimination of 870 jobs.

During 2005 the Company expended $3.4 million of cash on 2003 programs, which are substantially complete as of December 31, 2005.

NOTE 5. Other Expense

Other expense (income) was as follows:

	Year Ended December 31,
(Dollars in millions)	2005			2004			2003
Equity in net income of unconsolidated joint ventures	$	(34.8	)	$	(28.2	)	$	(25.9	)
Minority interest expense		14.4			18.4			15.6
Receivable discount fees		46.1			41.8			42.5
Accretion expense on retirement plans		25.7			33.1			34.4
Foreign exchange (gain) loss		(3.9	)		4.1			(9.6	)
Interest income		(3.4	)		(9.1	)		(2.3	)
Gain on sale of assets		(2.5	)		(3.7	)		(7.9	)
Other, net		(10.4	)		(6.4	)		6.3
	$	31.2		$	50.0		$	53.1

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The Company has investments in affiliates that are accounted for on the equity method. The most significant of these investments is in Meritor WABCO Vehicle Control Systems (“Meritor/WABCO”). Meritor/WABCO, in which the Company has a 50% equity ownership, is a U.S. sales and marketing organization serving truck, trailer, bus and sport utility vehicle manufacturers and providing after-market distribution for Vehicle Control Systems. The Company recognized $169.1 million, $159.1 million and $113.4 million of sales to this joint venture for the years ended December 31, 2005, 2004 and 2003, respectively. The Company also holds a 24.5% ownership interest in Alliance Compressors, (“Alliance”) a joint venture the supplies the Company’s Air Conditioning Systems and Services business with air conditioning system compressors. The Company purchased $73.5 million, $60.4 million and $50.7 million of goods from Alliance during the years ended December 31, 2005, 2004 and 2003, respectively.

NOTE 6. Post-retirement Benefits

The Company sponsors post-retirement benefit plans covering substantially all employees, including an Employee Stock Ownership Plan (the “ESOP”) and a 401(k) savings plan (the “Savings Plan”) for the Company’s U.S. salaried employees and certain U.S. hourly employees, a defined benefit plan for most U.S. employees covered by collective bargaining arrangements, and a pension plan established in 2003 as described below for certain U.S. salaried and non-union employees. The ESOP and Savings Plan are individual-account defined contribution plans. Shares of the Company’s common stock held by the ESOP and Savings Plan are allocated to the accounts of eligible employees through basic allocations of 3% of covered compensation in the ESOP, and a matching Company contribution to the Savings Plan of up to 6% of covered compensation. The Company will fund the ESOP and Savings Plan through contributions of either cash or shares of the Company’s common stock. Shares of common stock earned by employees under the ESOP are credited to each employees ESOP account based on the fair value of shares on the date earned. Cash dividends earned by shares held in the ESOP are credited to each employee’s account. At December 31, 2005, 1.5 million shares of common stock had been allocated to employee accounts. Shares of common stock held by the ESOP are included in the average number of shares outstanding for both basic and diluted earnings per share. Effective September 1, 2003, the Company established a pension plan for salaried and non-union U.S. employees (the “Cash Balance Plan”). Eligible employees may elect to participate in the pension plan and receive a credit equal to 3% of eligible pay. For these employees the Company match in the Savings Plan is 50% of the employee contribution (up to a Company match of 3%). For employees who do not elect to participate in the pension plan, the Company match in the Savings Plan is 100% of the employee contribution (up to a Company match of 6%).

Benefits under defined benefit pension plans on a worldwide basis are generally based on years of service and either employee’s compensation during the last years of employment or negotiated benefit levels. Participants under the Cash Balance Plan receive 3% of their salary per year. This benefit earns an interest credit approximating five-year U.S. Treasury Securities and vests over a three-year period. In the U.S. the Company also provides various post-retirement health and life insurance benefits for certain of its employees. Certain of the pension plans are funded, depending on tax and statutory considerations in the country. Post-retirement health and life insurance benefits are funded as incurred.

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The following table provides a reconciliation of the changes in pension and post-retirement health and life insurance benefit obligations and fair value of assets for the years ending December 31, 2005 and 2004, and a statement of the funded status as of December 31, 2005 and 2004:

(Dollars in millions)	2005 Domestic Pension Benefits			2005 Domestic Health & Life Ins. Benefits			2005 Foreign Pension Benefits			2004 Domestic Pension Benefits			2004 Domestic Health & Life Ins. Benefits			2004 Foreign Pension Benefits
Reconciliation of benefit obligation:
Obligation at beginning of year	$	676.4		$	308.7		$	1,014.7		$	640.2		$	307.6		$	827.8
Service cost		20.2			8.0			36.5			18.6			7.8			35.6
Interest cost		38.4			16.9			51.3			36.8			17.4			47.6
Participant contributions		—			9.8			0.6			—			2.4			1.7
Plan amendments		5.9			(3.4	)		0.2			3.6			(6.0	)		—
Actuarial loss		10.1			12.4			96.2			13.9			8.6			85.5
Curtailment		(0.2	)		—			—			(0.8	)		(1.0	)		—
Special termination benefits		0.9			—			—			0.5			—			—
Benefit payments		(39.8	)		(27.9	)		(53.5	)		(37.9	)		(26.0	)		(50.5	)
Medicare Part D subsidy		—			(5.0	)		—			—			(2.1	)		—
Foreign exchange effects		—			—			(132.8	)		—			—			69.5
Other		—			—			7.3			1.5			—			(2.5	)
Obligation at end of year	$	711.9		$	319.5		$	1,020.5		$	676.4		$	308.7		$	1,014.7
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year		550.0			—			481.5			472.1			—			405.8
Actual return on assets		46.2			—			85.6			58.9			—			40.6
Divestitures		—			—			1.3			—			—			—
Employer contributions		54.6			18.1			54.2			56.9			23.6			50.3
Participant contributions		—			9.8			0.6			—			2.4			1.7
Benefit payments		(39.8	)		(27.9	)		(53.5	)		(37.9	)		(26.0	)		(50.5	)
Foreign exchange effects		—			—			(52.1	)		—			—			36.2
Other expenses		—			—			(1.3	)		—			—			(2.6	)
Fair value of plan assets at end of year	$	611.0		$	—		$	516.3		$	550.0		$	—		$	481.5
Funded Status at December 31:
Funded status		(100.9	)		(319.5	)		(504.2	)		(126.4	)		(308.7	)		(533.2	)
Unrecognized prior service cost (benefit)		54.8			(38.3	)		2.8			54.9			(39.5	)		3.6
Unrecognized net actuarial loss		108.1			139.4			209.4			102.8			138.4			208.1
Net amount recognized	$	62.0		$	(218.4	)	$	(292.0	)	$	31.3		$	(209.8	)	$	(321.5	)
Amounts Recognized on Balance Sheet
Prepaid Benefit Cost		—			—			18.0			—			—			20.1
Accrued Benefit Liability		(94.8	)		(218.4	)		(405.6	)		(120.8	)		(209.8	)		(475.9	)
Intangible Asset		55.2			—			2.1			54.8			—			3.3
Accumulated Other Comprehensive Income		101.6			—			93.5			97.3			—			131.0
Net amount recognized	$	62.0		$	(218.4	)	$	(292.0	)	$	31.3		$	(209.8	)	$	(321.5	)

Accrued benefit liabilities recorded on the balance sheet included current liabilities of $58.2 million and $55.5 million at year end 2005 and 2004, respectively.

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The following table provides a summary of pension plans with accumulated benefit obligations in excess of assets as of December 31:

(Dollars in millions)	2005 Domestic Plans			2005 Foreign Plans			2004 Domestic Plans			2004 Foreign Plans
For all plans:
Accumulated benefit obligation	$	705.8		$	910.3		$	669.7		$	912.6
For pension plans with Accumulated Benefit Obligations in excess of plan assets:
Projected benefit obligation		711.9			951.1			676.4			947.8
Accumulated benefit obligation		705.8			910.3			669.7			848.3
Fair value of plan assets		611.0			427.1			550.0			394.7
Unfunded ABO	$	94.8		$	483.2		$	119.7		$	453.6
Additional Minimum Liability	$	156.9		$	71.9		$	152.1		$	134.3
Increase/(Decrease) in Minimum Liability included in Other Comprehensive Income		4.3			(46.5	)		(2.6	)		94.6
Deferred tax effects included in above		(1.7	)		11.5			1.0			(28.8	)
Net change included in Other Comprehensive Income	$	2.6		$	(35.0	)	$	(1.6	)	$	65.8

Total post-retirement costs are shown below:

(Dollars in millions)	Year ended December 31,
	2005		2004		2003
Domestic Pensions	$	24.0	$	27.7	$	37.8
Foreign Pensions		62.7		59.0		38.2
Health and life insurance benefits		26.6		26.8		26.1
Subtotal		113.3		113.5		102.1
Defined contribution plan cost, principally ESOP		64.5		60.1		58.8
Total post-retirement costs, including accretion expense	$	177.8	$	173.6	$	160.9

Components of post-retirement costs are broken out in the tables below:

Pension Benefit Costs

(Dollars in millions)	2005 Domestic Pensions			2005 Foreign Pensions			2004 Domestic Pensions			2004 Foreign Pensions			2003 Domestic Pensions			2003 Foreign Pensions
Service cost-benefits earned during period	$	20.2		$	36.5		$	18.6		$	35.6		$	15.9		$	25.6
Interest cost on projected benefit obligation		38.4			51.3			36.8			47.6			37.1			34.5
Less assumed return on plan assets		(45.1	)		(33.4	)		(40.0	)		(33.7	)		(31.0	)		(24.0	)
Amortization of prior service cost		5.7			0.7			5.5			0.7			5.8			0.5
Amortization of net (gain) loss		3.7			7.6			2.8			6.7			4.4			1.4
Defined benefit plan cost		22.9			62.7			23.7			56.9			32.2			38.0
Curtailment loss		1.1			—			4.0			2.1			5.6			0.2
Net defined benefit plan cost after curtailments	$	24.0		$	62.7		$	27.7		$	59.0		$	37.8		$	38.2

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Other Post Retirement Benefit Costs

(Dollars in millions)	2005 Domestic Health & Life Ins. Benefits			2004 Domestic Health & Life Ins. Benefits			2003 Domestic Health & Life Ins. Benefits
Service cost-benefits earned during period	$	8.0		$	7.8		$	7.9
Interest cost on projected benefit obligation		16.9			17.4			17.4
Amortization of prior service cost		(4.5	)		(4.3	)		(4.2	)
Amortization of net loss		6.3			6.4			5.1
Defined benefit plan cost		26.7			27.3			26.2
Curtailment gain		(0.1	)		(0.5	)		(0.1	)
Net defined benefit plan cost after curtailments	$	26.6		$	26.8		$	26.1

Amortization of prior service cost is computed on the straight-line method over the average remaining service period of active participants.

Major assumptions used in determining the benefit obligation and net cost for post-retirement plans are presented below as weighted averages:

Benefit Obligation at December 31,

	2005 Domestic Plans		2005 Foreign Plans		2004 Domestic Plans		2004 Foreign Plans
Discount Rate	5.75	%	4.3	%	5.75	%	5.0	%
Salary Growth	4.1	%	3.4	%	4.1	%	3.5	%
Net Periodic Pension Cost for the year
Discount Rate	5.75	%	4.85	%	6.0	%	5.5	%
Salary Growth	4.1	%	3.4	%	4.5	%	3.1	%
Expected Return on Plan Assets	8.25	%	7.25	%	8.5	%	7.15	%

The assumed rate of return is a long-term investment return that takes into account the types of assets held by the plan and expected returns for the asset class. Return expectations reflect forward-looking analysis as well as historical experience. The Company’s asset management strategy focuses on maintaining a diversified portfolio using various asset classes to generate attractive returns while managing risk. In determining the target asset allocation for a given plan, consideration is given to the nature of its liabilities, and portfolios are periodically rebalanced with reference to the target level.

Asset Allocation

	2005 Domestic Plans		2005 Foreign Plans		2004 Domestic Plans		2004 Foreign Plans		Target Domestic Plans		Target Foreign Plans
Equity Securities	66	%	66	%	68	%	64	%	64	%	64	%
Debt Securities	33	%	31	%	31	%	32	%	31	%	34	%
Other, including Real Estate	1	%	3	%	1	%	4	%	5	%	2	%

The Company makes contributions to pension plans that at a minimum meet all statutory funding requirements. Contributions in 2005, including payment of benefits incurred by unfunded plans, totaled $54.6 million to domestic plans and $54.2 million to foreign plans. Similar levels of contribution are expected for 2006.

Expected future benefit payments are shown in the table below:

(Dollars in millions)	2006		2007		2008		2009		2010		2011-2015
Domestic plans without subsidy	$	59.3	$	72.2	$	66.5	$	71.4	$	78.8	$	413.5
Medicare D subsidy reimbursements		0.7		0.8		0.8		0.8		0.8		3.9
Foreign Plans		49.6		51.2		52.6		54.2		58.2		343.7

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The weighted-average annual assumed rate of increase in the health care cost trend rate is 9.5% for 2006 and is assumed to decrease to 9.0% in 2007 and gradually decline to 4.75% by 2018. The health care cost trend rate assumption has a significant effect on the amounts reported. A change in the assumed rate of one percentage point for each future year would have the following effects:

(Dollars in millions)	1% Increase		1% Decrease
Effect on the health care component of accumulated post-retirement obligation	$	11.3	$	(10.3	)
Effect on total of service and interest cost components of net periodic post-retirement health care benefit costs		0.6		(0.6	)

In May 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. SFAS 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 which addresses the accounting and disclosure requirements required as a result of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) enacted on December 8, 2003. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least equivalent to Medicare. Provisions of the Act will provide eligible plan sponsors with a subsidy that the Company expects to use to decrease the benefit obligation and net post-retirement benefit cost. Under the FSP, which was effective for the Company in the third quarter of 2004, the decrease in the benefit obligation upon initial adoption was accounted for as an actuarial gain of $0.1 million.

NOTE 7. Income Taxes

The Company’s income before income taxes and the applicable provision for income taxes were:

	Year Ended December 31,
(Dollars in millions)	2005			2004			2003
Income before income taxes:
Domestic	$	397.6		$	59.4		$	253.4
Foreign		328.3			303.5			295.8
	$	725.9		$	362.9		$	549.2
Provision for income taxes:
Current:
Domestic	$	57.4		$	91.5		$	55.3
Foreign		92.0			87.0			55.7
		149.4			178.5			111.0
Deferred:
Domestic		36.5			(130.6	)		12.1
Foreign		(16.3	)		1.6			20.9
		20.2			(129.0	)		33.0
Total provision	$	169.6		$	49.5		$	144.0

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A reconciliation between the actual income tax expense provided and the income taxes computed by applying the statutory federal income tax rate of 35% in 2005, 2004 and 2003 to the income before income taxes is as follows:

	Year Ended December 31,
(Dollars in millions)	2005			2004			2003
Tax provision at statutory rate	$	254.1		$	127.0		$	192.2
Foreign earnings taxed at other than 35%		(44.5	)		(84.6	)		(15.3	)
Increase (decrease) in valuation allowance		(0.3	)		49.4			(13.1	)
Withholding taxes on undistributed earnings		—			(18.0	)		—
Benefit of tax audit settlements		(62.3	)		(18.5	)		(26.7	)
State tax provision		11.1			0.8			6.7
Repatriation of foreign earnings under Jobs Creation Act		22.6			—			—
Other, net		(11.1	)		(6.6	)		0.2
Total provision	$	169.6		$	49.5		$	144.0

The increase in the valuation allowance in 2004 was primarily attributable to a net increase in foreign net operating loss carryforwards, which, are not expected to be utilized, partially offset by the utilization of foreign tax credits. The decrease in the valuation allowance in 2003 was primarily attributable to the utilization of foreign tax credits, partially offset by a net increase in foreign net operating loss carryforwards.

The following table details the gross deferred tax liabilities and assets and the related valuation allowances:

	Year Ended December 31,
(Dollars in millions)	2005			2004
Deferred tax liabilities:
Facilities (accelerated depreciation, capitalized interest and purchase accounting differences)	$	233.7		$	229.7
Inventory (LIFO and purchase accounting differences)		29.3			23.9
Employee benefits		63.6			44.4
Intangibles		27.9			22.8
Basis difference in minority interest		15.1			11.3
Other		78.6			102.7
		448.2			434.8
Deferred tax assets:
Post-retirement and other employee benefits		177.9			189.0
Warranties		89.2			86.5
Foreign net operating losses and tax credits		158.2			160.1
Reserves		83.6			86.8
Asbestos		113.6			119.0
Inventory		10.7			6.4
Facilities		8.6			9.7
Intangibles		17.9			22.8
Foreign exchange		20.6			23.1
Other		4.1			4.6
Valuation allowances		(174.5	)		(174.8	)
		509.9			533.2
Net deferred tax assets	$	61.7		$	98.4

Deferred tax assets related to foreign net operating loss carry forwards (2005 and 2004) have been reduced by a valuation allowance since realization is dependent in part on the generation of future taxable income in the legal entity which gave rise to tax losses. The foreign tax credits were fully utilized during 2004. The foreign net operating losses (“NOL”) are available for utilization in future years. As of December 31, 2005, $126 million of the net operating losses has an unlimited life. The carry forward period for the remaining NOLs varies in number of years by jurisdiction between five and fifteen years. The valuation allowance for deferred tax assets includes $14.8 million for which subsequently recognized tax benefits will be allocated as a reduction of goodwill.

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As a result of the allocation of purchase accounting (principally goodwill) to foreign subsidiaries, the book basis in the net assets of the foreign subsidiaries exceeds the related U.S. tax basis in the subsidiaries’ stock. Such investments are considered permanent in duration and accordingly, no deferred taxes have been provided on such differences, which are significant. The Company considers the earnings of all its foreign subsidiaries to be permanently reinvested and as such no additional U.S. tax cost has been provided on approximately $423 million of earnings at December 31, 2005. Estimating the tax liability that would arise if these earnings were remitted is not practicable.

As a result of the American Jobs Creation Act of 2004 (the “Job Creation Act”), the Company repatriated approximately $500 million in 2005. The Company recorded a one-time charge of $22.6 million in the fourth quarter of 2005 attributable to the repatriation of these earnings.

NOTE 8. Accounts Receivable Securitization Agreements

To reduce its borrowing cost, in May and September 2002 the Company established accounts receivable financing facilities in Europe and the U.S. with major international banks. As part of these facilities, the Company formed, special-purpose entities (in Europe, the “ESPE;” in the U.S., the “USSPE;” collectively, the “SPEs”) that are included in the consolidated financial statements of the Company for the sole purpose of buying and selling receivables generated by the Company. Under these facilities the Company irrevocably and without recourse, transfers all eligible accounts receivable to the SPEs, which in turn, sell them, or undivided ownership interests in them, to conduits administered by the banks. The assets of the SPEs are not available to pay the claims of the Company or any of its subsidiaries. The Company retains a subordinated interest in the receivables sold of approximately 8% for ESPE and 51% for USSPE. The conduits obtain the funds to purchase the interests in the receivables, other than the retained interest, by selling commercial paper to third-party investors. Advances from the conduits to the SPEs are limited to approximately $501.0 million (€275.0 million, or approximately $326.0 million at December 31, 2005 exchange rates under the European facility, and $175.0 million under the U.S. facility). The Company retains responsibilities for the collection and administration of receivables subject to these facilities. The Company is currently in compliance with these covenants. The European facility is subject to the maintenance of specified debt-rating levels, and for the U.S. facility, the maintenance of certain financial covenants. The Company is currently in compliance with the covenants. In addition, these facilities are subject to annual renewals. The European facility will require renewal in May 2006 and the U.S. facility in September 2006. The Company has the ability to renew these facilities and intends to renew them upon their expiration.

The receivables sold are removed from the balance sheet since they meet the applicable criteria of FAS 140. The Company’s retained interest is recorded at fair value in the Company’s Consolidated Balance Sheet. To the extent that the cash received and value of the retained interest is less than the net book value of the receivables sold, losses are recognized at the time of the sale. Those losses amounted to $47.9 million, $40.2 million and $41.7 million for the years ended December 31, 2005, 2004 and 2003, respectively and are included in other expense. The receivables represented by the retained interest are exposed to the risk of loss for any uncollectible amounts in the pool of receivables sold under this arrangement.

Following is a summary of receivables subject to the financing facilities:

	December 31, 2005						December 31, 2004
(Dollars in millions)	ESPE		USSPE		Total		ESPE		USSPE		Total
Outstanding balances of receivables sold to SPEs	$	373.4	$	347.1	$	720.5	$	453.8	$	265.7	$	719.5
Net retained interest	$	31.4	$	177.0	$	208.4	$	51.9	$	122.6	$	174.5
Advances from conduits	$	306.4	$	172.2	$	478.6	$	368.8	$	135.1	$	503.9

The advances from conduits include amounts due to the conduits under the European and U.S. accounts receivable facilities for collections of receivables under the servicing agreement. The decrease in advances from conduits was comprised of a $46.9 million foreign exchange translation effect and $15.5 million reduction in the amount of receivables financed.

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As of December 31, 2005 and 2004, the interest rates on amounts outstanding under the European facility were 2.79% and 2.70%, and under the U.S. facility were 4.27% and 2.24%, respectively.

NOTE 9. Inventories

The components of inventories, which are carried principally on a last-in, first-out (LIFO) basis, are as follows:

	Year Ended December 31,
(Dollars in millions)	2005		2004
Finished products	$	659.8	$	658.0
Products in process		228.2		233.2
Raw materials		190.2		196.0
Inventories at cost	$	1,078.2	$	1,087.2

The current replacement cost of inventories exceeded the LIFO carrying cost in 2005 by approximately $11 million. The current replacement cost approximated the LIFO carrying cost in 2004.

NOTE 10. Facilities

The components of facilities, at cost, are as follows:

	Year Ended December 31,
(Dollars in millions)	2005		2004
Land	$	78.4	$	83.5
Buildings		709.1		735.0
Machinery and equipment		1,727.8		1,803.6
Improvements in progress		208.8		122.8
Gross facilities		2,724.1		2,744.9
Less: accumulated depreciation		1,101.9		1,124.9
Net facilities	$	1,622.2	$	1,620.0

Depreciation expense for owned assets and assets under capital leases for the years ended December 31, 2005, 2004 and 2003 was $180.4 million, $171.0 million and $161.8 million, respectively.

NOTE 11. Debt

The Company has one primary bank credit agreement. The agreement was established on July 7, 2005 and replaced the bank credit agreement in existence for the first half of 2005. The new agreement reflects improved pricing and other modifications reflecting the Company’s investment grade rating. The agreement provides the Company and certain subsidiaries (the “Borrowers”) with a senior, unsecured, five-year $1 billion multi-currency revolving credit facility that expires in July 2010. During the third quarter of 2005, the Company cancelled a Euro-denominated, 364-day bank credit agreement as the Company determined it no longer needed the facility.

Debt securities (Senior Notes) sold under the 1998 Shelf Registration are issued by American Standard Inc. and unconditionally guaranteed by American Standard Companies Inc. and ASII.

Short-term–Short-term borrowings are available under credit facilities and overdraft lines. At December 31, 2005 and 2004, the Company had $17.5 million and $76.6 million, respectively, of such foreign or domestic short-term debt outstanding at average interest rates of 6.2% and 3.7% per annum, respectively. The Company also had an additional $274 million of unused facilities as of December 31, 2005. The banks may revoke these facilities at any time. Additionally, there were $72 million of outstanding letters of credit issued by other banks.

Average short-term borrowings for 2005 and 2004 were $91 million and $111 million, respectively, at weighted-average interest rates of 4.1% and 4.3%, respectively.

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Long-term–The aggregate borrowings of up to $1 billion available under the primary bank credit agreement can be used for general corporate purposes, of which up to $250 million may be used for issuing letters of credit and up to $150 million for same-day, short-term borrowings. Each loan outstanding under this agreement is due at the end of each interest period (a maximum of 12 months). The Company may, however, concurrently borrow equivalent amounts subject to compliance with certain conditions contained in the agreement. All borrowings under the credit agreement are therefore classified as long-term.

The Company pays a facilities fee of .125% per annum on the five-year facility (whether available funds are borrowed or not), and borrowings thereunder bear interest generally at the London Interbank Offered Rate (“LIBOR”) plus .50% per annum. These LIBOR spreads are subject to adjustment should the Company’s debt rating change. The Company also pays .50% per annum plus issuance fees for letters of credit.

At December 31, 2005, there were $349.8 million of borrowings outstanding under the five-year facility. Remaining availability under that facility at December 31, 2005, after reduction for $77.7 million of letters of credit usage, was $572.5 million.

The Company repaid $208.5 million of 7 3/8% Senior Notes that matured on April 15, 2005 with $200 million of Senior Notes, maturing on April 1, 2015. The senior notes were issued on April 1, 2005 and bear interest at a rate of 5 1/2% payable semi-annually on April 1 and October 1 of each year. The Company, at its option, may at any time and from time to time redeem all or a portion of the senior notes for an amount equal to the principal amount of the notes redeemed plus a make whole premium. The senior notes were not issued under the 1998 Shelf Registration, but are unconditionally guaranteed by the Company and ASII.

On June 1, 2006 the 7.125% Euro senior notes referenced in the table below are due. The Company intends to repay this debt with borrowings from its primary bank credit agreement and therefore these notes have been classified as long term.

At December 31, 2005, the Company’s total indebtedness was $1,696.2 million, $17.5 million was considered short-term, and annual scheduled debt maturities were $2.6 million, $3.1 million, $323.7 million, $207.7 million and $901.9 million for the years 2006 through 2010, respectively and $239.7 million thereafter.

Long-term debt is recorded at face amount, net of unamortized discount and the fair value of interest-rate swaps, and debt denominated in foreign currencies is reported at its U.S. dollar equivalent as follows:

	Year Ended December 31,
(Dollars in millions)	2005		2004
Five-year credit agreement expiring 2010	$	349.8	$	35.0
7 3/8% senior notes due 2005		—		208.5
7.125% Euro senior notes due 2006		288.8		332.8
7 3/8% senior notes due 2008		320.8		328.8
8.25% senior notes due 2009		97.5		97.4
8.25% Sterling senior notes due 2009		103.4		115.2
7 5/8% senior notes due 2010		261.0		260.9
7.59% Euro senior bonds due 2013		35.5		40.9
5.50% senior notes due 2015		199.5		—
Other long-term debt		22.4		11.8
		1,678.7		1,431.3
Less current maturities		2.6		2.2
Total long-term debt	$	1,676.1	$	1,429.1

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The U.S. Dollar equivalent of borrowings outstanding under all bank credit agreements at December 31, 2005 and 2004, and the effective weighted-average interest rates were:

	Year Ended December 31,
(Dollars in millions)	2005		2004
Loans at U.S. dollar equivalent at 3.14% in 2005; 3.44% in 2004	$	349.8	$	35.0

None of the Senior Notes outstanding as of December 31, 2005, are redeemable by the Company prior to maturity, except for the $200 million 5.50% senior notes issued on April 1, 2005 as discussed above. In January 2003, a European subsidiary of the Company issued €30 million ($36 million at December 31, 2005 exchange rates) of 7.59% Guaranteed Senior Bonds due 2013 in a private placement as part of some changes in the financial structure and organization of its European subsidiaries. The bonds are guaranteed by the Company. The proceeds were used to repay borrowings under bank credit agreements.

During the second half of 2001 the Company entered into interest rate swaps that effectively convert fixed-rate debt to variable-rate debt on $225 million of the 7 3/8% Senior Notes due 2008. The maturity date of the interest rate swaps coincides with the maturity date of the underlying debt. Under these swaps, the Company pays a specified variable interest rate and receives the fixed rate applicable to the underlying debt. The interest income/expense on the swaps is accrued as earned and recorded as a reduction/increase of the interest expense accrued on the fixed-rate debt. The interest rate swaps are designated as fair-value hedges of the underlying debt. The fair value of the hedges amounted to $2 million and $11 million as of December 31, 2005 and 2004, respectively, and is recorded in other long-term assets with a corresponding increase in the debt obligation. The change in fair values of the hedge instrument and the debt are recorded as equal and offsetting unrealized gains and losses. As of December 31, 2005, the average effective interest rate on the $225 million of Senior Notes to which the swaps apply was approximately 6.5%. See Note 13 for additional information on the interest rate swaps.

The Company has designated a portion of the 7.125% Euro Senior Bonds due 2006 and 8.25% Sterling notes due 2009 as a hedge of its investments in its European and U.K. operations, respectively. As a result, the Company recorded exchange (gains)/losses of $(51.3) million, $25.2 million and $35.1 million associated with these notes as a component of foreign currency translation within other comprehensive income for the years ended December 31, 2005, 2004 and 2003, respectively.

Interest costs capitalized as part of the cost of constructing facilities for the years ended December 31, 2005, 2004 and 2003, were $0.5 million, $0.2 million and $0.9 million, respectively. Cash interest paid in those years on all outstanding indebtedness amounted to $111 million, $107 million, and $114 million, respectively.

The Company, American Standard Inc., and American Standard International Inc. guarantee obligations under the primary bank credit agreement.

The primary bank credit agreement contains various covenants that limit, among other things, liens, transactions, subsidiary indebtedness, and certain mergers and sales of assets. The covenants also require the Company to meet certain financial tests: ratio of consolidated debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and consolidated free cash flow to interest expense. The Company is currently in compliance with the covenants contained in the credit agreement.

NOTE 12. Capital Stock

The Company’s Restated Certificate of Incorporation, as amended, authorizes the Company to issue up to 560,000,000 shares of common stock, par value $.01 per share and 2,000,000 shares of preferred stock, par value $.01 per share, of which the Board of Directors designated 900,000 shares as a new series of Junior Participating Cumulative Preferred Stock. The Company has also adopted a Rights Agreement. Each outstanding share of common stock has associated with it one right to purchase a specified amount of Junior Participating Cumulative Preferred Stock at a stipulated price in certain circumstances relating to changes in the ownership of the common stock of the Company.

On May 27, 2004 the Company completed a three-for-one common stock split.

On February 2, 2006 the Company’s Board of Directors has approved a quarterly dividend of $.18 per share of common stock. The dividend will be paid on March 20, 2006, to shareholders of record on March 1, 2006. The Company purchased 11,742,034 shares in 2005 for $500 million, 6,962,000 shares in 2004 for $251 million, 6,005,400 shares in 2003 for $152 million ($2 million of which was paid in 2004), and 30,492,600 shares in prior

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years for $485 million. On December 8, 2005 the Company’s Board of Directors also approved $500 million to purchase shares of the Company’s common stock in the open market. As of December 31, 2005, the unexpended authorization under the Company’s share repurchase program was $462 million. As of February 21, 2006, the unexpended authorization on the current program totaled $353,059,310.

In 2002 shareholders approved the Omnibus Incentive Plan (the “2002 Omnibus Plan”), effective January 1, 2002, under which awards may be granted to employees and non-employee directors in the form of stock options, restricted stock, restricted stock units, stock appreciation rights (“SARs”) and certain other incentive awards. The maximum number of shares or units that may be issued under the 2002 Omnibus Plan is 16,500,000, of which no more than 2,475,000 may be used for awards other than stock options or SARs. The total of stock options and SARs that may be granted to any individual annually may not exceed 4,500,000 shares, and the number of restricted stock and restricted unit awards to any individual annually may not exceed 450,000 shares or units. At December 31, 2005, options to purchase a total of 7,593,700 shares were outstanding and there were 8,172,913 shares available for grant under the 2002 Omnibus Plan. The shares to be issued under the 2002 Omnibus Plan may be newly issued shares or treasury shares. The Company also has a 1995 Stock Incentive Plan (the “1995 Stock Plan”) under which similar awards were granted. At December 31, 2005, options to purchase a total of 10,269,688 shares were outstanding under the 1995 Stock Plan. The shares to be issued under the 1995 Stock Plan to satisfy outstanding options are expected to be from available treasury shares. No further awards will be made under the 1995 Stock Plan. Stock option awards granted under the 2002 Omnibus Plan and the 1995 Stock Plan generally vest ratably over three years on the anniversary date of the awards and are exercisable generally over a period of ten years. On February 1, 2006, awards in the form of options to purchase 2,288,400 shares were granted under the 2002 Omnibus Plan.

A summary of stock option activity and related information for 2003, 2004 and 2005 follows:

	Shares Underlying Options		Weighted- Average Exercise Price	Weighted- Average Fair Value Of Grants
Outstanding December 31, 2002	19,035,105		16.61
Granted	2,967,915		23.32	$	7.15
Exercised	(3,704,369	)	14.69
Forfeited	(330,525	)	19.24
Outstanding December 31, 2003	17,968,126		18.07
Granted	2,658,775		35.38	$	10.75
Exercised	(2,259,584	)	16.42
Forfeited	(701,754	)	23.57
Outstanding December 31, 2004	17,665,563		20.67
Granted	2,599,225		43.35	$	10.09
Exercised	(1,884,882	)	18.96
Forfeited	(516,518	)	32.35
Outstanding December 31, 2005	17,863,388		23.82
Exercisable at end of year:
2003	8,420,886
2004	9,322,870
2005	10,178,830

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The weighted average fair value of stock option grants was estimated at the date of grant using the Black-Scholes option-pricing model. For the assumptions used in determining the fair value, see Note 2, “Accounting Policies–Stock-Based Compensation.”

Following is a summary of options outstanding and exercisable by price range as of December 31, 2005:

	Options Outstanding			Options Exercisable			Weighted- Average Remaining Contractual Life (Years)
Price range	Number of Options	Weighted- Average Exercise Price		Number of Options	Weighted- Average Exercise Price
$10.00–$13.00	3,572,698	$	12.69	3,572,698	$	12.69	3.7
$13.01–$19.00	2,134,958		17.78	2,134,958		17.78	4.5
$19.01–$22.00	5,314,010		19.92	2,291,756		19.92	6.0
$22.01–$31.00	2,048,097		22.98	1,347,879		22.97	7.0
$31.01–$42.00	2,424,950		35.60	831,539		35.44	8.2
$42.01–$48.00	2,368,675		43.47	0		0	9.1
	17,863,388	$	23.82	10,178,830	$	18.61	6.2

On January 1, 2000, the Chief Executive Officer of the Company was granted an award of 750,000 shares of restricted stock under the 1995 Stock Plan. Such shares vested in three equal annual installments beginning January 1, 2003. Unearned compensation equal to the fair market value of the shares at the date of grant was recorded as a component of stockholders’ equity and was amortized as a charge to compensation expense based upon the vesting schedule, beginning on January 1, 2000 and ending December 31, 2004.

The Company has elected to follow APB 25 and related Interpretations in accounting for stock options and accordingly has recognized no compensation expense for stock issued under its stock option plans. See Note 2, “Accounting Policies–Stock-Based Compensation” for information on compensation expense that would have been recorded had the Company adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, and its effect on net income and net income per share.

In 1997, shareholders approved the establishment of the Employee Stock Purchase Plan commencing January 1, 1998. Upon enrollment, employees purchase shares of the Company’s common stock at the end of each calendar quarter, through payroll deductions, at a discount of 15% from the market price, as quoted on the New York Stock Exchange on the last trading day of each calendar quarter. Annual purchases are limited to a maximum of $21,250 per employee. Shares purchased under the plan are deposited with a custodian and must be held for one year before they may be sold. The Company funds the plan as soon as practicable after the close of each quarter with either treasury shares or newly issued shares, at the Company’s discretion. Employees purchased 232,009 shares in 2005, 236,211 shares in 2004 and 342,423 shares in 2003 under this plan. In 2002, shareholders authorized an additional 1,500,000 shares for issuance under this plan.

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Following is a summary of shares issued or reacquired by the Company for the years ended December 31, 2005, 2004, and 2003.

	Number of Shares of Common Stock
	Total Shares	Treasury Shares		Net Shares Outstanding
Balance, December 31, 2002	251,746,020	(33,904,812	)	217,841,208
Shares issued upon exercise of stock options	10,050	3,742,698		3,752,748
Stock purchased for treasury		(6,005,400	)	(6,005,400	)
Shares issued to ESOP		2,301,579		2,301,579
Shares issued to ESPP	1,512	340,911		342,423
Other shares issued or (reacquired), net		(317,580	)	(317,580	)
Balance, December 31, 2003	251,757,582	(33,842,604	)	217,914,978
Shares issued upon exercise of stock options	9,999	2,250,740		2,260,739
Stock purchased for treasury		(6,962,000	)	(6,962,000	)
Shares issued to ESOP		1,598,657		1,598,657
Shares issued to ESPP	1,160	235,051		236,211
Other shares issued or (reacquired), net		(100,597	)	(100,597	)
Balance, December 31, 2004	251,768,741	(36,820,753	)	214,947,988
Shares issued upon exercise of stock options		1,884,882		1,884,882
Stock purchased for treasury		(11,742,034	)	(11,742,034	)
Shares issued to ESOP		1,494,965		1,494,965
Shares issued to ESPP	1,053	230,956		232,009
Other shares issued or (reacquired), net		(76,414	)	(76,414	)
Balance, December 31, 2005	251,769,794	(45,028,398	)	206,741,396

The Company accounts for purchases of treasury stock under the cost method as defined in APB Opinion Number 6, Status of Accounting Research Bulletins with the costs of such share purchases reflected in treasury stock in the accompanying consolidated balance sheets. When treasury shares are reissued they are recorded at the average cost of treasury shares acquired since the inception of the share buy back programs, net of shares previously reissued and the Company reflects the difference between the average cost paid and the amount received for the reissued shares in capital surplus.

NOTE 13. Financial Instruments

From time to time, the Company enters into transactions to manage its financial market risk, including commodity price, foreign exchange and interest rate risk. These transactions involve off-balance sheet contracts and financial instruments with financial risk. To minimize the risk of counter-party nonperformance, such agreements are made only through major financial institutions with significant experience in such financial instruments. Such agreements hedge only specific transactions or commitments.

To manage the balance between floating interest rate debt and fixed interest rate debt, the Company has entered into interest rate swaps that effectively convert fixed-rate debt to variable-rate debt. The maturity date of these swap contracts coincides with the maturity date of the underlying debt. Under these interest rate swaps, the Company pays a specified variable interest rate and receives the fixed-rate applicable to the underlying debt. The interest rate swaps are designated as fair value hedges of the underlying debt. The fair value of the hedges is recorded in other long-term assets or liabilities with a corresponding increase or decrease in the debt obligation. The change in fair values of the hedge instrument and the debt are recorded as equal and offsetting unrealized gains and losses. The existing fair value hedges are 100% effective and therefore there is no effect on current earnings from hedge ineffectiveness.

To minimize the risk of fluctuations in the market price of major raw material commodities, such as copper and aluminum used in the manufacturing process, the Company at times enters commodity-forward contracts to

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effectively fix the cost of the commodity. Maturity dates of the contracts are scheduled to coincide with market purchases of the commodity. Changes in the fair value of commodity-derivative instruments qualifying as cash flow hedges are reported in accumulated other comprehensive income with a corresponding increase or decrease in other assets. Cash proceeds or payments between the Company and the counter-party at maturity of the contracts are recognized as an adjustment to the cost of the commodity purchased, to the extent the hedge is effective. The Company generally does not enter into commodity hedges extending beyond eighteen months.

Since the Company sells certain finished products in currencies different than the currency of the subsidiary that manufactured the products, the Company is exposed to foreign currency risk on such transactions. The Company hedges some of this risk by entering foreign-currency-forward contracts that effectively fix the transaction cost. Changes in the fair value of foreign-currency-derivative instruments qualifying as cash flow hedges are reported in accumulated other comprehensive income. Cash settlement proceeds or payments upon maturity of the contracts are included in the price of the transaction hedged, to the extent the hedge is effective. The gains or losses on these hedges are reclassified to the statement of income when the underlying hedged items are recorded in income. The Company generally does not enter currency hedges extending beyond one year.

To convert Pounds Sterling financing under the European accounts receivable securitization program to U.S. dollar equivalent financing, the Company enters into currency-forward contracts that effectively fix the transaction costs in U.S. dollars. These forward contracts are defined as speculative and accordingly, changes in the market value of the contracts are recorded in other income or expense as incurred, with a corresponding increase or decrease in other assets. The recorded gains or losses are essentially offset by foreign exchange gains or losses on the Company’s Sterling-denominated debt.

The notional amount and estimated fair value of interest rate swaps and hedging contracts at December 31, 2005 and 2004 are as follows:

	2005				2004
(Dollars in millions)	Notional Value		Fair Value		Notional Value		Fair Value
Interest rate swaps	$	225	$	2	$	300	$	11
Commodity-forward contracts		128		28		95		12
Foreign-currency-forward contracts related to receivables securitization		53		1		69		1

The fair value of interest rate swaps are reflected in long term assets and commodity forward contracts are included in other assets in the accompanying Consolidated Balance Sheet. The fair market value of interest rate swaps and commodity forward contracts is based on indicative market quotes obtained from major financial institutions.

The estimated fair value and carrying amounts of other financial instruments were:

	December 31, 2005				December 31, 2004
(Dollars in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Credit agreement loans	$	350	$	350	$	35	$	35
7 3/8% senior notes due 2005		—		—		208		211
7.125% Euro senior notes due 2006		289		292		333		352
7 3/8% senior notes due 2008		321		334		329		361
8.25% senior notes due 2009		98		106		97		113
8.25% Sterling senior notes due 2009		103		113		115		128
7 5/8% senior notes due 2010		261		280		261		298
7.59% Euro senior bonds due 2013		36		44		41		51
5.50% senior notes due 2015		200		197		—		—
Other debt obligations		23		23		12		12

The fair values of the Company’s credit agreement loans were estimated by the Company to approximate their carrying value since the loans bear interest at floating rates and have terms representative of current market conditions. The fair values of senior notes were based on indicative market quotes obtained from a major securities

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dealer. The fair values of other debt obligations are not significant and were estimated by the Company to approximate their carrying value.

The fair values presented above are estimates and are not necessarily indicative of amounts for which the Company could settle such instruments currently or indicative of the intent or ability of the Company to dispose of or liquidate them.

NOTE 14. Warranties, Guarantees, Commitments and Contingencies

Warranties

Products sold by the Company are covered by a basic limited warranty with terms and conditions that vary depending upon the product and country in which it was sold. The limited warranty covers the equipment, parts and labor (in certain cases) necessary to satisfy the warranty obligation for a period ranging from one to ten years generally, and for the lifetime of certain bath and kitchen faucets. The Company estimates the costs that may be incurred under its warranty obligations and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. At least once a quarter the Company assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Costs to satisfy warranty claims are charged as incurred to the accrued warranty liability.

The Company also sells a variety of extended warranty contracts for up to ten years on certain air conditioning products. Revenues from the sales of extended warranties are deferred and amortized on a straight-line basis over the terms of the contracts or based upon historical experience. Actual costs to satisfy claims on extended warranty contracts are charged to cost of sales as incurred and were $41 million, $36 million and $35 million for 2005, 2004 and 2003, respectively. Total warranty expense was $205 million, $199 million and $175 million for 2005, 2004 and 2003, respectively.

Following is a summary of changes in the Company’s product warranty liability for the three years ended December 31, 2005:

	Year Ended December 31,
(Dollars in millions)	2005			2004			2003
Balance of basic warranty costs accrued and deferred income on extended warranty contracts, beginning of year	$	397.5		$	356.0		$	315.9
Warranty costs accrued		160.0			142.6			138.5
Deferred income on extended warranty contracts sold		73.0			68.2			64.4
Warranty claims settled		(143.7	)		(142.3	)		(123.6	)
Amortization of deferred income on extended warranty contracts		(55.3	)		(53.2	)		(46.7	)
Increases (decreases) in warranty estimates made in prior years, including foreign exchange translation effects		(2.9	)		26.2			7.5
Balance of basic warranty costs accrued and deferred income on extended warranty contracts, end of year		428.6			397.5			356.0
Current portion included in current liabilities		(181.9	)		(155.1	)		(153.1	)
Long-term warranty liability	$	246.7		$	242.4		$	202.9

Guarantees and Commitments

Future minimum rental commitments under all non-cancelable operating leases with original terms in excess of one year in effect at December 31, 2005, are: $137.4 million in 2006; $110.1 million in 2007; $84.8 million in 2008; $68.9 million in 2009; $58.3 million in 2010; and $117.9 million thereafter, a total of $577.4 million. Net rental expense for all operating leases was $181.4 million, $167 million and $165 million for the years ended December 31, 2005, 2004 and 2003, respectively.

The Company has commitments and performance guarantees, including energy savings guarantees totaling $75.2 million extending from 2006 to 2022, under long-term service and maintenance contracts related to its air

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conditioning equipment and system controls. Through 2005 the Company has only experienced one insignificant loss under such arrangements and considers the probability of any significant future losses to be remote.

The Company fully and unconditionally guarantees the payment obligations under all the Company’s Senior Notes that were issued by its wholly-owned subsidiary American Standard Inc. The Company also guarantees other debt obligations issued by other subsidiaries, including $36 million of Euro-denominated Senior Bonds. The Company, American Standard Inc., and American Standard International Inc. guarantee obligations under the primary bank credit agreement. See Note 11 of Notes to Financial Statements.

Contingencies

General

The Company and certain of its subsidiaries are parties to a number of pending legal and tax proceedings. The Company is also subject to federal, state and local environmental laws and regulations and is involved in environmental proceedings concerning the investigation and remediation of various sites, including certain facilities in the process of being closed. In those instances where it is probable as a result of such proceedings that the Company will incur costs that can be reasonably determined, the Company has recorded a liability.

Litigation

In October 1999, in Haynes Trane Service Agency, Inc. and Frederick M. Haynes v. American Standard, Inc., d/b/a the Trane Company, in the United States District Court for the District of Colorado, verdicts were returned against the Company for a total of $18 million on the claim that it wrongfully terminated distribution agreements. On August 28, 2002, the appellate court ruled in favor of the Company and vacated the $18 million judgment. The appellate court also reinstated the Company’s counterclaims including fraud, and remanded to the trial court limited portions of Haynes’ initial claims. On December 7, 2005, a jury in the United States District Court in Colorado returned a favorable verdict for the Company in its lawsuit alleging fraud by Haynes Trane Service Agency, Inc. (HTSA), a former distributor of the Company’s unitary air conditioning business. Damages will be determined by the court at a later date. The jury also returned an advisory verdict recommending that the court award Fred Haynes $4.8 million, because the jurors concluded that the Company had wrongfully terminated an agency agreement with Mr. Haynes, the owner of HTSA, after discovering HTSA’s fraudulent activities in 1995. The trial judge is now responsible for issuing a ruling on the merits of this claim. The Company has not recorded a liability related to this matter because it is unable to estimate the amount of the liability given the status of the ruling.

In November 2004, the Company was contacted by the European Commission as part of an industry-wide investigation into alleged infringement of European Union competition regulations relating to the distribution of bath and kitchen fixtures and fittings in certain European countries. In November 2005, the European Commission sent the Company a written request for information. Because the Company has not been accused of any wrong-doing in these investigations, which are ongoing, the Company is unable to reasonably estimate the loss or range of loss that may result from them. However, the Company believes that the resolution of this matter will not have a material adverse effect on the financial condition or liquidity of the Company.

On February 23, 2005, the Company received a grand jury subpoena from the Antitrust Division of the U.S. Department of Justice seeking information primarily related to the sale and marketing of bathroom fittings by its European affiliates from January 1997 to the present. Because the Company has not been accused of any wrong-doing in these investigations, which are ongoing, the Company is unable to reasonably estimate the loss or range of loss that may result from them. The Company is cooperating fully with this investigation. Also, in February 2005, the Company was named as a defendant in several lawsuits filed in the United States District Court for the Eastern District of Pennsylvania and in various state courts in the State of California alleging that the Company and certain of its competitors conspired to fix prices for fittings and fixtures in the U.S. The federal cases have been consolidated, and in June 2005 the plaintiff’s filed an amended complaint in the federal action alleging that the Company conspired to fix prices for fixtures in the U.S. The amended complaint deletes reference to fittings and identifies a somewhat different group of alleged co-conspirator co-defendants. On September 22, 2005, the Company filed a motion to dismiss the complaint in the federal action, which was argued before the trial court on January 26, 2006. The other defendants in the federal action also filed motions to dismiss. The California cases have been coordinated in the San Francisco Superior Court and in December 2005, the plaintiffs filed an amended complaint in the California action alleging that the Company had conspired to fix prices for fixtures and fittings in the U.S. The

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amended complaint identifies a somewhat different group of alleged co-conspirator co-defendants and purports to add a new and significantly larger class of plaintiffs. The Company removed the consolidated California action to the United States District Court for the Northern District of California on January 3, 2006. Currently pending is plaintiffs’ motion to remand the action back to San Francisco Superior Court, which the Company has opposed. None of these civil suits specify the amount of damages claimed. The Company believes that these lawsuits are the result of press reports about the European Commission’s investigation. The Company further believes that the lawsuits are without merit and will defend them vigorously.

On February 16, 2005, the French Competition Council issued a statement of objections (“notification de griefs”) addressed to more than 100 separate enterprises, including a Bath and Kitchen subsidiary of the Company, and to various trade associations and purchasing organizations active in the sanitary, heating, air-conditioning and canalization equipment and installation sectors. The addressees of the statement of objections are alleged to have restricted the distribution of products to large “do-it-yourself” retailers and to small installer cooperatives in France in the period 1993 through 1998 in violation of the French and European Union competition regulations. By November 2005, the Rapporteur General for the Competition Council recommended that the Competition Council dismiss all claims against the Company’s Bath and Kitchen subsidiary. The Company is vigorously defending itself against these allegations.

While the Company cannot predict the outcome of these matters with certainty, the Company believes that the resolution of the French Competition Council investigations and the civil lawsuits against the Bath and Kitchen business referenced above will not, individually or in the aggregate, have a material adverse effect on the financial condition, results of operations or liquidity of the Company.

Asbestos Litigation

Over the years, the Company has been named as a defendant in numerous lawsuits alleging various asbestos-related personal injury claims arising primarily from its historical sales of boilers and railroad brake shoes.

In these asbestos-related lawsuits, the Company is usually named as one of a large group of defendants. Many of these lawsuits involve multiple claimants, do not specifically identify the injury or disease for which damages are sought and/or do not allege a connection between any Company product and a claimed injury or disease. As a result, numerous lawsuits have been placed, and may remain on, inactive or deferred dockets, which some jurisdictions have established.

Accounting for Asbestos-related Contingencies

Until the fourth quarter of 2004, the Company recorded a liability only for filed asbestos claims. Costs associated with claims that might be filed in the future were not recorded because the Company did not believe its history and experience with asbestos-related litigation was sufficient to allow it to make a reasonable estimate of this liability. Set forth below is a description of the events that led up to the Company’s conclusion, in the fourth quarter of 2004, that it could reasonably estimate its potential liability for future asbestos-related claims.

Prior to the fourth quarter of 2002, the Company’s asbestos claims were managed by its primary insurance carriers under several lines of insurance coverage. At that time, the Company believed it had not incurred a significant loss for asbestos-related injuries because the Company had never had to pay any claimant (the insurance carriers had paid all settlements directly) and the Company’s estimated liability for known claims was only a small fraction of the Company’s total insurance coverage.

In the fourth quarter of 2002, the Company negotiated a buyout of the remainder of the policy limits from its most significant primary insurance carrier, and assumed primary responsibility for administering its asbestos-related claims. The Company engaged an outside consultant to assist it in this administrative effort. The consultant constructed a claims administration database from information provided by the Company’s insurance carrier and throughout 2003 worked to convert, enhance and verify the data in the database. In the course of that process, the Company observed unusually high claims filing activity in the period from January 2002 through April 2003. Approximately 64,000 claims were filed in that 16-month period as compared to approximately 71,000 claims in the preceding 20 years. The Company believes that the dramatic increase in filings in this 16-month period was influenced by the bankruptcy filings of numerous first and second-tier asbestos defendants (that is, companies that

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made asbestos or asbestos-containing products) and the prospect of various judicial and legislative reforms. Because of these extraneous factors, it seemed unlikely that this higher level of claims filed would be a reliable indicator of future claims filing activity, but at the time it was not clear when, or at what volumes, claims filing would level off.

After taking over the claims administration process in 2003, the Company gained considerable experience in settling claims and considerable knowledge from better tracking of settlements by type of injury claimed. Type of injury claimed is an important factor in estimating total potential liability because, typically, claims alleging a malignant condition such as mesothelioma or other cancers, are compensated at higher values than claims alleging unspecified or less severe injuries.

Also in 2003, the Company engaged asbestos insurance coverage counsel and insurance recovery consultants and, with their assistance, began developing an insurance recovery strategy with respect to other of the Company’s primary insurance carriers and lower layer excess carriers and syndicates, focusing its efforts first on buy-out arrangements with less creditworthy carriers. Among other settlements, in July 2004 the Company agreed to a settlement with KWELM, a group of insolvent London-based insurance companies that had provided a small portion of the Company’s historical insurance coverage. Also in 2004, the Company commenced negotiations with Equitas, the London-based entity responsible for all pre-1993 policy participations subscribed by underwriters at Lloyd’s, London. Early in 2005, the Company reached an agreement with Equitas for a total of $84.5 million, by far the Company’s most significant settlement to date.

In the fourth quarter of 2004, as negotiations with Equitas developed in earnest, the Company considered whether (i) the leveling-off of the filing of new claims after an anomalous period of volatility, (ii) the cumulative effect of almost two years of first-hand experience administering its own asbestos claims, and (iii) the negotiations with Equitas which provided “arm’s length” verification of a reasonable range of projected future liabilities, provided sufficient relevant and reliable information to reasonably estimate a total future liability for asbestos-related claims. Accordingly, in the fourth quarter of 2004, the Company retained Dr. Francine F. Rabinovitz of Hamilton, Rabinovitz & Alschuler, Inc. (“HR&A”) to assist it in calculating an estimate of the Company’s total liability for pending and unasserted potential future asbestos-related claims. Dr. Rabinovitz is an expert in performing complex calculations such as this. She has been involved in a number of asbestos-related valuations of current and future liabilities, and her valuation methodologies have been accepted by numerous courts.

The methodology used by HR&A to project the Company’s total liability for pending and unasserted potential future asbestos-related claims relied upon and included the following factors:

• HR&A’s interpretation of a widely accepted forecast of the population likely to have been exposed to asbestos;

• epidemiological studies estimating the number of people likely to develop asbestos-related diseases;

• HR&A’s analysis of the number of people likely to file an asbestos-related personal injury claim against the Company based on such epidemiological data and the Company’s most recent five-year claims history;

• an analysis of the Company’s pending cases, by type of injury claimed;

• an analysis of the Company’s most recent five-year history to determine the average settlement value of claims, by type of injury claimed;

• an adjustment for inflation in the future average settlement value of claims, at a 3% annual inflation rate; and

• an analysis of the period over which the Company has and is likely to resolve asbestos-related claims against it in the future.

As a result, in the fourth quarter of 2004, the Company increased its recorded liability for asbestos claims by $616 million, from $83 million to $699 million, based upon HR&A’s analysis of the Company’s total estimated liability for pending and unasserted potential future claims through 2055, which was HR&A’s reasonable best

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estimate of the time it would take to resolve all of the Company’s asbestos-related claims. This amount was calculated on a pre-tax basis, was not discounted for the time value of money, and excluded legal fees.

At December 31, 2003, 2004 and 2005 the total asbestos liability was estimated at $69.5 million, $699.4 million and $686.0 million, respectively. The Company increased its estimate by $40.1 million during 2003 primarily as a result of new claims filed, partially offset by $13.9 million of claims payments. In 2004, the increase was largely the result of a $568.2 million increase recorded in the fourth quarter of 2004 to reflect the estimate of the liability for unasserted potential future asbestos-related claims based on the analysis performed by HR&A as described above. The liability also increased by $34.7 million to reflect new claims filed during 2004, $15.8 million to account for the inclusion of specific claims associated with an unfavorable judgment against the Company in an arbitration involving indemnification rights, and $20.9 million as a result of calculating the estimated liability for claims pending at December 31, 2003, using the same assumptions HR&A used to calculate the estimated liability for future claims. The $20.9 million was comprised of $11.6 million related to a 3% annual inflation adjustment and $9.3 million for changes in assumptions with respect to average claim resolution amounts. The liability also increased by $14.9 million to reflect other adjustments such as the difference between actual settlements during 2004 as compared to prior period estimates. These increases were partially offset by $20.6 million of claims payments made during 2004. The asbestos indemnity liability decreased by $13.4 million in 2005, from $699.4 million as of December 31, 2004 to $686.0 million as of December 31, 2005. This decrease is due to claims payments made during the year.

Asbestos Claims Activity

From receipt of its first asbestos claim more than twenty years ago to December 31, 2005, the Company has resolved 33,690 claims. The total amount of all settlements paid by the Company (excluding insurance recoveries) and by its insurance carriers is approximately $64.2 million, for an average payment per resolved claim of $1,905. The average payment per claim resolved in each of the years ended December 31, 2005, 2004 and 2003 was $2,154, $3,637 and $1,986, respectively.

The table below provides additional information regarding asbestos-related claims filed against the Company, reflecting updated information for all periods.

	2005		2004		2003		Cumulative Total
Open Claims – January 1,	123,357		115,649		95,805		N/A
New claims filed	10,544		12,432		26,988		165,281
Claims settled	(659	)	(711	)	(550	)	(8,865	)
Claims dismissed	(5,044	)	(4,010	)	(6,577	)	(24,825	)
Inactive claims	(1	)	(3	)	(17	)	(3,395	)
Open Claims – December 31	128,197		123,357		115,649		N/A

Because claims are frequently filed and settled in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period.

Asbestos Insurance Recovery

The Company is in litigation against certain carriers whose policies it believes provide coverage for asbestos claims. The insurance carriers named in this suit are challenging the Company’s right to recovery. The Company filed the action in April 1999 in the Superior Court of New Jersey, Middlesex County, against various of its primary and lower layer excess insurance carriers, seeking coverage for environmental claims (the “NJ Litigation”). The NJ Litigation was later expanded to also seek coverage for asbestos related liabilities from twenty-one primary and lower layer excess carriers and underwriting syndicates. On September 19, 2005, the court granted the Company’s motion to add to the NJ Litigation 16 additional insurers and 117 new insurance policies. The court also required the parties to submit all contested matters to mediation. The Company and the defendants in the NJ Litigation engaged in their first mediation session on January 18, 2006. During that session, the parties agreed to an extension of discovery through September 6, 2006.

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With the addition of the parties and policies referred to above, the NJ coverage litigation would resolve the coverage issues with respect to approximately 89% of the recorded receivable. The remaining 11% of the recorded receivable comes from policies as to which the Company has not sought resolution of coverage because the policies were issued by parties whose coverage obligation are triggered at higher excess layers that are not expected to be reached in the near future. Ninety-two percent of the recorded insurance recovery receivables are with carriers rated A or better by AM Best. This percentage excludes amounts that have been settled but not yet collected, including amounts from Equitas which remain in a trust.

The Company estimates and records an asbestos receivable for amounts due to the Company for previously settled and paid claims, the reimbursable portion of incurred legal expenses, and the probable reimbursements relating to its estimated liability for pending and future claims. In calculating this amount, the Company used the estimated asbestos liability for pending and projected future claims calculated by HR&A. It also considered the amount of insurance available, gaps in coverage, applicable deductibles, allocation methodologies, solvency ratings and credit-worthiness of the insurers, the published dividend rates of insolvent insurers, amounts already recovered from insurers, and estimated annual legal fees. The aggregate amount of the stated limits in insurance policies available to the Company for asbestos-related claims, acquired over many years and from many different carriers, is substantial, significantly exceeding the projected liability against the Company. However, limitations in that coverage, primarily due to gaps in coverage, deductibles associated with the policies, and settlements for less than the full coverage limits with carriers in insolvency proceedings and carriers with questionable credit-worthiness (“Gaps, Deductibles and Discounts,”) are expected to result in the projected total liability to claimants and related expenses exceeding the probable insurance recovery.

The Company has concluded that its insurance receivable is probable of recovery because of the aforementioned information and the following factors:

• the success of other companies in collecting under their insurance policies in comparable circumstances. The Company has reviewed numerous situations involving other companies and concluded that the Company’s facts and circumstances support collection;

• the Company’s confidence in its right to recovery under the terms of its policies and pursuant to applicable law;

• the nature of the issues raised in the New Jersey coverage litigation, in which the insurer defenses have been primarily focused on which insurance company should pay, not whether the claims themselves are covered under the numerous policies. Disagreements among carriers concerning which one is responsible for which claim are not unique to the Company where, as here, the policy holder has multiple lines of coverage potentially available to it; and

• the Company’s recent experience in managing asbestos-related claims and insurance recoveries and settlements of such claims. The Company continues to receive payments on its remaining primary coverage and has reached several settlements with excess carriers. The Company’s settlements in the New Jersey litigation with various individual carriers and syndicates where the Company’s claims were the subject of litigation to date have reached approximately $98 million.

At December 31, 2003, 2004 and 2005 the asbestos receivable was $84.6 million, $405.6 million and $390.0 million, respectively. The Company increased its receivable during 2003 by $47 million to reflect the recoverable portion of new claims filed, partially offset by a $4.1 million reduction to reflect current information obtained regarding the solvency status of certain carriers. In 2004, the Company increased its asbestos insurance receivable to $405.6 million. Approximately $348.4 million of the increase reflected the recoverable portion of the change in the Company’s asbestos liability calculation. This increase was primarily related to the $568.2 million increase to the liability recorded in the fourth quarter of 2004 to reflect an estimate of the liability for unasserted potential future asbestos-related claims. The receivable was reduced by $24.2 million during 2004 to reflect cash received from insurance companies and $4.1 million to reflect current information obtained regarding solvency of insurance carriers. Finally, the Company’s asbestos insurance receivable decreased to $390.0 million as of December 31, 2005. The reduction was primarily the result of cash received from insurance companies of $23.7 million and refinements to solvency rates and settlements of $20.4 million. This reduction was partially offset by refinements to other data,

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including claims data, and policy information of $20.5 million and adjustments to reflect the recoverable portion of incurred legal expenses of $8.0 million.

As referenced above, in February 2005 the Company settled with Equitas for $84.5 million to buy-out the participants of certain underwriters in pre-1993 Lloyd’s, London policies included in the Company’s insurance coverage. During 2005, $14.4 million of this amount was received by the Company to cover asbestos and environmental costs, and $70.1 million remains in a trust expiring January 3, 2007. If, during the trust period, there is federal legislation that takes asbestos claims out of the courts and requires Equitas to make a duplicate payment to the asbestos trust, the remaining balance in the trust will be disbursed to Equitas minus some allowance to the Company for claim settlements that may be made or have been made in the period January 1, 2005 through January 3, 2008. If there is no such legislation by January 3, 2007, the balance of funds in the trust, including accrued interest, will be disbursed to the Company.

Critical Accounting Assumptions

The amounts recorded by the Company for asbestos-related liability and insurance-related receivables rely on assumptions that are based on currently known facts and strategy. The Company’s actual expenses or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company’s or HR&A’s calculations vary significantly from actual results. Key variables in these assumptions are identified above and include the number and type of new claims to be filed each year, the average cost of disposing of each such new claims, average annual defense costs, the resolution of coverage issues among insurance carriers, and the solvency risk with respect to the Company’s insurance carriers. Furthermore, predictions with respect to these variables are subject to greater uncertainty as the projection period lengthens. Other factors that may affect the Company’s liability and ability to recover under its insurance policies include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, and the passage of the state or federal tort reform legislation. The Company reviews these assumptions on a periodic basis to determine whether any adjustments are required to the estimate of its recorded asbestos-related liability and the related insurance receivables. The Company may also adjust these estimates based upon the outcome of court-ordered mediation referenced above and/or expected settlement discussions.

The Company does not believe that asbestos payment to claimants, net of insurance recoveries, will have a material adverse effect on its financial condition or liquidity in any particular year or in the aggregate. Adjustments, if any, to the Company’s estimate of its recorded asbestos-related liability and/or insurance receivable could be material to operating results for the periods in which the adjustments to the liability or receivable is recorded.

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NOTE 15. Goodwill and Intangible Assets

The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2005 and 2004, respectively.

Segment	January 1, 2005		Acquisitions		Dispositions			Foreign Exchange Translation			Other			December 31, 2005
Air Conditioning	$	307.6	$	2.6	$	(4.3	)	$	(1.1	)	$	0.3		$	305.1
Bath and Kitchen		604.6		1.7		—			(68.0	)		(2.2	)		536.1
Vehicle Controls		355.5		—		—			(43.6	)		(0.2	)		311.7
Total	$	1,267.7	$	4.3	$	(4.3	)	$	(112.7	)	$	(2.1	)	$	1,152.9

Segment	January 1, 2004		Acquisitions		Dispositions		Foreign Exchange Translation		Other			December 31, 2004
Air Conditioning	$	307.8	$	0.5	$	—	$	0.7	$	(1.4	)	$	307.6
Bath and Kitchen		566.3		0.5		—		40.0		(2.2	)		604.6
Vehicle Controls		331.9		—		—		24.8		(1.2	)		355.5
Total	$	1,206.0	$	1.0	$	—	$	65.5	$	(4.8	)	$	1,267.7

The following table summarizes the Company’s intangible assets, which are included in other assets, by asset classification for the years ended December 31, 2005 and December 31, 2004, respectively.

Description	December 31, 2005 Gross Amount		December 31, 2005 Accumulated Amortization			December 31, 2005 Net		Expected Amortization for the Next 5 Years
Patents	$	7.7	$	(6.9	)	$	0.8	$	0.8
Trademarks		7.9		(1.8	)		6.1		1.9
Customer lists		2.2		(0.3	)		1.9		0.3
Covenant not to compete		1.3		(1.0	)		0.3		0.3
Other		1.8		(1.6	)		0.2		0.2
Total	$	20.9	$	(11.6	)	$	9.3	$	3.5
Description	December 31, 2004 Gross Amount		December 31, 2004 Accumulated Amortization			December 31, 2004 Net
Patents	$	7.7	$	(6.3	)	$	1.4
Trademarks		5.1		(1.7	)		3.4
Customer lists		1.3		—			1.3
Covenant not to compete		1.0		(0.6	)		0.4
Other		2.3		(1.6	)		0.7
Total	$	17.4	$	(10.2	)	$	7.2

The Company recognized $2.4 million, $1.7 million, and $1.9 million of amortization expense related to intangible assets for the years ended December 31, 2005, 2004 and 2003, respectively.

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NOTE 16. Segments

American Standard has three business segments: Air Conditioning Systems and Services, Bath and Kitchen and Vehicle Control Systems.

Air Conditioning Systems and Services is a leading global manufacturer of commercial and residential heating, ventilation and air conditioning (“HVAC”) equipment, systems and controls. It also provides after-market parts to the HVAC industry, contracting for the installation and maintenance of commercial HVAC systems featuring its products, and service for its commercial products and those of other manufacturers. The Company’s air conditioning segment is organized and managed as two operating divisions: Trane Commercial Systems (“TCS”), a global business, and Residential Systems (“RS”), a North American regional business. TCS manufactures and distributes, on a global basis, commercial applied and commercial unitary equipment, controls and building automation systems, after-market parts, and outside North America, residential air conditioning products. TCS also installs and provides services for its products and those of other HVAC manufacturers. RS manufactures primarily residential HVAC products (air conditioners, furnaces, and related accessories and controls) and distributes both residential and commercial unitary products in North America through a separate distribution channel. In 2005, approximately 13% of RS sales were for commercial applications.

The TCS and the RS manufacturing operations are not organized on a purely product-line basis. Each manufactures products or components that are sold, or incorporated into products sold, by the other. In addition, while RS manages the manufacturing operations for residential products sold in the U.S. and Canadian markets, TCS manages the manufacturing, sourcing and distribution of residential products for all other international markets in which the Company participates.

Since manufacturing and distribution of TCS and RS have considerable overlap and have similar economic characteristics, we believe that aggregation of TCS and RS into a single reportable segment is the most meaningful way to report them. Therefore, in accordance with the aggregation criteria of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, for segment reporting purposes TCS and RS are aggregated into a single reportable segment called Air Conditioning Systems and Services.

The Bath and Kitchen segment designs and produces bathroom and kitchen products – including toilets, sinks, tubs, faucets, accessories and related products. Its products are sold through retail and wholesale sales channels for residential and commercial markets throughout the world.

Vehicle Control Systems produces a variety of control systems that improve vehicle safety and reduce overall vehicle operating costs for the world’s leading commercial truck, trailer, bus and passenger car manufacturers. Its largest-selling products are braking control systems and related electronic and other control systems. These include antilock and electronic braking systems (“ABS” and “EBS”, respectively), automated transmission controls and suspension control systems for heavy and medium-sized trucks, buses and trailers. Vehicle Control Systems also sells suspension control systems to manufacturers of luxury cars and sport utility vehicles.

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Segment Data

	Year Ended December 31
(Dollars in millions)	2005			2004			2003
Sales:
Air Conditioning Systems and Services	$	6,015		$	5,345		$	4,975
Bath and Kitchen		2,418			2,440			2,235
Vehicle Control Systems		1,831			1,724			1,358
	$	10,264		$	9,509		$	8,568
Segment income:
Air Conditioning Systems and Services	$	661		$	556		$	522
Bath and Kitchen		102			197			139
Vehicle Control Systems		250			231			177
		1,013			984			838
Equity in net income of unconsolidated joint ventures		35			28			26
Interest expense		(118	)		(115	)		(117	)
Asbestos indemnity charge, net of recoveries		—			(320	)		(10	)
Corporate and other expenses (b)		(204	)		(214	)		(188	)
Income from continuing operations before income taxes	$	726		$	363		$	549
Sales–Geographic distribution (a):
United States	$	5,485		$	4,783		$	4,513
Europe (countries below are included in this total)		3,023			3,164			2,664
Germany		891			878			719
U.K.		548			594			537
France		365			358			313
Italy		453			460			400
Other (countries below are included in this total)		1,756			1,562			1,391
China		234			239			223
Canada		234			221			205
Total sales	$	10,264		$	9,509		$	8,568
Segment income–Geographic distribution:
United States	$	648		$	485		$	445
Europe		226			326			253
Other		139			173			140
Total segment income	$	1,013		$	984		$	838

(a) Revenues from external customers are classified by country of destination.

(b) Corporate and other expenses are comprised of corporate functional spending, minority interest expense and other corporate expenses. Corporate functional spending includes salaries, fringe benefits and professional fees associated with corporate functions such as human resources, finance, information technology, and legal. Other corporate expenses include costs associated with incentive compensation related to the corporate functions listed above, asbestos litigation costs, losses on sales of receivables associated with the Company’s receivable securitization programs (See Note 8 of Notes to Financial Statements), pension and post-retirement benefit costs related to the corporate functions listed above and related accretion expense (See Note 6 of Notes to Financial Statements), non-operating foreign exchange gains/losses and other miscellaneous corporate related expenses.

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Segment Data (continued)

	As of December 31
(Dollars in millions)	2005		2004		2003
Assets
Air Conditioning Systems and Services	$	2,781	$	2,623	$	2,389
Bath and Kitchen		2,031		2,194		2,099
Vehicle Control Systems		1,016		1,122		906
Total identifiable assets	$	5,828	$	5,939	$	5,394
Geographic distribution:
United States	$	2,381	$	2,304	$	2,101
Europe (countries below are included in this total)		2,367		2,716		2,401
Germany		580		764		586
U.K.		287		388		361
France		177		294		326
Italy		366		456		374
Other		1,080		919		892
Total identifiable assets		5,828		5,939		5,394
Cash and cash equivalents		391		230		112
Prepaid charges		14		15		21
Corporate assets		635		658		352
Total assets	$	6,868	$	6,842	$	5,879
Goodwill included in assets:
Air Conditioning Systems and Services	$	305	$	308	$	308
Bath and Kitchen		536		605		566
Vehicle Control Systems		312		355		332
Total goodwill	$	1,153	$	1,268	$	1,206
Equity method investments:
Air Conditioning Systems and Services	$	25	$	15	$	8
Bath and Kitchen		5		6		5
Vehicle Control Systems		61		52		43
Corporate		7		5		6
Total equity method investments	$	98	$	78	$	62
	Year Ended December 31
(Dollars in millions)	2005		2004		2003
Capital expenditures, including investments and computer software:
Air Conditioning Systems and Services	$	182	$	112	$	90
Bath and Kitchen		103		78		101
Vehicle Control Systems		69		69		45
Corporate		10		5		4
Total capital expenditures	$	364	$	264	$	240
Depreciation and amortization:
Air Conditioning Systems and Services	$	91	$	90	$	85
Bath and Kitchen		91		93		94
Vehicle Control Systems		76		69		58
Corporate		10		10		10
Total depreciation and amortization	$	268	$	262	$	247

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NOTE 17. Supplemental Consolidating Condensed Financial Information

All of the Company’s Senior Notes were issued by its 100%-owned subsidiary, American Standard Inc. (“ASI”). American Standard Companies Inc. (the “Parent Company”) and American Standard International Inc. (“ASII”) fully and unconditionally guarantee the payment obligations under these securities (the Company’s “Public Debt”). In lieu of providing separate audited financial statements for ASI, the Company has included the accompanying audited consolidating condensed financial information. Management believes that separate financial statements of ASI are not material to investors. The following supplemental financial information sets forth, on an unconsolidated basis, statements of income and statements of cash flows for the years ended December 31, 2005, 2004 and 2003, and balance sheets as of December 31, 2005 and 2004 for the Parent Company, ASI, ASII, and the subsidiaries of the Parent Company which are not subsidiaries of ASI or ASII (the “Other Subsidiaries”). None of the Other Subsidiaries guarantees the Public Debt of ASI. The equity method of accounting is used to reflect investments of the Parent Company in ASI and Other Subsidiaries.

CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2005

(Dollars in millions)	Parent Company		ASI		ASII			Other Subsidiaries			Eliminations			Consolidated Total
Sales	$	—	$	5,306.5	$	5,355.7		$	13.7		$	(411.5	)	$	10,264.4
Costs and expenses:		—
Cost of sales		—		3,836.7		4,082.5			15.7			(411.3	)		7,523.6
Selling and administrative expenses		—		1,024.4		844.3			0.4			(3.7	)		1,865.4
Other (income) expense		—		121.1		(86.7	)		(6.7	)		3.5			31.2
Interest expense		—		111.4		6.9			—			—			118.3
Intercompany interest expense (income)		—		16.1		(16.1	)		—			—			—
Total expenses		—		5,109.7		4,830.9			9.4			(411.5	)		9,538.5
Income from continuing operations before income taxes and equity in net income of consolidated subsidiaries		—		196.8		524.8			4.3			—			725.9
Income taxes		—		30.8		137.3			1.5			—			169.6
Income from continuing operations before equity in net income of consolidated subsidiaries		—		166.0		387.5			2.8			—			556.3
Equity in net income of consolidated subsidiaries		556.3		—		—			—			(556.3	)		—
Net income	$	556.3	$	166.0	$	387.5		$	2.8		$	(556.3	)	$	556.3

90

NOTE 17. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2005

(Dollars in millions)	Parent Company		ASI			ASII			Other Subsidiaries			Eliminations			Consolidated Total
ASSETS
Current assets:
Cash and cash equivalents	$	0.1	$	141.7		$	246.3		$	2.6					$	390.7
Accounts receivable, net		—		537.3			601.0			23.0						1,161.3
Inventories		—		512.8			565.4			—						1,078.2
Other current assets		—		258.6			161.3			16.1						436.0
Total current assets		0.1		1,450.4			1,574.0			41.7						3,066.2
Facilities, net		—		629.7			992.5			—						1,622.2
Goodwill, net		—		178.0			974.9			—						1,152.9
Investment in subsidiaries		2,454.2		—			—			—		$	(2,454.2	)		—
Long-term asbestos receivable		—		384.0			—			—						384.0
Other assets		—		449.1			181.2			12.2			—			642.5
Total assets	$	2,454.3	$	3,091.2		$	3,722.6		$	53.9		$	(2,454.2	)	$	6,867.8
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Loans payable to banks						$	17.5			—					$	17.5
Current maturities of long-term debt			$	2.0			0.6			—						2.6
Other current liabilities				876.7			1,314.6		$	17.5						2,208.8
Total current liabilities				878.7			1,332.7			17.5						2,228.9
Long-term debt				1,282.8			393.3			—						1,676.1
Reserve for post-retirement benefits				254.9			376.7			—						631.6
Intercompany accounts, net	$	1,531.8		362.4			(1,760.7	)		(133.5	)					—
Long-term portion of asbestos liability		—		673.0			—			—			—			673.0
Other long-term liabilities		—		296.5			273.2			166.0						735.7
Total liabilities		1,531.8		3,748.3			615.2			50.0			—			5,945.3
Total shareholders’ equity (deficit)		922.5		(657.1	)		3,107.4			3.9		$	(2,454.2	)		922.5
Total liabilities and shareholders’ equity (deficit)	$	2,454.3	$	3,091.2		$	3,722.6		$	53.9		$	(2,454.2	)	$	6,867.8

91

NOTE 17. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW

FOR THE YEAR ENDED DECEMBER 31, 2005

(Dollars in millions)	Parent Company			ASI			ASII			Other Subsidiaries			Eliminations			Consolidated Total
Cash provided (used) by:
Operating activities:
Net income	$	556.3		$	166.0		$	387.5		$	2.8		$	(556.3	)	$	556.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization					99.9			167.8									267.7
Equity in earnings of unconsolidated joint ventures, net of dividends received					(10.6	)		(10.0	)								(20.6	)
Non-cash stock compensation					64.5												64.5
Deferred income taxes					35.9			1.7			(0.8	)					36.8
Gain on sale of property, plant and equipment					(3.1	)		(0.3	)								(3.4	)
Equity in net income of subsidiary		(556.3	)											556.3			—
Changes in assets and liabilities:
Accounts receivable					(62.4	)		8.4			4.1						(49.9	)
Inventories					(17.2	)		(12.8	)								(30.0	)
Accounts payable					44.8			(55.1	)								(10.3	)
Other accrued liabilities and taxes					52.2			11.6			4.3						68.1
Post-retirement benefits					(22.7	)		9.7									(13.0	)
Net asbestos indemnity liability					5.2												5.2
Other long-term liabilities					(15.7	)		4.8			34.5						23.6
Other current and long-term assets		—			(138.9	)		53.3			11.0			—			(74.6	)
Net cash provided by operating activities		—			197.9			566.6			55.9			—			820.4
Investing activities:
Purchases of property, plant and equipment					(146.5	)		(147.3	)								(293.8	)
Investments in affiliated companies and other businesses					(4.8	)		(21.8	)								(26.6	)
Investments in computer software					(25.8	)		(17.5	)								(43.3	)
Repayment of loan from unconsolidated joint venture, net					12.2												12.2
Proceeds from the disposal of property/equipment		—			23.1			5.1			—			—			28.2
Net cash used by investing activities		—			(141.8	)		(181.5	)		—			—			(323.3	)
Financing activities:
Proceeds from issuance of long-term debt					203.7			1.6									205.3
Repayments of long-term debt, including redemption premiums					(209.4	)		(1.8	)								(211.2	)
Net change in revolving credit facilities					(35.0	)		354.8									319.8
Net change in other short-term debt					(51.0	)		(6.8	)								(57.8	)
Purchases of treasury stock		(500.0	)														(500.0	)
Dividend payments		(126.4	)														(126.4	)
Net change in intercompany accounts		582.2			189.8			(715.9	)		(56.1	)					(0	)
Proceeds from exercise of stock options		35.6															35.6
Proceeds from foreign exchange forward contracts					(4.1	)											(4.1	)
Other common stock issued or reacquired, net		8.6			—			—			—			—			8.6
Net cash used by financing activities		—			94.0			(368.1	)		(56.1	)		—			(330.2	)
Effect of exchange rate changes on cash and cash equivalents								(5.6	)								(5.6	)
Net increase (decrease) in cash and cash equivalents		—			150.1			11.4			(0.2	)		—			161.3
Cash and cash equivalents at beginning of period		0.1			(8.6	)		235.1			2.8			—			229.4
Cash and cash equivalents at end of period	$	0.1		$	141.5		$	246.5		$	2.6		$	—		$	390.7

92

NOTE 17. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2004

(Dollars in millions)	Parent Company		ASI			ASII			Other Subsidiaries			Eliminations			Consolidated Total
Sales			$	4,806.8		$	5,134.1		$	11.0		$	(443.1	)	$	9,508.8
Costs and expenses:
Cost of sales				3,532.9			3,848.9			13.6			(443.1	)		6,952.3
Selling and administrative expenses				931.1			781.4			0.7			(4.7	)		1,708.5
Other expense				68.1			(19.8	)		(2.2	)		3.9			50.0
Asbestos indemnity charge, net of recoveries				320.2			—			—			—			320.2
Interest expense				103.9			11.0			—			—			114.9
Intercompany interest expense (income)				3.9			(2.2	)		(2.5	)		0.8			—
Total expenses				4,960.1			4,619.3			9.6			(443.1	)		9,145.9
Income from continuing operations before income taxes and equity in net income of consolidated subsidiaries				(153.3	)		514.8			1.4			—			362.9
Income taxes				(39.6	)		88.7			0.4						49.5
Income from continuing operations before equity in net income of consolidated subsidiaries				(113.7	)		426.1			1.0			—			313.4
Equity in net income of consolidated subsidiaries	$	313.4		—			—			—			(313.4	)		—
Net income	$	313.4	$	(113.7	)	$	426.1		$	1.0		$	(313.4	)	$	313.4

93

NOTE 17. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2004

(Dollars in millions)	Parent Company		ASI			ASII			Other Subsidiaries			Eliminations			Consolidated Total
ASSETS
Current assets:
Cash and cash equivalents	$	0.1	$	(8.6	)	$	235.1		$	2.8		$	—		$	229.4
Accounts receivable, net		—		473.2			654.2			27.1			—			1,154.5
Inventories		—		493.6			593.6			—			—			1,087.2
Other current assets		—		236.8			167.7			14.2			—			418.7
Total current assets		0.1		1,195.0			1,650.6			44.1			—			2,889.8
Facilities, net		—		570.6			1,049.4			—			—			1,620.0
Goodwill, net		—		183.4			1,084.3			—			—			1,267.7
Investment in subsidiaries		1,871.3		—			—			—		$	(1,871.3	)		—
Long-term asbestos receivable		—		399.6			—			—			—			399.6
Other assets		—		408.3			232.5			23.9			—			664.7
Total assets	$	1,871.4	$	2,756.9		$	4,016.8		$	68.0		$	(1,871.3	)	$	6,841.8
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Loans payable to banks	$	—	$	51.0		$	25.6		$	—		$	—		$	76.6
Current maturities of long-term debt		—		1.6			0.6			—			—			2.2
Other current liabilities		—		963.1			1,281.7			23.1			—			2,267.9
Total current liabilities		—		1,015.7			1,307.9			23.1			—			2,346.7
Long-term debt		—		1,379.5			49.6			—			—			1,429.1
Reserve for post-retirement benefits		—		275.5			468.6			—			—			744.1
Intercompany accounts, net		941.1		235.4			(1,082.8	)		(93.7	)		—			—
Long-term portion of asbestos liability		—		683.4			—			—			—			683.4
Other long-term liabilities		—		323.5			253.4			131.3			—			708.2
Total liabilities		941.1		3,913.0			996.7			60.7			—			5,911.5
Total shareholders’ equity (deficit)		930.3		(1,156.1	)		3,020.1			7.3			(1,871.3	)		930.3
Total liabilities and shareholders’ equity (deficit)	$	1,871.4	$	2,756.9		$	4,016.8		$	68.0		$	(1,871.3	)	$	6,841.8

94

NOTE 17. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW

FOR THE YEAR ENDED DECEMBER 31, 2004

(Dollars in millions)	Parent Company			ASI			ASII			Other Subsidiaries			Eliminations			Consolidated Total
Cash provided (used) by:
Operating activities:
Net income	$	313.4		$	(113.7	)	$	426.1		$	1.0		$	(313.4	)	$	313.4
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization					98.5			163.4									261.9
Equity in earnings of affiliates, net of dividends received					(8.1	)		(7.7	)								(15.8	)
Non-cash stock compensation					60.9												60.9
Deferred income taxes					(123.3	)		(30.0	)		(2.8	)					(156.1	)
Gain on sale of property, plant and equipment					(3.7	)											(3.7	)
Equity in net income of subsidiary		(313.4	)											313.4			—
Changes in assets and liabilities:
Accounts receivable					7.5			(91.6	)		(2.0	)					(86.1	)
Inventories					(71.0	)		(67.4	)								(138.4	)
Accounts payable					74.9			82.4			0.3						157.6
Other accrued liabilities					32.6			17.1			3.8						53.5
Post-retirement benefits					(26.9	)		7.8									(19.1	)
Net asbestos indemnity liability					316.3												316.3
Other long-term liabilities					22.5			39.6			15.1						77.2
Other assets					(45.8	)		(18.1	)		(20.1	)					(84.0	)
Net cash provided by operating activities before proceeds from initial sale of receivables		—			220.7			521.6			(4.7	)		—			737.6
Proceeds from initial sale of receivables, net		—			27.1			—			—			—			27.1
Net cash provided by operating activities		—			247.8			521.6			(4.7	)		—			764.7
Investing activities:
Purchase of property, plant and equipment					(75.0	)		(140.9	)								(215.9	)
Investments in affiliated companies								(1.5	)								(1.5	)
Investments in computer software					(24.7	)		(21.9	)								(46.6	)
Loan to unconsolidated joint venture, net					(16.2	)											(16.2	)
Proceeds from the disposal of property/equipment					26.8			2.6			—						29.4
Net cash used by investing activities		—			(89.1	)		(161.7	)		—			—			(250.8	)
Financing activities:
Proceeds from issuance of long-term debt					0.5			0.6									1.1
Repayments of long-term debt					(1.1	)		(1.7	)								(2.8	)
Net change in revolving credit facility					(135.0	)		(93.5	)								(228.5	)
Net change in other short-term debt					51.0			(24.4	)								26.6
Purchases of treasury stock		(253.0	)														(253.0	)
Net change in intercompany accounts		208.4			(19.7	)		(193.6	)		4.9						—
Proceeds from exercise of stock options		36.9															36.9
Proceeds from foreign exchange forward contracts					8.5												8.5
Other common stock issued or reacquired, net		7.7			(1.1	)		—									6.6
Net cash used by financing activities		—			(96.9	)		(312.6	)		4.9			—			(404.6	)
Effect of exchange rate changes on cash and cash equivalents		—			—			8.4			—						8.4
Net increase (decrease) in cash and cash equivalents		—			61.8			55.7			0.2			—			117.7
Cash and cash equivalents at beginning of year		0.1			(70.4	)		179.4			2.6						111.7
Cash and cash equivalents at end of year	$	0.1		$	(8.6	)	$	235.1		$	2.8		$	—		$	229.4

95

NOTE 17. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2003

(Dollars in millions)	Parent Company		ASI			ASII			Other Subsidiaries			Eliminations			Consolidated Total
Sales			$	4,583.7		$	4,445.8		$	7.9		$	(469.8	)	$	8,567.6
Costs and expenses:
Cost of sales				3,505.4			3,432.9			9.0			(469.8	)		6,477.5
Selling and administrative expenses				754.8			605.3			0.7						1,360.8
Other expense				33.1			20.8			(0.8	)					53.1
Asbestos indemnity charge, net of recoveries				10.0												10.0
Interest expense				105.4			11.6			—						117.0
Intercompany interest expense (income)				2.3			(2.3	)		—						—
Total expenses				4,411.0			4,068.3			8.9			(469.8	)		8,018.4
Income from continuing operations before income taxes and equity in net income of consolidated subsidiaries				172.7			377.5			(1.0	)		—			549.2
Income taxes				(2.1	)		145.0			1.1			—			144.0
Income from continuing operations before equity in net income of consolidated subsidiaries				174.8			232.5			(2.1	)		—			405.2
Equity in net income of consolidated subsidiaries	$	405.2		—			—			—			(405.2	)		—
Net income	$	405.2	$	174.8		$	232.5		$	(2.1	)	$	(405.2	)	$	405.2

96

NOTE 17. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW

FOR THE YEAR ENDED DECEMBER 31, 2003

(Dollars in millions)	Parent Company			ASI			ASII			Other Subsid- iaries			Elimin- ations			Consoli- dated Total
Cash provided (used) by:
Operating activities:
Net income	$	405.2		$	174.8		$	232.5		$	(2.1	)	$	(405.2	)	$	405.2
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization					95.6			151.2									246.8
Equity in earnings of affiliates, net of dividends received					(6.7	)		(7.6	)								(14.3	)
Non-cash stock compensation					60.4												60.4
Deferred income taxes					10.1			21.4									31.5
Gain on sale of property, plant and equipment					0.8			(8.7	)								(7.9	)
Equity in net income of subsidiary		(405.2	)											405.2			—
Changes in assets and liabilities:
Accounts receivable					(28.8	)		(32.4	)		(25.1	)					(86.3	)
Inventories					(68.7	)		(7.8	)								(76.5	)
Accounts payable					25.5			7.7			0.2						33.4
Other accrued liabilities					(5.6	)		175.1			18.7						188.2
Post-retirement benefits					(7.1	)		(2.3	)								(9.4	)
Net asbestos indemnity liability					0.2												0.2
Other long-term liabilities					(57.8	)		(75.8	)		116.3						(17.3	)
Other assets					125.7			(230.9	)		2.4						(102.8	)
Net cash provided by operating activities		—			318.4			222.4			110.4			—			651.2
Investing activities:
Purchase of property, plant and equipment					(66.7	)		(104.0	)								(170.7	)
Investments in affiliated companies								(25.0	)								(25.0	)
Investments in computer software					(23.2	)		(21.7	)								(44.9	)
Proceeds from the disposal of property/equipment					6.0			17.2									23.2
Net cash used by investing activities		—			(83.9	)		(133.5	)		—			—			(217.4	)
Financing activities:
Proceeds from issuance of long-term debt								33.0									33.0
Repayments of long-term debt					(126.0	)		(3.6	)								(129.6	)
Net change in revolving credit facility					(308.0	)		31.6									(276.4	)
Net change in other short-term debt								1.8									1.8
Purchases of treasury stock		(149.5	)														(149.5	)
Net change in intercompany accounts		87.7			102.9			(82.6	)		(108.0	)					—
Proceeds from exercise of stock options		54.9															54.9
Proceeds from foreign exchange forward contracts					38.2												38.2
Financing costs and other		7.0			0.5						—						7.5
Net cash used by financing activities		0.1			(292.4	)		(19.8	)		(108.0	)		—			(420.1	)
Effect of exchange rate changes on cash and cash equivalents								1.4									1.4
Net increase (decrease) in cash and cash equivalents		0.1			(57.9	)		70.5			2.4			—			15.1
Cash and cash equivalents at beginning of year		—			(22.9	)		119.5						—			96.6
Cash and cash equivalents at end of year	$	0.1		$	(80.8	)	$	190.0		$	2.4		$	—		$	111.7

97

Quarterly Data (Unaudited)

Year 2005

(Dollars in millions, except per share data)	First (a)		Second (a)		Third (a)		Fourth (a)
Sales	$	2,340.3	$	2,755.1	$	2,624.0	$	2,545.1
Cost of sales		1,726.4		1,992.7		1,896.5		1,908.0
Income before income taxes		127.1		251.0		221.3		126.5
Income taxes		2.2		43.1		62.2		62.1
Net income	$	124.9	$	207.9	$	159.1	$	64.4
Net income per common share:
Basic	$	0.58	$	0.98	$	0.76	$	0.31
Diluted	$	0.57	$	0.95	$	0.74	$	0.30
Average number of common shares (thousands):
Basic		214,033		212,032		210,524		208,641
Diluted		220,066		217,858		216,301		213,729
Range of prices on common stock:
High	$	48.39	$	47.29	$	47.93	$	47.76
Low	$	38.56	$	40.82	$	41.35	$	35.01

Year 2004

(Dollars in millions, except per share data)	First		Second (b)		Third (b)		Fourth (b)
Sales	$	2,185.0	$	2,575.3	$	2,396.1	$	2,352.4
Cost of sales		1,591.3		1,871.2		1,720.6		1,769.2
Income before income taxes		122.6		227.8		200.0		(187.5	)
Income taxes		38.0		68.1		44.0		(100.6	)
Net income	$	84.6	$	159.7	$	156.0	$	(86.9	)
Net income per common share:
Basic	$	.39	$	.75	$	.73	$	(.41	)
Diluted	$	.38	$	.73	$	.71	$	(.41	)
Average number of common shares (thousands):
Basic		216,474		214,235		214,184		214,458
Diluted		222,226		220,035		219,924		214,458
Range of prices on common stock:
High	$	38.33	$	40.93	$	40.55	$	41.82
Low	$	33.10	$	33.60	$	36.22	$	34.41

(a) The first quarter of 2005 includes operational consolidation expenses of $20.4 million ($14.8 million after tax) comprised of $12.8 million for Air Conditioning Systems and Services, $3.9 million for Bath and Kitchen and $3.7 million for Vehicle Control Systems; the second quarter of 2005 includes operational consolidation expenses of $24.1 million ($16.2 million after tax) comprised of $8.8 million for Air Conditioning Systems and Services, $12.0 million for Bath and Kitchen and $3.3 million for Vehicle Control Systems; the third quarter of 2005 includes operational consolidation expenses of $10.9 million ($6.6 million after tax) comprised of $3.4 million for Air Conditioning Systems and Services, $6.5 million for Bath and Kitchen and $1.0 million for Vehicle Control Systems and the fourth quarter of 2005 includes operational consolidation expenses of $13.8 million ($9.2 million after tax) comprised of $0.7 million for Air Conditioning Systems and Services, $7.3 million for Bath and Kitchen, $5.7 million for Vehicle Control Systems and $0.1 million in Corporate and Other expense. Income taxes include a tax benefit of $4.6 million related to those expenses. Income taxes in the first quarter of 2005 included a tax benefit of $39 million associated with the resolution of tax contingencies and the impact of certain non-U.S. tax planning

98

initiatives on prior tax years; income taxes in the second quarter of 2005 include $36.4 million primarily related to the resolution of tax audits; income taxes in the third quarter of 2005 include $9.0 million primarily related to an amount to adjust the 2004 tax provision to the final U.S. tax return and income taxes in the fourth quarter include a tax expense of $20.6 million primarily related to a charge of $23 million associated with remitting foreign earnings to the U.S. under Section 965 of the American Jobs Creation Act of 2004.

(b) The second quarter of 2004 includes operational consolidation expenses of $13.1 million ($9.0 million after tax) comprised of $12.9 million for Bath and Kitchen and $0.2 million for Vehicle Control Systems; the third quarter of 2004 includes operational consolidation expenses of $6.8 million ($4.7 million after tax) comprised of $0.7 million for Air Conditioning Systems and Services, $5.1 million for Bath and Kitchen and $1.0 million for Vehicle Control Systems and the fourth quarter of 2004 includes operational consolidation expenses of $26.5 million ($18.3 million after tax) comprised of $7.0 million for Air Conditioning Systems and Services, $15.0 million for Bath and Kitchen, $4.2 million for Vehicle Control Systems and $0.3 million in Corporate and Other expense. Income taxes include a tax benefit of $14.4 million related to those expenses. The fourth quarter of 2004 includes a $307 million ($188 million net of a $119 million tax benefit) charge covering estimated payments for pending and future asbestos-related claims. For a detailed description of the asbestos indemnity charge, see Item 3. Legal Proceedings and Note 14 of Notes to Financial Statements. Income taxes in the second quarter of 2004 include a tax benefit of $2.7 million related to the benefit recognized on certain tax items; income taxes in the third quarter of 2004 include $18 million related to a reduction in withholding tax liabilities arising from a decision to not distribute the earnings of certain foreign subsidiaries and income taxes in the fourth quarter include a tax benefit of $18.5 million from the resolution of tax audits, and a $119 million tax benefit related to the asbestos indemnity charge.

The sum of each line for the four quarters does not necessarily equal the amount reported for the full year because of rounding and, for per share amounts, because of the effect of averaging the shares used in the calculation.

99

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company has established a Disclosure Controls Committee that assists the Chief Executive Officer and Chief Financial Officer in their evaluation of the Company’s disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures, as defined in the Securities Exchange Act of 1934, Rule 13a-15(e), are (i) effective to ensure that the information required to be disclosed in the reports that the Company files or submits under the Securities Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

100

Management’s Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company,

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures included in such controls may deteriorate.

The Company conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon such evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2005.

The Company’s assessment of the effectiveness of our internal control over financial reporting, as of December 31, 2005, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report which is included immediately below.

American Standard Companies Inc.

February 21, 2006

101

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of American Standard Companies Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that American Standard Companies Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). American Standard Companies Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that American Standard Companies Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, American Standard Companies Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2005 consolidated financial statements of American Standard Companies Inc. and our report dated February 21, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York

February 21, 2006

102

ITEM 9B. OTHER INFORMATION

None.

103

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to instruction G(3) to Form 10-K, the information required by Item 10 with respect to the Directors of the Company set forth under the heading “Proposal 1 – Election of Directors” and “Directors” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

The information required by Item 10 with respect to the executive officers of the Company has been included in Part I of this Form 10-K (as Item 4A) under the heading “Executive Officers of the Registrant” in reliance on Instruction G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.

Pursuant to instruction G(3) to Form 10-K, information concerning compensation committee interlocks and insider participation set forth under the heading “Compensation Committee Interlocks and Insider Participation” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

Pursuant to instruction G(3) to Form 10-K, information concerning the independence of our Audit Committee and audit committee financial expert disclosure set forth under the headings “Board of Directors’ Meetings, Committees of the Board and Related Matters – Board Matters and Committee Membership”, –”Committees of the Board – Audit Committee” and “Audit Committee Matters – Audit Committee Membership Standards” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

Pursuant to instruction G(3) to Form 10-K, information concerning compliance with Section 16(a) of the Securities Act of 1933 by officers and directors of the Company set forth under the heading entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

Information regarding our Code of Conduct and Ethics set forth under the caption “Code of Conduct and Ethics” in Item 1 of Part I of this Form 10-K is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Pursuant to Instruction G(3) to Form 10-K, information concerning executive compensation and related matters set forth under the headings entitled, “Board of Directors’ Meetings, Committees of the Board and Related Matters – 2005 Compensation of Non-Management Directors”, “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

104

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Common Stock Ownership of Officers, Directors and Significant Shareholders

Pursuant to Instruction G(3) to Form 10-K, information concerning shares of common stock of the Company beneficially owned by management and others set forth under the heading “Common Stock Ownership of Officers, Directors and Significant Shareholders” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

Equity Compensation Plan Information

The following table sets forth certain information regarding the Company’s equity compensation plans as of December 31, 2005:

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	9,324,734	(1)	$	29.51	9,082,935	(2)
Equity compensation plans not approved by security holders	8,966,400	(3)	$	16.77	3,007,864	(4)
Total	18,291,134				12,090,799

(1) Includes options to purchase 1,731,034 shares of Company stock under the shareholder-approved 1995 American Standard Companies Inc. Stock Incentive Plan (the “1995 Stock Incentive Plan”); also includes options to purchase 7,593,700 shares under the shareholder-approved 2002 American Standard Companies Inc. Omnibus Incentive Plan (the “2002 Omnibus Plan”) which replaced the 1995 Stock Incentive Plan.

(2) Includes 8,172,913 shares available for issuance under the 2002 Omnibus Plan. In addition to options, warrants or rights, the 2002 Omnibus Plan also provides for not more than 2,475,000 awards that may be issued in the form of restricted stock or restricted units. Also includes 910,022 shares available for issuance under the American Standard Companies Inc. Employee Stock Purchase Plan.

(3) Includes options to purchase 8,538,654 shares under the 1995 Stock Incentive Plan; 50,842 share equivalents credited to participants’ accounts under the American Standard Companies Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”); and 376,904 share equivalents credited to participants’ accounts under the American Standard Inc. Supplemental Savings Plan (the “Supplemental Savings Plan”). Descriptions of the material features of the 1995 Stock Incentive Plan, the Deferred Compensation Plan and the Supplemental Savings Plan appear below.

(4) Includes 2,936,155 shares remaining available for issuance under the Deferred Compensation Plan; and 71,709 shares remaining available for issuance under the American Standard Companies Inc. Supplemental Compensation for Outside Directors (the “Directors’ Plan”). A description of the material features of the Directors’ Plan appears below.

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1995 Stock Incentive Plan

The 1995 Stock Incentive Plan was approved by the Company’s shareholders in 1995, with 22,813,425 shares authorized for issuance under the Plan. Under the 1995 Stock Incentive Plan, awards may be granted to officers and other key executives and employees, in the form of incentive or non-qualified stock options, stock appreciation rights, restricted stock and restricted units. Non-employee directors are eligible to receive awards other than incentive stock options. The exercise price of an option may not be less than the fair market value of the underlying stock on the date of grant and no option may have a term of more than ten years. Options awarded under the Plan generally vest ratably over three years. In the event of a change of control of the Company, any outstanding stock options will become immediately exercisable and may be cashed out at the discretion of the participant, and the restricted period will lapse as to any outstanding restricted stock or restricted units.

The Board of Directors of the Company subsequently approved 20.7 million additional shares for issuance under the Plan. The authorization of additional shares under the Plan did not require the approval of shareholders and was not submitted for their approval. In February 2002, the Board of Directors of the Company authorized the 2002 Omnibus Plan as a replacement for the 1995 Stock Incentive Plan and submitted the 2002 Omnibus Plan to shareholders for their approval. With the approval of the 2002 Omnibus Plan by shareholders in May 2002, no further awards will be issued under the 1995 Stock Incentive Plan, which expired on May 2, 2002 except with respect to awards outstanding on such date.

Deferred Compensation Plan

The Deferred Compensation Plan is an unfunded plan under which certain executive employees may defer receipt of all or part of long-term incentive awards and annual incentive awards and portions of base salary and commissions. Non-employee directors are also eligible to defer annual retainer and meeting fees. Participants may choose to invest their deferrals into either share equivalents of Company stock or an interest-bearing cash account. Should the participant choose to defer into share equivalents, allocations to the share account are based on the fair market value of the shares on the date the deferred compensation would otherwise have been paid, without a discount of any kind. At the time of the deferral, the participant chooses the date and form of distribution, which, can begin upon termination of employment, up to three years after termination of employment, or in a given year while still employed. Amounts deferred may be distributed earlier than scheduled upon the occurrence of certain triggering events. In the event of a change of control of the Company, all obligations under the Plan must be fully funded by the Company. Deferrals of amounts that were not earned and vested as of December 31, 2005 are subject to the regulations governing deferred compensation set forth in Section 409A of the Internal Revenue Code (“Section 409A”).

Supplemental Savings Plan

The Supplemental Savings Plan is an unfunded plan for the benefit of those ESOP, Savings Plan and Pension Plan participants, other than executive officers, whose ESOP, Savings-Plan and Pension-Plan-eligible compensation exceeds the limits of Section 401(a)(17) of the Internal Revenue Code. Participants in the ESOP and Savings Plan are credited annually with share equivalents of American Standard stock in an amount that is meant to roughly compensate them for employer contributions to the Employee Stock Ownership and Savings Plan(s) which are lost due to the limits of Section 401(a)(17). Participants receive dividend equivalents on their share equivalents in the form of additional share equivalents. Participants in the Pension Plan are credited annually with cash in an amount intended to compensate them for employer contributions to the Pension Plan, which, are lost due to the limits of Section 401(a)(17). The cash contributions earn interest at the same rate used to credit cash balances in the Pension Plan. In determining contributions credited under the Supplemental Savings Plan, only compensation up to $235,000 ($250,000 effective for the plan year beginning January 1, 2006) is considered. In order to receive a Plan allocation for a given year, participants must be employed with the Company on December 31 of such year. For participants who are hired on or after January 1, 2004, there is a three-year vesting requirement under the Plan. Thirty days after termination of employment (six months after termination of employment for those considered key executives under Section 409A), participants receive a distribution from the Plan, in shares with respect to their vested share account balances and in cash with respect to their vested cash account balances. The Plan is designed as a parallel excess plan within the meaning of the New York Stock Exchange rules regarding shareholder approval

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of equity compensation plans. Shares are available for issuance under the Plan as needed in connection with the operation of the ESOP and the Savings Plan.

Directors’ Plan

The Directors’ Plan is intended to promote an equity interest in the Company by its non-employee directors. Under the terms of the Directors’ Plan, each non-employee director, upon initial election to the Board, is allocated $100,000 worth of Company stock, based on the fair market value of the stock on the date immediately preceding the director’s election to the board, which is deposited in a grantor’s trust for the benefit of the director. In addition, directors have credited to their plan accounts annually, on the day prior to the annual meeting of the Company’s shareholders, that number of shares of common stock equal in value to $35,000 based on the closing price of the Company’s stock that day. These shares are distributed to the directors upon their leaving their position as director. Directors make a one time election to have any dividends issued to the trust with respect to the shares in their accounts either reinvested in shares or paid to them in cash annually, with accrued interest. Shares allocated to a director’s account are voted by the trustee as instructed by each director. In the event of change of control of the Company, the directors are entitled to an immediate distribution of their plan assets from the trust, which, at their option, can be in either shares or the cash value of the shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to Instruction G(3) to Form 10-K, information concerning certain relationships and related party transactions set forth under the heading entitled, “Certain Relationships and Related Party Transactions” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Pursuant to Instruction G(3) to Form 10-K, information concerning principal accounting fees and services set forth under the heading “Audit Committee Matters – Audit Committees’ Pre-approved Policies and Procedures” and “– Audit and Non-Audit Fees” in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this report is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1. and 2. Financial statements and financial statement schedules

The financial statements and financial statement schedules listed in the Index to Financial Statements and Financial Statement Schedules on the following page are incorporated herein by reference.

(b) The exhibits to this Report are listed on the accompanying Index to Exhibits and are incorporated herein by reference or are filed as part of this Annual Report on Form 10-K.

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INDEX TO FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULES

	Page No.
1. Financial Statements:
Consolidated Balance Sheet at December 31, 2005 and 2004	55
Years ended December 31, 2005, 2004 and 2003:
Consolidated Statement of Income	54
Consolidated Statement of Cash Flows	56
Consolidated Statement of Shareholders’ Equity and Comprehensive Income	57
Notes to Financial Statements	58
Report of Independent Registered Public Accounting Firm	53
2. Report of Independent Registered Public Accounting Firm on Financial Statement Schedules	117
3. Financial statement schedules, years ended December 31, 2005, 2004, and 2003
I Condensed Financial Information of Registrant	118
II Valuation and Qualifying Accounts	121

All other schedules have been omitted because the information is not applicable or is not material or because the information required is included in the financial statements or the notes thereto.

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AMERICAN STANDARD COMPANIES INC.

EXHIBIT INDEX

(The Commission File Number of American Standard Companies Inc. (formerly ASI Holding Corporation), the Registrant (sometimes hereinafter referred to as “Holding”), and for all Exhibits incorporated by reference, is 1-11415, except those Exhibits incorporated by reference in filings made by American Standard Inc. (the “Company”) the Commission File Number of which is 33-64450. Prior to filing its Registration Statement on Form S-2 on November 10, 1994, Holding’s Commission File Number was 33-23070.)

3.1	Restated Certificate of Incorporation of Holding (previously filed as Exhibit 3(i) to Holding’s Form 10-Q for the quarter ended September 30, 1998, and herein incorporated by reference.)
3.2	Amendment to the Restated Certificate of Incorporation of Holding (previously filed as Exhibit 3 to Holding’s Form 10-Q for the quarter ended June 30, 2004, and herein incorporated by reference.)
3.3	Amended and Restated By-laws of Holding (previously filed as Exhibit (3)(ii) to Holding’s Form 10-K for the fiscal year ended December 31, 1999, and herein incorporated by reference.)
4.1	Form of Common Stock Certificate (previously filed as Exhibit (4)(i) to Holding’s Form 10-K for the fiscal year ended December 31, 2002 and herein incorporated by reference.)
4.2	Form of Senior Debt Indenture dated as of January 15, 1998 among the Company, Holding and The Bank of New York, Trustee (previously filed as Exhibit (4)(i) to Amendment No. 1 to Registration Statement No. 333-32627 filed September 19, 1997, and herein incorporated by reference.)
4.3	Indenture dated as of January 15, 1998 among the Company, Holding and The Bank of New York, Trustee (previously filed as Exhibit 4.1 to Holding’s Form 10-Q for the quarter ended September 30, 1998, and herein incorporated by reference.)
4.4	First Supplemental Indenture dated as of January 15, 1998 between the Company, Holding and The Bank of New York, relating to the Company’s 7.375% Senior Notes due 2008, guaranteed by Holding (previously filed as Exhibit (4)(xi) to Holding’s Form 10-K for the fiscal year ended December 31, 1997, and herein incorporated by reference.)
4.5	Second Supplemental Indenture dated as of February 13, 1998 between the Company, Holding and The Bank of New York relating to the Company’s 7 1/8% Senior Notes due 2003 and 7 5/8% Senior Notes due 2010, guaranteed by Holding (previously filed as Exhibit (4)(xii) to Holding’s Form 10-K for the fiscal year ended December 31, 1997, and herein incorporated by reference.)
4.6	Third Supplemental Indenture dated as of April 13, 1998 to the Indenture dated as of January 15, 1998 among the Company, Holding and The Bank of New York relating to the 7 3/8% Senior Notes due 2005 (previously filed as Exhibit 4.2 to Holding’s Form 10-Q for the quarter ended September 30, 1998, and herein incorporated by reference.)
4.7	Fourth Supplemental Indenture dated as of May 28, 1999 to the Indenture dated as of January 15, 1998 among the Company, Holding and The Bank of New York relating to the 8.25% Senior Notes due 2009 (previously filed as Exhibit (4)(x) to Holding’s Form 10-K for the fiscal year ended December 31, 1999, and herein incorporated by reference.)

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4.8	Fifth Supplemental Indenture dated as of May 28, 1999 to the Indenture dated as of May 28, 1999 among the Company, Holding and The Bank of New York relating to the 8.25% Senior Notes due 2009 (previously filed as Exhibit (4)(xi) to Holding’s Form 10-K for the fiscal year ended December 31, 1999, and herein incorporated by reference.)
4.9	Sixth Supplemental Indenture dated as of May 28, 1999 to the Indenture dated as of May 28, 1999 among the Company, Holding and The Bank of New York relating to the 7.125% Senior Notes due 2006 (previously filed as Exhibit (4)(xii) to Holding’s Form 10-K for the fiscal year ended December 31, 1999, and herein incorporated by reference.)
4.10	Seventh Supplemental Indenture dated as of November 19, 2004 to the Indenture dated as of May 28, 1999 among the Company, Holding and The Bank of New York (previously filed as Exhibit 4.01 to Holding’s Form 8-K dated November 19, 2004, and herein incorporated by reference.)
4.11	Rights Agreement, dated as of January 5, 1995, between Holding and Citibank N.A. as Rights Agent (previously filed as Exhibit (4)(xxv) to Holding’s Form 10-K for the fiscal year ended December 31, 1994, and herein incorporated by reference.)
4.12	Amendment No. 1 to Rights Agreement, dated as of January 13, 2003 between American Standard Companies Inc. and The Bank of New York, as Rights Agent (previously filed as Exhibit (1)(a) to Holding’s Form 8-A/A (Amendment No. 2) filed on August 20, 2003, and herein incorporated by reference.)
4.13	Amendment No. 2 to Rights Agreement dated as of February 6, 2003, between American Standard Companies Inc. and The Bank of New York, as Rights Agent (previously filed as Exhibit (1)(b) to Holding’s Form 8-A/A (Amendment No. 2) filed on August 20, 2003 and herein incorporated by reference.)
4.14	Amendment No. 3 to Rights Agreement dated August 20, 2003, between American Standard Companies Inc. and The Bank of New York, as Rights Agent (previously filed as Exhibit (1)(c) to Holding’s Form 8-A/A (Amendment No. 2) filed on August 20, 2003 and herein incorporated by reference.)
4.15	Guaranty executed and delivered November 19, 2004, made by American Standard International Inc. to The Bank of New York (previously filed as Exhibit 4.02 to Holding’s Form 8-K dated November 19, 2004, and herein incorporated by reference.)
4.16	Indenture dated as of April 1, 2005, between the Company, Holding, American Standard International Inc. and The Bank of New York Trust Company, N.A., as trustee (previously filed as Exhibit 4.1 to Holding’s Form 8-K filed on April 1, 2005, and herein incorporated by reference.)
4.17	Form of 5 1/2% Senior Note Due 2015 (previously filed as Exhibit 4.20 to Holding’s S-4 filed on May 12, 2005, and herein incorporated by reference.)
10.1*	Amended and Restated Employment Agreement with Frederic M. Poses dated as of February 7, 2002 (previously filed as Exhibit (10)(iii) to Holding’s Form 10-K for the fiscal year ended December 31, 2001, and herein incorporated by reference.)
10.2*	Amendment to Employment Agreement with Frederic M. Poses dated October 6, 2004 (previously filed as Exhibit 10.1 to Holding’s Form 8-K filed on October 7, 2004, and herein incorporated by reference.)

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10.3*	Employment Agreement with J. Paul McGrath dated December 17, 1999 (previously filed as Exhibit (10)(iii) to Holding’s Form 10-K for the fiscal year ended December 31, 2000, and herein incorporated by reference.)
10.4*	Summary of Employment Arrangement with J. Paul McGrath (previously filed as Exhibit 10.4 to Holding’s Form 10-Q for the quarter ended June 30, 2004, and herein incorporated by reference.)
10.5*	Employment Agreement with G. Peter D’Aloia dated December 3, 1999 (previously filed as Exhibit (10)(iv) to Holding’s Form 10-K for the fiscal year ended December 31, 2000, and herein incorporated by reference.)
10.6*	Summary of Employment Arrangement with G. Peter D’Aloia (previously filed as Exhibit 10.6 to Holding’s Form 10-K for the fiscal year ended December 31, 2004, and herein incorporated by reference.)
10.7*	Employment Agreement with Lawrence B. Costello dated May 1, 2000 (previously filed as Exhibit (10)(vi) to Holding’s Form 10-K for the fiscal year ended December 31, 2001, and herein incorporated by reference.)
10.8*	Employment Agreement with James E. Dwyer dated August 12, 2004 (previously filed as Exhibit 99.1 to Holding’s Form 10-Q for the quarter ended September 30, 2004, and herein incorporated by reference.)
10.9*	The American Standard Companies Inc. Employee Stock Purchase Plan, amended and restated as of July 1, 2002 (previously filed as Exhibit (10)(viii) to Holding’s Form 10-K for the fiscal year ended December 31, 2002 and herein incorporated by reference.)
10.10*	Trust Agreement for American Standard Companies Inc. Long-Term Incentive Compensation Plan and American Standard Companies Inc. Supplemental Incentive Compensation Plan, as Amended and Restated in its Entirety as of February 3, 2005, (previously filed as Exhibit 10.12 to Holding’s Form 10-K for the fiscal year ended December 31, 2004, and herein incorporated by reference.)
10.11*	American Standard Companies Inc. Executive Supplemental Retirement Benefit Program, Restated to include all amendments through December 8, 2005, filed herewith.
10.12*	American Standard Companies Inc. Supplemental Compensation Plan for Outside Directors, as Amended and Restated effective October 7, 2004, (previously filed as Exhibit 10 to Holding’s Form 10-Q for the quarter ended September 30, 2004, and herein incorporated by reference.)
10.13*	Trust Agreement for the American Standard Companies Inc. Supplemental Compensation Plan for Outside Directors, Amended and Restated as of October 2, 2003 (previously filed as Exhibit 10.12 to Holding’s Form 10-K for the fiscal year ended December 31, 2003, and herein incorporated by reference.)
10.14*	American Standard Companies Inc. Corporate Officer Severance Plan, as Amended and Restated as of October 6, 2005, (previously filed as Exhibit 10.1 to Holding’s Form 10-Q for the quarter ended September 30, 2005, and herein incorporated by reference.)

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10.15*	American Standard Companies Inc. Deferred Compensation Plan, as Amended and Restated as of January 1, 2004, (previously filed as Exhibit 10.14 to Holding’s Form 10-K for the fiscal year ended December 31, 2003, and herein incorporated by reference.)
10.16*	American Standard Companies Inc. Stock Incentive Plan, as Amended through December 7, 2000, (previously filed as Exhibit (10)(xiv) to Holding’s Form 10-K for the fiscal year ended December 31, 2000, and herein incorporated by reference.)
10.17*	Addendum to Stock Incentive Plan to comply with local regulations in the United Kingdom with respect to options granted in that country (previously filed as Exhibit (10)(xii) to Holding’s Form 10-K for the fiscal year ended December 31, 1999, and herein incorporated by reference.)
10.18*	Addendum to Stock Incentive Plan referred to comply with local regulations in France with respect to options granted in that country (previously filed as Exhibit (10)(xiii) to Holding’s Form 10-K for the fiscal year ended December 31, 1999, and herein incorporated by reference.)
10.19*	Second Addendum for French Participants to Stock Incentive Plan in governing options granted to participants in France on or after May 16, 2001 (previously filed as Exhibit (10)(xix) to Holding’s Form 10-K for the fiscal year ended December 31, 2002 and herein incorporated by reference.)
10.20*	Addendum to Stock Incentive Plan for Canadian participants to comply with local regulation in Canada with respect to options granted in that country (previously filed as Exhibit 10.2 to Holding’s Form 10-Q for the quarter ended June 30, 2004 and herein incorporated by reference.) The Plan was previously filed as Exhibit (10)(xix) to Holding’s Form 10-K for the fiscal year ended December 31, 2002 and herein incorporated by reference.
10.21*	American Standard Companies Inc. 2002 Omnibus Incentive Plan (previously filed as Exhibit (10) to Holding’s Form 10-Q for the quarter ended March 31, 2002, and herein incorporated by reference.)
10.22*	Addendum to the 2002 Omnibus Incentive Plan governing options granted to participants in Canada with respect to options granted in that country (previously filed as Exhibit 10.1 to Holding’s Form 10-Q for the Quarter ended June 30, 2004.) The Plan was filed as Exhibit (10) to Holding’s Form 10-Q for the quarter ended March 31, 2002 and herein incorporated by reference.
10.23*	Addendum to the 2002 Omnibus Incentive Plan governing options granted to participants in France (previously filed as Exhibit (10)(xxi) to Holding’s Form 10-K for the fiscal year ended December 31, 2002 and herein incorporated by reference.)
10.24*	American Standard Inc. Supplemental Savings Plan, as Restated as of December 8, 2005, filed herewith.
10.25	Five-Year Credit Agreement, dated as of November 6, 2001, among Holding, the Company, American Standard International Inc., certain subsidiaries of Holding and the financial institutions listed therein: The Chase Manhattan Bank, as Administrative Agent, Issuing Bank and Swingline Lender; Chase Manhattan International Limited, as London Agent and Italian Agent; Bank of America, N.A., Citibank, N.A. and Deutsche Bank AG as Syndication Agents; The Industrial Bank of Japan Trust Company and Lloyds TSB Bank PLC as Documentation Agents; and JP Morgan as Advisor, Lead Arranger and Book Manager (previously filed as Exhibit (10)(i) to Holding’s Form 10-Q for the quarter ended September 30, 2001, and herein incorporated by reference.)

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10.26	First Amendment dated as of November 5, 2002, to the Five-Year Credit Agreement, dated as of November 6, 2001, among Holding, the Company, American Standard International Inc., the Borrowing Subsidiaries from time to time party thereto and the Lenders from time to time party thereto: JPMorgan Chase Bank, as Administrative Agent, as Issuing Bank and as Swingline Lender; and J. P. Morgan Europe Limited, as London Agent and as Belgian Agent (previously filed as Exhibit (10)(i) to Holding’s Form 10-Q for the quarter ended September 30, 2002, and herein incorporated by reference.)
10.27*	Consulting Agreement dated as of February 23, 2005, between the Company and J. Paul McGrath (previously filed as Exhibit 10.30 to Holding’s Form 10-K for the fiscal year ended December 31, 2004, and herein incorporated by reference.)
10.28*	American Standard Companies Inc. Stock Option Grant to J. Paul McGrath, dated July 7, 2004 (previously filed as Exhibit 10.31 to Holding’s Form 10-K for the fiscal year ended December 31, 2004, and herein incorporated by reference.)
10.29*	American Standard Companies Inc. Stock Option Grant to G. Peter D’Aloia, dated July 7, 2004 (previously filed as Exhibit 10.32 to Holding’s Form 10-K for the fiscal year ended December 31, 2004, and herein incorporated by reference.)
10.30*	American Standard Companies Inc. Stock Option Grant to G. Peter D’Aloia, dated February 2, 2005 (previously filed as Exhibit 10.33 to Holding’s Form 10-K for the fiscal year ended December 31, 2004, and herein incorporated by reference.)
10.31*	2005-2007 Long-Term Incentive Plan and 2005 Annual Incentive Plan Goals (previously filed as Exhibit 10.34 to Holding’s Form 10-K for the fiscal year ended December 31, 2004, and herein incorporated by reference.)
10.32	Registration Rights Agreement dated April 1, 2005 among American Standard Inc., American Standard Companies Inc., American Standard International Inc., Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and the Other Initial Purchasers referred to therein (previously filed as Exhibit 10.35 to Holding’s S-4 Amendment No. 1 filed on August 2, 2005, and herein incorporated by reference.)
10.33*	American Standard Companies Inc. Change of Control Severance Plan, Restated to include all amendments through October 6, 2005 (previously filed as Exhibit 10.3 to Holding’s Form 10-Q for the quarter ended September 30, 2005, and herein incorporated by reference.)
10.34*	American Standard Companies Inc. Executive Savings Plan, filed herewith.
10.35	Five-Year Credit Agreement, dated as of July 7, 2005, among Holding, the Company, American Standard International Inc., certain other subsidiaries of Holding and the financial institutions listed therein: JPMorgan Chase Bank, N.A., as Administrative Agent, Issuing Bank and Swingline Lender; J.P. Morgan Europe Limited, as London Agent and Belgian Agent; JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Agent; Bank of America, N.A., as Syndication Agent; ABN AMRO Bank N.V., Citicorp USA, Inc. and Mizuho Corporate Bank, Ltd., as Documentation Agents; and Lloyds TSB Bank PLC, as Co-Documentation Agent (previously filed as Exhibit 10.1 to Holding’s Form 8-K filed on July 12, 2005, and herein incorporated by reference.)

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10.36	First Amendment dated November 30, 2005 to the Five-Year Credit Agreement, dated as of July 7, 2005, among Holding, the Company, American Standard International Inc., certain other subsidiaries of Holding and the financial institutions listed therein: JPMorgan Chase Bank, N.A., as Administrative Agent, Issuing Bank and Swingline Lender; J.P. Morgan Europe Limited, as London Agent and Belgian Agent; JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Agent; Bank of America, N.A., as Syndication Agent; ABN AMRO Bank N.V., Citicorp USA, Inc. and Mizuho Corporate Bank, Ltd., as Documentation Agents; and Lloyds TSB Bank PLC, as Co-Documentation Agent, filed herewith.
10.37*	2006-2008 Long-Term Incentive Plan and 2006 Annual Incentive Plan Goals (previously filed in Holdings Form 8-K filed on February 3, 2006, and herein incorporated by reference.)
10.38	Description of Compensation Arrangements for Non-Employee Directors, filed herewith.
10.39	Form of Stock Option Agreement for U.S. employees, filed herewith.
10.40	Form of Stock Option Agreement for Non-U.S. employees, filed herewith.
10.41*	Description of Executive Life Insurance Benefit, filed herewith.
12	Ratio of Earnings to Fixed Charges, filed herewith.
21	Listing of Holding’s Subsidiaries, filed herewith.
23	Consent of Ernst & Young LLP, filed herewith.
23.1	Consent of Hamilton, Rabinovitz and Alschuler, Inc., filed herewith.
24	Power of Attorney (Steven E. Anderson, Jared L. Cohon, Paul J. Curlander, Steven F. Goldstone, Kirk S. Hachigian, Edward E. Hagenlocker, James F. Hardymon, Ruth Ann Marshall and Dale F. Morrison), filed herewith.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

* Management compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN STANDARD COMPANIES INC.
By:	/s/ FREDERIC M. POSES
Frederic M. Poses
Chairman and Chief Executive Officer

February 24, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and dates indicated.

Signature	Title	Date
/s/ FREDERIC M. POSES Frederic M. Poses	Chairman and Chief Executive Officer; Director (Principal Executive Officer)	February 24, 2006
/s/ G. PETER D’ALOIA G. Peter D’Aloia	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	February 24, 2006
/s/ BRAD M. CEREPAK Brad M. Cerepak	Vice President and Controller (Principal Accounting Officer)	February 24, 2006
* Steven E. Anderson	Director	February 24, 2006
* Jared L. Cohon	Director	February 24, 2006
* Paul J. Curlander	Director	February 24, 2006
* Steven F. Goldstone	Director	February 24, 2006
* Kirk S. Hachigian	Director	February 24, 2006
* Edward E. Hagenlocker	Director	February 24, 2006
* James F. Hardymon	Director	February 24, 2006
* Ruth Ann Marshall	Director	February 24, 2006
* Dale F. Morrison	Director	February 24, 2006
/s/ MARY ELIZABETH GUSTAFSSON Mary Elizabeth Gustafsson Attorney-in-fact		February 24, 2006

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULES

We have audited the consolidated financial statements of American Standard Companies Inc. as of December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, and have issued our report thereon dated February 21, 2006. Our audits also included the financial statement schedules listed in Item 15(a). These schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

New York, New York

February 21, 2006

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SCHEDULE I–CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF INCOME (Parent Company Separately)

(Dollars in millions)

	Year Ended December 31,
	2005		2004		2003
Equity in net income of subsidiaries	$	556.3	$	313.4	$	405.2
Net income	$	556.3	$	313.4	$	405.2

See notes to financial statements.

BALANCE SHEET (Parent Company Separately)

(Dollars in millions)

	December 31,
	2005			2004
ASSETS
Cash	$	0.1		$	0.1
Investment in subsidiaries		2,454.2			1,871.3
Total assets	$	2,454.3		$	1,871.4
LIABILITIES
Loans payable to subsidiaries	$	1,531.8		$	941.1
SHAREHOLDERS’ EQUITY
Common stock, $.01 par value, 560,000,000 shares authorized: issued and outstanding, 206,741,396 shares in 2005; 214,947,988 shares in 2004		2.5			2.5
Capital surplus		834.4			794.5
Unearned compensation		—			—
Treasury stock		(1,181.4	)		(760.1	)
Retained earnings		1,576.5			1,146.6
Accumulated other comprehensive income:
Foreign currency translation effects		(212.6	)		(102.8	)
Deferred gain on hedge contracts, net of tax		20.9			9.3
Minimum pension liability adjustment, net of tax		(117.8	)		(159.7	)
Total shareholders’ equity		922.5			930.3
Total liabilities and shareholders’ equity	$	2,454.3		$	1,871.4

See notes to financial statements.

118

SCHEDULE I–CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

STATEMENT OF CASH FLOWS (Parent Company Separately)

(Dollars in millions)

	Year Ended December 31,
	2005			2004			2003
Cash flows from operating activities:
Net income	$	556.3		$	313.4		$	405.2
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in net income of subsidiaries		(556.3	)		(313.4	)		(405.2	)
Changes in:
Accounts receivable
Accounts payable and accruals		—			—			—
Net cash flow from operating activities		—			—			—
Cash provided (used) by investing activities:
Investment in subsidiaries		—			—			—
Net cash provided (used) by investing activities		—			—			—
Cash provided (used) by financing activities:
Purchases of treasury stock		(500.0	)		(253.0	)		(149.5	)
Dividend payments		(126.4	)		—			—
Proceeds from exercise of stock options		35.6			36.9			54.9
Loan from subsidiary		582.2			208.4			87.7
Other		8.6			7.7			7.0
Net cash provided (used) by financing activities		—			—			.1
Net change in cash and cash equivalents								.1
Cash and cash equivalents beginning of year		0.1			0.1			—
Cash and cash equivalents end of year	$	0.1		$	0.1		$	0.1

See notes to financial statements.

119

SCHEDULE I–CONDENSED FINANCIAL INFORMATION

OF REGISTRANT–(Continued)

NOTES TO FINANCIAL STATEMENTS (Parent Company Separately)

(A) The notes to the consolidated financial statements of American Standard Companies Inc. (the “Parent Company”) are an integral part of these condensed financial statements.

(B) The Parent Company owns 100% of the outstanding shares of common stock American Standard Inc. and 100% of the shares of common stock of American Standard International Inc.

(C) The Company’s Board of Directors has approved a quarterly dividend of $.18 per share of common stock. The dividend will be paid on March 20, 2006, to shareholders of record on February 28, 2006. On December 8, 2005 the Company’s Board of Directors approved an additional $500 million to purchase shares of the Company’s common stock in the open market. As of February 21, 2006, the unexpended authorization on the current program totaled $353,059,310. The Company plans to repurchase the majority of this unexpended authorization in 2006, which would result in total share repurchases for 2006 of approximately $400 million.

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2005, 2004, and 2003

(Dollars in thousands)

Description	Balance Beginning of Period		Additions Charged to Income		Deductions			Other Changes			Foreign Currency Translation Effects			Balance End of Period
2005:
Reserve deducted from assets:
Allowance for doubtful accounts receivable	$	46,235	$	17,382	$	(17,612	)(A)	$	1,742		$	(866	)	$	46,881
2004:
Reserve deducted from assets:
Allowance for doubtful accounts receivable	$	45,308	$	16,743	$	(17,800	)(A)	$	550		$	1,434		$	46,235
2003:
Reserve deducted from assets:
Allowance for doubtful accounts receivable	$	38,112	$	25,709	$	(18,420	)(A)	$	(1,814	)	$	1,721		$	45,308

(A) Accounts charged off.

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EX-10.11

Exhibit 10.11

AMERICAN STANDARD COMPANIES INC.

EXECUTIVE SUPPLEMENTAL RETIREMENT BENEFIT PROGRAM

Restated to include all amendments through

December 8, 2005

ARTICLE I

DEFINITIONS

For all purposes of the Program the following definitions shall apply, with words in the masculine gender including, where appropriate, the feminine gender:

Act means the Securities Exchange Act of 1934, as amended.

Actuarial Equivalent means, with respect to any monthly payments referred to in Article IV, the lump sum payment which is the present value as of the date of commencement of such monthly payments, determined using the following actuarial assumptions:

(a) Mortality Table - 1983 Basic Group Annuity Mortality Table for males projected to 1988 with Scale H; and

(b) Interest Rate - the lesser of

(1) 120% of the annual interest rate used by the Pension Benefit Guaranty Corporation to value immediate annuities for plans terminating as of the date as of which the applicant’s monthly pension payments would otherwise commence; and

(2) the average yield of long-term U.S. Treasury bonds issued during the one month period ending one month before the date as of which the applicant’s monthly pension payments would otherwise commence, as published in the Federal Reserve Bulletin under the heading “Composite Index: Over 10 Years (long-term),” such average yield to be rounded to the nearest .25%;

provided that, for purposes of calculating a lump sum payment to a Prior Participant or his or her Surviving Spouse the interest rate applied to calculate that portion of such lump sum attributable to such Prior Participant’s Special Years of Service shall be multiplied by sixty and four-tenths percent (60.4%).

Average Monthly Earnings of a Participating Employee means his or her total Compensation for the three (3) calendar Years of Service (or such lesser number of calendar years as may constitute his or her Years of Service) in his or her last ten (10) calendar Years of Service (including in such ten (10) calendar years the year in which his or her Service is broken), during which his or her total Compensation was the highest, divided by thirty-six (36) (or such lesser number as may constitute the number of calendar months of his or her Years of Service).

Beneficial Owner means any “person”, as such term is used in Section 13(d) of the Act, who, directly or indirectly, has or shares the right to vote or dispose of such securities or otherwise has “beneficial ownership” of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 under the Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing).

Board means the Board of Directors of the Corporation.

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Cause means a Participant’s (i) willful and continued failure substantially to perform his or her duties with the Corporation or any Subsidiary (other than any such failure resulting from incapacity due to reasonably documented physical or mental illness), after a demand for substantial performance is delivered to such Participant by the Chairman of the Board or officer of equivalent authority which specifically identifies the manner in which it is believed that such Participant has not substantially performed his or her duties, (ii) conviction of, or plea of nolo contendere to, a felony, or (iii) the willful engaging by such Participant in gross misconduct materially and demonstrably injurious to the Corporation or any Subsidiary or to the trustworthiness or effectiveness of the Participant in the performance of his or her duties. For purposes hereof, no act, or failure to act, on such Participant’s part shall be considered “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Corporation or a Subsidiary. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done, or omitted to be done, by such Participant in good faith and in the best interest of the Corporation or such Subsidiary.

Change of Control shall mean the occurrence of any of the following events:

(a) any “person”, as such term is used in Section 13(d) of the Act (other than the Corporation, any Subsidiary or any employee benefit plan maintained by the Corporation or any Subsidiary (or any trustee or other fiduciary thereof)) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation’s then-outstanding securities, provided, however, that an acquisition of securities of the Corporation representing less than 25% of the combined voting power shall not constitute a Change of Control if, prior to meeting the 20% threshold, the members of the Board who are not Employees unanimously adopt a resolution consenting to such acquisition by such Beneficial Owners;

(b) during any consecutive 24-month period, individuals who at the beginning of such period constitute the Board, together with those individuals who first become directors during such period (other than by reason of an agreement with the Corporation or the Board in settlement of a proxy contest for the election of directors) and whose election or nomination for election to the Board was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (the “Continuing Directors”), cease for any reason to constitute a majority of the Board;

(c) the consummation of any merger, consolidation, recapitalization or reorganization involving the Corporation, other than any such transaction immediately following which the persons who were the Beneficial Owners of the outstanding voting securities of the Corporation immediately prior to such transaction are the Beneficial Owners of at least 55% of the total voting power represented by the voting securities of the entity surviving such transaction or the ultimate parent of such entity in substantially the same relative proportions as their ownership of the Corporation’s voting securities immediately prior to such transaction; provided that, such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such threshold (or to preserve such relative voting power) is due solely to the

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acquisition of voting securities by an employee benefit plan of the Corporation, such surviving entity, any Subsidiary or any subsidiary of such surviving entity;

(d) the sale of substantially all of the assets of the Corporation to any person other than any Subsidiary or any entity in which the Beneficial Owners of the outstanding voting securities of the Corporation immediately prior to such sale are the Beneficial Owners of at least 55% of the total voting power represented by the voting securities of such entity or the ultimate parent of such entity in substantially the same relative proportions as their ownership of the Corporation’s voting securities immediately prior to such transaction; or

(e) the shareholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation.

Code means the Internal Revenue Code of 1986, as amended.

Committee means the Committee constituted under Article III, Section 2 hereof.

Compensation means, for any calendar year, the total remuneration (other than remuneration that is not treated as “Compensation” under and for purposes of the ESOP) for Service rendered by a Participating Employee during such year, including any annual incentive compensation awarded to him with respect to such year, without regard to the year in which such incentive compensation is received; provided that Compensation shall include amounts deferred under the American Standard Companies Inc. Deferred Compensation Plan that would otherwise be treated as “Compensation” under and for purposes of the ESOP, and shall not include any payments under the American Standard Companies Inc. Long-Term Incentive Compensation Plan.

Corporation means American Standard Companies Inc. and its successors and any predecessor corporation merged with or into, or any business acquired by, American Standard Companies Inc.

Disability means, effective January 1, 2005, a Participating Employee (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) is by reason of medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participating Employee’s employer.

Employee means an employee of the Corporation or a Subsidiary Corporation.

ESOP means the American Standard Companies Inc. Employee Stock Ownership Plan and any successor plan thereto.

ESOP Offset means two (2) times the value, as of the date when a Participating Employee’s Service is broken, of the Basic Company Contributions to his or her account under the ESOP.

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Good Reason means any of the following:

(a) an adverse change in a Participating Employee’s status or position as an executive of the Corporation, any adverse change in a Participating Employee’s status or position as an executive of the Corporation as a result of a material diminution in his or her duties or responsibilities or a relocation of a Participating Employee’s principal place of employment to a location which is at least 30 miles further from such Participating Employee’s principal residence than his or her current location or the assignment to him or her of any duties or responsibilities which are inconsistent with such status or position(s), or any removal of such Participating Employee from or any failure to reappoint or reelect him or her to such position(s) (except in connection with the termination of his or her employment for Cause, Disability or retirement or as a result of death or by him or her other than for Good Reason);

(b) a reduction by the Corporation in such Participating Employee’s base salary;

(c) the taking of any action by the Corporation or a Subsidiary Company (including the elimination of a plan without providing substitutes therefor or the reduction of his or her awards thereunder) that would substantially diminish the aggregate projected value of such Participating Employee’s awards under the Corporation’s or such Subsidiary Company’s bonus and benefit plans in which the Participating Employee was participating at the time of the taking of such action;

(d) the taking of any action by the Corporation or a Subsidiary Company that would substantially diminish the aggregate value of the benefits provided to the Participating Employee under the Corporation’s or such Subsidiary Company’s medical, health, accident, disability, life insurance, thrift and retirement plans in which the Participating Employee was participating at the time of the taking of such action;

(e) any purported termination by the Corporation of the Participating Employee’s employment that is not effected for Cause, provided that this shall not include termination of employment at age sixty-five pursuant to the Corporation’s mandatory retirement policy for Corporate officers.

Notwithstanding the foregoing, a termination for Good Reason shall not have occurred (a) if the Participating Employee consented in writing to the event giving rise to the Good Reason or (b) if the Participating Employee voluntarily terminates his or her employment more than ninety (90) days after the occurrence of the event constituting Good Reason.

Other Post-Retirement Benefits means, with respect to a Participating Employee, his or her ESOP Offset, plus all amounts paid or payable to him or his or her Surviving Spouse under or with respect to the Retirement Plan (including any monthly pension payable hereunder because it exceeds the maximum limitation on pension amounts imposed by Section 415 of the Code), the American Standard Profit Sharing Plan and any other non-governmental defined benefit or defined contribution employee pension plan (except the Savings Plan of American Standard Inc. and Participating Subsidiary Companies, the American Standard Pension Plan and the American Standard Employee Stock Ownership Plan) to which the Corporation, any Subsidiary Company or any previous

5

employer of such Participating Employee had made contributions, provided that in calculating such amounts the following shall apply:

(a) Amounts paid or payable under retirement plans of previous employers shall only be offset under this Program in the event that the Participating Employee receives credit for service with the previous employer in determining such Participating Employee’s benefit under this Program;

(b) Such amounts shall include lump sum and installment distributions which, together with all Other Post Retirement Benefits, shall be expressed as an Actuarially Equivalent lifetime annuity payable monthly.

(c) Such amounts shall exclude benefits to the extent attributable to contributions made by such Participating Employee; and

(d) Such amounts shall reflect reductions for early commencement of benefits, if any.

Participating Employee means, subject to the exclusions set forth below, any Employee who has been elected an officer of the Corporation prior to December 8, 2005 and so long as he or she remains an officer of the Corporation. Effective July 7, 2005, individuals elected to the positions of Vice President & Controller or Vice President & Treasurer shall not be Participating Employees, provided, however, that any Employees holding such positions as of such date shall continue to be Participating Employees so long as they continue in such positions and, in the event they no longer hold such positions, for so long as the Plan Administrator determines is appropriate. Effective October 6, 2005, an individual elected to the position of Vice President & General Auditor shall not a Participating Employee. Notwithstanding the foregoing, a Participating Employee who loses status as an elected officer of the Corporation, but remains an Employee, may be allowed to continue as a Participating Employee for such period as the Plan Administrator deems appropriate under the circumstances. Effective December 8, 2005, there shall be no new Participating Employees in the Program.

Primary Social Security Benefit shall mean the amount of a Participating Employee’s monthly old-age insurance benefit which would be payable at the later of age 65 and the date service is broken under the Social Security Act benefit levels as in effect on January 1 of the year in which service is broken, computed without taking into account deferred retirement credits for those breaking service after Social Security Act normal retirement date and based on the assumption that (i) he or she has been continuously covered under said Social Security Act since the later of January 1, 1951 or the January 1 of the year in which he or she attained the age of 18; (ii) his or her annual remuneration for years prior to the calendar year preceding the year in which his or her service is broken are reduced in proportion to the index on national average wages maintained under the Social Security Act; and (iii) his or her employment remuneration for the calendar year in which his or her service is broken and each calendar year thereafter until age 65 shall be equal to his or her compensation during the calendar year preceding the year in which his or her service is broken. If a Participating Employee continues employment beyond age 65, the Primary Social Security Benefit, determined at the levels as in effect on January 1 of the year in which service is broken, shall not result in reduction of such individual’s benefit below the amount of the non-forfeitable benefit that would have been payable to such individual had he or she retired at age 65. In the event that the Participating

6

Employee provides the Committee with the actual amount of his or her Social Security Benefit plus the amounts, if any, payable to such Employee under a foreign social insurance or pension system (which is comparable in nature to the U.S. Social Security System) then the total of such amounts if less than the U.S. Primary Social Security Benefit as defined in the Retirement Plan shall be deemed the Participating Employee’s Primary Social Security Benefit for the purposes of this Program.

Program means the Amended and Restated Executive Supplemental Retirement Benefit Program of American Standard Companies Inc., as set forth in this document and as amended from time to time.

Retirement Plan means the Retirement Plan of American Standard Inc. and Participating Subsidiary Companies, as in effect immediately before the amendments thereto made as of June 30, 1988.

Service and Years of Service shall have the meanings ascribed to those terms in and by the ESOP, except as otherwise provided herein in the context of a Change of Control.

Subsidiary Company means any corporation whose outstanding voting stock is owned, directly or indirectly, by the Corporation or another Subsidiary Company.

Surviving Spouse means the person to whom a Participating Employee or former Participating Employee was legally married on the earlier of the date of his or her retirement or death.

7

ARTICLE II

PURPOSE

The purpose of the Program is to further the achievement of corporate goals of the Corporation by providing improved retirement income as a component of executive compensation, by providing retirement income not subject to the limits imposed on retirement plans qualified under Section 401(a) of the Code, and by assisting in recruiting and retaining senior executives.

8

ARTICLE III

AMENDMENT, CONTINUATION, ADMINISTRATION

Section 1 - Amendment and Continuation

The Board shall have the right to suspend or terminate the Program at any time and, at any time or from time to time, to amend its terms; provided, however, that no such action shall effect a forfeiture or a reduction in the amount of any benefit under the Program that

(a) an Employee who had been a Participating Employee for at least twelve (12) months prior to the month in which such action is authorized or

(b) the Surviving Spouse of such an Employee

would otherwise have been entitled to receive if such Employee had died on, or retired as of the first of the month coinciding with or following, the effective date of such action or, if later, the date of its authorization. Notwithstanding any such suspension, termination or amendment, the Corporation and Subsidiary Companies will at all times be free to establish other programs, similar or different, for the benefit of any Employees. Notwithstanding anything contained herein to the contrary, no such suspension, termination or amendment shall be taken within two (2) years following a Change of Control that shall diminish the rights provided herein to any Participating Employee, including, without limitation, benefit formulas, accrued benefits or service.

Section 2 - Administration

The Program shall be administered by a committee of the Board (the “Committee”) which is appointed by the Board. No member of such Committee shall be eligible to participate in the Program. The Committee shall interpret the Program, establish administrative policies, guidelines and rules and designate Participating Employees thereunder, and take any other action necessary or desirable for the proper operation of the Program. All such interpretations, policies, guidelines, rules, designations and actions shall be final and binding upon the Corporation, all Subsidiary Companies, all Employees and all Participating Employees. All deferrals hereunder are intended to comply with the requirements of Section 409A of the Code.

9

ARTICLE IV

ELIGIBILITY FOR AND AMOUNT OF BENEFITS

Section 1 - Upon Retirement at or After Age Sixty-five

Effective January 1, 2005, subject to the provision below regarding “key employees”, any Participating Employee who, after completing at least five (5) Years of Service, ceases to be an Employee on or after his or her sixty-fifth (65th) birthday shall receive from the Corporation, on the last day of the month coincident with or immediately succeeding his or her sixty-fifth (65th) birthday (or the month in which he or she ceases to be an Employee, if later), a single lump sum payment which shall be the Actuarial Equivalent of a monthly payment, commencing with such month and continuing for his or her lifetime, in an amount equal to the sum of (i) the excess of

(a) four percent (4%) of his or her Average Monthly Earnings, multiplied by the number, not in excess of ten (10), of his or her Years of Service, plus

(b) one percent (1%) of his Average Monthly Earnings, multiplied by the number of his Years of Service accumulated after his first ten (10) Years of Service (to a maximum of twenty percent (20%) of such Average Monthly Earnings),over the sum of

(c) such Participating Employee’s Other Post-Retirement Benefits, plus

(d) his or her Primary Social Security Benefit;

and (ii) the monthly pension, if any, which is not payable to him from the Retirement Plan because of the maximum limitations on pension amounts imposed by Section 415 of the Code. Notwithstanding the foregoing, effective January 1, 2005, if a Participating Employee is a “key employee” under Section 416(i) of the Code for the relevant measurement period under Section 409A of the Code, then the aforementioned lump sum payment (i) shall be delayed until six months following such Participating Employee’s termination of employment and (ii) shall include interest during the six month period of delay using the Interest Rate set forth in Article I that was used to calculate the Actuarial Equivalent of the Participating Employee’s benefit .

Section 2 - Upon Employment Termination Before Age Sixty-five

Effective January 1, 2005, any Participating Employee who ceases to be an Employee after completing at least five (5) Years of Service, but before his or her sixty-fifth (65th) birthday shall, subject to the provision below regarding “key employees”, receive from the Corporation, on the last day of the month after the later of (i) the month in which such Participating Employee ceases to be an Employee and (ii) the month in which such Participating Employee attains the age of fifty-five (55), a single lump sum payment which shall be the Actuarial Equivalent of a monthly payment, commencing with the month so designated by such Participating Employee and continuing for his lifetime, in an amount equal to the product of the amounts determined in clauses (a), (b) and (c) below, with such result reduced by the amount in clauses (d) and (e) below and increased by the amount in clause (f) below.

10

Notwithstanding any other provision of this Section 2 to the contrary, effective January 1, 2005, if a Participating Employee is a “key employee” under Section 416(i) of the Code for the relevant measurement period under Section 409A of the Code and would otherwise be entitled to a lump sum payment upon termination of employment (subject to attainment of age 55) under this Section 2, then the aforementioned lump sum payment (i) shall be delayed until six (6) months following such Participating Employee’s termination of employment and (ii) shall include interest during the period of delay required under Section 409A of the Code using the Interest Rate set forth in Article I that was used to calculate the Actuarial Equivalent of the Participating Employee’s benefit.

(a) The monthly payment that such Participating Employee would have received computed under the below (i) and (ii), if he had remained an Employee (with no change in his or her Average Monthly Earnings) until, and if he or she had retired on, his sixty-fifth (65th) birthday:

(i) four percent (4%) of his Average Monthly Earnings, multiplied by the number, not in excess of ten (10), of his or her Years of Service, plus

(ii) one percent (1%) of his or her Average Monthly Earnings, multiplied by the number of his or her Years of Service accumulated after his or her first ten (10) Years of Service (to a maximum of twenty percent (20%) of such Average Monthly Earnings);

(b) A fraction

(i) the numerator of which is the number of his or her Years of Service, and

(ii) the denominator of which is the number of Years of Service he would have accumulated if he or she had remained an Employee until his or her sixty-fifth (65th) birthday;

(c) The percentage determined according to attained age (in years and completed months) on date of commencement of monthly payments, in accordance with the following table with values for non-integral ages to be determined by interpolation:

Attained Age on Date of Commencement	Percentage
64	.97
63	.93
62	.88
61	.82
60	.75
59	.68
58	.61
57	.54
56	.47
55 or younger	.40

11

(d) Such Participating Employee’s Other Post-Retirement Benefits;

(e) Such Participating Employee’s Primary Social Security Benefit, multiplied by clauses (b) and (c) above, or the Participating Employee’s actual Social Security Benefit (or other comparable benefits), if so provided by the Participating Employee;

(f) Such Participating Employee’s monthly pension, if any, reduced (if applicable) for early commencement, which is not payable to him from the Retirement Plan because of the maximum limitations on pension amounts imposed by Section 415 of the Code.

Notwithstanding anything contained herein to the contrary, if such Participating Employee ceases to be an Employee due to the termination of his or her employment within two (2) years following a Change of Control by the Corporation without Cause or by the Participating Employee for Good Reason, two (2) years shall be added to such Participating Employee’s age and service for purposes of the calculation of monthly payments (but not for purposes of calculating the Actuarial Equivalent of such payments) under this Article IV.

Section 3 - Upon Death Before Retirement

Effective January 1, 2005, if a Participating Employee is married, and has accumulated at least five (5) Years of Service when he or she ceases to be an Employee due to his or her death, his or her Surviving Spouse shall receive from the Corporation, on the last day of the month immediately succeeding the month of his or her death, a single lump sum payment which shall be the Actuarial Equivalent of a monthly payment, commencing with such succeeding month and continuing for the lifetime of such Surviving Spouse, in an amount equal to the product of the amounts determined in the below clauses (a), (b), (c) and (d), with such result reduced by the amounts in the below clauses (e) and (f).

(a) The monthly payment that the Participating Employee would have received computed under the below (i) and (ii), if he or she had remained an Employee (with no change in his Average Monthly Earnings) until, and if he or she had retired on, his sixty-fifth (65th) birthday:

(i) four percent (4%) of his Average Monthly Earnings, multiplied by the number, not in excess of ten (10), of his Years of Service, plus

(ii) one percent (1%) of his or her Average Monthly Earnings, multiplied by the number of his or her Years of Service accumulated after his or her first ten (10) Years of Service (to a maximum of 20% of such Average Monthly Earnings),

(b) A fraction

(i) the numerator of which is the number of his or her Years of Service, and

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(ii) the denominator of which is the number of Years of Service he or she would have accumulated if he or she had remained an Employee until his sixty-fifth (65th) birthday,

(c) Fifty percent (50%), minus one percent (1%) for each full year by which the age of the Surviving Spouse is more than five (5) years lower than that of the Participating Employee,

(d) The percentage specified in clause (c) of Section 2 for the Participating Employee’s age at the time of his or her death,

(e) The Participating Employee’s Other Post-Retirement Benefits,

(f) The Participating Employee’s Primary Social Security Benefit, multiplied by clauses (b), (c), and (d) above.

Section 4 - Upon Death After Termination of Employment

Effective January 1, 2005, if a Participating Employee described in Section 2 of this Article IV is married when he or she dies after the termination of his or her employment but before his or her receipt of the lump sum payment to which he or she is entitled under said Section, his or her Surviving Spouse shall receive from the Corporation, on the last day of the month immediately following the month of his death, a single lump sum payment which shall be the Actuarial Equivalent of the single lump sum payment that such Participating Employee would have received if the month that he or she designated for purposes of said Section 2 had been the later of the month of his death and the month of his or her fifty-fifth (55th) birthday and if he or she had survived through such month, reduced by fifty percent (50%), minus one percent (1%) for each year by which the age of the Surviving Spouse is more than five (5) years lower than that of the Participating Employee.

Section 5 – Service Requirement Waived Upon Change of Control

Notwithstanding anything contained herein to the contrary, each individual who is a Participating Employee at the time of a Change of Control shall be eligible for benefits calculated in accordance with Article IV whether or not such Participating Employee has completed five years of Service.

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ARTICLE V

FORFEITURES AND LIMITATIONS

Section 1 - Forfeiture of Benefits

If the Committee determines that any Participating Employee (or any recipient of a benefit under the Program who had been a Participating Employee) has, while or at any time after he or she ceased to be an Employee, directly or indirectly engaged in any occupation in competition with, or has wrongfully disclosed trade secrets of or confidential information relating to, or has intentionally done any act materially harmful to the interests of, the Corporation or any Subsidiary Company, or otherwise committed any act, or omitted to take any action, in connection with such Participating Employee’s service or status as an officer of the Corporation that resulted in a violation by such individual or the Corporation or any of its affiliates of any law, rule or regulation, including, without limitation, any Federal securities law, other than an unintentional and immaterial violation that is promptly rectified or which does not result in an material fine, sanction, penalty or other detriment to such individual, the Corporation or an affiliate of the Corporation, the Committee may in its sole discretion terminate or annul the payment of such benefit.

Section 2 - Inalienability of Benefits

No sale, transfer, anticipation, assignment, pledge or encumbrance of any kind, at law or in equity, of any benefit under this Program shall be permitted or recognized under any circumstances, and no benefit under this Program shall be subject to attachment or other legal process.

Section 3 - Other Limitations

No benefit payable under the Program shall give rise to any offset or shall be included in any reduction pursuant to Article III or any other provision of the Retirement Plan or have any similar effect on any other benefit payable under any other private benefit plan to which the Corporation or any Subsidiary Company shall have contributed. Otherwise, the Committee may from time to time determine whether the total benefits payable to any individual under the Program and all other private benefit plans to which the Corporation or any Subsidiary Company shall have contributed shall be subject to any limitation as to amount other than as provided elsewhere in the Program and/or in such other private plans, and, if so, shall determine the amount of such limitation. Notwithstanding anything else contained herein to the contrary, the Corporation shall not be in breach of its obligations hereunder, nor liable for any interest or other payments, if it fails to make any payments hereunder on the stated date on which such payment is due, so long as such payment is made not later than the last day of the calendar in which it is otherwise due hereunder.

Section 4 - Minimum Benefit

For any Participating Employee, the portion of his or her benefit payable under Section 1 or 2 of Article IV which is attributable to his Years of Service and Average Monthly Earnings through

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December 31, 1993 shall not be less than a minimum, which shall be deemed fixed as of December 31, 1993 and shall be calculated on the basis of (x) a Primary Social Security Benefit determined for a retirement occurring December 31, 1993, but increased by five percent (5%) per annum for each whole calendar year between December 31, 1993 and the actual date of retirement and (y) an ESOP offset determined as of December 31, 1993 and increased by twenty percent (20%) per annum for each whole calendar year between December 31, 1993 and the actual date of retirement. This provision shall not apply, however, to calculation of the Actuarial Equivalent of the portion of a Participating Employee’s benefit under Section 1 or 2 of Article VI attributable to Years of Service and Average Monthly Earnings through December 31, 1993.

Section 5 – Governing Law

This Plan and all rights and obligations hereunder shall be construed in accordance with and governed by the laws of the state of Delaware, to the extent such laws are not superseded by ERISA or other federal law.

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EX-10.24

Exhibit 10.24

AMERICAN STANDARD COMPANIES INC.

SUPPLEMENTAL SAVINGS PLAN

(Restated to include all amendments through December 8, 2005)

Section 1. Purpose The purpose of the Plan is to provide those participants in the American Standard Companies Inc. Employee Stock Ownership Plan (the “ESOP”), the Savings Plan of American Standard Inc. and Participating Subsidiary Companies (the “Savings Plan”) and the American Standard Pension Plan (the “Pension Plan”), who are not Corporate Officers participating in the Company’s SERP, and whose employer contributions under the ESOP, the Savings Plan and the Pension Plan have been cut back by the statutory reduction to the amount of annual compensation recognizable for qualified plan benefit accruals under Section 401(a)(17) of the Code, with an annual benefit, subject to certain limitations, to roughly reflect the equivalent value of lost ESOP, Savings Plan and Pension Plan contributions.

Section 2. Definitions Whenever used herein, the following terms shall have the meanings set forth below. Words in the masculine gender shall also include the feminine gender.

2.1 Affected Earnings means that portion, if any, of a Participant’s Eligible Compensation for a calendar year in excess of the Statutory Limitation, provided that, if more than one Valuation Date occurs in a calendar year, the Plan Administrator shall allocate Affected Earnings in such manner as the Plan Administrator shall specify from time to time.

2.2 Applicable Interest Rate means for any calendar year, the interest rate used to credit interest to Participants’ accounts under the Pension Plan.

2.3 ASI means American Standard Inc., a Delaware corporation.

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2.4 Board means the Board of Directors of the Company.

2.5 Cash Account means a separate memorandum account established in respect of a Participant which shall be credited with awards under the Plan intended to compensate such Participant for employer contributions under the Pension Plan which have been cut back due to the Statutory Limitation.

2.6 Code means the Internal Revenue Code of 1986, as amended, or any subsequent income tax law of the United States. References to Code shall be deemed to include all subsequent amendments of those sections or the corresponding provisions of any subsequent income tax law.

2.7 Common Stock means the common stock, par value $0.01 per share, of the Company.

2.8 Company means American Standard Companies Inc., a Delaware corporation.

2.9 Disability means, effective January 1, 2005, the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) is by reason of medically determinable physical or mental impairment, which can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participant’s employer.

2.10 Eligible Compensation means, for any calendar year beginning on or after January 1, 2006, the Participant’s total remuneration, up to a maximum of $250,000 ($235,000 for calendar years prior to January 1, 2006), that would have been included in the definition of

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compensation under the ESOP, the Savings Plan and the Pension Plan but for the Statutory Limitation.

2.11 Employer Contribution Percentage means for each Participant the sum of (a) 3% plus (b) the percentage of such Participant’s compensation for which the Company actually provided a matching contribution under the Savings Plan during the year, determined by taking into account (i) such Participant’s level of contributions throughout the year and (ii) whether or not such Participant also participated in the Pension Plan.

2.12 Fair Market Value on any date means the closing price of a Share on such date as reported on the New York Stock Exchange consolidated reporting system, provided that, in the event that there are no Common Stock transactions reported on such date, Fair Market Value shall mean the closing price of a Share on the immediately preceding date on which Common Stock transactions were so reported.

2.13 Participant means with respect to each calendar year any participant in the ESOP, the Savings Plan or the Pension Plan, who is not a corporate officer of the Company who also actively participates in the Company’s Executive Supplemental Retirement Benefit Program (the “SERP”), and whose allowable employer contributions under the ESOP, the Savings Plan or the Pension Plan have been determined by the Plan Administrator to have been cut back by the Statutory Limitation.

2.14 Plan means this American Standard Companies Inc. Supplemental Savings Plan.

2.15 Plan Unit means a Participant’s right to receive pursuant to the Plan one Share upon such Participant’s Termination of Employment, which right is subject to forfeiture in accordance with Section 14 (a) of the Plan.

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2.16 Share means a share of Common Stock.

2.17 Statutory Limitation means for any calendar year the maximum dollar amount of compensation that may be taken into account under the ESOP, the Savings Plan and the Pension Plan pursuant to section 401(a) (17) of the Code.

2.18 Stock Account means a separate memorandum account established in respect of a Participant which shall be credited with Plan Units intended to compensate such Participant for employer contributions under the ESOP and Savings Plan which have been cut back due to the Statutory Limitation.

2.19 Termination of Employment means a Participant’s termination of service as such is defined for purposes of the ESOP, the Savings Plan and the Pension Plan.

2.20 Valuation Date means the last day of any calendar year (or such other date or dates as the Plan Administrator may specify from time to time).

Section 3. Form of Benefits. Benefits awarded under this Plan shall be in the form of either (a) Plan Units and fractions thereof, with each Plan Unit to be equivalent to one Share or (b) cash equivalent credits to the Cash Account.

Section 4. Stock Account. The Company shall maintain a Stock Account for each Participant. For each award of Plan Units, the Stock Account shall note the number of Plan Units and fractions thereof awarded, the date of the award, as well as the Fair Market Value that was used to determine the award of Plan Units and fractions thereof.

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Section 5. Cash Account. The Company shall maintain a Cash Account for each Participant who receives an award under the Plan due to such individual’s participation in the Pension Plan. For each award to the Cash Account, the account shall note the amount credited, the date of the award and interest accrued according to this Section 5. Any amounts credited to the Cash Account shall earn interest at the Applicable Interest Rate in effect for each calendar year, which interest shall be credited in the same manner as credited to Participants’ accounts under the Pension Plan.

Section 6. Awarding of Plan Units. As of the Valuation Date, the Company will add to each Participant’s Stock Account that number of Plan Units and/or fractions thereof equal to the quotient of:

(a) the Employer Contribution Percentage of the Participant’s Affected Earnings divided by

(b) the Fair Market Value as of the Valuation Date.

Notwithstanding anything to the contrary herein, a Participant whose employer contributions to the ESOP or Savings Plan have been limited by provisions of the Code applicable to contributions to qualified retirement plans other than the provisions of Section 401(a)(17) of the Code before such Participant would have otherwise been limited under Section 401(a)(17) of the Code shall be eligible for an award of Plan Units to the same extent as if such Participant had not first been limited by such other provisions. Notwithstanding the foregoing, for so long as the Valuation Date occurs less frequently than by each payroll period, no Participant shall be

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entitled to the foregoing award of Plan Units if such Participant has experienced a Termination of Employment before the applicable Valuation Date.

Whenever a dividend other than a dividend payable in the form of Shares is declared with respect to the Company’s Common Stock, the number of Plan Units in the Participant’s Stock Account shall be increased by a number of Plan Units determined by dividing (i) the product of (A) the number of Plan Units in the Participant’s Stock Account on the related dividend record date and (B) the amount of any cash dividend declared by the Company on a Share (or, in the case of any dividend distributable in property other than Common Stock, the per share value of such dividend, as determined by the Company for purposes of income tax reporting) by (ii) the Fair Market Value Per Share on the related dividend payment date.

Section 7 Awards to the Cash Account. As of each Valuation Date, the Company will add to the Cash Account of any Participant who suffered a reduction in employer credits to the Pension Plan as a result of the Statutory Reduction an amount equal to 3% of such Participant’s Affected Earnings. Notwithstanding anything to the contrary herein, a Participant whose employer contributions to the Pension Plan have been limited by provisions of the Code applicable to contributions to qualified retirement plans other than the provisions of Section 401(a)(17) of the Code before such Participant would have otherwise been limited under Section 401(a)(17) of the Code shall be eligible for an award under this Section 7 to the same extent as if such Participant had not first been limited by such other provisions.

Notwithstanding the foregoing, for so long as the Valuation Date occurs less frequently than by

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each payroll period, no Participant shall be entitled to an award if such Participant has experienced a Termination of Employment before the applicable Valuation Date.

Section 8 Vesting and Forfeitures. Any Participant who is employed by the Company or an Affiliate as of January 1, 2004 shall, subject to the last sentences of Sections 6 and 7, be 100% vested in their Cash and Stock Accounts at all times. Cash Account balances of those Participants who are first employed by the Company or an Affiliate (as such term is defined in the Pension Plan) after January 1, 2004 shall vest in accordance with the vesting rules in effect for the Pension Plan. Stock Account balances of those Participants who are first employed by the Company or an Affiliate (as such term is defined in the Savings Plan) after January 1, 2004 shall vest in accordance with the vesting rules in effect for the Savings Plan. Upon Termination of Employment of a Participant who is not vested in his or her Cash Account or Stock Account, such unvested accounts shall be forfeited as of the date of Termination of Employment. Notwithstanding the foregoing, forfeited balances in the Cash Account and Stock Account shall be subject to restoration in accordance with the rules regarding restoration of forfeited account balances in the Pension Plan and Savings Plan, respectively, including with respect to the Cash Account, restoration of interest credits that would have been earned during the period of forfeiture.

Section 9 Changes in Capital Structure. In the event of the payment of any dividend payable in, or the making of any distribution of, Shares to holders of record of Shares during the period any Plan Units awarded under the Plan are credited to a Participant’s Stock Account; or in

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the event of any stock split, combination of Shares, recapitalization or other similar change in the authorized capital stock of the Company during such period; or in the event of the merger or consolidation of the Company into or with any other corporation or the reorganization, dissolution or liquidation of the Company during such period; there shall be credited to such Participant’s Stock Account either (1) Plan Units corresponding to such new, additional or other shares of capital stock of any class or (2) other property (including cash), as such Participant would be entitled to receive as a matter of law if the number of Plan Units credited to the Participant’s Stock Account at the time of such event were actually Shares owned by such Participant.

Section 10. Distribution of a Participant’s Stock Account.

Effective January 1, 2005, upon a Participant’s Termination of Employment, such Participant shall be entitled to a distribution of his Stock Account thirty (30) days thereafter , provided that, if the Participant is a “key employee” under Section 416(i) of the Code for the relevant measuring period under Section 409A of the Code, any distribution in connection with the Participant’s Termination of Employment for any reason other than death or Disability will be made six months after Termination of Employment. The distribution shall be in Shares, with one Share distributed for each unit in the Stock Account, and fractional units converted to cash based on the Fair Market Value as of the last business day of the month preceding the date of distribution. Notwithstanding the foregoing, so long as it will not cause the Company or ASI to breach any covenant or otherwise incur a default under any credit or other financing agreement to which it is a party, the Company may elect to pay the Participant the cash value of his Shares

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based on the Fair Market Value as of the last business day of the month preceding the date of distribution. Distributions shall be subject to all required tax withholdings, and for purposes of Stock Account distributions, the Stock Account shall be valued as of the last business day of the month preceding the date of distribution. In the event of distribution of a Participant’s Stock Account due to such Participant’s death, distribution under this Section 10 shall be made to the same person or persons to whom such Participant’s interest in the Savings Plan becomes payable as a result of such Participant’s death.

Section 11. Distribution of a Participant’s Cash Account.

Effective January 1, 2005, upon a Participant’s Termination of Employment, such Participant shall be entitled to a distribution of the Actuarial Equivalent value of his Cash Account balance, if any, thirty (30) days thereafter, provided that, if the Participant is a “key employee” under Section 416(i) of the Code for the relevant measuring period under Section 409A of the Code, any distribution in connection with the Participant’s Termination of Employment for any reason other than death or Disability will be made six months after Termination of Employment. “Actuarial Equivalent” shall have the same meaning as ascribed to such term in the Pension Plan and Actuarial Equivalent value shall be calculated in the same manner as for lump sum distributions from the Pension Plan. The distribution shall be in cash, subject to all required tax withholdings, and for purposes of Cash Account distributions, the Cash Account shall be valued as of the last business day of the month preceding the date of distribution. In the event of a distribution of a Participant’s Cash Account due to such Participant’s death, distribution under this Section 11 shall be made to the same person or

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persons to whom such Participant’s interest in the Pension Plan becomes payable as a result of such Participant’s death.

Section 12. Effective Date, Amendment and Termination. The Plan was first effective as of January 1, 1994. Except as otherwise specified, the Plan, as amended and restated herein, shall be effective as of December 8, 2005. The Board may amend or terminate the Plan at any time; provided that, no such amendment or termination shall impair the rights of a Participant with respect to amounts then credited to his Account under the Plan.

Section 13. Administration. The Plan shall be administered by the Senior Vice President, Human Resources (the “Plan Administrator”) or his delegate(s). In addition to such functions and responsibilities specifically reserved to the Plan Administrator under the Plan, the Plan Administrator shall have full power and authority, subject to the provisions of the Plan, to determine any and all questions as to eligibility to participate in the Plan, the amounts to be credited to a Participant’s Account(s), a Participant’s right to receive a distribution from the Plan, to interpret and carry out the terms of the Plan, and to exercise discretion where necessary or appropriate in the interpretation of the Plan. All decisions by the Plan Administrator shall be final and binding on all affected parties. Claims made for benefits under the Plan shall be subject to the same claims and appeals procedures as the qualified plans.

Section 14. Miscellaneous.

a. Unfunded Plan. The Company shall not be obligated to fund its liabilities

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under the Plan, the Account(s) established for each Participant shall not constitute a trust, and a Participant shall have no claim against the Company or ASI or their assets other than as an unsecured general creditor. Without limiting the generality of the foregoing, the Participant’s claim at any time shall be for the amount credited to such Participant’s Stock Account and Cash Account at such time. Notwithstanding the foregoing, the Company may establish a grantor’s trust to assist it in meeting its obligations hereunder; provided, however, that in no event shall any Participant have any interest in such trust or property other than as an unsecured general creditor.

b. Non-Alienation. The right of a Participant to receive a distribution of the value of such Participant’s Account payable pursuant to the Plan shall not be subject to assignment or alienation.

c. No Right to Continued Employment. Nothing in this Plan shall be construed to give any Participant the right to continued employment by the Company or any of its affiliates.

d. Governing Law. This Plan and all rights and obligations hereunder shall be construed in accordance with and governed by the laws of the State of Delaware, to the extent such laws are not superseded by ERISA or other federal law. The Plan is intended to be a nonqualified deferred compensation plan maintained for a select group of management or highly compensated individuals.

e. Withholding. The Company shall provide for the withholding of any taxes required to be withheld by federal, state or local law in respect of any contribution, payment or

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distribution made pursuant to the Plan.

f. Compliance. The Plan Administrator shall impose such restrictions, limitations, rules and regulations as it may deem advisable in order to comply with the applicable federal securities laws, the requirements of the New York Stock Exchange or any other applicable stock exchange or automated quotation system, any applicable state securities laws, any provision of the Company Certificate of Incorporation of Bylaws, or any other law, regulation, rule, or binding contract to which the Company is subject. The Plan is intended to (i) be an excess parallel plan within the meaning of the New York Stock Exchange rules relating to shareholder approval of equity compensation plans and (ii) comply with the applicable requirements of Section 409A of the Code. Notwithstanding anything else contained herein to the contrary, the Company shall not be in breach of its obligations hereunder, nor liable for any interest or other payments, if it fails to make any payments hereunder on the stated date on which such payment is due, so long as such payment is made not later than the last day of the calendar year in which it is otherwise due hereunder.

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EX-10.34

Exhibit 10.34

AMERICAN STANDARD COMPANIES INC. EXECUTIVE SAVINGS PLAN

1. Purpose.

The purposes of the Plan are (i) to provide certain participants in the ESOP, Savings Plan and Pension Plan whose employer contributions under such Plans are limited by the operation of Section 401(a)(17) of the Code with an annual benefit, subject to certain limitations, to roughly reflect the equivalent value of lost ESOP, Savings Plan and Pension Plan contributions, and (ii) to provide additional credits to those persons selected to receive Transitional Contributions to compensate them, to the extent provided herein, for pension benefits lost or forgone by reason of entering into service with the Company and its Subsidiaries.

2. Definitions.

(a) “Account” means, with respect to any Participant, the book entry account maintained by the Company for the benefit of such Participant, as described in Section 4 below.

(b) “Accrued Prior Employer Benefit” means, in respect of an Eligible Employee, the Lump Sum Value as of the date of determination of such person’s accrued vested benefits under those pension benefit plans of his or her prior employer taken into account in determining his or her Projected Prior Employer Benefit.

(c) “Beneficiary” means any person or persons, estate or trust designated in accordance with Section 7 below, to receive the amount payable under this Plan upon the death of a Participant.

(d) “Board” means the Board of Directors of the Company.

(e) “Code” means the Internal Revenue Code of 1986, as amended, or any subsequent income tax law of the United States. References to Code section shall be deemed to include all subsequent amendments of those sections or the corresponding provisions of any subsequent income tax law.

(f) “Committee” means the Management Development and Compensation Committee of the Board of Directors of the Company, as such committee may be constituted from time to time.

(g) “Company” means American Standard Companies Inc., a Delaware corporation, and any successor thereto.

(h) “Compensation” means with respect to any Eligible Employee for any given calendar year the sum of (i) such person’s compensation taken into account under the ESOP for such year, (ii) such person’s compensation taken into account under the SSP for such year and (iii) such person’s Eligible Compensation, if any, under this Plan for such year.

(i) “Disability” shall mean the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) is by reason of medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participants’ employer.

(j) “Effective Date” means January 1, 2006.

(k) “Eligible Compensation” means for any calendar year the Participant’s compensation as defined under the ESOP in excess of the amount of compensation permitted to be taken into account as of the first day of such calendar year under the SSP.

(l) “Eligible Employee” means any Eligible Officer, and with respect to the Transitional Benefit, any person participating in the Company’s Long Term Incentive Plan or any other management or key employee who shall be selected by the Committee to receive an award of a Transitional Benefit hereunder.

(m) “Eligible Officer” means any officer of the Company, other than the Vice President & Controller, the Vice President & Treasurer and the Vice President & General Auditor, elected to office on or after the Effective Date.

(n) “ESOP” means the American Standard Companies Inc. Employee Stock Ownership Plan, as in effect and as it may be amended from time to time (including any successor plan thereto).

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(o) “ESOP Contributions” means, with respect to any Participant, an amount equal to the percentage of the employer basic contribution under the ESOP or such lesser percentage as the Plan Administrator may specify prior to the beginning of any calendar year, based on such factors as he or she shall determine) of the Participant’s Eligible Compensation.

(p) “Investment Officer” means the Company’s Vice President & Treasurer (or, if no such person is at any time fulfilling such title, the person performing the functions of the Treasurer).

(q) “Lump Sum Value” means, with respect to an Executive’s Employee’s Projected Prior Employer Benefit or Accrued Prior Employer Benefit, the actuarial lump sum value of the benefit that would be payable to an Eligible Employee at his or her Projected Retirement Date (or such earlier date as the Committee shall specify) using, where appropriate, the mortality table and interest rate then in use for purposes of determining lump sum payments (other than for small payments under IRS regulations) under the applicable prior employer’s pension plans or such other standard mortality table and interest rate as the Investment Officer may specify from time to time, based on such factors as such officer shall deem reasonable and appropriate.

(r) “Matching Contributions” means, in respect of any Participant, an amount equal to the maximum percentage of employer matching contributions under the Savings Plan (or such lesser percentage as the Plan Administrator may specify prior to the beginning of any calendar year, based on such factors as he or she shall determine) of the Participant’s Eligible Compensation.

(s) “Participant” means any Eligible Employee or former Eligible Employee with respect to whom an Account is being maintained.

(t) “Pension Plan” means the American Standard Pension Plan, as in effect and as it may be amended from time to (including any successor plan thereto)

(u) “Phantom Fund” means each mutual fund or other investment vehicle which shall be available to determine the hypothetical investment experience of a Participant’s Account under the Plan.

(v) “Plan” means the American Standard Companies Inc. Executive Savings Plan as in effect and as it may be amended from time to time (including any successor plan hereto).

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(w) “Plan Administrator” means the Senior Vice President-Human Resources of the Company (or, if at any time, no one is serving in such title, the person who is then performing the duties of such position).

(x) “Projected Company Benefit” means, in respect of an Eligible Employee, the value expected to be derived, at such individual’s Projected Retirement Age, from employer contributions or credits to a notional account other than by reason of any elective deferral of the Eligible Employee’s compensation, in each case, as is projected to be earned by the Eligible Employee under all plans (whether or not qualified under Section 401(a) of the Code) maintained by the Company and/or any of its Subsidiaries, including, without limitation, the Plan, the SSP, the Pension Plan, the Savings Plan and the ESOP, based on (i) the service such Eligible Employee would complete if he remained in the employ of the Company or a Subsidiary until his or her Projected Retirement Age, (ii) the Compensation such Eligible Employee is expected to earn over such working career, which shall be determined using an assumption of 6% per year annual compensation increase or such other assumption as the Committee shall determine based on such factors as it shall deem appropriate and (iii) assuming that such contributions or credits are increased by earnings from the date made or credited to the Projected Retirement Age (or such earlier date as the Committee shall determine) based on an assumed fixed rate of return of 8%, compounded annually, or such other rate established by the Investment Officer from time to time based on such factors or assumptions that such individual shall determine to be appropriate under the circumstances. Notwithstanding the foregoing, if the Committee believes that it would be warranted by the circumstances, the Committee may reduce the amount taken into account as the Projected Company Benefit, or include in the calculation of such amount only some, but not all, of the benefits projected to be accrued under the plans (or may exclude all benefits provided under one or more plans) maintained by the Company and/or any of its Subsidiaries.

(y) “Projected Prior Employer Benefit” mean, with respect to any Eligible Employee, the Lump Sum Value as of the date of determination of the benefit that would have been payable to such person pursuant to the terms of such prior employer’s retirement benefit plans designated by the Committee, assuming that such person continued in service with such prior employer until his or her Projected Retirement Age (or such earlier age as the Committee shall specify) and that his or her eligible compensation under such prior employer plans increased at a rate determined by the Committee using such factors as it deems appropriate. To the extent the Projected Prior Employer Benefit includes a defined contribution plan benefit, projected future contributions to such plan shall be assumed to earn the same rate of return utilized in Section 2(x) (iii).

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(z) “Projected Retirement Age” means, with respect to any Eligible Employee, age 65 or such lesser age as the Committee shall otherwise specify based on such factors as it shall determine to be appropriate under the circumstances.

(aa) “Savings Plan” means the Savings Plan of American Standard Inc. and Participating Subsidiary Companies, as in effect and as it may be amended from time to time (including any successor plan thereto).

(bb) “Service” shall have the meaning ascribed to such term in the ESOP.

(cc) “Shortfall Amount” means, with respect to any Eligible Employee, the excess of (1) such person’s Projected Prior Employer Benefit over (2) the sum of (i) such person’s Accrued Prior Employer Benefit and (ii) such person’s Projected Company Benefit. Notwithstanding the foregoing, at the time of any award of a Transitional Benefit, the Committee may establish an Eligible Employee’s Shortfall Amount as an amount which is less than the amount derived pursuant to the formula specified in the immediately preceding sentence.

(dd) “SSP” means the American Standard Companies Inc. Supplemental Savings Plan, as in effect and as may be amended from time to time (including any successor plan thereto).

(ee) “Subsidiary” means a corporation, the majority of the voting stock of which is owned directly or indirectly by the Company, or any other entity designated by the Plan Administrator, in which the Company has a controlling equity interest.

(ff) “Transitional Benefit” shall mean a benefit intended to compensate an Eligible Employee for all or a portion of his or her Shortfall Amount through the crediting of Transitional Contributions to such person’s Account for such number of years (or such other period) as the Committee shall determine at the time a Transitional Benefit is approved.

(gg) “Transitional Contributions” means a credit to an Eligible Employee’s Account for such percentage of the Eligible Employee’s Compensation (or for such dollar amount) as the Committee shall

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determine at the time it selects such Eligible Employee to receive a Transitional Benefit to compensate such Eligible Employee for all or a portion of his or her Shortfall Amount, using the same assumptions regarding rate of return and compensation increases used to compute such individual’s Projected Company Benefit. Unless otherwise specified by the Committee at any time, Transitional Contributions shall only continue during an Eligible Employee’s employment with the Company and/or a Subsidiary and shall be subject to such terms and conditions that the Committee shall impose.

(hh) “Valuation Date” means the last day of any calendar year (or such other date or dates as the Plan Administrator may specify from time to time).

3. Contributions.

(a) Generally. There are two types of credits that will be made to the Account of each Eligible Officer under the Plan: ESOP Contributions and Matching Contributions. The amount credited hereunder to an Eligible Officer in respect of each such type of contribution will be determined by the Plan Administrator in accordance with the terms of the Plan, including the power of the Plan Administrator to make adjustments to the amount of such contributions in respect of future calendar years. Solely to the extent authorized by the Committee, there may also be credited to the Account of any Eligible Employee selected by the Committee to receive a Transitional Benefit, Transitional Contributions in such amount and for such period as the Committee shall specify at the time the Transitional Benefit is awarded. The determination of the Committee as to the scope of any Transitional Benefit and the amount and duration of any Transitional Contributions shall be final, binding and conclusive on all parties, including the Participant, the Company, and any Beneficiary claiming any rights in respect of a Participant.

(b) ESOP and Matching Contributions. The Company shall make ESOP Contributions and Matching Contribution on behalf of each Eligible Officer. ESOP Contributions and Matching Contributions shall be credited to each Participant’s Account as of the Valuation Date with respect to which such contributions are accrued.

(c) Transitional Contributions. The Company shall make such Transitional Contributions as shall have been specified by the Committee in respect of those Participants to whom the Committee shall have awarded a Transitional Benefit. Transitional Contributions shall be made

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as soon as administratively practical following the Valuation Date as of which they are to be credited (or at such other time or times as the Plan Administrator shall specify from time to time).

4. Participant Accounts and Allocations.

(a) Accounts. The Company shall establish and maintain an Account for each Participant and shall make additions to and subtractions from such Account as provided in this Section 4. The Company shall keep a separate sub account under the Participant’s Account for any Transitional Contributions made on behalf of a Participant to record the amount of such Transitional Contributions and any investment experience thereon. At the times provided in Section 3(b) and 3(c) above, each Eligible Officer’s Account shall be credited with ESOP Contributions and Matching Contributions and each Participant’s Account shall be credited with any Transitional Contributions to which he or she is entitled.

(b) Designation of Phantom Investment Funds. The Investment Officer shall select one or more Phantom Funds which shall be used to determine the hypothetical investment experience of Participants’ Accounts under the Plan. Initially such Phantom Funds shall consist of a money market or fixed interest rate fund, a U.S. bond fund, a large cap U.S. equity fund, a medium or small cap U.S. equity fund and an international equity fund. The Investment Officer may adjust the Phantom Funds offered as deemed appropriate from time to time. Each Participant shall from time to time designate on a form approved by the Plan Administrator the Phantom Fund or Funds that shall determine the investment experience with respect to such Participant’s Account; provided, however, that the Plan Administrator may require that the Participant’s Account be credited or debited as though such Account were invested in the same Phantom Funds, and in the same percentages, as such Participant’s account balance attributable to elective contributions is invested from time to time under the Savings Plan. The Plan Administrator may, in its discretion, (i) establish minimum amounts (in terms of dollar amounts or a percentage of a Participant’s Account) which may be allocated to any Phantom Fund, (ii) establish rules regarding the time at which any such election (or any change in such election permitted under Section 4(c)) shall become effective, and (iii) permit different designations with respect to a Participant’s existing Account balance and amounts to be credited to such Account after the date the election form is filed with the Committee. If a Participant fails to make a valid election with respect to any portion of his Account (or if any such election ceases to be effective for any reason), such Participant shall be deemed to have

7

elected to have his entire Account deemed invested in the Phantom Fund which the Investment Officer determines to be the default investment option under the Plan. Unless the Participant directs the deemed investment to another Phantom Fund or Funds, if the Investment Officer determines to eliminate one or more Phantom Funds as an available investment selection hereunder, the Investment Officer shall determine which Phantom Fund or Funds the portion of such Participant’s Account that was deemed invested in the eliminated Phantom Fund(s) shall be deemed invested.

(c) Change in Designation of Phantom Fund. Effective as of the first business day of any calendar year commencing more than 10 business days after the proper form is filed with the Plan Administrator (or at such other time or times as the Plan Administrator may permit from time to time), a Participant may change the Phantom Funds designated with respect to all or any portion of such Participant’s Account. Any such change shall comply with all rules applicable with respect to any initial designation of such Phantom Funds.

(d) Crediting of Phantom Investment Experience. As of the Valuation Date, each Participant’s Account shall be credited or debited, as the case may be, with an amount equal to the net investment gain or loss which such Participant would have realized had he or she actually invested in each Phantom Fund an amount equal to the portion of his Account designated as deemed invested in such Phantom Fund during that calendar year (or such other period as may have been established by the Plan Administrator).

(e) No Actual Investment. Notwithstanding anything else in this Section 4 to the contrary, no amount standing to the credit of any Participant’s Account shall be set aside or invested in any actual fund on behalf of such Participant; provided, however, that, nothing in this Section 4(e) shall be deemed to preclude the Company from making investments for its own account in any Phantom Funds (whether directly or through a grantor trust) to assist it in meeting its obligations to the Participants (or Beneficiaries) hereunder, which the Company shall do if, when and to the extent that the Investment Officer shall determine.

(f) Vesting of Accounts. A Participant’s right to any ESOP Contributions or Matching Contributions made on his or her behalf under Section 3(b) above, together with any earnings thereon, shall vest upon such Participant’s attainment of five years of Service with the Company or a Subsidiary. The Committee may establish a vesting schedule applicable to any Transitional Contributions at the time it awards any Transitional

8

Benefit. The schedule selected by the Committee may impose a continuing service requirement in respect of Transitional Contributions that is greater or less than that required in respect of ESOP Contributions and Matching Contributions, and may contain such other non-service related conditions (such as a covenant not to compete or not to solicit employees or customers) as the Committee shall specify. If the Committee does not specify a vesting schedule for Transitional Contributions, then such contributions shall vest immediately. Notwithstanding any vesting schedule applicable to a Participant’s Account or any other provision of this Section 4(f), a Participant shall be 100% vested with respect to all amounts credited to such Participant’s Account upon such Participant’s death or Disability or upon a Change of Control (as defined in the Company’s 2002 Omnibus Incentive Plan, or any successor thereto, as in effect from time to time).

(g) Forfeitures. Upon the termination of employment of a Participant who is not fully vested in his or her Account, the unvested portion of such Account shall be forfeited as of the date of such termination of employment. Amounts forfeited shall not be reallocated to other Participants. Notwithstanding the foregoing, forfeited balances in a Participant’s Account related to ESOP Contributions, Matching Contributions and shall be subject to restoration in accordance with the rules regarding restoration of forfeited account balances in the ESOP; any forfeited balances in a Participant’s Account related to Transitional Contributions shall not be restored unless the Committee determines, in its sole discretion, that restoration is appropriate under the facts and circumstances of a particular case.

(h) Statements of Accounts. A Participant may request a written statement of the value of his Account as of the last day of any Plan Year. Upon receipt of such request, the Plan Administrator shall furnish said statement as soon as practicable after the later of:

(i) the date on which a request is received, or

(ii) the next Valuation Date.

5. Distribution of Accounts.

(a) Method and Time of Distributions. Upon a Participant’s termination of employment, the Plan Administrator shall determine the value of the Participant’s Account as of the Valuation Date coincident with or next succeeding the date of the Participant’s termination of employment, and shall cause the vested portion of such Participant’s

9

Account to be distributed in a lump sum 30 days after the date of such termination of employment, provided that, if the Participant is a “key employee” under section 416(i) of the Code for the relevant measurement period under Section 409A of the Code, any distribution in connection with the Participant’s termination of employment for any reason other than the Participant’s death or disability (as defined in such Section 409A) will be made six months after the date of such termination.

6. Distribution on Death.

If a Participant shall die before payment of all amounts credited to such Participant’s Account has been completed, the total unpaid balance then credited to such Participant’s Account shall be paid to the Participant’s designated Beneficiary or Beneficiaries or to the Participant’s legal representative as provided in Section 7 in a single lump-sum payment thirty (30) days thereafter.

7. Designation of Beneficiary.

Each Participant shall have the right to designate a Beneficiary (subject to such limitations as to the classes and number of Beneficiaries and contingent Beneficiaries and such other limitations as the Plan Administrator may from time to time prescribe) to receive, in the event of the death of the Participant, the amount which the Participant would have been entitled to receive pursuant to Section 5 above. No such designation shall be valid unless in writing and signed by the Participant, dated and filed with the Plan Administrator. A Participant may at any time revoke or change any designation of Beneficiary. Any such designation shall be controlling over any testamentary or other disposition. In the case of a failure of a designation or the death of a Beneficiary without a designated successor, distribution shall be made to the legal representative of the Participant’s estate.

8. Administration of this Plan.

(a) Role of Committee. The Committee shall make all determinations with respect to an Eligible Employee’s eligibility for a Transitional Benefit, and the amount, duration and other conditions related to any Transitional Contributions; provided that, other than with respect to any Eligible Officer, the Committee may delegate such responsibility and authority to the Plan Administrator.

(b) Role of the Plan Administrator. The Plan Administrator shall be responsible for the administration of the Plan other than as provided in Section 8(a) and with respect to those functions related to the Phantom Funds expressly reserved to the Investment Officer. In addition to such functions and responsibilities specifically reserved to the Plan

10

Administrator under the Plan, the Plan Administrator shall have full power and authority, subject to the provisions of the Plan, to determine any and all questions as to eligibility to participate in the Plan, the amounts to be credited to a Participant’s Account(s), a Participant’s right to receive a distribution from the Plan, to interpret and carry out the terms of the Plan, and to exercise discretion where necessary or appropriate in the interpretation of the Plan. All decisions by the Plan Administrator shall be final, binding and conclusive on all affected parties. The Plan Administrator may adopt, amend, suspend, rescind or modify such rules, regulations, policies and practices as he or she considers desirable for the administration of this Plan, provided they do not conflict with this Plan. The Plan Administrator may hire such agents and consultants, including legal counsel, as the Plan Administrator shall determine to be necessary or appropriate to fulfill his or her duties hereunder or to assist the Committee in the fulfillment of its duties. The Plan Administrator may delegate responsibility with respect to the administration and operation of the Plan to other employees or a group of employees of the Company. All expenses of administering this Plan shall be paid by the Company. Claims made for benefits under the Plan shall be subject to the same claims and appeals procedures as the ESOP.

9. Rights of Participants to Accounts.

Anything to the contrary notwithstanding, nothing contained herein shall be deemed to create a trust of any kind or create any fiduciary relationship. Amounts deemed invested under this Plan shall continue for all purposes to be part of the general funds of the Company and no person other than the Company shall, by virtue of the provisions of this Plan, have any interest in such funds. To the extent that any person acquires the right to receive payments from the Company under this plan, such right shall be no greater than the right of any unsecured general creditor of the Company. Notwithstanding the foregoing, the Company may establish a grantor trust to assist it in meeting its obligations hereunder, which grantor trust may be funded by the Company at such levels as the Investment Officer deems appropriate from time to time, provided, however, upon the occurrence of a Change of Control, the Company will immediately contribute to such grantor trust such amounts of cash or other liquid assets of readily ascertainable value (which shall not include employer stock) as is necessary to satisfy all claims for benefits under the Plan, on an assumed termination basis at such date.

10. Amendment of this Plan.

The Board or the Committee may amend or terminate the Plan at any time and from time to time; provided that, no such amendment or termination shall impair the rights of a Participant with respect to amounts then credited to his or her Account under the Plan, and further provided, that no amendment or termination may be effected with respect to a Participant prior to the end of two years following a Change of Control, except with the written consent of such an affected Participant.

11

11. Compliance.

The Plan Administrator shall impose such restrictions, limitations, rules and regulations as it may deem advisable in order to comply with the applicable federal securities laws, the requirements of the New York Stock Exchange or any other applicable stock exchange or automated quotation system, any applicable state securities laws, any provision of the Company or ASCI’s Certificate of Incorporation of Bylaws, or any other law, regulation, rule, or binding contract to which the Company or ASCI is subject. Notwithstanding anything else in the Plan, all deferrals hereunder are intended to comply with the applicable requirements of Section 409A of the Code. Notwithstanding anything else contained herein to the contrary, the Company shall not be in breach of its obligations hereunder, nor liable for any interest or other payments, if it fails to make any payment hereunder on the stated date on which such payment is due, so long as such payment is made not later than the last day of the calendar year in which it is otherwise due hereunder.

12. No Right to Continued Employment.

Neither the establishment of this Plan nor any payment hereunder nor any action of the Company shall be held or construed to confer upon a Participant any right to continued employment with the Company, nor shall it interfere in any way with the right of the Company to terminate a Participant’s employment at any time.

13. Withholding.

The Company shall provide for the withholding of any taxes required to be withheld by federal, state or local law in respect of any contribution, payment or distribution made pursuant to this Plan.

14. Inalienability of Accounts.

Except as otherwise required or permitted by law, the rights of a Participant in respect of his or her Account or to receive a distribution of the value of such Account payable pursuant to the Plan shall not be subject to assignment or alienation.

15. Forfeiture of Benefits.

If the Committee determines that any Participant has, while or at any time after he ceased to be an employee of the Company or an Subsidiary, directly or indirectly engaged in any occupation in competition with, or has wrongfully disclosed trade

12

secrets of or confidential information relating to, or has intentionally done any act materially harmful to the interests of, the Company or any Subsidiary, or otherwise committed any act, or omitted to take any action, in connection with such Participant’s service or status as an officer of the Company that resulted in a violation by such individual or the Company or any Subsidiary of any law, rule or regulation, including, without limitation, any Federal securities law, other than an unintentional and immaterial violation that is promptly rectified or which does not result in an material fine, sanction, penalty or other detriment to such individual, the Company or any Subsidiary, the Committee may in its sole discretion terminate or annul the payment of such benefit.

16. Governing Law.

This Plan and all rights and obligations hereunder shall be construed in accordance with and governed by the laws of the State of Delaware, to the extent such laws are not superseded by ERISA or other federal law. The Plan is intended to be a nonqualified deferred compensation plan maintained for a select group of management or highly compensated individuals.

13

EX-10.36

Exhibit 10.36

EXECUTION COPY

FIRST AMENDMENT dated as of November 30, 2005 (this “Amendment”), to the FIVE-YEAR CREDIT AGREEMENT dated as of July 7, 2005 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among AMERICAN STANDARD COMPANIES INC. (“Holdings”); AMERICAN STANDARD INC. (the “Company”); AMERICAN STANDARD INTERNATIONAL INC. “ASII”); the Borrowing Subsidiaries (as defined therein); the Lenders (as defined therein); JPMORGAN CHASE BANK, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”), Issuing Bank and Swingline Lender; J.P. MORGAN EUROPE LIMITED, as London Agent and Belgian Agent; JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Canadian Agent, BANK OF AMERICA, N.A., as Syndication Agent, ABN AMRO BANK N.V., CITICORP USA, INC. and MIZUHO CORPORATE BANK, LTD. as Documentation Agents, and LLOYDS TSB BANK PLC as Co-Documentation Agent.

A. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement.

B. The Company has requested that the Belgian Tranche Lenders amend the Credit Agreement as set forth herein.

C. Belgian Tranche Lenders having Belgian Tranche Revolving Credit Exposures and unused Belgian Tranche Commitments representing more than 50% of the sum of the total Belgian Tranche Revolving Credit Exposures and unused Belgian Tranche Commitments are willing to effect such amendment on the terms and subject to the conditions of this Amendment.

D. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:

SECTION I. Amendment of the Credit Agreement. Effective as of the Amendment Effective Date (as defined in Section 3), Article X of the Credit Agreement is amended by inserting new Section 10.17, which shall read as follows:

“SECTION 10. 17. Interest Act (Canada). With respect to Belgian Tranche Revolving Loans, for the purpose of complying with the Interest Act (Canada), it is expressly stated that:

(a) where interest is calculated pursuant hereto at a rate based on a 360 day or a 365 day period, the yearly rate or percentage of interest to which such rate is equivalent is such rate multiplied by a fraction the numerator of which is the actual number of days in the relevant year of calculation (365 or 366, as the case may be) and the denominator of which is 360 or 365, as the case may be; and

(b) the rates of interest, the Applicable Rate, the Margin and other rates specified in this Agreement are nominal rates and not effective rates or yields, and the parties hereto acknowledge that there is a material distinction between the nominal and effective rates of interest, that they are capable of making the calculations necessary to compare such rates and that the principle of deemed reinvestment of interest shall not apply to any calculations of interest hereunder.

SECTION 2. Representations and Warranties. To induce the other parties hereto to enter into this Amendment, Holdings represents and warranties to each of the Lenders and the Administrative Agent that, as of the Amendment Effective Date:

(a) The representations and warranties set forth in Article III of the Credit Agreement are, after giving effect to this Amendment, true and correct in all material respects on and as of the Amendment Effective Date with the same effect as though made on and as of the Amendment Effective Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case they were true and correct in all material respects as of such earlier date).

(b) No Default or Event of Default has occurred and is continuing.

SECTION 3. Effectiveness. This Amendment shall become effective as of the first date (the “Amendment Effective Date”) on which the following conditions have been satisfied:

(a) The Administrative Agent (or its counsel) shall have received duly executed counterparts hereof that, when taken together, bear the signatures of (i) the Administrative Agent, (ii) Holdings, (iii) the Company, (iv) ASII and (v) Belgian Tranche Lenders having Belgian Tranche Revolving Credit Exposures and unused Belgian Tranche Commitments representing more than 50% of the sum of the total Belgian Tranche Revolving Credit Exposures and unused Belgian Tranche Commitments.

(b) The Administrative Agent shall have received a certificate of the President, a Vice President or a Financial Officer of Holdings to the effect that the representations and warranties set forth in Section 2 hereof are true and correct on and as of the Amendment Effective Date.

The Administrative Agent shall notify Holdings, the Company, ASII and the Lenders of the Amendment Effective Date, and such notice shall be conclusive and binding.

SECTION 4. Effect of Amendment.

(a) Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Administrative

Agent under the Credit Agreement or any other Credit Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Credit Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Company or any other Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Credit Document in similar or different circumstances.

(b) On and after the Amendment Effective Date, each reference in the Credit Agreement to “this Agreement” “hereunder” “hereof”, “herein”, or words of like import, and each reference to the Credit Agreement in any Credit Document, shall be deemed a reference to the Credit Agreement as amended hereby. This Amendment shall constitute a “Credit Document” for all purposes of the Credit Agreement and the other Credit Documents.

SECTION 5. Costs and Expenses. The Company agrees to reimburse the Administrative Agent for its reasonable out of pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent.

SECTION 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof.

SECTION 7. Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

SECTION 8. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, as of the date and year first above written.

AMERICAN STANDARD COMPANES INC.,

by
/s/ R. Scott Massengill
Name:	R. Scott Massengill
Title:	Vice President and Treasurer
AMERICAN STANDARD INC.,
by
/s/ R. Scott Massengill
Name:	R. Scott Massengill
Title:	Vice President & Treasurer
AMERICAN STANDARD INTERNATIONAL INC.,
by
/s/ R. Scott Massengill
Name:	R. Scott Massengill
Title:	Vice President & Treasurer
JPMORGAN CHASE BANK, N.A.,
Individually and as Administrative Agent, by
by
Name:
Title:

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

AMERICAN STANDARD COMPANIES INC.,
by
Name:
Title:	AMERICAN STANDARD INC.,
by
Name:
Title:
AMERICAN STANDARD INTERNATIONAL INC.,
by
Name:
Title:
JPMORGAN CHASE BANK, N.A.,
Individually and as Administrative Agent,
by
/s/ Randolph Cates
Name:	RANDOLPH CATES
Title:	Vice President

SIGNATURE PAGE TO

FIRST AMENDMENT TO TIIE

AMERICAN STANDARD COMPANIES INC. CREDIT AGREEMENT

DATED AS OF JULY 7, 2005

To approve First Amendment to the

American Standard Companies Inc.

Credit Agreement dates as of

July 7, 2005:

BANK OF AMERICA, N.A.
/s/ John Walkiewicz
Name:	John Walkiewicz
Title:	Vice President

SIGNATURE PAGE TO

FIRST AMENDMENT TO THE

AMERICAN STANDARD COMPANIES INC. CREDIT AGREEMENT

DATED AS OF JULY 7, 2005

To approve First Amendment to the

American Standard Companies Inc.

Credit Agreement dates as of

July 7, 2005:

Name of Institution:

CITICORP USA
By:	/s/ Sandy Salgado
Name:	Sandy Salgado
Title:	Vice President

SIGNATURE PAGE TO

FIRST AMENDMENT TO THE

AMERICAN STANDARD COMPANIES INC. CREDIT AGREEMENT

DATED AS OF JULY 7, 2005

To approve First Amendment to the

American Standard Companies Inc.

Credit Agreement dates as of

July 7, 2005:

ABN AMRO Bank N.V.
By:	/s/ Eric Oppenheimer
Name:	Eric Oppenheimer
Title:	Director
By:	/s/ Eric Oppenheimer
Name:	Ruth E. Molina
Title:	Associate

SIGNATURE PAGE TO

FIRST AMENDMENT TO THE

AMERICAN STANDARD COMPANIES INC. CREDIT AGREEMENT

DATED AS OF JULY 7, 2005

To approve First Amendment to the

American Standard Companies Inc.

Credit Agreement dates as of

July 7, 2005:

Name of Institution:	BAYERISCHE HYPO- UND VEREINSBANK AG,
	NEW YORK BRANCH

By:	/s/ Marianne Weinzinger		By:	/s/ Patricia Grieve
	Name:	Marianne Weinzinger		Name:	Patricia Grieve
	Title:	Director		Title:	Director

EX-10.38

Exhibit 10.38

Description of Compensation Arrangements for Non-Employee Directors

Board Service
One-time Award upon Election to the Board	$	100,000	Shares equal to this value are deposited into the Trust for the Outside Directors Supplemental Compensation Plan and do not vest to direct ownership until the director leaves the Board
Retainer	$	52,000	Paid in quarterly installments
Restricted Shares	$	35,000	Shares equal to this value are deposited annually into the Trust for the Outside Directors Supplemental Compensation Plan and do not vest to direct ownership until the director leaves the Board
Stock Options		Determined annually	Same terms as employees under the 2002 Omnibus Incentive Plan (vest ratably over three years)
Meeting Fees	$	1,000	Attendance at Board meeting
Committee Service
Meeting Fees	$	1,000	Attendance at Committee meeting for Committee members
	$	2,000	Attendance at Committee meeting for Committee chairs

Directors also participate in the American Standard Companies Inc. Deferred Compensation Plan which allows them to defer all or part of their cash retainers and meeting fees into either a fixed interest cash account or an account holding notional shares of company stock. In addition, Directors are entitled to receive company products at no cost.

EX-10.39

Exhibit 10.39

Form of Stock Option Agreement for U.S. Based Employees

AMERICAN STANDARD COMPANIES INC.

STOCK OPTION GRANT

Dated as of February 1, 2006

AMERICAN STANDARD COMPANIES INC., a Delaware corporation (“Grantor”), hereby grants to                  (“Participant”), an employee of Grantor or one of its subsidiaries, the option to purchase (“Option”), at the exercise price set forth below, a total of              shares of Common Stock, par value $.01 per share (“Common Stock”), of the Grantor, pursuant to and subject to the terms and conditions set forth in the Grantor’s 2002 Omnibus Incentive Plan (the “Plan”) and to such further terms and conditions as are set forth below.

• Exercise Price. The exercise price applicable to the shares of Common Stock that may be purchased by the Participant pursuant to the Option is $             per share, representing the Fair Market Value (as defined in the Plan) of the Common Stock on the date hereof.

• Non-Qualified Stock Option. The option to purchase shares of Common Stock pursuant to the Option is granted as a “non-qualified stock option”, within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”).

• Vesting. Participant’s right to purchase shares of Common Stock pursuant to the Option shall vest in three equal installments on each of the first anniversaries of the grant, unless otherwise cancelled pursuant to Section 6 of the Plan.

IN WITNESS WHEREOF, the duly authorized officers of the Grantor named below have hereunto subscribed as of the day and year first above written.

	AMERICAN STANDARD COMPANIES INC.
Attest:
	By:
		Chairman and Chief Executive Officer
Secretary

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

EX-10.40

Exhibit 10.40

Generic Form of Stock Option Agreement for Non-U.S. Based Employees

AMERICAN STANDARD COMPANIES INC.

STOCK OPTION GRANT AGREEMENT

FOR NON-U.S. EMPLOYEES

Dated as of February 1, 2006

AMERICAN STANDARD COMPANIES INC., a Delaware corporation (“Grantor”), hereby grants to                  (“Participant”), an employee of Grantor or one of its subsidiaries, the option to purchase (“Option”), at the exercise price set forth below, a total of              shares of Common Stock, par value $.01 per share (“Common Stock”), of the Grantor, pursuant to and subject to the terms and conditions set forth in the Grantor’s 2002 Omnibus Incentive Plan (the “Plan”) and to such further terms and conditions as are set forth below in this Stock Option Grant Agreement (the “Agreement). Unless otherwise defined herein, the terms defined in the Plan shall have the same meanings in this Agreement.

1. Exercise Price. The exercise price applicable to the shares of Common Stock that may be purchased by the Participant pursuant to the Option is $             per share, representing the Fair Market Value (as defined in the Plan) of the Common Stock on the date hereof.

2. Non-Qualified Stock Option. The option to purchase shares of Common Stock pursuant to the Option is granted as a “non-qualified stock option”, within the meaning of the United States Internal Revenue Code of 1986, as amended.

3. Vesting. Participant’s right to purchase shares subject to the Option shall vest in three equal installments on each of the first three anniversaries of the grant, unless otherwise cancelled pursuant to Section 6 of the Plan or Section 7 of this Agreement.

4. Nature of Grant. In accepting the grant, the Participant acknowledges that:

(a) the Plan is established voluntarily by the Grantor, it is discretionary in nature and it may be modified, suspended or terminated by the Grantor at any time, as provided in the Plan and this Agreement;

(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past;

(c) all decisions with respect to future option grants, if any, will be at the sole discretion of the Grantor;

(d) the Participant is voluntarily participating in the Plan;

(e) the Option is an extraordinary item which is outside the scope of the Participant’s employment contract, if any;

(f) the Option is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and

(g) in the event of involuntary termination of the Participant’s employment, his or her right to receive options and vest in the Option under the Plan, if any, will terminate effective as of the date that the Participant is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden

leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of employment, the Participant’s right to exercise the Option after termination of employment, if any, will be measured by the date of termination of the Participant’s active employment and will not be extended by any notice period mandated under local law.

5. Responsibility for Taxes. Prior to exercise of the Option, the Participant shall pay or make adequate arrangements satisfactory to the Grantor and/or the Employer to satisfy all income tax, social insurance, payroll tax, payment on account or other tax-related withholding obligations of the Grantor and/or the Employer (“Tax-Related Items”). In this regard, the Participant authorizes the Grantor and/or the Employer to withhold all applicable Tax-Related Items legally payable by the Participant from his or her wages or other cash compensation paid to the Participant by the Grantor and/or the Employer or from proceeds of the sale of the shares of Common Stock. Finally, the Participant shall pay to the Grantor or the Employer any amount of Tax-Related Items that the Grantor or the Employer may be required to withhold as a result of the Participant’s participation in the Plan or his or her purchase of shares that cannot be satisfied by the means previously described. The Grantor may refuse to honor the exercise and refuse to deliver the shares if the Participant fails to comply with his or her obligations in connection with the Tax-Related Items as described in this section.

6. Data Privacy. THE PARTICIPANT HEREBY EXPLICITLY AND UNAMBIGUOUSLY CONSENTS TO THE COLLECTION, USE AND TRANSFER, IN ELECTRONIC OR OTHER FORM, OF HIS OR HER PERSONAL DATA AS DESCRIBED IN THIS AGREEMENT BY AND AMONG, AS APPLICABLE, THE EMPLOYER, THE GRANTOR AND ITS SUBSIDIARIES AND AFFILIATES FOR THE EXCLUSIVE PURPOSE OF IMPLEMENTING, ADMINISTERING AND MANAGING HIS OR HER PARTICIPATION IN THE PLAN.

THE PARTICIPANT UNDERSTANDS THAT THE GRANTOR AND THE EMPLOYER HOLD CERTAIN PERSONAL INFORMATION ABOUT HIM OR HER, INCLUDING, BUT NOT LIMITED TO, HIS OR HER NAME, HOME ADDRESS AND TELEPHONE NUMBER, WORK LOCATION AND PHONE NUMBER, DATE OF BIRTH, STOCK OPTION PLAN IDENTIFICATION NUMBER, HIRE DATE, HOME COUNTRY, DETAILS OF ALL OPTIONS OR ANY OTHER ENTITLEMENT TO SHARES OF COMMON STOCK AWARDED, CANCELLED, EXERCISED, VESTED, UNVESTED OR OUTSTANDING IN THE PARTICIPANT’S FAVOR, FOR THE PURPOSE OF IMPLEMENTING, ADMINISTERING AND MANAGING THE PLAN (“PERSONAL DATA”). THE PARTICIPANT UNDERSTANDS THAT PERSONAL DATA MAY BE TRANSFERRED TO ANY THIRD PARTIES ASSISTING IN THE IMPLEMENTATION, ADMINISTRATION AND MANAGEMENT OF THE PLAN, THAT THESE RECIPIENTS MAY BE LOCATED IN THE PARTICIPANT’S COUNTRY OR ELSEWHERE, AND THAT THE RECIPIENT’S COUNTRY MAY HAVE DIFFERENT DATA PRIVACY LAWS AND PROTECTIONS THAN THE PARTICIPANT’S COUNTRY. THE PARTICIPANT UNDERSTANDS THAT HE OR SHE MAY REQUEST A LIST WITH THE NAMES AND ADDRESSES OF ANY POTENTIAL RECIPIENTS OF THE PERSONAL DATA BY CONTACTING HIS OR HER LOCAL HUMAN RESOURCES REPRESENTATIVE. THE PARTICIPANT AUTHORIZES THE RECIPIENTS TO RECEIVE, POSSESS, USE, RETAIN AND TRANSFER THE PERSONAL DATA, IN ELECTRONIC OR OTHER FORM, FOR THE PURPOSES OF IMPLEMENTING, ADMINISTERING AND MANAGING HIS OR HER PARTICIPATION IN THE PLAN, INCLUDING ANY REQUISITE TRANSFER OF SUCH PERSONAL DATA AS MAY BE REQUIRED TO A BROKER OR OTHER THIRD PARTY WITH WHOM THE PARTICIPANT MAY ELECT TO DEPOSIT ANY SHARES OF COMMON STOCK ACQUIRED UPON EXERCISE OF THE OPTION. THE PARTICIPANT UNDERSTANDS THAT PERSONAL DATA WILL BE HELD ONLY AS LONG AS IS NECESSARY TO IMPLEMENT, ADMINISTER AND MANAGE HIS OR HER PARTICIPATION IN THE PLAN. THE PARTICIPANT UNDERSTANDS THAT HE OR SHE MAY, AT ANY TIME, VIEW PERSONAL DATA, REQUEST ADDITIONAL INFORMATION ABOUT THE STORAGE AND PROCESSING OF PERSONAL DATA, REQUIRE ANY NECESSARY AMENDMENTS TO PERSONAL DATA OR REFUSE OR WITHDRAW THE CONSENTS HEREIN, IN ANY CASE WITHOUT COST, BY

CONTACTING IN WRITING HIS OR HER LOCAL HUMAN RESOURCES REPRESENTATIVE. THE PARTICIPANT UNDERSTANDS, HOWEVER, THAT REFUSING OR WITHDRAWING HIS OR HER CONSENT MAY AFFECT HIS OR HER ABILITY TO PARTICIPATE IN THE PLAN. FOR MORE INFORMATION ON THE CONSEQUENCES OF PARTICIPANT’S REFUSAL TO CONSENT OR WITHDRAWAL OF CONSENT, THE PARTICIPANT UNDERSTANDS THAT HE OR SHE MAY CONTACT HIS OR HER LOCAL HUMAN RESOURCES REPRESENTATIVE.

7. Acceptance. This grant is subject to acceptance, within 90 days of its receipt, by return to Grantor’s Senior Vice President-Human Resources of a signed copy of this Agreement. Failure to accept the grant within 90 days of its receipt shall result in the cancellation of the Option.

IN WITNESS WHEREOF, the duly authorized officers of the Grantor named below have hereunto subscribed as of the day and year first above written.

	AMERICAN STANDARD COMPANIES INC.
Attest:
	By:
		Chairman and Chief Executive Officer
Secretary

By signing this Agreement, the Participant acknowledges that he or she accepts the Option granted hereunder, is familiar with the terms and conditions of this Agreement and the Plan, and agrees to be bound by said terms and conditions.

(Date)

(Participant’s Signature)

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

EX-10.41

Exhibit 10.41

Description of Executive Retiree Life Insurance Benefit

for Corporate Officers

Officers who retire on or after attainment of age 55 with at least ten years of service with the company are eligible for company paid retiree life insurance. The amount of the life insurance benefit is equal to one times Annual Earnings. Annual Earnings is defined as the individual’s base salary at retirement, plus the average of the individual’s last three payments under the annual incentive program or, if higher, the average of any earlier three year average of annual incentive payouts.

All group life insurance coverage is subject to IRS regulations under which the company provided life insurance in excess of $50,000 will be multiplied by a factor related to the individual’s age, furnished by the IRS, to arrive at the imputed income that the participant realizes from the life insurance benefit. The imputed income is added to the participant’s taxable earnings. The participant may avoid the imputed income by electing to have the life insurance coverage limited to $50,000 (or any subsequent limit imposed by the IRS).

EX-12

Exhibit 12

AMERICAN STANDARD COMPANIES INC.

COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in Millions)

	For the Years Ended December 31,
	2001			2002			2003			2004			2005
Income from continuing operations before taxes	$	476.3		$	556.2		$	549.2		$	362.9		$	725.9
Equity in net (income) loss of associated companies net of dividends received		(2.8	)		(13.5	)		(14.3	)		(15.8	)		(20.6	)
Amortization of capitalized interest		2.3			2.3			2.3			2.3			2.3
Interest expense		168.7			129.0			117.0			114.9			118.3
Rental expense factor		53.2			58.6			37.5			38.7			41.8
Earnings available for fixed charges	$	697.8		$	732.6		$	691.7		$	503.0		$	867.7
Interest expense	$	168.7		$	129.0		$	117.0		$	114.9		$	118.3
Capitalized interest		4.8			2.6			0.9			0.2			0.5
Rental expense factor		53.2			58.6			37.5			38.7			41.8
Fixed charges	$	226.7		$	190.2		$	155.4		$	153.8		$	160.6
Ratio of earnings to fixed charges (a)		3.1			3.9			4.5			3.3			5.4

a) For the purpose of computing the ratio of earnings to fixed charges, earnings consist of consolidated net income before income taxes, plus fixed charges other than capitalized interest but including the amortization thereof, adjusted by the excess or deficiency of dividends over income of entities accounted for by the equity method, fixed charges consist of interest on debt (including capitalized interest), amortization of debt discount and expense, and a portion of rentals determined to be representative of interest (rental expense factor).

EX-21

Exhibit 21

Entity Name	Jurisdiction
A-S (Beijing) Enamel Steel Sanitaryware Co., Ltd.	China, Peoples Republic of
Air Conditioning Service (Midlands) Limited	United Kingdom
Airco Limited	Thailand
Alimenterics B. V.	The Netherlands
Alimenterics Inc.	Delaware
Alimenterics International Inc.	Delaware
Alliance Compressors Inc.	Delaware
Alliance Compressors LLC	Delaware
Amair Limited	Thailand
American Standard (U.K.) Co.	United Kingdom
American Standard Bermuda Ltd.	Bermuda
American Standard Companies Inc.	Delaware
American Standard Credit Inc.	Delaware
American Standard Europe BVBA	Belgium
American Standard Europe Holdings Inc.	Delaware
American Standard Europe L.P.	Bermuda
American Standard Foreign Trading Limited	Bermuda
American Standard Inc.	Delaware
American Standard International Inc.	Delaware
American Standard International L.L.C.	Delaware
American Standard Italia Investments BV	The Netherlands
American Standard Korea, Inc.	Korea
American Standard Leasing Inc.	Delaware
American Standard Philippine Holdings, Inc.	Philippines
American Standard Philippines II L.L.C.	Delaware
American Standard Philippines L.L.C.	Delaware
American Standard Philippines Limited, Co.	Philippines
American Standard Sanitaryware (Thailand) Public Co., Ltd.	Thailand
American Standard Trane Brands, Inc.	Delaware
American Standard Trane Japan, Ltd.	Japan
American Standard Trane LLC	Delaware
American Standard Vietnam Inc. (Cong Ty Lien Doanh Su Ve Sinh My Phu)	Vietnam
American Standard Warranty Company	South Carolina
American Standards Inc.	Delaware
Amstan Air Inc.	Delaware
Amstan Corporation	Delaware
Amstan Hotels AD	Bulgaria
Amstan Logistica, S. A. de C. V.	Mexico
Amstan Logistics Inc.	Delaware
Armitage Shanks (Ireland) Limited	Ireland
Armitage Shanks International Limited	United Kingdom
Armitage Shanks Limited	United Kingdom
Armitage Venesta Washroom Systems Limited	United Kingdom
A-S (China) Co., Limited	China, Peoples Republic of
A-S (Guangzhou) Enamel Ware Company Limited	China, Peoples Republic of
A-S (Jiangmen) Fittings Co. Ltd.	China, Peoples Republic of
A-S (Shanghai) Pottery Co., Ltd.	China, Peoples Republic of
A-S (Tianjin) Consulting Co., Ltd.	China, Peoples Republic of
A-S (Tianjin) Pottery Co., Ltd.	China, Peoples Republic of
A-S Air Conditioning Products Limited	Cayman Islands

A-S Air Conditioning System (Tianjin) Co. Ltd.	China, Peoples Republic of
A-S Air-Conditioning System (Shanghai) Co., Ltd.	China, Peoples Republic of
A-S China Plumbing Products Limited	Cayman Islands
A-S China Plumbing Products Servco Limited	Hong Kong
AS Deutschland GmbH	Germany
A-S Energy, Inc.	Texas
AS Foreign Trading Limited	Bermuda
AS Rheinland Ventures Gmbh	Germany
A-S Thai Holdings Ltd.	Delaware
AS Vidalia, LLC	Delaware
ASE Finance Ltd.	Bermuda
ASE Finance SPRL	Belgium
ASE Holdings BV	The Netherlands
ASI China Holdings Limited	Cayman Islands
ASI Receivables Funding LLC	Delaware
BMM, Inc.	Delaware
CAPP Holdings Limited	Cayman Islands
Capsule Trane Connecticut Inc.	Delaware
Cardwell Trane Greenville Inc.	Delaware
Central Hope (China) Limited	Hong Kong
Ceramic Export Trading Company Inc.	British Virgin Islands
Ceramic Sanitaryware Pte. Ltd.	Singapore
Clayton Dewandre Company Limited	United Kingdom
Clayton Dewandre Holdings Limited	United Kingdom
Cooling Equipment Services Limited	United Kingdom
DFM Trane Oklahoma Corp.	Delaware
DiaSorin International B. V.	The Netherlands
DiaSorin International Inc.	Delaware
Dradnats Inc.	Delaware
EBB Holdings Limited	Barbados
Edwards Logistics (Bulgaria) Eood	Bulgaria
Edwards Logistics Limited	United Kingdom
Egyptian American Industrial Plastics Company S.A.E.	Egypt
Egyptian American Sanitary Wares Co. S.A.E.	Egypt
Environmental Technologies Australia Pty Ltd.	Australia
FACServices, Inc.	Texas
Filairco Technical Services Co., Inc.	Philippines
Filairco, Inc.	Philippines
FWJ Inc.	Delaware
Hang Zhou A-S Air Conditioning Technical Services Co., Ltd.	China, Peoples Republic of
Hepren Limited	United Kingdom
Hermann Trane Harrisburg Inc.	Delaware
Houston Trane, Inc.	Texas
Hua Mei Sanitary Ware Company Ltd.	China, Peoples Republic of
Ideal Standard (Ireland) Limited	Ireland
Ideal Standard (Thailand) Ltd.	Thailand
Ideal Standard (UK) Limited	United Kingdom
Ideal Standard Beteiligungs-GmbH	Germany
Ideal Standard Bulgaria AD	Bulgaria
Ideal Standard Equipamentos Sanitarios LDA.	Portugal

Ideal Standard Europe B.V.	The Netherlands
Ideal Standard France S.A.	France
Ideal Standard GmbH	Germany
Ideal Standard GmbH & Co. OHG	Germany
Ideal Standard Holding Italia S.r.l.	Italy
Ideal Standard IBV Ltd.	Delaware
Ideal Standard Industrial S.L.U.	Spain
Ideal Standard Industriale S.r.l.	Italy
Ideal Standard Industries France SAS	France
Ideal Standard Italia S.r.l.	Italy
Ideal Standard Manufacturing (UK) Limited	United Kingdom
Ideal Standard Nederland B. V.	The Netherlands
Ideal Standard Polska Sp. Z.o.o.	Poland
Ideal Standard Porcher (UK) Limited	United Kingdom
Ideal Standard S. L. U.	Spain
Ideal Standard S.A.I.	Greece
Ideal Standard Scandinavia A/S	Denmark
Ideal Standard s.r.o.	Czech Republic
Ideal Standard Verwaltungs GmbH	Germany
Ideal Standard Wabco Trane Industria e Comercio Ltda.	Brazil
Ideal Standard, S.A. de C.V.	Mexico
Ideal Standard-Vidima AD	Bulgaria
Ideal-Standard Limited	United Kingdom
Ideal-Standard Trane Inc.	Canada
Ideal-Standard Trustees Limited	United Kingdom
Industria Centroamericana de Sanitarios, Sociedad Anonima (“Incesa - Guatemala”)	Guatemala
Industria Ceramica Centroamericana, S.A. (“Incesa-Nicaragua”)	Nicaragua
Industria Ceramica Costarricense S.A. (“INCESA- Costa Rica”)	Costa Rica
Industria Ceramica Del Centro, S. A. de C. V.	Mexico
Industrial Chill Servicing Private Ltd.	Mauritius
Industrial Y Minera Nortena S. A.	Mexico
Intercentroamericana, S.A. (“Old Panama”)	Panama
Internacional de Inversiones Diversas S. A. (“New Panama”)	Panama
Inversiones Intercentroamericanas S.A.	Costa Rica
Investcorp Private Limited	Mauritius
Islamic Acrylic Company For Acrylic Products S. A. E.	Egypt
Itargila Mineracao Ltda.	Brazil
Ives Trane NY, Inc.	Delaware
Jado Bathroom And Hardware Manufacturing Corporation	Delaware
Jado GmbH	Germany
Jado Iberia-Produtos Metalurgicos, S. A.	Portugal
Jado Italia S.r.l.	Italy
John Steventon & Sons Limited	United Kingdom
JTA China Import Limited	Hong Kong
Materias Primas Dominicanas, S. A. (MAPRIDOSA)	Dominican Republic
Meritor Wabco Vehicle Control Systems	Delaware
Minera Industrial Regiomontana, S.A.	Mexico
MJM Hong Kong Ltd.	Delaware
Mongrue Trane Massachusetts, Inc.	Delaware
Pareo S.A.S.	France
PARTSLIFE Recycling System GmbH	Germany
Perfect Pitch, L.P.	Delaware
Perrot Brakes (U.K.) Limited	United Kingdom

Perrot North America, Inc.	Illinois
Pinko Palino Inc.	Delaware
Prime Air Limited	Thailand
PT American Standard Indonesia	Indonesia
PT Trane Indonesia	Indonesia
Qualitas Bathrooms Limited	United Kingdom
Rand Trane Dallas Inc.	Delaware
Ronald Marley Associates Limited	United Kingdom
Sanistan B.V.	The Netherlands
Sanitaire Benchekroun - Slaoui S.A.	Morocco
Sanitarios Dominicanos, S. A. (SADOSA)	Dominican Republic
Sanitary Wares Manufacturing Corporation	Philippines
SAU Corp.	Delaware
Servicefirst Aircon Private Ltd.	India
Sevlievogas - 2000 AD	Bulgaria
Shangdong Weiming Automotive Products Ltd.	China, Peoples Republic of
]Societe Trane SAS	France
Sophista Limited	Hong Kong
Sottini Bathrooms Ltd.	United Kingdom
Standard Centennial Property, LLC	Delaware
Standard Compressors Inc.	Delaware
Standard Industrial Mineral Products Corp.	Philippines
Standard Resources And Development Corporation	Philippines
Standard Trane Insurance Company	Vermont
Standard Trane Insurance Ireland Limited	Ireland
Standex S.A.	Greece
Sundaram-Clayton Limited	India
T.I. Solutions (Israel) Ltd.	Israel
Tac Distribution Pte. Ltd.	Singapore
Tantofex (Engineers) Limited	United Kingdom
Tantofex Limited	United Kingdom
Tast Limited	Thailand
TDU Pty Limited	Australia
Tecniceramica de Costa Rica, S.A.	Costa Rica
Teling Air Conditioner Company Limited	China, Peoples Republic of
Teling Air Conditioning Systems (Jiangsu) Co., Ltd.	China, Peoples Republic of
The Trane Company (Delaware)	Delaware
The Trane Company (Nevada)	Nevada
Thorthol Holdings B. V.	The Netherlands
TJ Technical Services Limited	Hong Kong
TM Air Conditioning Sdn. Bhd.	Malaysia
Trane (Colchester) Ltd.	United Kingdom
Trane (Ireland) Limited	Ireland
Trane (Malaysia) SND. BHD.	Malaysia
Trane (Schweiz) GmbH / Trane (Suisse) S.a.r.l.	Switzerland
Trane (Scotland) Limited	Scotland
Trane (Thailand) Ltd.	Thailand
Trane (UK) Ltd.	United Kingdom
Trane Airconditioning BV	The Netherlands
Trane Airconditioning Pte. Ltd.	Singapore
Trane Aire Acondicionado, S. L.	Spain

Trane Algérie SARL	Algeria
Trane Asia Pacific Limited	Hong Kong
Trane Bahamas Ltd.	Bahamas
Trane Central America, Inc.	Delaware
Trane Central Plant 1, LLC	Delaware
Trane Comfort Solutions Inc.	Delaware
Trane CR Spol sro.	Czech Republic
Trane de Argentina S.A.	Argentina
Trane de Chile S.A.	Chile
Trane de Colombia S. A.	Colombia
Trane Deutschland GmbH	Germany
Trane Export LLC	Delaware
Trane General Corporation	Delaware
Trane GmbH	Austria
Trane Hellas S.A.	Greece
Trane Hungary KFT	Hungary
Trane India Ltd.	Delaware
Trane Italia S.r.L	Italy
Trane Klima Ticaret AS	Turkey
Trane Klimatechisches Buero Nuernberg GmbH	Germany
Trane Korea, Inc.	Korea
Trane Kuwait Airconditioning Co WLL	Kuwait
Trane Limited	United Kingdom
Trane Malaysia Sales & Services SDN. BHD.	Malaysia
Trane Polska Sp. Z.O.O.	Poland
Trane Pty Ltd.	Australia
Trane Puerto Rico Inc.	Delaware
Trane Reinetsu Service Co., Ltd (Trane Reinetsu Service Kabushiki Kaisha)	Japan
Trane Romania S.R.L.	Romania
Trane S.A.E.	Egypt
Trane Service Company L.L.C.	Egypt
Trane Servicefirst, C.A.	Venezuela
Trane Services Acquisition I Inc.	Delaware
Trane Sweden AB	Sweden
Trane Taiwan Distribution Ltd.	China, Peoples Republic of
Trane Technologies LLC	Russia
Trane Tunisie S.a.r.l.	Tunisia
Trevi Showers Ltd.	United Kingdom
Troc Air Conditioning, Ltd.	China, Peoples Republic of
TSI Anstalt	Liechtenstein
TYS Limited	Hong Kong
Ultrawide Engineering Limited	Hong Kong
United Partner General Contracting Co WLL	Kuwait
Venborgh Holding B. V.	The Netherlands

WABCO (China) Co., Ltd.	China, Peoples Republic of
Wabco (Schweiz) GmbH / Wabco (Suisse) S.a.r.l.	Switzerland
Wabco (U.K.) Limited	United Kingdom
Wabco Air Compressor Holdings Inc.	Delaware
Wabco Austria GesmbH	Austria
Wabco Automotive AB	Sweden
Wabco Automotive B.V.	The Netherlands
Wabco Automotive Control Systems Inc.	Delaware
Wabco Automotive Holdings Inc.	Delaware
Wabco Automotive Italia S.r.L.	Italy
WABCO Automotive Pension Trustees Limited	United Kingdom
Wabco Automotive Products Inc.	Ontario
Wabco Automotive Products Limited	Cayman Islands
Wabco Automotive South Africa	South Africa
WABCO Automotive U.K. Limited	United Kingdom
Wabco B. V.	The Netherlands
Wabco Belgium BVBA / SPRL	Belgium
WABCO brzdy k vozidlum spol.s.r.o.	Czech Republic
WABCO Canada LP	Canada
Wabco Compressor Manufacturing Co.	Delaware
WABCO Development GmbH, Hanover	Germany
Wabco Espana S. L.	Spain
Wabco Fahrzeugsysteme GmbH, Hannover	Germany
Wabco France Logistics S.A.S.	France
Wabco France SNC	France
Wabco GmbH	Germany
Wabco GmbH & Co. OHG	Germany
WABCO GP Inc.	Canada
WABCO Holding Co.	Canada
Wabco Japan Inc.	Japan
Wabco Korea Inc.	Delaware
Wabco Korea Ltd.	Korea
WABCO Logistics (Qingdao) Co., Ltd.	China, Peoples Republic of
WABCO Logistik GmbH	Germany
Wabco North America Inc.	Delaware
Wabco Polska Spolka Z Ograniczona Odpowiedzialnoscia	Poland
Wabco Radbremsen GmbH	Germany
Wabco Sandown B. V. (Netherlands)	The Netherlands
WABCO Shanghai Co., Ltd.	China, Peoples Republic of
Wabco Standard Export Ltd.	Delaware
Wabco Standard French Holdings Sarl	France
Wabco Standard GmbH	Germany
Wabco Standard Trane B.V.	The Netherlands
WABCO Standard Trane C.I.S. Limited Liability Company	Russia
Wabco Standard Trane Co.	Nova Scotia
Wabco Standard Trane Credit Inc.	Delaware
WABCO Standard Trane S.A.	Switzerland
Wabco Standard Trane Sarl	France
WABCO Systeme GmbH	Germany
Wabco Wednesbury Ltd.	United Kingdom
Wabco Westinghouse S.A.S (France)	France
Wabco, Inc. (PA)	Pennsylvania
Westinghouse Air Brake International Corporation	Pennsylvania
World Standard Ltd.	Delaware
World Standard Trade Limited	Cayman Islands
Xiamen Jardine Mechanical And Electrical Joint Design Office Technical Services Division	China, Peoples Republic of

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements Form S-8 pertaining to the 2002 Omnibus Incentive Plan and Employee Stock Purchase Plan (Registration No. 333-96547), Form S-3 pertaining to the registration of $1.0 billion of debt securities (Registration No. 333-67943), Form S-8 pertaining to the Employee Stock Purchase Plan (Registration No. 333-40575), Form S-8 pertaining to the Deferred Compensation Plan (Registration No. 333-75492), Form S-8 pertaining to the Supplemental Compensation Plan for Outside Directors (Registration No. 333-109562) and Forms S-8 pertaining to the Stock Incentive Plan (Registration Nos. 333-65252 and 033-63007) of American Standard Companies Inc., of our reports dated February 21, 2006, with respect to the consolidated financial statements and schedules of American Standard Companies Inc., American Standard Companies Inc. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of American Standard Companies Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2005.

/s/ Ernst & Young LLP

New York, New York

February 21, 2006

EX-23.1

Exhibit 23.1

CONSENT OF HAMILTON, RABINOVITZ & ALSCHULER, INC.

Hamilton, Rabinovitz & Alschuler (“HR&A”) consents to being named in American Standard Companies Inc.’s Annual Report (“Form 10-K”) for the year ended December 31, 2005 in the form and context in which HR&A is named and to the incorporation by reference in the Registration Statements on Form S-8 pertaining to the 2002 Omnibus Incentive Plan and Employee Stock Purchase Plan (Registration No. 333-96547), Form S-3 pertaining to the registration of $1.0 billion of debt securities (Registration No. 333-67943), Form S-8 pertaining to the Employee Stock Purchase Plan (Registration No. 333-40575), Form S-8 pertaining to the Deferred Compensation Plan (Registration No. 333-75492), Form S-8 pertaining to the Supplemental Compensation Plan for Outside Directors (Registration No. 333-109562) and Form S-8 pertaining to the Stock Incentive Plan (Registration Nos. 333-65252 and 033-63007). HR&A does not authorize or cause the filing of such Annual Report and does not make or purport to make any statement other than as reflected in the Annual Report.

/s/ Francine F. Rabinovitz

Hamilton, Rabinovitz & Alschuler

February 8, 2006

EX-24

Exhibit 24

POWER OF ATTORNEY

The undersigned does hereby appoint G. Peter D’Aloia, Mary Elizabeth Gustafsson and Mark C. Cresitello as their true and lawful attorneys to sign American Standard Companies Inc. (the “Corporation”) Annual Report on Form 10-K for the year ended December 31, 2005, and any amendments thereto, on behalf of the undersigned as a director of the Corporation, and to file the same, with any exhibits thereto, with the Securities and Exchange Commission; each of said attorneys shall have the power to act hereunder with or without the others.

Signature	Date
/s/ Steven E. Anderson Steven E. Anderson	February 21, 2006
/s/ Jared L. Cohon Jared L. Cohon	February 21, 2006
/s/ Paul J. Curlander Paul J. Curlander	February 21, 2006
/s/ Steven F. Goldstone Steven F. Goldstone	February 15, 2006
/s/ Kirk S. Hachigian Kirk S. Hachigian	February 21, 2006
/s/ Edward E. Hagenlocker Edward E. Hagenlocker	February 21, 2006
/s/ James F. Hardymon James F. Hardymon	February 17, 2006
/s/ Ruth Ann Marshall Ruth Ann Marshall	February 22, 2006
/s/ Dale F. Morrison Dale F. Morrison	February 21, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Frederic M. Poses, certify that:

1. I have reviewed this report on Form 10-K of American Standard Companies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

1

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2006

By:	/s/ Frederic M. Poses
	Frederic M. Poses
	Chief Executive Officer

2

EX-31.2

Exhibit 31.2

CERTIFICATION

I, G. Peter D’Aloia, certify that:

1. I have reviewed this report on Form 10-K of American Standard Companies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2006

By:	/s/ G. Peter D’Aloia
	G. Peter D’Aloia
	Senior Vice President and Chief Financial Officer

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EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of American Standard Companies Inc. (the “Company”) on Form 10-K for the fiscal year ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederic M. Poses, the Chief Executive Officer of the Company hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

/s/ Frederic M. Poses

Frederic M. Poses

Chief Executive Officer

February 24, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of American Standard Companies Inc. (the “Company”) on Form 10-K for the fiscal year ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, G. Peter D’Aloia, Senior Vice President and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

/s/ G. Peter D’Aloia

G. Peter D’Aloia

Senior Vice President and Chief Financial Officer

February 24, 2006