##### 



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

|     |  |                                                                                        
|---- |  | ---------------------------------------------------------------------------------------
|xbox |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

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

For the transition period from      to      .

Commission file number 1-11415

AMERICAN STANDARD COMPANIES INC.


(Exact name of Registrant as specified in its charter)


|                                                                                              |  |                                                
|--------------------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)                       |  | 13-3465896
(I.R.S. Employer
Identification No.)
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |  |                                                
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|One Centennial Avenue, P.O. Box 6820, Piscataway, NJ
(Address of principal executive offices) |  | 08855-6820
(Zip Code)                          
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |  |                                                
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Registrants telephone number, including area code                                            |  | (732) 980-6000                                 

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

xbox   Yes                      No box

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

Common stock, $.01 par value, outstanding at

|              |  |                  
|------------- |  | -----------------
|July 31, 2002 |  | 71,840,009 shares





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##### 



PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

American Standard Companies Inc. (the Company) is a Delaware corporation
that owns all the outstanding common stock of American Standard Inc. and
American Standard International Inc. (ASII), both Delaware corporations.
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 COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF INCOME
(Dollars in millions except per share amounts)

|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |         |            | 
|--------------------------------- | ----------------------------------- | ------- | ------- | ------------------ | ---------- | ---------------- | ------- | ------- | ---------- | ---- | ------- | ------- | ---------- | - | ------- | ------- | ---------- | 
|                                  |                                     |         |         | Three Months Ended |            | Six Months Ended
|                                  |                                     |         |         | June 30,           |            | June 30,        
|                                  |                                     |         |         |                    |            |                 
|                                  |                                     |         |         | 2002               |            | 2001             |         | 2002    |            | 2001
|                                  |                                     |         |         |                    |            |                  |         |         |            |     
|Sales                             |                                     | $       | 2,086.5 |                    |            | $                | 2,039.3 |         |            | $    | 3,848.4 |         |            | $ | 3,830.0 |        
|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|Cost and expenses                 |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|                                 
|                                 
|                                 
|                                 
|                                  | Cost of sales                       |         |         | 1,557.0            |            |                  |         | 1,497.3 |            |      |         | 2,909.6 |            |   |         | 2,854.1 |           
|                                 
|                                 
|                                 
|                                 
|                                  | Selling and administrative expenses |         |         | 302.6              |            |                  |         | 304.6   |            |      |         | 584.9   |            |   |         | 586.8   |           
|                                 
|                                 
|                                 
|                                 
|                                  | Other expense                       |         |         | 5.3                |            |                  |         | 1.4     |            |      |         | 13.4    |            |   |         | 2.0     |           
|                                 
|                                 
|                                 
|                                 
|                                  | Interest expense                    |         |         | 32.6               |            |                  |         | 44.4    |            |      |         | 66.0    |            |   |         | 91.2    |           
|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|                                  |                                     |         | 1,897.5 |                    |            |                  | 1,847.7 |         |            |      | 3,573.9 |         |            |   | 3,534.1 |        
|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|Income before income taxes        |                                     |         | 189.0   |                    |            |                  | 191.6   |         |            |      | 274.5   |         |            |   | 295.9   |        
|                                 
|                                 
|                                 
|                                 
|Income taxes                      |                                     |         | 62.9    |                    |            |                  | 71.8    |         |            |      | 91.4    |         |            |   | 111.1   |        
|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|Net income                        |                                     | $       | 126.1   |                    |            | $                | 119.8   |         |            | $    | 183.1   |         |            | $ | 184.8   |        
|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|Net income per common share       |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|                                 
|                                 
|                                 
|                                 
|                                  |                                     | Basic   |         | $                  | 1.74       |                  |         | $       | 1.68       |      |         | $       | 2.53       |   |         | $       | 2.60       | 
|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|                                  |                                     | Diluted |         | $                  | 1.71       |                  |         | $       | 1.63       |      |         | $       | 2.48       |   |         | $       | 2.54       | 
|                                  |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|Average common shares outstanding |                                     |         |         |                    |            |                  |         |         |            |      |         |         |            |   |         |        
|                                 
|                                 
|                                 
|                                 
|                                  |                                     | Basic   |         |                    | 72,450,074 |                  |         |         | 71,502,745 |      |         |         | 72,341,957 |   |         |         | 71,053,972 | 
|                                 
|                                 
|                                 
|                                 
|                                  |                                     | Diluted |         |                    | 73,935,940 |                  |         |         | 73,462,399 |      |         |         | 73,704,707 |   |         |         | 72,882,681 | 

See accompanying notes

2



---



##### 



Item 1. Financial Statements (continued)

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

|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |         |        |  
|---------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------- | -------- | ------ | ------------ | ------- | ------- | ------ | -
|                                               |                                                                                                                                   |                                                     |         | June 30, |        | December 31,
|                                               |                                                                                                                                   |                                                     |         | 2002     |        | 2001        
|                                               |                                                                                                                                   |                                                     |         |          |        |             
|ASSETS                                         |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                              
|                                              
|                                              
|                                              
|Current assets:                                |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents                                                                                                         |                                                     | $       | 124.3    |        |              | $       | 82.1    |       
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable                                                                                                               |                                                     |         | 1,069.3  |        |              |         | 998.3   |       
|                                              
|                                              
|                                              
|                                              
|                                               | Inventories:                                                                                                                      |                                                     |         |          |        |              |         |         |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                   | Finished products                                   |         |          | 424.2  |              |         |         | 378.1  |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                   | Products in process                                 |         |          | 149.5  |              |         |         | 135.3  |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                   | Raw materials                                       |         |          | 163.2  |              |         |         | 143.7  |  
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                               |                                                                                                                                   |                                                     | 736.9   |          |        |              | 657.1   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other current assets                                                                                                              |                                                     |         | 157.4    |        |              |         | 158.9   |       
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|Total current assets                           |                                                                                                                                   |                                                     | 2,087.9 |          |        |              | 1,896.4 |        
|                                              
|                                              
|                                              
|                                              
|Facilities, less accumulated depreciation:     |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | June 2002 - $741.9; Dec. 2001 - $657.8                                                                                            |                                                     |         | 1,370.3  |        |              |         | 1,362.8 |       
|                                              
|                                              
|                                              
|                                              
|Goodwill                                       |                                                                                                                                   |                                                     | 965.4   |          |        |              | 929.0   |        
|                                              
|                                              
|                                              
|                                              
|Other assets                                   |                                                                                                                                   |                                                     | 680.8   |          |        |              | 643.2   |        
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|Total assets                                   |                                                                                                                                   | $                                                   | 5,104.4 |          |        | $            | 4,831.4 |        
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                              
|                                              
|                                              
|                                              
|Current liabilities:                           |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Loans payable to banks                                                                                                            |                                                     | $       | 49.4     |        |              | $       | 58.7    |       
|                                              
|                                              
|                                              
|                                              
|                                               | Current maturities of long-term debt                                                                                              |                                                     |         | 4.8      |        |              |         | 11.4    |       
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable                                                                                                                  |                                                     |         | 680.5    |        |              |         | 604.1   |       
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued payrolls                                                                                                                  |                                                     |         | 277.6    |        |              |         | 265.2   |       
|                                              
|                                              
|                                              
|                                              
|                                               | Other accrued liabilities                                                                                                         |                                                     |         | 803.4    |        |              |         | 748.9   |       
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|Total current liabilities                      |                                                                                                                                   |                                                     | 1,815.7 |          |        |              | 1,688.3 |        
|                                              
|                                              
|                                              
|                                              
|Long-term debt                                 |                                                                                                                                   |                                                     | 2,037.3 |          |        |              | 2,142.0 |        
|                                              
|                                              
|                                              
|                                              
|Reserve for post-retirement benefits           |                                                                                                                                   |                                                     | 541.3   |          |        |              | 489.5   |        
|                                              
|                                              
|                                              
|                                              
|Other liabilities                              |                                                                                                                                   |                                                     | 609.9   |          |        |              | 601.7   |        
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|Total liabilities                              |                                                                                                                                   |                                                     | 5,004.2 |          |        |              | 4,921.5 |        
|                                              
|                                              
|                                              
|                                              
|Shareholders equity (deficit):                |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Preferred stock, 2,000,000 shares authorized,
none issued and outstanding                                                         |                                                     |         |         |        |              |         |        |       
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock $.01 par value, 200,000,000 shares
authorized; shares issued and outstanding: 72,200,747 in 2002; 72,071,944 in 2001 |                                                     |         | .7       |        |              |         | .7      |       
|                                              
|                                              
|                                              
|                                              
|                                               | Capital surplus                                                                                                                   |                                                     |         | 713.5    |        |              |         | 707.2   |       
|                                              
|                                              
|                                              
|                                              
|                                               | Unearned compensation                                                                                                             |                                                     |         | (3.8     | )      |              |         | (5.2    | )     
|                                              
|                                              
|                                              
|                                              
|                                               | Treasury stock                                                                                                                    |                                                     |         | (549.1   | )      |              |         | (505.3  | )     
|                                              
|                                              
|                                              
|                                              
|                                               | Retained earnings                                                                                                                 |                                                     |         | 240.1    |        |              |         | 57.0    |       
|                                              
|                                              
|                                              
|                                              
|                                               | Accumulated other comprehensive income:                                                                                           |                                                     |         |          |        |              |         |         |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                   | Foreign currency translation effects                |         |          | (291.5 | )            |         |         | (331.8 | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                   | Deferred gain (loss) on hedge contracts, net of tax |         |          | 2.0    |              |         |         | (1.0   | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                   | Minimum pension liability adjustment, net of tax    |         |          | (11.7  | )            |         |         | (11.7  | )
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|Total shareholders equity (deficit)           |                                                                                                                                   |                                                     | 100.2   |          |        |              | (90.1   | )      
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        
|                                               |                                                                                                                                   | $                                                   | 5,104.4 |          |        | $            | 4,831.4 |        
|                                               |                                                                                                                                   |                                                     |         |          |        |              |         |        

See accompanying notes

3



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##### 



Item 1. Financial Statements (continued)

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF CASH FLOWS
(Dollars in millions)

|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                  |       |       |       |        |   | 
|------------------------------------------------------------ | --------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---------------------------------------------- | ----------------------------------- | ------ | ----- | ---------------- | ----- | ----- | ----- | ------ | - | 
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       | Six months ended
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       | June 30,        
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       | 2002             |       | 2001 
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                  |       |      
|Cash provided (used) by:                                     |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Operating activities: |                                                                         |                                                                                            |                                                |                                     |        |       |                  |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Net income                                                              |                                                                                            | $                                              | 183.1                               |        |       | $                | 184.8 |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Adjustments to reconcile net income
to net cash provided by operations: |                                                                                            |                                                |                                     |        |       |                  |       |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            | Depreciation and amortization                  |                                     |        | 100.4 |                  |       |       | 113.2 |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            | Non-cash stock compensation                    |                                     |        | 26.2  |                  |       |       | 32.3  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            | German tax settlement paid                     |                                     |        | (55.0 | )                |       |       |      |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            | Job elimination expenses paid                  |                                     |        | (17.7 | )                |       |       |      |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            | Restructuring charges paid                     |                                     |        | (3.1  | )                |       |       | (15.2 | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            | Changes in assets and liabilities:             |                                     |        |       |                  |       |       |       |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            |                                                | Accounts receivable                 |        |       | (153.4           | )     |       |       | (151.6 | )
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            |                                                | Inventories                         |        |       | (61.9            | )     |       |       | (88.4  | )
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            |                                                | Accounts payable                    |        |       | 51.1             |       |       |       | 20.1   |  
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            |                                                | Other accrued liabilities and taxes |        |       | 80.0             |       |       |       | 64.4   |  
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            |                                                | Other assets                        |        |       | 8.0              |       |       |       | (48.9  | )
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            |                                                | Other long-term liabilities         |        |       | 24.6             |       |       |       | 26.3   |  
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|                                                             |                       |                                                                         | Net cash provided by operating activities before
proceeds from initial sale of receivables |                                                |                                     | 182.3  |       |                  |       | 137.0 |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       |                                                                         |                                                                                            | Proceeds from initial sale of receivables, net |                                     |        | 182.0 |                  |       |       |      |       
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|                                                             |                       |                                                                         | Net cash provided by operating activities                                                  |                                                |                                     | 364.3  |       |                  |       | 137.0 |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Investing activities: |                                                                         |                                                                                            |                                                |                                     |        |       |                  |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Purchase of property, plant and equipment                               |                                                                                            |                                                | (55.6                               | )      |       |                  | (71.4 | )    
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Investments in affiliated companies and other businesses                |                                                                                            |                                                | (22.0                               | )      |       |                  | (30.4 | )    
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Investments in computer software                                        |                                                                                            |                                                | (19.6                               | )      |       |                  | (28.3 | )    
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Proceeds from sales and leaseback transactions                          |                                                                                            |                                                |                                    |        |       |                  | 26.6  |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Other                                                                   |                                                                                            |                                                | 11.8                                |        |       |                  | 7.2   |      
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|                                                             |                       |                                                                         | Net cash used by investing activities                                                      |                                                |                                     | (85.4  | )     |                  |       | (96.3 | )    
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|                                                             | Financing activities: |                                                                         |                                                                                            |                                                |                                     |        |       |                  |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Repayments of long-term debt                                            |                                                                                            |                                                | (39.0                               | )      |       |                  | (2.3  | )    
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Net change in revolving credit facilities                               |                                                                                            |                                                | (119.6                              | )      |       |                  | (2.4  | )    
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Net change in other short-term debt                                     |                                                                                            |                                                | (10.4                               | )      |       |                  | .5    |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Purchases of treasury stock                                             |                                                                                            |                                                | (120.6                              | )      |       |                  | (63.7 | )    
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Proceeds from exercise of stock options                                 |                                                                                            |                                                | 47.6                                |        |       |                  | 68.5  |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Purchase of warrants                                                    |                                                                                            |                                                |                                    |        |       |                  | (35.3 | )    
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                       | Other                                                                   |                                                                                            |                                                | 3.9                                 |        |       |                  | 7.5   |      
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|                                                             |                       |                                                                         | Net cash used by financing activities                                                      |                                                |                                     | (238.1 | )     |                  |       | (27.2 | )    
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|Effect of exchange rate changes on cash and
cash equivalents |                       |                                                                         | 1.4                                                                                        |                                                |                                     |        | (1.8  | )               
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|Net increase in cash and cash equivalents                    |                       |                                                                         | 42.2                                                                                       |                                                |                                     |        | 11.7  |                 
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents at beginning of period             |                       |                                                                         | 82.1                                                                                       |                                                |                                     |        | 85.4  |                 
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 
|Cash and cash equivalents at end of period                   |                       | $                                                                       | 124.3                                                                                      |                                                |                                     | $      | 97.1  |                 
|                                                             |                       |                                                                         |                                                                                            |                                                |                                     |        |       |                 

See accompanying notes

4



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##### 



AMERICAN STANDARD COMPANIES INC.
NOTES TO FINANCIAL STATEMENTS

Note 1. Basis of Financial Statement Presentation

The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation of financial data have
been included. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for the entire year.
The condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and accompanying notes included in
the Companys Annual Report on Form 10-K for the year ended December 31, 2001.

Note 2. Restructuring and Asset Impairment Charges

2000 Restructuring Program

As described in Note 5 of Notes to Financial Statements included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2001, in
2000, the Company announced a worldwide restructuring program that included
improving efficiency through the transfer of production to locations with lower
product costs, the closure of manufacturing and administrative facilities,
outsourcing production of certain products, capitalizing on synergistic
opportunities in several businesses and termination costs related to upgrading
the effectiveness of the organization. In connection with this program, in the
fourth quarter of 2000 the Company recorded a net restructuring and asset
impairment charge of $70 million ($51 million net of tax benefits, or $.71 per
diluted share). This charge was comprised of $26 million for Air Conditioning
Systems and Services, $34 million for Plumbing Products and $15 million for
Vehicle Control Systems, offset by a $5 million reversal of restructuring
charges recorded previously for a 1998-1999 restructuring program as the
Company was able to complete the activities at lower cost than originally
estimated. The Air Conditioning Systems and Services charge included costs
related to a workforce reduction of 700 people to integrate international
operations, costs of lease obligations on properties no longer to be used, and
asset impairment charges. The Plumbing Products charge included an asset
impairment write-down for the closure of one plant in the U.S., a workforce
reduction of 250 people and the transfer of production to other facilities in
the Americas. The Plumbing Products charge also included termination costs for
a workforce reduction of 350 people as a result of the centralization and
realignment of certain functions in Western Europe, the Americas and Asia to
eliminate redundancies. The Vehicle Control Systems charge primarily reflects
the transfer of production to the lower-labor cost facility in Poland and
consolidation of certain operations and administrative functions in Western
Europe to eliminate redundancies, resulting in a net workforce reduction of 450
people.

In 2001 the majority of the actions described above were completed for
substantially the same amounts as originally accrued. With respect to the
other actions, the Company was able to settle certain items on more favorable
terms than expected and others on less favorable terms. Additionally, the
scope of certain activities was changed. For Air Conditioning Systems and
Services, the Company was able to release employees on more favorable terms
than originally contemplated and terminate lease obligations more favorably
than expected, resulting in a $5 million reversal of the accrual. However, the
Company incurred additional costs of $4 million, principally related to
discontinuing certain product lines in Europe. This additional cost was
charged to restructuring expense in 2001. For Vehicle Control Systems, the
Company did not

5



---



##### 



undertake all of its planned activities for consolidating administrative
functions in Western Europe and therefore reversed $4 million of the 2000
accrual. However, the scope of the production transfer to Poland was expanded
and accelerated, resulting in additional costs of $11 million, primarily for
severance, which was charged to restructuring expense in 2001. Plumbing
Products terminated fewer people than planned, resulting in a $3 million
reversal of the 2000 accrual. However, in 2001 Plumbing Products incurred
additional restructuring costs, principally severance of $2 million in North
America.

Following is a summary of the 2000 restructuring program and asset
impairment charges through June 30, 2002 (dollars in millions):

|                                              |  |         |      |           |  |          |       |         |  |          |      |         |  |          |      |         |  |          |       |   |  |         |       |   |  |   |     |  |  |   |      |   |  |   |     | 
|--------------------------------------------- |  | ------- | ---- | --------- |  | -------- | ----- | ------- |  | -------- | ---- | ------- |  | -------- | ---- | ------- |  | -------- | ----- | - |  | ------- | ----- | - |  | - | --- |  |  | - | ---- | - |  | - | --- | 
|                                              |  | Initial |      | Non-Cash  |  | Balance  |       | Charges |  | Charges  |      |         |  |          |      | Balance |  |          |       |   |  | Balance
|                                              |  | Charge  |      | Write-off |  | Dec. 31, |       | Accrued |  | Reversed |      | Paid in |  | Dec. 31, |      | Paid in |  | June 30,
|                                              |  | 2000    |      | in 2000   |  | 2000     |       | in 2001 |  | in 2001  |      | 2001    |  | 2001     |      | 2002    |  | 2002    
|                                              |  |         |      |           |  |          |       |         |  |          |      |         |  |          |      |         |  |         
|Termination payments and
other employee costs |  | $       | 47.4 |           |  | $        |      |         |  | $        | 47.4 |         |  | $        | 11.7 |         |  | $        | (9.4  | ) |  | $       | (44.8 | ) |  | $ | 4.9 |  |  | $ | (2.1 | ) |  | $ | 2.8 | 
|                                             
|                                             
|                                             
|                                             
|Asset impairments                             |  |         | 24.1 |           |  |          | (24.1 | )       |  |          |     |         |  |          |     |         |  |          |      |   |  |         |      |   |  |   |    |  |  |   |     |   |  |   |    | 
|                                             
|                                             
|                                             
|                                             
|Other                                         |  |         | 3.7  |           |  |          |      |         |  |          | 3.7  |         |  |          | 6.1  |         |  |          | (2.9  | ) |  |         | (5.5  | ) |  |   | 1.4 |  |  |   | (1.0 | ) |  |   | .4  | 
|                                              |  |         |      |           |  |          |       |         |  |          |      |         |  |          |      |         |  |          |       |   |  |         |       |   |  |   |     |  |  |   |      |   |  |   |     | 
|                                              |  | $       | 75.2 |           |  | $        | (24.1 | )       |  | $        | 51.1 |         |  | $        | 17.8 |         |  | $        | (12.3 | ) |  | $       | (50.3 | ) |  | $ | 6.3 |  |  | $ | (3.1 | ) |  | $ | 3.2 | 
|                                              |  |         |      |           |  |          |       |         |  |          |      |         |  |          |      |         |  |          |       |   |  |         |       |   |  |   |     |  |  |   |      |   |  |   |     | 

The Company expects that essentially all of the $3.2 million balance as of
June 30, 2002 related to the 2000 restructuring program will be utilized in
2002. The remaining accrued termination payments and other employee costs are
for severance and other related payments due terminated employees.

Note 3. Comprehensive Income

Total comprehensive income consisted of the following (dollars in
millions):

|                                                    |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       |  
|--------------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | -
|                                                    |  | Three months ended |       | Six months ended
|                                                    |  | June 30,           |       | June 30,        
|                                                    |  |                    |       |                 
|                                                    |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                                                    |  |                    |       |                  |  |      |       |     
|Net income                                          |  | $                  | 126.1 |                  |  | $    | 119.8 |      |  | $ | 183.1 |  |  | $ | 184.8 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Foreign currency translation effects                |  |                    | 55.5  |                  |  |      | 4.3   |      |  |   | 40.3  |  |  |   | 2.0   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Deferred gain (loss) on hedge
contracts, net of tax |  |                    | (2.2  | )                |  |      | 1.0   |      |  |   | 3.0   |  |  |   | (3.7  | )
|                                                    |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       |  
|Total comprehensive income                          |  | $                  | 179.4 |                  |  | $    | 125.1 |      |  | $ | 226.4 |  |  | $ | 183.1 |  
|                                                    |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       |  

Note 4. Tax Matters

The Company had been in discussions and negotiations with The State
Finance Administration for North Rhine-Westphalia, Germany (the German Tax
Authority) concerning certain tax issues covering the years
1984 - 1994. For
the years 1984 - 1990, the Company received a tax assessment from the German
Tax Authority in the amount of $90 million. For years
1991 - 1994, the Company
anticipated a further assessment for an amount substantially greater than that
assessed for 1984 - 1990. On January 15, 2002, the Company settled all issues
for 1984 through 1994 for a current cash payment of approximately $55 million
plus $30 million previously deposited in escrow. Since the Company previously
had provided adequate reserves for all issues, the settlement had no impact on
results of operations.

6



---



##### 



Note 5. Earnings Per Share

The average number of outstanding shares of common stock used in computing
diluted earnings per share for the three months ended June 30, 2002 and 2001
included 1,485,866 and 1,959,654 average incremental shares, respectively, for
the assumed exercise of stock options. The six-month periods ended June 30,
2002 and 2001 included 1,362,750 and 1,828,709 average incremental shares,
respectively.

Note 6. Adoption of New Accounting Standard for Goodwill and Other Intangible Assets

In 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests. Other
intangible assets will continue to be amortized over their useful lives. The
Company began applying the new rules in the first quarter of 2002. Application
of the non-amortization provisions of FAS 142 resulted in a second quarter 2002
net income increase of $7.8 million, or $.10 per diluted share, an increase of
$15.6 million, or $.20 per diluted share for the six months ended June 30,
2002, and is expected to result in an increase in net income of approximately
$30 million, or $.40 per diluted share annually. During the first half of
2002, the Company performed the first of the required impairment tests of
goodwill and indefinite-lived intangible assets and determined that there was
no impairment.

Following is a summary of net income for the three months and six months
ended June 30, 2002, compared with net income for the three months and six
months ended June 30, 2001, as reported and as adjusted to exclude goodwill
amortization (dollars in millions):

|                                                           |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |      | 
|---------------------------------------------------------- | --------------------- | - | ------------------ | ---- | ---------------- | - | ----- | ---- | ---- | - | ----- | ---- |  | - | ----- | ---- | 
|                                                           |                       |   | Three months ended |      | Six months ended
|                                                           |                       |   | June 30,           |      | June 30,        
|                                                           |                       |   |                    |      |                 
|                                                           |                       |   | 2002               |      | 2001             |   | 2002  |      | 2001
|                                                           |                       |   |                    |      |                  |   |       |      |     
|Reported net income                                        |                       | $ | 126.1              |      |                  | $ | 119.8 |      |      | $ | 183.1 |      |  | $ | 184.8 |     
|                                                          
|                                                          
|                                                          
|                                                          
|Add goodwill amortization, net of
income taxes in 2001 (a) |                       |   |                   |      |                  |   | 7.8   |      |      |   |      |      |  |   | 15.6  |     
|                                                           |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Adjusted net income                                        |                       | $ | 126.1              |      |                  | $ | 127.6 |      |      | $ | 183.1 |      |  | $ | 200.4 |     
|                                                           |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Basic earnings per share:                                  |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Reported net income   |   | $                  | 1.74 |                  |   | $     | 1.68 |      |   | $     | 2.53 |  |   | $     | 2.60 | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Goodwill amortization |   |                    |     |                  |   |       | .11  |      |   |       |     |  |   |       | .22  | 
|                                                           |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                           | Adjusted net income   |   | $                  | 1.74 |                  |   | $     | 1.79 |      |   | $     | 2.53 |  |   | $     | 2.82 | 
|                                                           |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Diluted earnings per share:                                |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Reported net income   |   | $                  | 1.71 |                  |   | $     | 1.63 |      |   | $     | 2.48 |  |   | $     | 2.54 | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Goodwill amortization |   |                    |     |                  |   |       | .10  |      |   |       |     |  |   |       | .20  | 
|                                                           |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                           | Adjusted net income   |   | $                  | 1.71 |                  |   | $     | 1.73 |      |   | $     | 2.48 |  |   | $     | 2.74 | 
|                                                           |                       |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     



|(a) |  | In certain foreign countries goodwill amortization
is deductible for tax purposes, resulting in tax benefits of $.4
million and $.8 million for the three and six months ended June
30, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7



---



##### 



Note 7. Accounts Receivable Securitization Agreement

On May 6, 2002, the Company entered into a three-year European accounts
receivable securitization agreement, subject to annual renewals and maintenance
of specified debt rating levels, with a major international bank for the sale
of receivables on a non-recourse basis for a fee. Under the agreement the
Company sells eligible receivables (on an ongoing basis) to an entity that was
formed for the sole purpose of entering into these transactions which in turn
sells the receivables to a subsidiary of the bank. The Company retains an
interest (approximately 10-15%) in the receivables sold. The sale of
receivables (other than the retained interest) is funded through the sale of
commercial paper issued by the bank subsidiary. The receivables transactions
are treated as sales since they meet the applicable criteria of Statement of
Financial Accounting Standards No. 140 and, accordingly, the receivables are
removed from the balance sheet except for the retained interest. The amount of
receivables sold and outstanding under this agreement (excluding retained
interest) is limited to 250 million (approximately $248 million at current
exchange rates), will fluctuate in amount and was $233 million as of June 30,
2002. Following is a summary of certain cash flows received from or paid to
the special purpose entity from inception through June 30, 2002 (in millions):

|                                                                                           |  |                    |       | 
|------------------------------------------------------------------------------------------ |  | ------------------ | ----- | 
|                                                                                           |  | Three months ended
|                                                                                           |  | June 30, 2002     
|                                                                                           |  |                   
|Proceeds from initial securitizations, net of
decrease in previous arrangements terminated |  | $                  | 182.0 | 

The interest rate paid to the bank and its subsidiary on amounts
outstanding under this facility is the London Interbank Offered Rate (LIBOR)
plus .45% as of June 30, 2002.

The Companys retained interest in the receivables at June 30, 2002 is
classified in trade accounts receivable in the Companys consolidated financial
statements and its carrying amount approximates fair value because of the
relatively short-term nature and amounted to $42 million as of June 30, 2002.

Note 8. Impact of Other Recently Issued Accounting Standards

In August 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets,effective for fiscal years beginning after
December 15, 2001. The statement establishes new rules on accounting for
impairments of long-lived assets and provides guidance on differentiating
between assets held and used, held for sale, and held for disposal other than
by sale. The new statement was adopted by the Company at the beginning of 2002
with no significant effect on the Companys results of operations or financial
position. Other FASB statements recently issued have little or no immediate
effect on the Company and will have an effect in the future only in the event
the Company enters into transactions governed by those statements. Those
statements included No. 143, Accounting for Asset Retirement Obligations;No.
145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13 (leases), and Technical Corrections;and No. 146, Accounting
for Costs Associated with Exit or Disposal Activities.

8



---



##### 



Note 9. Debt

On January 8, 2002, the company redeemed all of the 9 1/4% Sinking Fund
Debentures, at a redemption price 102.313% of the face amount of the bonds plus
unpaid interest up to the redemption date. The total redemption cost of $38.7
million, including accrued interest of $.4 million, was paid with lower-cost
borrowings under the Companys credit agreements.

Note 10. Supplemental Consolidating Condensed Financial Information

All of the Companys Senior Notes were issued by its wholly owned
subsidiary, American Standard Inc. (ASI). American Standard Companies Inc.
(the Parent Company) fully and unconditionally guarantees the payment
obligations under these securities (the ASI Public Debt). In lieu of
providing separate financial statements for ASI, included is the accompanying
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 for the three months and six months ended June 30,
2002 and 2001, statements of cash flows for the six months ended June 31, 2002
and 2001 and balance sheets as of June 30, 2002 and December 31, 2001 for the
Parent Company, ASI, and the subsidiaries of the Parent Company which are not
subsidiaries of ASI (the Other Subsidiaries). None of the Other Subsidiaries
guarantees the ASI Public Debt. 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 THREE MONTHS ENDED JUNE 30, 2002
(Unaudited)

|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |         |         | 
|-------------------------------------------------------------------------------- | -------------------------------------- | -------------- | ----- | ------ |  | ------------ | ------- | ------------ | ------- | ----- | ----- | ----- | ----- | - | ------ | ------------ | ------ | - | ------- | ------- | ------- | 
|                                                                                 |                                        |                |       | Parent |  |              |         |              |         | Other |       |       |       |   |        | Consolidated
|(Dollars in millions)                                                            |                                        | Company        |       | ASI    |  | Subsidiaries |         | Eliminations |         | Total
|                                                                                 |                                        |                |       |        |  |              |         |              |         |      
|Sales                                                                            |                                        |                |       |        |  | $            | 1,226.5 |              |         | $     | 982.8 |       |       | $ | (122.8 | )            |        | $ | 2,086.5 |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |        
|Costs and expenses:                                                              |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cost of sales                          |                |       |        |  |              |         | 912.0        |         |       |       | 767.8 |       |   |        | (122.8       | )      |   |         | 1,557.0 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Selling and administrative expenses    |                |       |        |  |              |         | 162.5        |         |       |       | 140.1 |       |   |        |              |        |   |         | 302.6   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other (income) expense                 |                |       |        |  |              |         | 7.0          |         |       |       | (1.7  | )     |   |        |              |        |   |         | 5.3     |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Interest expense                       |                |       |        |  |              |         | 30.4         |         |       |       | 2.2   |       |   |        |              |        |   |         | 32.6    |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Intercompany interest expense (income) |                |       |        |  |              |         | .1           |         |       |       | (.1   | )     |   |        |              |        |   |         |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |        
|                                                                                 |                                        | Total expenses |       |        |  |              |         |              | 1,112.0 |       |       |       | 908.3 |   |        |              | (122.8 | ) |         |         | 1,897.5 | 
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |        
|Income before income taxes and equity in
net income of consolidated subsidiaries |                                        |                |       |        |  |              | 114.5   |              |         |       | 74.5  |       |       |   |       |              |        |   | 189.0   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Income taxes                                                                     |                                        |                |       |        |  |              | 38.9    |              |         |       | 24.0  |       |       |   |        |              |        |   | 62.9    |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |        
|Income before equity in net income of
consolidated subsidiaries                  |                                        |                |       |        |  |              | 75.6    |              |         |       | 50.5  |       |       |   |       |              |        |   | 126.1   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Equity in net income of consolidated
subsidiaries                                |                                        | $              | 126.1 |        |  |              |         |              |         |       |       |       |       |   | (126.1 | )            |        |   |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |        
|Net income                                                                       |                                        | $              | 126.1 |        |  | $            | 75.6    |              |         | $     | 50.5  |       |       | $ | (126.1 | )            |        | $ | 126.1   |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |        |   |         |        

9



---



##### 



Note 10. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(Unaudited)

|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |         |         | 
|-------------------------------------------------------------------------------- | -------------------------------------- | -------------- | ----- | ------ |  | ------------ | ------- | ------------ | ------- | ----- | ------- | ------- | ------- | - | ------ | ------------ | ------ | - | ------- | ------- | ------- | 
|                                                                                 |                                        |                |       | Parent |  |              |         |              |         | Other |         |         |         |   |        | Consolidated
|(Dollars in millions)                                                            |                                        | Company        |       | ASI    |  | Subsidiaries |         | Eliminations |         | Total
|                                                                                 |                                        |                |       |        |  |              |         |              |         |      
|Sales                                                                            |                                        |                |       |        |  | $            | 2,240.6 |              |         | $     | 1,802.0 |         |         | $ | (194.2 | )            |        | $ | 3,848.4 |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Costs and expenses:                                                              |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cost of sales                          |                |       |        |  |              |         | 1,700.5      |         |       |         | 1,403.3 |         |   |        | (194.2       | )      |   |         | 2,909.6 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Selling and administrative expenses    |                |       |        |  |              |         | 320.9        |         |       |         | 264.0   |         |   |        |              |        |   |         | 584.9   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other expense                          |                |       |        |  |              |         | 4.5          |         |       |         | 8.9     |         |   |        |              |        |   |         | 13.4    |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Interest expense                       |                |       |        |  |              |         | 61.4         |         |       |         | 4.6     |         |   |        |              |        |   |         | 66.0    |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Intercompany interest expense (income) |                |       |        |  |              |         | .3           |         |       |         | (.3     | )       |   |        |              |        |   |         |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|                                                                                 |                                        | Total expenses |       |        |  |              |         |              | 2,087.6 |       |         |         | 1,680.5 |   |        |              | (194.2 | ) |         |         | 3,573.9 | 
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Income before income taxes and equity in
net income of consolidated subsidiaries |                                        |                |       |        |  |              | 153.0   |              |         |       | 121.5   |         |         |   |       |              |        |   | 274.5   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Income taxes                                                                     |                                        |                |       |        |  |              | 52.9    |              |         |       | 38.5    |         |         |   |        |              |        |   | 91.4    |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Income before equity in net income of
consolidated subsidiaries                  |                                        |                |       |        |  |              | 100.1   |              |         |       | 83.0    |         |         |   |       |              |        |   | 183.1   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Equity in net income of consolidated
subsidiaries                                |                                        | $              | 183.1 |        |  |              |         |              |         |       |         |         |         |   | (183.1 | )            |        |   |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Net income                                                                       |                                        | $              | 183.1 |        |  | $            | 100.1   |              |         | $     | 83.0    |         |         | $ | (183.1 | )            |        | $ | 183.1   |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        

CONSOLIDATING CONDENSED BALANCE SHEETS
AS OF JUNE 30, 2002
(Unaudited)

|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |         |         | 
|---------------------------------------------- | ------------------------------------ | ------------------------------------------ | ----- | ------ | ----- | ------------ | ------- | ------------ | -------- | ----- | ------ | ----- | ------- | - | ------ | ------------ | ------ | - | ------- | ------- | ------- | 
|                                               |                                      |                                            |       | Parent |       |              |         |              |          | Other |        |       |         |   |        | Consolidated
|(Dollars in millions)                          |                                      | Company                                    |       | ASI    |       | Subsidiaries |         | Eliminations |          | Total
|                                               |                                      |                                            |       |        |       |              |         |              |          |      
|ASSETS                                         |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                              
|                                              
|                                              
|                                              
|Current assets:                                |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents            |                                            |       |        |       |              | $       | 17.9         |          |       | $      | 106.4 |         |   |        |              |        |   | $       | 124.3   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable, net             |                                            | $     | .6     |       |              |         | 505.4        |          |       |        | 563.3 |         |   |        |              |        |   |         | 1,069.3 |        
|                                              
|                                              
|                                              
|                                              
|                                               | Inventories                          |                                            |       |        |       |              |         | 350.2        |          |       |        | 386.7 |         |   |        |              |        |   |         | 736.9   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other current assets                 |                                            |       |        |       |              |         | 104.4        |          |       |        | 53.0  |         |   |        |              |        |   |         | 157.4   |        
|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                               |                                      | Total current assets                       |       |        | .6    |              |         |              | 977.9    |       |        |       | 1,109.4 |   |        |              |        |   |         |         | 2,087.9 | 
|                                              
|                                              
|                                              
|                                              
|Facilities, net                                |                                      |                                            |       |        |       |              | 537.2   |              |          |       | 833.1  |       |         |   |        |              |        |   | 1,370.3 |        
|                                              
|                                              
|                                              
|                                              
|Goodwill, net                                  |                                      |                                            |       |        |       |              | 131.4   |              |          |       | 834.0  |       |         |   |        |              |        |   | 965.4   |        
|                                              
|                                              
|                                              
|                                              
|Investment in subsidiaries                     |                                      |                                            | 722.0 |        |       |              |         |              |          |       |        |       |         | $ | (722.0 | )            |        |   |        |        
|                                              
|                                              
|                                              
|                                              
|Other assets                                   |                                      |                                            |       |        |       |              | 584.4   |              |          |       | 96.4   |       |         |   |        |              |        |   | 680.8   |        
|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                               |                                      | Total assets                               |       | $      | 722.6 |              |         | $            | 2,230.9  |       |        | $     | 2,872.9 |   |        | $            | (722.0 | ) |         | $       | 5,104.4 | 
|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|LIABILITIES AND SHAREHOLDERS
(DEFICIT) EQUITY |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                              
|                                              
|                                              
|                                              
|Current liabilities:                           |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Loans payable to banks               |                                            |       |        |       |              | $       | 5.0          |          |       | $      | 44.4  |         |   |        |              |        |   | $       | 49.4    |        
|                                              
|                                              
|                                              
|                                              
|                                               | Current maturities of long-term debt |                                            |       |        |       |              |         | 3.2          |          |       |        | 1.6   |         |   |        |              |        |   |         | 4.8     |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other current liabilities            |                                            |       |        |       |              |         | 1,007.8      |          |       |        | 753.7 |         |   |        |              |        |   |         | 1,761.5 |        
|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                               |                                      | Total current liabilities                  |       |        |       |              |         |              | 1,016.0  |       |        |       | 799.7   |   |        |              |        |   |         |         | 1,815.7 | 
|                                              
|                                              
|                                              
|                                              
|Long-term debt                                 |                                      |                                            |       |        |       |              | 1,961.9 |              |          |       | 75.4   |       |         |   |        |              |        |   | 2,037.3 |        
|                                              
|                                              
|                                              
|                                              
|Reserve for postretirement benefits            |                                      |                                            |       |        |       |              | 309.5   |              |          |       | 231.8  |       |         |   |        |              |        |   | 541.3   |        
|                                              
|                                              
|                                              
|                                              
|Intercompany accounts, net                     |                                      | $                                          | 622.4 |        |       |              | 150.3   |              |          |       | (772.7 | )     |         |   |        |              |        |   |        |        
|                                              
|                                              
|                                              
|                                              
|Other long-term liabilities                    |                                      |                                            |       |        |       |              | 314.2   |              |          |       | 295.7  |       |         |   |        |              |        |   | 609.9   |        
|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                               |                                      | Total liabilities                          |       |        | 622.4 |              |         |              | 3,751.9  |       |        |       | 629.9   |   |        | $            |       |   |         |         | 5,004.2 | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Total shareholders (deficit) equity       |       |        | 100.2 |              |         |              | (1,521.0 | )     |        |       | 2,243.0 |   |        |              | (722.0 | ) |         |         | 100.2   | 
|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        
|                                               |                                      | Total liabilities and shareholders
equity |       | $      | 722.6 |              |         | $            | 2,230.9  |       |        | $     | 2,872.9 |   |        | $            | (722.0 | ) |         | $       | 5,104.4 | 
|                                               |                                      |                                            |       |        |       |              |         |              |          |       |        |       |         |   |        |              |        |   |         |        

10



---



##### 



Note 10. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(Unaudited)

|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |        |       |       |        |  
|------------------------ | ------------------------------------------------------------ | ------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------------- | --- | ------------ | ------ | ------------ | ----- | ----- | ------ | ------ | ----- | ---- | ------ | - | - | ------------ | ----- | ------ | ----- | ----- | ------ | -
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     | Parent       |        |              |       |       |        | Other  |       |      |        |   |   | Consolidated
|(Dollars in millions)    |                                                              | Company                                                                                           |                                                                                | ASI                                                      |     | Subsidiaries |        | Eliminations |       | Total
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |      
|Cash provided (used) by: |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                        
|                        
|                        
|                        
|                         |                                                              | Operating activities:                                                                             |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |        |       |      
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   | Net income                                                                     |                                                          | $   | 183.1        |        |              | $     | 100.1 |        |        | $     | 83.0 |        |   | $ | (183.1       | )     |        | $     | 183.1 |       
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   | Adjustments to reconcile net income to net
cash provided (used) by operations: |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |        |       |       |       
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Depreciation and amortization                            |     |              |        |              |       |       | 40.9   |        |       |      | 59.5   |   |   |              |       |        |       |       | 100.4  |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Non-cash stock compensation                              |     |              |        |              |       |       | 26.2   |        |       |      |        |   |   |              |       |        |       |       | 26.2   |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | German tax settlement paid                               |     |              |        |              |       |       |        |        |       |      | (55.0  | ) |   |              |       |        |       |       | (55.0  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Job elimination expenses paid                            |     |              |        |              |       |       | (10.6  | )      |       |      | (7.1   | ) |   |              |       |        |       |       | (17.7  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Restructuring charges paid                               |     |              |        |              |       |       | (1.3   | )      |       |      | (1.8   | ) |   |              |       |        |       |       | (3.1   | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Equity in net income of subsidiaries                     |     |              | (183.1 | )            |       |       |        |        |       |      |        |   |   |              | 183.1 |        |       |       |       |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Changes in assets and liabilities:                       |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |        |       |       |        |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Accounts receivable                                      |     |              | (.7    | )            |       |       | (31.1  | )      |       |      | (121.6 | ) |   |              |       |        |       |       | (153.4 | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Inventories                                              |     |              |        |              |       |       | (39.8  | )      |       |      | (22.1  | ) |   |              |       |        |       |       | (61.9  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Accounts payable                                         |     |              |        |              |       |       | 23.6   |        |       |      | 27.5   |   |   |              |       |        |       |       | 51.1   |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Other accrued liabilities and taxes                      |     |              |        |              |       |       | 115.6  |        |       |      | (35.6  | ) |   |              |       |        |       |       | 80.0   |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Other assets                                             |     |              |        |              |       |       | (73.7  | )      |       |      | 81.7   |   |   |              |       |        |       |       | 8.0    |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Other long-term liabilities                              |     |              |        |              |       |       | 25.1   |        |       |      | (.5    | ) |   |              |       |        |       |       | 24.6   |  
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         |                                                              | Net cash provided (used) by operating activities
before proceeds from initial sale of receivables |                                                                                |                                                          | (.7 | )            |        |              | 175.0 |       |        |        | 8.0   |      |        |   |  |              |       |        | 182.3 |      
|                        
|                        
|                        
|                        
|                         |                                                              | Proceeds
from initial sale of receivables                                                         |                                                                                |                                                          |     |              |        |              |       |       |        |        | 182.0 |      |        |   |   |              |       |        | 182.0 |      
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         |                                                              | Net cash provided (used) by operating activities                                                  |                                                                                |                                                          | (.7 | )            |        |              | 175.0 |       |        |        | 190.0 |      |        |   |  |              |       |        | 364.3 |      
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         |                                                              | Investing activities:                                                                             |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |        |       |      
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Purchase of property, plant and equipment                |     |              |        |              |       |       | (23.5  | )      |       |      | (32.1  | ) |   |              |       |        |       |       | (55.6  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Investments in affiliated companies and
other businesses |     |              |        |              |       |       | (22.0  | )      |       |      |        |   |   |              |       |        |       |       | (22.0  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Investments in computer software                         |     |              |        |              |       |       | (9.6   | )      |       |      | (10.0  | ) |   |              |       |        |       |       | (19.6  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Other                                                    |     |              |        |              |       |       | 2.2    |        |       |      | 9.6    |   |   |              |       |        |       |       | 11.8   |  
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         | Net cash used by investing activities                        |                                                                                                   |                                                                                |                                                         |     |              |        | (52.9        | )     |       |        | (32.5  | )     |      |        |  |   |              |       | (85.4  | )    
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         | Financing activities:                                        |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |        |      
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Repayments of long-term debt                             |     |              |        |              |       |       | (37.9  | )      |       |      | (1.1   | ) |   |              |       |        |       |       | (39.0  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Net change in revolving credit facilities                |     |              |        |              |       |       | (186.0 | )      |       |      | 66.4   |   |   |              |       |        |       |       | (119.6 | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Net change in other short-term debt                      |     |              |        |              |       |       | 5.0    |        |       |      | (15.4  | ) |   |              |       |        |       |       | (10.4  | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Purchases of treasury stock                              |     |              | (120.6 | )            |       |       |        |        |       |      |        |   |   |              |       |        |       |       | (120.6 | )
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Net change in intercompany accounts                      |     |              | 69.8   |              |       |       | 111.6  |        |       |      | (181.4 | ) |   |              |       |        |       |       |       |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Proceeds from exercise of stock options                  |     |              | 47.6   |              |       |       |        |        |       |      |        |   |   |              |       |        |       |       | 47.6   |  
|                        
|                        
|                        
|                        
|                         |                                                              |                                                                                                   |                                                                                | Other                                                    |     |              | 3.9    |              |       |       |        |        |       |      |        |   |   |              |       |        |       |       | 3.9    |  
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         | Net cash provided (used) by financing activities             |                                                                                                   |                                                                                | .7                                                       |     |              |        | (107.3       | )     |       |        | (131.5 | )     |      |        |  |   |              |       | (238.1 | )    
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         | Effect of exchange rate changes on cash
and cash equivalents |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        | 1.4    |       |      |        |   |   |              |       | 1.4    |      
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         | Net increase (decrease) in cash and
cash equivalents         |                                                                                                   |                                                                                |                                                         |     |              |        | 14.8         |       |       |        | 27.4   |       |      |        |  |   |              |       | 42.2   |      
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         | Cash and cash equivalents at
beginning of period             |                                                                                                   |                                                                                |                                                         |     |              |        | 3.1          |       |       |        | 79.0   |       |      |        |  |   |              |       | 82.1   |      
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       
|                         | Cash and cash equivalents at end of period                   |                                                                                                   | $                                                                              |                                                         |     |              | $      | 17.9         |       |       | $      | 106.4  |       |      | $      |  |   |              | $     | 124.3  |      
|                         |                                                              |                                                                                                   |                                                                                |                                                          |     |              |        |              |       |       |        |        |       |      |        |   |   |              |       |       

11



---



##### 



Note 10. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2001
(Unaudited)

|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |         |         | 
|-------------------------------------------------------------------------------- | -------------------------------------- | -------------- | ----- | ------ |  | ------------ | ------- | ------------ | ------- | ----- | ----- | ----- | ----- | - | ------ | ------------ | ----- | - | ------- | ------- | ------- | 
|                                                                                 |                                        |                |       | Parent |  |              |         |              |         | Other |       |       |       |   |        | Consolidated
|(Dollars in millions)                                                            |                                        | Company        |       | ASI    |  | Subsidiaries |         | Eliminations |         | Total
|                                                                                 |                                        |                |       |        |  |              |         |              |         |      
|Sales                                                                            |                                        |                |       |        |  | $            | 1,222.2 |              |         | $     | 876.8 |       |       | $ | (59.7  | )            |       | $ | 2,039.3 |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |        
|Costs and expenses:                                                              |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cost of sales                          |                |       |        |  |              |         | 902.2        |         |       |       | 654.8 |       |   |        | (59.7        | )     |   |         | 1,497.3 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Selling and administrative expenses    |                |       |        |  |              |         | 174.6        |         |       |       | 130.0 |       |   |        |              |       |   |         | 304.6   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other (income) expense                 |                |       |        |  |              |         | (12.6        | )       |       |       | 14.0  |       |   |        |              |       |   |         | 1.4     |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Interest expense                       |                |       |        |  |              |         | 35.3         |         |       |       | 9.1   |       |   |        |              |       |   |         | 44.4    |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Intercompany interest expense (income) |                |       |        |  |              |         | 6.7          |         |       |       | (6.7  | )     |   |        |              |       |   |         |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |        
|                                                                                 |                                        | Total expenses |       |        |  |              |         |              | 1,106.2 |       |       |       | 801.2 |   |        |              | (59.7 | ) |         |         | 1,847.7 | 
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |        
|Income before income taxes and equity in
net income of consolidated subsidiaries |                                        |                |       |        |  |              | 116.0   |              |         |       | 75.6  |       |       |   |       |              |       |   | 191.6   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Income taxes                                                                     |                                        |                |       |        |  |              | 44.6    |              |         |       | 27.2  |       |       |   |        |              |       |   | 71.8    |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |        
|Income before equity in net income of
consolidated subsidiaries                  |                                        |                |       |        |  |              | 71.4    |              |         |       | 48.4  |       |       |   |       |              |       |   | 119.8   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Equity in net income of consolidated
subsidiaries                                |                                        | $              | 119.8 |        |  |              |         |              |         |       |       |       |       | $ | (119.8 | )            |       |   |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |        
|Net income                                                                       |                                        | $              | 119.8 |        |  | $            | 71.4    |              |         | $     | 48.4  |       |       | $ | (119.8 | )            |       | $ | 119.8   |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |       |       |       |   |        |              |       |   |         |        

CONSOLIDATING CONDENSED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)

|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |         |         | 
|-------------------------------------------------------------------------------- | -------------------------------------- | -------------- | ----- | ------ |  | ------------ | ------- | ------------ | ------- | ----- | ------- | ------- | ------- | - | ------ | ------------ | ------ | - | ------- | ------- | ------- | 
|                                                                                 |                                        |                |       | Parent |  |              |         |              |         | Other |         |         |         |   |        | Consolidated
|(Dollars in millions)                                                            |                                        | Company        |       | ASI    |  | Subsidiaries |         | Eliminations |         | Total
|                                                                                 |                                        |                |       |        |  |              |         |              |         |      
|Sales                                                                            |                                        |                |       |        |  | $            | 2,227.2 |              |         | $     | 1,716.0 |         |         | $ | (113.2 | )            |        | $ | 3,830.0 |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Costs and expenses:                                                              |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cost of sales                          |                |       |        |  |              |         | 1,677.1      |         |       |         | 1,290.2 |         |   |        | (113.2       | )      |   |         | 2,854.1 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Selling and administrative expenses    |                |       |        |  |              |         | 323.1        |         |       |         | 263.7   |         |   |        |              |        |   |         | 586.8   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other (income) expense                 |                |       |        |  |              |         | (13.0        | )       |       |         | 15.0    |         |   |        |              |        |   |         | 2.0     |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Interest expense                       |                |       |        |  |              |         | 72.2         |         |       |         | 19.0    |         |   |        |              |        |   |         | 91.2    |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Intercompany interest expense (income) |                |       |        |  |              |         | 12.0         |         |       |         | (12.0   | )       |   |        |              |        |   |         |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|                                                                                 |                                        | Total expenses |       |        |  |              |         |              | 2,071.4 |       |         |         | 1,575.9 |   |        |              | (113.2 | ) |         |         | 3,534.1 | 
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Income before income taxes and equity in
net income of consolidated subsidiaries |                                        |                |       |        |  |              | 155.8   |              |         |       | 140.1   |         |         |   |       |              |        |   | 295.9   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Income taxes                                                                     |                                        |                |       |        |  |              | 59.3    |              |         |       | 51.8    |         |         |   |        |              |        |   | 111.1   |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Income before equity in net income of
consolidated subsidiaries                  |                                        |                |       |        |  |              | 96.5    |              |         |       | 88.3    |         |         |   |       |              |        |   | 184.8   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Equity in net income of consolidated
subsidiaries                                |                                        | $              | 184.8 |        |  |              |         |              |         |       |         |         |         | $ | (184.8 | )            |        |   |        |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        
|Net income                                                                       |                                        | $              | 184.8 |        |  | $            | 96.5    |              |         | $     | 88.3    |         |         | $ | (184.8 | )            |        | $ | 184.8   |        
|                                                                                 |                                        |                |       |        |  |              |         |              |         |       |         |         |         |   |        |              |        |   |         |        

12



---



##### 



Note 10. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2001
(Unaudited)

|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |         |         |  
|---------------------------------------------- | ------------------------------------ | ------------------------------------------ | - | ------ | ----- | ------------ | - | ------------ | -------- | ----- | - | ------ | ------- | ------------ | - | ------ | ------ | - | - | ------- | ------- | -
|                                               |                                      |                                            |   | Parent |       |              |   |              |          | Other |   |        |         | Consolidated
|(Dollars in millions)                          |                                      | Company                                    |   | ASI    |       | Subsidiaries |   | Eliminations |          | Total
|                                               |                                      |                                            |   |        |       |              |   |              |          |      
|ASSETS                                         |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                              
|                                              
|                                              
|                                              
|Current assets:                                |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents            |                                            |   |        |       |              | $ | 3.1          |          |       | $ | 79.0   |         |              |   |        |        |   | $ | 82.1    |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable, net             |                                            | $ | .5     |       |              |   | 464.6        |          |       |   | 533.2  |         |              |   |        |        |   |   | 998.3   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Inventories                          |                                            |   |        |       |              |   | 310.0        |          |       |   | 347.1  |         |              |   |        |        |   |   | 657.1   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other current assets                 |                                            |   |        |       |              |   | 108.3        |          |       |   | 50.6   |         |              |   |        |        |   |   | 158.9   |        
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                               |                                      | Total current assets                       |   |        | .5    |              |   |              | 886.0    |       |   |        | 1,009.9 |              |   |        |        |   |   |         | 1,896.4 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Facilities, net                      |                                            |   |        |       |              |   | 544.8        |          |       |   | 818.0  |         |              |   |        |        |   |   | 1,362.8 |        
|                                              
|                                              
|                                              
|                                              
|                                               | Goodwill, net                        |                                            |   |        |       |              |   | 134.2        |          |       |   | 794.8  |         |              |   |        |        |   |   | 929.0   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Investment in subsidiaries           |                                            |   | 454.7  |       |              |   |              |          |       |   |        |         |              | $ | (454.7 | )      |   |   |        |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other assets                         |                                            |   |        |       |              |   | 438.3        |          |       |   | 204.9  |         |              |   |        |        |   |   | 643.2   |        
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                               |                                      | Total assets                               |   | $      | 455.2 |              |   | $            | 2,003.3  |       |   | $      | 2,827.6 |              |   | $      | (454.7 | ) |   | $       | 4,831.4 |  
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|LIABILITIES AND SHAREHOLDERS
(DEFICIT) EQUITY |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                              
|                                              
|                                              
|                                              
|Current liabilities:                           |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Loans payable to banks               |                                            |   |        |       |              | $ | .1           |          |       | $ | 58.6   |         |              |   |        |        |   | $ | 58.7    |        
|                                              
|                                              
|                                              
|                                              
|                                               | Current maturities of long-term debt |                                            |   |        |       |              |   | 10.0         |          |       |   | 1.4    |         |              |   |        |        |   |   | 11.4    |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other current liabilities            |                                            |   |        |       |              |   | 865.6        |          |       |   | 752.6  |         |              |   |        |        |   |   | 1,618.2 |        
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                               |                                      | Total current liabilities                  |   |        |       |              |   |              | 875.7    |       |   |        | 812.6   |              |   |        |        |   |   |         | 1,688.3 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Long-term debt                       |                                            |   |        |       |              |   | 2,137.8      |          |       |   | 4.2    |         |              |   |        |        |   |   | 2,142.0 |        
|                                              
|                                              
|                                              
|                                              
|                                               | Reserve for post-retirement benefits |                                            |   |        |       |              |   | 282.2        |          |       |   | 207.3  |         |              |   |        |        |   |   | 489.5   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Intercompany accounts, net           |                                            | $ | 545.3  |       |              |   | 20.7         |          |       |   | (566.0 | )       |              |   |        |        |   |   |        |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other long-term liabilities          |                                            |   |        |       |              |   | 315.7        |          |       |   | 286.0  |         |              |   |        |        |   |   | 601.7   |        
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                               |                                      | Total liabilities                          |   |        | 545.3 |              |   |              | 3,632.1  |       |   |        | 744.1   |              |   | $      |       |   |   |         | 4,921.5 |  
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                               |                                      | Total shareholders (deficit) equity       |   |        | (90.1 | )            |   |              | (1,628.8 | )     |   |        | 2,083.5 |              |   |        | (454.7 | ) |   |         | (90.1   | )
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        
|                                               |                                      | Total liabilities and shareholders equity |   | $      | 455.2 |              |   | $            | 2,003.3  |       |   | $      | 2,827.6 |              |   | $      | (454.7 | ) |   | $       | 4,831.4 |  
|                                               |                                      |                                            |   |        |       |              |   |              |          |       |   |        |         |              |   |        |        |   |   |        

13



---



##### 



Note 10. Supplemental Consolidating Condensed Financial Information (continued)

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)

|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |       |       |       |        |  
|------------------------ | ------------------------------------------------ | ------------------------------------------------------------ | ------------------------------------------------------------------------------ | -------------------------------------------------------- | --- | ------------ | ------ | ------------ | ----- | ----- | ----- | ----- | ----- | ---- | ----- | --- | ---- | ------------ | ----- | ----- | ----- | ----- | ------ | -
|                         |                                                  |                                                              |                                                                                |                                                          |     | Parent       |        |              |       |       |       | Other |       |      |       |     |      | Consolidated
|(Dollars in millions)    |                                                  | Company                                                      |                                                                                | ASI                                                      |     | Subsidiaries |        | Eliminations |       | Total
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |      
|Cash provided (used) by: |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      
|                        
|                        
|                        
|                        
|                         | Operating activities:                            |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |       |      
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              | Net income                                                                     |                                                          | $   | 184.8        |        |              | $     | 96.5  |       |       | $     | 88.3 |       |     | $    | (184.8       | )     |       | $     | 184.8 |       
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              | Adjustments to reconcile net income to net
cash provided (used) by operations: |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |       |       |       |       
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Depreciation and amortization                            |     |              |        |              |       |       | 49.9  |       |       |      | 63.3  |     |      |              |       |       |       |       | 113.2  |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Non-cash stock compensation                              |     |              |        |              |       |       | 32.3  |       |       |      |       |     |      |              |       |       |       |       | 32.3   |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Restructuring charges paid                               |     |              |        |              |       |       | (1.6  | )     |       |      | (13.6 | )   |      |              |       |       |       |       | (15.2  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Equity in net income of subsidiary                       |     |              | (184.8 | )            |       |       |       |       |       |      |       |     |      |              | 184.8 |       |       |       |        |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Changes in assets and liabilities:                       |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |       |       |       |        |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Accounts receivable                                      |     |              | 1.0    |              |       |       | (75.1 | )     |       |      | (77.5 | )   |      |              |       |       |       |       | (151.6 | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Inventories                                              |     |              |        |              |       |       | (9.0  | )     |       |      | (79.4 | )   |      |              |       |       |       |       | (88.4  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Accounts payable                                         |     |              |        |              |       |       | 26.0  |       |       |      | (5.5  | )   |      |              | (.4   | )     |       |       | 20.1   |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Other accrued liabilities                                |     |              | .2     |              |       |       | 27.2  |       |       |      | 30.4  |     |      |              | 6.6   |       |       |       | 64.4   |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Other assets                                             |     |              | (.9    | )            |       |       | (98.3 | )     |       |      | 63.4  |     |      |              | (13.1 | )     |       |       | (48.9  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Other long-term liabilities                              |     |              |        |              |       |       | (.8   | )     |       |      | 27.1  |     |      |              |       |       |       |       | 26.3   |  
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      
|                         |                                                  | Net cash provided (used) by operating
activities             |                                                                                |                                                          | .3  |              |        |              | 47.1  |       |       |       | 96.5  |      |       |     | (6.9 | )            |       |       | 137.0 |      
|                        
|                        
|                        
|                        
|                         | Investing activities:                            |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |       |       |      
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Purchase of property, plant and equipment                |     |              |        |              |       |       | (36.5 | )     |       |      | (34.9 | )   |      |              |       |       |       |       | (71.4  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Investments in affiliated companies and
other businesses |     |              |        |              |       |       | (.4   | )     |       |      | (30.0 | )   |      |              |       |       |       |       | (30.4  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Investments in computer software                         |     |              |        |              |       |       | (14.4 | )     |       |      | (13.9 | )   |      |              |       |       |       |       | (28.3  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Other                                                    |     |              |        |              |       |       | 26.0  |       |       |      | 7.8   |     |      |              |       |       |       |       | 33.8   |  
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      
|                         | Net cash used by investing activities            |                                                              |                                                                                |                                                         |     |              |        | (25.3        | )     |       |       | (71.0 | )     |      |       |    |      |              |       | (96.3 | )    
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      
|                         | Financing activities:                            |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |       |      
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Decrease in other long-term debt                         |     |              |        |              |       |       | (.5   | )     |       |      | (1.8  | )   |      |              |       |       |       |       | (2.3   | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Net change in credit facility                            |     |              |        |              |       |       | (22.1 | )     |       |      | 19.7  |     |      |              |       |       |       |       | (2.4   | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Net change in short-term debt                            |     |              |        |              |       |       |       |       |       |      | .5    |     |      |              |       |       |       |       | .5     |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Purchases of treasury stock                              |     |              | (63.7  | )            |       |       |       |       |       |      |       |     |      |              |       |       |       |       | (63.7  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Net change in inter-company accounts                     |     |              | 26.3   |              |       |       | (.5   | )     |       |      | (32.6 | )   |      |              | 6.8   |       |       |       |       |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Proceeds from exercise of stock options                  |     |              | 68.5   |              |       |       |       |       |       |      |       |     |      |              |       |       |       |       | 68.5   |  
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Purchase of warrants                                     |     |              | (35.3  | )            |       |       |       |       |       |      |       |     |      |              |       |       |       |       | (35.3  | )
|                        
|                        
|                        
|                        
|                         |                                                  |                                                              |                                                                                | Other                                                    |     |              | 3.8    |              |       |       | 3.7   |       |       |      |      |     |      |              |       |       |       |       | 7.5    |  
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      
|                         |                                                  | Net cash provided (used) by financing activities             |                                                                                |                                                          | (.4 | )            |        |              | (19.4 | )     |       |       | (14.2 | )    |       |     | 6.8  |              |       |       | (27.2 | )    
|                        
|                        
|                        
|                        
|                         |                                                  | Effect of exchange rate changes on cash and
cash equivalents |                                                                                |                                                          |     |              |        |              |       |       |       |       | (1.8  | )    |       |     |      |              |       |       | (1.8  | )    
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      
|                         | Net increase in cash and cash
equivalents        |                                                              |                                                                                |                                                          | (.1 | )            |        |              | 2.4   |       |       |       | 9.5   |      |       |     | (.1  | )            |       |       | 11.7  |      
|                        
|                        
|                        
|                        
|                         | Cash and cash equivalents at beginning of
period |                                                              |                                                                                |                                                          | .1  |              |        |              | 18.9  |       |       |       | 66.4  |      |       |     |     |              |       |       | 85.4  |      
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      
|                         | Cash and cash equivalents at end of period       |                                                              | $                                                                              |                                                         |     |              | $      | 21.3         |       |       | $     | 75.9  |       |      | $     | (.1 | )    |              | $     | 97.1  |      
|                         |                                                  |                                                              |                                                                                |                                                          |     |              |        |              |       |       |       |       |       |      |       |     |      |              |       |      

14



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##### 



Note 11. Segment Data

Summary Segment and Income Data
(Dollars in millions)
(Unaudited)

|                                                      |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|----------------------------------------------------- | ------------------------------------- | - | ------------------ | ----- | ---------------- | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                      |                                       |   | Three Months Ended |       | Six Months Ended
|                                                      |                                       |   | June 30,           |       | June 30,        
|                                                      |                                       |   |                    |       |                 
|                                                      |                                       |   | 2002               |       | 2001             |   | 2002  |       | 2001
|                                                      |                                       |   |                    |       |                  |   |       |       |     
|Sales:                                                |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Air Conditioning Systems and Services |   | $                  | 1,312 |                  |   | $     | 1,342 |      |   | $     | 2,360 |  |   | $     | 2,413 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Plumbing Products                     |   |                    | 512   |                  |   |       | 464   |      |   |       | 981   |  |   |       | 919   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Vehicle Control Systems               |   |                    | 263   |                  |   |       | 233   |      |   |       | 507   |  |   |       | 498   | 
|                                                      |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                                      |                                       | $ | 2,087              |       |                  | $ | 2,039 |       |      | $ | 3,848 |       |  | $ | 3,830 |      
|                                                      |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Segment income:                                       |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Air Conditioning Systems and Services |   | $                  | 182   |                  |   | $     | 193   |      |   | $     | 265   |  |   | $     | 295   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Plumbing Products                     |   |                    | 43    |                  |   |       | 43    |      |   |       | 82    |  |   |       | 79    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Vehicle Control Systems               |   |                    | 39    |                  |   |       | 35    |      |   |       | 72    |  |   |       | 80    | 
|                                                      |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                                      |                                       |   | 264                |       |                  |   | 271   |       |      |   | 419   |       |  |   | 454   |      
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in net income of unconsolidated joint ventures |                                       |   | 6                  |       |                  |   | 6     |       |      |   | 11    |       |  |   | 11    |      
|                                                      |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                                      |                                       |   | 270                |       |                  |   | 277   |       |      |   | 430   |       |  |   | 465   |      
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |                                       |   | (33                | )     |                  |   | (44   | )     |      |   | (66   | )     |  |   | (91   | )    
|                                                     
|                                                     
|                                                     
|                                                     
|Corporate and other expenses                          |                                       |   | (48                | )     |                  |   | (41   | )     |      |   | (90   | )     |  |   | (78   | )    
|                                                      |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Income before income taxes                            |                                       | $ | 189                |       |                  | $ | 192   |       |      | $ | 274   |       |  | $ | 296   |      
|                                                      |                                       |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      

For a comparative analysis of this Summary Segment and Income Data, see
Managements Discussion and Analysis of Financial Position and Results of
Operations.

15



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##### 



PART 1. FINANCIAL INFORMATION

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

Results of Operations for the Second Quarter and First Six Months of 2002
Compared with the Second Quarter and First Six Months of 2001

Sales in the second quarter of 2002 were $2,087 million, an increase of
$48 million, or 2% (1% excluding favorable foreign exchange effects), from
$2,039 million in the second quarter of 2001. Sales increased 10% for
Plumbing Products and 13% for Vehicle Control Systems but decreased 2% for Air
Conditioning Systems and Services.

Segment income for the second quarter of 2002 was $264 million, a
decrease of $7 million, or 3% (6% excluding favorable foreign exchange
effects), from $271 million in the second quarter of 2001. Segment income
decreased 6% for Air Conditioning Systems and Services, was flat for Plumbing
Products and increased 11% for Vehicle Control Systems. Effective January
2002, the Company adopted the new goodwill accounting standard that eliminated
the amortization of goodwill. This change increased segment income in the
second quarter of 2002 by $8 million  $2 million for Air Conditioning
Systems and Services, $3 million for Plumbing Products and $3 million for
Vehicle Control Systems. Segment income for the second quarter of 2002 would
have decreased by 5% if reported segment income for the second quarter of 2001
were similarly adjusted to eliminate goodwill amortization. See footnote 6 to
financial statements for a comparative summary of the effects of this
accounting change on net income and net income per share for the second
quarter and first six months of 2002 and 2001.

Sales for the first half of 2002 were $3,848 million, an increase of $18
million, or 0.5% (up 1% excluding unfavorable foreign exchange effects), from
$3,830 million in the first half of 2001. Sales increased 7% for Plumbing
Products and 2% for Vehicle Control Systems but decreased 2% for Air
Conditioning Systems and Services. Segment income was $419 million for the
first half of 2002, a decrease of 8% (with little effect from foreign
exchange), compared with $454 million in the first half of 2001. Segment
income decreased 10% for Air Conditioning Systems and Services and 10% for
Vehicle Control Systems but increased 4% for Plumbing Products. Segment
income for the first half of 2002 would have decreased by 11% if reported
segment income for the first half of 2001 were similarly adjusted to eliminate
goodwill amortization.

Sales of Air Conditioning Systems and Services decreased 2% (with little
effect from foreign exchange) to $1,312 million for the second quarter of
2002, from $1,342 million for the second quarter of 2001, primarily because of
a decline in commercial equipment sales, offset partly by gains in residential
systems and the commercial parts, service and solutions business. Commercial
applied and commercial unitary equipment sales together decreased 12% in the
U.S., primarily as a result of continued deferrals of both new construction
and replacement activity. The sales decrease reflected lower volume, and
lower prices because of intense price competition. The commercial unitary
market remained weak. We believe the U.S. commercial unitary market was down
in the estimated range of 15 to 20% in the quarter. Our sales in that market
were down by a comparable amount. The commercial unitary sales mix was
unfavorable also, as product demand shifted somewhat to lower-tonnage
products. Applied equipment sales declined by low single digits in markets
that we believe were down an estimated 7 to 9%. Those declines were partly
offset by growth in the U.S. parts, service and solutions business, which grew
5%, somewhat below our recent typical growth rate of 8 to

16



---



##### 



10%, reflecting short-term deferrals of maintenance and service. Sales
outside the U.S., which are substantially commercial, decreased 6% overall (in
local currencies). That decrease primarily reflected a decline of 25% in Latin
America (owing to its troubled economies), and declines of 3% in Europe and 6%
in Asia (excluding China) (both because of economic weakness), all partly
offset by volume increases of 7% in China and 6% in the Middle East.
Residential air conditioning sales in the U.S. increased 9% to record levels,
benefiting from the Companys strong position in the premium, high-efficiency
market, warmer-than-normal weather, low inventories industry-wide, and
expanding distribution (especially through Sears and Home Depot in the retail
channel). Sales of new higher-efficiency models increased 21% in a market
that increased an estimated 10%. Market share for residential products
declined slightly in the quarter as factory production rates were temporarily
unable to meet the high demand caused by low dealer inventories and hot
weather. Sales for Air Conditioning Systems and Services for the first half
of 2002 decreased by 2% (with little effect from foreign exchange) to $2,360
million from $2,413 million in the first half of 2001, primarily for the same
reasons explaining the second quarter decrease.

Segment income of Air Conditioning Systems and Services decreased 6%
(with little effect from foreign exchange) to $182 million in the second
quarter of 2002 from $193 million in the second quarter of 2001 as margins
declined from 14.4% to 13.9%. Segment income and margins declined primarily
because of an unfavorable sales mix  lower volumes of high-margin commercial
equipment sales and higher volumes of lower-margin residential systems and
commercial parts, services and solutions. Lower prices for commercial
products as a result of competitive pressures also reduced margins. The
residential business improved because of higher volume, a favorable shift in
customer demand to higher-capacity, higher-efficiency products with higher
margins and the positive impact of productivity initiatives. These gains in
the residential business were somewhat tempered by continuing start-up costs
associated with launching the new high-efficiency product line, by the effects
of production constraints on older high-efficiency models which are still in
strong demand, and the effects of other cost escalations. The 2002 quarter
also benefited from the lack of goodwill amortization. If goodwill
amortization were also excluded from the second quarter of 2001, segment
income would have decreased by 7%. Segment income for the first half of 2002
decreased 10% (11% excluding the favorable effects of foreign exchange and
goodwill amortization from 2001) to $265 million from $295 million in the
first half of 2001, essentially for the reasons mentioned for the second
quarter decrease.

Sales of Plumbing Products increased 10% (8% excluding favorable foreign
exchange effects) to $512 million in the second quarter of 2002, from $464
million in the second quarter of 2001, primarily as the result of another
record quarter in the Americas. Sales in the Americas increased 15%, led by
strong growth in North America, from continued strong demand in replacement
and home improvement markets. Sales benefited from the rollout of an expanded
Whirlpool tub program at Home Depot stores and faucet promotions, which helped
gain market share in both fixtures and fittings. In Europe, sales were up 7%
(2% excluding favorable foreign exchange effects) while we believe that
markets were down 3 to 5%, as sales benefited from three small fittings
businesses acquired in 2001. In Asia, sales increased 20%, off a small but
growing base. Sales of Plumbing Products for the first half of 2002 increased
7% (with little effect from foreign exchange) to $981 million from $919
million in the first half of 2001. This increase was due principally to the
same factors affecting second quarter results.

Segment income of Plumbing Products for the second quarter of 2002 was
even with the second quarter of 2001 at $43 million (but declined 3% excluding
favorable foreign exchange effects). Margins increased to 8.4% in the second
quarter of 2002 from 8.3% in the first quarter of this year, but were well
below the 9.3% margins in the second quarter of 2001.

17



---



##### 





Although we achieved substantial sales gains and derived savings from
materials management and Six Sigma initiatives in the 2002 quarter, those
gains were more than offset by the effects of operational issues in the U.S.
and France. In the U.S., we incurred higher costs as we responded to strong
sales demand and simultaneously consolidated warehouse operations. In France,
we experienced manufacturing conversion problems. Remedial programs have been
implemented and we expect improvements to occur over the remainder of the
year. Despite the operational problems, segment income was up substantially
because of higher volume in the U.S., and up modestly in Asia and Canada, but
was down in Europe and Latin America. The quarter also benefited from the lack
of goodwill amortization. If goodwill amortization were excluded from the
second quarter of 2001, segment income would have been down 7% (down 10% in
local currencies). Segment income for the first half of 2002 increased 4%
(but was down 5% excluding both unfavorable foreign exchange effects and
goodwill amortization from 2001) to $82 million from $79 million in the first
half of 2001. The decrease (in local currencies) resulted primarily for the
same reasons as those responsible for the second quarter decrease.

Sales of Vehicle Control Systems for the second quarter of 2002 were $263
million, an increase of 13% (8% excluding favorable foreign exchange effects)
from $233 million in the second quarter of 2001, primarily because of a
significant increase in sales from Europe to our North American marketing
joint venture. The North American truck market experienced 10% growth as U.S.
customers actively purchased vehicles before the October 1, 2002 change in
diesel engine emissions regulations. Sales in Europe, our largest market,
grew 5% in local currencies, primarily as a result of higher content per
vehicle. This was achieved despite a decrease in unit volumes of truck and
bus production in Western Europe of 4% in the second quarter following a 20%
decline in the first quarter of 2002. Sales increased sharply in Asia and
Latin America. Our sales continue to outperform the heavy vehicle
manufacturing markets through sales of our new control systems, new
applications with existing customers, geographic expansion and market
penetration. Sales of Vehicle Control Systems for the first half of 2002
increased 2% (3% excluding foreign exchange effects) to $507 million from $498
million in the first half of 2001, primarily for the reasons cited for the
second quarter increase which overcame declines in the first quarter of 2002.

Segment income for Vehicle Control Systems for the second quarter of 2002
increased 11% (6% excluding favorable foreign exchange effects) to $39 million
from $35 million in the second quarter of 2001. Margins decreased from 15.0%
in the second quarter of 2001 to 14.8% in the second quarter of 2002. The
increase in segment income primarily reflected higher sales to the U.S.
marketing joint venture and higher content sales in Europe, partly offset by
lower prices and costs associated with resolution of a product warranty issue
in the U.S., a portion of which was also absorbed by our U.S. joint venture.
Savings from materials management and Six Sigma initiatives and the lack of
goodwill amortization in the 2002 quarter essentially offset cost escalations.
If goodwill amortization were excluded from the second quarter of 2001,
segment income would have increased 5% (flat in local currencies). Segment
income for Vehicle Control Systems for the first half of 2002 was $72 million,
a decrease of 10% (15% excluding both foreign exchange effects and goodwill
amortization from 2001) from $80 million in the first half of 2001,
principally because of volume declines in the first quarter of 2002, partly
offset by the second quarter improvements discussed above.

Other Summary Segment and Income Data Items

Equity in net income of unconsolidated joint ventures was $6 million for
the second quarter of 2002 and $11 million for the first half of 2002, both
amounts even with amounts for the same periods of 2001. Increased income from
higher sales in the Meritor/WABCO

18



---



##### 



marketing joint venture and higher income in the Alliance Compressor joint
venture were offset by the effect of the warranty settlement discussed above.

Interest expense decreased by $11 million in the second quarter of 2002
and by $25 million in the first half of 2002 compared to the year-earlier
quarter and first half, because of lower average debt balances and lower
average interest rates. Corporate and other expenses increased by $7 million
in the second quarter of 2002 and by $12 million in the first half of 2002
compared to the year-earlier quarter and first half. These increases were
primarily the result of higher retiree pension and medical costs, and higher
incentive compensation because of increased earnings.

The income tax provision for the second quarter of 2002 was $63 million
and for the first half of 2002 was $91 million, or 33.3% of income before
income taxes, compared with provisions of $72 million and $111 million, or
37.5% of income before income taxes in the same periods of 2001. The
effective income tax rate is lower in 2002 primarily because of a more
efficient tax structure and the absence of a charge for goodwill amortization.
Most of the goodwill amortization recorded in 2001 (and prior years) was not
deductible for tax purposes, which had the effect of increasing the effective
tax rate.

Liquidity and Capital Resources

Net cash provided by operating activities, excluding proceeds from the
sale of receivables and after cash interest paid of $65 million, was $182
million for the first half of 2002. This compared with net cash provided of
$137 million after cash interest paid of $89 million for the first half of
2001. Proceeds from the initial sale of receivables under a new financing
arrangement in Europe, net of a decrease in receivables previously sold in
Europe, added $182 million to total cash provided by operating activities in
2002. Other factors contributing to the increase were lower net working
capital usage, partly offset by a $55 million payment as part of the German
tax settlement and payments of job elimination costs accrued in the fourth
quarter of 2001.

In investing activities, the Company made capital expenditures of $78
million for the first half of 2002, including $22 million of investments in
affiliated companies and other businesses. This compared with capital
expenditures of $102 million in the first half of 2001, including $30 million
of investments in affiliated companies and other businesses. The Company also
invested $20 million in computer software in the first six months of 2002,
compared with $28 million in the 2001 period. Investing activities in 2002
were partly offset by proceeds of $12 million from the sale of miscellaneous
assets and in 2001 by proceeds of $27 million from sale and leaseback
transactions.

The excess of cash provided by operating activities over cash used for
investing activities in the first half of 2002 was used to fund financing
activities of $238 million, primarily net debt repayments of $169 million and
the purchase of treasury stock of $121 million, partly offset by proceeds
realized from the exercise of stock options of $48 million. The Company
purchased 1.8 million shares of the Companys common stock pursuant to the
Companys share repurchase program. This compares with financing activities
of $27 million in 2001 including purchases of 1.1 million shares of treasury
stock for $64 million and net debt repayments of $4 million, offset by
proceeds realized from the exercise of stock options of $68 million. In 2001
the Company also bought back warrants for the purchase of 3 million shares of
the Companys common stock held by Kelso ASI Partners, L. P. for $35 million.

On January 8, 2002, the company redeemed all of the 9 1/4% Sinking Fund

19



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##### 



Debentures, at a redemption price 102.313% of the face amount of the bonds
plus unpaid interest up to the redemption date. The total redemption cost of
$38.7 million was funded with lower-cost borrowings under the Companys bank
credit agreements.

On November 6, 2001, the Company entered into two new bank credit
agreements. The new agreements provide the Company with senior unsecured
revolving credit facilities aggregating $1.3 billion as follows: (a) a
five-year, $1 billion multi-currency facility which expires in 2006 and (b) a
364-day, $300 million U.S. dollar facility which expires November 5, 2002,
with an option to renew for an additional 364 days.

The new credit agreements contain various covenants that limit, among
other things, indebtedness, liens, sale and leaseback transactions, subsidiary
indebtedness including preferred stock, mergers, consolidations, dissolutions
and asset sales, investments or acquisitions, dividends and redemptions of
capital stock, loans and advances, and certain other business activities. 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 new
credit agreements.

At June 30, 2002, the Company had borrowings of $674 million outstanding
under its bank credit agreements. There was $532 million available under
those agreements after reduction for borrowings and for $94 million of letters
of credit usage. The Companys foreign subsidiaries had $125 million
available at June 30, 2002, under overdraft facilities that can be withdrawn
by the banks at any time. In addition, the Companys operations in China have
$18 million available under bank credit facilities after reduction for letters
of credit usage of $10 million.

The Company believes that the amounts available from operating cash
flows, funds available under its new 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 will be sufficient
to meet its expected operating needs and planned capital expenditures for the
foreseeable future.

As described in Note 4 of Notes to Financial Statements in Part I of this
Form 10-Q, in January 2002 the Company settled all issues of its proceedings
with German tax authorities for the years 1984 through 1994 for a current cash
payment of approximately $55 million plus $30 million previously deposited in
escrow. Since the Company previously had provided adequate reserves for all
issues, the settlement had no impact on results of operations.

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 equity
markets, the Company uses two principal off-balance sheet techniques:
operating leases and receivables financing. Operating leases are employed as
an alternative to purchasing certain property, plant and equipment. Future
rental commitments under all non-cancelable leases have not changed
significantly from the amounts disclosed in the Companys Annual Report on
Form 10-K for the year ended December 31, 2001. The Company is a partner in
American Standard Financial Services, a financial services partnership with
Transamerica Commercial Finance Corporation (Transamerica). Under this
arrangement, the Company sells certain receivables to the joint venture on a
non-recourse basis for a fee and finances certain purchases of inventory by
customers, thus accelerating the cash flow from realization of the
receivables. The uncollected balance of receivables sold or financed has
fluctuated recently between approximately $170 million and $270 million and
was $266 million as of June 30, 2002. To
20

achieve lower borrowing rates, the Company plans to terminate the partnership
with Transamerica in the second half of 2002 and establish new arrangements
for the sale of receivables in the U.S. On May 6, 2002, the Company entered
into a three-year European accounts receivable securitization agreement with a
major international bank for the sale of receivables on a non-recourse basis
for a fee (see Note 7 to Financial Statements). Under the agreement the
Company sells eligible receivables (on an ongoing basis) to an entity that was
formed for the sole purpose of entering into these transactions which in turn
sells the receivables to a subsidiary of the bank. The Company retains an
interest (approximately 10% to 15%) in the receivables sold. The sale of
receivables (other than the retained interest) is funded through the sale of
commercial paper issued by the subsidiary of the bank. The receivables
transaction is treated as a sale since it meets the applicable criteria of
Statement of Financial Accounting Standards No. 140 and, accordingly, the
receivables are removed from the balance sheet except for the retained
interest. The balance of receivables sold and outstanding under this
agreement (excluding retained interest) is limited to 250 million
(approximately $248 million at current exchange rates), will fluctuate in
amount and was $233 million as of June 30, 2002. Receivables sold under this
agreement, net of the effect of termination of previously existing
arrangements, resulted in an acceleration of cash flows of $182 million that
was used to repay debt under the Companys bank credit agreements.

Disclosure Regarding 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 belief, are
forward-looking statements. Forward-looking statements are made based upon
managements good faith expectations and belief 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-Q includes important information as to risk factors in
the Notes to Financial Statements under the headings Restructuring and
Asset Impairment Charges, and in the section titled 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 construction activity in the Companys Air
Conditioning Systems and Services and Plumbing Products markets and
the level of truck and bus production in the Companys Vehicle
Control Systems markets;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the ability of the Company to implement its restructuring
programs as planned;                                                                                                                                       
|
| |  |  | the extent to which the Company will be able to realize the
estimated savings from the salaried workforce reduction, and from
Materials Management and Six Sigma initiatives;                                        
|
| |  |  | the timing of completion and success in the start-up of new production facilities;                                                                                                                                   
|
| |  |  | 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;                                      

21



---



##### 





| |  |  | 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 the supply of steel necessary
to avoid disruptions of operations at pricing levels which will not
have an unduly adverse effect on results of operations;
|
| |  |  | increased difficulties in obtaining a consistent supply of other
basic materials like aluminum, copper, clays, electronics and natural
gas at stable pricing levels;                         
|
| |  |  | labor relations; integration of acquired businesses;                                                                                                                                         
|
| |  |  | difficulties in obtaining or retaining the management and other
human resource competencies that the Company needs to achieve its
business objectives;                                       
|
| |  |  | the ability of the Company to effectively and timely implement
remedial programs to overcome operational issues in Plumbing
Products U.S. and French operations;                            
|
| |  |  | 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 products or potential products;                                                           
|
| |  |  | changes in laws or different interpretations of laws that may
affect the Companys expected effective tax rate for 2002;                                                                     
|
| |  |  | transactions or other events affecting the need for, timing and
extent of the Companys capital expenditures;                                                                                
|
| |  |  | the extent of and the costs at which the Company effects
repurchases of its common stock; and                                                                                                
|
| |  |  | the extent to which the Company reduces outstanding debt.                                                                                                                                    

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosure on this matter made in
the Companys Annual Report on Form 10-K for the year ended December 31, 2001.

22



---



##### 



PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of the settlement of German tax issues, see Note 4 to
Financial Statements in Part I of this report which is incorporated herein
by reference.

Item 4. Submission of Matters to a Vote of Security Holders.

The Companys 2002 Annual Meeting of Shareholders (Annual Meeting) was
held on May 2, 2002. At the Annual Meeting, the Companys shareholders: (a)
elected two Class I Directors with terms expiring at the 2005 Annual Meeting
of Shareholders; (b) approved the 2002 Omnibus Incentive Plan which replaced
the Companys current Stock Incentive Plan and Long-Term Incentive Plan; (c)
approved amendments to the companys Employee Stock Purchase Plan; (d)
ratified the appointment of Ernst & Young LLP as independent Certified Public
Accountants of the Company for 2002; and (e) rejected a shareholder proposal
regarding greenhouse gas emissions.

Following the Annual Meeting, three Class II Directors, having terms
expiring in 2003, and two Class III Directors, having terms expiring in 2004,
continued in office.

The following sets forth the results of voting at the Annual Meeting:

|                                                           |                                                                   |     |                   |         |  |             |            |       |  |           |           |  |  |   |           |  |        |   | 
|---------------------------------------------------------- | ----------------------------------------------------------------- | --- | ----------------- | ------- |  | ----------- | ---------- | ----- |  | --------- | --------- |  |  | - | --------- |  | ------ | - | 
|                                                           |                                                                   |     |                   |         |  |             |            |       |  |           |           |  |  |   |           |  | Broker
|                                                           |                                                                   |     |                   |         |  |             |            |       |  |           |           |  |  |   |           |  | Non-  
|Matters                                                    |                                                                   | For |                   | Against |  | Abstentions |            | Votes
|                                                           |                                                                   |     |                   |         |  |             |            |      
|Election of Directors*                                     |                                                                   |     |                   |         |  |             |            |       |  |           |           |  |  |   |           | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | For a term expiring at the Annual
Meeting of Shareholders in 2005 |     |                   |         |  |             |            |       |  |           |           |  |  |   |           |  |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |                                                                   |     | Jared L. Cohon    |         |  | 65,258,591  |            |       |  | 1,047,107 |           |  |  | * |           |  |        | 0 | 
|                                                           |                                                                   |     | James F. Hardymon |         |  | 65,250,974  |            |       |  | 1,054,724 |           |  |  | * |           |  |        | 0 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Approval of Omnibus Incentive Plan                         |                                                                   |     | 38,907,247        |         |  |             | 21,508,078 |       |  |           | 626,121   |  |  |   | 5,264,252 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Approval of amendments to the Employee Stock Purchase Plan |                                                                   |     | 59,285,971        |         |  |             | 1,231,466  |       |  |           | 524,009   |  |  |   | 5,264,252 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Appointment of Independent Certified Public Accountants    |                                                                   |     | 63,818,437        |         |  |             | 2,230,282  |       |  |           | 256,979   |  |  |   | 0         | 
|                                                          
|                                                          
|                                                          
|                                                          
|Shareholder proposal on greenhouse
gas emissions           |                                                                   |     | 16,335,849        |         |  |             | 38,857,476 |       |  |           | 5,848,119 |  |  |   | 5,264,254 | 



---

|* |  | With respect to the election of directors, the form of proxy permitted
shareholders to check boxes indicating votes either For or Withheld, or to
vote For all except and to name exceptions; votes relating to directors
designated above as Against include votes cast as Withheld and for named
exceptions.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23



---



##### 



Item 5. Other Information.

At its regularly scheduled meeting on July 11, 2002, the Board of
Directors of American Standard Companies Inc. elected Richard S. Paradise to
the office of Vice President and Controller.

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



| | (a) |  | Exhibits. The exhibits listed on the accompanying Index to
Exhibits are filed as part of this quarterly report on Form 10-Q.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Reports on Form 8-K. During the quarter ended June 30,
2002, the Company filed no Current Reports on Form 8-K.              

24



---



##### 



SIGNATURE

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

|               |  |                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------
|               |  | AMERICAN STANDARD COMPANIES INC                                                      
|              
|              
|              
|              
|               |  |                                                                                      
|              
|              
|              
|              
|               |  | /s/ Richard S. Paradise

Vice President and Controller
(Principal Accounting Officer)
|              
|              
|              
|              
|               |  |                                                                                      
|              
|              
|              
|              
|August 9, 2002 |  |                                                                                      

25



---



##### 



AMERICAN STANDARD COMPANIES INC.

INDEX TO EXHIBITS

(The File Number of the Registrant, American Standard Companies Inc. is 1-11415)

|            |  |                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                         
|            |  |                                                                                                                                                     
|(12)        |  | Ratio of Earnings to Fixed Charges                                                                                                                  
|           
|           
|           
|           
|            |  |                                                                                                                                                     
|           
|           
|           
|           
|(99.1)      |  | Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|           
|           
|           
|           
|            |  |                                                                                                                                                     
|           
|           
|           
|           
|(99.2)      |  | Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

26