Listen, I like American Standard (NYSE:ASD). (With a name like that, how can you not?) But for the past two quarters, I've been finding the company a lot harder to like, and here's why.

It began two months ago, when American Standard reported strong fiscal 2004 revenues and profits that were depressed only by a decision to take a huge charge to earnings to account for future expected asbestos claims. Back then, I found three things to dislike about the company, and coming all at once as they did, they magnified my negative sentiment. First, there was the earnings charge. When companies take a huge charge like that, the aim is often to sweep a lot of negative news into the past in one fell swoop -- and make future results look prettier by comparison. Then there was the company's decision to start buying back shares at their all-time high. And finally, the company's cash flow results: Free cash flow for fiscal 2004 increased just 5% vs. an 11% increase in sales. Not good.

In the results American Standard released yesterday, there was no asbestos charge. No news of increased buybacks. But there was also no free cash flow.

On the contrary, while net income in Q1 2005 grew 48% against the year-ago quarter, cash flow turned heavily negative. American Standard consumed cash from operations, increased its capital spending, and, in the end, wound up with a cash outflow of $99 million for the quarter -- as opposed to last year, when it broke even. The reason for the change appears to lie primarily in an increase in unsold inventories.

Sales, you see, increased 7% year-on-year. Total inventories, however, increased 12%. Now, the picture isn't quite as simple as that. On the one hand, raw materials inventories increased 18%, suggesting that American Standard is stocking up in anticipation of increased demand. But on the other hand, finished goods inventories increased 14%, suggesting that a lot of the stuff American Standard has already built is still sitting on the shelves.

In the end, I remain far from willing to write this stock off. It performed well through most of last year and only in the past six months appears to have developed a few issues that an investor could quibble with. Over the next few quarters, however, I'm going to pay a whole lot of attention to what those inventories are doing, how much progress the company makes toward its goal of reversing yesterday's cash outflow news, and whether it hits its $550 million free cash flow target for the year.

Up until recently, I was one of American Standard's few investing fans. Read why in:

Fool contributor Rich Smith has no position in any of the companies mentioned in this article.