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                 SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549
                           ------------
                             FORM 10-K
                  FOR ANNUAL AND TRANSITION REPORTS
               PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934
(Mark One)
   [X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934
   For the fiscal year ended December 31, 1997
                             OR
   [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934
   For the transition period from           to
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                     Commission file number  1-7955
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                 INTERNATIONAL COMFORT PRODUCTS CORPORATION
          ------------------------------------------------------
          (Exact Name of Registrant as Specified in Its Charter)

         Canada                                          98-004520009
-------------------------------                      -------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                       Identification No.)

 66th Floor, First Canadian Place, Toronto, Ontario, Canada     M5X 1B8
 ----------------------------------------------------------   ----------
     (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:  (615) 771-0200
                                                     --------------
Securities Registered Pursuant to Section 12(b) of the Act:
    Title of each class           Name of each exchange on which registered
     Ordinary Shares                      American Stock Exchange
     Ordinary Shares                      Toronto Stock Exchange

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.    Yes [X]  No [  ].

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

     As of March 23, 1998, there were 23,682,544 Ordinary Shares of
International Comfort Products Corporation outstanding and held by non-
affiliates with an aggregate market value of $202,781,783.

     As of March 23, 1998, there were 39,873,463 Ordinary Shares of
International Comfort Products Corporation outstanding.

                  DOCUMENTS INCORPORATED BY REFERENCE

              DOCUMENT                               Incorporated into

     Portions of the Definitive Proxy Statement
     for Annual Meeting of Shareholders on May 13,
     1998 (hereinafter the "1998 Proxy Statement")
     to be filed within 120 days after the end of the
     fiscal year ended December 31, 1997                      Part III
=========================================================================

                                PART I

ITEM 1. BUSINESS.

GENERAL

The Registrant, International Comfort Products Corporation (formerly Inter-
City Products Corporation), is referred to herein as the "Company" and such
reference includes both the Registrant and its consolidated subsidiaries,
unless otherwise indicated.

The Company is one of the leading designers, manufacturers and marketers of
central air conditioning and heating products for residential and light
commercial use in the United States and Canada.  The Company also has
recently emphasized its presence in other international markets, such as
Mexico, Latin America and southern Europe.  The Company designs,
manufactures, sells and distributes a complete range of central air
conditioners, heat pumps and combination gas/electric units (collectively,
"unitary air conditioners" or "cooling products"), and gas, oil and
electric furnaces ("heating products") along with related parts and
accessories for the residential and light commercial markets.

Its principal brand names - Heil, Tempstar, Arcoaire, Comfortmaker, Airquest,
KeepRite and Lincoln - are widely recognized in the industry.  The Company's
commercial products carry the new ICP Commercial brand, as well as the
traditional Heil, Tempstar, Arcoaire, Comfortmaker and KeepRite identities.
Management believes that the Company and its products are known for their
quality, reliability, customer service and price competitiveness.  The
Company's products are sold primarily through a network of approximately 400
independent heating, ventilation and air conditioning ("HVAC") distributors
in the U.S., Canada, and international markets.  The Company's products are
also marketed through independent air conditioning and refrigeration
wholesalers, major commercial contractors and builders.

In 1997, the Company had operating revenue of $630.7 million.  For 1997,
sales of cooling products were approximately 61.3% (1996 - 61.7%; 1995 -
63.3%) of consolidated operating revenue and sales of heating products were
approximately 25.7% (1996 - 27.1%; 1995 - 27.7%) of consolidated operating
revenue.  In 1997, service parts and other income accounted for 13.0% (1996 -
 11.2%; 1995 - 9.0%) of consolidated operating revenue.  Management believes
the Company derived approximately 70% of its sales in 1997 from the
replacement and renovation market and approximately 30% from the new
residential and commercial construction market.  Financial information by
geographic area is disclosed in Note 14 to the Consolidated Financial
Statements and is incorporated herein by reference.

The Company was formed by articles of amalgamation dated September 1, 1988 as
amended by articles of arrangement dated April 18, 1990 under the laws of the
Province of Manitoba
                              - 1 -

and subsequently continued under the Canada Business Corporations Act
effective August 14, 1992.  The Company's primary heating and cooling
subsidiaries are International Comfort Products Corporation (USA) ("ICP USA")
and International Comfort Products Corporation (Canada) ("ICP Canada").

STRATEGY

Since 1995, the Company has undertaken a strategic initiative to (i) reduce
manufacturing and overhead costs; (ii) reduce lead times for processing
customer orders; (iii) improve product quality and customer service; (iv)
broaden product offerings while rationalizing stockkeeping units within
product lines; and (v) improve and expand the Company's distribution network.
The restructuring process included:

    *     the consolidation of production at ICP (USA)'s Lewisburg,
          Tennessee, manufacturing facility;
    *     writing off discontinued businesses and nonperforming assets;
    *     extensive salaried and hourly staff layoffs, including the
          elimination of management layers;
    *     major streamlining of manufacturing practices;
    *     revisions to product prices and distributor credit terms;
    *     the workdown of inventory in the factory and in the distribution
          system;
    *     the introduction of competitive entry-level products;
    *     the termination of underperforming distributors and addition of new
          distributors;
    *     the implementation of effective working capital management
          practices; and
    *     improvements in operations, product quality, and customer service.

Although the immediate results of the Company's strategic initiative severely
depressed 1995 revenues and earnings, management believes that the steps it
undertook allowed the Company to return to profitability and positions the
Company for continued growth.  From 1995 through 1997, the Company
identified and eliminated approximately $50 million from its manufacturing
cost base.

In addition to continuing the Company's implementation of its 1995
initiatives, the Company is committed to (i) growing its operating revenue in
excess of industry growth rates; (ii) improving profitability; and (iii)
managing working capital.  The Company seeks to achieve these goals through
the implementation of the following strategies:

(i)  Modify management systems and incentives.

The Company has organized its major operations into five separate business
units (residential, commercial, Canada, FAST Parts, and international).  Each
unit has
                                - 2 -

separate growth strategies and long-term goals, and access to all corporate
services and resources to address these needs.  The Company believes this
approach focuses energy on long-term planning and building to customer
demand, and encourages a healthy degree of internal competitiveness.

(ii)   Increase residential market share in the United States and Canada by
improving the distribution network.  The Company believes that by
strengthening its substantial distributor base and selecting additional
distributors in markets where sales are below market share targets, the
Company may increase its core residential sales.  As part of its strategy,
the Company intends to focus on strengthening its relationships with its
distributors, with special emphasis on the distributor's commitment to annual
sales quotas, participation in the Company's marketing and promotional
programs, staff training and mutually beneficial business practices.

(iii)  Expand its commercial market product offerings and gain market share.
The Company also intends to undertake efforts to increase its commercial
product sales.  In 1997, the Company formed a business unit devoted solely to
designing, manufacturing and marketing commercial unitary package and split
systems up to 20 tons.  Until 1998, the Company sourced split systems of
commercial products from 12.5 to 20 tons from other manufacturers.  The
Company is also considering manufacturing and marketing an expanded
commercial product offering to meet market requirements through 40 tons.

(iv)   Develop aftermarket replacement parts business.  Aftermarket parts
currently represents about 5% of the Company's revenues.  In order to grow
this segment of its business, the Company has designated this as a separate
business group.  With 27,000 stockkeeping units, the Company intends to
provide distributors the benefit of one-stop shopping for compressors, coils,
motors, fans, values, fasteners and other repair items for HVAC equipment.

(v)    Pursue international opportunities .  The Company intends to
expand its operations outside North America.  In 1997, the Company opened two
distribution warehouses in Miami to service the Latin American markets, two
distribution warehouses in Mexico, and a parts distribution store in Brazil.
Late in 1997, the Company also acquired a distribution company in Spain.
The Company believes it can increase its operating revenues by establishing
a brand name parts distribution center in South America for air conditioning
and refrigeration repair service sectors and follow with the introduction of
the Company's products later.  The Company believes that this strategy of
expansion overseas can create an opportunity to generate early cash flow
without risking a substantial amount of capital.

(vi)   Seek to augment internally generated growth by acquiring businesses
with new

                               - 3-

products, customer lists and manufacturing resources.  With a stronger
financial position, the Company intents to consider acquisitions that support
its growth strategy and are synergetic to its management style, distribution
systems and purchasing and manufacturing methods.

(vii)  Continue to reduce manufacturing costs and standardize components.
By reducing costs, the Company can continue to lower its break-even point for
its operations.  Management believes that its positive results of operations
for 1997 resulted in large part from structural cost reductions achieved
during the prior two years.  Management believes it is necessary to continue
productivity gains in order to offset the effects of inflation.

(viii) Reduce lead time.  The Company also is attempting to reduce the lead
time required for customer orders.  Lead time on customer orders has declined
from 90 days as recently as 1994 to 14 days in 1997 on approximately 98
percent of the Company's residential products.  The Company intends to
continue to focus efforts to reduce the lead time even further in order to
reduce inventory requirements for the Company's distributors and thereby make
the Company a more attractive supplier of heating and cooling products.

(ix)   Expand strategic relationships.  The Company also believes that it
can increase its core residential sales by building relationships with
national accounts, such as dealer buying groups, distributor consolidators,
and major home builders.  Management believes that the selection of the
Company by 23 national home builders, including five within the last two
years, to supply the Company's products for new home developments is evidence
of past success of this approach.


ACQUISITIONS AND DIVESTITURES

Effective January 31, 1998, ICP (USA) acquired United Electric Company
("United Electric") of Wichita Falls, Texas, a manufacturer of hydronic and
direct expansion blower and HVAC coils, fan coils, and hydronic unit
ventilators for commercial HVAC systems.  United Electric's estimated 1997
sales were approximately $25.0 million.  This acquisition will be included in
the consolidated financial statements of the Company upon the acquisition
date.

In September 1997, the Company sold substantially all of the assets and
liabilities of General Heating and Cooling Company ("General Heating"), a
heating and cooling products distributor and a company-owned factory branch
to Pameco Corporation, a leading distributor in the HVAC industry. In January
1997, the Company also sold Coastline Distribution Inc. ("Coastline") which
had 21 branches throughout Florida, Georgia and Alabama, to Watsco, Inc., a
leading distributor in the climate control industry.  In addition, Watsco,
Inc. also acquired four of the Company's U.S. factory branches.  Coastline
and General were acquired in July 1996 as a strategic move to protect the
Company's long-term prospects in the U.S. southeast and midwest and were sold
when owners committed to the businesses were found.

During 1997, the Company acquired two western Canadian distributors and a
distribution company in Spain to expand coverage in the western Canadian
provinces and establish a base in Europe, respectively.

In May 1996, the Company sold Thompson Pipe and Steel Company ("Thompson
Pipe"), a wholly owned steel pipe manufacturing subsidiary, which was
involved in the fabrication of large diameter steel pipe and fittings and the
manufacture of liquid propane gas tank cylinders.  The results of operations
of Thompson Pipe have been accounted for as a discontinued operation.


                                - 4 -

PRODUCTS

The Company designs, manufactures, and markets heating and cooling systems
for single family homes, mobile homes and multi-family apartment buildings,
as well as commercial properties such as schools, restaurants, small business
offices, retail stores, and other industrial and commercial buildings.

The Company's products are:

UNITARY AIR CONDITIONERS

(1)     Split system and packaged air conditioners

A split system air conditioner consists of an outdoor unit containing
a compressor and a condenser, and a connected indoor unit containing a
heat exchanger, an electric, gas or oil heating section, an indoor blower
system and associated controls.  A packaged air conditioner consists of a
self-contained cooling system in a single weatherized cabinet.

(2)     Split system and packaged heat pumps

These systems are used for heating as well as cooling systems.  A split
system heat pump is similar to a split system air conditioner, but also
includes a refrigerant reversing valve, special controls and auxiliary
heat (usually electric).  A packaged heat pump is similar to a packaged
air conditioner and includes a reversing valve, special controls and
auxiliary heat.

(3)     Combination gas/electric units

A combination gas/electric unit is a self-contained packaged air
conditioner with a gas furnace heat exchanger and special controls in a
single weatherized cabinet.

The Company's residential unitary air conditioners range in capacity from one
to five tons, while its commercial unitary packaged and split systems range
in capacity from three to 20 tons.   The Company's longer term goal is to
manufacture and market a commercial system up to 40 tons.

GAS, OIL AND ELECTRIC FURNACES

The Company's residential furnaces range in capacity from 50,000 to 150,000
British Thermal Units per hour ("BTU/hr"), while its commercial heating line
features furnaces ranging in capacity up to 355,000 BTU/hr.

BRAND NAMES

The Company offers its various products under several brand names - HEIL,
TEMPSTAR, ARCOAIRE, COMFORTMAKER, AIRQUEST, KEEPRITE, and LINCOLN.  United
Electric sells its products under the MAGICAIRE brand.  The Company believes
that its products are widely recognized for their quality, customer service,
reliability and price competitiveness.

PARTS AND ACCESSORIES BUSINESS

The Company also conducts an active parts business under the "FAST" (Factory
Authorized Service Technology) trademark in the United States and Canada.
The parts business has shifted

                                  - 5 -

from a primary emphasis on serving warranty claims to being a one-stop
shopping counter that a distributor, dealer or contractor might need to
service heating and cooling systems.  The Company believes its warranty
protection is generally equal to or superior to that of its major
competitors.

SALES AND DISTRIBUTION

The Company markets its products in all 50 states in the United States,
primarily through  independent distributors.  These distributors are the
Company's link to dealers and, in turn, to consumers.  Distributors sell the
Company's products to installers in the replacement and renovation businesses
as well as building contractors in the new housing and light commercial
construction sectors.  Approximately 70 percent of the Company's products are
used to replace existing systems, with the balance installed in new
construction projects.  The Company is also focused on building relationships
with national accounts, such as dealer buying groups, distributor
consolidators, and major home builders.

Within the Company, two separate teams are responsible for sales of the
Company's United States sales between an Eastern and Western division.  The
Company offers distributors a variety of advantages designed to promote
maximum profitability to the Company and its distributors.  A network of
regional sales managers, field sales and customer service personnel is
accessible to distributors to coordinate promotional activities and to
quickly resolve any product problems.  To improve communications with
distributors, the Company has a program designed to give them computer access
to the Company's inventory records.  Such improved communications will
facilitate the Company's "just-in-time" production system, permitting the
Company to tailor its manufacturing schedule to the specific product lines in
the greatest demand.  Allowing distributor access to available inventory
levels has the additional benefit of permitting distributors to reduce their
inventory levels while being assured of an adequate and timely supply of
products.  The on-line program also permits distributors to process warranty
claims through a computer network linked with the Company.

The Company monitors monthly shipments and inventory levels from a
representative sampling of distributors using new electronic data interchange
capabilities.  This sampling allows the Company to gauge future sales demand
and improves the communication between the different functions that are
involved in forecasting and scheduling production.

In Canada, the Company markets its products through four primary channels:

1.     KEEPRITE, ARCOAIRE and COMFORTMAKER brand residential central heating
and air conditioning products are sold through HVAC distributors and
independent wholesalers in all provinces in Canada. KEEPRITE brand
commercial products are sold through independent distributors and major
commercial contractors across Canada;

2.     HEIL brand residential products are sold directly to distributors and
installing dealers by distribution centres which are wholly-owned by the
Company in Ontario, Quebec, Manitoba and British Columbia;

3.     TEMPSTAR brand products are sold through plumbing and heating
wholesaler outlets

                               - 6 -

owned by Westburne Industrial Enterprises on an exclusive basis in all
provinces in Canada; and

4.     LINCOLN brand oil and electric furnaces are sold by the Company in
eastern Canada.

In 1997, the Company generated approximately $26.7 million in export revenue
(1996 - $8.2 million; 1995 - $6.4 million).  The Company's principal markets
for international sales are in Latin America and Europe.

The Company also offers extensive training courses at its national training
center in LaVergne and other selected locations.  The courses are designed to
help improve business and technical skills and include small business
management, dealer sales, distributor sales, residential application and
design, introduction to heating and air conditioning, heat pump service and
troubleshooting, gas furnace installation and service fundamentals and
troubleshooting.

The Company conducts advertising to enhance consumer awareness and to
position its principal brands as premier residential heating and cooling
products.  The advertising program is complemented with trade advertising
that focuses on dealers who install the Company's products and who influence
the sale of heating and cooling products at the consumer level.

The Company offers a cooperative program to certain of its distributors which
subsidizes local advertising and other promotional and developmental costs.
In addition, the Company enables its distributors to offer various incentives
to their dealer customers.

COMPETITION

Based on the Company's industry knowledge and published industry statistics,
the Company believes itself to be one of the leading manufacturers (in terms
of units shipped) of residential and light commercial heating and cooling
products in the United States and Canada.  The Company's six largest
competitors in these markets are Carrier Corporation, Goodman Manufacturing
Corporation, Rheem Manufacturing, The Trane Company,  York International
Corporation, and Lennox Industries Inc.  The Company believes that the total
market share for these competitors (including the Company's market share)
accounted for over 90% of the residential unitary air conditioner and the
warm air furnace markets in 1997.

MANUFACTURING

Substantially, all of the Company's residential cooling and heating products
are manufactured at a company-owned, 1,010,000 square foot facility located
in Lewisburg, Tennessee.  The Company focuses on lean production from its
plant, supported by the latest cost-cutting  technology  and  a  "just-in-
time"  production  system.   This system is designed to minimize raw material
and in process inventories through close coordination of delivery of raw
materials and components from outside suppliers at the manufacturing
facility.  The production process facilitates the manufacturing of
standardized products.  By manufacturing standardized products and using more
adaptable equipment, the Company is able to reduce the time necessary to set
up the

                              - 7 -

production line to manufacture a particular model and to change the
production line to manufacture other similar models.

While most of the components used by the Company are purchased from outside
suppliers, the Company manufactures selected components where it is cost-
efficient. For example, the Company produces heat transfer surfaces, or
coils, for its unitary air conditioners as well as patented heat exchangers
used in its furnaces.  The Company imposes strict quality control standards
through a Total Quality Management Program covering all aspects of the
manufacturing process.  All units produced are tested and key statistics from
selected units are recorded prior to shipment.  In addition, several units
are randomly selected each day for a quality audit of construction and
performance.  In 1996, the Company adopted the ISO 9000 standards which set
quality guidelines for manufacturers and requires an independent party to
audit and document the compliance guidelines twice a year.  The Company's
Lewisburg and LaVergne facilities received the Certificate of Registration to
the ISO 9001:1994 Quality Standard on July 1, 1997.

Beginning in 1995, distributors and dealers have been participating in
monthly in-plant audits of products whereby a product is selected from the
assembly line for inspection and testing.  These in-plant audits provide
suggestions for improved quality and features which have resulted in a
significantly higher customer satisfaction rating for the Company's products.

FACILITIES

In 1995, the Company constructed a 500,000 square foot distribution center in
Lewisburg, adjacent to the manufacturing facility.  All marketing, finance
and administrative functions were consolidated at the manufacturing and
distribution facilities in Lewisburg in 1995.  The Company leases parts
warehouses in LaVergne and Manchester, Tennessee.

In Canada, the Company owns two main facilities.  Oil and electric furnaces
are manufactured in Laval, Quebec and the former manufacturing facility
located in Brantford, Ontario, is being utilized as ICP (Canada)'s primary
distribution center.  The Company also leases other distribution facilities
in Ontario, Quebec, Manitoba and British Columbia.

RAW MATERIALS AND PURCHASED COMPONENTS

The Company purchases all raw materials and most components used in the
manufacturing process. Purchased materials and components include copper,
aluminum, steel, wire, paint, compressors, motors, capacitors, fasteners,
controls, valves and insulating  materials.  When practical, the Company
establishes multiple  sources for  the purchase of raw materials and
components in an attempt to ensure competitive pricing, supply flexibility
and protection from supply disruption.  The Company works closely with major
suppliers to ensure that all major components meet quality and performance
standards.  The Company deals with approximately 250 suppliers, of whom 65
firms represent 95 percent of its purchasing expenditures.  Typically,

                               - 8 -

outside suppliers provide warranties on all major purchased components.  The
Company believes that it has adequate sources of raw materials and components
for its manufacturing requirements.

The Company purchases many of its components from suppliers who are certified
by the Company. Certified suppliers are judged by the Company to have quality
components that can be readily introduced into the production lines without
being inspected upon receipt.  The Company believes that the process of
certification identifies a small number of quality suppliers, which
facilitates the Company's "just-in-time" production system.

RESEARCH AND DEVELOPMENT

The Company maintains an engineering staff of approximately 60 people, who
are involved in laboratory testing and improvement of existing product lines
and in the development and testing of new products for the United States,
Canadian, and international markets.  These activities are conducted in the
Company's laboratory and manufacturing facilities located in LaVergne and
Lewisburg, Tennessee, respectively.  The Company is in the process of
relocating its laboratory from its LaVergne facility to the Lewisburg plant.
The primary objective of the engineering department is to conduct research to
keep the Company's products competitive by improving product cost, safety,
reliability and performance and ensuring compliance with environmental
standards.  The Company's goal is to respond to market needs and the
technological demands of government regulation.  The engineering staff also
strives to reduce manufacturing costs through cost control programs,
standardization, size and weight reduction, the application of new
technology, and improvements in production techniques.

Close contact is maintained with marketing personnel to ensure that the final
product will meet customer needs, and with manufacturing personnel to ensure
that the product design is compatible with the Company's flexible "just-in-
time" manufacturing process.  The Company's engineers also work closely with
major component suppliers to improve manufacturing efficiencies and keep
abreast of new technological advances.

During the past three fiscal years, research and development costs aggregated
approximately $8.7 million.

PATENTS AND TRADEMARKS

The Company holds numerous patents relating to the design and use of its
products that it considers important.  It is the Company's policy to obtain
patent protection for its new and developmental products and to enforce such
patent rights as appropriate.  The Company owns several trademarks that it
considers important in the marketing of its products, including HEIL,
TEMPSTAR, KEEPRITE, ARCOAIRE, COMFORTMAKER, LINCOLN, and AIRQUEST.  The
Company believes that its rights in these trademarks are adequately
protected.

MAJOR CUSTOMERS

During 1997, one customer accounted for approximately 11% of the Company's
consolidated

                                 - 9 -

operating revenue and revenues from the Company's 10 largest customers
accounted for approximately 36% of consolidated operating revenue.  While
management believes its relationships with its distributors are satisfactory,
in the event of the loss of a significant distributor, the Company's results
of operations would be adversely effected in the event that the Company is
unable to satisfactorily replace the distributor.

ENVIRONMENTAL REGULATION AND PROCEEDINGS

The Company and its operations are subject to a variety of federal,
provincial, state and local environmental laws and regulations, including,
among others, the Clean Air Act, the Clean Water Act, the Comprehensive
Environmental, Resource, Conservation and Liability Act, the Resource
Conservation and Recovery Act, the Occupational Health and Safety Act and the
Toxic Substances Control Act in the United States and the Canadian
Environmental Protection Act, the Fisheries Act (Canada), the Environmental
Protection Act (Ontario), the Gasoline Handling Act (Ontario), and the
Environmental Quality Act (Quebec) in Canada.  The Company believes that it
is in substantial compliance with such existing environmental laws and
regulations.

Growing concern over potential ozone depletion has led to increased
regulation of high ozone depletion refrigerants, including the Montreal
Protocol.  On November 25, 1992, the Montreal Protocol was amended to phase-
out the production and use of hydrochlorofluorocarbons ("HCFCs"), beginning
in 1996 and ending in 2030.

In the United States, the 1990 Clean Air Act Amendments implement the
Montreal Protocol by establishing a program for limiting the production and
use of ozone-depleting chemicals.  Under the Clean Air Act, HCFC-22 (the only
refrigerant used in the Company's products) is designated as a "Class II
substance"; such substances are currently scheduled to be phased out under
the Clean Air Act Amendments between 2010 and 2020.

As a result of the recent amendments to the Montreal Protocol, the
Environmental Protection Agency ("EPA"), which is authorized under the Clean
Air Act to accelerate the statutory phase-out schedule for any Class II
substance, is likely to promulgate regulations to implement those amendments.
Alternatively, the EPA could adopt proposals made by various groups to
phase-out Class II substances,  including HCFC-22,  substantially earlier
than under the schedule provided by either the Clean Air Act or the Montreal
Protocol.  It is unclear which, if any, of these proposed schedules will be
adopted by the EPA.

In Canada, the Ozone-Depleting Substance Regulations under the Canadian
Environmental Protection Act do not currently regulate the production and use
of HCFCs. However, Environment Canada is committed to complying with the
Montreal Protocol and is considering a more aggressive phase-out of HCFCs
than is currently agreed under the Montreal Protocol.  It is anticipated that
the Ozone-Depleting Substance Regulations may be amended to provide for a
gradual phase-out of HCFCs between 2004 and 2020.

All cooling products manufactured by the Company contain HCFC-22.  This
refrigerant is sealed

                               - 10 -

inside the air conditioner and is expected to remain within the unit
throughout the operating life of the system without leakage to the
atmosphere.  The Company believes that its operations comply with all current
legislation and regulations relating to refrigerants and that the Montreal
Protocol, the Clean Air Act Amendments and their implementing regulations as
currently in effect or any anticipated accelerated phase-out will not have a
material adverse impact on its operations over the next ten years.  However,
the Company believes that the implementation of more severe restrictions on
the use of Class II refrigerants could have such an impact.

Prior to the phase-out of HCFC-22, the Company must identify substitute
refrigerants for use in cooling products.  The Company has been working
closely with refrigerant manufacturers and others in the industry to develop
new refrigerants that are compatible with its existing cooling product lines.
Such new refrigerants may require the Company to modify the design of its
cooling products.  The Company is unable to predict the precise extent of
necessary modifications or the costs associated with the use of alternative
refrigerants, but does not expect that either will have a material adverse
effect on the industry unless the phase-out is accelerated more rapidly than
is currently anticipated under the Clean Air Act or the Montreal Protocol.

The Company and its operations are subject to federal, provincial, state and
local laws and regulations that limit the discharge of pollutants into the
air and water and establish standards for the treatment, storage and disposal
of solid and hazardous wastes. Federal, provincial and state environmental
laws and regulations impose liability on responsible parties, including past
and present owners and operators of sites, to clean up, or contribute to the
cost of cleaning up sites at which hazardous wastes or materials were
disposed or released.  The Company is involved in remedial action at its
Lewisburg manufacturing facility pursuant to these laws, but, based on
information currently available, does not anticipate that such action will
have a material adverse effect on its financial condition or operations as
further described.

In conjunction with the Tennessee Department of Environment and Conservation,
ICP (USA) has been involved in paying the costs of assessing the extent of,
and remediating, soil and ground water contamination at its Lewisburg
manufacturing facility caused by a sudden and accidental spill of
trichloroethylene in 1980 by the previous owner of the property.  ICP (USA)
has paid for certain investigative activities and initial remediation at the
manufacturing facility as well as off-site drum storage locations. At
December 31, 1997, the costs of the remainder of the environmental cleanup,
which management believes are reasonably determinable over a ten year period,
were discounted at 5.5%.  At December 31, 1997, ICP (USA) has a provision of
approximately $3.1 million for the cost of this cleanup.

In connection with the environmental remediation at the off-site drum storage
locations, ICP (USA) has entered into a cost-sharing agreement with the
previous owner.  This agreement calls for each entity to bear fifty percent
of the investigation, cleanup, monitoring, removal and treatment of the
existing drum storage sites.  Additionally, in the event that other drum
storage sites are discovered, ICP (USA) and the previous owner shall bear the
additional costs at a ratio of sixty percent and forty percent, respectively.
The estimated costs to cleanup the existing drum storage sites are included
in the amounts detailed above.


                               - 11 -

In December 1991, the Company and Flying J, Inc. ("Flying J") entered into a
cost sharing agreement whereby the Company will participate with Flying J in
the financing of future cleanup activities for environmental contamination at
various refinery sites sold by the Company to Flying J in 1980.  This
settlement does not affect claims by Flying J or the Company against third
parties who may be responsible for contribution to refinery cleanup costs.
In December 1991, the Company also reached a settlement with several of its
insurance carriers whereby the insurers will reimburse the Company for a
portion of the expenses the Company will incur in the cleanup activities at
the refineries.  Ongoing cleanup activities at four refinery sites are at
different regulatory stages.

Although the scope of the project is becoming better understood and defined
with the various regulatory agencies, the ultimate scope of the projects
remains uncertain and it is not possible to definitively estimate the
ultimate costs of remediation of such environmental contamination.  At
December 31, 1997, the Company has an accrual of  $11.0 million for its
estimated share of future cleanup costs.  The Company has offsetting
receivables due from insurers of $6.8 million included in the consolidated
balance sheet.  Based on current information prepared by independent
environmental consultants, the Company's share of the cost of environmental
cleanup, discounted at 5.5% is currently estimated to be approximately $7.2
million over the next 21 years. The expected insurance recoveries discounted
at 5.5% are currently estimated to be approximately $3.6 million over the
next 21 years.

OTHER GOVERNMENTAL REGULATIONS

The Company is subject to regulations in the United States promulgated under
the 1987 National Appliance Energy Conservation Act, as amended, and various
state regulations concerning the energy efficiency of its products.  The
Company has developed and continues to develop products which will comply
with these regulations, and does not believe that such regulations will have
a material adverse effect on its business.

The Company is also subject to the energy efficiency requirements contained
in the Energy Policy Act of 1992, which became effective in 1994.  All of the
Company's products comply with these standards.

BACKLOG ORDERS

The backlog of orders was approximately $24.2 million at December 31, 1997
(1996 - $63.4 million, 1995 - $71.6 million).  The decline in backlog of
orders reflects the Company's shift away from advanced orders and pre-season
sales programs due to significantly shorter lead times on customer orders
over the past three years.

EXPORT SALES

Export sales, being sales from the Company's domestic operations to foreign
customers amounted to approximately $26.7 million in 1997 (1996 - $8.2
million; 1995 - $6.4 million).

                                - 12 -

EMPLOYEES

At December 31, 1997, the Company had approximately 2,300 salaried and hourly
employees engaged in its operations. The hourly employees representing
approximately 1,600 of the total employees, are represented under five
collective bargaining agreements with four unions. The renegotiation of these
collective agreements will occur during the years 1998 and 1999.  The Company
considers its labor relations to be satisfactory.







































                               - 13 -

ITEM 2. PROPERTIES.

The major operating facilities which are owned or leased by the Company at
December 31, 1997 are shown in the following table:
<TABLE>
<CAPTION>

                  OWNED/           AREA
LOCATION          LEASED<F1>     (SQ.FT.)       PRODUCTS/ACTIVITIES
--------------------------------------------------------------------------
<S>                 <C>         <C>             <C>
UNITED STATES

Franklin, TN         L             10,400       Executive office
Lewisburg, TN        O          1,010,000       Manufacture of residential
                                                and light commercial
                                                heating and cooling products
                     O            500,000       Distribution
LaVergne, TN<F2>     O            247,000       Research, development and
                                                training center
Nashville, TN        L            160,700       Service parts warehouse
Manchester, TN       L             75,000       Service parts warehouse
Miami, FL            L             32,800       Parts and distribution
                     L              5,600       Parts and distribution
CANADA

Brantford, ON        O            323,000       Distribution
                     L             22,500       Distribution
Laval, PQ            O             96,800       Manufacture of residential
                                                heating products
                     L             88,800       Distribution
Vaughan, ON          L             41,300       Distribution
Prince George, BC    L             28,100       Distribution
Winnipeg, MB         L             26,900       Distribution
Langley, BC          L             10,800       Distribution
Burnaby, BC          L             10,700       Distribution
Waterloo, ON         L             10,600       Distribution
Coquitlam, BC        L              5,200       Distribution
Kelowna, BC          L              4,800       Distribution
Terrace, BC          L              4,800       Distribution

BRAZIL
Sao Paulo            L             10,800       Parts and distribution

MEXICO
Guadalajara          L             14,000       Parts and distribution
Monterrey            L             12,000       Parts and distribution

SPAIN
Madrid               L             11,400       Parts and distribution
Barcelona            L              3,900       Parts and distribution

</TABLE>
[FN]
<F1>
Certain of the Company's assets are pledged as collateral against ICP (USA)'s
9.75% Senior Notes.  See "International Comfort Products Corporation - Notes
to the Consolidated Financial Statements".
<F2>
Research laboratory is in the process of being relocated to the Lewisburg
manufacturing facility.  The Company is currently subleasing approximately
108,000 sq. ft. of the facility to a third party.
</FN>

                               - 14 -

ITEM 3. LEGAL PROCEEDINGS.

Legal proceedings pertaining to the Company and its subsidiaries is set forth
on note 15 to the Company's Consolidated Financial Statements and is
incorporated herein by reference.

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

During the fourth quarter of the fiscal year covered by this Annual
Report on Form 10-K, no matter was submitted to a vote of security holders,
through the solicitation of proxies or otherwise.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.

The Company, in accordance with General Instruction G(3) to Form 10-K
and Instruction 3 to Item 401(b) of Regulation S-K, 17 C.F.R. Section
229.401, furnishes the following information with regard to its executive
officers as an additional item in Part I of this Annual Report on Form 10-K.
The following officers are those that the Company currently deems to be
"executive officers", as defined by the Securities and Exchange Commission.
<TABLE>
<CAPTION>
      Name                   Office                                     Age
      ----                   ------                                     ---
<S>                    <C>                                              <C>
Richard W. Snyder      Chairman of the Board                             59
W. Michael Clevy       President and Chief Executive Officer             49
David P. Cain          Senior Vice President, General Counsel
                       and Secretary                                     52
Stephen L. Clanton     Senior Vice President, Chief Financial Officer
                       and Treasurer                                     46
Francis C. Harrell     Senior Vice President, USA Sales                  58
Robert C. Henningsen   Senior Vice President, Human Resources and
                       Administration                                    58
Herman V. Kling        Senior Vice President, Marketing                  48
Alexander T. Lim       Vice President, Engineering                       55
Augusto H. Millan      Senior Vice President and General Manager,
                       International Sales and General Manager,
                       Aftermarket Sales                                 48
David B. Schumacher    Vice President and General Manager,
                       Commercial Products Group                         38
Karla G. Smith         Vice President, Corporate Communications          36
H. David Tayler        Senior Vice President and General Manager,
                       Canadian Operations                               54
James R. Wiese         Senior Vice President and General Manager,
                       Residential Products Group                        47
</TABLE>

There is no family relationship among the above or any of the directors of
the Company.  Although all executive officers are employees at will of the
Company, each executive officer of the Company generally is elected each year
for a term of one year.

Mr. Snyder, in 1982, founded SnyderGeneral Corporation, a manufacturer and
marketer of air quality control products for the heating, ventilating and air
conditioning markets.  SnyderGeneral Corporation's residential air
conditioning and heating business was acquired by the Corporation in June
1991.  Mr. Snyder is a former Chairman of the Air Conditioning and
Refrigeration Institute.  Mr. Snyder was elected Chairman of the Board of the
Corporation in June 1997.

Mr. Clevy joined the Corporation as President and Chief Operating Officer of
the Corporation's U.S. operating subsidiary, International Comfort Products
Corporation (USA) ("ICP USA") in September 1994.  He was appointed President
and Chief Executive Officer of the Corporation in December 1995.  Prior to
joining the Corporation, he was Vice President of Manufacturing and
Technology of Carrier Corporation.
                                 - 15 -
Mr. Cain joined the Corporation on January 25, 1977 as Superintendent of
Distribution.  Thereafter, he moved into Manufacturing from 1978 until 1980,
into Sales and Marketing until 1986, and into the Law department where he
advanced to Senior Vice President and General Counsel on January 1, 1993 and
Senior Vice President, General Counsel and Secretary on June 4, 1996.

Mr. Clanton joined the Corporation as Senior Vice President, Chief Financial
Officer and Treasurer on July 8, 1996.  Prior to joining the Corporation, he
was Executive Vice President and Chief Financial Officer for Falcon Products
Inc., St. Louis, Missouri from 1988 to 1996.

Mr. Harrell joined the Corporation as Vice President, Sales transferring from
SnyderGeneral on July 1, 1991.  He was appointed Senior Vice President, USA
Sales on January 1, 1995.

Mr. Henningsen joined the Corporation as General Manager, Human Resources on
June 1, 1987.  He was appointed as Vice President, Human Resources and
Administration on January 1, 1989.  He has served as Senior Vice President,
Human Resources and Administration since December 7, 1994.

Mr. Kling joined the Corporation as Senior Vice President - Marketing on
February 1, 1997.  Prior to joining the Corporation, he was Product Manager
for General Electric Company. He worked for General Electric in marketing,
customer service and sales for 20 years.

Mr. Lim joined the Corporation as Director, Light Residential Engineering on
May 1, 1987, transferring from KeepRite Inc.  He served as Director and
Senior Director of Quality and Technology from 1989 until December 1, 1995
when he was appointed Vice President - Engineering.

Mr. Millan joined the Corporation as Vice President, Financial Operations on
November 1, 1994.  He was appointed as Senior Vice President and General
Manager, International Sales and General Manager, Aftermarket Sales on
January 1, 1996.   Prior to joining the Corporation, he was Managing Director
of United Technologies Corporation.

Mr. Schumacher joined the Corporation on March 1, 1992 as Manager -
Development Engineer transferring from SnyderGeneral.  He was promoted to
Manager Product Marketing (ACO) on January 1, 1993 and to Senior Director -
Product Marketing on March 1, 1995.  He was appointed Vice President and
General Manager, Commercial Products Group on January 1, 1997.

Ms. Smith joined the Corporation as Manager - Communications on May 1, 1992
transferring from SnyderGeneral.  She was promoted to Director, Advertising
and Sales Promotion on February 1, 1994 and to Senior Director, Corporate
Communications on February 1, 1996.  She was appointed Vice President,
Corporate Communications on January 1, 1997.

Mr. Tayler joined the Corporation in May 1972.  He served as Vice President -
Operations from 1986 to 1995.  In May 1995, he was appointed Senior Vice
President and General Manager, Canadian Operations.

Mr. Wiese joined the Corporation as Director, Dealer Development on August
22, 1988.  He was

                               - 16 -

promoted to Senior Director - Sales on August 1, 1992.  He was appointed
Senior Vice President, Marketing on January 25, 1993 and has served as Senior
Vice President and General Manager, Residential Products Group since January
1, 1997.















































                                - 17 -

                               PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)     MARKET INFORMATION.  The Company's ordinary shares are traded on
the Toronto Stock Exchange ("TSE") and the American Stock Exchange ("AMEX")
under the symbol "ICP."  The following table sets forth the high and low
trading prices of the Company's ordinary shares as reported by the TSE and
AMEX during each of the fiscal quarters of the prior two fiscal years:

<TABLE>
<CAPTION>

   1997                    TSE-Cdn.$                  AMEX-U.S.$
   ---------------------------------------------------------------
                       High        Low           High         Low
   ---------------------------------------------------------------
   <S>                 <C>         <C>           <C>          <C>
    First Quarter       7.35       3.90          5.38         2.88

    Second Quarter      8.25       6.30          6.06         4.56

    Third Quarter      12.85       8.00          9.50         5.19

    Fourth Quarter     13.25       9.70          9.06         6.31
   ---------------------------------------------------------------
<CAPTION>

   1996                    TSE-Cdn.$                  AMEX-U.S.$
   ---------------------------------------------------------------
                       High        Low           High         Low
   ---------------------------------------------------------------
   <S>                 <C>         <C>           <C>          <C>
    First Quarter      2.25        1.20          1.75         1.00

    Second Quarter     4.25        2.05          3.19         1.56

    Third Quarter      4.30        3.70          3.25         2.75

    Fourth Quarter     4.60        3.40          3.50         2.56
   ---------------------------------------------------------------
</TABLE>

(b)     HOLDERS.  There were 1,538 shareholders of record as of December 31,
1997.

(c)     DIVIDENDS.  The Company has not paid a dividend on its ordinary
shares since 1990.  The Company currently intends to retain all earnings to
support the development and growth of the Company.  In addition, the
Company's senior debt issue limits the ability to pay dividends and
distributions on its ordinary shares.

                                - 18 -

ITEM 6.  SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
                              EIGHT YEAR SUMMARY OF OPERATIONS
                                      (Canadian GAAP)
------------------------------------------------------------------------------------------
For the Years
ended December 31   1997     1996     1995     1994     1993     1992     1991     1990
------------------------------------------------------------------------------------------
<S>                 <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
OPERATIONS
(In Millions of
  U.S. Dollars)

Operating revenue   $ 630.7  $ 641.9  $ 532.8  $ 635.2  $ 598.0  $ 566.7  $ 467.9  $ 473.8

Gross margin          127.0    124.1     65.4    112.9     99.6    121.3    102.3    108.6

Operating
   profit (loss)       41.5     33.4    (43.3)    17.6     (4.0)    14.6     16.7     27.3

Financial expenses     19.5     21.8     25.1     23.1     18.1     16.8     26.6     21.9

Income (loss) from
   continuing
   operations          22.0     11.6    (81.2)    (4.6)   (17.8)    (2.1)    (5.0)     1.7

Net income (loss)      22.0      8.5    (93.2)    (7.5)   (21.0)    (3.2)    (6.9)   153.3
------------------------------------------------------------------------------------------

PER ORDINARY SHARE
(In U.S. Dollars)

Income (loss) from
   continuing
   operations       $  0.56  $  0.30  $ (2.09) $ (0.20) $ (0.87) $ (0.26) $ (0.70) $ (0.29)

Net income (loss)
   after
   discontinued
   operations       $  0.56  $  0.22  $ (2.40) $ (0.29) $ (1.00) $ (0.31) $ (0.86) $ 21.83
------------------------------------------------------------------------------------------

FINANCIAL POSITION
(In Millions of
  U.S. Dollars)

Total assets        $ 352.0  $ 345.0  $ 345.8  $ 486.1  $ 490.2  $ 401.8  $ 420.5  $ 327.1

Working capital       136.6    103.8     60.5    153.0    167.5    102.9     73.8     45.2

Fixed assets (cost)   214.3    213.2    186.2    197.9    213.3    201.9    179.1    155.6

Debt*                 185.5    204.0    182.7    242.8    216.0    128.8    197.0    150.1
------------------------------------------------------------------------------------------
</TABLE>

* Includes short-term borrowings and long-term debt.

                                - 19 -

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATION.

The Company reported its second consecutive year of profits in 1997 after
five prior years of losses.  The 1997 net income totaled $22.0 million, or 56
cents a share, compared with $8.5 million, or 22 cents per share, a year
earlier.  Improved net income was achieved despite a slight decline in
operating revenue.

ACQUISITIONS AND DIVESTITURES

During 1997, the Company sold two distribution companies and five factory
branches. The distribution companies were acquired in July 1996 to protect
the Company's long-term growth prospects in the U.S. midwest and southeast.
At the time of acquisition, the Company stated that it would sell the
distributors when owners committed to the business could be found.

The sale of the two distributor companies and five factory branches primarily
accounted for the 1997 decline in the Company's operating revenue.

In 1997, the Company acquired a distribution company in Spain and two
distribution companies in Canada to establish a base in Europe and to expand
coverage in the western provinces, respectively. The Company intends to make
further acquisitions in North America and overseas that complement or augment
its core businesses of manufacturing and selling residential and commercial
heating and cooling systems.  Subsequent to year end, the Company purchased
United Electric Company of Wichita Falls, Texas.  With 1997 sales of
approximately $25 million, United Electric is a profitable company that
manufactures components for commercial products.  United Electric will
continue to operate as an independent company.

                               - 20 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

The following table sets forth, for the years presented, certain information
relating to the operations of the Company, expressed as a percentage of
operating revenue.

<TABLE>
<CAPTION>
                              1997             1996           1995
     ---------------------------------------------------------------
     <S>                      <C>              <C>            <C>
     Operating revenue        100.0%           100.0%         100.0%
     Cost of sales             79.9             80.7           87.7
     Gross margin              20.1             19.3           12.3
     Selling, general and
      administrative expenses  13.6             14.1           17.5
     Operating profit (loss)    6.5              5.2           (8.1)
     Financial expenses         3.0              3.4            4.7
     Income (loss) before
       income taxes             3.5              1.8          (12.8)
     Income taxes                -                -            (2.4)
     Income (loss) from
       continuing operations    3.5              1.8          (15.2)
     Loss from discontinued
       operations                -               (.5)          (2.3)
     Net income (loss)          3.5              1.3          (17.5)
     ===============================================================
</TABLE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

OPERATING REVENUE

Operating revenue was $630.7 million in 1997, compared with $641.9 million a
year earlier, a decline of $11.2 million, or 1.7 percent.  The two
distribution companies noted earlier accounted for 3.3 percent of 1997
operating revenue, compared  with 4.5 percent in 1996.

When the revenue of the distribution companies and the factory branches is
removed from the 1997 and 1996 results, the Company's 1997 operating revenue
increased slightly to $609.1 million from $607.1 million.   This occurred in
a year when North American industry sales declined by about five percent due
to the impact of a cool spring and summer on the demand for air conditioning
units.   Higher international, commercial and parts sales offset the revenue
decline in the Company's residential products.

Approximately 84 percent of the 1997 revenue was generated in the United
States, 12 percent in Canada, and 4 percent in international markets,
compared with 87 percent, 12 percent, and 1 percent, respectively in 1996.

                              - 21 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

GROSS MARGIN

Despite lower production and sales volumes, gross margin increased by $2.9
million to $127.0 million, or 20.1 percent of operating revenue in 1997
compared to 19.3 percent in 1996.  The improved margin resulted primarily
from continuous cost savings and manufacturing efficiencies introduced at the
plant in Lewisburg, Tennessee.  The Company intends to continue the emphasis
on cost reductions and manufacturing efficiencies to improve gross margin.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses ("SG&A") excluding warranty
expense were virtually unchanged in 1997 compared with 1996.  The higher
expenses associated with two acquisitions in Western Canada, a distribution
company in Spain and the establishment of parts outlets in Latin America were
offset by the cost savings resulting from the sale of the non-core businesses
noted earlier.  Total SG&A declined as a percentage of operating revenue from
14.1% in 1996 to 13.6% in 1997 primarily due to reduced warranty expense.

Warranty expense declined in 1997, partly as a result of reductions in
product field failure rates and the progress made toward the Company's
quality control target of zero defects. The remainder of the decline in
warranty expense related to a specific provision recorded in 1996 for a
component used by many installers and supplied by other manufacturers.

The 1996 warranty expense also included a provision for the introduction of
a standard five-year limited warranty on replacement and service parts,
replacing the previous one-year warranty, and an additional provision for the
packaged terminal air conditioning product line sold at the end of 1994.

OPERATING PROFIT

The 1997 operating profit of $41.5 million was a 24 percent improvement over
the previous year of $33.4 million.  Earnings before interest, taxes,
depreciation and amortization ("EBITDA") was $56.6 million, compared with
$49.1 million in 1996.

FINANCIAL EXPENSES

Financial expenses declined to $19.5 million in 1997 from $21.8 million in
1996.  The downward trend reflected lower interest expense, which fell to
$18.2 million in 1997 versus $19.4 million in the previous year.  The
reduction in interest expense was the result of both lower interest rates and
lower average borrowing levels that declined, net of cash, to approximately
$186 million in 1997 from $196 million in 1996.

                               - 22 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

In 1997, $1.3 million of debt issuance costs were amortized, compared with
$1.8 million in 1996.  In addition, $0.6 million of debt issuance costs were
written off in 1996.

INCOME TAXES

The Company is currently not recording an income tax provision as a result of
accumulated tax losses from prior years.

DISCONTINUED OPERATIONS

The Company had no discontinued operations in 1997.

In 1996, the Company incurred a $3.1 million loss on the sale of Thompson
Pipe & Steel Company ("TP&S"), a steel pipe manufacturing company based in
Denver, which was sold in 1996.

NET INCOME (LOSS)

Net income totaled $22.0 million, or 56 cents per share in 1997, compared
with $8.5 million, or 22 cents per share, in 1996.

The improvement in 1997 net income reflected structural cost reductions
through the introduction of lean production at the manufacturing plant since
1995, and tight management of overhead costs and financial expenses. The net
income also benefited from the early results of the long-term strategy to
diversify the revenue stream beyond the mature North American residential
market into commercial products, aftermarket parts and international sales.


YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

OPERATING REVENUE

Operating revenue was $641.9 million in 1996, an increase of $109.1 million,
or 20.5 percent, compared to 1995.  Approximately $40 million was due to
robust industry growth, gains in market share, and the addition of new
distributors. Another $40 million was the result of renewed confidence in the
Company's future among distributors who replenished inventories after
reducing them in 1995 following a change in the Company's credit terms. The
acquisition of the two distribution companies discussed earlier added $29
million in 1996 revenue.

GROSS MARGIN

Gross margin increased from 12.3 percent of operating revenue in 1995 to 19.3
percent in 1996, more than reversing the decline experienced in 1995.  The
recovery was the result of increased factory utilization from higher
production volumes and sales as well as cost saving measures and
manufacturing efficiencies at the plant in Lewisburg.

                                - 23 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In 1996, SG&A declined by $2.5 million due to lower bad debt expense, offset
by higher marketing, advertising and sales expenditures associated with
strong business expansion as well as additional expense for managing the two
distributor networks acquired in 1996.

The 1996 warranty expense also increased by $2.8 million resulting from a
provision for the introduction of a standard five-year limited warranty on
replacement and service parts, and an additional provision for the packaged
terminal air conditioning product line sold at the end of 1994.

OPERATING PROFIT (LOSS)

The 1996 operating profit of $33.4 million was a dramatic reversal of the
$43.3 million operating loss recorded in 1995.  EBITDA for 1996 was $49.1
million compared with a negative $24.5 million in 1995.

In 1995, $10.1 million was charged in asset writedowns for redundant
machinery and equipment, the closing of the paint shop at the Lewisburg plant
and the write-off of idle assets at the former Brantford, Ontario, plant.
Restructuring costs totaled $5.4 million in 1995 for staff severance in the
U.S. and Canadian operations.  No similar charges were incurred in 1996.

FINANCIAL EXPENSES

Financial expenses declined to $21.8 million in 1996 from $25.1 million in
1995.  The downward trend reflected lower interest expense, which fell to
$19.4 million in 1996 compared to $21.7 million in the prior year.  The
reduction in interest expense was the result of both lower interest rates and
lower average borrowing levels that declined, net of cash, to approximately
$196 million in 1996 from $239 million in 1995.

In 1996, $1.8 million of debt issuance costs were amortized, compared with
$1.3 million in 1995.  In addition, $0.6 million of debt issuance costs were
written off in 1996 and $2.1 million in 1995.

INCOME TAXES

The Company did not record an income tax provision in 1996 as a result of
accumulated tax losses from prior years.  In 1995, the total tax provision of
$12.8 million included a deferred tax provision of $11.4 million, which
represented the write-off of accumulated deferred income tax debits recorded
as of December 31, 1994. This write-off was required since there was not
reasonable assurance as of December 31, 1995, that the timing differences
supporting these deferred tax debits would reverse.

                                - 24 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

DISCONTINUED OPERATIONS

In 1996, the Company incurred a $3.1 million loss on the sale of TP&S.

In 1995, losses from discontinued operations totaled $12.0 million and
consisted of: (i) $14.3 million for TP&S, including $6.0 million in asset
writedowns; (ii) a $1.9 million write-off of a deferred tax debit established
in prior years; (iii) the receipt of $2.9 million from a favorable judgment
involving a former Canadian oil and gas subsidiary sold in 1989; and (iv)
the utilization of tax losses for prior years resulting from the costs of
selling the gas utility and propane operations of the Company in 1990.

NET INCOME (LOSS)

Net income was $8.5 million, or 22 cents per share, in 1996 compared with a
loss of $93.2 million, or $2.40 per share, in 1995.

The 1996 return to profitability reflected strong growth in sales revenue
coupled with lower structural costs.

The 1995 loss included $50 million for restructuring costs, asset writedowns,
a discontinued non-core subsidiary, loss on the impairment of intangible
assets, write-off of debt issuance costs, and the write-off of accumulated
deferred tax debits.  These expenses resulted in a loss of approximately
$1.29 per share in 1995.


LIQUIDITY AND FINANCIAL RESOURCES

The Company has sufficient credit facilities and liquidity from free cash
flow to meet its current capital and operating requirements.

CASH FLOW

Free cash flow (cash from operations adjusted for cash received from or
utilized in investing activities) totaled $29.9 million in 1997, compared
with a negative $4.4 million in 1996 and positive $59.5 million in 1995.

The 1997 free cash flow included $19.2 million from continuing operations,
versus $14.1 million in 1996 and $70.5 million in 1995. The remaining $10.7
million of free cash flow in 1997 was principally a result of the sale of
non-core distribution businesses.

                                - 25 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

WORKING CAPITAL AND SHORT-TERM BORROWINGS

Working capital rose to $136.6 million in 1997 from $103.8 million in 1996
and $60.5 million in 1995. The principal causes were higher accounts
receivable, increased cash from operations beyond current capital and
operating requirements, and substantially lower short-term borrowings.

The Company brought inventories back to acceptable levels by year end after
reducing production in response to the lower demand for air conditioning
systems during the cool summer. When the impact of the two distributor
companies are removed, inventory levels were virtually unchanged in 1997 from
1996.

<TABLE>
<CAPTION>
(millions of US dollars)                1997      1996     1995
-------------------------------------------------------------------
<S>                                    <C>       <C>      <C>
Inventories                             94.5     117.7     85.5
Accounts receivable                     96.5      78.0     77.9
Working capital                        136.6     103.8     60.5
Short-term borrowings                   19.7      39.0     17.7
</TABLE>

Accounts receivable grew by 24 percent to $96.5 million as a result of more
distributors taking advantage of the Company's recently established HVAC
First financing service, increased international sales that take longer to
settle, and an increase in sales close to year end in December 1997.

The $18.5 million increase in accounts receivable was more than offset by the
$23.2 million decrease in inventories.  These changes, coupled with a $5.2
million rise in accounts payable, meant that there was minimal change in non-
cash working capital in 1997 compared with 1996.

CREDIT FACILITIES

The Company has negotiated credit facilities separately for the Canadian and
the U.S. operations.

The Canadian operating company has a Cdn. $30 million revolving credit
facility, which is sufficient to meet its needs.  The three-year facility was
arranged with a new lender in 1996.

The U.S. operating company has a five-year $70 million receivables purchase
facility with a U.S. lender. This facility was arranged in July 1996 to
replace the $75 million 364-day revolving credit facility scheduled to expire
in January 1997. In July 1997, the U.S. company arranged a $15 million
inventory credit facility.  The U.S. operating company has adequate credit
availability and expects to have more than sufficient cash flow from
operations to meet its obligations in 1998.

                                - 26 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

LONG-TERM DEBT

The U.S. operating company has $140 million of seven-year senior notes
maturing in March 2000. The notes are collateralized by the real and personal
property of the U.S. company other than accounts receivable and inventories.

Long-term debt also includes a $25 million five-year unsecured term loan
arranged for the Company's U.S. holding company which matures in October
2001.

CAPITAL EXPENDITURES

The Company spent approximately $8 million on capital improvements, primarily
at the Lewisburg plant in 1997, compared with $12 million in 1996.

RISKS AND RISK MANAGEMENT

WEATHER RISK: An early and hot summer, or an early and cold winter, can
create a surge in sales. Mild seasons, by contrast, undermine customer
demand. To reduce the costs of exposure to short-term weather risk, the
Company has reduced the time it takes to fulfill a customer's order to 14
days for most products. In 1997, for example, the cool spring and summer
reduced the demand for air conditioning units. The Company responded by
adjusting production levels to avoid a costly inventory build up.

SUPPLIER RISK: For a variety of reasons, a key supplier could be unable to
meet the Company's requirements. Close relations are maintained with 65
companies that provide 95 percent of the material used in manufacturing.
Several suppliers consign inventory and the Company only pays for components
when they are used. Information management systems are integrated with key
suppliers so that they can scan for product use at the end of the production
line, provide an invoice, and replenish inventory.

DISTRIBUTOR RISK: The Company's distribution system consists of approximately
400 independent distributors in the U.S., Canada and internationally.
Distributor risk is managed in part by terminating underperforming
distributors and replacing them with more aggressive ones. The Company also
emphasizes a mutually beneficial partnership with distributors, involving
them in product design, monthly in-plant product audits and other programs.

MARKET RISK: The heating, ventilating and air conditioning business for
residential and light commercial users in North America is approximately a $6
billion a year industry at the manufacturing level and $25 billion at the
final customer level.  The Company faces six major

                                - 27 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

competitors.   As the North American industry is mature, no new competitors
are likely. The Company has improved its competitive position through a much
lower cost structure and a change in its product mix.

YEAR 2000 COMPLIANCE RISK:  The Company is completing the installation of new
information management systems in 1998 that are year 2000 compliant.  The
systems have been customized to embrace all aspects of the Company's
operations from ordering raw materials through to production of finished
products, as well as for financial analysis and disclosure and general
management purposes.   A management committee is responsible for ensuring
that all interfacing systems of suppliers and customers will be year 2000
compliant.

TECHNOLOGY RISK: Technological risk is low as technical improvements in
heating and cooling systems tend to be evolutionary over a number of years.

ECONOMIC RISK: The Company faces the normal economic risks of any consumer-
oriented company -- such as changes in interest rates, employment levels,
consumer spending, and general consumer and business confidence in the
economy. Under adverse economic conditions, homeowners and commercial
property owners are more likely to repair rather than replace deteriorated
and older heating or cooling systems. The poor condition of many systems that
have already been repaired, and the introduction of lower-cost entry-level
systems, tend to offset this risk.  Internationally, the Company's operations
are concentrated in Latin America and more recently Europe with no exposure
to markets in southeast Asia.

FINANCIAL RISK: The Company's return to profitability, a much lower break-
even point, and adequacy of capital resources have mitigated financial risk.
The Company's capitalization is over leveraged compared with other companies
in and related to the industry.

FORWARD-LOOKING INFORMATION: Certain statements contained in this document
constitute forward-looking statements that are not historical. Forward-
looking statements involve risks and uncertainties, including but not limited
to the risk factors described previously.  Actual results could differ
materially from those projected in the forward-looking statements as a result
of these risks and should not be relied upon as a prediction of actual future
results. The Company undertakes no obligation to update any forward-looking
statements to reflect events or circumstances after the date on which such
statement is made, or to reflect the occurrence of unanticipated events.

                                - 28 -


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------

FUTURE EXPECTATIONS

The long-term strategic plan developed by management in 1996 in consultation
with the Board of Directors was reviewed and updated in 1997.  The plan
establishes performance targets for the year 2000 within the framework of  a
10-year corporate vision of growth.

The focus of the long-term strategy is to diversify beyond the Company's
traditional core business of selling heating and cooling systems to the
residential market. Key areas of future growth are commercial products,
aftermarket replacement parts and international sales. The emphasis will be
on improving gross margin to ensure profitability from internal growth as
well as acquisitions that complement and augment the strategic plan.
Subsequent to year end, the Company made its first strategic acquisition,
United Electric Company, a profitable Texas company that manufactures
components such as coils and ventilators for commercial heating and cooling
systems.

                                - 29 -


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


         The consolidated financial statements of the registrant and its
subsidiaries, together with all notes thereto, are set forth immediately
following this page as pages 32 through 69 of this Annual Report on Form 10-
K.
---------------------------------------------------------------------------

                         ARTHUR ANDERSEN & CO.

---------------------------------------------------------------------------
                           AUDITORS' REPORT
---------------------------------------------------------------------------


To the Shareholders
International Comfort Products Corporation

We have audited the consolidated balance sheet of International Comfort
Products Corporation (formerly Inter-City Products Corporation) as at
December 31, 1997 and the consolidated statements of income (loss) and
deficit and changes in financial position for the year then ended.  These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in Canada.  Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of International Comfort
Products Corporation as at December 31, 1997 and the results of its
operations and the changes in its financial position for the year then ended
in accordance with accounting principles generally accepted in Canada.


 /s/ Arthur Andersen & Co.


February 9, 1998
Mississauga, Canada

                                - 30 -



COOPERS        chartered      145 King Street West      tel.:(416)869-1130
& LYBRAND      accountants    Toronto, Ontario          fax: (416)863-0926
                              Canada M5H 1V8            direct tel.:941-8237
                                                        direct fax: 941-8446



                          AUDITORS' REPORT


To The Shareholders
Inter-City Products Corporation



We have audited the consolidated balance sheet of Inter-City Products
Corporation as at December 31, 1996 and the consolidated statements of income
and deficit and changes in financial position for the years ended December
31, 1996 and 1995.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of Inter-City Products
Corporation as at December 31, 1996 and the results of its operations and the
changes in its financial position for the years ended December 31, 1996 and
1995 in accordance with generally accepted accounting principles.


 /s/ Coopers & Lybrand

Coopers & Lybrand
Chartered Accountants
Toronto, Ontario

February 11, 1997
                                - 31 -

                 INTERNATIONAL COMFORT PRODUCTS CORPORATION
           CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND DEFICIT
                   For the Year Ended December 31, 1997
                 (With Comparative Figures for the Years
                Ended December 31, 1996 and 1995 - note 20)
                      (In Millions of U.S. Dollars)
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                1997        1996      1995
---------------------------------------------------------------------------
<S>                                           <C>         <C>       <C>
Operating Revenue                             $ 630.7     $ 641.9   $ 532.8
Cost of Sales                                   503.7       517.8     467.4
---------------------------------------------------------------------------
Gross Margin                                    127.0       124.1      65.4
Selling, General and Administrative Expenses     85.5        90.7      93.2
Asset Writedowns and Restructuring Costs
  (note 17)                                        -           -       15.5
---------------------------------------------------------------------------
Operating Profit (Loss)                          41.5        33.4     (43.3)
---------------------------------------------------------------------------

Financial Expenses
  Interest expense                               18.2        19.4      21.7
  Amortization of debt issuance costs             1.3         1.8       1.3
  Write-off of debt issuance costs                 -           .6       2.1
---------------------------------------------------------------------------
                                                 19.5        21.8      25.1
---------------------------------------------------------------------------
Income (Loss) Before Income Taxes                22.0        11.6     (68.4)
Income Taxes (note 11)                             -           -      (12.8)
----------------------------------------------------------------------------
Income (Loss) From Continuing Operations         22.0        11.6     (81.2)
Loss From Discontinued Operations (note 16)        -         (3.1)    (12.0)
----------------------------------------------------------------------------
Net Income (Loss)                                22.0         8.5     (93.2)
Deficit - Beginning of the Year                (138.4)     (146.9)    (53.7)
----------------------------------------------------------------------------
Deficit - End of the Year                     $(116.4)    $(138.4)  $(146.9)
============================================================================
</TABLE>

Income (Loss) Per Ordinary Share (note 12)


                       see accompanying notes

                               - 32 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
                      CONSOLIDATED BALANCE SHEETS
                        As at December 31, 1997
     (With Comparative Figures as at December 31, 1996 - note 20)
                    (In Millions of U.S. Dollars)
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                      1997         1996
-------------------------------------------------------------------------
<S>                                                  <C>          <C>
ASSETS
Current Assets
  Cash and short-term deposits                       $  31.0      $  17.6
  Accounts receivable - trade (less allowance
    for doubtful accounts; 1997 - $6.0; 1996 - $7.7)    96.5         78.0
  Note receivable (note 2)                               7.7           -
  Inventories (note 3)                                  94.5        117.7
  Prepaid expenses and other                             7.6          6.0
-------------------------------------------------------------------------
                                                       237.3        219.3
-------------------------------------------------------------------------

Fixed Assets (note 4)
Property, plant and equipment - at cost                214.3        213.2
Accumulated depreciation                               120.7        113.0
-------------------------------------------------------------------------
                                                        93.6        100.2
-------------------------------------------------------------------------

Intangible Assets, net (note 5)                         11.0         12.1

Other Assets, net (note 6)                              10.1         13.4
-------------------------------------------------------------------------
                                                     $ 352.0      $ 345.0
=========================================================================
</TABLE>

----------------------------------     -----------------------------------
Director                                Director


                         see accompanying notes

                                - 33 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
                      CONSOLIDATED BALANCE SHEETS
                        As at December 31, 1997
     (With Comparative Figures as at December 31, 1996 - note 20)
                    (In Millions of U.S. Dollars)
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                      1997         1996
-------------------------------------------------------------------------
<S>                                                  <C>          <C>
LIABILITIES
Current Liabilities
  Short-term borrowings (note 7)                     $  19.7      $  39.0
  Accounts payable                                      44.8         39.6
  Accrued liabilities                                   26.5         28.2
  Product warranty                                       9.5          8.7
  Current portion of long-term debt (note 8)              .2           -
-------------------------------------------------------------------------
                                                       100.7        115.5

Long-Term Debt (note 8)                                165.6        165.0
Product Warranty                                        16.2         17.9
Environmental Liabilities                               12.9         13.6
Other Long-Term Liabilities                              5.1          4.2
-------------------------------------------------------------------------
                                                       300.5        316.2
-------------------------------------------------------------------------

Commitments and Contingencies (note 15)

SHAREHOLDERS' EQUITY
Ordinary Shares (note 9)                               171.2        169.2
Deficit                                               (116.4)      (138.4)
Foreign Currency Translation Adjustment (note 10)       (3.3)        (2.0)
-------------------------------------------------------------------------
                                                        51.5         28.8
-------------------------------------------------------------------------
                                                     $ 352.0      $ 345.0
=========================================================================
</TABLE>

                        see accompanying notes

                                - 34 -


                 INTERNATIONAL COMFORT PRODUCTS CORPORATION
          CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
                   For the Year Ended December 31, 1997
                 (With Comparative Figures for the Years
                Ended December 31, 1996 and 1995 - note 20)
                      (In Millions of U.S. Dollars)
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Cash provided by (used for):                  1997        1996      1995
---------------------------------------------------------------------------
<S>                                           <C>         <C>      <C>
OPERATIONS
  Income (loss) from continuing operations    $ 22.0      $ 11.6   $ (81.2)
  Items not involving current cash flows
    note 18a)                                   17.3        20.9      54.4
  Changes in working capital (note 18b)        (20.1)      (18.4)     97.3
---------------------------------------------------------------------------
                                                19.2        14.1      70.5
  Discontinued Steel Pipe Operation               -           .5       (.2)
---------------------------------------------------------------------------
                                                19.2        14.6      70.3
---------------------------------------------------------------------------

INVESTING
  Property, plant and equipment                 (8.5)      (11.8)    (24.5)
  Proceeds on sale of fixed assets                .2         1.6      11.8
  Proceeds from sale of/(acquisition of)
    Coastline and General (note 2)              24.6       (15.3)       -
  Acquisitions of distribution
    companies (note 2)                          (5.6)         -         -
  Discontinued operations                         -          6.5       1.9
---------------------------------------------------------------------------
                                                10.7       (19.0)    (10.8)
---------------------------------------------------------------------------

FINANCING
  Ordinary shares issued                         2.0          .5        .6
  Long-term debt issued                           .8          -         -
  Refinancing costs                               -         (4.5)      (.9)
  Discontinued Steel Pipe Operation               -         (2.1)     (1.4)
  Other                                           -          2.2        -
---------------------------------------------------------------------------
                                                 2.8        (3.9)     (1.7)
---------------------------------------------------------------------------
Increase (Decrease) in Cash (Net Borrowings)    32.7        (8.3)     57.8
Net Borrowings - Beginning of the Year         (21.4)      (13.1)    (70.9)
---------------------------------------------------------------------------
Net Cash (Borrowings) - End of the Year       $ 11.3      $(21.4)  $ (13.1)
===========================================================================

Represented by
  Cash and short-term deposits                $ 31.0      $ 17.6    $ 13.0
  Less: Short-term borrowings                  (19.7)      (39.0)    (17.7)
---------------------------------------------------------------------------
                                                11.3       (21.4)     (4.7)
  Discontinued operations                         -           -       (8.4)
---------------------------------------------------------------------------
                                              $ 11.3      $(21.4)   $(13.1)
===========================================================================
</TABLE>

                         see accompanying notes

                                - 35 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

1.     SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

International Comfort Products Corporation, formerly Inter-City Products
Corporation, is a Canadian holding company which has two primary operating
subsidiaries: International Comfort Products Corporation (USA) ("ICP (USA)"),
and International Comfort Products Corporation (Canada) ("ICP (Canada)").

These financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada which differ in certain
respects with accounting principles in the United States.  The differences
between GAAP in Canada and the United States as they affect the Company are
described in note 19.

CONSOLIDATION

The consolidated financial statements include the assets, liabilities and
operating results of all subsidiary companies from the dates of acquisition,
on the basis of purchase accounting.  All significant intercompany
transactions have been eliminated.

NATURE OF OPERATIONS

The Company manufactures and markets central air conditioning and heating
products for residential and light commercial use primarily in the United
States and Canada.  At the end of 1997, the Company's network consisted of
approximately 400 independent distributors, of which one distributor
accounted for approximately 11% of the Company's operating revenue.  The
Company's network also includes company-owned distribution centers in Canada,
Mexico, Brazil and Spain.

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of the Company's Canadian and foreign operations
are translated into United States dollars at the rate of exchange in effect
at the balance sheet date. Revenues and expenses are translated at the
average exchange rates prevailing during the year. The unrealized translation
gains and losses are accumulated in a separate component of shareholders'
equity.

REVENUE AND EXPENSE RECOGNITION

Product sales are recognized at the time of shipment.  Selling, general and
administrative costs are charged to expense as incurred.  Service contract
revenue is deferred and amortized into income over the life of the contract
on a straight-line basis.

INVENTORIES

Raw materials and supplies, work in process and finished goods, are valued at
the lower of cost (first-in, first-out) or net realizable value.

-------------------------------------------------------------------------
                              - 36 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

1.     SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

FIXED ASSETS

Fixed assets are recorded at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis at the following annual
rates based on the estimated useful lives of the applicable assets:

<TABLE>
<CAPTION>
      <S>                                          <C>
      Buildings                                    2.5% - 10%
      Machinery, equipment and furniture             5% - 20%
      Tooling and drawings                          10% - 33%
      Land improvements                              5% - 10%
</TABLE>

INTANGIBLE AND OTHER ASSETS

Intangible and other assets include amounts paid for patents, tradenames,
goodwill and debt issuance costs.  Amortization of intangible assets is
provided on a straight-line basis over various periods, not exceeding twenty
years.  The realizability of goodwill and other intangibles is evaluated
periodically as events and circumstances indicate a possible inability to
recover their carrying amount.  Such evaluation is based on undiscounted cash
flow projections.  The analyses necessarily involve significant management
judgment regarding such projections and the actual results could differ
materially from these projections.  Amortization of debt issuance costs is
provided on a straight-line basis over the term of the related debt.

INCOME TAXES

The Company follows the deferral method of tax allocation in accounting for
income taxes. Under this method, timing differences between accounting and
taxable income result in the recording of deferred income taxes.

PRODUCT WARRANTIES

A liability for estimated warranty expense is established by a charge against
operations at the time products are sold. The subsequent costs incurred for
warranty claims serve to reduce the product warranty liability. The actual
warranty costs the Company will ultimately pay could differ materially from
this estimate.  The Company offers and sells extended warranty contracts for
its products through certain distributors.  The revenue for such contracts is
deferred and recognized over the life of the contract on a straight-line
basis.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company provides certain retirement benefits for its retired employees.
Retirement benefits include health care benefits and life insurance. The
Company accounts for these benefit payments on a cash basis.

-------------------------------------------------------------------------

                            - 37 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

1.     SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

FINANCIAL INSTRUMENTS

Periodically, the Company enters into interest rate swap agreements and
forward rate agreements to hedge its interest exposure.  The fair values of
swap and forward rate agreements are based on current interest rates and any
payments and receipts relating to these agreements are recognized in interest
expense over the period of the respective agreement.  All interest rate swaps
are subject to market risks as interest rates fluctuate.  The Company is
exposed to credit risk in the event of nonperformance by counterparties.  The
Company was not party to any interest rate swap or forward rate agreements
during 1997.

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Such estimates include, but are not limited to, allowance for doubtful
accounts, product warranty, product liability, environmental liability, sales
returns and allowances, inventory obsolescence, pension obligation
assumptions, and self-insured medical claims.  Actual results could differ
from these estimates.

RECLASSIFICATIONS

Certain comparative figures have been reclassified to conform with current
financial statement presentations.


2.     ACQUISITIONS AND DIVESTITURES

Effective January 31, 1998, ICP (USA) acquired United Electric Company
("United Electric") of Wichita Falls, Texas, a manufacturer of air
conditioning components for commercial HVAC systems through a cash payment of
approximately $25.0.  United Electric's estimated 1997 sales were
approximately $25.0.  This acquisition will be included in the consolidated
financial statements of the Company upon the acquisition date.

-------------------------------------------------------------------------

                               - 38 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

2.     ACQUISITIONS AND DIVESTITURES (CONT'D)

During 1997, the Company acquired four distributors for total consideration
of approximately $5.6, comprised of cash payments of $3.6 and assumption of
debt of $2.0.  The total goodwill recorded on these transactions was
approximately $2.8.

On September 30, 1997, ICP (USA) sold substantially all of the assets and
liabilities of General Heating and Cooling Company ("General"), a heating and
cooling products distributor, and a company-owned factory branch for net book
value of approximately $10.0.  The total consideration is comprised of a cash
payment of $2.3 and a current note receivable of $7.7.  In 1997, General and
the factory branch contributed operating revenue of approximately $19.2.

On January 27, 1997, ICP (USA) sold Coastline Distribution, Inc.
("Coastline"), a heating and cooling products distributor, and four company-
owned factory branches for net book value of approximately $22.3, the
proceeds of which were used to repay short-term borrowings.

On July 25, 1996, ICP (USA) acquired all of the outstanding shares of
Coastline and General.  The purchase price was allocated on the basis of the
fair market value estimates of the net assets acquired as follows:

<TABLE>
<CAPTION>
            Net assets acquired
            ----------------------------------
            <S>                         <C>
            Accounts receivable         $ 12.8
            Inventories                   18.1
            Fixed assets                   1.4
            Intangible and other assets    4.2
            Current liabilities          (20.0)
            Long-term debt assumed       (16.5)
            ----------------------------------

            Net purchase price          $   -
            ==================================
</TABLE>
-----------------------------------------------------------------------

                               - 39 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------
3.     INVENTORIES

       Inventories are classified as follows:
<TABLE>
<CAPTION>

                                           1997            1996
        --------------------------------------------------------
        <S>                               <C>            <C>
        Finished goods                    $ 58.8         $  86.3
        Raw materials and work in process   13.4            15.7
        Service parts                       22.3            15.7
        --------------------------------------------------------
                                          $ 94.5         $ 117.7
        ========================================================
</TABLE>


4.      FIXED ASSETS

        Fixed assets are classified as follows:
<TABLE>
<CAPTION>
                           1997                             1996
-----------------------------------------------------------------------------
                           Accumu-                         Accumu-
                           lated         Net               lated        Net
                          Depreci-      Book              Depreci-     Book
                 Cost      ation       Value      Cost     ation      Value
-----------------------------------------------------------------------------
<S>              <C>       <C>         <C>        <C>       <C>       <C>
Machinery,
  equipment and
  furniture      $ 100.2   $  59.7     $ 40.5     $ 101.7   $  58.4   $  43.3

Buildings and
  improvements      51.3      18.0       33.3        51.2      16.6      34.6

Tooling and
  drawings          51.3      38.9       12.4        49.0      34.3      14.7

Land and land
  improvements      11.5       4.1        7.4        11.3       3.7       7.6
-----------------------------------------------------------------------------
                 $ 214.3   $ 120.7     $ 93.6     $ 213.2   $ 113.0   $ 100.2
=============================================================================
</TABLE>

     Depreciation expense for the year amounted to $14.2 (1996 - $14.1;
         1995 - $14.8).

-----------------------------------------------------------------------

                                - 40 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

5.     INTANGIBLE ASSETS

       Intangible assets, net of accumulated amortization, are classified
       as follows:
<TABLE>
<CAPTION>
                                           1997          1996
        ------------------------------------------------------
        <S>                               <C>           <C>
        Goodwill                          $  7.0        $  4.7
        Patents                              2.4           2.8
        Tradenames                           1.6           1.7
        Customer lists                        -            2.8
        Other intangible assets               -             .1
        ------------------------------------------------------
                                          $ 11.0        $ 12.1
        ======================================================
</TABLE>

        Amortization of intangible assets during the year was $.9
        (1996 - $1.6; 1995 - $4.0).  The accumulated amortization of
        intangible assets at December 31, 1997, was $10.5 (1996 -
        $9.6).

        In 1995, the Company reengineered various business processes
        which led to a change in the extent to which certain intangibles
        were used in the Company's operations.  Impairments were recognized
        when the undiscounted expected future operating cash flows
        derived from such intangible assets were less than their carrying
        values or in the case of certain patents and technology, on the
        discontinued use of such identifiable intangibles.  The 1995
        operating loss included a $1.3 million loss on the impairment of such
        intangible assets.


6.      OTHER ASSETS

        Other assets are classified as follows:
<TABLE>
<CAPTION>
                                                1997          1996
        ----------------------------------------------------------
        <S>                                    <C>           <C>
        Debt issuance costs, less
          accumulated amortization             $  4.3        $  5.7
        Due from insurers on
          environmental claim (note 15 (b))       5.0           5.6
        Other                                      .8           2.1
        -----------------------------------------------------------
                                               $ 10.1        $ 13.4
        ===========================================================
</TABLE>

----------------------------------------------------------------------

                                - 41 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

7.     SHORT-TERM BORROWINGS

       The details of short-term borrowings at December 31 are as follows:
<TABLE>
<CAPTION>
                                                    1997          1996
     -------------------------------------------------------------------
     <S>                                            <C>           <C>
     ICP (USA) - Receivables Purchase Agreement     $ 10.0        $ 27.0
     ICP (Canada)                                      8.8          12.0
     Industrias HVH, S.A. - Line of Credit              .9            -
     -------------------------------------------------------------------
                                                    $ 19.7        $ 39.0
     ===================================================================
</TABLE>

         (a) ICP (USA)

             Receivables Purchase Agreement
             On July 25, 1996, ICP (USA) entered into a five year agreement
             to sell on a revolving basis, up to a $70.0 undivided
             participation ownership interest in a designated pool of its
             accounts receivable. This transfer of receivables does not
             constitute a sale for accounting purposes on the basis that all
             the significant risks and rewards of ownership of the
             receivables are not transferred to the purchaser.  Accordingly,
             the pool of receivables of $10.0 is included in accounts
             receivable at December 31, 1997 (1996 - $27.0).  In connection
             with the significant change in and amendment to previous
             financing agreements, ICP (USA) recorded a write-off of debt
             issuance costs of $2.1 in the 1995 consolidated statement of
             loss.

             The receivables purchase agreement requires ICP (USA) to pay
             fees plus certain administrative costs.  At December 31, 1997,
             the cost of the receivable facility including unused line fees
             was 10.4% (1996 - 9.8%).  The unamortized transaction fees of
             $1.1 are included in Other Assets at December 31, 1997.

             Revolving Credit Facility
             On July 18, 1997, ICP (USA) entered into a two year $15.0
             million revolving credit facility secured by inventories.  This
             revolving credit facility accrues interest at prime or LIBOR
             plus 1.5%.  As of December 31, 1997, the Company has no
             outstanding balance owing on this facility.

-----------------------------------------------------------------------
                                - 42 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

7.       SHORT-TERM BORROWINGS (CONT'D)

         (b) ICP (CANADA)

             ICP (Canada) has a Cdn. $30.0 million revolving credit facility,
             of which $8.8 (Cdn $12.6 million) was utilized at December 31,
             1997. This three year facility was established on December 19,
             1996.   ICP (Canada)'s revolving credit facility accrues
             interest at prime plus 1.0% per annum or at Bankers' Acceptance
             rates plus a stamping fee of 2.0% as selected by the Company
             (7.0% at December 31, 1997).  All of ICP (Canada)'s assets are
             pledged as collateral under its facility which contains
             covenants, the most restrictive of which require it to maintain
             a certain minimum interest coverage and net worth and precludes
             the payment of dividends.  At December 31, 1997, the restricted
             net assets of ICP (Canada) were approximately $13.0.  Subsequent
             to year end, ICP (Canada) obtained a waiver of its covenant
             breach for the minimum interest coverage ratio which existed at
             December 31, 1997.

         (c) The maximum amount of short-term borrowings outstanding,
             including the advances received under the receivables purchase
             agreement  at any month-end during the year ended December 31,
             1997, was $65.9 (1996 - $64.4). The average short-term
             borrowings outstanding, including the advances received under
             the receivables purchase agreement, calculated by averaging
             month-end balances, during the year ended December 31, 1997, was
             $39.2 (1996 - $46.0).

             The weighted average interest rate on the outstanding short-term
             borrowings at December 31, 1997, was 8.2% (1996 - 7.9%).
             Weighted average interest rates are calculated based on actual
             interest rates in effect and the short-term borrowings
             outstanding as at December 31.


8.       LONG-TERM DEBT

         (a)   The details of long-term debt are as follows:
<TABLE>
<CAPTION>
                                                    1997          1996
     -------------------------------------------------------------------
     <S>                                          <C>           <C>
     9.75% Senior Notes due March 1, 2000         $ 140.0       $  140.0
     Term bank loan, due 2000 and 2001               25.0           25.0
     Note payable                                      .8             -
     -------------------------------------------------------------------
                                                    165.8          165.0
     Current portion of note payable included
       in current liabilities                          .2             -
     -------------------------------------------------------------------
                                                  $ 165.6        $ 165.0
     ===================================================================
</TABLE>


-----------------------------------------------------------------------
                                 - 43 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

8.       LONG-TERM DEBT (CONT'D)

         (b) ICP (USA)

             On March 11, 1993, ICP (USA) issued $140.0 of 9.75% senior
             secured notes ("Senior Notes") which are repayable on March 1,
             2000.  The Senior Notes require mandatory prepayments if ICP
             (USA) has certain cash proceeds from asset sales as defined in
             the Senior Note agreement. Interest on the Senior Notes is
             payable semi-annually in March and September. The Senior Notes
             were trading 101.50/102 (bid/offer) at December 31, 1997.

             The Senior Notes are collateralized by substantially all the
             real and personal property of ICP (USA), other than accounts
             receivable and inventories. The Senior Notes indenture contains
             covenants which limit certain transactions including the payment
             of dividends.

             On July 25, 1996, ICP (USA) terminated $20.0 notional amount of
             interest rate swaps which had effectively converted this amount
             of the Senior Notes to a variable rate of interest.   In
             connection with the termination of this interest rate swap, ICP
             (USA) incurred costs of $1.9 which were deferred and are being
             amortized over the remaining term of the Senior Notes.   As of
             December 31, 1997, the entire $140.0 Senior Notes are fixed at
             a rate of 9.75% through the maturity date of March 1, 2000.

         (c) CHL HOLDINGS INC.

             On December 19, 1996, CHL Holdings Inc., a wholly owned United
             States subsidiary of the Company, arranged an unsecured term
             bank loan in the amount of $25.0 due in full by October 15,
             2001.  The Company is required to repay $15.0 in 2000 and $10.0
             in 2001.  The term bank loan accrues interest at LIBOR plus
             0.25% (6.2% at December 31, 1997) and has been guaranteed by a
             third party. The guarantor holds a $15.0 subordinated security
             interest in ICP (Canada)'s receivables and inventories, and the
             shares of ICP (Canada) have been pledged in support of the
             guarantee. The pledge agreement contains certain covenants, the
             most restrictive of which requires ICP (Canada) to maintain a
             minimum level of receivables and inventories in excess of its
             borrowings.

         (d) Under the provisions of the various loan agreements and
             indentures, the Company is required to make installments of $.2,
             $.2, $155.2, $10.2, and nil during the next five years beginning
             in 1998.

-----------------------------------------------------------------------------
                                  - 44 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
---------------------------------------------------------------------------
9.     SHARE CAPITAL

      (a) ORDINARY SHARES

      (i) AUTHORIZED AND OUTSTANDING
          The Company is authorized to issue an unlimited number of
          ordinary shares.  Changes in the issued and outstanding ordinary
          shares for the years 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
                         1997                 1996                1995
                  ------------------   ------------------   ----------------
                  Number      Amount   Number      Amount   Number    Amount
-----------------------------------------------------------------------------
<S>               <C>         <C>      <C>         <C>      <C>        <C>
Issued and
  outstanding
  Beginning of
  the year        39,260,322  $169.2   39,042,574  $166.5   38,649,949 $165.9

Issued under
  the Employee
  Stock Option
  Plan               474,200     1.3         -         -          -        -

Issued under
  the Share
  Ownership
  Savings Plan        95,920      .6      201,763      .5      392,625     .6

Issued under
  the Directors
  Share
  Compensation
  Arrangement         16,670      .1       15,985      -          -        -

Receipt of
  Funds from
  Trustee for
  1990 Plan of
  Arrangement           -         -          -        2.2         -        -
-----------------------------------------------------------------------------
Issued and
  outstanding
  End of the year 39,847,112  $171.2   39,260,322  $169.2   39,042,574 $166.5
=============================================================================
</TABLE>
      (ii)  EMPLOYEE STOCK OPTION PLAN
       A maximum of 2,500,000 ordinary shares have been reserved for issuance
       to officers and employees of the Company under the Employee Stock
       Option Plan.  The term of all options cannot exceed ten years from the
       date the option is granted and are vested at an annual rate of 20% per
       year on a cumulative basis, except in certain circumstances where the
       exercise of such options would be accelerated.

       The option exercise price is fixed by the Board of Directors at the
       time each option is authorized and cannot be less than the weighted
       average sales price per share on The Toronto Stock Exchange on the
       business day preceding the date of authorization.
---------------------------------------------------------------------------
                                 - 45 -
             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
---------------------------------------------------------------------------
9.    SHARE CAPITAL (CONT'D)

      (a)  ORDINARY SHARES (CONT'D)

      (ii) EMPLOYEE STOCK OPTION PLAN (CONT'D)

Changes in the share options outstanding from January 1, 1995 to
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                       1997          1996        1995
  ----------------------------------------------------------------------
  <S>                                 <C>         <C>          <C>
  Balance - Beginning of the year     1,720,000     776,000    1,281,400
  Granted                               770,000   1,000,000         -
  Exercised                            (474,200)       -            -
  Canceled                              (56,000)    (56,000)    (515,400)
  1990 LTIP units converted                -           -          10,000
  ----------------------------------------------------------------------
  Balance - End of the year           1,959,800   1,720,000      776,000
  ======================================================================
</TABLE>

The details of the options outstanding at December 31, 1997, at
each exercise price are as follows:

<TABLE>
<CAPTION>

   Exercise Price                                     Number of
        (Cdn.$)             Expiry Date               Shares
  -----------------------------------------------------------
  <S>                       <C>                     <C>
  $3.10                     February 29, 2000          25,000
  $3.10                     May 30, 2000               25,000
  $3.50                     August 24, 2001            65,000
  $3.10                     December 19, 2001         211,000
  $2.80                     April 16, 2003            723,800
  $3.90                     July 11, 2003             105,000
  $4.20                     July 31, 2003              10,000
  $4.10                     August 23, 2003            15,000
  $3.83                     November 29, 2003          10,000
  $5.20                     January 31, 2004           45,000
  $5.80                     February 28, 2004          15,000
  $7.05                     April 29, 2004            710,000
                                                    ---------
                                                    1,959,800
                                                    =========
</TABLE>
----------------------------------------------------------------------
                               - 46 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------
9.    SHARE CAPITAL (CONT'D)

      (a)   ORDINARY SHARES (CONT'D)

      (iii) SHARE OWNERSHIP SAVINGS PLAN

            Effective July 1, 1992, certain employees of the
            Company were eligible to participate in the Company's Share
            Ownership Savings Plan (the "Savings Plan"). Generally, the
            Savings Plan is available to all non-union employees following
            the completion of one year of continuous service with the
            Company.  The Savings Plan allows eligible employees to
            contribute from one to six percent of their salary to the Savings
            Plan. The Company is required to match 25% of the employees'
            contributions and may make additional annual contributions of up
            to 75% of the employees' contribution at its discretion.  In
            February 1997, the hourly employees began participating in a
            hourly savings plan with no matching company contributions.  In
            1997, the Company's expense with respect to both savings plans
            was $.3 (1996- $.1).

      (iv)  LONG-TERM INCENTIVE PLANS

            Effective April 29, 1997, the Company adopted the
            1997 Long-Term Incentive Plan (the "1997 Plan") which will
            provide deferred compensation opportunities to certain senior
            managers of the Company.  This deferred cash compensation plan
            is based on the awarding of Performance Units, the value of which
            is related to the appreciation in the value of the ordinary
            shares of the Company.

            The 1997 Plan is comprised of (i) Three year Performance Units
            which are awarded, valued and paid at the end of a three
            calendar year period (the "Performance Period") as designated by
            the Pension and Compensation Committee (the "Committee") of the
            Board of Directors, and (ii) Long-term Performance Units which
            are awarded at the end of the Performance Period, but paid upon
            retirement, according to a vesting schedule, and subject to
            forfeiture.  The initial grant price of the Performance Units is
            the value established by the Committee at the beginning of the
            Performance Period, to which the future ordinary share price
            shall be compared to determine the appreciated value for purposes
            of determining the value of Performance Units attributable to
            that Performance Period.  At the end of the Performance Period,
            the number of Performance Units earned, if any, will be based on
            the extent to which the established objectives of average three
            year earnings per share goals have been achieved.  If the
            threshold objective is not met, no Performance Units are earned.
            If the target objective is exceeded, additional Performance Units
            can be earned, up to a predetermined maximum level.
---------------------------------------------------------------------------
                                 - 47 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

9.  SHARE CAPITAL (CONT'D)

   (a)  ORDINARY SHARES (CONT'D)

   (iv) LONG-TERM INCENTIVE PLANS (CONT'D)

        Performance Units shall be valued in the currency of the resident
        country of the participant.  The value of a Three year Performance
        Unit is calculated as the equivalent of the difference in price of
        the Company's ordinary shares for the average of the last five
        business days of the last calendar year of the Performance Period,
        less the Grant Price.  The value of a Long-term Performance Unit is
        calculated as the equivalent of the difference in price of the
        Company's ordinary shares for the average of the six months prior
        to termination or retirement, less the grant price.

        On April 29, 1997, the Company awarded target thresholds of 177,500
        Performance Units and 180,000 Long-term Performance Units to senior
        management at a grant price of Cdn. $7.05.  The expense for 1997
        relating to the 1997 Plan based upon the increase in the Company's
        stock price since the date of grant is $.4.

        In 1990, the Company adopted a long-term incentive plan (the "1990
        Plan").  Under the 1990 Plan, certain key officers and employees of
        the Company were granted long-term incentive compensation units
        ("1990 LTIP Units") the value of which shall be determined by
        reference to the appreciation in the market value of the ordinary
        shares over stated periods of time.  Based on the discretion of the
        Board of Directors of the Company, the appreciation in the market
        value of the ordinary shares will be distributed to the holder
        thereof by payment of cash, issuance of ordinary shares or a
        combination thereof.

        As at December 31, 1997, 34,000 units from the February 1, 1993
        granting were outstanding under the 1990 Plan with an initial
        value per unit of Cdn $7.125 and a valuation date of February 1,
        1998.   In 1997, the Company's expense with respect to the 1990 Plan
        was approximately $.1.
---------------------------------------------------------------------------
                                 - 48 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
---------------------------------------------------------------------------
9.    SHARE CAPITAL (CONT'D)

     (b)    PREFERENCE SHARES

            The Company is authorized to issue an unlimited number of Class
            A preference shares issuable in series and rank senior to the
            Class B preference shares and ordinary shares as to dividends and
            participation in certain distributions of assets on liquidation.
            Any series of the shares may be made convertible into ordinary
            shares and have no voting rights as a class.  The Company is also
            authorized to issue an unlimited number of Class B preference
            shares issuable in series and rank senior to ordinary shares and
            junior to the Class A preference shares as to dividends and
            participation in certain distributions of assets on liquidation.
            Any series of the shares may be made convertible into ordinary
            shares and have no voting rights as a class.

            As of December 31, 1997, the Company has not issued any Class A
            or B preference shares.


10. FOREIGN CURRENCY TRANSLATION ADJUSTMENT

            The Company adopted the United States dollar as its
            reporting currency, effective January 1, 1994.  Accordingly, the
            foreign currency translation adjustment which is included as
            a component of shareholders' equity, represents the
            unrealized gain or loss on translation of financial statements of
            self-sustaining operations up to December 31, 1997.  Prior to
            1994, this adjustment represented the unrealized gain or
            loss on translation of financial statements of self-sustaining
            operations in the United States.  Changes during the
            respective years are as follows:
<TABLE>
<CAPTION>
                                       1997         1996         1995
  -----------------------------------------------------------------------
  <S>                                  <C>          <C>          <C>
  Cumulative unrealized loss at
    January 1                          $(2.0)       $(1.1)       $(1.9)

  Unrealized gain (loss) on
    translation of net assets           (1.3)         (.9)          .8
  -----------------------------------------------------------------------
  Cumulative unrealized loss
    at December 31                     $(3.3)       $(2.0)       $(1.1)
  =======================================================================
</TABLE>
           The rate of exchange as at December 31, 1997 was U.S.
           $1.00 = Cdn. $1.4291 (1996 -U.S. $1.00 = Cdn. $1.3706), and the
           average rate for the year was U.S. $1.00 = Cdn. $1.3847 (1996 -
           U.S. $1.00 = Cdn. $1.3636; 1995 - U.S. $1.00 = Cdn. $1.3727).
--------------------------------------------------------------------------
                                 - 49 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------
11.    INCOME TAXES

       The components of income (loss) before income taxes and the
       income tax provision (recovery) are as follows:

<TABLE>
<CAPTION>
                                        1997         1996         1995
  ------------------------------------------------------------------------
  <S>                                   <C>          <C>          <C>
  Income (loss) before income taxes
    Canada                              $  (.3)      $  2.0       $  (1.3)
    United States                         22.3          9.6         (67.1)
  ------------------------------------------------------------------------
                                        $ 22.0       $ 11.6       $ (68.4)
  ------------------------------------------------------------------------

  Current income tax provision
  (recovery)
    Canada                                  -            -            1.8
    United States                           .6           -            (.4)
   -----------------------------------------------------------------------
                                            .6           -            1.4
  ------------------------------------------------------------------------

  Deferred income tax provision
  (recovery)
    Canada                                  -            -            3.9
    United States                          (.6)          -            7.5
  ------------------------------------------------------------------------

                                           (.6)          -           11.4
  ------------------------------------------------------------------------

  Total income tax provision (recovery) $   -        $   -        $  12.8
  ========================================================================
</TABLE>

       In 1995, the deferred income tax provision of $11.4 represented the
       write-off of accumulated deferred income tax debits recorded as of
       December 31, 1994.  This write-off was required since there was no
       longer reasonable assurance as of December 31, 1995, that the timing
       differences supporting these deferred tax debits would reverse.

------------------------------------------------------------------------
                                 - 50 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-------------------------------------------------------------------------
11.    INCOME TAXES (CONT'D)

       A reconciliation between the combined statutory and the
       effective rate of income tax is provided below:
<TABLE>
<CAPTION>

                                        1997         1996         1995
  ------------------------------------------------------------------------
  <S>                                   <C>          <C>          <C>
  Income (loss) before income taxes     $ 22.0       $ 11.6       $ (68.4)

  Combined statutory tax rate             38.8%        38.8%         38.8%
  ------------------------------------------------------------------------

  Computed income tax
    provision (recovery)                   8.5          4.5         (26.5)
  Increase (decrease) resulting from:
    Non-deductible depreciation             .3           .3            .8
    Unrecognized (recognized) benefit
      of losses and expenses               (.8)        (1.6)         25.7
    Prior years' deferred taxes
      written-off                           -            -           11.4
    Utilization of loss carryforwards     (7.7)        (3.4)           -
    Other                                  (.3)          .2           1.4
  ------------------------------------------------------------------------

  Actual income tax provision
    (recovery)                          $   -        $   -        $  12.8
  ========================================================================

  Effective rate of income                 not          not          not
    tax recovery                        meaningful   meaningful   meaningful
============================================================================
</TABLE>












                                 - 51 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

11.    INCOME TAXES (CONT'D)

       At December 31, 1997, the Corporation and its subsidiaries
       had the following approximate amounts available to reduce future
       years' earnings for income tax purposes, the effect of
       which has not been recognized in the financial statements.
<TABLE>
<CAPTION>
       ----------------------------      ------------------------------
       Losses for tax purposes                        United
       expiring in                        Canada      States       Total
       ----------------------------      --------------------------------
       <S>     <C>                       <C>          <C>         <C>
               1998                       $  3.5          -        $  3.5
               1999                          6.5          -           6.5
               2000                           .5          -            .5
               2001                          7.9          -           7.9
               2002                          5.5          -           5.5
               2003                          2.9          -           2.9
               2004                          1.6          -           1.6
               2010                           -         21.0         21.0
               2011                           -          4.6          4.6
       -----------------------------      -------------------------------
       Total losses                         28.4        25.6         54.0

       Other deductions and basis
       differences not yet taken as
       a deduction for income tax
       purposes                              9.6        32.1         41.7
       ----------------------------       -------------------------------
                                          $ 38.0      $ 57.7       $ 95.7
       ============================       ===============================
</TABLE>








-------------------------------------------------------------------------

                                  - 52 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-------------------------------------------------------------------------

12.    INCOME (LOSS) PER ORDINARY SHARE

       The basic income (loss) per ordinary share is calculated on
       the weighted average number of shares outstanding during the
       respective years as follows:
<TABLE>
<CAPTION>
  ----------------------------------------------------------------------
                                       1997         1996       1995
  ----------------------------------------------------------------------
  <S>                                  <C>          <C>        <C>
  Income (loss) to ordinary
    shareholders before
    discontinued operations            $ 22.0       $ 11.6     $ (81.2)
  Loss from discontinued operations        -          (3.1)      (12.0)
  ----------------------------------------------------------------------
  Net income (loss) to ordinary
    shareholders                       $ 22.0       $  8.5     $ (93.2)
  ======================================================================
  Weighted average number of
    ordinary shares outstanding
    during the year (in millions)        39.664       39.161      38.828
  ======================================================================

  Income (loss) per ordinary share
    From continuing operations         $  0.56      $  0.30    $  (2.09)
    After discontinued operations      $  0.56      $  0.22    $  (2.40)
  ======================================================================
</TABLE>

  The calculation of net income per ordinary share on a fully diluted
  basis assumes the exercise of outstanding stock options if such action
  would result in dilution of earnings per share.  In 1997, fully diluted net
  income per ordinary share was approximately $0.54.













----------------------------------------------------------------------------


                                  - 53 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

13.    PENSION PLANS

       The Company and its subsidiaries have various defined
       benefit pension plans available to substantially all permanent
       full-time employees. The total pension expense for 1997
       amounted to $2.9 (1996 - $2.8; 1995 - $3.5) and is comprised
       of the following:
<TABLE>
<CAPTION>
                                       1997         1996       1995
  --------------------------------------------------------------------
  <S>                                  <C>          <C>        <C>

  Current service costs                $  2.4       $  2.3     $  2.3
  Interest costs on projected
    benefit obligation                    4.5          4.1        4.5
  Return on assets held
    in the plans                         (4.3)        (4.5)      (6.2)
  Net amortization and deferral            .3           .9        2.9
  --------------------------------------------------------------------
                                       $  2.9       $  2.8     $  3.5
  ====================================================================
</TABLE>

       The actuarial present value of accrued pension benefits
       represents the discounted value of benefits expected to be paid to
       plan members, based on projected salaries prorated on service. No
       escalation of salaries is used to determine the actuarial present
       value of accrued pension benefits where the pension benefit is fixed
       and subject to renegotiation.

       Certain key assumptions used in determining both the pension
       expense for 1997, and the actuarial present value of accrued pension
       benefits as at December 31, 1997, are as follows:

<TABLE>
<CAPTION>
                                                      Canadian    U.S.
                                                        Plans     Plans
  ---------------------------------------------------------------------
  <S>                                                    <C>       <C>
  Discount rate                                          8.0%      7.5%

  Rate of increase of compensation levels                6.0%      4.5%

  Expected long-term rates of return on plan assets      8.0%      9.0%
  ---------------------------------------------------------------------
</TABLE>








---------------------------------------------------------------------------
                                 - 54 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

13.    PENSION PLANS (CONT'D)

       The status of pension plans at December 31, 1997, is as
       follows:
<TABLE>
<CAPTION>
                                             Canadian          U.S.
                                               Plans          Plans
  -------------------------------------------------------------------
  <S>                                         <C>             <C>
  Actuarial present value of
    Vested benefit obligations                $ 13.6          $  36.9
    Nonvested benefit obligations                 -               3.2
  -------------------------------------------------------------------
  Accumulated benefit obligations               13.6             40.1
  Additional amounts related to
    projected salary and wage increases           .5              9.2
  -------------------------------------------------------------------
  Total projected benefit obligations           14.1             49.3
  Plan assets at market value                   16.6             43.7
  -------------------------------------------------------------------
  Plan assets in excess of (less than)
      projected benefit obligations              2.5             (5.6)
  Unrecognized net (gain) loss                  (1.5)             2.7
  Unrecognized prior service cost                 .2              1.4
  Unrecognized net (asset) obligation            (.6)             1.1
  --------------------------------------------------------------------
  Prepaid (accrued) pension cost                 $.6             $(.4)
  ====================================================================
</TABLE>










---------------------------------------------------------------------------

                                 - 55 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

14.    BUSINESS SEGMENTS

       The following is an analysis of certain financial
       information by business lines and geographical areas for the three
       years ended December 31, 1997, 1996 and 1995 as it relates to
       operating revenue, operating profit (loss), identifiable assets,
       capital expenditures and depreciation and amortization of intangibles.
       Operating profit is total revenue less operating expenses which
       includes an allocation of corporate expenses.  Identifiable assets
       include only those assets directly identifiable with those
       operations.
<TABLE>
<CAPTION>
                        Operating Revenue         Operating Profit (Loss)
--------------------------------------------------------------------------
                      1997     1996    1995      1997     1996     1995
--------------------------------------------------------------------------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>
Heating and cooling
  Canada              $ 74.0   $ 76.8   $ 79.0   $  .3    $ 3.3    $ (1.0)
  United States        556.3    564.7    453.6    41.2     30.2     (38.3)
--------------------------------------------------------------------------
                       630.3    641.5    532.6    41.5     33.5     (39.3)
Corporate                 .4       .4       .2      -       (.1)     (4.0)
--------------------------------------------------------------------------
                      $630.7   $641.9   $532.8   $41.5    $33.4    $(43.3)
==========================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                       Amortization of
                    Identifiable                 Capital               Intangibles and
                       Assets                  Expenditures             Depreciation
-----------------------------------------------------------------------------------------
                1997    1996    1995      1997    1996     1995     1997    1996    1995
-----------------------------------------------------------------------------------------
<S>             <C>     <C>     <C>       <C>     <C>      <C>      <C>     <C>     <C>
Heating
and cooling
  Canada        $ 43.8  $ 46.5  $ 42.2    $ 1.4   $  .4    $  .6     $  .9  $  .6   $  .6
  United States  293.1   280.4   251.0      7.1    11.4     23.9      14.2   15.1    17.7
-----------------------------------------------------------------------------------------
                 336.9   326.9   293.2      8.5    11.8     24.5      15.1   15.7    18.3
Corporate         15.1    18.1    25.0       -       -        -         -      -       .5
-----------------------------------------------------------------------------------------
                $352.0  $345.0  $318.2    $ 8.5   $11.8    $24.5     $15.1  $15.7   $18.8
Discontinued                          ===================================================
Steel Pipe
Operation           -       -     27.6
--------------------------------------
                $352.0  $345.0  $345.8
======================================
</TABLE>


----------------------------------------------------------------------------
                                - 56 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

15.    COMMITMENTS AND CONTINGENCIES

       (a) ICP (USA) has been involved in paying the costs of assessing the
           extent of, and remediating, environmental contamination at its
           Lewisburg manufacturing facility caused by a sudden and accidental
           spill in 1980.  ICP (USA) has paid for certain investigative
           activities and remediation at the manufacturing facility as well
           as off-site drum storage locations.  At December 31, 1997, the
           costs of the remainder of the environmental cleanup, which
           management believes are reasonably determinable over a ten year
           period, were discounted at 5.5%.  At December 31, 1997, ICP (USA)
           has an accrual of $3.1 for the cost of this cleanup, of which $2.7
           is included in Environmental Liabilities and $.4 in Accrued
           liabilities.

          The undiscounted cash flows are estimated to be as follows:
<TABLE>
<CAPTION>
                           -----------             ------
                              Year
                           -----------             ------
                           <S>                       <C>
                           1998                      $ .4
                           1999                        .7
                           2000                        .2
                           2001                        .2
                           2002                        .2
                           Thereafter                 1.6
                                                    -----
                                                    $ 3.3
                                                    =====
</TABLE>

           In connection with the environmental remediation at the off-site
           drum storage locations, ICP (USA) has entered into a cost-sharing
           agreement with the previous owner.  This agreement calls for each
           entity to bear fifty percent of the investigation, cleanup,
           monitoring, removal and treatment of the existing drum storage
           sites.  Additionally, in the event that other drum storage sites
           are discovered, ICP (USA) and the previous owner shall bear the
           additional costs at a ratio of sixty percent to forty percent,
           respectively.  The estimated costs to clean up the existing drum
           storage sites are included in the amounts detailed above.











--------------------------------------------------------------------------
                                - 57 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

15.    COMMITMENTS AND CONTINGENCIES (CONT'D)

      (b) In 1991, the Company and Flying J, Inc. ("Flying J") entered into
          a cost sharing agreement whereby the Company will participate with
          Flying J in the financing of future cleanup activities for
          environmental contamination at various refinery sites sold by the
          Company to Flying J in 1980. This settlement does not affect
          claims by Flying J or the Company against third parties who may be
          responsible for contribution to refinery cleanup costs. In 1991,
          the Company also reached a settlement with several of its insurance
          carriers whereby the insurers will reimburse the Company for a
          portion of the expenses the Company will incur in the cleanup
          activities at the refineries.  Ongoing cleanup activities at four
          refinery sites are at different regulatory stages.

          Although the scope of the projects is becoming better understood
          and defined with the various regulatory agencies, the ultimate
          scope of the projects remains uncertain and it is not possible to
          definitively estimate the ultimate costs of remediation of such
          environmental contamination. At December 31, 1997, the Company has
          an accrual of $11.0 for its estimated share of future cleanup
          costs, of which $10.2 is included in Environmental Liabilities and
          $.8 in Accrued liabilities.  The Company has offsetting receivables
          due from insurers of $5.0 and $1.8 which are included in Other
          Assets and Accounts receivable, respectively.

          The undiscounted cash flows are expected to be as follows:
<TABLE>
<CAPTION>
                           -----------             --------
                              Year
                           -----------             --------
                             <S>                    <C>
                             1998                   $   .8
                             1999                       .8
                             2000                      1.5
                             2001                       .5
                             2002                       .5
                             Thereafter                6.9
                                                   --------
                                                    $ 11.0
                                                   ========
</TABLE>

          Based on current information prepared by independent environmental
          consultants, the Company's share of the cost of environmental
          cleanup, discounted at 5.5% is currently estimated to be
          approximately $7.2 over the next 21 years. The expected
          insurance recoveries discounted at 5.5% are currently estimated to
          be approximately $3.6 over the next 21 years.



----------------------------------------------------------------------------
                                - 58 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

15.    COMMITMENTS AND CONTINGENCIES (CONT'D)

       (c) In February 1995, an action was commenced against
           ICP (Canada) in the Ontario Court (General Division)
           (the "Court"), for damages for breach of contract or
           negligence in the amount of $4.9 (Cdn $7.0 million), plus
           interest and costs, arising out of alleged defective cooling
           banks which were designed, manufactured and delivered by Unifin
           International, a former  division of ICP (Canada) ("Unifin"),
           to the plaintiffs between 1981 and 1984.

           The Company has filed a statement of Defense with the Court that
           denies the plaintiffs' allegations and intends to vigorously
           defend its position against the claim. The Company has notified
           its primary and umbrella liability insurance carriers for their
           possible involvement with this claim.  The Company believes that
           it has insurance coverage for this claim.

           In a similar action, ICP (Canada) was served with an Amended
           Summons on January 22, 1998 in an action commenced in the
           Supreme Court of New South Wales, Sydney Registry ("Supreme
           Court"), alleging that Unifin designed, manufactured and supplied
           defective oil coolers to a generator/transformer project in
           Australia.  The plaintiff pleads that Unifin's negligence caused
           the oil coolers to produce aluminum alloy metal contamination of
           the transformer cooling oil, in turn causing major damage to the
           generators/transformers necessitating major repairs in the amount
           of at least approximately $9.0 (Aus $14.0 million).

           The Company was not represented on the hearing of an application
           for leave to amend the Summons and intends to move the Supreme
           Court to contest its jurisdiction, and set aside the substitution
           and service of the Amended Summons. While it is too early to
           evaluate the merits of the plaintiff's claim against it, the
           Company believes that the plaintiff's action should be heard in
           the Ontario Court,if at all, and consolidated with the similar
           February 1995 action brought in Ontario which is based on
           substantially the same allegations of fact.














---------------------------------------------------------------------------
                                   - 59 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

15.    COMMITMENTS AND CONTINGENCIES (CONT'D)

      (d) The Company leases certain facilities and equipment under
          noncancelable operating leases. Lease rental expense during the
          current year amounted to $4.0 (1996 - $5.9; 1995 - $6.8). The
          approximate aggregate minimum annual rentals under long-term leases
          in future years, excluding capital leases, at December 31, 1997,
          are as follows:
<TABLE>
<CAPTION>
                           -----------              ------
                           Year
                           -----------              ------
                            <S>                     <C>
                            1998                    $  2.8
                            1999                       2.0
                            2000                       1.6
                            2001                        .6
                            2002                        .4
                            Thereafter                  .6
                                                    ------
                                                    $  8.0
                                                    ======
</TABLE>

      (e) The Company and its subsidiaries are parties to various other
          claims and lawsuits.  The Company believes that such proceedings
          will not have a material effect on the Company's financial position
          or future operating results, although no assurance can be given
          with respect to the ultimate outcome for any such litigation.


16.     DISCONTINUED OPERATIONS

        There were no discontinued operations in 1997.  In the
        consolidated statements of income (loss), discontinued operations
        consisted of the following:
<TABLE>
<CAPTION>
                                               1996               1995
------------------------------------------------------------------------
<S>                                          <C>               <C>
Steel Pipe Operations                        $ (3.1)            $ (14.3)
Settlement of Former Resources Claim             -                  2.9
Utilization of Prior Years' Tax Losses           -                  1.3
Write-off of Deferred Tax Debit-Flying J
  Environmental Provision                        -                 (1.9)
------------------------------------------------------------------------
                                             $ (3.1)            $ (12.0)
========================================================================
</TABLE>

    (i) STEEL PIPE OPERATIONS
        On May 30, 1996, the Company sold Thompson Pipe and Steel Company,
        its wholly owned steel pipe manufacturing subsidiary, for total
        consideration of approximately $6.5, including the assumption of bank
        indebtedness of approximately $6.1.

-----------------------------------------------------------------------------
                                - 60 -
             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
----------------------------------------------------------------------

16.   DISCONTINUED OPERATIONS (CONT'D)

      Operating results of the Steel Pipe Operation for the five months
      ended May 30, 1996, and the year ended December 31, 1995, are as
      follows:
<TABLE>
<CAPTION>
                                                  1996            1995
     ---------------------------------------------------------------------
     <S>                                          <C>              <C>
     Operating revenue                            $ 10.9           $ 37.9
     ---------------------------------------------------------------------

     Loss before income taxes                       (3.1)            (8.0)
     (Provision for) recovery of income taxes         -               (.3)
     ---------------------------------------------------------------------

     Loss from Steel Pipe Operation                 (3.1)            (8.3)
     Write-down to estimated net realizable value     -              (5.4)
     Estimated disposal costs                         -               (.6)
     ---------------------------------------------------------------------
                                                   $(3.1)          $(14.3)
     =====================================================================
</TABLE>

   (ii)  SETTLEMENT OF FORMER RESOURCES CLAIM

         In December 1995, the Company received a final cash settlement
         resulting from a favorable judgment relating to the Company's
         former Resources Operations, which were sold in 1989.  The $2.9
         received has been recorded as income from discontinued operations.

   (iii) UTILIZATION OF PRIOR YEARS' TAX LOSSES

         The Company has utilized prior years' tax losses which resulted
         from the costs incurred on the sale of the Company's Utilities
         and Propane Operations in 1990 to reduce current taxes otherwise
         payable from continuing operations.

   (iv)  WRITE-OFF OF DEFERRED TAX DEBIT - FLYING J
         ENVIRONMENTAL PROVISION

         In 1995, the deferred tax provision of $1.9 represents the
         write-off of a deferred tax debit established in prior years.
         This write-off was required since there was no longer reasonable
         assurance as of December 31, 1995, that the timing differences
         supporting this deferred tax debit would reverse.





--------------------------------------------------------------------------
                                  - 61 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

17.    ASSET WRITEDOWNS AND RESTRUCTURING COSTS

       Through the continuation of the business process
       reengineering efforts which began in 1993, ICP (USA) identified
       in 1995 certain fixed assets which were no longer considered
       to be economically viable to the production process.  These
       assets included a coil delivery system with a carrying value of
       $3.4, an automated paint system with a carrying value of $4.1,
       and other idle assets with a carrying value of $1.2.  ICP (USA)
       recognized an impairment loss on these assets of $8.7 which was
       included in asset writedowns and restructuring costs in 1995.

       In 1995, ICP (Canada) wrote down the carrying value of idle
       assets, comprised of machinery and equipment by $1.4 to orderly
       liquidation value.  This writedown was also included in asset
       writedowns and restructuring costs for 1995.

       During 1995, the restructuring and reengineering programs
       resulted in $2.2 of severance and benefits expense at ICP (USA).
       In addition, reductions in salaried personnel at ICP (Canada)
       resulted in severance costs of $1.1.  Finally, the Company's
       decision in December 1995 to move its Canadian Corporate head
       office to Lewisburg, Tennessee, resulted in severance and other
       retirement benefits of $2.8.  The restructuring costs totaling
       $6.1 were partially offset by a reduction of prior years'
       restructuring accruals of $.7, resulting in a 1995 restructuring
       charge of $5.4 which was included in asset writedowns and
       restructuring costs.

       A rollforward of the restructuring cost accrual is as follows:
<TABLE>
<CAPTION>
                                  1997          1996         1995
   ---------------------------------------------------------------
   <S>                            <C>           <C>          <C>
   Balance - Beginning of
     the year                     $ 2.4         $ 6.1        $ 3.6
   Restructuring cost provision      -             -           6.1
   Reversals of prior years'
     accruals                       (.4)           -           (.7)
   Payments                         (.6)         (3.7)        (2.9)
   ----------------------------------------------------------------

   Balance - End of the year      $ 1.4         $ 2.4        $ 6.1
   ================================================================
</TABLE>








---------------------------------------------------------------------

                                 - 62 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

18.    DETAILS OF CASH PROVIDED BY (USED FOR) OPERATIONS

<TABLE>
<CAPTION>
                                        1997          1996            1995
    -----------------------------------------------------------------------
    <S>                                <C>           <C>            <C>
    (a)  ITEMS NOT INVOLVING CURRENT
         CASH FLOWS
     Depreciation and
       amortization                    $ 16.4        $ 17.5         $ 20.1
     Deferred income taxes                 -             -            11.4
     Asset writedowns                      -             -            10.1
     Provision for bad debts               .9           2.8            9.7
     Write-off of debt
       issuance costs                      -             .6            2.1
     Other                                 -             -             1.0
     ----------------------------------------------------------------------
                                       $ 17.3        $ 20.9         $ 54.4
     ======================================================================
</TABLE>

<TABLE>
<CAPTION>
                                        1997          1996            1995
    -----------------------------------------------------------------------
    <S>                                <C>           <C>            <C>
    (b)  CHANGES IN WORKING CAPITAL
    Accounts and note receivable       $(37.5)       $  5.7         $ 33.8
    Inventories                          10.2         (14.1)          59.9
    Accounts payable, accrued
       liabilities and
       product warranty                  10.2         (15.3)           8.3
    Other                                (3.0)          5.3           (4.7)
    -----------------------------------------------------------------------
                                       $(20.1)       $(18.4)        $ 97.3
    =======================================================================
</TABLE>









------------------------------------------------------------------------

                                  - 63 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------
19.    SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND U.S.
       ACCOUNTING PRACTICES

       Accounting principles adopted by the Company as reflected in
       these consolidated financial statements in accordance with Canadian
       GAAP are generally consistent with accounting principles accepted in
       the United States ("U.S. GAAP") with certain exceptions.  The
       following reconciliations reflect the differences in these
       accounting principles where applicable to the Company. If accounting
       principles generally accepted in the United States were followed, the
       effect on the consolidated financial statements would be:

      (a) Net income (loss) in accordance with U.S. GAAP
<TABLE>
<CAPTION>
                                          ------------------------------
                                             1997      1996      1995
                                          ------------------------------
  <S>                                       <C>        <C>       <C>
  Income (loss) from continuing
    operations (as reported)                $ 22.0     $ 11.6    $(81.2)

  U.S. GAAP adjustments
    Accounting for income taxes (1)            (.7)       (.7)      2.8

    Postretirement benefits, net of
      income tax recovery of nil in
      1997 (1996 - nil; 1995 - $.5) (2)       (1.9)      (1.8)      (.8)

    Loss on early extinguishment of debt,
      net of income tax recovery of nil
      in 1996 and 1995 (3)                      -          .6        .9

    Utilization of prior years' tax
       losses from discontinued
       operations (4)                           -          -        1.3

    Discount on sale of receivables,
      net of income tax provision of $.8
      in 1995 (5)                               -          -        1.3
  ----------------------------------------------------------------------
  Adjusted income (loss) from
    continuing operations                     19.4        9.7     (75.7)

  Loss from discontinued operations,
    net of income taxes                         -        (3.1)    (13.3)
  -----------------------------------------------------------------------
  Income (loss) before
    extraordinary item                        19.4        6.6     (89.0)

  Extraordinary item
    Loss on early extinguishment of
      debt, net of income tax recovery
      of nil in 1996 and 1995 (3)               -         (.6)      (.9)
  -----------------------------------------------------------------------
  Net income (loss) under U.S. GAAP         $ 19.4     $  6.0    $(89.9)
  =======================================================================
</TABLE>
--------------------------------------------------------------------------
                                - 64 -
             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------
19.    SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND U.S.
       ACCOUNTING PRACTICES (CONT'D)
<TABLE>
<CAPTION>
                                    -------------------------------------
                                           1997      1996      1995
                                    -------------------------------------
      <S>                                 <C>       <C>       <C>
       Weighted average number of
          ordinary shares outstanding
          during the year under U.S.
          GAAP (in millions)

          Basic                           39.664    39.161    38.828
          Diluted                         40.549    39.254    38.828

       Basic income (loss) per
          ordinary share under
          U.S. GAAP (in dollars)

          From continuing operations      $ 0.49    $ 0.25    $(1.95)
          Before extraordinary item       $ 0.49    $ 0.17    $(2.29)
          After extraordinary item        $ 0.49    $ 0.15    $(2.32)

       Diluted income (loss) per
       ordinary share under
       U.S. GAAP (in dollars)

          From continuing operations      $ 0.48    $ 0.25    $(1.95)
          Before extraordinary item       $ 0.48    $ 0.17    $(2.29)
          After extraordinary item        $ 0.48    $ 0.15    $(2.32)
</TABLE>




---------------------------------------------------------------------
                                 - 65 -


             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------
19.    SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND U.S. ACCOUNTING
       PRACTICES (CONT'D)

       (1)  This reconciliation reflects the application of Statement of
            Financial Accounting Standard ("SFAS") No. 109 "Accounting
            for Income Taxes."  Additionally, the following table outlines
            the significant components of the Company's deferred tax assets
            (liabilities) as at December 31, 1997 and 1996, under U.S. GAAP
            disclosure requirements.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
DECEMBER 31, 1997                              UNITED STATES       CANADA          TOTAL
------------------------------------------------------------------------------------------
<S>                                                <C>            <C>             <C>
Deferred tax assets
  Net operating losses and other carryforwards     $ 8.7          $ 12.3          $  21.0
  Product liability and warranty                    10.6              .8             11.4
  Allowance for doubtful accounts                    1.6              -               1.6
  Other tax assets                                  11.9             1.7             13.6
------------------------------------------------------------------------------------------
Total deferred tax assets before allowance          32.8            14.8             47.6
Valuation allowance for deferred tax assets        (18.2)          (14.3)           (32.5)
------------------------------------------------------------------------------------------
Deferred tax assets                                 14.6              .5             15.1
------------------------------------------------------------------------------------------
Deferred tax liabilities
  Tax over book depreciation                       (12.6)             -             (12.6)
  Other tax liabilities                             (1.4)            (.5)            (1.9)
------------------------------------------------------------------------------------------
Total deferred tax liabilities                     (14.0)            (.5)           (14.5)
------------------------------------------------------------------------------------------
Net deferred tax assets                            $  .6          $   -           $    .6
==========================================================================================
<CAPTION>
------------------------------------------------------------------------------------------
DECEMBER 31, 1996                               UNITED STATES      CANADA          TOTAL
------------------------------------------------------------------------------------------
Deferred tax assets
  Net operating losses and other carryforwards     $ 14.0         $ 12.5          $  26.5
  Product liability and warranty                     10.1             .9             11.0
  Allowance for doubtful accounts                     2.0             -               2.0
  Other tax assets                                   14.1            1.9             16.0
------------------------------------------------------------------------------------------
Total deferred tax assets before allowance           40.2           15.3             55.5
Valuation allowance for deferred tax assets         (26.3)         (14.8)           (41.1)
------------------------------------------------------------------------------------------
Deferred tax assets                                  13.9             .5             14.4
------------------------------------------------------------------------------------------
Deferred tax liabilities
  Tax over book depreciation                        (12.7)             -            (12.7)
  Other tax liabilities                              (1.2)           (.5)            (1.7)
------------------------------------------------------------------------------------------
Total deferred tax liabilities                      (13.9)           (.5)           (14.4)
------------------------------------------------------------------------------------------
Net deferred tax assets                            $   -           $  -           $    -
==========================================================================================
</TABLE>
----------------------------------------------------------------------
                                - 66 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

19.    SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND U.S.
       ACCOUNTING PRACTICES (CONT'D)

       (2)  This reconciliation reflects the application of SFAS No. 106
            "Employers' Accounting for Postretirement Benefits Other Than
            Pensions", for the Company's U.S. plans.  The standard
            requires, among other things, the recognition of postretirement
            benefits on an accrual basis as opposed to the practice of
            recognizing the expense on a cash basis.  The application of the
            new accounting method, prospectively, results in the transition
            obligation of U.S. $9.7 million being amortized on a
            straight-line basis over 25 years for hourly employees and 21
            years for salaried employees. The effect of applying SFAS 106 was
            to decrease net income by $1.9 and $1.8 for 1997 and 1996,
            respectively, and increase the net loss by $.8 in 1995.  Under
            Canadian GAAP, the Company expenses such benefits as incurred.

            The net periodic cost for postretirement health care benefits
            during 1997, 1996, and 1995, includes the following:
<TABLE>
<CAPTION>
                                    1997           1996            1995
                                   -------------------------------------
       <S>                         <C>            <C>              <C>
       Service cost                $ 1.0           $ 1.1           $  .7
       Interest cost                 1.4             1.4             1.3
       Amortization of
         transition obligation        .6              .6              .5
                                   -------------------------------------
                                   $ 3.0           $ 3.1           $ 2.5
                                   =====================================
</TABLE>
            In general, retiree health benefits are paid as covered expenses
            are incurred.  The following table sets forth the funded status
            for the Company's postretirement health care plan at December 31,
            1997 and 1996.
<TABLE>
<CAPTION>
                                          1997              1996
                                         ------------------------
   <S>                                   <C>                <C>
   Accumulated postretirement
      benefit obligations:
         Retirees                        $ 8.8              $ 6.2
         Fully eligible active plan
            participants                   2.7                2.5
         Other active plan participants   10.5               10.3
                                         ------------------------
   Total obligation                       22.0               19.0

   Unrecognized:
      Transition obligation               (6.8)              (8.1)
      Change in actuarial assumptions     (7.1)              (5.0)
                                         -------------------------
   Accrued postretirement benefit        $ 8.1              $ 5.9
                                         =========================
</TABLE>
---------------------------------------------------------------------
                               - 67 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

19.    SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND
       U.S. ACCOUNTING PRACTICES (CONT'D)

       (2)  The assumed discount rate was 7.5% and 7.75% at December 31,
            1997 and 1996, respectively, and the rate of increase in per
            capita costs of covered health care benefits is assumed to
            be 6% in 1997, decreasing gradually to 5% by the year 1999.
            Increasing the assumed health care cost trend rate by 1
            percentage point would increase the accumulated postretirement
            obligation as of December 31, 1997, by approximately 13% and
            increase net periodic postretirement benefit cost by
            approximately 16% in 1997.

       (3)  Under Canadian GAAP, this item is included in loss from
            continuing operations.  Under U.S. GAAP, such an item is
            treated as an extraordinary item.

       (4)  There are differences between Canadian and U.S. GAAP in the
            presentation of the Statement of Changes in Financial Position
            and the Statements of Income (Loss).  Under U.S. GAAP, the
            utilization of prior years' tax losses is included in loss
            from continuing operations in 1995.  Accordingly, cash
            provided by continuing operations, under U.S. GAAP for
            the year ended December 31, 1995, was $71.8.  In addition,
            U.S. GAAP defines cash and cash equivalents to include cash
            and short-term, highly liquid investments, whereas Canadian
            GAAP defines cash to include cash, net of short-term
            borrowings.

       (5)  There are differences between Canadian and U.S. GAAP in the
            recognition of a transfer of receivables as a sale.  Under
            Canadian GAAP, for a transfer of receivables to be recognized
            as a sale, the transferor must transfer the significant risks
            and rewards of ownership of the receivables, whereas U.S. GAAP
            focuses on the control of the assets involved.

   (b)  Additional disclosure required under U.S. GAAP

       (1)  SFAS 123 permits the Company to continue to apply the recognition
            and measurement principles of Accounting Principles Board Opinion
            No. 25., "Accounting for Stock Issued to Employees," to its stock
            option plan. If the compensation cost for the Company's stock
            option plan had been determined based on the fair value at the
            grant dates for the 1997 and 1996 options, consistent with the
            method provided in SFAS 123, the Company's 1997 and 1996 pro
            forma net income and earnings per share would have been $18.5
            and $5.7, and $0.47 and $0.15, respectively.  The weighted
            average fair values of the 1997 and 1996 option grants are
            estimated on the dates of grant using the Black-Scholes option
            pricing model with the following assumptions: expected volatility
            for 1997 and 1996 was 70 percent and 53 percent, respectively;
            risk-free interest rates for 1997 and 1996 were 5.7% and 6.6%,
            respectively; and expected lives of seven years for both years.
            The weighted average fair values of the options granted in 1997
            and 1996 were Cdn. $4.39 and Cdn. $1.46, respectively.

------------------------------------------------------------------------
                              - 68 -

             INTERNATIONAL COMFORT PRODUCTS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the Year Ended December 31, 1997
               (With Comparative Figures for the Years
              Ended December 31, 1996 and 1995 - note 20)
        (In Millions of U.S. Dollars Unless Otherwise Stated)
-----------------------------------------------------------------------

19.    SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND U.S.
       ACCOUNTING PRACTICES (CONT'D)

       (2)  Research and development expenses in 1997, 1996 and 1995 were
            $3.0, $2.9, and $2.8, respectively.

   (c)  Consolidated Balance Sheets
<TABLE>
<CAPTION>
                       --------------------------------------------------
                                                     AMOUNTS AS ADJUSTED
                       AMOUNTS REPORTED UNDER        TO CONFORM WITH U.S.
                           CANADIAN GAAP                    GAAP
                       --------------------------------------------------
                       1997           1996           1997         1996
                       --------------------------------------------------
    <S>              <C>             <C>           <C>            <C>
    Prepaid
      expenses
      and other         7.6             6.0           8.8            7.2
    Fixed assets       93.6           100.2          95.5          102.3
    Intangible
      assets           11.0            12.1          14.8           16.3
    Accrued
      liabilities      26.5            28.2          30.8           32.4
    Other long-term
      liabilities       5.1             4.2          13.2            9.0
    Deficit          (116.4)         (138.4)       (118.2)        (140.6)
    Shareholders'
      equity           51.5            28.8          49.7           26.6

</TABLE>

20. PRIOR YEARS COMPARATIVE FIGURES

    The consolidated financial statements as at December 31, 1996 and
    for the years ended December 31, 1996 and 1995, were audited by
    another public accounting firm which expressed their opinion without
    reservation on those consolidated financial statements in their report
    dated February 11, 1997.







                               - 69 -


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

There are no Company disclosures required by Item 304 of Regulation
S-K, 17 C.F.R. Section 229.304.


                               PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" contained in the 1998 Proxy Statement is incorporated herein by
reference.  See also Item 4A, "Executive Officers of the Registrant" in Part
I of this Annual Report on Form 10-K.


ITEM 11. EXECUTIVE COMPENSATION.

"Compensation of Executive Officers" contained in the 1998 Proxy Statement
is incorporated herein by reference.  The matters labeled "Report of the
Compensation and Pension Committee" and "Performance Graphs" contained in
the 1998 Proxy Statement shall not be deemed incorporated by reference into
this Annual Report on Form 10-K.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

"Security Ownership of Certain Beneficial Owners and Management" contained
in the 1998 Proxy Statement is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

"Certain Transactions" contained in the 1998 Proxy Statement is incorporated
herein by reference.

                                - 70 -


                               PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a)    The following documents are filed as a part of this Annual Report
on Form 10-K:

          (1)     Financial Statements:
                  Auditors' Reports

                  Consolidated Balance Sheets -
                                 December 31, 1997 and December 31, 1996.

                  Consolidated Statements of Income (Loss) and Deficit -
                                Years ended December 31, 1997,
                                   December 31, 1996 and December 31, 1995.

                  Consolidated Statements of Changes in Financial Position -
                                Years ended December 31, 1997,
                                   December 31, 1996, and December 31, 1995.

                  Notes to Consolidated Financial Statements -
                                Years ended December 31, 1997,
                                   December 31, 1996 and December 31, 1995.

          (2)     Schedules:
                  Auditors' Reports

                  Schedule I - Condensed Financial Information of the
                               Registrant for the Years Ended December 31,
                               1997, 1996 and 1995.

                  Schedule II - Consolidated Valuation and Qualifying
                               Accounts for the Years Ended December 31,
                               1997, 1996 and 1995.

           All other schedules for which provision is made in the applicable
           accounting regulation of the Commission are not required under the
           related instructions or are inapplicable, and therefore have been
           omitted.

          (3)     Those exhibits required to be filed as Exhibits to this
Annual Report on Form 10-K pursuant to Item 601 of Regulation S-K, 17 C.F.R.
Section 229.601, as follows:

     3(i), 4.1     Articles of Incorporation of International Comfort
                   Products Corporation filed as Exhibit 3(i)/4.1 to the
                   Company's Quarterly Report on Form 10-Q for the quarter
                   ended September 30, 1997 filed with the Commission on
                   November 14, 1997, and incorporated herein by this
                   reference

     3(ii), 4.2    Bylaws of International Comfort Products Corporation filed
                   as Exhibit 1.2 to the Company's Annual Report on Form 20-F
                   for the year ended December

                                - 71 -


                   31, 1993 filed with the Commission on June 29, 1994,
                   and incorporated herein by this reference

     4.3           Indenture dated as of March 1, 1993 between International
                   Comfort Products Corporation (USA) (f/k/a Inter-City
                   Products Corporation (USA)) ("ICP (USA)") and United
                   States Trust Company of New York, as trustee (and
                   correlative form of Certificate, form of Mortgage, form of
                   Pledge and Security Agreement and form of Intellectual
                   Property Security Agreement) relating to ICP (USA)'s
                   9 3/4% Senior Secured Notes due 2002, filed as Exhibit 4.1
                   to Amendment No. 3 to ICP (USA)'s Registration Statement
                   on Form S-1 filed with the Commission on March 2, 1993,
                   and incorporated herein by this reference

     4.4           Master Trust Pooling and Service Agreement, dated as of
                   July 25, 1996 among Inter-City Products Receivables
                   Company, L.P.("ICP-Receivables"), ICP (USA) and LaSalle
                   National Bank, as Trustee filed as Exhibit 4.4 to the
                   Company's Quarterly Report on Form 10-Q for the quarter
                   ended September 30, 1997 filed with the Commission on
                   November 14, 1997, and incorporated herein by this
                   reference

     4.5           Series 1996-1 Supplement to Master Trust Pooling and
                   Service Agreement, dated as of July 25, 1996 among ICP
                   -Receivables, ICP (USA) and LaSalle National Bank, as
                   Trustee (and correlative form of Class A (Series 1996-1)
                   Certificate and form of Class B (Series 1996-1)
                   Certificate, and form of Guaranty from ICP (USA) filed as
                   Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q
                   for the quarter ended September 30, 1997 filed with the
                   Commission on November 14, 1997, and incorporated herein
                   by this reference

     4.6           Receivables Purchase Agreement dated as of July 25, 1996
                   among ICP (USA), Inter-City Products Partner Corporation
                   ("ICP-Partner") and ICP-Receivables filed as Exhibit 4.6
                   to the Company's Quarterly Report on Form 10-Q for the
                   quarter ended September 30, 1997 filed with the Commission
                   on November 14, 1997, and incorporated herein by this
                   reference

     4.7           Certificate Purchase Agreement (Series 1996-1, Class A)
                   dated as of July 25, 1996 among ICP-Receivables, ICP
                   (USA), the Purchasers named therein and The Chicago
                   Corporation, as Agent filed as Exhibit 4.7 to the
                   Company's Quarterly Report on Form 10-Q for the quarter
                   ended September 30, 1997 filed with the Commission on
                   November 14, 1997, and incorporated herein by this
                   reference

     4.8           Certificate Purchase Agreement (Series 1996-1, Class B)
                   dated as of July 25, 1996 among ICP-Receivables, ICP (USA)
                   and Argos Funding Corp. filed as Exhibit 4.8 to the
                   Company's Quarterly Report on Form 10-Q for the quarter

                                - 72 -


                   ended September 30, 1997 filed with the Commission on
                   November 14, 1997, and incorporated herein by this
                   reference

     4.9           First Amendment to Certificate Purchase Agreement (Series
                   1996-1, Class A) dated as of December 1, 1996 among ICP
                   -Receivables, ICP (USA), the Purchasers named therein and
                   The Chicago Corporation, as Agent filed as Exhibit 4.9 to
                   the Company's Quarterly Report on Form 10-Q for the
                   quarter ended September 30, 1997 filed with the Commission
                   on November 14, 1997, and incorporated herein by this
                   reference

     4.10          First Amendment to Receivables Purchase Agreement and
                   Second Amendment to Certificate Purchase Agreement (Series
                   1996-1, Class A) dated as of January 27, 1997 among ICP
                   -USA, ICP-Partner, General Heating and Cooling Company,
                   Coastline Distribution, Inc., ICP-Receivables, Anagram
                   Funding Corp. and ABN AMRO Chicago Corporation filed as
                   Exhibit 4.10 to the Company's Quarterly Report on Form 10
                   -Q for the quarter ended September 30, 1997 filed with the
                   Commission on November 14, 1997, and incorporated herein
                   by this reference

     4.11          Second Amendment to Receivables Purchase Agreement as of
                   September 30, 1997 among ICP (USA), ICP-Partner, General
                   Heating and Cooling Company, ICP-Receivables, Anagram
                   Funding Corp. and ABN AMRO Chicago  Corporation filed as
                   Exhibit 4.11 to the Company's Quarterly Report on Form 10
                   -Q for the quarter ended September 30, 1997 filed with the
                   Commission on November 14, 1997, and incorporated herein
                   by this reference

     10.1          Loan and Security Agreement dated as of July 18, 1997
                   between ICP (USA) and NationsBank, N.A. filed as Exhibit
                   4.12 to the Company's Quarterly Report on Form 10-Q for
                   the quarter ended September 30, 1997 filed with the
                   Commission on November 14, 1997, and incorporated herein
                   by this reference

     10.2          International Comfort Products Corporation Employee Stock
                   Option Plan filed as Exhibit 4.1 to the Company's
                   Registration Statement on Form S-8 (File No. 33-90366)
                   filed with the Commission on March 16, 1995, and
                   incorporated herein by this reference

     10.3          International Comfort Products Corporation Share
                   Compensation Arrangement for Non-Employee Directors

                                - 73 -


     10.4          International Comfort Products Corporation Long Term
                   Incentive Plan filed as Exhibit 10.25 to ICP (USA)'s
                   Registration Statement on Form S-1 (File No. 33-56238)
                   filed with the Commission on December 23, 1992, and
                   incorporated herein by this reference

     10.5          Amendment to International Comfort Products Corporation
                   Long Term Incentive Plan filed as Exhibit 10.11 to
                   ICP (USA)'s Annual Report on Form 10-K for the year ended
                   December 31, 1993 filed with the Commission on March 28
                   1994, and incorporated herein by this reference

     10.6          International Comfort Products Corporation 1997 Long Term
                   Incentive Plan for Senior Management

     10.7          ICP (USA) Share Ownership Savings Plan filed as Exhibit
                   10.26 to ICP (USA)'s Registration Statement on Form S-1
                   (File No. 33-56238) filed with the Commission on
                   December 23, 1992, and incorporated herein by this
                   reference

     10.8          Amendments to ICP (USA)'s Share Ownership Savings Plan

     10.9          Retirement Plan for Salaried Employees filed as Exhibit
                   10.27 to ICP (USA)'s Registration Statement on Form S-1
                   (File No. 33-56238) filed with the Commission on
                   December 23, 1992, and incorporated herein by this
                   reference

     10.10         Supplemental Retirement Benefit Agreement dated September
                   1, 1994 with W. Michael Clevy filed as Exhibit 10.16 to
                   ICP (USA)'s Annual Report on Form 10-K for the year ended
                   December 31, 1995 filed with the Commission on March 28,
                   1996, and incorporated herein by this reference

     10.11         Termination Agreement with W. Michael Clevy

     10.12         Termination Agreement with Stephen L. Clanton

     10.13         Termination Agreement with James L. Kirwan *

     10.14         Termination Agreement with Herman V. Kling *

     10.15         Change in Control Agreement with David P. Cain

     10.16         Change in Control Agreement with Francis C. Harrell **

     10.17         Change in Control Agreement with Robert C. Henningsen **

-------------------
     *    Document not filed because substantially identical to Exhibit 10.12

     **   Document not filed because substantially identical to Exhibit 10.15

                                - 74 -


     10.18         Change in Control Agreement with Alexander T. Lim **

     10.19         Change in Control Agreement with Augusto H. Millan **

     10.20         Change in Control Agreement with H. David Tayler **

     10.21         Change in Control Agreement with James R. Wiese **

     21            Subsidiaries of International Comfort Products Corporation

     23.1          Consent of Arthur Andersen & Co., independent chartered
                   accountants

     23.2          Consent of Coopers & Lybrand, independent chartered
                   accountants

     27            Financial Data Schedule

     99.1          Consolidated Financial Statements of International Comfort
                   Products Corporation (USA)

     99.2          Schedule I - Condensed Financial Information

     99.3          Schedule II - Consolidated Valuation and Qualifying
                   Accounts


-------------------
     **   Document not filed because substantially identical to Exhibit 10.15


     (b)     No Current Reports on Form 8-K were filed by the Company during
the last quarter of the period covered by this Annual Report on Form 10-K.

     (c)     Exhibits -- the response to this portion of Item 14 is submitted
as a separate section of this Report.  See Item 14(a).

     (d)     Financial Statement Schedules -- the response to this portion of
Item 14 is submitted as a separate section of this Report.  See Item 14(a).

                                - 75 -


<PAGE>
                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on this  30th
day of March, 1998.                                                  ------


                                 INTERNATIONAL COMFORT PRODUCTS CORPORATION

                                 By:/s/ S. Clanton
                                    ---------------------------
                                        Stephen L. Clanton
                                        Senior Vice President, Chief
                                        Financial Officer and Treasurer

     Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities indicated on this  30th  day of March, 1998.
                                                   ------
SIGNATURE                                      TITLE

 /s/ Richard W. Snyder            Chairman of the Board and Director
-------------------------
(Richard W. Snyder)

 /s/ W. Michael Clevy             President and Chief Executive Officer
-------------------------
(W. Michael Clevy)

 /s/ David P. Cain                Senior Vice President, General Counsel
-------------------------         and Secretary
(David P. Cain)

 /s/ S.L. Clanton                 Senior Vice President, Chief Financial
-------------------------         Officer and Treasurer
(S.L. Clanton)

 /s/ Stanley M. Beck              Director
-------------------------
(Stanley M. Beck)

 /s/ William G. Davis             Director
-------------------------
(William G. Davis)

 /s/ John F. Fraser               Director
-------------------------
(John F. Fraser)

 /s/ Roy T. Graydon               Director
-------------------------
(Roy T. Graydon)
                                - 76 -


 /s/ Marvin G. Marshall           Director
-------------------------
(Marvin G. Marshall)

 /s/ Ernest C. Mercier           Director
-------------------------
(Ernest C. Mercier)

 /s/ David H. Morris              Director
-------------------------
(David H. Morris)

 /s/ David A. Rattee              Director
-------------------------
(David A. Rattee)

 /s/ William A. Wilson            Director
-------------------------
(William A. Wilson)






























                                - 77 -


                            EXHIBIT INDEX

                                                                 Sequential
Exhibit No.               Description                            Page Number
----------       ----------------------------------              -----------
3(i), 4.1     Articles of Incorporation of International Comfort
              Products Corporation filed as Exhibit 3(i)/4.1 to the
              Company's Quarterly Report on Form 10-Q for the quarter
              ended September 30, 1997 filed with the Commission on
              November 14, 1997, and incorporated herein by this
              reference

3(ii), 4.2    Bylaws of International Comfort Products Corporation filed
              as Exhibit 1.2 to the Company's Annual Report on Form 20-F
              for the year ended December 31, 1993 filed with the
              Commission on June 29, 1994, and incorporated herein by
              this reference

4.3           Indenture dated as of March 1, 1993 between International
              Comfort Products Corporation (USA) (f/k/a Inter-City
              Products Corporation (USA)) ("ICP (USA)") and United States
              Trust Company of New York, as trustee (and correlative
              form of Certificate, form of Mortgage, form of Pledge and
              Security Agreement and form of Intellectual Property
              Security Agreement) relating to ICP (USA)'s 9 3/4% Senior
              Secured Notes due 2002, filed as Exhibit 4.1 to Amendment
              No. 3 to ICP (USA)'s Registration Statement on Form S-1
              filed with the Commission on March 2, 1993, and
              incorporated herein by this reference

4.4           Master Trust Pooling and Service Agreement, dated as of
              July 25, 1996 among Inter-City Products Receivables
              Company, L.P.("ICP-Receivables"), ICP (USA) and LaSalle
              National Bank, as Trustee filed as Exhibit 4.4 to the
              Company's Quarterly Report on Form 10-Q for the quarter
              ended September 30, 1997 filed with the Commission on
              November 14, 1997, and incorporated herein by this
              reference

4.5           Series 1996-1 Supplement to Master Trust Pooling and
              Service Agreement, dated as of July 25, 1996 among ICP
              -Receivables, ICP (USA) and LaSalle National Bank, as
              Trustee (and correlative form of Class A (Series 1996-1)
              Certificate and form of Class B (Series 1996-1)
              Certificate, and form of Guaranty from ICP (USA) filed as
              Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q
              for the quarter ended September 30, 1997 filed with the
              Commission on November 14, 1997, and incorporated herein
              by this reference


                                                                 Sequential
Exhibit No.               Description                            Page Number
----------       ----------------------------------              -----------

4.6           Receivables Purchase Agreement dated as of July 25, 1996
              among ICP (USA), Inter-City Products Partner Corporation
              ("ICP-Partner") and ICP-Receivables filed as Exhibit 4.6
              to the Company's Quarterly Report on Form 10-Q for the
              quarter ended September 30, 1997 filed with the Commission
              on November 14, 1997, and incorporated herein by this
              reference

4.7           Certificate Purchase Agreement (Series 1996-1, Class A)
              dated as of July 25, 1996 among ICP-Receivables, ICP (USA),
              the Purchasers named therein and The Chicago Corporation,
              as Agent filed as Exhibit 4.7 to the Company's Quarterly
              Report on Form 10-Q for the quarter ended September 30,
              1997 filed with the Commission on November 14, 1997, and
              incorporated herein by this reference

4.8           Certificate Purchase Agreement (Series 1996-1, Class B)
              dated as of July 25, 1996 among ICP-Receivables, ICP (USA)
              and Argos Funding Corp. filed as Exhibit 4.8 to the
              Company's Quarterly Report on Form 10-Q for the quarter
              ended September 30, 1997 filed with the Commission on
              November 14, 1997, and incorporated herein by this
              reference

4.9           First Amendment to Certificate Purchase Agreement (Series
              1996-1, Class A) dated as of December 1, 1996 among ICP
              -Receivables, ICP (USA), the Purchasers named therein and
              The Chicago Corporation, as Agent filed as Exhibit 4.9 to
              the Company's Quarterly Report on Form 10-Q for the
              quarter ended September 30, 1997 filed with the Commission
              on November 14, 1997, and incorporated herein by this
              reference

4.10          First Amendment to Receivables Purchase Agreement and
              Second Amendment to Certificate Purchase Agreement (Series
              1996-1, Class A) dated as of January 27, 1997 among ICP
              -USA, ICP-Partner, General Heating and Cooling Company,
              Coastline Distribution, Inc., ICP-Receivables, Anagram
              Funding Corp. and ABN AMRO Chicago Corporation filed as
              Exhibit 4.10 to the Company's Quarterly Report on Form 10
              -Q for the quarter ended September 30, 1997 filed with the
              Commission on November 14, 1997, and incorporated herein
              by this reference


                                                                 Sequential
Exhibit No.               Description                            Page Number
----------       ----------------------------------              -----------

4.11          Second Amendment to Receivables Purchase Agreement as of
              September 30, 1997 among ICP (USA), ICP-Partner, General
              Heating and Cooling Company, ICP-Receivables, Anagram
              Funding Corp. and ABN AMRO Chicago  Corporation filed as
              Exhibit 4.11 to the Company's Quarterly Report on Form 10
              -Q for the quarter ended September 30, 1997 filed with the
              Commission on November 14, 1997, and incorporated herein
              by this reference

10.1          Loan and Security Agreement dated as of July 18, 1997
              between ICP (USA) and NationsBank, N.A. filed as Exhibit
              4.12 to the Company's Quarterly Report on Form 10-Q for
              the quarter ended September 30, 1997 filed with the
              Commission on November 14, 1997, and incorporated herein
              by this reference

10.2          International Comfort Products Corporation Employee Stock
              Option Plan filed as Exhibit 4.1 to the Company's
              Registration Statement on Form S-8 filed with the
              Commission on March 16, 1995, and incorporated herein by
              this reference

10.3          International Comfort Products Corporation Share
              Compensation Arrangement for Non-Employee Directors

10.4          International Comfort Products Corporation Long Term
              Incentive Plan filed as Exhibit 10.25 to ICP (USA)'s
              Registration Statement on Form S-1 (File No. 33-56238)
              filed with the Commission on December 23, 1992, and
              incorporated herein by this reference

10.5          Amendment to International Comfort Products Corporation
              Long Term Incentive Plan filed as Exhibit 10.11 to
              ICP (USA)'s Annual Report on Form 10-K for the year ended
              December 31, 1993 filed with the Commission on March 28,
              1994, and incorporated herein by this reference

10.6          International Comfort Products Corporation 1997 Long Term
              Incentive Plan for Senior Management

10.7          ICP (USA) Share Ownership Savings Plan filed as Exhibit
              10.26 to ICP (USA)'s Registration Statement on Form S-1
              (File No. 33-56238) filed with the Commission on
              December 23, 1992, and incorporated herein by this
              reference

10.8          Amendments to ICP (USA)'s Share Ownership Savings Plan

10.9          Retirement Plan for Salaried Employees filed as Exhibit
              10.27 to ICP (USA)'s Registration Statement on Form S-1
              (File No. 33-56238) filed with the Commission on
              December 23, 1992, and incorporated herein by this
              reference

                                                                 Sequential
Exhibit No.               Description                            Page Number
----------       ----------------------------------              -----------

10.9          Retirement Plan for Salaried Employees filed as Exhibit
              10.27 to ICP (USA)'s Registration Statement on Form S-1
              (File No. 33-56238) filed with the Commission on
              December 23, 1992, and incorporated herein by this
              reference

10.10         Supplemental Retirement Benefit Agreement dated September
              1, 1994 with W. Michael Clevy filed as Exhibit 10.16 to
              ICP (USA)'s Annual Report on Form 10-K for the year ended
              December 31, 1995 filed with the Commission on March 28,
              1996, and incorporated herein by this reference

10.11         Termination Agreement with W. Michael Clevy

10.12         Termination Agreement with Stephen L. Clanton

10.13         Termination Agreement with James L. Kirwan *

10.14         Termination Agreement with Herman V. Kling *

10.15         Change in Control Agreement with David P. Cain

10.16         Change in Control Agreement with Francis C. Harrell **

10.17         Change in Control Agreement with Robert C. Henningsen **

10.18         Change in Control Agreement with Alexander T. Lim **

10.19         Change in Control Agreement with Augusto H. Millan **

10.20         Change in Control Agreement with H. David Tayler **

10.21         Change in Control Agreement with James R. Wiese **

21            Subsidiaries of International Comfort Products Corporation

23.1          Consent of Arthur Andersen & Co., independent chartered
              accountants

23.2          Consent of Coopers & Lybrand, independent chartered
              accountants

27            Financial Data Schedule

99.1          Consolidated Financial Statements of International Comfort
              Products Corporation (USA)

99.2          Schedule I - Condensed Financial Information

99.3          Schedule II - Consolidated Valuation and Qualifying
                   Accounts

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     *    Document not filed because substantially identical to Exhibit 10.12

     **   Document not filed because substantially identical to Exhibit 10.15