##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, DC 20549
  FORM 10-Q
  (Mark One)x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES  EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES  EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 1-13894
  PROLIANCE INTERNATIONAL,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of incorporation or organization)

34-1807383(I.R.S. Employer
    Identification No.)    100 Gando
    Drive, New Haven, Connecticut 06513 (Address
    of principal executive offices, including zip code)
  (203) 401-6450
 (Registrants telephone
    number, including area code)
   x o
  Rule 12b-2
  o o o x
   Rule 12b-2 o x




---



##### 





INDEX
   
 PagePART I.

FINANCIAL INFORMATIONItem 1.

Financial StatementsCondensed Consolidated Statements of Operations
    for the Three and Six Months Ended June 30, 2008 and 2007
    (unaudited)


3Condensed Consolidated Balance Sheets at
    June 30, 2008 (unaudited) and December 31, 2007


4Condensed Consolidated Statements of Cash Flows
    for the Six Months Ended June 30, 2008 and 2007
    (unaudited)


5Notes to Condensed Consolidated Financial
    Statements


6Item 2.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


19Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


33Item 4.

Controls and Procedures


33PART II.

OTHER INFORMATIONItem 4.

Submission of Matters to a Vote of Security
    Holders


34Item 5.

Other Information


34Item 6.

Exhibits


35Signatures


36EX-10.1: AMENDMENT NO. 5 TO CHARLES E. JOHNSON EMPLOYMENT AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1.
    FINANCIAL
    STATEMENTS  PROLIANCE
    INTERNATIONAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF
    OPERATIONS
  Three Months


Six Months(Unaudited)

Ended June 30,


Ended June 30,(in thousands, except per share amounts)

2008


2007


2008


2007Net sales

$
102,154


$
102,414


$
178,694


$
194,352Cost of sales


81,614



81,162



147,072



155,742Gross margin


20,540



21,252



31,622



38,610Selling, general and administrative expenses


14,764



19,906



27,595



40,495Arbitration earn-out decision






3,174







3,174Restructuring charges






1,053



172



1,328Operating income (loss)


5,776



(2,881
)


3,855



(6,387
)Interest expense


4,549



2,922



8,285



5,603Debt extinguishment costs










576



Income (loss) before income taxes


1,227



(5,803
)


(5,006
)


(11,990
)Income tax provision


706



431



649



576Net income (loss)

$
521


$
(6,234
)

$
(5,655
)

$
(12,566
)Net income (loss) per common share-basic

$
0.03


$
(0.48
)

$
(0.36
)

$
(0.90
)Net income (loss) per common share-diluted

$
0.03


$
(0.48
)

$
(0.36
)

$
(0.90
)Weighted average common shares  basic


15,748



15,269



15,739



15,264Weighted average common shares  diluted


19,151



15,269



15,739



15,264    3




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##### Table of Contents



PROLIANCE
    INTERNATIONAL, INC.CONDENSED CONSOLIDATED BALANCE SHEETS
  June 30,


December 31,(in thousands, except share data)

2008


2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
3,464


$
476Accounts receivable (less allowances of $3,779 and $4,601)


77,509



60,153Inventories


91,300



106,756Other current assets


8,409



7,645Total current assets


180,682



175,030Property, plant and equipment


48,900



50,165Accumulated depreciation and amortization


(28,473
)


(29,001
)Net property, plant and equipment


20,427



21,164Other assets


18,132



12,699Total assets

$
219,241


$
208,893LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt and current portion of long-term debt

$
54,062


$
67,242Accounts payable


69,711



48,412Accrued liabilities


26,758



24,649Total current liabilities


150,531



140,303Long-term liabilities:Long-term debt


72



211Other long-term liabilities


5,544



5,353Total long-term liabilities


5,616



5,564Commitments and contingent liabilitiesStockholders equity:Preferred stock, $.01 par value: Authorized
    2,500,000 shares; issued and outstanding as follows:Series A junior participating preferred stock,
    $.01 par value: authorized 200,000 shares; issued and
    outstanding  none at June 30, 2008 and
    December 31, 2007






Series B convertible preferred stock, $.01 par value:
    authorized 30,000 shares; issued and
    outstanding;  9,913 shares at June 30, 2008
    and December 31, 2007 (liquidation preference $3,453)






Common stock, $.01 par value: authorized
    47,500,000 shares; issued 15,836,217 and
    15,838,962 shares, outstanding 15,794,281 and
    15,797,026 shares at June 30, 2008 and
    December 31, 2007, respectively


158



158Paid-in capital


112,301



109,145Accumulated deficit


(53,780
)


(48,039
)Accumulated other comprehensive income


4,430



1,777Treasury stock, at cost, 41,936 shares at June 30,
    2008 and December 31, 2007


(15
)


(15
)Total stockholders equity


63,094



63,026Total liabilities and stockholders equity

$
219,241


$
208,893    4




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##### Table of Contents



PROLIANCE
    INTERNATIONAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Six Months Ended(Unaudited)

June 30,(in thousands)

2008


2007Cash flows from operating activities:Net loss

$
(5,655
)

$
(12,566
)Adjustments to reconcile net loss to net cash provided by (used
    in) operating activitiesDepreciation and amortization


4,932



3,775Provision for (benefit from) uncollectible accounts receivable


343



(516
)Non-cash stock compensation costs


117



130Non-cash arbitration earn-out decision charge






3,174Gain on disposal of fixed assets


(3,979
)


(886
)Deferred income tax






136Changes in operating assets and liabilities:Accounts receivable


(16,131
)


(7,450
)Inventories


17,729



3,250Accounts payable


20,242



3,271Accrued expenses


1,743



(1,981
)Other


(1,997
)


(2,210
)Net cash provided by (used in) operating activities


17,344



(11,873
)Cash flows from investing activities:Capital expenditures, net of normal sales and retirements


(2,833
)


(963
)Proceeds from sales of buildings


1,538



750Insurance proceeds from damaged fixed assets


3,428



Cash expenditures for restructuring costs on Modine Aftermarket
    acquisition balance sheet


(62
)


(187
)Net cash provided by (used in) investing activities


2,071



(400
)Cash flows from financing activities:Dividends paid


(88
)


(32
)Net (repayments) borrowings under revolving credit facility


(12,410
)


625Borrowings of short-term foreign debt


5,538



5,948Borrowings under term loan






8,000Repayments of term loan and capitalized lease obligations


(6,446
)


(869
)Deferred debt issuance costs


(3,184
)


(880
)Proceeds from stock option exercise






25Net cash (used in) provided by financing activities


(16,590
)


12,817Effect of exchange rate changes on cash


163



25Increase in cash and cash equivalents


2,988



569Cash and cash equivalents at beginning of period


476



3,135Cash and cash equivalents at end of period

$
3,464


$
3,704    5




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##### Table of Contents



PROLIANCE
    INTERNATIONAL, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
  Note 1 
    Interim
    Financial Statements  Form 10-K
  Form 10-Q Regulation S-X. Form 10-K.
    Note 2 
    Southaven Event and Related Liquidity Issues
   6




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and/or
       7




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##### Table of Contents



Note 3 
    Inventory    June 30,


December 31,2008


2007(in thousands)Raw material and component parts

$
27,121


$
23,055Work in progress


4,149



4,044Finished goods


60,030



79,657Total inventory

$
91,300


$
106,756   Note 4 
    Debt    June 30,


December 31,2008


2007(in thousands)Short-term foreign debt

$
5,537


$
Term loan


43,745



49,625Revolving credit facility


4,668



17,078Current portion of long-term debt


112



539Total short-term debt and current portion of long-term debt

$
54,062


$
67,242        8




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and/or
         9




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##### Table of Contents



Form S-3
 10




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##### Table of Contents



Note 5 
    Comprehensive
    Income (Loss)    Three Months Ended June 30,


Six Months Ended June 30,(in thousands)

2008


2007


2008


2007Net income (loss)

$
521


$
(6,234
)

$
(5,655
)

$
(12,566
)Minimum pension liability adjustment














Foreign currency translation adjustment


1,199



758



2,653



573Comprehensive income (loss)

$
1,720


$
(5,476
)

$
(3,002
)

$
(11,993
)  11




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##### Table of Contents



Note 6 
    Stock
    Compensation Plans  Stock Options
    Option Price RangeNumber of



WeightedOptions

Low

Average

HighStock PlanOutstanding at December 31, 2007


339,777


$
2.56


$
3.99


$
5.25Cancelled


(25,000
)


4.51



4.64



4.72Outstanding at June 30, 2008


314,777


$
2.56


$
3.94


$
5.25Directors PlanOutstanding at December 31, 2007


30,800


$
2.70


$
4.61


$
5.50Cancelled














Outstanding at June 30, 2008


30,800


$
2.70


$
4.61


$
5.50Equity Incentive PlanOutstanding at December 31, 2007


177,500


$
2.90


$
6.34


$
11.75Granted


216,000



2.80



2.80



2.80Cancelled


(19,152
)


1.54



3.04



5.27Outstanding at June 30, 2008


374,348


$
2.80


$
4.47


$
11.75       Restricted Stock
    Grant Date Fair ValueNumber of



WeightedShares

Low

Average

HighOutstanding at December 31, 2007


69,330


$
2.35


$
4.26


$
5.27Vested


(28,166
)


2.35



3.71



5.27Cancelled


(2,745
)


5.27



5.27



5.27Outstanding at June 30, 2008


38,419


$
2.35


$
4.59


$
5.27    12




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##### Table of Contents



Performance Restricted Stock
    Note 7 
    Restructuring
    and Other Special Charges        Workforce

Facility(in thousands)

Related

Consolidation

TotalBalance at December 31, 2007

$
979


$
702


$
1,681Charge to operations


164



8



172Cash payments


(774
)


(394
)


(1,168
)Balance at June 30, 2008

$
369


$
316


$
685    13




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##### Table of Contents



Note 8 
    Retirement
    and Post-Retirement Plans    Three Months Ended June 30,2008


2007


2008


2007(in thousands)

Retirement Plans


Post-retirement PlansService cost

$
228


$
288


$



$
Interest cost


588



504



3



4Expected return on plan assets


(649
)


(518
)






Amortization of net loss


163



138



(2
)


Net periodic benefit cost

$
330


$
412


$
1


$
4   Six Months Ended June 30,2008


2007


2008


2007(in thousands)

Retirement Plans


Post-retirement PlansService cost

$
465


$
570


$



$
Interest cost


1,220



999



6



7Expected return on plan assets


(1,351
)


(1,021
)






Amortization of net loss


341



277



(4
)


Net periodic benefit cost

$
675


$
825


$
2


$
7     Note 9 
    Gain on
    Sale of Building   14




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##### Table of Contents



Note 10 
    Income
    (Loss) Per Share    Three Months Ended June 30,


Six Months Ended June 30,(In thousands, except per share amounts)

2008


2007


2008


2007Numerator:Net income (loss)

$
521


$
(6,234
)

$
(5,655
)

$
(12,566
)Deduct  preferred stock dividend


(43
)


(1,151
)


(86
)


(1,167
)Net income (loss) attributable to common
    stockholders  basic


478



(7,385
)


(5,741
)


(13,733
)Add back: preferred stock dividend


43











Net income (loss) attributable to common
    stockholders  diluted

$
521


$
(7,385
)

$
(5,741
)

$
(13,733
)Denominator:Weighted average common shares  basic


15,748



15,269



15,739



15,264Dilutive effect of stock options














Dilutive effect of restricted stock


46











Dilutive effect of Series B Preferred Stock


2,807











Dilutive effect of warrants


550











Weighted average common shares  diluted


19,151



15,269



15,739



15,264Basic net income (loss) per common share

$
0.03


$
(0.48
)

$
(0.36
)

$
(0.90
)Diluted net income (loss) per common share

$
0.03


$
(0.48
)

$
(0.36
)

$
(0.90
)       Note 11 
    Business
    Segment Data   15




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##### Table of Contents



Three Months Ended


Six Months EndedJune 30,


June 30,(in thousands)

2008


2007


2008


2007Net sales:Domestic

$
68,367


$
76,601


$
118,084


$
145,642International


33,787



25,813



60,610



48,710Intersegment sales:Domestic


1,391



921



1,980



2,036International


5,234



4,901



10,025



8,917Elimination of intersegment sales


(6,625
)


(5,822
)


(12,005
)


(10,953
)Total net sales

$
102,154


$
102,414


$
178,694


$
194,352Operating income (loss):Domestic

$
3,485


$
3,158


$
2,160


$
2,742Restructuring charges






(975
)


(172
)


(1,235
)Domestic total


3,485



2,183



1,988



1,507International


1,848



573



1,910



534Restructuring charges






(78
)






(93
)International total


1,848



495



1,910



441Corporate income (expenses)


443



(2,385
)


(43
)


(5,161
)Arbitration earn  out decision






(3,174
)






(3,174
)Total operating income (loss)

$
5,776


$
(2,881
)

$
3,855


$
(6,387
)       Three Months Ended June 30,


Six Months Ended June 30,(in thousands)

2008


2007


2008


2007Automotive and light truck heat exchange products

$
62,217


$
63,457


$
107,610


$
125,448Automotive and light truck temperature control products


13,971



16,532



23,650



25,516Heavy duty heat exchange products


25,966



22,425



47,434



43,388Total net sales

$
102,154


$
102,414


$
178,694


$
194,352  16




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##### Table of Contents



Note 12 
    Supplemental
    Cash Flow Information    Six Months Ended June 30,(in thousands)

2008


2007Non-cash financing activity:Value of common stock warrants and increase of deferred debt
    costs

$
3,040



Cash paid during the period for:Interest

$
6,649


$
4,884Income taxes

$
1,093


$
690   Note 13 
    Recent
    Accounting Pronouncements        Note 14 
    Subsequent
    Events   17




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50-50
   18




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Item 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Introduction
  and/or
         19




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##### Table of Contents



Operating
    Results
  Quarter
    Ended June 30, 2008 Versus Quarter Ended June 30,
    2007
    Three Months Ended June 30,2008


2007


Increase (Decrease)%





%Amount


of Net Sales


Amount


of Net Sales


Amount


Percent(in thousands of dollars)Net sales

$
102,154



100.0
%

$
102,414



100.0
%

$
(260
)


(0.3
)%Cost of sales


81,614



79.9



81,162



79.3



452



0.6Gross margin


20,540



20.1



21,252



20.7



(712
)


(3.4
)Selling, general and administrative expenses


14,764



14.4



19,906



19.4



(5,142
)


(25.8
)Arbitration earn-out decision










3,174



3.1



(3,174
)


(100.0
)Restructuring charges










1,053



1.0



(1,053
)


(100.0
)Operating income (loss)


5,776



5.7



(2,881
)


(2.8
)


8,657



300.5Interest expense


4,549



4.5



2,922



2.9



1,627



55.7Debt extinguishment costs






















Income (loss) before income taxes


1,227



1.2



(5,803
)


(5.7
)


7,030



121.1Income tax provision


706



0.7



431



0.4



275



63.8Net income (loss)

$
521



0.5
%

$
(6,234
)


(6.1
)%

$
6,755



108.4
%     Three Months Ended June 30,2008


2007%





%Amount


of Net Sales


Amount


of Net Sales(in thousands of dollars)Net SalesDomestic segment

$
68,367



66.9
%

$
76,601



74.8
%International segment


33,787



33.1



25,813



25.2Total net sales

$
102,154



100.0
%

$
102,414



100.0
%Gross MarginDomestic segment

$
12,436



18.2
%

$
15,448



20.2
%International segment


8,104



24.0



5,804



22.5Total gross margin

$
20,540



20.1
%

$
21,252



20.7
%    20




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21




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22




---



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Six
    Months Ended June 30, 2008 Versus Six Months Ended
    June 30, 2007
  Six Months Ended June 30,2008


2007


Increase (Decrease)%





%Amount


of Net Sales


Amount


of Net Sales


Amount


Percent(in thousands of dollars)Net sales

$
178,694



100.0
%

$
194,352



100.0
%

$
(15,658
)


(8.1
)%Cost of sales


147,072



82.3



155,742



80.1



(8,670
)


(5.6
)Gross margin


31,622



17.7



38,610



19.9



(6,988
)


(18.1
)Selling, general and administrative expenses


27,595



15.4



40,495



20.8



(12,900
)


(31.9
)Arbitration earn-out decision










3,174



1.6



(3,174
)


(100.0
)Restructuring charges


172



0.1



1,328



0.8



(1,156
)


(87.0
)Operating income (loss)


3,855



2.2



(6,387
)


(3.3
)


10,242



160.4Interest expense


8,285



4.7



5,603



2.9



2,682



47.9Debt extinguishment costs


576



0.3











576



NmLoss before income taxes


(5,006
)


(2.8
)


(11,990
)


(6.2
)


6,984



58.2Income tax provision


649



0.4



576



0.3



73



12.7Net loss

$
(5,655
)


(3.2
)%

$
(12,566
)


(6.5
)%

$
6,911



55.0
%     23




---



##### Table of Contents



Six Months Ended June 30,2008


2007%





%Amount


of Net Sales


Amount


of Net Sales(in thousands of dollars)Net SalesDomestic segment

$
118,084



66.1
%

$
145,642



74.9
%International segment


60,610



33.9



48,710



25.1Total net sales

$
178,694



100.0
%

$
194,352



100.0
%Gross MarginDomestic segment

$
17,710



15.0
%

$
27,999



19.2
%International segment


13,912



23.0



10,611



21.8Total gross margin

$
31,622



17.7
%

$
38,610



19.9
%        24




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25




---



##### Table of Contents



Financial
    Condition, Liquidity and Capital Resources
     26




---



##### Table of Contents



27




---



##### Table of Contents



and/or
         28




---



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Form S-3
 29




---



##### Table of Contents



50-50
  Short-term Liquidity
   30




---



##### Table of Contents



and/or
     31




---



##### Table of Contents



Longer-term Liquidity
    Critical
    Accounting Estimates
  Form 10-K
  Recent
    Accounting Pronouncements
       32




---



##### Table of Contents



Forward-Looking
    Statements and Cautionary Factors
  Form 10-Q, Form 10-K
  Item 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Form 10-K
  Item 4.
    CONTROLS
    AND PROCEDURES  Rule 13a-15(e).
     33




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##### Table of Contents



PART II.
    OTHER INFORMATION  Item 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS      Nominee

For


WithheldBarry R. Banducci


13,197,771



455,831Charles E. Johnson


12,678,001



975,601Vincent L. Martin


13,240,544



413,058     For

Against

Abstain13,301,607

70,070

281,923     Item 5.
    OTHER
    INFORMATION   34




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##### Table of Contents



Item 6.  EXHIBITS  10
.1

Amendment No. 5 to Employment Agreement between the Company
    and Charles E. Johnson31
.1

Certification of CEO in accordance with Section 302 of the
    Sarbanes-Oxley Act.31
.2

Certification of CFO in accordance with Section 302 of the
    Sarbanes-Oxley Act.32
.1

Certification of CEO in accordance with Section 906 of the
    Sarbanes-Oxley Act.32
.2

Certification of CFO in accordance with Section 906 of the
    Sarbanes-Oxley Act.  35




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##### Table of Contents



SIGNATURES    PROLIANCE INTERNATIONAL, INC.
   Date: August 12, 2008

By:

/s/  Charles
    E. JohnsonCharles
    E. Johnson
    President and Chief Executive Officer
    (Principal Executive Officer)   Date: August 12, 2008

By:

/s/  Arlen
    F. HenockArlen
    F. Henock
    Executive Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)  36