<PAGE>   1
                                                                      EXHIBIT 13
FINANCIAL HIGHLIGHTS

(amounts in thousands except per share, current ratio and employee data)

<TABLE>
<CAPTION>
                                         1997           1996           1995           1994           1993
                                       --------       --------       --------       --------       --------
OPERATING RESULTS
<S>                                    <C>            <C>            <C>            <C>            <C>
Sales                                  $288,866       $264,095       $151,660       $118,506       $ 94,292
Gross margin                             66,684         61,827         31,174         20,983         16,709
Plant and business consolidation
      and closure costs                   3,958          4,389             --             --             --
Income from operations                   16,448         17,006         13,907         16,114          9,442
Income from joint
     venture                                 --             --          2,495          1,368            407
Net income                                7,875          8,420          9,074          9,966          4,774
Basic and diluted earnings per share*  $   1.20       $   1.28       $   1.39       $   1.51       $    .72


Cash dividends per share               $    .20       $    .20       $    .05             --             --


FINANCIAL CONDITION
Current ratio                              2.65           2.46           2.27           2.18           1.99
Working capital                        $ 63,465       $ 56,161       $ 53,255       $ 17,837       $ 13,823
Capital expenditures                      7,214          5,565          4,066          2,512          4,227
Depreciation expense                      6,627          5,911          3,701          3,220          3,247
Net property, plant and
     equipment                           36,752         37,939         36,951         23,618         25,836
Total assets                            144,540        140,266        139,718         87,907         82,769
Debt                                     37,838         38,917         40,846         13,950         14,100
Total equity                             65,015         58,696         51,103         54,647         47,077
Number of employees                       2,322          2,139          2,001            828            832
</TABLE>

* The basic and diluted earnings per share for years prior to 1995 are for
comparative purposes only as common shares were not issued until October 1995
and assumes average shares outstanding of 6,621,000.

                  See Note 1 to Consolidated Financial Statements for a
description of the transactions that occurred to form TransPro, Inc. The above
table sets forth certain selected historical (1993 through 1995) financial data
for the Crown and G&O divisions of the Company (formerly the Automotive and
Truck Products Business of The Allen Group Inc.). Prior to October 1, 1995, the
date on which the financial results of GDI were reported on a fully consolidated
basis, TransPro's 50% ownership in GDI was reported under the equity method of
accounting. Therefore the 1993 and 1994 sales, gross margin and income from
operations amounts in the table above do not include GDI and the 1995 sales,
gross margin and income from operations amounts in the table above include only
three months of GDI activity. The number of employees includes GDI for 1995.

<TABLE>
<CAPTION>
                                             ACTUAL         ACTUAL       PRO FORMA
                                              1997           1996           1995
                                            --------       --------       --------
(Amounts in thousands, except
per share data)
PRO FORMA OPERATING RESULTS
<S>                                         <C>            <C>            <C>
Sales                                       $288,866       $264,095       $247,342
Gross margin                                  66,684         61,827         60,001
Plant and business consolidation
      and closure costs                        3,958          4,389             --
Income from operations                        16,448         17,006         17,451
Net income                                     7,875          8,420          8,565
Basic and diluted earnings per share*       $   1.20       $   1.28       $   1.32
</TABLE>


Pro Forma results include 100% of the earnings of GDI, incremental overhead
costs and the additional debt associated with the GDI Redemption. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Pro Forma Financial Information for a further discussion of pro
forma operating results.



                                       1
<PAGE>   2
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

                  The consolidated financial statements of TransPro, Inc. and
its subsidiaries, and all other information presented herein are the
responsibility of the management of the Company. The financial statements have
been prepared in accordance with generally accepted accounting principles.

                  Management is responsible for the integrity and objectivity of
the financial statements, including estimates and judgments reflected in them.
It fulfills this responsibility primarily by establishing and maintaining
accounting systems and practices adequately supported by internal accounting
controls. These controls include the selection and training of management and
supervisory personnel; maintenance of an organizational structure providing for
delegation of authority and establishment of responsibilities; communication of
requirements for compliance with approved accounting, control and business
practices throughout the organization and business planning and review. However,
an effective internal control system, no matter how well designed, has inherent
limitations -- including the possibility of the circumvention or overriding of
controls -- and, therefore, can provide only reasonable assurance with respect
to financial statement preparation and such safeguarding of assets. Further,
because of changes in conditions, internal control system effectiveness may vary
over time. Management believes the internal accounting controls in use provide
reasonable assurance that the Company's assets are safeguarded, that
transactions are executed in accordance with management's authorizations, and
that the financial records are reliable for the purpose of preparing financial
statements.


                  The Audit Committee will recommend the selection of the
independent public accountants who are then appointed by the Board of Directors.
The independent public accountants are engaged to perform an audit of the
consolidated financial statements in accordance with generally accepted auditing
standards. Their report appears herein.

                  The Audit Committee of the Board of Directors is comprised
entirely of individuals who are not employees of the Company. This Committee
meets periodically with management and the independent public accountants to
review audit results.


Hank McHale
President and Chief Executive Officer


John C. Martin, III
Vice President, Treasurer, Secretary and Chief Financial Officer


Timothy E. Coyne
Vice President, Controller and Assistant Secretary
Chief Accounting Officer








                                       2
<PAGE>   3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

                  TransPro, Inc. (the "Company") is a manufacturer and supplier
of heat transfer components and systems, and fabricated metal products for a
variety of Aftermarket and OEM automotive, truck and specialty industrial
equipment applications.

                  On September 29, 1995, the Company completed a series of
transactions pursuant to which the Company's sole stockholder, Allen Telecom
Inc. (formerly The Allen Group Inc. ("Allen") contributed (the "Allen
Contribution") to the Company substantially all of the assets and liabilities of
Allen's original equipment radiator and fabricated metal products business (the
"Automotive and Truck Products Business"), as well as Allen's 50% ownership
interest in GO/DAN Industries ("GDI"), a 50/50 joint venture partnership between
affiliates of Allen and Handy & Harman. Immediately thereafter, the Company made
a capital contribution (the "TransPro Contribution") to GDI in the aggregate
amount of approximately $23 million. Together with approximately $2 million of
borrowings made by GDI, the TransPro Contribution was used to redeem the
outstanding ownership in GDI not already owned by Allen (the "GDI Redemption"),
thereby making GDI a wholly owned partnership of the Company.

                  In connection with the foregoing transactions, the Company
also entered into a Revolving Credit and Term Loan Agreement with the First
National Bank of Boston, as agent, and certain lenders named therein (the
"Credit Agreement"). (See "Financial Condition, Liquidity and Capital Resources"
and Note 9 to the consolidated financial statements for additional information.)
The Company borrowed $23 million under the Credit Agreement to finance the
TransPro Contribution.

                  In addition, Allen effected the distribution (the
"Distribution") of 100% of the outstanding shares of the Company's common stock
to the holders of record of Allen's common stock as of the close of business on
September 29, 1995 on the basis of one share of the Company's common stock for
every four shares of Allen's common stock. As a result of the Distribution, the
Company became an independent publicly-traded company.

                  This Management's Discussion and Analysis of Financial
Condition and Results of Operations includes the twelve months ended December
31, 1995, the first nine months of which the Company was owned by and operated
as the Automotive and Truck Products Business of Allen and the Company's 50%
ownership interest in GDI was accounted for under the equity method. Under this
method, the Company's share of net earnings of GDI was included as a separate
item in the consolidated statements of income of the Company. As a result of the
GDI Redemption, which was accounted for under the purchase method of accounting,
the financial results of GDI were reported on a fully consolidated basis with
those of the Company effective October 1, 1995.

YEAR ENDED DECEMBER 31, 1997 VERSUS YEAR ENDED DECEMBER 31, 1996

                  Net sales for 1997 increased 9% to $288.9 million compared
with $264.1 million for 1996. Sales of Aftermarket heat transfer products
increased $7.4 million or 6% reflecting a full year's inclusion of replacement
automotive air conditioning condenser sales from the August 1996 acquisition of
Rahn Industries ("Rahn"), coupled with higher sales of other Aftermarket heat
transfer products. Sales of OEM contract fabricated metal products increased
$14.6 million or 16% reflecting the impact of a large van conversion order from
Ford Motor Company ("Ford") for the United States Postal Service delivery fleet,
slightly higher sales of Crew Cabs and Dual Rear Wheel ("DRW") components to
Ford due to higher daily shipment rates in 1997 compared with 1996 and an
increase in sales of other OEM contract fabricated metal products, primarily to
telecommunications customers. Sales of OEM

                                       3
<PAGE>   4
heat transfer products increased $2.8 million or 8% from the levels of a year
ago as a result of higher volume to off highway and specialty vehicle customers.

                  Gross margins of 23.1% in 1997 were lower than the 23.4%
achieved last year. The OEM heat transfer products business experienced
significant negative gross margins in 1997 as a result of continued operating
inefficiencies related to the relocation and consolidation of heavy duty
radiator manufacturing operations into the Jackson, Mississippi facility. These
operating inefficiencies have exceeded the Company's original estimates and have
persisted for a longer period of time than anticipated. As a result, the cost
savings goals related to the plant consolidations in the OEM heat transfer
products business were not realized in 1997. In the Aftermarket heat transfer
business, margins declined reflecting the impact of price competition which was
offset by lower copper costs as well as higher expenses associated with the move
of heater production to Mexico and higher repairs and maintenance expenses.
Gross margins in the OEM contract fabricated metal products business improved
due to the successful fulfillment of the Ford Postal Service order and better
manufacturing efficiencies resulting from cost reduction programs coupled with
higher overhead absorption related to higher sales of fabricated metal
components to telecommunications customers and the additional component
production volume for the Ford Postal Service order.

                  Selling, general and administrative expenses ("S,G&A") in 1997
increased $5.8 million or 14% over 1996 as a result of increases in Aftermarket
heat transfer business S,G&A related to the inclusion of the Rahn business for a
full year in 1997 which added approximately $1.1 million of incremental cost,
additional warehousing and freight costs of approximately $0.9 million related
to higher inventory levels, the cost of additional sales personnel in the
industrial core products and national accounts areas which amounted to
approximately $0.2 million and incremental expenses of approximately $0.3
million associated with the conversion of several agents to Company branches in
certain markets. In addition, the allowance for doubtful accounts in the
Aftermarket heat transfer business was increased by approximately $0.8 million
as the result of the bankruptcy filing of a large customer. Corporate Office
expenses increased as a result of absorbing the carrying costs of approximately
$0.3 million of unoccupied manufacturing space in New Haven as a result of the
consolidation of heavy duty radiator production into Jackson, Mississippi as
well as reflecting an adjustment of approximately $1.1 million to reduce the
accrued Workers' Compensation liability in 1996.

                  The Company recorded $4.0 million in plant and business
consolidation and closure costs in 1997, of which $3.2 million was associated
with the closing of the Company's Louisville, Kentucky plant as a result of the
previously announced loss of the Ford Crew Cab and DRW pickup truck components
business. See "End of Crew Cab and Dual Rear Wheel Contract" for a discussion of
this matter. In addition, in 1997, the Company recorded $1.3 million of costs
related to previously announced consolidation actions of its OEM and Aftermarket
heat transfer businesses which were offset by the reversal of previously
recorded employee termination benefits of $0.5 million also associated with
these consolidation actions. In 1996, the Company recorded costs of $4.4 million
associated with the OEM and Aftermarket heat transfer business consolidation
actions.

                  Net interest expense increased to $3.1 million in 1997 from
$2.9 million in 1996 as a result of higher borrowings under the Revolving Credit
and Term Loan Agreement to finance higher inventory levels.

                  The Company's effective tax rate of 40.8% for 1997 is
comprised of the U.S. Federal income tax rate plus the estimated aggregate
effective rate for state and local income taxes and increased from the 1996 rate
of 40.4% principally as a result of higher non-tax deductible expenses in 1997.

                  Net income was $7.9 million or $1.20 per basic and diluted
share in 1997 compared with $8.4 million or $1.28 per basic and diluted share in
1996. Before the impact of plant and business consolidation and closure costs,

                                       4
<PAGE>   5
corresponding net income was $10.2 million or $1.55 per basic and diluted share
in 1997 compared with $11.0 million or $1.67 per basic and diluted share in
1996.

YEAR ENDED DECEMBER 31, 1996 VERSUS YEAR ENDED DECEMBER 31, 1995

                  Net sales for 1996 were $264.1 million versus $151.7 million
for 1995, an increase of $112.4 million or 74%. GDI was not included in the
sales for the first nine months of 1995 and contributed $109.5 million of the
additional sales in 1996 including $4.1 million of replacement automotive air
conditioning condenser sales resulting from the acquisition of certain assets
and liabilities of Rahn. Sales of OEM contract manufacturing products increased
$4.8 million or 6% primarily as a result of higher shipments of Crew Cabs to
Ford. Sales of OEM heat transfer products declined $1.9 million reflecting lower
sales of heat transfer products to heavy duty truck manufacturers consistent
with continued weakness in that market.

                  Gross margins of 23.4% in 1996 were up from the 20.6% reported
in 1995. The increase was primarily the result of the inclusion of GDI's
Aftermarket sales which generally yield higher gross margins than OEM sales in
order to support GDI's national Aftermarket distribution system. Margins in the
OEM contract manufacturing business improved as a result of higher Crew Cab
production rates. Margins in the OEM heat transfer business declined due to
operating inefficiencies resulting from the relocation of the New Haven,
Connecticut manufacturing to Jackson, Mississippi, coupled with costs associated
with the start-up of aluminum heat transfer production in Jackson, Mississippi.

                  Selling, general and administrative expenses totaled $40.4
million in 1996 versus $17.3 million in 1995. The majority of the increase is
due to the inclusion in 1996 of GDI on a fully consolidated basis as well as a
full twelve months of corporate office expenses in 1996 necessary to support the
operation of the Company as an independent publicly-traded company. GDI's
nationwide distribution system and related marketing expenses produce
substantially higher selling expenses than those incurred in the OEM business.

                  As more fully discussed in Note 4 to the consolidated
financial statements, plant and business consolidation costs of $4.4 million
were recognized in 1996. The costs result from the previously announced actions
to consolidate the OEM and Aftermarket heat transfer organizations in order to
increase competitiveness and profitability, close the New Haven, Connecticut OEM
heat transfer plant and move such manufacturing to Jackson, Mississippi, and
close the Peru, Illinois Aftermarket heat transfer plant and move such
manufacturing to Mexico. The costs reflect severance and other personnel
termination costs, costs to move equipment and other costs directly associated
with these consolidations. The total cost of these actions is anticipated to be
approximately $5.5 million on a pre-tax basis. Once completed, the ongoing
annual pre-tax cost benefit of these actions is expected to be approximately
$5.0 million. See "Forward-Looking Statements - Cautionary Factors" for a
discussion of certain factors to consider in connection with the foregoing
forward-looking statements.

                  Net interest expense rose $1.8 million to $2.9 million in 1996
versus $1.1 million in 1995 due to the approximately $25.0 million in additional
debt incurred for the GDI Redemption. Interest costs in 1995 were comprised of
both interest on outstanding industrial revenue bonds and an allocation of
interest costs from Allen, which are not necessarily indicative of the interest
costs which would have been incurred if TransPro was financed independently.

                  The Company's effective tax rate is comprised of the U.S.
Federal income tax rate plus the estimated aggregate effective rate for state
and local income taxes and was 40.4% in 1996 compared with 40.8% in 1995.

                  Net income was $8.4 million or $1.28 per basic and diluted
share in 1996 compared with $9.1 million or $1.39 per basic and diluted share in
1995. Excluding the effect of plant and business consolidation costs,

                                       5
<PAGE>   6
comparable 1996 net income was $11.0 million or $1.67 per basic and diluted
share versus $9.1 million or $1.39 per basic and diluted share in 1995.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

                  Prior to the GDI Redemption, the financial position of the
Company and its cash flow and financial needs were intertwined with those of
Allen, and with the exception of certain industrial revenue bonds, the Company's
cash flow and financial requirements had been funded to or from Allen through
daily intercompany transactions.

                  Immediately prior to the Distribution, the Company entered
into the Credit Agreement with a group of five banking institutions. The Credit
Agreement provides for unsecured borrowings or the issuance of letters of credit
in an aggregate amount not to exceed $75 million. The Credit Agreement is
comprised of a $50 million Revolving Credit Facility and a $25 million Term
Loan. The Term Loan is payable in 20 equal quarterly installments over five
years commencing December 31, 1995. The Revolving Credit Facility and Term Loan
each bear interest at variable rates based on either (i) a Eurodollar loan rate,
plus an applicable margin based upon the ratio of the Company's total funded
debt to earnings before interest, taxes, depreciation and amortization, or (ii)
the prime lending rate, at the Company's option. The Company incurred
approximately $25 million of borrowings under the Term Loan in connection with
the GDI Redemption and to refinance approximately $2 million of existing GDI
indebtedness. Approximately $13 million of borrowings were incurred under the
Revolving Credit Facility to refinance the remaining existing indebtedness of
GDI. The Company's Credit Agreement contains financial covenants which, among
other things, require the maintenance of a minimum tangible net worth and debt
service coverage and a maximum level of debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA") and debt to net worth, as well as
covenants which place limits on dividend payments in excess of $3.6 million per
annum and capital expenditures in excess of 140% of the prior fiscal year's
depreciation expense unless certain financial ratios are attained.

                  During 1997, the Company generated $10.0 million of cash from
operations. Net income plus total adjustments to reconcile net income to net
cash provided by operating activities, which includes, among other things,
depreciation and amortization generated $18.4 million of operating cash flow.
The Company's investment in accounts receivable and inventory required cash of
$3.2 million and $5.5 million, respectively.

                  In 1996, the Company generated $14.7 million in operating cash
flows. Net income plus total adjustments to reconcile net income to net cash
provided by operating activities generated $16.1 million. In addition, cash was
generated from the collection of trade accounts receivable of $0.9 million, the
repayment of miscellaneous notes receivable of $0.8 million and the return of
$0.4 million of federal tax deposits. Cash was used to reduce accounts payable
and accrued expenses by $3.3 million.

                  1995 operating cash flows were $18.7 million which was
primarily the result of GDI's strong cash generation in the fourth quarter.

                  Capital spending totaled $7.2 million, $5.6 million and $4.1
million in 1997, 1996 and 1995, respectively. In 1997, the Company acquired
substantially all of the assets and assumed certain specified liabilities of
Vehicle Management Systems Inc. ("VMS") for approximately $1.0 million, and paid
$5.5 million for certain assets and liabilities of Rahn in 1996. In 1995 the
Company completed the GDI Redemption for $23.0 million.

                  Cash dividends of $1.3 million were paid in 1997 and 1996. No
dividends were paid in 1995.

                                       6
<PAGE>   7
                  In 1997, net borrowings under the Credit Agreement decreased
by $1.2 million. During 1996, net borrowings under this same agreement declined
by $1.8 million and other borrowings declined $0.2 million. During 1995, $37.7
million of borrowings were incurred under the Credit Agreement to complete the
GDI Redemption and refinance approximately $15.0 million of existing GDI
indebtedness.

                  The future liquidity and ordinary capital needs of the Company
in the near term are expected to be met from operations. The Company's working
capital requirements peak during the second and third quarters, reflecting the
normal seasonality of the heat transfer Aftermarket. The Company believes that
the Credit Agreement, along with cash flow from operations, will be adequate to
meet near term anticipated ordinary capital expenditure and working capital
requirements. However, the capital for major growth initiatives and seasonal
working capital requirements may exceed the aggregate amount of borrowings
available under the Credit Agreement. If this were to occur, the Company would
have to negotiate a new credit facility or seek additional sources of capital.
No assurance can be given that the Company would be successful in negotiating a
new credit facility or in securing additional sources of capital.

                  As discussed further in this Management's Discussion and
Analysis of Financial Condition and Results of Operations - Trends and Outlook,
the Company's earnings for 1998 and beyond will be significantly negatively
affected by the end of the Crew Cab/DRW program until the earnings generated by
this program can be replaced by a combination of cost savings measures or growth
initiatives in the core businesses. Absent significant cost savings or growth
initiatives, the Company believes that it is likely that in the second half of
1998 its EBITDA will fall below the level necessary to maintain compliance with
the financial covenants in the Credit Agreement. In such event, the Company
would seek a waiver of the financial covenants or an amendment to the Credit
Agreement. If such a waiver or amendment was not granted, the banks could
require the Company to repay all amounts owing under the Credit Agreement, which
would force the Company to seek alternate sources of capital. However, although
no assurance can be given, the Company believes that it would be successful in
either obtaining a waiver or amendment or in securing additional sources of
capital.

PRO FORMA FINANCIAL INFORMATION

                  The following unaudited pro forma condensed consolidated
statement of income for the year ended December 31, 1995 reflects the effects on
the historical results of the Automotive and Truck Products Business of (i) the
GDI Redemption and the incurrence of approximately $25 million of indebtedness
in connection therewith, (ii) the distribution of the shares of Company stock to
Allen stockholders, and (iii) the addition of expenses to be incurred by the
Company when operating as an independent, publicly-traded business. The
following pro forma condensed consolidated statement of income for the year
ended December 31, 1995 has been prepared as if the transactions described above
occurred on January 1, 1995. The pro forma condensed consolidated statement of
income for the year ended December 31, 1995 is unaudited and is not necessarily
indicative of the results of operations of the Company had the transactions
reflected therein actually been consummated on the date assumed. The pro forma
condensed consolidated statement of income for the year ended December 31, 1995
and the following discussion are presented for informational purposes only. This
information should be read in conjunction with the historical consolidated
financial statements and the notes thereto included elsewhere in this report.
This presentation is consistent with the pro forma financial information in the
S-1 Registration Statement, dated September 28, 1995 relating to the spin-off of
the Company.

                                       7
<PAGE>   8




<TABLE>
<CAPTION>
                                                     ACTUAL         ACTUAL        PRO FORMA
(Amounts in Thousands, Except Per Share Data)          1997           1996           1995
                                                     --------       --------       --------
PRO FORMA OPERATING RESULTS
<S>                                                   <C>            <C>            <C>
Sales                                                  $288,866       $264,095       $247,342
Gross margin                                             66,684         61,827         60,001
Plant and business consolidation
      and closure costs                                   3,958          4,389             --
Income from operations                                   16,448         17,006         17,451
Net income                                                7,875          8,420          8,565
Basic and diluted earnings per share                   $   1.20       $   1.28       $   1.32
</TABLE>

A discussion of the results of the year ended December 31, 1997 versus the year
ended December 31, 1996 is included above.

YEAR ENDED DECEMBER 31, 1996 VERSUS YEAR ENDED DECEMBER 31, 1995

                  Net sales for 1996 were $264.1 million, an increase of $16.8
million or 6.8% over 1995 sales of $247.3 million. Sales of Aftermarket heat
transfer products increased $13.8 million, including $4.1 million of sales of
replacement air conditioner condensers arising from the Rahn acquisition. OEM
contract manufacturing sales increased $4.8 million as a result of higher
shipments of Crew Cabs to Ford. Sales of OEM heat transfer products declined
$1.9 million reflecting lower sales to heavy duty truck manufacturers consistent
with continued weakness in that market.

                  Gross margins of 23.4% declined from the 24.3% achieved in
1995. Margins in the Aftermarket heat transfer business declined as a result of
a sales channel mix change and price competition. Margins in the OEM heat
transfer business were lower due to inefficiencies associated with the move of
the New Haven, Connecticut manufacturing to Jackson, Mississippi and the start
up of aluminum heat transfer production in Jackson, Mississippi. Margins in the
OEM contract manufacturing business improved as a result of higher Crew Cab
production rates.

                  S,G&A expenses for the year ended December 31, 1996 were $40.4
million, a decrease of $2.1 million or 5% compared with 1995. The improvement
reflects unusually high S,G&A costs in the third quarter of 1995 immediately
preceding the spin off of the Company from Allen and in the fourth quarter of
1995 related to certain workers' compensation benefit expenses as well as more
favorable experience in 1996 related to certain workers' compensation and
medical benefits expenses.

                  As previously discussed, the Company recorded pre-tax plant
and business consolidation and closure costs of approximately $4.4 million in
1996.

                  Net interest expense was $2.9 million in 1996 compared with
$3.0 million in 1995.

                  The Company's effective tax rate is comprised of the U.S.
Federal income tax rate plus estimated state and local taxes and was 40.4% in
1996 compared with 40.8% in 1995.

                  Net income was $8.4 million or $1.28 per basic and diluted
share in 1996 compared with $8.6 million or $1.32 per basic and diluted share in
1995. Excluding the effect of plant and business consolidation costs, comparable
1996 net income was $11.0 million or $1.67 per basic and diluted share versus
$8.6 million or $1.32 per basic and diluted share in 1995.

                                       8
<PAGE>   9
ACQUISITIONS

                  In December, 1997 the Company acquired substantially all of
the assets and assumed certain specified liabilities of VMS for approximately
$1.0 million. VMS is located in Ontario, Canada and specializes in utility van
conversions. VMS reported fiscal year end February 1997 sales of $1.6 million.
The acquisition was accounted for as a purchase and VMS's results have been
included in the consolidated financial statements from the date of acquisition.
The Company financed the purchase of the VMS assets by borrowings under the
Credit Agreement and recorded $0.4 million of goodwill related to the
transaction, which is being amortized over 20 years.

                  In August 1996, the Company acquired substantially all of the
assets and assumed certain specified liabilities of Rahn. Rahn is a manufacturer
of replacement automotive air conditioner condensers and evaporators for the
Aftermarket as well as tube and fin heat exchangers for industrial applications.
Rahn reported sales of $12.3 million for the twelve months ended December 31,
1995. The acquisition was accounted for as a purchase and Rahn's results of
operations have been included in the consolidated financial statements from the
date of acquisition. The transaction was structured with an initial purchase
price of $5.3 million paid in cash at closing, with an opportunity for a maximum
additional payout of $2.5 million based upon the future earnings performance of
the business. In addition, approximately $0.2 million was capitalized for
transaction costs incurred to complete the acquisition. The initial purchase
price was financed by borrowings under the Credit Agreement. In connection with
this transaction, the Company recorded $2.4 million of goodwill which is being
amortized over 20 years.

END OF CREW CAB AND DUAL REAR WHEEL CONTRACT

                  Until December 1997, the Company's largest customer was Ford.
The Company was the exclusive supplier of the cab portion of Ford's Crew Cab
pickup truck and the rear fender panel for Ford's DRW pickup truck under a five
year contract that expired on December 31, 1995. The Company's manufacturing
facility in Louisville, Kentucky was dedicated solely to the production of Crew
Cab and DRW components. During 1997, 1996 and 1995, Ford accounted for
approximately 27%, 24% and 38%, respectively, of the Company's net sales and a
significantly greater portion of the Company's total 1997, 1996 and 1995 profits
as a result of the higher margins and significantly lower selling, distribution
and administrative costs associated with the Ford contract compared with the
average of the Company's other businesses.

                  In early 1996, Ford notified the Company that it planned to
move the production of Crew Cab and DRW components in-house in late 1997.
Attempts to develop new business for the Louisville plant have been unsuccessful
and, accordingly, the Company closed the Louisville plant in December 1997. In
the third quarter of 1997, the Company recorded a one-time pre-tax charge of
approximately $3.2 million for all of the expected costs in connection with the
Louisville plant closure. These costs include approximately $1.5 million of
severance and other employee termination costs for the approximately 200
employees at the Louisville plant and approximately $1.7 million for facility
lease cancellation penalties and the abandonment of the fixed assets utilized at
the plant. Substantially all of the severance and other employee termination
costs were paid and the abandoned fixed assets written off in 1997. The
remaining employee severance and termination costs and lease cancellation
penalties are included in the December 31, 1997 balance sheet as accrued plant
and business consolidation and closure costs and are expected to be paid in
1998.

IMPACT OF THE YEAR 2000 ISSUE

                  The Year 2000 issue results from computer systems using two
digit date sensitive software. Such software may not recognize a date identified
as "00" or may assume the year 1900 rather than the year 2000.

                                       9
<PAGE>   10
This may result in system failure or miscalculation causing disruption of
operations, including but not limited to, a temporary inability to process
transactions, send invoices, generate disbursement checks, or engage in similar
normal business activities.

                  The Company has identified an information systems platform to
which the majority of current systems employed by the Company will be converted.
The software associated with the Company's information systems strategy is Year
2000 compliant. The conversion project began in 1996 and is expected to be
completed no later than mid-year 1999. Both internal and external resources will
be utilized to execute the conversion and test it. To date, the Company has
spent approximately $0.6 million on this project. Hardware and software costs
have been capitalized and will be expensed over the useful life of the new
system. The remaining cost of the Year 2000 project is estimated at $1.5
million, a portion of which is related to hardware and software which will be
capitalized and the balance of which will be expensed as incurred over the
duration of the project.

                  The Company has yet to initiate formal communications with all
of its significant vendors, service providers, lenders and large customers to
determine the extent to which it is vulnerable to the Year 2000 issue
externally. There can be no guarantee that the systems of other companies on
which the Company relies will be converted on a timely basis, that a conversion
will even occur, or that a conversion that is incompatible with the Company's
systems would not have a material impact on the Company.

                  The costs of the Year 2000 project and the date on which all
of the Company's primary information systems are converted are based upon
management's best estimates given current available information and resource
requirements. There can be no assurance, however, that these estimates will be
achieved and actual results may differ materially from these expectations.
Uncertainties that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to affect the timely conversion of all relevant systems, and other
similar factors.

INFLATION

                  The overall impact of the low rate of inflation in recent
years has resulted in no significant impact on labor costs and general services
utilized by the Company. Certain raw materials, such as copper, brass and other
primary metals, used in the Company's business are generally subject to
commodity pricing and variations in the market prices for such materials. The
principal raw materials used by the Company in its original equipment and
replacement radiator product lines are copper and brass. Although these
materials are available from a number of vendors, the Company has chosen to
concentrate its sources with a limited number of long-term suppliers. The
Company typically executes purchase orders for its copper and brass requirements
approximately three to six months prior to the actual delivery date. The
purchase price for such copper and brass is established at the time such orders
are placed by the Company and not at the time of delivery.

                  The Company manages its metals commodity pricing by attempting
to pass through any cost increases to its customers. Although the Company has
been successful in passing through price increases to its customers to offset a
portion of past cost increases of copper and brass, there is no assurance that
the Company will continue to be successful in raising prices in the future. The
Company does not use hedging transactions with respect to its metals
consumption.

ENVIRONMENTAL MATTERS

                  The Company is subject to federal, state and local laws
designed to protect the environment and believes that, as a general matter, its
policies, practices, and procedures are properly designed to reasonably prevent
risk

                                       10
<PAGE>   11
of environmental damage and financial liability to the Company. The Company
believes it is reasonably possible that environmental related liabilities may
exist with respect to an industrial site formerly occupied by the Company. Based
upon environmental site assessments, the Company believes that the cost of any
potential remediation for which the Company may ultimately be responsible will
not have a material adverse effect on the consolidated financial position,
results of operations, or liquidity of the Company.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

                  During 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123") "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a fair value based method of accounting for
stock options and similar equity instruments (together "Stock Compensation
Plans") and allows an entity to measure compensation cost for Stock Compensation
Plans under the fair value method or to continue using the intrinsic value
method of accounting prescribed by Accounting Principles Board Opinion No. 25
("APB No. 25") "Accounting for Stock Issued to Employees." The Company applies
APB No. 25 and related interpretations in accounting for its Stock Compensation
Plans. Accordingly, no compensation expense has been recognized for stock
options. The effect of using the fair value method under SFAS No. 123 is
immaterial to the Company's 1997, 1996 and 1995 net income but has been
disclosed in the footnotes to the Company's annual financial statements.

                  In 1997 the Company adopted Statement of Financial Accounting
Standards No. 128 ("SFAS No. 128") "Earnings per Share," whose objective is to
simplify the computation of earnings per share ("EPS") and to make the U.S.
standard of computing EPS more compatible with the international standard. The
adoption of SFAS No. 128 has not had a material effect on the EPS of the
Company.

                  The Company has also adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130") "Reporting Comprehensive Income," which
requires an entity to report and display comprehensive income and its components
in a separate financial statement displayed with the same prominence as other
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources and includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. Comprehensive income includes revenues, expenses, gains and losses that
under generally accepted accounting principles are excluded from net income as
presented in the income statement.

                  In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131")
"Disclosures about Segments of an Enterprise and Related Information," which
requires that public business enterprises report financial and descriptive
information about reportable operating segments in annual financial statements
and interim financial reports issued to shareholders. Operating segments are
defined as those components of an enterprise about which separate financial
information is available that is regularly used internally by the chief
operating decision maker in evaluating segment performance and in deciding how
to allocate resources to segments. SFAS No. 131 requires that a public business
enterprise report a measure of segment profit or loss, certain specific revenue
and expense items, and segment assets. It requires reconciliations of total
segment revenues, total segment profit or loss, total segment assets, and other
amounts disclosed for segments to corresponding amounts in the enterprise's
general-purpose financial statements. It requires that all public business
enterprises report information about the revenues derived from the enterprise's
products or services (or groups of similar products and services), about the
countries in which the enterprise earns revenues and holds assets, and about
major customers regardless of whether that information is used in making
operating decisions. SFAS No. 131 also requires that a public business
enterprise report descriptive information about the way that the operating
segments were determined, the products and services provided by the operating
segments, differences between the measurements used in

                                       11
<PAGE>   12
reporting segment information and those used in the enterprise's general-purpose
financial statements, and changes in the measurement of segment amounts from
period to period. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of adoption, comparative
information for earlier years is to be restated. SFAS No. 131 need not be
applied to interim financial statements in the initial year of its application,
but comparative information for interim periods in the initial year of
application is to be reported in financial statements for interim period in the
second year of application. The impact on the Company of the adoption of SFAS
No. 131 has not been determined at this time.

TRENDS AND OUTLOOK

                  The results for 1997 in the Aftermarket and OEM heat transfer
businesses were below the Company's expectations as a result of market softness
and price competition in the heat transfer Aftermarket and the operating
inefficiencies experienced in the OEM heat transfer business. The automotive
Aftermarket is expected to remain soft and price competition is expected to
continue in 1998. Operating inefficiencies related to plant consolidations in
the OEM heat transfer business have significantly exceeded estimates and have
prevented the cost savings goals previously anticipated from being realized thus
far. No cost savings as a result of the OEM heat transfer plant consolidations
were realized in 1997. The Crew Cab/DRW program ended in December 1997. As a
result of the adverse conditions in the Aftermarket and OEM heat transfer
businesses, progress toward replacing the earnings generated by the Crew Cab/DRW
program has been slower than expected and Crew Cab/DRW related earnings
therefore constitute a more significant portion of the Company's total earnings
than previously anticipated.

                  As a result of the end of the Crew Cab/DRW program, the
Company's net income for 1998 and beyond will be significantly negatively
affected until the earnings generated by this program can be replaced by a
combination of cost savings measures and strategic growth initiatives in the
core businesses. In addition, the adverse factors discussed above will
exacerbate the impact of the end of the Crew Cab/DRW contract and the normal
seasonal variations in the first and fourth quarters in the Company's remaining
operations will become more pronounced.

FORWARD - LOOKING STATEMENTS - CAUTIONARY FACTORS

                  Statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical in nature
are forward-looking statements. Such forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements regarding the Company's future
business prospects, revenues, orders, sales and liquidity are subject to certain
risks, uncertainties and other factors that could cause actual results to differ
materially from those projected or suggested in the forward-looking statements,
including but not limited to: business conditions and growth in the general
economy and automotive and truck business, the impact of competitive products
and pricing, the financial impact of the loss of the Ford Crew Cab and DRW
business, changes in customer and product mix, failure to obtain new customers,
retain existing customers or changes in the financial stability of customers,
changes in the cost of raw materials, components or finished products, the
effect of the Company's restructuring actions and changes in interest rates.
Improvements in manufacturing efficiencies and reduction of costs are subject to
a number of factors, including but not limited to, the ability of management to
implement improvements in workforce efficiencies and the timing of such
improvements.



                                       12
<PAGE>   13
                                 TRANSPRO, INC.

                        CONSOLIDATED STATEMENTS OF INCOME


(amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,

                                                                     1997             1996             1995
                                                                  ---------        ---------        ---------
<S>                                                               <C>              <C>              <C>
Sales                                                             $ 288,866        $ 264,095        $ 151,660
Cost of sales                                                       222,182          202,268          120,486
                                                                  ---------        ---------        ---------
Gross margin                                                         66,684           61,827           31,174
Selling, general, and
    administrative expenses                                          46,278           40,432           17,267
Plant and business consolidation and closure costs (Note 4)           3,958            4,389               --
                                                                  ---------        ---------        ---------
Income from operations                                               16,448           17,006           13,907
Equity in earnings of GDI (Note 8)                                       --               --            2,495
Interest expense                                                     (3,186)          (2,999)          (1,481)
Interest income                                                          46              113              416
                                                                  ---------        ---------        ---------
Income before taxes                                                  13,308           14,120           15,337
Provision for income taxes (Note 5)                                   5,433            5,700            6,263
                                                                  ---------        ---------        ---------
Net income                                                        $   7,875        $   8,420        $   9,074
                                                                  =========        =========        =========

Basic and diluted earnings share                                  $    1.20        $    1.28        $    1.39
                                                                  =========        =========        =========
Weighted average common shares - basic                                6,553            6,554            6,511
                                                                  =========        =========        =========
Weighted average common shares - diluted                              6,586            6,571            6,533
                                                                  =========        =========        =========
</TABLE>


                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
(amounts in thousands)
                                                 1997           1996           1995
                                               -------        -------        -------
<S>                                            <C>            <C>            <C>
Net income                                     $ 7,875        $ 8,420        $ 9,074

Other comprehensive income, net of tax:
    Foreign currency translation                   (26)           (71)          (111)
    Minimum pension liability adjustment          (326)           487           (398)
                                               -------        -------        -------
Other comprehensive income                        (352)           416           (509)
                                               -------        -------        -------
Comprehensive income                           $ 7,523        $ 8,836        $ 8,565
                                               =======        =======        =======
</TABLE>



        The accompanying notes are an integral part of these statements.



                                       13
<PAGE>   14
                                 TRANSPRO, INC.

                           CONSOLIDATED BALANCE SHEETS



(amounts in thousands)
<TABLE>
<CAPTION>
                                                                      DECEMBER 31,   DECEMBER 31,
                                  ASSETS                                 1997           1996
                                                                       --------       --------
<S>                                                                    <C>            <C>
Current assets:
     Cash and cash equivalents                                         $    593       $    920
     Accounts receivable  (less allowances of $3,441 and $3,378)         37,506         35,936
     Inventories:
         Raw materials                                                   15,151         13,218
         Work in process                                                  7,632          8,198
         Finished goods                                                  35,752         31,513
                                                                       --------       --------
     Total inventories                                                   58,535         52,929
                                                                       --------       --------

     Deferred income tax benefit (Note 5)                                 3,318          3,343
     Other current assets                                                 1,984          1,609
                                                                       --------       --------
Total current assets                                                    101,936         94,737
                                                                       --------       --------

Property, plant and equipment:
     Land and land improvements                                             784            784
     Buildings                                                           17,087         16,395
     Machinery and equipment                                             65,949         64,820
     Leasehold improvements                                               3,206          3,491
                                                                       --------       --------
                                                                         87,026         85,490
     Less accumulated depreciation and amortization                      50,274         47,551
                                                                       --------       --------
Net property, plant and equipment                                        36,752         37,939
                                                                       --------       --------

Deferred start-up costs                                                       0          1,446
Goodwill (net of amortization of $170 and $50)                            2,733          2,241
Other assets                                                              3,119          3,903
                                                                       --------       --------
Total assets                                                           $144,540       $140,266
                                                                       ========       ========
</TABLE>

        The accompanying notes are an integral part of these statements.



                                       14
<PAGE>   15
                                 TRANSPRO, INC.

                           CONSOLIDATED BALANCE SHEETS



(amounts in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,     DECEMBER 31,
                       LIABILITIES AND STOCKHOLDERS' EQUITY                  1997             1996
                                                                          ---------        ---------



Current liabilities:
<S>                                                                       <C>              <C>
     Accounts payable                                                     $  13,604        $  12,207
     Notes payable and current maturities
        of long-term obligations (Note 9)                                     5,000            5,000
     Accrued insurance                                                        5,817            6,011
     Accrued salaries and wages                                               4,310            5,610
     Accrued taxes                                                            2,450            2,054
     Accrued plant and business consolidation charges                           387            1,146
     Accrued expenses                                                         6,903            6,548
                                                                          ---------        ---------
Total current liabilities                                                    38,471           38,576
                                                                          ---------        ---------
Long-term liabilities:
     Long-term debt (Note 9)                                                 32,838           33,917
     Retirement and postretirement obligations                                7,050            6,470
     Deferred income taxes (Note 5)                                             793            1,800
     Other liabilities                                                          373              807
                                                                          ---------        ---------
Total liabilities                                                            79,525           81,570
                                                                          ---------        ---------
Commitments and contingent liabilities (Note 10)                                 --               --
Stockholders' equity:
     Common stock, $.01 par value:                                               66               66
         Authorized 17,500,000 shares at December 31, 1997 and 1996
         6,683,571 shares issued (6,661,139 in 1996)
         6,611,460 shares outstanding (6,591,835 in 1996)
     Preferred stock, $.01 par value:                                            --               --
         Authorized 2,500,000 shares;
         none issued at December 31, 1997 and 1996
     Treasury stock at cost                                                     (26)              --
         72,111 shares at December 31, 1997 and
         69,304 at December 31, 1996
     Paid-in capital                                                         52,227           52,061
     Unearned compensation                                                     (369)            (346)
     Retained earnings                                                       14,584            8,030
     Accumulated other comprehensive income                                  (1,467)          (1,115)
                                                                          ---------        ---------
Total stockholders' equity                                                   65,015           58,696
                                                                          ---------        ---------
Total liabilities and stockholders' equity                                $ 144,540        $ 140,266
                                                                          =========        =========
</TABLE>

        The accompanying notes are an integral part of these statements.



                                       15
<PAGE>   16


                                 TRANSPRO, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
 (amounts in thousands)

<TABLE>
<CAPTION>
                                                                                                   YEAR ENDED DECEMBER 31,

                                                                                             1997            1996            1995
                                                                                           --------        --------        --------
Cash flows from operating activities, excluding the effects of the GDI
redemption:
<S>                                                                                        <C>             <C>             <C>
     Net income                                                                            $  7,875        $  8,420        $  9,074
     Adjustments to reconcile net income to net cash provided by operating activities:
         Depreciation and amortization                                                        6,627           5,911           3,701
         Amortization of deferred start-up costs and goodwill                                 1,566           1,109             966
         Joint venture income                                                                    --              --          (2,495)
         Deferred income taxes                                                                 (797)           (428)           (210)
         Provision for losses - accounts receivable                                           1,790           1,090            (100)
         Write-off of fixed assets related to plant closure                                   1,379              --              --
                                                                                           --------        --------        --------
     Total adjustments to reconcile net income to net cash provided by operating
            activities                                                                       10,565           7,682           1,862
                                                                                           --------        --------        --------
     Change in operating assets and liabilities, net of acquisitions:
         Accounts receivable                                                                 (3,217)            919           7,525
         Joint venture receivable                                                                --              --             857
         Inventory                                                                           (5,454)           (137)         (4,244)
         Accounts payable                                                                     1,397          (1,455)            738
         Accrued expenses                                                                    (1,504)         (1,813)          2,410
         Other                                                                                  347           1,133             524
                                                                                           --------        --------        --------
     Total change in operating assets and liabilities,  net of acquisitions                  (8,431)         (1,353)          7,810
                                                                                           --------        --------        --------
Cash provided by operating activities                                                        10,009          14,749          18,746
                                                                                           --------        --------        --------
Cash flows from investing activities:
     Redemption of GDI                                                                           --              --         (23,028)
     Capital expenditures                                                                    (7,214)         (5,565)         (4,066)
     Sales and retirements of fixed assets, net                                                 318             581             213
     Acquisitions, net of cash acquired                                                        (967)         (5,532)             --
                                                                                           --------        --------        --------

Cash used in investing activities                                                            (7,863)        (10,516)        (26,881)
                                                                                           --------        --------        --------
Cash flows from financing activities:
     Exercise of stock options                                                                   24               6              --
     Purchase of treasury stock                                                                 (26)             --              --
     Dividends paid                                                                          (1,321)         (1,319)             --
     Borrowings of long-term debt                                                             3,850           4,450          37,672
     Repayments of long-term debt and current maturities of long-term debt                   (5,000)         (6,450)        (23,891)
     Increase in receivable from The Allen Group Inc.                                            --              --         (11,395)
                                                                                           --------        --------        --------
Cash (used in) provided by financing activities                                              (2,473)         (3,313)          2,386
                                                                                           --------        --------        --------
(Decrease) Increase in cash and cash equivalents                                               (327)            920          (5,749)
Cash and cash equivalents:
     Beginning of year                                                                          920              --           5,749
                                                                                           --------        --------        --------
     End of year                                                                           $    593        $    920        $   ----
                                                                                           ========        ========        ========

Interest paid                                                                              $  3,209        $  3,150        $  1,084
Taxes paid  (net of refunds)                                                               $  5,722        $  5,270              --
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       16
<PAGE>   17
                                 TRANSPRO, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(amounts in thousands except
share and per share amounts)

<TABLE>
<CAPTION>
                                                                  TREASURY
                                         COMMON STOCK              STOCK          PAID-IN         RETAINED
                                   SHARES           VALUE          VALUE          CAPITAL         EARNINGS
                                  ----------     -----------     -----------     -----------     -----------
<S>                                <C>           <C>             <C>             <C>             <C>
Balance December 31, 1994


Net distribution costs &
  adjustments                      6,545,605     $        66                     $    51,611
Net income after spin-off                                                                        $     1,259
Cash dividends declared
  ($.05 per share)                                                                                      (331)
Replacement restricted
  stock issued                        71,834               1                             834
Amortization of unearned
  compensation
Net change in translation
  adjustment
Net change in adjustment for
  minimum pension liability
                                  ----------     -----------     -----------     -----------     -----------
Balance December 31, 1995          6,617,439     $        67           $----     $    52,445     $       928
                                  ----------     -----------     -----------     -----------     -----------

Net income                                                                                             8,420
Cash dividends declared
  ($.20 per share)                                                                                    (1,318)
Restricted stock issued                9,463                                              72
Restricted stock canceled            (36,411)                                           (416)
Stock options exercised                1,344                                               6
Amortization of unearned
  compensation
Net change in translation
  adjustment
Net change in adjustment for
  minimum pension liability
Other adjustments                                         (1)                            (46)
                                 -----------     -----------     -----------     -----------     -----------
Balance December 31, 1996          6,591,835     $        66           $----     $    52,061     $     8,030
                                 -----------     -----------     -----------     -----------     -----------

Net income                                                                                             7,875
Cash dividends declared
  ($0.20 per share)                                                                                   (1,321)
Treasury stock issued                 (2,807)                           (26)
Restricted stock issued               18,400                                             142
Stock options exercised                4,032                                              24
Amortization of unearned
  compensation
Net change in translation
  adjustment
Net change in adjustment for
  minimum pension liability
Other adjustments
                                 ===========     ===========     ===========     ===========     ===========
Balance December 31, 1997          6,611,460     $        66     $       (26)    $    52,227     $    14,584
                                 ===========     ===========     ===========     ===========     ===========
</TABLE>

<TABLE>
<CAPTION>
                                                             OTHER           TOTAL
                                BUSINESS    UNEARNED      COMPREHENSIVE   STOCKHOLDERS'
                                 EQUITY       COMP.          INCOME          EQUITY
                                  -----    -----------     -----------     -----------
<S>                             <C>        <C>             <C>             <C>
Balance December 31, 1994       $55,669                    $    (1,022)    $    54,647

Net distribution costs &
  adjustments                   (55,669)                                        (3,992)
Net income after spin-off                                                        1,259
Cash dividends declared
  ($.05 per share)                                                                (331)
Replacement restricted
  stock issued                             $      (835)                             --
Amortization of unearned
  compensation                                      29                              29
Net change in translation
  adjustment                                                      (111)           (111)
Net change in adjustment for
  minimum pension liability                                       (398)           (398)
                                  -----    -----------     -----------     -----------
Balance December 31, 1995         $----    $      (806)    $    (1,531)    $    51,103
                                  -----    -----------     -----------     -----------

Net income                                                                       8,420
Cash dividends declared
  ($.20 per share)                                                              (1,318)
Restricted stock issued                            (72)                             --
Restricted stock canceled                          416                              --
Stock options exercised                                                              6
Amortization of unearned
  compensation                                      65                              65
Net change in translation
  adjustment                                                       (71)            (71)
Net change in adjustment for
  minimum pension liability                                        487             487
Other adjustments                                   51                               4
                                  -----    -----------     -----------     -----------
Balance December 31, 1996         $----    $      (346)    $    (1,115)    $    58,696
                                  -----    -----------     -----------     -----------

Net income                                                                       7,875
Cash dividends declared
  ($0.20 per share)                                                             (1,321)
Treasury stock issued                                                              (26)
Restricted stock issued                           (142)                             --
Stock options exercised                                                             24
Amortization of unearned
  compensation                                      99                              99
Net change in translation
  adjustment                                                       (26)            (26)
Net change in adjustment for
  minimum pension liability                                       (326)           (326)
Other adjustments                                   20                              20
                                  =====    ===========     ===========     ===========
Balance December 31, 1997         $----    $      (369)    $    (1,467)    $    65,015
                                  =====    ===========     ===========     ===========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       17
<PAGE>   18
                                 TRANSPRO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY


                  TransPro, Inc. (the "Company") is a manufacturer and supplier
of heat transfer components and systems, and specialty fabricated metal products
for a variety of Aftermarket and OEM automotive, truck and industrial equipment
applications.

                  On September 29, 1995, the Company completed a series of
transactions pursuant to which the Company's sole stockholder, Allen Telecom
Inc. (formerly The Allen Group Inc.) ("Allen"), contributed (the "Contribution")
to the Company substantially all of the assets and liabilities of Allen's
original equipment radiator and fabricated metal products business (the
"Automotive and Truck Products Business"), as well as Allen's 50% ownership
interest in GO/DAN Industries ("GDI"), a 50/50 joint venture partnership between
affiliates of Allen and Handy & Harman. Immediately thereafter, Allen caused GDI
to redeem the outstanding ownership interest in GDI not already owned by Allen
(the "GDI Redemption"), thereby making GDI an indirect wholly owned partnership
of the Company. GDI produces replacement radiators and other heat transfer
products for the automotive and truck Aftermarkets. The GDI Redemption was
accounted for under the purchase method of accounting.

                  In addition, Allen effected the distribution (the
"Distribution") of 100% of the outstanding shares of the Company's common stock
to the holders of record of Allen's common stock as of the close of business on
September 29, 1995 (the "Record Date"). The Distribution was made on the basis
of one share of the Company's common stock for every four shares of Allen's
common stock outstanding on the Record Date, which resulted in the distribution
of an aggregate of 6,621,349 shares of TransPro common stock.

                  In connection with the foregoing transactions, the Company
also entered into a Revolving Credit and Term Loan Agreement with The First
National Bank of Boston, as agent, and certain lenders named therein (the
"Credit Agreement").

                  As a result of the Contribution, the GDI Redemption and the
Distribution, TransPro now owns the Automotive and Truck Products Business and
100% of GDI, and is an independent publicly-traded company.

                  Operating results up to the date of the Distribution as
presented herein include all costs directly associated with the Automotive and
Truck Products Business operations, including all facilities and data processing
costs, and an allocation of Allen's compensation, insurance, interest and
pension plans. Results of operations do not include residual costs for certain
general corporate management and public reporting functions since there is no
reasonable basis to prepare such an allocation and any such allocation would be
arbitrary. As such, these statements may not necessarily reflect the combined
income (loss) that would have resulted if the Company had operated as an
independent stand-alone company prior to the Distribution. As part of the
Distribution, TransPro entered into agreements with Allen relating to interim
administrative services, certain employee matters and other miscellaneous
matters. Any agreements entered into as part of or following the Distribution
are on an arm's length basis.



                                       18
<PAGE>   19
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  Basis of Consolidation: The Company's consolidated financial
statements include the accounts of all subsidiaries. Intercompany balances and
transactions have been eliminated.

                  The consolidated statements of income reflect the earnings of
Allen's Automotive and Truck Products Business and its 50% equity interest in
GDI through September 29, 1995 and do not include the incremental costs for
TransPro to perform the necessary functions of a public company and the
incremental cost of borrowings to accomplish the redemption of the 50% of GDI
not owned by Allen. Effective October 1, 1995, the financial results of GDI were
reported on a fully consolidated basis.

                  Cash Equivalents: The Company considers all highly liquid
investments with maturities of three months or less at the time of purchase to
be cash equivalents.

                  Inventories: Inventories are valued at the lower of cost
(first-in, first-out method) or market.

                  Property, Plant and Equipment: Property, plant and equipment
is recorded at cost. Ordinary maintenance and repairs are expensed, replacements
and betterments are capitalized. Land improvements, buildings and machinery are
depreciated over their estimated useful lives under the straight-line method.
The provision for amortization of leasehold improvements is based on the term of
the lease or the estimated useful lives of the improvements, whichever is
shorter. Upon retirement or disposition of plant and equipment, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in income.

                  Deferred Start-Up Costs: During the initial phase of major new
programs or development of significant new plant facilities for which
prospective sales and cost recovery are based upon long-term commitments from
customers, start-up costs are deferred and amortized over the contract period.

                  Goodwill: Goodwill represents the excess of cost over the fair
value of assets acquired and is being amortized using the straight-line method
over 20 years. On a periodic basis the Company estimates the future undiscounted
cash flows of the businesses to which goodwill relates to ensure that the
carrying value of such goodwill has not been impaired. The Company's existing
goodwill relates to the acquisition of VMS in 1997 and Rahn in 1996.

                  Impairment of Long-Lived Assets: The Company, in the event
that circumstances arise that indicate that its fixed assets may be impaired,
would perform an evaluation of recoverability of the assets in accordance with
Statement of Financial Accounting Standards No. 121 ("SFAS No. 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." The assets' carrying value would be compared to the estimated
future undiscounted cash flows of the assets to determine if a writedown is
required. There were no impaired long-lived assets at December 31, 1997 other
than those reserved for as part of the Louisville plant shutdown.

                  Foreign Currency Translation: Assets and liabilities of the
Company's foreign subsidiaries are translated into U.S. dollars at the current
rate of exchange, while revenues and expenses are translated at the average
exchange rate during the year. The functional currency of the Company's
manufacturing operations in Mexico is the U.S. dollar and therefore any
adjustments related to currency translations are included in results from
operations. Conversely, adjustments from translating other foreign subsidiaries'
financial statements are excluded from the results of operations and are
reported as a separate component of stockholders' equity.

                                       19
<PAGE>   20
                  Revenue Recognition: The Company recognizes revenues from
product sales upon shipment to its customers.

                  Research and Development: Research and development costs are
charged to income as incurred.

                  Financial Instruments: The Company was party to an interest
rate swap agreement which expired on December 29, 1997 involving the exchange of
fixed and floating rate interest payments. The difference to be paid or received
was accrued as interest rates changed and was recognized over the life of the
agreement as an adjustment to interest expense.

                  Income Taxes: The Company accounts for income taxes in
accordance with the provisions of Statement of Financial Accounting Standards
No. 109 ("SFAS No. 109"), "Accounting for Income Taxes," under which deferred
income taxes are recorded to reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end.

                  Earnings Per Share: Earnings per share are computed in
accordance with the provisions of Statement of Financial Accounting Standards
No. 128 ("SFAS No. 128") "Earnings Per Share" whereby net earnings are divided
by the weighted average number of shares of common stock outstanding less shares
of non-vested restricted stock to arrive at basic earnings per share. Stock
options granted are included in diluted earnings per share.

                  Other Comprehensive Income: The Company has reported other
comprehensive income in accordance with the provisions of Statement of Financial
Accounting Standards No. 130 ("SFAS No. 130") "Reporting Comprehensive Income".
Other comprehensive income represents the change in the equity of the business
from non-owner sources and is presented as required in a separate financial
statement.

                  Use of Estimates: The preparation of the consolidated
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 dates of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.




                                       20
<PAGE>   21
NOTE 3 - SEGMENT AND BUSINESS INFORMATION

                  The Company operates in one segment, "automotive and truck
products."

                  The Company's largest customer was Ford. During 1997, 1996 and
1995, Ford accounted for approximately 27%, 24% and 38%, respectively, of the
Company's net sales and a significantly greater portion of total 1997, 1996 and
1995 profitability on both a historical and pro forma basis. The Company was the
exclusive supplier of certain components of the Crew Cab and Dual Rear Wheel
("DRW") pick up truck models to Ford under a five-year contract that expired on
December 31, 1995. The Company had a facility in Louisville, Kentucky dedicated
solely to the production of Crew Cab and DRW components. Ford moved production
of its Crew Cab and DRW pickup truck models in-house in December 1997 and the
Kentucky production facility has been closed.

                  In 1997 and 1996, the Company had no other customers who
individually accounted for greater than 10% of the Company's net sales. In 1995
other significant customers included PACCAR who accounted for 11% of the
Company's net sales. The Company had net sales to Allen of approximately $0.9
million in 1997, $0.7 million in 1996 and $2.9 million in 1995 for fabricated
metal products used by Allen in its telecommunications and automotive emissions
test businesses. The Company believes that the terms of such sales were no less
favorable than what could have been achieved through arms-length negotiations.
The Company expects such sales to Allen to continue in the foreseeable future.

                  Export sales from North America were below 10% in each of the
years reported. The Company has a manufacturing facility in Mexico which has no
sales in Mexico and acquired a van upfitting facility in Canada in December
1997.



                                       21
<PAGE>   22


NOTE 4 - PLANT AND BUSINESS CONSOLIDATION AND CLOSURE COSTS

                  In 1997 the Company recorded approximately $4.0 million of
plant and business consolidation and closure costs. Of this amount,
approximately $3.2 million related to expenses in connection with the closing of
the Company's Louisville, Kentucky plant as a result of Ford's decision to move
the production of Crew Cab and DRW components in-house in late 1997. These costs
include approximately $1.5 million of severance and other employee termination
costs for the nearly 200 employees at the Louisville plant and approximately
$1.7 million for facility lease cancellation penalties and the abandonment of
the fixed assets utilized at the plant. In addition, the Company recorded $1.3
million in plant and business consolidation and closure costs related to the
previously announced consolidation of the OEM and Aftermarket heat transfer
organizations; the closing of the New Haven, Connecticut OEM heat transfer
product manufacturing plant and move such manufacturing to Jackson, Mississippi;
and the closing of the Peru, Illinois Aftermarket heater manufacturing plant and
movement of such manufacturing to Mexico. These charges were offset by the
reversal of previously recorded employee termination benefits of $0.5 million
related to the transfer of manufacturing operations to Jackson, Mississippi and
Mexico. At December 31, 1997, approximately $0.4 million remained on the balance
sheet related to employee termination costs and facility lease cancellation
penalties for the closing of the Company's Louisville, Kentucky plant, all of
which are expected to be paid in 1998.

                  The Company recorded approximately $4.4 million in plant and
business consolidation and closure costs in 1996 resulting from the actions to
consolidate the OEM and Aftermarket heat transfer organizations, close the New
Haven, Connecticut and Peru, Illinois manufacturing plants and to relocate these
manufacturing operations to Jackson, Mississippi and Mexico respectively. The
costs included severance and other personnel termination costs of approximately
$2.4 million for approximately 80 employees in New Haven and for approximately
130 employees in Peru. The balance of the 1996 plant and business consolidation
and closure costs related to the movement of equipment from New Haven,
Connecticut and Peru, Illinois to Jackson, Mississippi and Mexico, respectively.
During 1996, approximately $1.3 million was paid in connection with employee
terminations. Approximately $1.1 million in severance and termination costs
remained on the December 31, 1996 balance sheet in accrued plant and business
consolidation charges. With the exception of $0.5 million of termination
benefits which were subsequently reversed, these liabilities were paid in 1997.





                                       22
<PAGE>   23


NOTE 5 - INCOME TAXES

Information with respect to income taxes is as follows:

(amounts in thousands)

<TABLE>
<CAPTION>
Provision (benefit) for income taxes:         1997            1996            1995
                                            --------        --------        --------
<S>                                         <C>             <C>             <C>
     Current:  Federal                      $  4,929        $  4,950        $  5,134
               State and local                 1,301           1,178           1,339
                                            --------        --------        --------
                                               6,230           6,128           6,473
                                            --------        --------        --------

     Deferred: Federal                          (630)           (346)           (170)
               State and local                  (167)            (82)            (40)
                                            --------        --------        --------
                                                (797)           (428)           (210)
                                            --------        --------        --------
                                            $  5,433        $  5,700        $  6,263
                                            ========        ========        ========


Income before taxes                         $ 13,308        $ 14,120        $ 15,337
                                            ========        ========        ========
</TABLE>






             A reconciliation of the provision for income taxes at the Federal
statutory rate of 35% to the reported tax provisions is as follows:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                        1997         1996         1995
                                                       ------       ------       ------
<S>                                                    <C>          <C>          <C>
Provision computed at the Federal statutory rate       $4,657       $4,942       $5,368
State and local income taxes, net of Federal
  income tax benefit                                      738          713          844
Other                                                      38           45           51
                                                       ------       ------       ------
                                                       $5,433       $5,700       $6,263
                                                       ======       ======       ======
</TABLE>

                                       23
<PAGE>   24


Significant components of deferred income tax assets and liabilities as of
December 31 are as follows:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                        1997           1996
                                                        ----           ----
<S>                                                  <C>            <C>
Deferred tax assets:
     Inventory                                       $   354        $   313
     Pensions and deferred compensation                2,310          2,090
     Postretirement benefits                             588            603
     Allowance for bad debts                             200            206
     Self insurance reserves                           1,395          1,360
     Warranty reserves                                   648            502
     Accrued vacation                                    361            199
     Plant and business consolidation reserves            --            422
     Other                                               459            326
                                                     -------        -------
         Total deferred tax assets                     6,315          6,021
                                                     -------        -------

Deferred tax liabilities:
     Depreciation                                     (2,312)        (2,345)
     Investment in joint venture                        (902)        (1,139)
     Deferred start-up costs                              --           (431)
     Deferred charges                                   (477)          (490)
     Other                                               (97)           (73)
                                                     -------        -------
         Total deferred tax liabilities               (3,788)        (4,478)
                                                     -------        -------

Net deferred tax assets                              $ 2,527        $ 1,543
                                                     =======        =======
</TABLE>

                  For Federal income tax purposes, the Contribution and
Distribution (as described in Note 1) should qualify as a tax-free spin-off
under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as
amended. In connection with the spin-off, it is intended that Allen will be
responsible for all Federal, state and local income and franchise tax
liabilities prior to the effective date of the spin-off.



                                       24
<PAGE>   25
NOTE 6 - EARNINGS PER SHARE

                  The following table sets forth the computation of basic and
diluted earnings per share:

<TABLE>
<CAPTION>
(Amounts in Thousands, Except Per Share Amounts)      1997           1996           1995
                                                      ----           ----           ----
<S>                                                 <C>            <C>            <C>
Numerator:

Net Income                                          $ 7,875        $ 8,420        $ 9,074
                                                    =======        =======        =======


Denominator:

Weighted average common shares                        6,604          6,596          6,583
Non-vested restricted stock                             (51)           (42)           (72)
                                                    -------        -------        -------
Denominator for basic earnings per share -
  adjusted weighted average common shares             6,553          6,554          6,511

Dilutive effect of stock options                         33             17             22
                                                    -------        -------        -------

Denominator for diluted earnings per share -
  adjusted weighted average common shares and
  assumed conversions                                 6,586          6,571          6,533
                                                    =======        =======        =======

Basic and diluted earnings per share                $  1.20        $  1.28        $  1.39
                                                    =======        =======        =======
</TABLE>


                                       25
<PAGE>   26
NOTE 7 - FAIR VALUES OF FINANCIAL INSTRUMENTS

                  Financial Accounting Standards Board ("FASB") Statements No.
107, "Disclosure about Fair Value of Financial Instruments" and No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments," are part of a continuing process by the FASB to improve
information regarding financial instruments. The following methods and
assumptions were used by the Company in estimating the fair value of each class
of financial instruments:

                  Cash and Cash Equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair value.

                  Current Maturities of Long-Term Debt: The carrying amounts are
a reasonable approximation of fair value due to the short-term maturity of these
instruments.

                  Long-Term Debt: The carrying amounts of the Company's
long-term debt either approximate fair value or are estimated using discounted
cash flow analyses based on the Company's current incremental borrowing rates
for similar types of borrowing arrangements.

                  Letters of Credit: The Company utilizes letters of credit to
back its industrial revenue bonds, certain insurance policies and certain trade
purchases. The letters of credit reflect fair value as a condition of their
underlying purpose.

                  Interest Rate Swap Agreements: The Company was party to an
interest rate swap agreement which effectively fixed the interest rate on a
portion of its domestic floating rate bank debt. This arrangement served the
purpose of reducing the volatility of reported results due to fluctuating
short-term U.S. interest rates and of effectively providing long-term financing
at costs favorable to alternative forms of fixed rate borrowings.

                  Under this agreement, the Company was charged interest at a
fixed rate by the counterparty, received credit from the counterparty for
interest at a variable rate based on the London Interbank Offered Rate ("LIBOR")
and paid or received the difference. At December 31, 1996, the Company had a
contract in place which served to fix the interest rate on $25 million of
underlying bank debt at 5.85% plus margin of between .75% and 1.25% based on the
leverage ratio of the Company. The contract expired on December 29, 1997.

                  Concentration of Credit Risk: The Company is subject to a
concentration of credit risk primarily with its trade and notes receivable. The
Company grants credit to certain customers who meet pre-established credit
requirements, and generally requires no collateral from its customers. Credit
losses are provided for in the Company's consolidated financial statements and
are well within management's expectations and industry averages. As of December
31, 1997 the Company had no other significant concentrations of credit risk.




                                       26
<PAGE>   27
                  The carrying amounts and fair values of the Company's
financial instruments at December 31, 1997 and 1996 are as follows:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                                  CARRYING AMOUNT                    FAIR VALUE
                                                                  ---------------                    ----------
<S>                                                               <C>                           <C>
1997
Current maturities of long-term debt                                     $  5,000                      $  5,000
Long-term debt                                                             32,838                        32,838

Off balance sheet financial instruments:
    Letters of Credit                                                      18,861                        18,861


1996
Current maturities of long-term debt                                     $  5,000                      $  5,000
Long-term debt                                                             33,917                        33,917

Off balance sheet financial instruments
    Letters of Credit                                                      18,245                        18,245
    Interest rate swap (notional amount)                                   25,000                        25,043
</TABLE>



                                       27
<PAGE>   28
NOTE 8 - INVESTMENT IN GDI

                  Prior to September 29, 1995, the Company had a 50% investment
in GDI which was reported under the equity method of accounting. As a result of
the GDI Redemption, the financial results of GDI were reported on a fully
consolidated basis after September 29, 1995.

                  Summarized financial data for GDI is as follows:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                            1995
                                                            ----
<S>                                                   <C>
Revenues                                              $  121,998
Gross margin                                              37,875
Net income                                                 7,685
Current assets                                            62,744
Non-current assets                                        18,220
Current liabilities                                       27,414
Non-current liabilities                                    1,000
Equity                                                    52,550
</TABLE>

                  In 1995, net income excludes a charge in the amount of
$794,000 for certain defined compensation costs absorbed by the partners.

                  The Company's unaudited pro forma data for 1995 presented in
Management's Discussion and Analysis of Financial Condition and Results of
Operations assumes that the GDI redemption had taken place at January 1, 1995.
The pro forma data also includes estimates of related costs associated with
TransPro becoming a stand alone, publicly-traded business.

                  GDI had the following transactions with the Automotive and
Truck Products Business and Handy & Harman during 1995:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                              1995
                                                              ----
<S>                                                         <C>
Automotive and Truck Products
  Products purchased from                                   $  886
  Fees received for services rendered to                        63
  Fees paid for services provided by                            53
  Fees paid for rental of facilities from                       77

Handy & Harman
  Fees paid for rental of facilities from                      344
</TABLE>



                                       28
<PAGE>   29
NOTE 9 - FINANCING

         In September 1995, the Company entered into the Credit Agreement with a
group of five banking institutions. The Credit Agreement provides for unsecured
borrowings or the issuance of letters of credit in an aggregate amount not to
exceed $75 million. The Credit Agreement expires in October, 2000, and is
comprised of a $50 million five year revolving credit facility (the "Revolver")
and a $25 million term loan facility (the "Term Loan"). The Term Loan is payable
in 20 equal quarterly installments over five years commencing December 31, 1995.
The Revolver and Term Loan each bear interest at variable rates based on either
(i) a Eurodollar loan rate, plus an applicable margin based upon the ratio of
the Company's total funded debt to earnings before interest, taxes, depreciation
and amortization, or (ii) the prime lending rate, at the Company's option. The
Credit Agreement calls for a commitment fee payable quarterly, in arrears, of
 .25% per annum on the average daily unused portion. During 1997, 1996 and the
fourth quarter of 1995, $25 million of the total borrowings under the Credit
Agreement were subject to the interest swap agreement (see Note 7) to fix the
interest rate at 5.85% plus a margin of between .75% and 1.25% based on the
Company's leverage ratio. The interest swap agreement expired on December 29,
1997. The weighted average interest rate on all borrowings under the Credit
Agreement approximated 6.89% for 1997 and 7.19% for 1996 after the effect of the
interest swap agreement. The interest rate for borrowings under the Credit
Agreement at December 31, 1997 and 1996 was 6.84% and 6.92% respectively, after
the effect of the interest swap agreement.

         The Company's Credit Agreement contains financial covenants which,
among other things, requires the maintenance of a minimum tangible net worth and
debt service coverage and a maximum level of debt to earnings before interest,
taxes, depreciation and amortization and to net worth, as well as covenants
which place limits on dividend payments in excess of $3.6 million per annum and
capital expenditures in excess of 140% of the prior fiscal year's depreciation
expense unless certain financial ratios are attained.

         Long-term debt consisted of the following:

(amounts in thousands)

<TABLE>
<CAPTION>
                                              DECEMBER 31,        DECEMBER 31,
                                                  1997                1996
                                                  ----                ----
<S>                                            <C>               <C>
  Revolver                                     $ 11,500           $  7,650

  Term Loan                                      13,750             18,750

  Industrial revenue bonds:
       Floating rate bond due 2010                8,000              8,000
       Floating rate bond due 2013                5,000              5,000

  Unamortized debt expense                         (412)              (483)
                                               ---------          ---------
                                                 37,838             38,917
  Less current maturities                         5,000              5,000
                                               ---------          ---------
  Total long-term debt                         $ 32,838           $ 33,917
                                               =========          =========
</TABLE>

         The floating rate industrial revenue bonds bear interest at a rate
based on a short-term tax-exempt bonds index, as defined in the bonds, and which
approximated 3.86% at December 31, 1997 and 4.05% at December 31, 1996. The
average interest rate for all industrial revenue borrowings approximated 3.82%
during 1997 and 3.52% during 1996.


                                       29
<PAGE>   30
         Long-term debt (excluding the unamortized debt expense) at December 31,
1997 matures during the following years:

(amounts in thousands)

<TABLE>
<S>                                    <C>
         1998                          $  5,000
         1999                             5,000
         2000                            15,250
         2001                                --
         2002                                --
         Thereafter                      13,000
</TABLE>


                                       30
<PAGE>   31
NOTE 10 - COMMITMENTS AND CONTINGENCIES


         Leases: The Company's leases consist primarily of manufacturing and
distribution facilities and equipment and expire principally between 1998 and
2002. A number of leases require that the Company pay certain executory costs
(taxes, insurance, and maintenance) and contain renewal and purchase options.
Annual rental expense for operating leases approximated $3,749,000 in 1997,
$3,907,000 in 1996 and $1,621,000 in 1995. Future minimum payments under
noncancelable operating leases as of December 31, 1997 were as follows:

(amounts in thousands)

<TABLE>
<S>                        <C>
1998                       $  3,581
1999                          2,738
2000                          2,250
2001                            302
2002                             78
                           ---------
Total                      $  8,949
                           =========
</TABLE>

         Insurance: The Company is self-insured for health care, workers
compensation, general liability and product liability up to predetermined
amounts above which third party insurance applies. The Company is contingently
liable to insurance carriers under its workers compensation and liability
policies and has reserved approximately $5.8 million to pay such claims. As a
condition of insurability, the Company has provided letters of credit totaling
$3.6 million.

         Legal Proceedings: Various legal actions are pending against or involve
the Company with respect to such matters as product liability, casualty and
employment related claims including one potential claim under the Americans with
Disabilities Act and one claim of sexual harassment of a group of non-exempt
union employees by another non-exempt union employee at one of the Company's
manufacturing facilities. In the opinion of management, after review and
consultation with counsel, the aggregate liability, if any, that ultimately may
be incurred in excess of amounts already provided should not have a material
adverse effect on the consolidated financial position, results of operations, or
liquidity of the Company.

         Severance Agreements: The Company has a Key Employee Severance Policy
and has entered into severance agreements with senior key employees in order to
provide financial assistance if employment with the Company is terminated under
the circumstances set forth in the policy and the agreements. The policy and
agreements provide for formalized severance benefits in the event of
non-voluntary termination.

         Environmental Matters: The Company is subject to Federal, state and
local laws designed to protect the environment and believes that, as a general
matter, its policies, practices and procedures are properly designed to
reasonably prevent risk of environmental damage and financial liability to the
Company. The Company believes it is reasonably possible that environmental
related liabilities may exist with respect to one industrial site formerly
occupied by the Company. Based upon environmental site assessments, the Company
believes that the cost of any potential remediation for which the Company may
ultimately be responsible will not have a material adverse effect on the
consolidated financial position, results of operations, or liquidity of the
Company.

         Collective Bargaining Agreements: The Company had approximately 2,300
employees at December 31, 1997. Of these employees, approximately 1,200 were
covered by collective bargaining agreements which


                                       31
<PAGE>   32
expire at different times. The Company has successfully renegotiated 7
collective bargaining agreements over the last several years and feels labor
relations are good, but there can be no assurance that work stoppages will not
occur in the future.


                                       32
<PAGE>   33
NOTE 11 - STOCK COMPENSATION PLANS

STOCK OPTIONS

         At December 31, 1997, the Company had two stock option plans under
which key employees and directors have options to purchase TransPro Common
Stock. Under the 1995 Stock Plan (the "Stock Plan") options are granted at fair
market value on the date of grant and are exercisable cumulatively at the rate
of 50% two years from the date of grant, 75% three years from the date of grant,
and 100% four years from the date of grant. Options granted under the Stock Plan
expire 10 years from the date of the grant. Awards of restricted stock may also
be granted to key employees under the Stock Plan and may be issued in addition
to, or in lieu of stock options. The total number of shares of Common Stock with
respect to which stock options may be granted and restricted shares may be
awarded under the Stock Plan shall not exceed 600,000. At December 31, 1997 and
1996, 461,429 and 361,822 common shares, respectively, were reserved for stock
options and restricted shares under the Stock Plan. The Directors Stock Option
Plan (the "Directors Plan") provides for the purchase price per share of Common
Stock for which each option is exercisable to be equal to 100% of the fair
market value of the Common Stock covered thereby on the date of grant. Subject
to certain acceleration provisions, each option granted under the Directors Plan
will be exercisable 50% after two years from the date of grant, 75% after three
years from the date of grant and 100% after four years from the date of grant.
Options granted under the Directors Plan expire 10 years from the date of grant.
The total number of shares of Common Stock with respect to which options may be
granted under the Directors Plan may not exceed 100,000 shares. At December 31,
1997 and 1996, 43,600 and 54,300 shares, respectively, were reserved for future
grants of stock options under the Directors Plan.

         The Company applies APB Opinion No. 25 "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized. Had compensation cost for the
Company's plans been determined based on the fair value at the grant dates for
awards under the plans consistent with Statement of Financial Accounting
Standards No. 123 "Accounting for Stock Based Compensation", the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                                               1997               1996               1995
                                                               ----               ----               ----

<S>                                                          <C>                <C>                <C>
Net Income                              As reported          $   7,875          $   8,420          $   9,074
                                        Pro forma                7,590              8,136              8,975

Basic and Diluted Earnings              As reported          $    1.20          $    1.28          $    1.39
Per Share                               Pro forma            $    1.16          $    1.24          $    1.38
</TABLE>

         The fair value of each option grant is estimated for the above
disclosure on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                           1997                    1996                     1995
                                           ----                    ----                     ----

<S>                                     <C>                     <C>                      <C>
Dividend yield                            2.20%                   2.20%                    2.20%
Expected Volatility                      30.20%                  31.10%                   32.80%
Risk-free interest rate                   6.69%                   5.88%                    5.82%
Expected life                           6 Years                 6 Years                  6 Years
</TABLE>

Information regarding the Stock Plan and the Directors Plan is as follows:


                                       33
<PAGE>   34
<TABLE>
<CAPTION>
                                                                                     OPTION PRICE RANGE
                                                                         --------------------------------------------
                                                        NUMBER OF                            WEIGHTED
STOCK PLAN                                               OPTIONS            LOW              AVERAGE          HIGH
----------                                               -------            ---              -------          ----
<S>                                                    <C>              <C>               <C>            <C>
Outstanding at December 31, 1995                         219,397          $  3.730          $    8.320     $  11.750
Granted                                                  166,225          $  7.500          $    7.556     $   8.125
Exercised                                                 (1,344)         $  4.680          $    4.680     $   4.680
Canceled                                                 (68,686)         $  4.680          $    7.377     $   8.610
                                                       ----------
Outstanding at December 31, 1996                         315,592          $  3.730          $    8.137     $  11.750
Granted                                                   95,400          $  7.750          $    7.750     $   7.750
Exercised                                                  (4032)         $  5.880          $    5.880     $   5.880
Canceled                                                 (14,193)         $  6.240          $    7.900     $   8.600
                                                       ----------
Outstanding at December 31, 1997                         392,767          $  3.720          $    7.970     $  11.750
                                                       ==========

Exercisable at December 31, 1997                          89,134          $  3.720          $    8.460     $  11.750
                                                       ==========       ===========         ===========   ===========
Exercisable at December 31, 1996                          30,911          $  3.720          $    6.240     $   8.120
                                                       ==========       ===========         ===========   ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                     OPTION PRICE RANGE
                                                                         --------------------------------------------
                                                        NUMBER OF                            WEIGHTED
DIRECTORS PLAN                                           OPTIONS            LOW              AVERAGE          HIGH
--------------                                           -------            ---              -------          ----
<S>                                                    <C>             <C>               <C>            <C>
Outstanding at December 31, 1995                          35,000          $  9.625          $   10.700     $  11.750
Granted                                                   10,700          $  8.375          $    8.375     $   8.375
                                                       ----------
Outstanding at December 31, 1996                          45,700          $  8.375          $   10.156     $  11.750
Granted                                                   10,700          $  7.750          $    7.750     $   7.750
                                                       ----------
Outstanding at December 31, 1997                          56,400          $  7.750          $    9.700      $ 11.750
                                                       ==========

Exercisable at December 31, 1997                          17,500          $  9.625           $  10.700      $ 11.750
                                                       ==========       ===========         ===========   ===========
</TABLE>

RESTRICTED STOCK

         Restricted stock awarded in 1997 and 1996 vests four years from the
date of the award. Restricted stock awarded in 1995 and outstanding at December
31, 1995 represents replacement restricted shares for former Allen employees
currently employed by TransPro. These replacement shares vest over time in
accordance with original Allen vesting schedules. The vesting of some of these
replacement shares may be accelerated when the Company's average earnings per
common share over three consecutive fiscal years equal or exceed specified
target levels.


                                       34
<PAGE>   35
RESTRICTED STOCK AWARDS

<TABLE>

<S>                                        <C>
Outstanding at December 31, 1995             71,834
Awarded                                       9,463
Vested                                       (2,651)
Canceled                                    (36,411)
                                            -------
Outstanding at December 31, 1996             42,235
Awarded                                      18,400
Vested                                      (10,049)
                                            -------
Outstanding at December 31, 1997             50,586
                                            =======
</TABLE>

         Unearned compensation, representing the fair value of the restricted
shares at the date of the award, is charged to income over a four year period
beginning when the stock is issued, or over the period of actual vesting of such
shares, whichever period is shorter.

         Compensation expense with respect to all restricted shares amounted to
$99,000 in 1997, $73,000 in 1996 and $126,000 in 1995.


                                       35
<PAGE>   36
NOTE 12 - STOCKHOLDER RIGHTS PLAN

         On September 14, 1995, the Board of Directors adopted a stockholder
rights plan (the "Rights Plan"), under which one Right was issued and
distributed for each share of Common Stock. The Rights Plan is intended to
protect shareholders against unsolicited attempts to acquire control of the
Company that do not offer what the Company believes to be an adequate price to
all shareholders. Each Right will entitle the registered holder to purchase from
the Company one one-hundredth of a share of Series A Preferred Stock at a price
of $60.00 per one one-hundredth of a share of Series A Preferred Stock subject
to adjustment. The description and terms of the Rights are set forth in a Rights
Agreement between the Company and The First National Bank of Boston, as Rights
Agent.

         The Rights will become exercisable only if a person or group acquires
or obtains the right to acquire beneficial ownership of 20% or more of the
outstanding shares of Common Stock (an "Acquiring Person") or 10 days (or such
later date as the Company's Board of Directors may determine) following the
commencement by a person or group of a tender or exchange offer which would
result in such person or group becoming an Acquiring Person. The earlier of such
dates is called the "Rights Distribution Date." Until the Rights Distribution
Date, the Rights will be evidenced by the certificates for shares of Common
Stock. In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision shall be made so that each holder
of a Right, other than Rights that are or were owned beneficially by the
Acquiring Person (which, from and after the later of the Rights Distribution
Date and the date of the earliest of any such events, will be void), will
thereafter have the right to receive, upon exercise thereof at the then current
exercise price of the Right, that number of shares of Common Stock having a
market value of two times the exercise price of the Right.


                                       36
<PAGE>   37
NOTE 13 - RETIREMENT PLANS

         The Company has noncontributory defined benefit pension plans covering
the majority of its full-time U.S. employees. Salaried employees at the
Company's Crown and G&O operations and hourly employees at the Company's
Kentucky plant, participated in Allen's non-contributory Corporate Retirement
Plan (the "Allen Plan") which provided benefits based on years of service and
compensation during the ten-year period prior to retirement. The Company has
established a mirror plan (the "Mirror Plan") and the assets and liabilities
attributable to the TransPro employees have been transferred into the Mirror
Plan from the Allen Plan. Other plans covering hourly employees provide benefits
of specified amounts for each year of service. Non-Union employees at the
Company's GDI operations are covered by a cash balance defined benefit plan. The
Company maintains a nonqualified retirement plan to supplement benefits for
designated employees whose pension plan benefits are limited by the provisions
of the Internal Revenue Code. It is the Company's policy to make contributions
to qualified retirement plans sufficient to meet the minimum funding
requirements of applicable laws and regulations.

         The assets of the plans consist principally of equity securities, fixed
income instruments and investment contracts with insurance companies.

         The Company has recorded an additional minimum liability at the end of
each year representing the excess of the accumulated benefit obligations over
the fair value of plan assets and accrued pension liabilities. To the extent
possible, the liabilities have been offset by intangible assets representing
unrecognized prior service costs. The balance of the liability at the end of the
period is reported as a separate reduction of stockholders' equity, net of tax
benefits.

         Amounts are summarized as follows:

         (amounts in thousands)

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                                   1997              1996
                                                   ----              ----
<S>                                               <C>              <C>
Additional minimum liability                      $ 3,194          $  2,600
                                                  ========         =========

Intangible assets                                 $ 1,078          $  1,032
Reduction of stockholders' equity                 $ 1,259          $    933
Tax benefits                                      $   857          $    635
</TABLE>

         Net periodic pension cost for the Company's plans is summarized as
follows:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                              1997                1996                 1995
                                                             -------             -------             -------
<S>                                                          <C>                 <C>                 <C>
Service cost for benefits earned during the year             $ 1,026             $   941             $   637
Interest cost on the projected benefit obligation              1,916               1,693               1,079
Return on plan assets                                         (1,956)             (2,283)             (1,859)
Net amortization and deferral                                     88                 707                 989
                                                             -------             -------             -------
Net periodic pension cost                                    $ 1,074             $ 1,058             $   846
                                                             =======             =======             =======
</TABLE>


                                       37
<PAGE>   38
         The Louisville, Kentucky manufacturing facility which was dedicated
solely to the production of Crew Cab and DRW components for Ford was closed in
late 1997. There were no pension curtailment losses associated with this closing
nor were any costs incurred related to the termination of benefits. The
settlement resulting from the partial plan termination will be paid out in 1998,
and is not expected to have a material impact on the Company's results.

         In 1996, the Company closed its G&O New Haven, Connecticut
manufacturing operation and moved the work to G&O's manufacturing operation in
Jackson, Mississippi. As a result of this action, pension curtailment losses and
costs for the termination of benefits of $270,000 were recorded in 1996. This
amount was recorded as part of the 1996 plant and business consolidation costs
and is not included in the 1996 amounts above.

         The 1995 net periodic pension cost includes three months of expense
when the Company maintained the Mirror Plan. The 1995 amounts above also include
the GDI Plan for the full year although only GDI's fourth quarter pension
expense of $89,000 was included in the Company's operating expenses.

         In 1997, 1996 and 1995 GDI contributed $22,000, $141,000 and $139,000
respectively, to multi-employer pension plans covering certain union employees
based on a stated amount per hour. These contributions are deposited directly to
the trustee and are not included in the net periodic pension cost amounts
presented above. In addition, the net periodic pension costs presented above do
not include approximately $29,000 charged to the Company by Allen in 1995 for
participation in the Allen Plan.

         The following table sets forth the Company's plans' combined funded
status and amounts recognized in the Company's consolidated balance sheet.

<TABLE>
<CAPTION>
                                                            DECEMBER 31, 1997                         DECEMBER 31, 1996
                                                            -----------------                         -----------------
                                                     ACCUMULATED       ASSETS EXCEED          ACCUMULATED          ASSETS EXCEED
                                                      BENEFITS          ACCUMULATED            BENEFITS             ACCUMULATED
(amounts in thousands)                              EXCEED ASSETS         BENEFITS            EXCEED ASSETS          BENEFITS
<S>                                                 <C>                 <C>                   <C>                  <C>
Actuarial present value of benefit
     obligations:
         Vested benefit obligation                    $ 12,640             $ 13,763             $ 11,769             $ 12,620
         Non-vested benefit obligation                     602                  993                  478                  830
                                                      --------             --------             --------             --------
Accumulated benefit obligation                          13,242               14,756               12,247               13,450
Effect of proposed compensation increases                   80                  943                   82                  873
                                                      --------             --------             --------             --------
Projected benefit obligation                            13,322               15,699               12,329               14,323
Plan assets at fair value                                9,622               16,063                9,092               13,584
                                                      --------             --------             --------             --------
Excess (Deficiency) of plan assets over
     projected benefit obligation                       (3,700)                 364               (3,237)                (739)
Gain (Loss) due to actuarial experience varying
     from actuarial assumptions                          2,291               (2,983)               1,740               (1,597)
Prior service cost not yet recognized in
      pension cost                                       1,078                  (49)               1,058                  (46)
Unrecognized net transition liability                     (106)                 (96)                (118)                (126)
Adjustment to recognize minimum liability               (3,194)                  --               (2,600)                  --
                                                      --------             --------             --------             --------
Accrued pension cost recognized
     in the consolidated balance sheet                $ (3,631)            $ (2,764)            $ (3,157)            $ (2,508)
                                                      ========             ========             ========             ========
</TABLE>

The measurement date for each plan is December 31.


                                       38
<PAGE>   39
The projected benefit obligation for all plans was determined using the
following assumptions:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                       1997                 1996
                                                       ----                 ----
<S>                                                    <C>             <C>
Weighted average discount rate                         7.00%           7.50-7.75 %
Rate of increase in compensation levels                4.00%                4.50 %
Expected long-term rate of return on assets            9.00%                9.00 %
</TABLE>


401 (K) INVESTMENT PLANS

         Under the Company's 401(k) Plans, substantially all of the Company's
non-union employees are eligible to save, by payroll deductions, a portion of
their salaries. Effective January 1, 1996, the amount saved may be invested in
the Company's Common Stock. Depending upon the Plan, the Company matches certain
percentages of the amounts saved by the employees. The Company's matching
contribution to the 401(k) Plans was approximately $458,000 in 1997, $376,000 in
1996 and $149,000 in 1995.


                                       39
<PAGE>   40
NOTE 14 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

         The Company provides health care and life insurance benefits for
certain retired employees who reach retirement age while working for the
Company.

         The Company accounts for the cost of its postretirement health care and
life insurance benefits in accordance with Statement of Financial Accounting
Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires that the Company accrue for such
postretirement benefits based on actuarially determined costs recognized over
the period from the date of hire to the full eligibility date of employees who
are expected to qualify for these benefits.

         The components of the expense for postretirement health care and life
insurance benefits are as follows:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,

                                                  1997              1996             1995
                                                 -----             -----            -----
<S>                                              <C>               <C>              <C>
Service cost for benefits earned
    during the year                              $  27             $  50            $  71
Interest cost on accumulated
    postretirement benefit obligation               85               109              146
Net amortization                                   (32                27               (6)
                                                 -----             -----            -----
Net periodic postretirement benefit
    cost                                         $  80             $ 186            $ 211
                                                 =====             =====            =====
</TABLE>

         In 1996, the Company closed its G&O New Haven, Connecticut
manufacturing operation and moved the work to the G&O manufacturing operation in
Jackson, Mississippi. As a result of this action, curtailment gains of $181,000
were recorded in 1996. This amount was recorded as part of the 1996 plant and
business consolidation costs and is not included in the 1996 amounts above.

         The components of the accumulated postretirement benefit obligation
(all of which are unfunded) are as follows:

(amounts in thousands)

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                          1997              1996
                                                         ------            ------
<S>                                                      <C>               <C>
Retirees                                                 $  624            $  756
Fully eligible active plan participants                      12                12
Other active plan participants                              535               454
Unrecognized net gain                                       220               287
                                                         ------            ------
Accumulated postretirement benefit obligation            $1,391            $1,509
                                                         ======            ======
</TABLE>


                                       40
<PAGE>   41
The accumulated postretirement obligation was determined using the following
assumptions:

(dollars in thousands)

<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                            1997             1996
                                                                            ----             ----

<S>                                                                        <C>              <C>
Weighted average discount rate                                              7.0%             7.5%
Health care cost trend rate for next year                                   9.6%             9.6%
Health care trend rate decreases .4% per year until
    ultimate rate achieved in year                                          2010             2010
Ultimate health care cost trend rate                                        5.0%             5.0%
Effect of a 1% increase in the assumed health care
    cost trend rate on the accumulated
    postretirement benefit obligation at year end                          $  42            $  44
Effect of a 1% increase in the assumed health care
    cost trend rate on the aggregate of service and
    interest cost components of the net periodic
    postretirement benefit cost during the year                            $   8            $  12
</TABLE>


                                       41
<PAGE>   42
NOTE 15 - QUARTERLY FINANCIAL DATA (UNAUDITED)

(amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31, 1997
                                                ----------------------------------------------------------------
                                                1st Qtr            2nd Qtr            3rd Qtr            4th Qtr

<S>                                             <C>                <C>                <C>                <C>
Sales                                           $62,096            $79,303            $80,181            $67,286
Gross margin                                    $13,914            $21,281            $19,156            $12,333
Net income                                      $ 1,000            $ 4,639            $ 2,018            $   218
Basic and diluted earnings per share            $  0.15            $  0.71            $  0.31            $  0.03

Market price of common stock:
     High                                       $    10            $ 8-7/8            $11-15/16          $11-1/2
     Low                                        $ 8-5/8            $ 7-1/8            $8-3/8             $7-5/8
</TABLE>


(amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31, 1996
                                                ----------------------------------------------------------------
                                                1st Qtr            2nd Qtr            3rd Qtr            4th Qtr

<S>                                             <C>                <C>                <C>                <C>
Sales                                           $58,338            $69,849            $72,501            $63,407
Gross margin                                    $13,827            $16,889            $16,419            $14,692
Net income                                      $ 1,290            $ 2,886            $ 3,240            $ 1,004
Basic and diluted earnings per share            $   .20            $   .44            $   .49            $   .15

Market price of common stock:
     High                                       $    11            $ 8-3/4            $ 8-3/8            $ 9-1/4
     Low                                        $ 6-1/4            $ 6-3/4            $ 5-1/2            $ 6-3/4
</TABLE>


         The above table summarizes quarterly financial information for 1997 and
1996. In management's opinion, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the information for such
quarters have been reflected above.


                                       42
<PAGE>   43
NOTE 16 - ACQUISITIONS

         In December, 1997 the Company acquired substantially all of the assets
and assumed certain specified liabilities of VMS for approximately $1.0 million.
VMS is located in Ontario, Canada and specializes in utility van conversions.
VMS reported fiscal year end February 1997 sales of $1.6 million. The
acquisition was accounted for as a purchase and VMS's results have been included
in the consolidated financial statements from the date of acquisition. The
Company financed the purchase of VMS by borrowings under the Credit Agreement
and recorded $0.4 million of goodwill related to the transaction, which is being
amortized over 20 years.

         In August 1996, the Company acquired substantially all of the assets
and assumed certain specified liabilities of Rahn. Rahn is a manufacturer of
replacement automotive air conditioner condensers and evaporators for the
Aftermarket as well as tube and fin heat exchangers for industrial applications.
Rahn reported sales of $12.3 million for the twelve months ended December 31,
1995. The acquisition was accounted for as a purchase and Rahn's results of
operations have been included in the consolidated financial statements from the
date of acquisition. The transaction was structured with an initial purchase
price of $5.3 million paid in cash at closing, with an opportunity for a maximum
additional payout of $2.5 million based upon the future earnings performance of
the business. In addition, approximately $0.2 million was capitalized for
transaction costs incurred to complete the acquisition. The initial purchase
price was financed by borrowings under the Credit Agreement. In connection with
this transaction, the Company recorded $2.4 million of goodwill which is being
amortized over 20 years.

NOTE 17 - COMPREHENSIVE INCOME

The following table sets forth the income tax expense or (benefit) related to
each item of other comprehensive income:

<TABLE>
<CAPTION>
                                                                      TAX
                                                   PRE-TAX         EXPENSE OR       NET-OF-TAX
(Amounts in Thousands)                             AMOUNT          (BENEFIT)          AMOUNT
                                                   -----             -----             -----
<S>                                                <C>               <C>            <C>
YEAR ENDED DECEMBER 31, 1997
Foreign currency translation adjustment            $ (44)            $ (18)            $ (26)
Minimum pension liability adjustment                (548)             (222)             (326)
                                                   -----             -----             -----
Other comprehensive income                          (592)             (240)             (352)
                                                   =====             =====             =====
YEAR ENDED DECEMBER 31, 1996
Foreign currency translation adjustment             (119)              (48)              (71)
Minimum pension liability adjustment                 817               330               487
                                                   -----             -----             -----
Other comprehensive income                           698               282               416
                                                   =====             =====             =====
YEAR ENDED DECEMBER 31, 1995
Foreign currency translation adjustment             (188)              (77)             (111)
Minimum pension liability adjustment                (672)             (274)             (398)
                                                   -----             -----             -----
Other comprehensive income                         $(860)            $(351)            $(509)
                                                   =====             =====             =====
</TABLE>


                                       43
<PAGE>   44
The following is a rollforward of the accumulated other comprehensive income
balances:

<TABLE>
<CAPTION>
                                                         MINIMUM          ACCUMULATED
                                     FOREIGN             PENSION             OTHER
                                     CURRENCY           LIABILITY         COMPREHENSIVE
(Amounts in Thousands)             TRANSLATION          ADJUSTMENT           INCOME
                                     -------             -------             -------
<S>                                <C>                  <C>                <C>
BALANCE DECEMBER 31, 1994            $    --              (1,022)            $(1,022)
Current period change                   (111)               (398)               (509)
                                     -------             -------             -------
BALANCE DECEMBER 31, 1995               (111)             (1,420)             (1,531)
                                     -------             -------             -------
Current period change                    (71)                487                 416
                                     -------             -------             -------
BALANCE DECEMBER 31, 1996               (182)               (933)             (1,115)
                                     -------             -------             -------
Current period change                    (26)               (326)               (352)
                                     -------             -------             -------
BALANCE DECEMBER 31, 1997            $  (208)             (1,259)            $(1,467)
                                     =======             =======             =======
</TABLE>


                                       44
<PAGE>   45
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of TransPro, Inc.

         We have audited the accompanying consolidated balance sheets of
TransPro, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, comprehensive income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1997. 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 the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
TransPro, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.


Coopers & Lybrand L.L.P.
Hartford, Connecticut
February 13, 1998


                                       45
<PAGE>   46
C O R P O R A T E  I N F O R M A T I O N

<TABLE>
<CAPTION>
STOCK EXCHANGE LISTING                                       ANNUAL STOCKHOLDERS' MEETING

<S>                                                          <C>
Common stock:                                                The Annual Meeting of
New York Stock Exchange                                      Stockholders will be held at
Ticker  Symbol:  TPR                                         11:00 AM on
                                                             April 29, 1998 at the
                                                             Omni Berkshire Place Hotel
REGISTRAR & TRANSFER AGENT                                   21 East 52nd Street
                                                             New York, New York
Bank Boston
c/o  Boston EquiServe
PO Box 8040                                                  FORM 10-K OR ADDITIONAL INFORMATION
Boston, Massachusetts 02266-8040
1-800-733-5001                                               If you are requesting the 1997 Annual Report,
                                                             Form 10-K or other written information,
                                                             please phone 203-401-6450.
COUNSEL

Wiggin & Dana                                                STOCKHOLDERS
New Haven, Connecticut
                                                             As of March 4, 1998, TransPro, Inc.
                                                             had 6,611,460 shares of common stock
INDEPENDENT ACCOUNTANTS                                      outstanding owned by 1,325 holders of
                                                             record.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
                                                             CORPORATE OFFICE
ANNUAL REPORT DESIGN
                                                             TransPro, Inc.
Donaldson Makoski, Inc.                                      100 Gando Drive
Avon, Connecticut                                            New Haven, Connecticut 06513
                                                             203-401-6450
INVESTOR RELATIONS

Morgen-Walke Associates, Inc.
New York, New York
</TABLE>


                                       46
<PAGE>   47
BOARD OF DIRECTORS

William J. Abraham, Jr.
Partner
Foley & Lardner

Barry R. Banducci
Chairman of the Board
TransPro, Inc.

Philip Wm. Colburn
Chairman of the Board
Allen Telecom Inc.

Paul R. Lederer
Executive Vice President
Worldwide Aftermarket
Federal-Mogul Corporation

Hank McHale
President and Chief Executive Officer
TransPro, Inc.

Sharon M. Oster
Frederic D. Wolfe Professor of
Management and Entrepreneurship
Yale University School of Management

F. Alan Smith
Former Executive Vice President
General Motors Corporation

CORPORATE OFFICERS

Hank McHale
President and Chief Executive Officer

John C. Martin, III
Vice President, Treasurer, Secretary
and Chief Financial Officer

Jeffrey L. Jackson
Vice President, Human Resources

Timothy E. Coyne
Vice President, Controller
and Assistant Secretary


DIVISION PRESIDENTS

John Della Ventura, President, G&O
Manufacturing Co.

Michael Hooper, President, Crown Divisions


                                       47