SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K                                


             X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
                                       OR
                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
                      FOR THE TRANSITION PERIOD FROM      TO
                          Commission file number 1-5530

                           Allied Products Corporation

             (Exact name of Registrant as specified in its charter)


             Delaware                                       38-0292230
             --------                                       ----------
        (State or other jurisdiction of                   (I.R.S. Employer
        Incorporation or Organization                    Identification No.

     10 South Riverside Plaza, Chicago, Illinois              60606
     -------------------------------------------              -----
          (Address of principal executive offices)          (Zip Code)
                
                             
        Registrant's telephone number, including area code (312) 454-1020

           Securities registered pursuant to Section12(b) of the Act:


         Title of Each Class          Name of Each Exchange on Which Registered
         -------------------          -----------------------------------------
    Common Stock-$.01 par value                  New York and Pacific           
                                                                                

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



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

                                    Yes X      No

As of February 27, 1998, 10,150,152 shares of common stock were outstanding, and
the aggregate market value of the shares of common stock (based upon the


<PAGE>



closing  price on the New York  Stock  Exchange)  held by  nonaffiliates  of the
Company was approximately $232,819,111.  Determination of common stock ownership
by affiliates was made solely for the purpose of responding to this requirement,
and the Registrant is not bound by this determination for any other purpose.

The Company's  definitive  Proxy Statement (which will be filed at a later date)
for the Annual  Meeting of  Stockholders  scheduled  to be held May 20, 1998 and
Annual  Report to  security  holders  for the year ended  December  31, 1997 are
incorporated by reference in Part III and Part IV herein.

The Exhibit Index is located on page 37.



                                     PART I

ITEM 1.   BUSINESS

         Allied Products Corporation  (Company) was organized under Delaware law
in 1967 as the successor to a Michigan corporation which was formed in 1928. Its
principal executive offices are at 10 South Riverside Plaza,  Chicago,  Illinois
60606 and its telephone number is (312) 454-1020.

         The  Company's  operations  involve  a  single  industry  segment,  the
manufacturing and sale of agricultural and industrial  machinery,  in accordance
with the  provisions of Statement of Financial  Accounting  Standard  (SFAS) No.
14-Financial Reporting for Segments of a Business Enterprise.

         The operations of the Company were realigned into one business  segment
in 1993  reflecting  the sale or closure of several  operating  divisions.  This
restructuring  of the Company,  which began in 1991,  was completed in 1994 with
the sale of the Cooper division.

         Approximately  6%, 16% and 11% of the Company's net sales in 1997, 1996
and 1995, respectively, were exported principally to Canada and Mexico.

PRODUCT LINES
Implements and Machinery



 Products.  The Bush Hog division offers a comprehensive  line of implements and
machinery used by farmers, ranchers, large estate owners, commercial turf mowing
and  landscape  contractors,  golf courses and  municipalities.  Implements  and
machinery sold by Bush Hog include rotary cutters,  tractor mounted loaders, hay
mowers, tillers,  cultivators, back hoes, Zero-Turn mowers, landscape tools, and
turf and golf course mowing equipment.

         Bush Hog(R) rotary  cutters are used to shred stalks after the crop has
been  harvested,  to mow  pasture,  for land  maintenance  and for  governmental
right-of-way mowing. The use season for rotary cutters extends from early spring
to late fall,  and even longer in warmer  climates.  Bush Hog has a major market
share (approximately 38%) of rotary cutters sold in North America.

         Front  end  loaders  are used by  farmers  and  ranchers  for  material
handling. Cultivators are used for weed control after crops have been planted.



<PAGE>


         Implements  tend  to  have a  shorter  life  than  tractors  and  other
self-propelled  machines,  and  purchases  of  implements  are less likely to be
deferred in times of economic uncertainty, somewhat dampening cyclical swings in
demand.  Sales of replacement parts accounted for almost one sixth of Bush Hog's
total revenue in 1997.

         In  order  to  maintain  and  expand  its  market  position,  Bush  Hog
continually  updates and improves its product offerings.  This is done through a
combination of internal development and external acquisition of technology.


         Bush Hog introduced several new product models which contributed to its
record sales in 1997. Products of major significance were a series of five, six,
seven,  and  eight-foot  agricultural  rotary cutters which received wide spread
customer  acceptance.  In  addition  to the  introduction  of  new  agricultural
products,  Bush Hog also  introduced a  revolutionary  new mulching mower to the
golf industry for golf course rough  maintenance.  Early  acceptance of this new
mower exceeded the Company's expectations. A network of thirty turf distributors
has been  established  to market  this new mower and other  turf care  products.
Plans for 1998 include the addition of an  eight-foot  mulching  mower and other
products targeted specifically to the golf course and turf care industry.

         Bush Hog is planning to introduce  its own line of Zero-Turn  mowers to
replace a line of this product which was previously  outsourced.  A pilot run is
expected to be released by midyear with full production by early 1999. Zero-Turn
mowers are used by  commercial  mowing  contractors  and  homeowners  with large
acreage to maintain.

 Marketing.  Bush Hog markets its products,  except for commercial turf and golf
course mowing equipment, through 58 commissioned manufacturer's  representatives
operating  as   independent   contractors   within  defined   territories.   The
manufacturer's  representatives call on dealers located within their territories
which  have been  approved  to carry the Bush  Hog(R)  line.  In all,  there are
approximately   2,650  Bush  Hog(R)  dealers.   In  general,   the  dealers  are
independent, local businessmen who have an established local clientele developed
over  the  years  and  represent  more  than  35% of the  total  farm  equipment
dealerships  in the United  States and  Canada.  The Bush  Hog(R)  brand name is
particularly  strong in the southeastern and southwestern  states.  Bush Hog has
also contracted with independent distributors to market commercial turf and golf
course mowing equipment within defined territories.

         To even out the seasonal  variations in its production cycles, Bush Hog
provides incentives for off-season  purchases,  including extended payment terms
to  dealers  in the form of floor plan  financing.  Bush Hog  retains a security
interest  in this floor  plan  equipment.  Under  certain  state and  provincial
statutes,  a dealer  may return  floor plan  equipment  to a  manufacturer  upon
termination of the dealership.

         Bush Hog  services  its network of dealers  through  two  manufacturing
facilities and eight service parts distribution centers strategically located in
the United States and Canada.

 Competition.  Competition  for the type of equipment  sold by Bush Hog includes
the major line  manufacturers  of tractors and landscape  equipment,  along with
several  hundred  companies  producing  one or more models of shortline  farm or
landscape implements and machinery. Price, quality, service and availability are
all  factors  in  brand  selection.  Bush  Hog's  objective  is to be a low cost
producer of high quality  products.  To do this it  continues  to modernize  its
facilities to improve efficiency.
 Industry.  The  agricultural  equipment  industry in North  America is a mature
industry  engaged in producing  replacement  equipment for a declining number of
farmers.  It is dominated by a small number of major line  manufacturers,  which
market a full range of farm machinery,  including  tractors,  grain combines and
various  implements  through  their own dealer  organizations  and  account  for
approximately 60% of the dollar volume of industry shipments.  The remaining 40%
of  the  market  is  shared  by  approximately   700  companies  that  generally
concentrate  their  production on shortline  implements such as plows,  harrows,
cultivators, livestock equipment, grain handling equipment or hay equipment.

         During the  1980's,  the farm  economy was in decline and this led to a
deterioration in farmers' financial  condition.  Capital expenditures by farmers
reached a low in 1986.  Since  then,  commodity  exports  have  improved  due to
changes in governmental programs and foreign exchange rates.  Individual farmers
have reduced their debt load and are much less leveraged  after several years of
good earnings.

         Economic  conditions in the U.S. farm sector remained  positive in 1997
although  commodity  prices  retreated  from the record or near record  highs of
1996.  As a result,  1997 net farm  income  declined to $45.9  billion  from the
record  high of $52.2  billion  in 1996.  Although  net  farm  income  declined,
farmer's  balance  sheet  equity  improved in 1997 as land values  continued  to
increase.

         Although  commodity prices and net farm income declined in 1997, it was
encouraging that the price of stocker cattle improved dramatically which allowed
the cow/calf operator,  Bush Hog's largest customer, to return to profitability.
Herd  liquidation  continued in 1997 and will  probably  continue at a declining
rate through the first  quarter of 1998.  Stocker  prices are expected to remain
strong and even  strengthen in 1998 as the cattle sector moves from  liquidation
to the herd rebuilding phase. Traditionally,  herd rebuilding results in tighter
supply of cattle and increased profits for the cow/calf producer.

         The U.S.  grain  and  commodity  situation  continues  to be  favorable
although pricing levels in 1998 will be below the 1996 record levels.  Favorable
conditions  are  expected  to  continue  through  2001 with  normal  adjustments
resulting from weather and other factors.

         While the overall farm sector situation  remains  relatively strong and
financially  sound,  1998 prices for  commodities  and  finished  livestock  are
expected  to be  weaker  than  anticipated  due to the  deepening  of the  Asian
financial crisis which is expected to depress  agricultural exports in 1998. The
Asian  situation is not expected to negatively  impact stocker cattle prices nor
profitability of the cow/calf producer.

Industrial Products And Equipment



 Products.  The Verson  division  manufactures  a broad line of both  medium and
large  technologically  advanced mechanical and hydraulic metal forming presses.
These products are used in the  manufacture  of components  for the  automotive,
appliance,  office equipment,  farm equipment,  ordnance,  aerospace and general
metal working  industries.  A transfer press is a specialized  mechanical  press
that  combines  a series of  operations  by  transferring  a work piece from one
station to another  inside of a single  press.  Each  station in the press has a
separate  die  that  is  individually   adjustable.   This  process  allows  all
operations, from initial draw to finished product, to take place
in one press,  resulting in increased  output and reduced labor expense.  Prices
vary by type and size.  Size  categories  for  transfer  presses  range from "A"
(largest) to "D"  (smallest).  An "A" transfer  press is generally 13 to 15 feet
wide,  80 to 90 feet long and stands four stories  tall.  By  comparison,  a "B"
transfer  press is  approximately  10 feet wide,  60 feet long and four  stories
tall.  The  difference  between these  machines is the component  part size they
stamp. Investment in a large transfer press can range from $15-$35 million.

         Approximately  10-15% of  Verson's  revenue was  generated  by customer
special services. Items included in the special services area are: repair parts,
complete remanufacturing of used presses,  contract machining and manufacturing,
die consultation  and training.  In addition to the fabrication and machining of
components,  Verson provides complete tooling and engineering services necessary
for turnkey systems.

         Complimenting the manufacturing of presses by Verson, a new division of
Allied Products,  Precision Press Industries (PPI),  began operation in November
1997.  PPI is engaged in the  fabrication  of large  components  weighing  up to
240,000  pounds and is  located  in a 40,000  square  foot  facility  in Hobart,
Indiana.  PPI  uses the  most  sophisticated  welding  machinery  and  processes
available. Supplier agreements, production scheduling and control methods enable
PPI to work in a just-in-time  format.  Extensive  employee training and ongoing
process  documentation  activities  are intended to provide that PPI operates in
accordance with ISO9000 guidelines. The division currently does work exclusively
for  the  Verson  division,   but  retains  the  capability  to  perform  custom
fabrication work for third party customers.

 Marketing.  Verson's  Marketing  Group is headed by a Director of Marketing and
Sales, with  responsibility  for all Verson products and services.  Verson sells
and promotes its  products by using a direct  sales force that  concentrates  in
strategically  significant markets and contract  representatives  which focus on
lower volume potential markets.

         Verson's major customers are the U.S.  automobile  manufacturers  (both
U.S. and foreign  owned) and first and second tier  automotive  parts  producing
companies,  which,  on average,  account for the largest part of Verson's annual
revenue. The other major market served by Verson is the appliance industry where
the division's customers include all major brand names.

         Verson is the  technology  leader,  having  designed the world's  first
transfer press in 1939, the world's first  electronic  feed in 1981, a cross bar
feed in 1992 which  significantly  improves  production,  and most  recently,  a
Dynamic  Orientation(TM)  system which  further  improves  production  and saves
space.

 Competition.  There are only a few  companies  in the entire  world that supply
large transfer press systems similar to those provided by Verson.  Verson is now
the only American owned company  competing in this upper end segment.  Principal
competition comes from German and Japanese  manufacturers.  Press  manufacturers
compete on the basis of  technology,  capability,  reliability  and  price.  The
barriers  to  entry  for new  competitors  are  high  due to the  large  capital
expenditures required.

 Industry.   Domestic  automobile  manufacturers  are  seeking  to  become  more
cost-effective by requiring quality parts,  implementing  just-in-time concepts,
obtaining price reductions from suppliers,  redesigning cost out of automobiles,
and restructuring and automating their manufacturing processes.

         Demand  from  the  appliance  industry  remains  strong  as  the  major
manufacturers  seek to increase  capacity,  reduce  costs and gear up to produce
water conserving clothes washers.
         The Verson  division  is in a strong  position to  capitalize  on major
retooling and modernization  programs as they come on stream. The second wave of
this demand is being felt now as the major  suppliers to the automakers  convert
to new  technology.  In response to these  market  factors and an  unprecedented
incoming order rate in 1994, the Verson division  completed a 40,000 square foot
expansion of its assembly  facilities in 1995.  The division is currently in the
process of further  expanding  its assembly  facility by  approximately  117,000
square  feet.  The  expansion  is  scheduled to be completed by the end of 1998.
These additions have and will significantly  expand the division's  capacity for
manufacturing large transfer presses.

Thermoplastic Resins



 Products and Services.  On October 14, 1997, the Company sold its Coz division.
Coz provided a complete line of thermoplastic resins and related services to the
plastic molding and extrusion industry.

Sales Backlog


         Sales  backlog as of  December  31, 1997 was  $204,988,000  compared to
$142,304,000  at December 31, 1996.  Over 65% of the backlog orders are expected
to be filled prior to the end of 1998.

Employees

         Allied Products  currently  employs  approximately  1,500  individuals.
Approximately 30% of Allied Products' employees are represented by a union.

Raw Materials and Sources of Supply

         The  principal  raw  materials  used by the Bush  Hog,  Verson  and PPI
operations include steel and other metals and purchased components. During 1997,
the materials needed by Allied Products  generally were available from a variety
of sources in  adequate  quantities  and at  prevailing  market  prices.  No one
supplier  is  responsible  for  supplying  more  than 10% of the  principal  raw
materials used by Allied Products.

Patents, Trademarks and Licenses

         Allied Products owns the federally  registered  trademarks  "Bush Hog,"
which  is  used  on its  agricultural,  landscape,  and  turf  and  golf  course
equipment,  "Verson,"  which is used on its metal  forming  presses,  and "ETF,"
which is used on the  electronically  controlled  transfer feeds manufactured by
the  Verson  division.  Allied  Products  has  also  filed  an  application  for
registration  of the  name  "MultiMode,"  which is also  used on  electronically
controlled  transfer feeds,  with the United States Patent and Trademark Office.
Allied  Products  considers  each of the  above  registered  trademarks  and the
"MultiMode"  trade name to be material to its  business.  While Allied  Products
believes that the other trademarks used by each of its operations are important,
none  of  the  patents,  licenses,  franchises  or  such  other  trademarks  are
considered material to the operation of its business.

Major Customers

      Net sales to the three major U.S. automobile manufacturers accounted for
approximately 31% of total consolidated sales in 1997. Approximately 39% and
29% of Allied Products' consolidated net sales in 1996 and 1995,
respectively,   were   derived   from  sales  to  the  major   U.S.   automobile
manufacturers.  With the exception of the three major automobile  manufacturers,
no  material  part of  Allied  Products'  business  is  dependent  upon a single
customer.

Seasonality

         Retail sales of and cash  collected  for farm  equipment  tend to occur
during or just preceding the use seasons  previously  described.  Sales and cash
receipts for the other divisions are not affected by seasonality.

Environmental Factors

         Reference  is  made  to  Note 10 of  Notes  to  Consolidated  Financial
Statements regarding environmental factors and matters.

Forward-looking Statements

         Some of the information  contained in the above  discussion may contain
forward-looking  statements that are subject to certain risks, uncertainties and
assumptions.  Such  forward-looking  statements are intended to be identified in
this  document by the words  "anticipate,"  "expect,"  "estimate,"  "objective,"
"possible" and similar  expressions.  Actual results may vary. Reference is made
to the "Safe Harbor Statement" contained under Item 7-Management  Discussion and
Analysis of Financial Condition and Results of Operations.

Executive Officers of the Company

         The  following  table  sets  forth the names and ages of the  Company's
Executive  Officers,  together  with all  positions  and  offices  held with the
Company by such officers as of February 28, 1998.
<TABLE>
<CAPTION>


              Name                    Position with Allied Products          Age
              ----                    -----------------------------          ---
<S>                         <C>                                              <C>    
                                                                                                
Richard A. Drexler......... Chairman, President and Chief Executive Officer  50
Bobby M.Middlebrooks........Senior Vice President                            62
Robert J. Fleck.............Vice President-Accounting, Chief Accounting and              
                                      Administrative Officer                 50
Richard W. Metzger......... Vice President                                   43
Mark C. Standefer...........Vice President, General Counsel and Secretary    43
</TABLE>

         No family relationships exist among the executive officers, however,
Mr. Richard A. Drexler is the son of Lloyd A. Drexler, a director of the
Company. During 1997, Messrs. Kenneth B. Light, Martin A. German, Patrick J.
Riley and David B. Corwine retired as Executive Officers of the Company.

         Each executive officer, except Mr. Metzger, has been employed by Allied
Products for over 10 years. Pursuant to Allied Products' By-laws, each
officer is elected annually by the Board of Directors.

         Mr.  Drexler,  who became  Chairman in 1993,  has been  President and a
Director  of Allied  Products  since 1982 and has been Chief  Executive  Officer
since 1986. Mr. Drexler  served as Acting Chief  Financial  Officer from 1991 to
1992, Chief Financial Officer from 1989 to 1990 and Chief Operating Officer from
1981 to 1986. He was also Chief  Financial  Officer from 1977 to 1987.  Prior to
becoming President, Mr. Drexler served as Executive Vice President,  Senior Vice
President  of  Administration,  Vice  President  of  Administration,  Staff Vice
President-Development, and Director of Planning.

         Mr. Middlebrooks has been Senior Vice President since 1985 and was Vice
President  of  Allied  Products  from  1984  to  1985 in  charge  of the  former
Agricultural   Equipment  Group.  Prior  to  that,  he  was  President-Bush  Hog
Implements Division. He joined Bush Hog in 1955.

         Mr.  Fleck  has  been  Vice  President-Accounting   since  1985,  Chief
Accounting Officer since 1986 and Chief Administrative  Officer since 1997. From
1983 to 1985 he was Staff Vice  President-Accounting and prior to that he served
as Corporate  Controller  and in various other  accounting  positions for Allied
Products.  Prior to joining Allied Products in 1974, he was an internal  auditor
with Marquette Cement Company, a national cement manufacturing company.

         Mr. Metzger was elected Vice President of Allied  Products  Corporation
in 1997 and has been President of the Verson division since 1996. Prior to that,
he was Vice  President-Operations in 1996, Vice President-Marketing & Sales from
1994 to 1996 and Director of Marketing & Sales of the Verson  division from 1990
to 1994.  Prior to joining the Verson  division in 1990, he was  responsible for
Domestic and International  Development for Ferranti Sceaky,  Inc., an aerospace
machinery supplier.

         Mr. Standefer was elected Vice President, General Counsel and Secretary
in 1997.  From  1995 to 1997 he was  Staff  Vice  President,  Assistant  General
Counsel and Assistant Secretary, and from 1986 to 1995 Assistant General Counsel
and Assistant  Secretary.  Mr. Standefer joined Allied Products in 1984 as Staff
Attorney.  Prior to  joining  Allied  Products,  he was Staff  Attorney  for Sun
Electric Corporation.

 
 





<PAGE>



ITEM 2.  PROPERTIES



         Allied Products owns four manufacturing  facilities in three states for
the  production of its various  products and maintains  warehouse  facilities in
various locations throughout the United States and Canada.

         Management  is  of  the  opinion  that  all  facilities  are  of  sound
construction,  in good  operating  condition  and are  adequately  equipped  for
carrying on the business of the Company.

         Operations at the Bush Hog division are conducted in Selma,  Alabama in
two owned facilities containing  approximately 700,000 square feet in total. The
division also maintains  several leased  facilities in various states and Canada
which are used as warehouses and parts depots. Operations at the Verson division
(including PPI) are conducted in Chicago,  Illinois and Hobart, Indiana in owned
facilities  containing  approximately 440,000 square feet. The Company is in the
process of expanding its Chicago facility by approximately 117,000 square feet.

ITEM 3.  LEGAL PROCEEDINGS

         Reference  is  made  to  Note 10 of  Notes  to  Consolidated  Financial
Statements with respect to the Company's  involvement in legal  proceedings as a
defending party.

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

         None.




<PAGE>


                                     PART II

ITEM 5. MARKET PRICE OF THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
        MATTERS



The  Company's  common  stock  is  listed  on the New  York  and  Pacific  Stock
Exchanges.  The price range of the common stock on the New York Stock  Exchange,
as adjusted for the three-for-two stock split effected on August 15, 1997, is as
follows:



                                                                            
------------------------------------------------------------------------------
                      Beginning    End of    1997
            1997       of Year      Year     Qtr      High     Low    Dividend
-------------------------------------------------------------------------------
                                                                                
Common                $1913/16      $24       1     $2113/16   $181/2   $.0333
------------------------------------------------------------------------------
                                              2      235/16     189/16   .0333
-------------------------------------------------------------------------------
                                              3      26         213/16   .0400
-------------------------------------------------------------------------------
                                              4      27         231/4    .0400
================================================================================

                      Beginning    End of    1996
            1996       of Year      Year     Qtr      High     Low    Dividend
--------------------------------------------------------------------------------
Common                $16           $1913/16  1     $163/16    $133/4   $.0333
--------------------------------------------------------------------------------
                                              2      20 3/4     1413/16  .0333
--------------------------------------------------------------------------------
                                              3      1815/16    163/16   .0333
--------------------------------------------------------------------------------
                                              4      201/4      1513/16  .0333
--------------------------------------------------------------------------------

         As of February 28, 1998, the approximate number of holders of record of
the Company's common stock ($.01 par value) was 2,200.

         The Company paid no dividends from 1982 until 1995.  Restrictions  from
paying  dividends  were  removed  in 1995.  Subsequent  to the end of 1995,  the
Company  increased  its  quarterly  dividend from $.0167 per share to $.0333 per
share.  During the third  quarter of 1997,  the Company  increased its quarterly
dividend to $.04 per share.

ITEM 6.  SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
                                               1997               1996              1995                1994                1993
                                               ----               ----              ----                ----                ----
<S>                                       <C>                <C>                <C>                 <C>                 <C>    
Net sales from continuing  operations...  $270,562,000       $274,414,000       $260,861,000        $215,529,000        $217,988,000
                               
Income from continuing operations.......  $ 19,971,000       $ 19,004,000       $ 33,989,000        $ 19,687,000        $  5,951,000
                                                         
Earnings per common share (basic) from
  continuing operations (A)(B)..........     $1.65               $1.41              $2.39               $1.31                $.29

Total assets.........................     $199,783,000       $171,949,000       $166,743,000        $150,555,000        $192,040,000
                 
Long-term debt (including
   capitalized leases and redeemable                                                                                           
   preferred stock)..................     $    670,000        $    489,000      $     315,000       $ 12,130,000        $ 23,522,000
Cash dividend declared per common 
  share (A)..................                $.147               $.133              $.05                $-                   $-

</TABLE>


-----------

(A)      Restated prior to 1997 to reflect the effect of a  three-for-two  stock
         split in 1997.

(B)      Restated  prior  to  1997  to  reflect  the  effect  of  adopting  SFAS
         128-Earnings per Share - in 1997.

                   The accompanying Notes to Consolidate Financial Statements 
                            are an integral part of this summary.

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

OPERATING RESULTS

         Reference  is  made  to  Note  3 of  Notes  to  Consolidated  Financial
Statements regarding the sale of the Coz division in the last quarter of 1997.

1997 Compared to 1996

         The Company's net sales in 1997 were $270,562,000 compared to net sales
of  $274,414,000  in 1996.  The decrease in  consolidated  net sales in 1997 was
associated with the effects of the sale of the Coz division as noted above.  Net
sales of the Coz division for 1997 were  $11,000,000  less than net sales of the
prior  year.  Income  before  taxes in 1997 was  $31,489,000  compared to income
before  taxes  of  $29,708,000  for the  prior  year.  Net  income  in 1997  was
$19,971,000  ($1.65  per common  share)  compared  to net income of  $19,004,000
($1.41 per common share) in 1996. Earnings per common share and weighted average
shares  outstanding  for 1996 have been  adjusted  to reflect  the  effects of a
three-for-two stock split which occurred during the third quarter of 1997. These
amounts have also been restated for 1996 to reflect the  provisions of Statement
of Financial  Accounting Standards (SFAS) No. 128-Earnings per Share. The impact
of this restatement on previously issued earnings per share computations was not
considered significant.

         Net sales at the Bush Hog division increased to a record level by over
10% in 1997  compared to net sales of 1996.  The  majority of the  increase  was
associated  with the cutter and loader  product  lines.  Sales  increases in the
cutter and loader  product  lines were  associated  with the upturn in  cow/calf
prices in the spring of 1997.  Cattle  ranchers  use the cutters and loaders for
grazing pasture and feed lot maintenance,  respectively.  Cutter sales were also
favorably affected by new/redesigned products introduced in prior years aimed at
the turf and landscaping market for utilization by commercial turf (sod) growers
and for golf course maintenance. Service parts sales also increased in 1997, but
at a lesser rate.  Gross profits and gross profit margins  increased at the Bush
Hog  division  in 1997  compared to the prior  year.  Approximately  half of the
increase in the gross  profit was  associated  with the  increased  sales volume
discussed  above.  The  improved  gross  profit  margin was related to continued
improvements  in the  manufacturing  process  resulting in greater  direct labor
efficiencies  and better control of overhead costs. The division also benefitted
from increased facility utilization during 1997.

         At the Verson division,  net sales decreased 3% in 1997 compared to net
sales  of 1996.  The  entire  decrease  was  related  to  press  production  and
associated  with  the  mix of  jobs  in  production.  Revenue  and  profits  are
recognized  on a percentage  of  completion  basis for press  production at this
division. During the first quarter of 1997, production was completed on the last
press of an order for three "A" size transfer  presses for  Chrysler.  The first
two presses related to this order were produced and shipped in 1996.  Production
in 1997 reflects a smaller portion of production against this order and a larger
portion of production related to smaller presses with lower margins.  Production
was also  affected  in 1997 by a four  week  strike  in the  middle of the year.
Production  continued  on  a  limited  basis  through  the  use  of  supervisory
employees.  Gross  profits  and gross  profit  margins  decreased  at the Verson
division in 1997  compared  to 1996.  The  decrease  in gross  profits and gross
profit margins was primarily  associated with decreased facility  utilization in
1997.  Production  hours decreased by 14% in the current year due to the effects
of the  impact  of  outsourced  production,  a four week  strike  and the mix of
products  manufactured as noted above.  Also impacting gross profits and margins
were increased overtime costs necessary to meet delivery schedules following the
strike and costs associated with a program  undertaken to identify  improvements
in the  manufacturing  process.  These cost increases were offset in part by the
recovery of a claim associated with prior periods and lower warranty costs.

         Sales,  gross  profits  and gross  profit  margins  at the  former  Coz
division decreased in 1997 compared to the prior year. The division was sold for
cash in the early part of the fourth quarter of 1997.

         Selling and  administrative  expenses  were  $34,124,000  (12.6% of net
sales) in 1997  compared to  $33,400,000  (12.2% of net sales) in 1996.  Selling
expenses  increased  slightly  (less  than 1%) in the  current  year.  Decreases
related to lower commissions at the Bush Hog division (where the commission rate
was changed in 1997) were offset by costs incurred at the Verson  division for a
new international  marketing effort,  also in 1997.  Increases in administrative
costs  included the effects of small  staffing  increases  at the  manufacturing
operations  and  normal  cost  increases  (salaries,   fringe  benefits,   etc.)
associated with the operations of the Company.

         Interest expense in 1997 increased to $3,306,000 from $1,557,000 in the
prior year.  Increased  borrowing needs were associated with the Verson division
where the number of  presses  in  process  has  increased  and the  division  is
awaiting final payment on presses  currently being  installed.  The Company also
purchased over  $21,500,000 of treasury stock during 1997 as a part of a program
to purchase up to 2,250,000 shares of the Company's common stock.
         Other  income  was  $3,111,000  in 1997  compared  to other  expense of
$631,000  in  1996.  Reference  is  made to Note  12 of  Notes  to  Consolidated
Financial Statements for an analysis of other (income) expense in 1997 and 1996.

         Reference  is  made  to  Note  4 of  Notes  to  Consolidated  Financial
Statements  for  an  analysis  and  explanation  of  the  current  and  deferred
provisions for income taxes in 1997 and 1996.

1996 Compared to 1995

         Net  sales  in  1996  were  $274,414,000   compared  to  net  sales  of
$260,861,000 for 1995.  Income before taxes in 1996 was $29,708,000  compared to
income before taxes of  $18,330,000  for the prior year.  Net income in 1996 was
$19,004,000 compared to net income of $33,989,000 reported in 1995. During 1995,
the Company  evaluated its net operating loss  carryforwards  and other deferred
tax assets in relation to its earnings  history over the prior few years and the
projected  future  earnings over the next few years. As a result of this review,
the Company  recorded a deferred tax asset  ($27,361,000)  which  represented  a
reversal of the valuation allowance  associated with the net deferred tax asset.
The  credit  to  income  taxes  was  reduced  by  $10,713,000  representing  the
elimination of goodwill associated with certain  acquisitions which included net
operating  loss  carryforwards.  The net effect of these two items resulted in a
credit to income taxes of $16,648,000 in 1995.

         Net sales at the Bush Hog  division  decreased  by less than 2% in 1996
compared to 1995. On an overall basis,  no single  product line was  responsible
for any  significant  increase  or  decrease  in sales  comparing  1996 to 1995.
Decreases were primarily related to disc mowers and loaders.  These products, as
well as  certain  models of  rotary  cutters,  were  adversely  impacted  by the
continued  effects of the widespread  liquidation  of cattle herds  resulting in
lower  cattle  prices.  Cattle  ranchers use the cutters and loaders for grazing
pasture  and feed lot  maintenance,  respectively.  Peanut  combine  sales  also
decreased in 1996. Subsequent to the end of 1996, the division announced that it
would no longer  manufacture  peanut  combines.  These  decreases were partially
offset by the effect of increased  overall rotary cutter sales and the full year
impact of new products  introduced  in the last half of 1995.  New products were
primarily  related  to the  turf  and  landscaping  market  for  utilization  by
commercial turf (sod) growers and for golf course maintenance. Gross profits and
gross profit  margins  improved in 1996 compared to 1995.  The majority of these
increases were related to improved direct labor  efficiencies  and management of
overhead  costs.  A program was initiated in the last half of 1995 and completed
at the end of the  first  half of 1996 to help  recognize  areas  and  means  of
improvement  in the  manufacturing  process.  Management  believes  that further
implementation  of these  changes  should  result in  additional  savings in the
future.

         At the  Verson  division,  net  sales  increased  by  over  12% in 1996
compared to the prior year. The entire increase was related to press production.
During  the last half of 1995,  production  began on an order for three "A" size
transfer  presses from  Chrysler.  During 1996,  production  (and  shipment) was
completed on two of these presses with significant  production  completed on the
third.  Shipment  of the last  press is  expected  to occur in the first half of
1997.  During 1995,  the press  assembly  area was expanded to  accommodate  the
continuing  increase in press orders and  production.  Product  sales other than
presses decreased  slightly in 1996. Gross profits increased in 1996 compared to
1995. The increase was principally  associated with increased sales (production)
volume as noted above. Gross profit margins decreased slightly
in 1996 due to the effects of increased  employment levels (direct and indirect)
in order to meet  production and delivery  schedules.  Absorption of engineering
costs decreased in 1996.  Absorption in 1995 was related  primarily to the order
for the three "A" presses  discussed above. Two of these presses were shipped in
1996  with the third in  production.  Engineering  activities  are  expected  to
increase in 1997 as the  division  has received an order to design and build two
large transfer presses for Ford.

         At the Company's former Coz division, net sales in 1996 decreased by 2%
over net sales of the prior year. Sales by product line indicated no significant
changes between the two years.  Gross profits and gross profit margins decreased
in 1996.  The decrease  reflected the effects of increased  material costs which
were not being passed on to customers in order to remain  competitive with other
manufacturers.  The division was selling  older  inventory  stock,  which was no
longer in  demand,  at prices  that  generated  less than  normal  margins.  The
majority of this inventory was eventually sold.

         Selling and  administrative  expenses  were  $33,400,000  (12.2% of net
sales)  in 1996  compared  to  $34,452,000  (13.2% of net  sales)  in 1995.  The
majority of the increase in selling  expenses was  associated  with the Bush Hog
division.  Commissions  (which are based on cash collections)  increased in 1996
due to strong retail activity in the last quarter of the year.  Additional costs
were also incurred at this division  related to the introduction of new products
at turf and lawn shows during 1996.  Administrative  expenses  decreased in 1996
compared to 1995.  The  majority of the decrease  was  associated  with costs of
$1,543,000   incurred  in  1995  for  the   termination/retirement   of  certain
individuals.

         The  increase  in  interest  expense  ($1,557,000  in 1996  compared to
$1,052,000 in 1995) was directly  associated  with increased  average  borrowing
levels  ($17,201,000  in 1996  compared  to  $7,998,000  in 1995)  under  credit
agreements  in effect.  The effect of increased  borrowing  levels was partially
offset  by lower  average  borrowing  rates  in 1996  (7.16%)  compared  to 1995
(8.88%).  The  majority of the  increased  borrowings  was  associated  with the
Company's  common stock purchase program  described below.  Reference is made to
Note 5 of  Notes to  Consolidated  Financial  Statements  for a  description  of
borrowing arrangements in effect during 1996 and 1995.

         Other  expense was  $631,000 in 1996  compared to  $7,483,000  in 1995.
Reference is made to Note 12 of Notes to Consolidated  Financial  Statements for
an analysis of other (income) expense in 1996 and 1995.

         Reference  is  made  to  Note  4 of  Notes  to  Consolidated  Financial
Statements for an analysis and explanation of the current and deferred provision
(credit) for income taxes in 1996 and 1995.

FINANCIAL CONDITION
1997

         Working  capital at December 31, 1997 was  $51,492,000  and the current
ratio was 1.54 to 1.0. Net accounts receivables increased by $1,815,000 in 1997.
At the Bush Hog division, net receivables increased by approximately  $7,000,000
in 1997.  Net sales  levels  increased  to record  levels in 1997,  including an
increase in net sales of over 20% in the fourth quarter,  resulting in increased
receivable  levels at the end of 1997. At the Verson  division,  net receivables
decreased  slightly  in 1997.  The above  noted  increase  in  consolidated  net
receivables was partially  offset by the effects of the sale of the Coz division
in the early part of the fourth  quarter of 1997. On a consolidated  basis,  net
inventories  increased  by  $21,912,000  in  1997.  Inventories  at the Bush Hog
division decreased slightly in 1997. At the
Verson  division,  inventories  increased by over $28,000,000 from year end 1996
levels. While the level of accumulated costs of presses in process has decreased
at the end of 1997,  the level of customer  deposits and  progress  payments has
decreased by a greater amount (over  $36,000,000) at the end of 1997,  resulting
in a net  increase  in the work in  process  inventory  level.  The above  noted
increase was partially  offset by the effects of the sale of the Coz division as
noted above.

         Fixed asset additions  ($15,334,000)  included the purchase of a 40,000
square foot facility for the PPI division (for  manufacturing  capabilities  and
the  opportunity to expand the Verson business with the  manufacturing  of other
related equipment), the upgrade of the Verson engineering area and new machinery
and  equipment at the Bush Hog and Verson  operations  (to reduce  manufacturing
costs and  improve  product  quality).  During the fourth  quarter of 1997,  the
Company  announced  a  $28,000,000  capital  expansion  project  as a part  of a
three-year program to increase production capacity at the Verson division.  This
phase of the  project  will  more  than  double  the size of  Verson's  assembly
facility and will increase the division's  capacity by  approximately  35%. This
phase of the expansion is scheduled to be completed by the end of 1998. Funds to
finance these additions include current operating cash flow and borrowings under
the  Amended  and  Restated  Credit  Agreement.  Other  than the sale of the Coz
division  (cash  proceeds in excess of  $14,700,000),  there were no major asset
dispositions in 1997.

         The changes in the deferred tax assets  (classified as both current and
other assets) were  associated with changes in timing  differences  between book
and tax income.  The continued earnings history of the Company and prospects for
future  earnings makes it more likely than not that the Company will utilize the
benefits  arising from the deferred tax assets noted above.  See Note 4 of Notes
to Consolidated Financial Statements.

         Net  borrowings   under  the  Amended  and  Restated  Credit  Agreement
increased by $23,400,000 since the end of 1996. These borrowings, along with the
proceeds from the sale of the Coz division and internally  generated  cash, were
used to finance working capital needs and fixed asset additions  described above
and the purchase of approximately  975,000 treasury shares during 1997.  Through
the end of 1997, the Company has purchased approximately 2,182,000 shares of its
common  stock  since  the  inception  of the  plan in 1996 to  repurchase  up to
2,250,000  shares of the common stock.  Some treasury shares purchased have been
reissued upon the exercise of stock options.

         During the third  quarter of 1997,  the  Company's  Board of  Directors
authorized a three-for-two  stock split for stockholders of record on August 15,
1997.  The Board  also  authorized  a dividend  increase  of 20% over the second
quarter's dividend.

1996

         Working  capital at December 31, 1996 was  $50,800,000  and the current
ratio was 1.68 to 1.0. Net accounts receivables increased by $8,621,000 in 1996.
The entire increase was associated with the Verson division, of which $6,000,000
cash was in transit at the end of 1996.  The  remaining  portion of the increase
was related to two "A" presses  which were  shipped to Chrysler  facilities  for
installation.  Under the terms of the agreement with Chrysler,  a portion of the
amounts  due are held back  until  installation  and die tryout of each press is
complete.  Receivables at the Bush Hog division decreased in 1996. Strong retail
activity and cash collections  occurred in the last quarter of 1996 resulting in
this decrease in  receivables.  Additional  decreases were  associated  with the
collection  of amounts  due on the sale of an idle  facility at the end of 1995.
Inventory levels increased by $4,384,000
at the end of 1996 compared to the end of the prior year. This increase was also
related to the Verson division.  While the level of accumulated costs of presses
in process  decreased at the end of 1996  (primarily  due to the shipment of two
"A" presses noted above),  the level of customer  deposits and progress payments
has  decreased  by a  greater  amount  at the end of  1996,  resulting  in a net
increase in the work in process  inventory  level.  Inventory levels at the Bush
Hog division decreased due primarily to improved  inventory  management in 1996.
Coz division inventory levels also decreased in 1996. The division  successfully
increased its efforts to eliminate  excess raw material levels and better manage
production quantities.

         Fixed  asset   additions  were  primarily   associated  with  equipment
necessary to improve  productivity and quality at all  manufacturing  divisions.
Funds to  finance  these  additions  include  current  operating  cash  flow and
borrowings  under loan  agreements  in effect.  There were no major  fixed asset
dispositions in 1996.

         The changes in the deferred tax assets  (classified as both current and
other assets) were  associated with changes in timing  differences  between book
and  tax  income  and  the  utilization  of  net  operating  loss  carryforwards
recognized in 1995.

         During the first quarter of 1996,  the Company  increased the quarterly
dividend  from  $.0167  per share to $.0333 per share  effective  with the first
quarter  dividend of 1996 paid at the end of that  quarter.  Quarterly  dividend
rates remained at this level for the remainder of 1996.

         During 1996,  the Company  issued  317,250 new common shares to certain
officers of the Company upon exercise of stock options.  The Company repurchased
these shares from the officers for treasury stock purposes.  The Company's Board
of Directors  authorized the purchase of up to 2,250,000 shares of the Company's
common stock from time to time on the open market,  subject to prevailing market
conditions.  Of this  amount,  approximately  1,200,000  shares  were  purchased
through  the end of 1996.  Funds  to  finance  these  treasury  share  purchases
included  current  operating cash flow and borrowings  under loan  agreements in
effect.  Some treasury shares  purchased have been reissued upon the exercise of
stock options.

LIQUIDITY AND CAPITAL RESOURCES

         At the end of 1997, the Company's sales backlog was approximately
$205,000,000.  The majority of this amount is related to the Verson division and
is  represented  by orders for new  presses.  Production  against  these  orders
extends  out to the early part of 2000.  Accumulated  production  costs of these
orders are not invoiced until  shipment of the related  press.  During 1997, the
number of orders for new presses  accompanied  by  significant  deposits  and/or
progress payments decreased. As a result, cash requirements for press production
have become more dependent upon internally  generated cash and borrowings  under
the Amended and Restated Credit Agreement.

         At the Bush Hog  division,  cash  collections  associated  with machine
sales generally are dependent upon the retail sale of the product by the dealer.
Extended  payment terms are offered in the form of floor plan financing which is
customary  within the  agricultural  equipment  industry.  Net farm cash  income
decreased  in 1997 as crop prices  were  lower.  During  1997,  cow/calf  prices
increased  significantly as the liquidation of cattle herds decreased during the
year. It is  anticipated  that net farm income and commodity  prices during 1998
will not change significantly from 1997 levels.

         During 1995, the Company reversed its previous valuation allowance
associated with certain net operating loss carryforwards, tax credits and timing
differences.  In 1997 and future years,  the Company has and will be recording a
tax provision based  principally  upon the Federal  statutory rate in effect and
anticipates no reductions in future tax provisions  from  additional tax credits
at this time.  However,  the Company  projects  that future  Federal  income tax
payments  will be based upon the  Alternative  Minimum  Tax rate as the  Company
continues to utilize its  substantial tax loss  carryforwards  for tax reporting
purposes.

         Reference  is  made  to  Note 10 of  Notes  to  Consolidated  Financial
Statements  for a current  discussion  on  outstanding  environmental  and legal
issues and other contingent liabilities.

         At the end of  1997,  the  Company  entered  into an  amendment  to the
Amended and Restated Credit  Agreement.  Reference is made to Note 5 of Notes to
Consolidated  Financial  Statements for a description of the major terms of this
amended agreement.

         As of December 31, 1997,  the Company had cash and cash  equivalents of
$609,000 and  additional  funds of $72,153,000  available  under its Amended and
Restated  Credit  agreement  of  which  $47,153,000  is  available  for  general
corporate  and  operating  purposes  (including  costs  incurred  by the  Verson
division in  connection  with new press  orders from the major U. S.  automotive
manufacturers)  and an additional  $25,000,000 which is available for new Verson
business as noted above. The Company  believes that its expected  operating cash
flow and funds  available  under the Amended and Restated  Credit  Agreement are
adequate to finance its operations and capital  expenditures in the near future.
During 1997,  the Company has been in  compliance  with all  provisions  of loan
agreements in effect.

IMPACT FROM NOT YET EFFECTIVE RULES

         In June 1997, the Financial  Accounting  Standards  Board (FASB) issued
SFAS  No.  130-Reporting   Comprehensive   Income.  This  statement  establishes
standards  for  the  reporting  and  display  of  comprehensive  income  and its
components and is effective for fiscal years  beginning after December 15, 1997.
Reclassification  of financial  statements for earlier  periods for  comparative
purpose  is  also   required.   Also  in  June  1997,   the  FASB   issued  SFAS
131-Disclosures  about Segments of an Enterprise and Related  Information.  This
statement  establishes  standards for the way that public  business  enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments  in  interim  financial   reports  issued  to  shareholders.   It  also
establishes  standards  for related  disclosures  about  products and  services,
geographic areas and major customers.  This statement is effective for financial
statements  for  periods   beginning   after  December  15,  1997.   Comparative
information for earlier years is also to be presented.  In relation to SFAS Nos.
130 and 131,  the  Company is in the process of  evaluating  the impact of these
statements on its financial reporting.

YEAR 2000 COMPLIANCE

         The Company has reviewed the Year 2000 Compliance  issue in relation to
its operations  including  relationships with customers and suppliers.  In house
modifications  of software  began in 1996 and  continued  throughout  1997 at no
significant  additional  cost to the Company.  Testing of some systems  began in
1997 and will continue throughout 1998. Financial and manufacturing  systems are
currently being upgraded with software which is Year 2000 Compliant. The Company
does not anticipate incurring significant additional costs in 1998
and 1999 in becoming Year 2000  Compliant  and does not foresee any  significant
problem affecting its business  operations and relationships  with customers and
suppliers in becoming Year 2000 Compliant.

SAFE HARBOR STATEMENT

         Statements  contained  within the  description  of the  business of the
Company contained in Item 1, the Management Discussion and Analysis of Financial
Conditions  and Results of  Operations as well as within the non 10-K portion of
the 1997 Annual  Report that relate to future  operating  periods are subject to
risks  and  uncertainties  that  could  cause  actual  results  to  differ  from
management's  projections.  Operations of the Company include the  manufacturing
and sale of agricultural and industrial  machinery.  In relation to the Bush Hog
division, forward-looking statements involve certain factors that are subject to
change.  These elements encompass  interrelated  factors that affect farmers and
cattle ranchers' confidence,  including demand for agricultural products,  grain
stock levels,  commodity prices,  weather conditions,  crop and animal diseases,
crop  yields,  farm land values and  government  farm  programs.  Other  factors
affecting all  operations of the Company  include  actions of competitors in the
industries served by the Company, production difficulties including capacity and
supply  constraints,  labor  relations,  interest  rates  and  other  risks  and
uncertainties.  The Company's outlook is based upon assumptions  relating to the
factors discussed above.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
  of Allied Products Corporation

         We have  audited the  consolidated  balance  sheets of Allied  Products
Corporation and consolidated  subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income, shareholders' investment and cash
flows for each of the three years in the period ended December 31, 1997. We have
also audited the financial  statement  schedule  listed in Part IV of Form 10-K,
Item 14(a)2 for each of the three years in the period  ended  December 31, 1997.
These   financial   statements   and  financial   statement   schedule  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements and financial statement schedule 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 Allied
Products  Corporation and consolidated  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.  In addition,  in our opinion,  the
financial statement schedule referred to above, when
considered in relation to the financial  statements  taken as a whole,  presents
fairly,  in all  material  respects,  the  information  required  to be included
therein.

                           COOPERS & LYBRAND L. L. P.

Chicago, Illinois

February 2, 1998




<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                                                   -----------------------
                                                                        1997                1996                1995
                                                                        ----                ----                ----
<S>                                                                 <C>                 <C>                 <C>                   
Net sales........................................................   $270,562,000        $274,414,000        $260,861,000
                                                                                                            
Cost of products sold............................................    204,754,000         209,118,000         199,544,000
                                                                    ------------        ------------        ------------ 
  Gross profit...................................................   $ 65,808,000        $ 65,296,000        $ 61,317,000
                                                                    ------------        ------------        ------------ 
Other costs and expenses:
  Selling and administrative expenses............................   $ 34,124,000        $ 33,400,000        $ 34,452,000
   Interest expense..............................................      3,306,000           1,557,000           1,052,000
   Other (income) expense, net...................................     (3,111,000)            631,000           7,483,000
                                                                    ------------        ------------        ------------          
                                                                    $ 34,319,000        $ 35,588,000        $ 42,987,000
                                                                    ------------        ------------        ------------           
Income before taxes..............................................   $ 31,489,000        $ 29,708,000        $ 18,330,000
Provision (credit) for income taxes:
   Current.......................................................      1,195,000             921,000             989,000
   Deferred......................................................     10,323,000           9,783,000         (16,648,000)
                                                                    ------------        ------------        ------------          
Net income.......................................................   $ 19,971,000        $ 19,004,000        $ 33,989,000
                                                                    ------------        ------------        ------------ 
                                                                    ------------        ------------        ------------           
Net income applicable to common stock............................   $ 19,971,000        $ 19,004,000        $ 32,789,000
                                                                    ------------        ------------        ------------ 
                                                                    ------------        ------------        ------------ 
Earnings per common share:
   Basic.........................................................      $1.65               $1.41               $2.39

   Diluted.......................................................      $1.62               $1.39               $2.34

Weighted average shares outstanding:                                                                                              
   Basic.........................................................     12,107,000          13,505,000          13,692,000
                                                                    ------------        ------------        ------------ 
                                                                    ------------        ------------        ------------          
   Diluted.......................................................     12,353,000          13,718,000          14,011,000
                                                                    ------------        ------------        ------------ 
                                                                    ------------        ------------        ------------ 
</TABLE>



          The accompanying notes to consolidated financial statements are an
                         integral part of these statements.




<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                ----------------------------------
                                                                     1997                 1996
                                                                ------------          ------------
<S>                                                             <C>                   <C>                                          
Current Assets:
   Cash and cash equivalents...............................     $    609,000          $    833,000
                                                                ------------          ------------
   Notes and accounts receivable, less allowances of                                                                
      $531,000 and $629,000, respectively..................     $ 54,729,000          $ 52,914,000
                                                                ------------          ------------ 
   Inventories:                                                                                                                    
      Raw materials........................................     $  6,193,000          $  9,524,000                                
      Work in process......................................       58,090,000            28,269,000                                
      Finished goods.......................................       14,419,000            18,997,000
                                                                ------------          ------------                                
                                                                $ 78,702,000          $ 56,790,000
                                                                ------------          ------------                                
   Deferred tax asset......................................     $ 12,773,000          $ 14,532,000
                                                                ------------          ------------ 
   Prepaid expenses........................................     $    415,000          $    191,000
                                                                ------------          ------------                                 
        Total current assets...............................     $147,228,000          $125,260,000
                                                                ------------          ------------ 
Plant and Equipment, at cost:                                                                                                     
   Land....................................................     $  2,243,000          $  2,155,000                                
   Buildings and improvements..............................       40,750,000            37,196,000                                 
   Machinery and equipment.................................       51,339,000            50,083,000
                                                                ------------          ------------ 
                                                                $ 94,332,000          $ 89,434,000                                
   Less-Accumulated depreciation and amortization..........       48,811,000            51,048,000
                                                                ------------          ------------ 
                                                                $ 45,521,000          $ 38,386,000
                                                                ------------          ------------ 
Other Assets:                                                                                                                    
   Deferred tax asset......................................     $  4,071,000          $  5,282,000
   Deferred charges (goodwill), net of amortization........        1,491,000             1,668,000
   Other...................................................        1,472,000             1,353,000
                                                                ------------          ------------                                
                                                                $  7,034,000          $  8,303,000
                                                                ------------          ------------                                
                                                                $199,783,000          $171,949,000
                                                                ------------          ------------ 
                                                                ------------          ------------ 

</TABLE>


        The accompanying notes to consolidated financial statements are an
                           integral part of these statements.




<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    LIABILITIES AND SHAREHOLDERS' INVESTMENT

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                ----------------------------------
                                                                     1997                1996
                                                                ------------ -        -----------  
<S>                                                             <C>                   <C>                                         
Current Liabilities:
   Revolving credit agreement..............................     $ 50,400,000          $ 27,000,000
   Current portion of long-term debt.......................          268,000               193,000                                 
   Accounts payable........................................       19,923,000            16,692,000                                
   Accrued expenses........................................       25,145,000            30,575,000
                                                                ------------          ------------                                 
        Total current liabilities..........................     $ 95,736,000          $ 74,460,000
                                                                ------------          ------------ 
Long-term debt, less current portion shown above...........     $    670,000          $    489,000
                                                                ------------          ------------                                
Other long-term liabilities................................     $ 10,353,000          $  3,547,000
                                                                ------------          ------------ 
Commitments and Contingencies
Shareholders' Investment:
   Preferred stock:
      Undesignated-authorized 1,500,000 shares at
        December 31, 1997 and 1996; none issued............     $     -               $     -
   Common stock, par value $.01 per share; authorized
      25,000,000 shares; issued 14,047,249 and
      9,364,844 shares at December 31, 1997 and 1996,
      respectively.........................................          140,000                94,000                                
   Additional paid-in capital..............................       94,709,000            94,671,000                                
   Retained earnings.......................................       40,428,000            22,227,000
                                                                ------------           -----------                                 
                                                                $135,277,000          $116,992,000
   Less: Treasury stock, at cost: 2,144,263 and
      905,071 at December 31, 1997 and 1996,                                                                        
      respectively.........................................      (42,253,000)          (23,539,000)
                                                                ------------          ------------                                 
        Total shareholder's equity.........................     $ 93,024,000          $ 93,453,000
                                                                ------------          ------------ 
                                                                $199,783,000          $171,949,000
                                                                ------------          ------------ 
                                                                ------------          ------------ 

</TABLE>


           The accompanying notes to consolidated financial statements are an
                       integral part of these statements.




<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                    Year Ended December 31,
                                                                    ------------------------------------------------------
                                                                        1997                  1996                1995
                                                                    ------------          ------------        ------------
<S>                                                                 <C>                   <C>                 <C>                  
Cash Flows from Operating Activities:                                                                                              
   Net income....................................................   $ 19,971,000          $ 19,004,000        $ 33,989,000
   Adjustments to reconcile net income to
    net cash provided from (used for) operating activities:
      Gains on sales of operating and                                                                                
        nonoperating assets......................................     (1,662,000)             (106,000)         (2,000,000)
      Depreciation and amortization..............................      5,026,000             5,075,000           5,033,000
      Amortization of deferred charges...........................        177,000               177,000           2,068,000
      Deferred income tax provision (benefit)....................     10,323,000             9,534,000         (16,648,000)
      Provision for collectability of long-term receivable.......         -                     -                7,699,000
      Changes in noncash assets and liabilities, net of effects 
       of assets/businesses sold and noncash transactions:
        (Increase) decrease in accounts receivable...............     (5,976,000)           (8,835,000)             99,000
        (Increase) in inventories................................    (25,894,000)           (4,384,000          (3,951,000)
        (Increase) decrease in prepaid expenses..................       (294,000)              132,000             133,000
        Decrease in notes receivable, due after one year.........         -                     40,000             423,000
        Increase (decrease) in accounts payable and
         accrued expenses........................................     (3,230,000)           (6,621,000)          1,349,000
      Other, net.................................................       (456,000)              438,000             802,000
                                                                    ------------          ------------        ------------ 
   Net cash provided from (used for)                                                                        
      operating activities.......................................   $ (2,015,000)         $ 14,454,000        $ 28,996,000
                                                                    ------------          ------------         ----------- 
Cash Flows from Investing Activities:                                                                                              
   Additions to plant and equipment..............................   $(15,334,000)         $ (4,684,000)       $(14,378,000)
   Proceeds from sales of plant and equipment....................        504,000               207,000           3,611,000
   Proceeds from sales of assets/businesses......................     14,737,000                -                   -
                                                                    ------------          ------------        ------------ 
   Net cash used for investing activities........................   $    (93,000)         $ (4,477,000)       $(10,767,000)
                                                                    ------------          -------------       ------------- 
Cash Flows from Financing Activities:
   Borrowings under revolving loan and credit agreements.........   $122,000,000          $119,650,000        $110,300,000
   Payments under revolving loan and credit agreements...........    (98,600,000)         (103,850,000)       (109,400,000)
   Payments of short and long-term debt..........................       (270,000)             (696,000)           (827,000)       
   Redemptions of preferred stock................................         -                     -              (17,997,000)
   Common stock issued...........................................         -                  1,501,000              -             
   Purchases of treasury stock...................................    (21,572,000)          (25,993,000)             -             
   Dividends paid................................................     (1,770,000)           (1,808,000)         (1,883,000)
   Stock option transactions.....................................      2,096,000             1,308,000             668,000
                                                                    ------------          ------------        ------------ 
   Net cash provided from (used for) financing activities.......    $  1,884,000          $ (9,888,000)       $(19,139,000)
                                                                    ------------          -------------       ------------- 
Net increase (decrease) in cash and cash equivalents............    $   (224,000)         $     89,000        $   (910,000)
Cash and cash equivalents at beginning of year..................         833,000               744,000           1,654,000
                                                                    ------------          ------------        ------------ 
Cash and cash equivalents at end of year........................    $    609,000          $    833,000        $    744,000
                                                                    ------------          ------------        ------------ 
                                                                    ------------          ------------        ------------ 

</TABLE>


     The accompanying notes to consolidated financial statements are an
                    integral part of these statements.




<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                      ------------------------------------------
                                                                         1997            1996            1995
                                                                      ----------      ----------      ---------- 
<S>                                                                   <C>             <C>             <C>                         
Supplemental Information:
       (A) Noncash investing and financing
           activities:
        1. Assets acquired through the assumption of debt.........    $  526,000      $  442,000      $  444,000          
                                                                      ----------      ----------      ---------- 
                                                                      ----------      ----------      ----------                   
        2. Treasury shares received in lieu of cash for stock
              option exercise.....................................    $   -           $   86,000      $    - 
                                                                      ----------      ----------      ---------- 
                                                                      ----------      ----------      ----------                  
        3. Treasury shares issued for non cash exercise of 
              stock options......................................     $   -           $  773,000      $    -
                                                                      ----------      ----------      ---------- 
                                                                      ----------      ----------      ----------                  
       (B) Interest paid during year.............................     $3,225,000      $1,636,000      $  939,000
                                                                      ----------      ----------      ---------- 
                                                                      ----------      ----------      ---------- 

                                                                        
       (C) Income/franchise taxes paid during year, net of 
             refunds.............................................     $1,313,000      $1,291,000      $  471,000
                                                                      ----------      ----------      ---------- 
                                                                      ----------      ----------      ---------- 

</TABLE>


              The accompanying notes to consolidated financial statements are an
                               integral part of these statements.




<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
                      Preferred, Common and Treasury Stock

<TABLE>
<CAPTION>

                                                                        Series B
                                                                        Preferred             Common
                                                                         ($50                 ($.01             Treasury
                                                                       Stated Value          Par Value           Stock,
                                                                        Per Share)           Per Share)          at Cost
                                                                       -------------         ----------       ------------ 
<S>                                                                    <C>                   <C>              <C>                 
Balance at December 31, 1994...................................        $   7,340,000         $   91,000       $     -
   Redemption of 146,800 Series B preferred shares.............           (7,340,000)             -                 -
   Issuance of 35,000 common shares in connection with the 
     exercises of stock options................................               -                   -                 -
                                                                       --------------        -----------      ------------ 
Balance at December 31, 1995...................................        $      -              $    91,000      $     -
   Issuance of 226,500 common shares in connection with the 
     exercises of stock options................................               -                    3,000            -
   Purchase of 1,016,309 common shares for treasury purposes.                 -                     -          (26,079,000)
   Treasury shares issued (111,238) in connection with the 
     exercises of stock options...............................                -                     -            2,540,000
                                                                       --------------        -----------      ------------         
Balance at December 31, 1996....................................       $      -              $    94,000      $(23,539,000)
   Issuance of 4,682,405 common shares in connection with a 
      three-for-two stock split.................................              -                   46,000            -
   Purchase of 974,930 common shares for treasury purposes......              -                     -          (21,572,000)
   Treasury shares issued (188,273) in connection with the 
     exercises of stock options.................................              -                     -            2,858,000
                                                                       --------------        -----------      ------------        
Balance at December 31, 1997....................................       $      -              $   140,000      $(42,253,000)
                                                                       --------------        -----------      ------------ 
                                                                       --------------        -----------      ------------ 
</TABLE>



         The accompanying notes to consolidated financial statements are an
                        integral part of these statements.




<PAGE>


            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
           Additional Paid-In Capital and Retained Earnings (Deficit)

<TABLE>
<CAPTION>                                                                                       
                                                                                        Additional          Retained
                                                                                         Paid-in            Earnings
                                                                                         Capital            (Deficit)
                                                                                       -----------         ------------
<S>                                                                                    <C>                 <C>                    
Balance at December 31, 1994.....................................................      $92,146,000         $(27,075,000)
   Net income for the year.......................................................           -                33,989,000
   Preferred dividends declared and paid:
      Series B (variable based on prime rate-$1.825 per share)...................           -                  (268,000)
      Series C-$8.1075 per share.................................................           -                  (932,000)
   Common dividends declared and paid-$.075 (pre-split basis) per share..........           -                  (683,000)
   Issuance of 35,000 common shares in connection with the exercises of 
     stock options...............................................................          205,000               -
   Excess of cost ($589,000) over fair market value of 41,961 common 
     shares purchased and reissued in connection with the Company's 
     contribution to the Employee Stock Plan.....................................          (30,000)              -
   Excess of cost ($614,000) over fair market value of 42,500  common  
     shares  purchased  and  reissued  in  connection  with  the Company's 
     incentive stock plan........................................................         (151,000)              -
   Excess of stated value over cost ($5,516,000) in connection with the 
     early retirement of the Series B preferred stock............................          973,000               -
                                                                                       ------------        ------------            
Balance at December 31, 1995.....................................................      $93,143,000         $  5,031,000
   Net income for the year.......................................................           -                19,004,000
   Common dividends declared and paid-$.20 (pre-split basis) per share...........           -                (1,808,000)
   Issuance of 226,500 common shares in connection with the exercises of 
     stock options...............................................................        1,584,000               -
   Excess of cost of treasury shares issued over exercise price in connection 
     with the exercises of stock options.........................................       (1,754,000)              -
   Tax benefit associated with stock option exercises............................        1,698,000               -
                                                                                       -----------         ------------           
Balance at December 31, 1996.....................................................      $94,671,000         $ 22,227,000
   Net income for the year.......................................................           -                19,971,000           
   Common dividends declared and paid-$.147 per share............................           -                (1,770,000)
   Issuance of 4,682,405 common shares in connection with a three-for-two 
     stock split.................................................................          (46,000)              -
   Excess of cost of treasury shares issued over exercise price in connection 
     with the exercises of stock options.........................................         (762,000)              -
   Tax benefit associated with stock option exercises............................          846,000               -
                                                                                       -----------         ------------            
Balance at December 31, 1997.....................................................      $94,709,000         $ 40,428,000
                                                                                       -----------         ------------ 
                                                                                       -----------         ------------ 
</TABLE>



        The accompanying notes to consolidated financial statements
                          are an integral part of these statements





            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies:

 Principles of Consolidation-

         The  consolidated  financial  statements  include  the  accounts of the
Company and its majority owned subsidiaries.  All significant intercompany items
and transactions have been eliminated.

 Nature of Operations-

         Allied Products  Corporation  manufactures large metal stamping presses
and  implements  and  machinery  used in  agriculture,  landscaping  and  ground
maintenance businesses. The Company's Coz division, which supplied thermoplastic
compounds  and  additives,   was  sold  in  the  fourth  quarter  of  1997.  All
manufacturing operations are within the United States.  Implements and machinery
manufactured by the Bush Hog division are primarily sold through  dealerships in
the United  States with some  limited  export  sales to Canada.  Metal  stamping
presses produced by the Verson division are sold directly to the end users which
include  automobile  manufacturers,  first  and  second  tier  automotive  parts
producing  companies and the appliance  industry.  Automobile  manufacturers and
automotive parts producing companies account for approximately 85% of the Verson
division's revenues. Press sales generally are concentrated in the United States
and Mexico.

 Use of Estimates-

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

 Revenue Recognition-

         Sales by the Bush Hog division are recorded  when  products are shipped
to independent  dealers in accordance  with industry  practices.  Provisions for
sales  incentives  and other sales related  expenses are made at the time of the
sale.  Revenues and profits are  recognized on a percentage of completion  basis
for major  contracts  at the Verson  division.  Changes in the Verson  divison's
estimated  sales,  costs and profits are recognized over the remaining period of
production related to the particular order. Additionally, any anticipated losses
on contracts are charged to operations as soon as they are  determinable.  Other
products are recorded as sales when shipped.

 Accounts Receivable-

         Current  accounts  receivables  for the  Bush Hog  division  are net of
provisions for sales  incentive  programs and returns and  allowances.  Extended
payment  terms (up to one year) are offered to dealers in the form of floor plan
financing which is customary  within the industry.  Such  receivables  (with the
exception of receivables associated with service parts) are generally not
collected  until the dealer  sells the related  piece of  equipment  to a retail
customer.  The Company maintains a security interest in the equipment related to
such receivables to minimize the risk of loss.

 Inventories-

         The basis of all of the  Company's  inventories  is determined by using
the lower of FIFO cost or market method.

         Included  in  work  in  process   inventory   are   accumulated   costs
($52,535,000  at  December  31,  1997 and  $23,674,000  at  December  31,  1996)
associated  with  contracts  under  which the  Company  recognizes  revenue on a
percentage  of  completion   basis.   These  balances  include  unbilled  actual
production  costs incurred plus a measure of estimated  profit  ($19,162,000  at
December 31, 1997 and  $15,674,000 at December 31, 1996)  recognized in relation
to the sales recorded,  less customer payments  ($7,357,000 at December 31, 1997
and  $43,579,000  at  December  31,  1996)  associated  with the work in process
inventory.  A  significant  portion  of the work in  process  inventory  will be
completed, shipped and invoiced prior to the end of the following year.

 Plant and Equipment-

         Expenditures  for the maintenance and repair of plant and equipment are
charged to expense as incurred. Expenditures for major replacement or betterment
are  capitalized.  The cost and related  accumulated  depreciation  of plant and
equipment  replaced,  retired  or  otherwise  disposed  of is  removed  from the
accounts and any gain or loss is reflected in earnings.

 Depreciation-

         Depreciation  of the original cost of plant and equipment is charged to
expense  over the  estimated  useful lives of such assets  calculated  under the
straight-line  method.  Estimated  useful lives are 20 to 40 years for buildings
and improvements and 3 to 12 years for machinery and equipment.

 Deferred Charges (Goodwill)-

         Deferred  charges  (goodwill)  associated with the 1986  acquisition of
Verson (approximately  $13,113,000) are being amortized on a straight line basis
over a period of 20 years.  The  Company  assesses  at each  balance  sheet date
whether  there has been a permanent  impairment  in the value of goodwill.  Such
assessment includes obsolescence,  demand, new technology, competition and other
pertinent  economic  factors  and trends that may have an impact on the value of
remaining useful life of goodwill.

 Stock Split-

         On July 24,  1997,  the Company  announced  that the Board of Directors
authorized a three-for-two  stock split effected by means of a stock dividend to
shareholders  of record on August  15,  1997.  A total of  4,682,405  additional
common  shares  were issued in  conjunction  with the stock  split.  The Company
distributed  cash in lieu of fractional  shares  resulting from the stock split.
All applicable share and per share data have been adjusted for the stock split.

 Earnings Per Common Share-

         During 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128)-Earnings per
Share.  Earnings per common share for the years prior to 1997 have been restated
to reflect the provisions of this accounting standard. Basic earnings per common
share is based on the average number of common shares  outstanding  (12,107,000,
13,505,000 and 13,692,000 for the years ended December 31, 1997,  1996 and 1995,
respectively) after decreasing net income for preferred dividend requirements of
$1,200,000  for the year ended  December 31, 1995.  Diluted  earnings per common
share is based on the  average  number of common  shares  outstanding,  as noted
above,  increased by the dilutive effect of outstanding  stock options (246,000,
213,000  and  319,000  for the years ended  December  31,  1997,  1996 and 1995,
respectively) after decreasing net income for preferred dividend requirements of
$1,200,000 for the year ended December 31, 1995.

 Income Taxes-

         Income taxes are accounted for under the asset and liability  method in
accordance with FASB SFAS 109-Accounting for Income Taxes. See Note 4.

 Statement of Cash Flows-

         For purposes of the Consolidated  Statements of Cash Flows, the Company
considers  investments  with  original  maturities of three months or less to be
cash equivalents.

 Financial Instruments-

         The fair value of cash and cash  equivalents  approximates the carrying
value of these assets due to the short maturity of these  instruments.  The fair
value of the Company's debt, current and long-term,  is estimated to approximate
the carrying value of these  liabilities  based upon borrowing  rates  currently
available to the Company for borrowings with similar terms.

 Recently Issued Accounting Standards-

         In June 1997, the FASB issued SFAS 130-Reporting  Comprehensive Income.
This  statement   establishes   standards  for  the  reporting  and  display  of
comprehensive  income and its  components  and is  effective  for  fiscal  years
beginning after December 15, 1997.  Reclassification of financial statements for
earlier periods for comparative purpose is also required. Also in June 1997, the
FASB issued SFAS  131-Disclosures  about  Segments of an Enterprise  and Related
Information.  This  statement  establishes  standards  for the way  that  public
business  enterprises  report  information  about  operating  segments in annual
financial  statements  and  requires  that  those  enterprises  report  selected
information  about  operating  segments in interim  financial  reports issued to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services,  geographic areas and major customers.  This statement is
effective for financial  statements  for periods  beginning  after  December 15,
1997.  Comparative  information  for earlier years is also to be  presented.  In
relation to SFAS 130 and 131,  the Company is in the process of  evaluating  the
impact of these statements on its financial reporting.

2.  Accrued Expenses:

         The Company's accrued expenses consist of the following:
<TABLE>
<CAPTION>
                                                        December 31,
                                                 -------------------------
                                                    1997            1996
                                                 ----------      ----------
<S>                                              <C>             <C>                                                              
Salaries and wages............................   $5,560,000      $6,026,000
Warranty......................................    4,938,000       9,559,000
Self insurance accruals.......................    2,858,000       4,046,000
Pensions, including retirees' health..........    6,439,000       6,417,000
Taxes, other than income taxes................    1,158,000         811,000
Environmental matters.........................    1,810,000       2,020,000
Other.........................................    2,382,000       1,696,000
                                                -----------      ----------                                                       
                                                $25,145,000      $30,575,000
                                                -----------      ----------- 
                                                -----------      ----------- 
</TABLE>



3.  Dispositions:

         During  the  fourth   quarter  of  1997,  the  Company  sold  for  cash
(approximately $14,700,000) substantially all of the assets of its Coz division.
The purchaser also assumed certain  specified  liabilities  associated with this
division. The sale resulted in a pretax gain of approximately  $1,530,000 and is
included  in Other  (income)  expense  under the  caption  "Net gain on sales of
operating and non-operating assets"-see Note 12.

         At the end of 1993, the Company sold for cash  substantially all of the
assets  and  liabilities  of the  White-New  Idea Farm  Equipment  division.  In
connection with this sale, the purchaser is required to purchase the real estate
located in Coldwater,  Ohio pending a favorable review of environmental matters.
The Company has completed  necessary  environmental  remediation and is awaiting
the issuance of a covenant not to sue and related no further  action  letters by
the State of Ohio-see Note 10. During 1995, the Company and the purchaser of the
White-New  Idea  division  agreed to a five-year  lease of the  Coldwater,  Ohio
facility while the Company completes the evaluation. Sale of the facility to the
purchaser of the  White-New  Idea  division  will occur after  completion of the
evaluation and after resolution of any issues raised by the evaluation.

 Restructuring Costs-

         Prior to 1994, the Company  provided  $14,700,000  for the impact of an
operational  restructuring  plan designed to reduce operating losses by closing,
consolidating  or scaling  back certain  operations.  The  restructuring  of the
Company was substantially completed during 1996 with the remaining reserve being
allocated to accruals  associated  with certain  noncontinuing  businesses.  Net
charges  to the  restructuring  reserve  in 1996  and  1995  were  $748,000  and
$1,879,000, respectively.

         As of December 31, 1997, the  accompanying  consolidated  balance sheet
includes  real  estate  with a net book value of  $1,579,000,  which is held for
sale,  including  $1,281,000 related to real estate under lease to the purchaser
of the White-New Idea division as discussed above.

4.  Income Taxes:

         Provision  (credit) for income taxes in 1997, 1996 and 1995 consists of
the following:
<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                            ----------------------------------------------
                                                1997            1996             1995
                                            -----------      -----------      ------------ 
<S>                                         <C>              <C>              <C>    
                                                 
Federal-current.........................    $   617,000      $   688,000      $    756,000                                        
Federal-deferred........................     10,323,000        9,783,000       (16,648,000)
State-current...........................        578,000          233,000           233,000                                        
                                            -----------      -----------      ------------                                        
Total provision (credit)...............     $11,518,000      $10,704,000      $(15,659,000)
                                            -----------      -----------      ------------ 
                                            -----------      -----------      ------------ 

</TABLE>


         The provision  (credit) for income taxes in 1997, 1996 and 1995 differs
from  amounts  computed  by  applying  the  statutory  rate to pretax  income as
follows:
<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                            ----------------------------------------------                    
                                                1997             1996             1995
                                            -----------      -----------      ------------                                        
<S>                                         <C>              <C>              <C>                                                 
Income tax at statutory rate.............   $11,021,000      $10,398,000      $  6,416,000
Utilization of net operating loss                                                                                            
   carryforward..........................        -                -             (5,997,000)
State income tax, net of federal tax
   benefit...............................       376,000          151,000           151,000
Permanent book over tax differences on
   acquired assets.......................        62,000          104,000           910,000
Adjustment to deferred tax asset                                                                                             
   valuation allowance...................        -                -            (16,648,000)
Other, net...............................        59,000           51,000          (491,000)
                                            -----------      -----------      ------------                                        
Total provision (credit).............       $11,518,000      $10,704,000      $(15,659,000)
                                            -----------      -----------      ------------ 
                                            -----------      -----------      ------------ 

</TABLE>


         The significant components of deferred tax assets were as follows:
<TABLE>
<CAPTION>
                                                                     December 31,
                                                             ----------------------------
                                                                 1997            1996
                                                             -----------      -----------
<S>                                                          <C>              <C>                                                 
Deferred tax assets:                                                                                                              
   Self-insurance accruals...............................    $ 1,840,000      $ 1,934,000
   Inventories...........................................      2,421,000        1,999,000
   Receivables...........................................        417,000        2,845,000
   Sale/leaseback transaction............................      1,557,000        1,557,000
   Employee benefits, including pensions.................      4,928,000        4,696,000
   Warranty..............................................      1,803,000        3,489,000
   Sales allowances......................................      2,616,000        2,200,000
   Environmental matters.................................        658,000          737,000
   Other.................................................        604,000          357,000
                                                              ----------      ----------- 
    Total deferred tax asset.............................    $16,844,000      $19,814,000
                                                             -----------      ----------- 
                                                             -----------      ----------- 

</TABLE>


         During 1995, the Company evaluated its net operating loss carryforwards
and other deferred tax assets in relation to its earnings  history over the past
few years and the estimated  projected  future earnings over the next few years.
As a  result  of  this  review,  the  Company  recorded  a  deferred  tax  asset
($27,361,000)  which  represented a reversal of a valuation  allowance  recorded
prior to 1995.  The related  credit to income  taxes was reduced by  $10,713,000
representing  the elimination of goodwill  associated with certain  acquisitions
which included net operating loss carryforwards.  In addition to the above noted
tax asset,  the Company has available net operating loss  carryforwards of up to
$146,527,000  (of which  $65,811,000  results from various  acquisitions)  which
expire  between  1998 and 2008,  and  investment  tax  credit  carryforwards  of
$1,561,000  (which  expire  between  1998  and  2004)  including  up to  $41,000
resulting from acquisitions.

         The  Company  will  continue to record a tax  provision  based upon the
Federal  statutory  rate in effect and  anticipates  no reductions in future tax
provisions  from  additional  tax  credits at this time.  However,  the  Company
projects that future Federal income tax payments will be based upon the
Alternative  Minimum Tax rate as substantial tax loss carryforwards  still exist
for tax reporting purposes. In addition,  other long-term liabilities contain an
accrual related to deferred tax matters.

         Tax returns for the years subsequent to 1993 are potentially subject to
audit by the Internal Revenue Service.

5.  Financial Arrangements:

         The Company's debt consists of the following:
<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                     -----------------------
                                                                                       1997           1996
                                                                                     --------       --------
<S>                                                                                  <C>            <C>                           
Capitalized lease obligations,  at interest rates up to 12% (weighted average of
   10.4% and 10.3% at December 31, 1997   and 1996, respectively), due in
   varying amounts through 2002 (Note 6)........................................     $938,000       $682,000                      
Less current portion............................................................      268,000        193,000
                                                                                     --------       --------                      
                                                                                     $670,000       $489,000
                                                                                     --------       -------- 
                                                                                     --------       -------- 


</TABLE>

         Scheduled  maturities of the  noncurrent  portion of long-term  debt at
December 31, 1997 are due as follows:

<TABLE>
<CAPTION>
<S>                                                            <C>                                                                
1999......................................................     $283,000                                                           
2000......................................................      247,000                                                           
2001......................................................      109,000
2002......................................................       31,000
                                                               -------- 
                                                               $670,000
                                                               -------- 
                                                               -------- 

</TABLE>


         During  1994,  the Company  entered into a Revolving  Credit  Agreement
(which was  subsequently  amended in 1995)  with two banks  providing  for up to
$35,000,000  in working  capital  related loans and up to $15,000,000 in standby
letters of credit  required  for the  Company's  self-insurance  program and for
other  commercial  purposes.  During the last half of 1996, the Company  entered
into an Amended and Restated  Credit  Agreement  (which  replaced the  Revolving
Credit  Agreement)  with the same two banks.  The  Amended and  Restated  Credit
Agreement was amended at the end of 1997. The amended agreement  provides for up
to  $125,000,000  of  borrowings  and/or  letters of credit at either a floating
prime or fixed  LIBOR  (with the rate  dependent  on the ratio of Funded Debt to
Operating Cash Flow) rate. Under the Amended and Restated Credit Agreement,  the
Company must meet certain periodic financial tests,  including minimum net worth
($89,790,000,  as defined, at December 31, 1997), debt coverage and fixed charge
coverage ratio and maximum funded  debt/operating cash flow ratio.  Beginning in
1998,  the  Company  must  maintain  revolving  loans  under this  agreement  to
$60,000,000  or less for thirty  (30)  consecutive  days during each fiscal year
while the agreement  remains in effect.  Maximum  amounts  available  under this
amended  agreement are reduced by  $5,000,000  per quarter  beginning  March 31,
1999. The agreement expires on September 30, 2000.

         The  weighted  average  interest  rate  on  borrowings  outstanding  at
December 31, 1997 and 1996 was 6.9% and 7.4%, respectively.

6.  Leases:



 Capital Leases-



         The  Company  leases  various  types  of   manufacturing,   office  and
transportation equipment.

         Capital leases included in Machinery and equipment in the  accompanying
balance sheets are as follows:
<TABLE>
<CAPTION>
                                                                         December 31,
                                                                 ------------------------ 
                                                                     1997          1996
<S>                                                              <C>            <C>                                               
Capitalized cost............................................     $2,490,000     $2,558,000                                        
Less-Accumulated amortization...............................      1,528,000      1,764,000
                                                                 ----------     ---------- 
                                                                 $  962,000     $  794,000
                                                                 ----------     ---------- 
                                                                 ----------     ---------- 

</TABLE>


         See Note 5 for  information as to future debt payments  relating to the
above leases.

 Operating Leases-

         Rent expense for operating leases, which is charged against income, was
as follows:
<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                              --------------------------------------------
                                                 1997               1996           1995
                                              ----------         ----------     ----------
<S>                                           <C>                <C>            <C>                                               
Minimum rentals...........................    $1,989,000         $1,943,000     $1,922,000
Contingent rentals........................        41,000             79,000         89,000
                                              ----------         ----------     ----------                                        
                                              $2,030,000         $2,022,000     $2,011,000
                                              ----------         ----------     ---------- 
                                              ----------         ----------     ---------- 

</TABLE>


         Contingent  rentals are composed  primarily of truck fleet unit charges
for actual usage. Some leases contain renewal and purchase  options.  The leases
generally provide that the Company pay taxes, maintenance, insurance and certain
other operating expenses.

         At December 31, 1997,  future minimum rental payment  commitments under
operating  leases that have  initial or remaining  noncancelable  lease terms in
excess of one year are as follows:

<TABLE>
<CAPTION>
                                                                                    Net
                                                Minimum                           Minimum
                                                Annual            Sublease         Annual
                                                Rental             Rental          Rental
                                               Payments            Income         Payments
                                              ----------         ----------      ----------
<S>                                           <C>                <C>             <C>     
Year ending December 31,                                                         
   1998....................................   $1,541,000         $ (602,000)     $  939,000                                       
   1999....................................    1,561,000           (667,000)        894,000 
   2000....................................    1,295,000           (731,000)        564,000                   
   2001....................................      473,000             -              473,000
   2002....................................      372,000             -              372,000
   Later...................................      492,000             -              492,000
                                              ----------         -----------     ----------                                       
                                              $5,734,000         $(2,000,000)    $3,734,000
                                              ----------         -----------     ---------- 
                                              ----------         -----------     ---------- 

</TABLE>


7.  Preferred Stock:

         The Company has 2,000,000 shares of authorized preferred stock of which
350,000  shares are  designated as Series B Variable Rate  Cumulative  Preferred
Stock and 150,000 shares are designated as Series C Cumulative  Preferred Stock.
All shares of the Series B and Series C Preferred Stock have been redeemed.  The
remaining  1,500,000  shares of authorized  preferred stock are undesignated and
unissued at December 31, 1997.

8.  Common Stock and Options:

         The  Company  has  an  incentive  stock  plan  (the  1977  plan)  which
authorizes stock incentives for key employees in the form of stock awards, stock
appreciation  rights and stock options.  Options under the 1977 plan,  which are
granted at fair market value at date of grant,  are  non-qualified  options (not
"incentive  stock  options" as defined by the Internal  Revenue  Code).  Options
currently  outstanding  under the 1977 plan become  exercisable to the extent of
25% one year  from date of grant and 25% in each of the next  three  years,  and
expire 10 years from the date of grant.  There were no stock awards issued under
this plan in 1997, 1996 or 1995. No stock appreciation  rights have been granted
to date under this plan. There are 50,835 options outstanding under this plan at
December  31,  1997  and are  included  in the  table  below.  Additional  stock
incentives will not be issued under this plan.

         In 1990,  the  Company's  Board of Directors  approved a new  incentive
stock  plan,  the 1990 Long Term  Incentive  Stock  Plan (the 1990  plan)  which
authorizes  stock  incentives  for key employees in the form of stock awards and
stock  options.  The 1990 plan,  as amended,  authorizes  the  issuance of up to
1,500,000  shares of the Company's  Common  Stock.  Options under the 1990 plan,
which are  granted  at fair  market  value at date of grant,  may be  granted as
either incentive stock options or non-statutory  stock options.  Options granted
become  exercisable  to the  extent  of 50% one year  from date of grant and the
remaining  50% two years  from date of grant.  Since the  inception  of the 1990
plan,  the  Company  has issued  options to  purchase  1,436,252  shares (net of
forfeitures)  of the Company's  Common Stock at prices  between $1.00 and $19.00
per share. There are 429,775 options outstanding under this plan at December 31,
1997 and are included in the table below.  At December 31, 1997, the Company has
the capacity to issue an additional 63,748 stock incentives under the 1990 plan.

         In 1994, shareholders approved a new incentive plan, the 1993 Directors
Incentive Plan (the 1993 plan) which authorizes the issuance of stock options to
members of the Board of Directors who are not employees of the Company.  Options
under the 1993 plan,  which are granted at fair  market  value at date of grant,
are granted as non-statutory  stock options.  Options granted become exercisable
to the extent of 50% one year from date of grant and the remaining 50% two years
from date of grant. Since the inception of the 1993 plan, the Company has issued
options to  purchase  114,750  shares of the  Company's  Common  Stock at prices
between $8.34 and $19.01 per share.  All options  issued are  outstanding  under
this plan at December 31, 1997 and are included in the table below.
         In 1997,  shareholders  approved a new incentive  stock plan,  the 1997
Incentive  Stock Plan (the 1997 Plan) to replace the 1990 Plan and the 1993 Plan
described  above.  The 1997 Plan permits a committee of the  Company's  Board of
Directors to grant incentive awards in the form of non-qualified  stock options,
incentive  stock  options,   stock  awards  including  restricted  stock,  stock
appreciation  rights and  performance  units to key employees  and  non-employee
directors.  The 1997 Plan authorizes the issuance of up to 750,000 shares of the
Company's Common Stock pursuant to the grant or exercise of stock options, stock
appreciation rights, restricted stock and performance units. Non-qualified stock
options  issued under this plan (105,000  shares in 1996 subject to  shareholder
approval,  which was received in 1997,  and 110,000 shares in 1997) were granted
at fair market value at date of grant. Options granted become exercisable over a
period of up to three years from date of grant with no option  exercisable prior
to one year  from  date of grant.  Other  than  these  noted  options,  no other
incentive  awards have been  granted  under this plan since its  inception.  All
options  issued  under this plan are  outstanding  at December  31, 1997 and are
included in the table below.

         Stock option transactions in 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                  --------------------------------------------------------------------------
                                                           1997                      1996                      1995
                                                  ----------------------    ----------------------     ---------------------
                                                                                                                  
                                                                Weighted                  Weighted                  Weighted      
                                                                Average                   Average                   Average       
                                                                Exercise                  Exercise                  Exercise
                                                   Shares        Price        Shares       Price         Shares      Price
                                                  -------       --------    ---------     --------     ---------    ---------
<S>                                              <C>             <C>         <C>             <C>        <C>            <C>         
Outstanding at beginning                                                                                     
   of year....................................    931,758        $12.15     1,148,025       $ 7.71     1,116,523      $ 7.23
   Granted....................................    110,000         24.65       413,250        16.18       190,502        9.65      
   Exercised..................................   (188,273)        11.14      (627,018)        6.69      (116,250)       5.75
   Expired....................................       (375)        16.09         -              -           -             -        
   Forfeited..................................    (42,750)        15.87        (2,499)        9.50       (42,750)       9.23
                                                  -------        ------     ---------       ------     ---------       ----- 
Outstanding at end of year....................    810,360        $13.89       931,758       $12.15     1,148,025      $ 7.71
                                                  -------        ------     ---------       ------     ---------      ------ 
                                                  -------        ------     ---------       ------     ---------      ------
Options exercisable at end of year.............   523,529        $10.93       474,509       $ 9.60       756,899      $ 7.09
Weighted average fair value of options 
  granted during the year..                       $  6.60                   $    3.81                  $    3.85
                       
</TABLE>

         The fair value of each option grant was  estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>

                                                 Year Ended December 31,
                                                 -----------------------                                                          
                                             1997           1996        1995
                                             ------         ------      ------ 
<S>                                          <C>            <C>         <C>                                                        
Risk free interest rate...................     6.10%          5.80%       7.70%
Dividend yield............................     0.70%          0.80%       0.40%                                                   
Expected lives............................   4 years        4 years     4 years
Volatility................................... 23.00%         22.00%       39.00%

</TABLE>


         The  following  table  summarizes   information   about  stock  options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>

                                                     Options Outstanding             Options  Exercisable
                                          --------------------------------------     --------------------                         
                                                          Weighted                             
                                                          Average       Weighted                Weighted
                                                         Remaining       Average                 Average  
                                                        Contractual     Exercise                Exercise
        Ranges of Exercis Prices          Shares           Life           Price      Shares       Price
        ------------------------         -------        -----------     --------     --------   -------- 
<S>                                      <C>            <C>             <C>          <C>        <C>     
                                                                                                                                  
              $1.75-3.84                  37,775          3.4 years     $   2.58      37,775    $   2.58                          
              8.34-12.92                 304,145          6.1 years         8.99     304,145        8.99                          
             15.26-24.875                468,440          8.3 years        17.98     181,609       15.92
                                         -------                                     -------                                      
             $1.75-24.875                810,360          7.3 years     $  13.89     523,529     $ 10.93
                                         -------                                     ------- 
                                         -------                                     ------- 

</TABLE>


         At December 31, 1997, the Company has four stock options  plans,  which
are described  above.  The Company  applied  Accounting  Principles  Board (APB)
Opinion  25  and  related   interpretations   in  accounting  for  these  plans.
Accordingly,  no compensation  costs have been  recognized for these plans.  Had
compensation costs for the Company's stock option plans been determined based on
the  fair  value at the  grant  date  for  options  granted  under  these  plans
consistent with the method of SFAS 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>
                                                           Year Ended December 31,
                                                   ---------------------------------------
                                                       1997         1996          1995
                                                   -----------   -----------   -----------
<S>                               <C>              <C>           <C>           <C>                                                
Net income                        As reported      $19,971,000   $19,004,000   $33,989,000
                                  Pro forma         19,460,000    18,581,000    33,651,000                                        
Basic earnings per share          As reported      $      1.65   $      1.41   $      2.39
                                  Pro forma               1.61          1.38          2.37                                        
Diluted earnings per share        As reported      $      1.62   $      1.39   $      2.34
                                  Pro forma               1.58          1.35          2.32
</TABLE>

         Under  provisions of SFAS 123, the above pro forma  disclosures are not
representative  of the effects on reported net income of options  issued  during
the financial  reporting  phase in period as options vest over a two year period
from date of  issuance  and have,  in some  instances,  been  issued on  several
occasions during each year.

         On February 15, 1991, the Company  declared a dividend  distribution of
one right ("Right") to purchase an additional 1.5 shares of the Company's Common
Stock for $50 on each 1.5 shares of Common Stock outstanding.  The Rights become
exercisable  10 days after a person or group  acquires,  or tenders  for, 20% or
more of the Company's Common Stock. The Company is entitled to redeem the Rights
at $.01 per  Right at any time  until 10 days  after  any  person  or group  has
acquired 20% of the Common Shares.  If a person or group acquires 20% or more of
the Company's Common Stock (other than
pursuant to an acquisition from the Company or pursuant to a tender offer deemed
fair by the Board of Directors),  then each Right, other than Rights held by the
acquiring  person or group,  entitles the holder to purchase for $50 that number
of shares of the Company's  Common Stock having a current  market value of $100.
If a person or group  acquires  20% or more of the  Company's  Common  Stock and
prior to the  person  or group  acquiring  50% of such  outstanding  stock,  the
Company may convert each  outstanding  Right,  other than the Rights held by the
acquiring person or group, into 1.5 new shares of the Company's Common Stock. If
a person or group  acquiring more than 20% of the Company's  Common Stock merges
with the Company or engages in certain other transactions with the Company, each
Right,  other than Rights held by the  acquiring  person or group,  entitles the
holder  to  purchase  shares of common  stock of the  acquiring  person or group
having a current  market value of $100 for $50. The Rights  attach to all of the
Company's  Common Stock  outstanding  as of February 15, 1991,  or  subsequently
issued,  and have a term of 10 years.  The Rights  also  expire upon a merger or
acquisition of the Company undertaken with the consent of the Company's Board of
Directors.

9.  Retirement, Pension and Postretirement Health Plans:

         The Company  sponsors several defined benefit pension plans which cover
certain union and office  employees.  Benefits  under these plans  generally are
based on the  employee's  years of  service  and  compensation  during the years
immediately  preceding  retirement.  The Company's  general funding policy is to
contribute amounts deductible for Federal income tax purposes.

         Net periodic pension costs as they relate to defined benefit plans were
as follows:
<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                      ------------------------------------------------
                                          1997             1996              1995
                                      -----------       -----------        -----------
<S>                                   <C>               <C>                <C>    
                                                                      
Service cost........................  $   758,000       $   658,000        $   673,000
Interest cost.......................    2,717,000         2,438,000          2,284,000
Actual loss (gain) on plan assets...   (7,320,000)       (2,787,000)        (7,989,000)
Net amortization and deferral.......    4,170,000           316,000          6,038,000
Curtailment expense (income)........      210,000            -                 (64,000)
                                      -----------       -----------        ----------- 
Net periodic pension cost...........  $   535,000       $   625,000        $   942,000
                                      -----------       -----------        ----------- 
                                      -----------       -----------        ----------- 

</TABLE>


         Although  the  actual  return on plan  assets is  shown,  the  expected
long-term  rate of return used in determining  the net periodic  pension cost in
all years was 7.5%.  The  difference  between the actual return and the expected
return is included in the "Net  amortization  and  deferral" in the above table.
The actuarial  present value of benefits was determined using a discount rate of
7.5% in 1997,  7.75% in 1996 and 7% in 1995. The rate of  compensation  increase
used to measure  the  projected  benefit  obligation  in three plans was 5%. All
other  plans are  based on  current  compensation  levels.  Curtailment  expense
(income) was related to the retirement of certain Corporate executives.

         The  following  table  sets forth the  funded  status of the  Company's
defined benefit pension plans:

<TABLE>
<CAPTION>

                                                         December 31,
                                          --------------------------------------------------------
                                                     1997                        1996
                                          -------------------------    ---------------------------                                
                                             Assets     Accumulated       Assets       Accumulated
                                             Exceed      Benefits         Exceed        Benefits
                                          Accumulated     Exceed       Accumulated       Exceed
                                            Benefits      Assets         Benefits        Assets
                                          -----------   -----------    -----------    ------------                                
<S>                                       <C>           <C>            <C>            <C>                                         
Plan assets at fair value..............   $46,162,000   $    -         $41,270,000    $      -
                                          -----------   -----------    -----------    ------------ 
Actuarial present value  of benefit 
  obligations:                                                                                            
   Vested benefits....................    $32,214,000   $ 1,815,000    $28,981,000    $    843,000
   Nonvested benefits.................      1,813,000        -           1,456,000          -
                                          -----------   -----------    -----------    ------------ 
Accumulated benefit obligation........    $34,027,000   $ 1,815,000    $30,437,000    $    843,000
Effect of projected future 
  compensation increases..............      2,380,000       385,000      1,750,000         382,000
                                          -----------   -----------    -----------    ------------ 
Projected benefit obligation..........    $36,407,000   $ 2,200,000    $32,187,000    $  1,225,000
                                          -----------   -----------    -----------    ------------ 
Plan assets in excess of (less than)
  projected benefit obligation........     $9,755,000   $(2,200,000)    $9,083,000    $ (1,225,000)
Unrecorded net (gain) loss from past 
  experience different from that 
  assumed and effect of changes in 
  assumptions........................     (13,305,000)      111,000    (10,913,000)       (115,000)
Unrecorded prior service cost........       1,583,000       564,000        226,000         407,000
Unrecognized net (asset) at date 
  of initial application.............        (954,000)        -         (1,427,000)          -
Adjustment for minimum liability.....          -           (290,000)        -                -
                                          -----------    ----------    -----------    ------------                                
(Accrued) pension costs..............     $(2,921,000)  $(1,815,000)   $(3,031,000)   $   (933,000)
                                          -----------   -----------    -----------    ------------ 
                                          -----------   -----------    -----------    ------------ 
</TABLE>



         The plans'  assets  include  common  stocks,  fixed income  securities,
short-term  investments and cash. Common stock investments include approximately
246,000 shares of the Company's Common Stock at December 31, 1997 and 1996.

         The  Company  also has a defined  contribution  retirement  plan  which
covers certain employees.  There are no prior service costs associated with this
plan. The Company follows the policy of funding retirement  contributions  under
this plan as accrued. Contributions to this plan were $222,000 in 1997, $217,000
in 1996 and $206,000 in 1995.

         The Company  employees are also eligible to become  participants in the
Save Money and Reduce Taxes (SMART) plan.  Under terms of the plan,  the trustee
is directed by each employee on how to invest the employee's deposit. Investment
alternatives  include a money market fund,  four mutual funds and a fixed income
fund.  As of  December  31,  1997 and 1996,  assets of the  SMART  plan  include
approximately 511,000 and 724,000 shares, respectively,  of the Company's Common
Stock.

         Effective  January 1, 1995,  the Company  instituted a  noncontributory
defined  contribution  retirement  plan called the Target  Benefit Plan. All non
union employees not covered by pension plans are covered under the Target
Benefit Plan.  Under the terms of the Target Benefit Plan, the Company will make
an  actuarially   determined  annual   contribution  based  upon  each  eligible
employee's  years of  service  and  earnings  as  defined.  Employee  investment
alternatives  include a money market fund,  four mutual funds and a fixed income
fund.  Employees become vested in the Company  contribution  after five years of
service.  Provisions for the  contribution  to this plan in 1997,  1996 and 1995
were $664,000, $773,000 and $932,000, respectively.

         The Company provides medical benefits for retirees and their spouses at
one  operating  division  and  certain  other  individuals  related  to  several
discontinued operations. Accruals for such costs are recognized in the financial
statements over the service lives of these employees. Contributions are required
of most retirees for medical coverage.  The current obligation was determined by
application of the terms of the related medical plans,  including the effects of
established  maximums  on  covered  costs,   together  with  relevant  actuarial
assumptions and  health-care  cost trend rates projected at annual rates ranging
ratably from 7.8% for retirees under age 65 (7.2% for retirees age 65 and older)
in 1998 to 5.5% over 25 years.  The  effect  of a 1%  annual  increase  in these
assumed cost trend rates would increase the accumulated  postretirement  benefit
obligation  by  approximately  $68,000.  The annual  service  costs would not be
materially affected.

         The following table provides information on the status of these plans:

<TABLE>
<CAPTION>

                                                              December 31,
                                                    --------------------------
                                                        1997           1996
                                                    -----------    -----------
<S>                                                 <C>            <C>    
                  
Accumulated postretirement benefit obligation:
                                                                                                                    
   Retirees and their dependents..................  $  (196,000)   $  (265,000)
   Fully eligible active plan participants........      (59,000)       (55,000)
   Active employees not fully eligible............     (544,000)      (447,000)
                                                    -----------    -----------                                                    
Accumulated postretirement benefit obligation.....  $  (799,000)   $  (767,000)
Plan assets.......................................       -             -
Unrecognized prior service costs..................       11,000         12,000
Unamortized net (gain) loss.......................     (241,000)      (274,000)
                                                    -----------    -----------                                                    
(Accrued) postretirement benefit costs............  $(1,029,000)   $(1,029,000)
                                                    -----------    ----------- 
                                                    -----------    ----------- 

</TABLE>


         Net periodic postretirement benefit costs include the following:
<TABLE>
<CAPTION>

                                                             Year Ended December 31,
                                                         -------------------------------
                                                          1997        1996        1995
                                                         -------     -------     -------
<S>                                                      <C>         <C>         <C>    
                                                                                                                                  
Service cost...........................................  $50,000     $37,000     $33,000                                          
Interest cost..........................................   56,000      40,000      56,000                                          
Amortization of unrecognized net (gain)................  (11,000)     (3,000)    (18,000)
Amortization of prior plan amendment...................    1,000       1,000       1,000
                                                         -------     -------     ------- 
Net periodic postretirement benefit cost...............  $96,000     $75,000     $72,000
                                                         -------     -------     ------- 
                                                         -------     -------     ------- 
</TABLE>



         Measurement of the accumulated  postretirement  benefit  obligation was
based on a discount rate of 7.5% in 1997, 7.75% in 1996 and 7.0% in 1995.

         During 1995, the Company made  provisions  totaling  $1,543,000 for the
termination/retirement of certain individuals.

10.  Environmental, Legal and Contingent Liabilities:



 Environmental Matters-

         The  Company's   manufacturing   plants  generate  both  hazardous  and
nonhazardous  wastes,  the treatment,  storage,  transportation  and disposal of
which are subject to federal, state and local laws and regulations.  The Company
believes that its  manufacturing  plants are in substantial  compliance with the
various federal,  state and local laws and regulations,  and does not anticipate
any material expenditures to remain in compliance.

         Under  the  Comprehensive   Environmental   Response  Compensation  and
Liability  Act of 1980,  as amended  (CERCLA),  and other  statutes,  the United
States  Environmental  Protection Agency (EPA) and the states have the authority
to impose liability on waste generators,  site owners and operators,  and others
regardless  of  fault  or  the  legality  of  the  original  disposal  activity.
Accordingly,  the  Company  has been named as a  potentially  responsible  party
(PRP), or may otherwise face potential  liability for environmental  remediation
or cleanup,  in connection  with the sites  described  below that are in various
stages of investigation or remediation.

         At one site,  the Company is one of seven PRP's because of its apparent
absentee ownership of four parcels of land from 1967 to 1969 which may have held
part or all of one or more settling  ponds  operated by a tenant  business.  The
Company has already paid  $85,000 as its share of a settlement  of an EPA demand
for $415,000 in past  response  costs,  and the EPA has sought  payment from the
PRP's of an  additional  $572,000  in  response  costs.  The EPA has ordered the
Company  and one other PRP to  undertake  the  design  and  construction  of the
remediation  project.  All  PRP's  have  agreed  to  undertake  the  design  and
construction of the remediation  project  pursuant to a financial  participation
agreement.  The EPA  estimates  the present  value of the cost to implement  its
selected cleanup method to be approximately $1,869,000.  The Company has accrued
its  estimated  share of the  remaining  cleanup  cost  which is not  considered
significant. The Company has also filed a claim against its insurers.

         Pursuant to a consent  decree  entered  into in November  1991 with the
U.S. Department of Justice,  the Company closed and remediated a landfill leased
by the Company and formerly used for the disposal of spent foundry sands. During
1995, remedial action required by the consent decree was completed,  and the EPA
approved the Remedial  Action  Report  submitted by the Company.  The  Company's
remaining  obligations  under the consent decree include  periodic  inspections,
monitoring and maintenance as needed.

         The Company has also been named as a PRP, along with numerous  parties,
at  various  hazardous  waste  sites  undergoing  cleanup or  investigation  for
cleanup.  The  Company  believes  that at  each  of  these  sites,  it has  been
improperly named or will be considered to be a "de minimis" party.

         The Company is a  defendant  in an action  where a private  party seeks
recovery of costs  associated with an  environmental  cleanup at a site formerly
owned by the Company. At this site, which the Company or one of its subsidiaries
owned from 1968 until 1976,  the plaintiff and current owner seeks to recover in
excess of $4,000,000, including attorney fees, from the
Company and other  defendants.  The Company has denied  liability and asserted a
counter-claim against plaintiff and cross-claims against the co-defendants.  The
Company has also filed claims against its insurers.

         The Company is in the process of  investigating  or has  determined the
need to perform  environmental  remediation or clean up at certain manufacturing
sites formerly  operated and still owned by the Company.  At the sites where the
Company has determined that some remediation or cleanup is required, the Company
has provided for the estimated cost for such remediation or cleanup.

         One site,  located in Coldwater,  Ohio, is under contract to be sold to
the purchaser of the  White-New  Idea  business.  That sale is contingent on the
issuance of a covenant not to sue and related no further  action  letters by the
State of Ohio under the Ohio Voluntary Action Program. The Company has completed
all necessary  investigation  and  remediation,  and has expended  approximately
$1,300,000  in this  effort.  The final report and request for a covenant not to
sue is currently under review by The Ohio  Environmental  Protection  Agency. In
addition,  the Company has entered  into a series of  agreements  for  financial
contribution  with  both the  prior  owner  and the  contract  purchaser  of the
facility, and has recovered approximately 50% of the $1,300,000 spent.

         During 1997, 1996 and 1995, the Company recorded  provisions  (credits)
of approximately  $(1,181,000),  $(418,000) and $921,000,  respectively,  toward
various environmental matters discussed above. At December 31, 1997, the Company
has accruals,  including those discussed  above, of $1,810,000 for the estimated
cost to  resolve  its  potential  liability  with  the  above  and  other,  less
significant,  matters.  Additional  liabilities  are  possible  and the ultimate
outcome of these matters may have an effect on the financial position or results
of operations in a future period.  However,  the Company believes that the above
accruals are adequate for the resolution of known environmental  matters and the
outcome of these  matters is not expected to have a material  adverse  effect on
the Company's financial position or its ongoing results of operations.

 Other-

         During  1994,  the Company  learned  the United  States  Department  of
Justice was  investigating  possible improper payments made in connection with a
foreign sale by the  Company's  former  Cooper  division in mid-1993.  In August
1993,  the Company  announced  that it had  uncovered a diversion of funds to an
account opened by a former employee of the Cooper division in Brady,  Texas, and
possible  improper  diversion of funds that might  constitute  violations of the
Foreign Corrupt Practices Act. At that time, the Company  voluntarily turned its
findings over to the Department of Justice.  The Company  continues to cooperate
fully with the Department of Justice.

         In  connection  with the sale of the business and assets of the Littell
division in 1991,  the Company  entered into a "License  Agreement"  pursuant to
which the Company  licensed  certain  technology  to the purchaser for which the
purchaser agreed to pay royalties totaling $8,063,000 plus interest,  in minimum
quarterly  installments  of $312,500  commencing in November 1992,  with a final
lump sum payment of  approximately  $7,300,000 due May 22, 1996. The purchaser's
payment  obligation was secured by the technology  license and was guaranteed by
the  purchaser's  parent.  The Company  initially  recorded this  agreement as a
long-term note receivable.  In 1995, however,  the Company established a reserve
of  $7,699,000  (reduced  to  $7,165,000  at  December  31,  1996)  against  the
receivable,  due to published adverse financial  information about the purchaser
and its parent which raised serious concerns about the
collectability  of the  receivable.  During  1997,  the Company  entered  into a
settlement agreement with the purchaser of the business.  Under the terms of the
agreement,  the  purchaser  agreed  to pay the  Company  $3,000,000  ($2,390,000
collected   through   the  end  of  1997)   and  all   parties   agreed  to  the
dismissal/release of certain actions, claims and security

             
              

interests. Remaining amounts due under this agreement ($610,000) at December 31,
1997 and the  related  reserve are  classified  as "Other  Assets-Other"  in the
accompanying balance sheet.

         The Company is involved  in a number of other  legal  proceedings  as a
defending  party,  including  product  liability  claims  for  which  additional
liability is reasonably  possible.  It is the  Company's  policy to reserve on a
non-discounted  basis for all known product  liability  claims,  with  necessary
reserves ($2,600,000 and $3,168,000 at December 31, 1997 and 1996, respectively)
determined  in  consultation  with  independent  insurance  companies  and legal
counsel.  Payment of these  claims may take place over the next  several  years.
Additional  liabilities  are possible and the ultimate  outcome of these matters
may have an effect on the  financial  position  or  results of  operations  in a
future  period.   However,  after  consideration  of  relevant  data,  including
insurance coverage and accruals,  management  believes that the eventual outcome
of these  matters  will not have a  material  adverse  effect  on the  Company's
financial position or its ongoing results of operations.

         At  December  31,  1997,  the  Company  was  contingently   liable  for
approximately $1,369,000 primarily relating to outstanding letters of credit.


         The Company has entered into agreements with certain executive officers
of the Company which provide that, if within one year following a defined change
in ownership or control of the Company there shall be an involuntary termination
of such  executive's  employment,  or if there  shall  be  defined  patterns  of
activity  during such period by the Company  causing  such  executive to resign,
then,  subject to prevailing tax laws and  regulations,  the executive  shall be
entitled to payments of up to approximately three years' compensation.

11.  Operations by Industry Segment:

         The Company's operations involve a single industry segment as described
in Note 1.

         Approximately  6%, 16% and 11% of the Company's net sales in 1997, 1996
and 1995, respectively, were exported principally to Canada and Mexico.

         Approximately 31%, 39% and 29% of the Company's net sales in 1997, 1996
and 1995, respectively, were derived from sales to the three major U.S.
automobile manufacturers.

12.  Summary of Other (Income) Expense:

         Other (income) expense consists of the following:
<TABLE>
<CAPTION>

                                                                                       Year Ended December 31,
                                                                          ---------------------------------------------
                                                                              1997             1996             1995
                                                                          -----------      -----------      -----------
<S>                                                                       <C>              <C>              <C>     
                                                                                                                                  
Interest income........................................................   $  (127,000)     $  (112,000)     $  (437,000)
Goodwill amortization..................................................       177,000          177,000        2,068,000
Loan cost expenses/amortization........................................        -               333,000          440,000           
Environmental related expenses (credits)...............................    (1,181,000)        (418,000)       1,110,000
Net gain on sales of operating and non-operating assets................    (1,662,000)        (106,000)      (2,000,000)
Provision (credit) for collectability (recovery) of long-term 
  note receivable (Note 10)............................................    (2,390,000)        (534,000)       7,699,000           
Idle facility income...................................................      (368,000)        (147,000)         (30,000)
Litigation settlements/insurance provisions............................     2,125,000        1,512,000       (1,125,000)
Other miscellaneous....................................................       315,000          (74,000)        (242,000)
                                                                          -----------      -----------      ----------- 
                                                                          $(3,111,000)     $   631,000      $ 7,483,000
                                                                          -----------      -----------      ----------- 
                                                                          -----------      -----------      ----------- 

</TABLE>


13.  Quarterly Financial Data (unaudited):

         Summarized  quarterly  financial  data for 1997 and 1996 are as follows
(in thousands of dollars, except per share data):

<TABLE>
<CAPTION>

                                                                             Quarter Ending                            
                                                       ----------------------------------------------------
                                                       March 31    June 30     September 30     December 31
                                                       --------    -------     ------------     ----------- 
<S>                                                    <C>         <C>         <C>              <C>                               
1997                                                                                      
   Net sales........................................   $72,881     $76,902        $63,714         $57,065                         
   Gross profit.....................................    17,655      19,579         16,199          12,375
   Income before extraordinary items and 
    cumulative effect of change in accounting.......     5,171       6,206          5,013           3,581
   Earnings per common share before
    extraordinary items and cumulative
    effect of change in accounting (a)..............       .42         .51             .42            .30
   Net income.......................................     5,171       6,206           5,013          3,581
   Net income per common share-basic (a)............       .42         .51             .42            .30

1996                                                                                      
   Net sales........................................   $75,243     $69,198         $72,273        $57,700                         
   Gross profit.....................................    16,896      17,806          16,122         14,472
   Income before extraordinary items and 
    cumulative effect of change in accounting.......     5,118       5,542           4,806          3,538
   Earnings per common share before
      extraordinary items and cumulative
      effect of change in accounting (a)............       .37         .41             .36            .27
   Net income.......................................     5,118       5,542           4,806          3,538
   Net income per common share-basic (a)............       .37         .41             .36            .27
</TABLE>

(a)  Restated to reflect the effect of a three-for-two stock split in 1997.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE
   None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         See the Company's Proxy Statement  incorporated by reference as part of
this Part III,  under the  caption  "Proposal  1:  Election  of  Directors"  for
information  with respect to the  directors.  In addition,  see the  information
under the caption "Executive  Officers of the Company" as part of Part I, Item 1
of this Report which is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

         See the Company's Proxy Statement  incorporated by reference as part of
Part III, Item 10 of this report, under the captions  "Management  Compensation"
for information with respect to executive compensation.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         (a)  Security Ownership of Certain Beneficial Owners.

         See the Company's Proxy Statement  incorporated by reference as part of
Part III,  Item 10 of this  report,  under the captions  "Outstanding  Stock and
Voting Rights",  "Beneficial Owners" and "Principal  Stockholders and Management
Ownership" for information  with respect to the ownership of certain  beneficial
owners of Common Stock of the Company.

         (b)  Security Ownership of Management.

         See the Company's Proxy Statement  incorporated by reference as part of
Part III, Item 10 of this report, under the caption "Principal  Stockholders and
Management  Ownership" for information with respect to the beneficial  ownership
by management of Common Stock of the Company.

         (c)  Changes in Control.

         There is no  arrangement  known to the Company,  the operation of which
may at a subsequent date result in a change in control of the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         See the Company's Proxy Statement  incorporated by reference as part of
Part III,  Item 10 of this report,  under the captions  "Proposal 1: Election of
Directors" and "Management Compensation" for information with respect to certain
relationships and related transactions with management.

                                     PART IV

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



(a) 1.  Financial Statements

    Included in Part II of this report:

        Report of Independent Accountants
        Consolidated statements of income for the years ended December 31,
          1997, 1996 and 1995
        Consolidated balance sheets as of December 31, 1997 and 1996
        Consolidated statements of cash flows for the years ended
          December 31, 1997, 1996 and 1995
        Consolidated statements of shareholders' investment for the years
          ended December 31, 1997, 1996 and 1995
        Notes to consolidated financial statements

(a) 2. Financial Statement Schedules 
    Included in Part IV of this report:

        Schedule II-Valuation and qualifying accounts for the years ended
          December 31, 1997, 1996 and 1995

(a) 3.  Exhibits
    The following exhibits are incorporated by reference as noted below:

     3(a)   The Registrant's Restated Certificate of Incorporation,  as amended,
            is  incorporated  by  reference to Exhibit 3 of the  Company's  1988
            Annual Report on Form 10-K (File No. 1-5530).
     3(b)   The Registrant's Amendments to Restated Certificate of Incorporation
            is  incorporated  by  reference to Exhibit 3 of the  Company's  1990
            Annual Report on Form 10-K (File No. 1-5530).
     3(c)   The   Registrant's   By-Laws  of  the  Company,   as  amended,   are
            incorporated  by reference to Exhibit 3 of the Company's 1989 Annual
            Report on Form 10-K (File No. 1-5530).
     10(a)  The  Registrant's  1977  Incentive  Stock  Plan is  incorporated  by
            reference to Exhibit  10(a) of the  Company's  1980 Annual Report on
            Form 10-K (File No. 1-5530).
     10(b)  The Registrant's  SMART Plan is incorporated by reference to Exhibit
            10(d) of the  Company's  1984  Annual  Report on Form 10-K (File No.
            1-5530).
     10(c)  The Registrant's 1990 Long-Term Incentive Stock Plan is incorporated
            by reference to Exhibit 10 of the  Company's  1991 Annual  Report on
            Form 10-K (File No. 1-5530).
     10(d)  The  Registrant's  Agreement  for  the  sale  of the  assets  of the
            White-New   Idea  Farm   Equipment   Division  of  Allied   Products
            Corporation is incorporated by reference to  Exhibit(c)(2)(a)(i)  of
            the Company's report on Form 8-K dated January 14, 1994 (File
            No. 1-5530).
     10(e)  The Registrant's Allied Products  Corporation  Executive  Retirement
            Plan dated April 4, 1994 is  incorporated  by  reference  to Exhibit
            10(a) of the  Company's  1994  Annual  Report on Form 10-K (File No.
            1-5530).
     10(f)  The Registrant's Executive Officer's Agreement in Event of Change in
            Control or Ownership of Allied Products  Corporation  dated April 1,
            1994 is  incorporated by reference to Exhibit 10(b) of the Company's
            1994 Annual Report on Form 10-K (File No. 1-5530).
     10(g)  The Registrant's Allied Products  Corporation  Retirement Plan dated
            as of December  31, 1993 is  incorporated  by  reference  to Exhibit
            10(d) of the  Company's  1994  Annual  Report on Form 10-K (File No.
            1-5530).
     10(h)  The Registrant's Bush Hog Segment of the Allied Products Corporation
            Combined Retirement Plan effective December 31, 1993 is incorporated
            by reference to Exhibit 10(e) of the Company's 1994 Annual Report on
            Form 10-K (File No. 1-5530).
     10(i)  The Registrant's  Verson Segment of the Allied Products  Corporation
            Combined Retirement Plan effective December 31, 1993 is incorporated
            by reference to Exhibit 10(f) of the Company's 1994 Annual Report on
            Form 10-K (File No. 1-5530).
     10(j)  The Registrant's  Littell Segment of the Allied Products Corporation
            Combined Retirement Plan effective December 31, 1993 is incorporated
            by reference to Exhibit 10(g) of the Company's 1994 Annual Report on
            Form 10-K (File No. 1-5530).
     10(k)  The  Registrant's  Amended and Restated Credit Agreement dated as of
            August 23, 1996 among Allied Products  Corporation,  the banks named
            herein and Bank of America  Illinois,  individually  and as Agent is
            incorporated  by  reference  to Exhibit  10A of the  Company's  1996
            Annual Report on Form 10-K (File No. 1-5530).
     10(l)  The Registrant's  Consent to Stock  Repurchases dated as of November
            27,  1996  is  incorporated  by  reference  to  Exhibit  10B  of the
            Company's 1996 Annual Report on Form 10-K (File No. 1-5530).
     10(m)  The  Registrant's  1997  Incentive  Stock  Plan is  incorporated  by
            reference  to Exhibit 10 of the  Company's  June 30, 1997  Quarterly
            Report on Form 10-Q (File No. 1-5530).


         The  following  exhibits are attached only to the copies of this report
filed with the Securities and Exchange Commission:


     Exhibit No.     Name of Exhibit     
     -----------     --------------- 
        10A          Material Contract-Amendment No. 2 to Credit Agreement.
        21           Subsidiaries of the Registrant.
        23           Consent of Independent Accountants.
        24           Power of Attorney.
        27           Financial Data Schedule.

         Other financial  statements,  schedules and exhibits not included above
have been  omitted  as  inapplicable  or because  the  required  information  is
included in the consolidated financial statements or notes thereto.

(b)      Reports on Form 8-K

         On October 29,  1997,  the Company  filed a report  under Item  5-Other
Events.  This report was filed in connection  with the completion of the sale of
the Coz division. No financial statements were filed with this report.

ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                                              Year Ended December 31,
                                                   ---------------------------------------------
                                                      1997              1996             1995
                                                   -----------      -----------      -----------
<S>                                                <C>              <C>              <C>     
                                                           
Allowance for doubtful accounts-
  Current receivables:                                                                                                            
      Balance at beginning of year...............  $   629,000      $   948,000      $ 1,521,000
      Add (deduct)-
        Provision charged to income..............      114,000          214,000          451,000
        Receivables charged off as bad debts,                                                                         
         net of recoveries.......................     (212,000)        (533,000)      (1,024,000)
                                                   -----------      -----------      -----------  
      Balance at end of year.....................  $   531,000      $   629,000      $   948,000
                                                   -----------      -----------      ----------- 
                                                   -----------      -----------      ----------- 
  Long-term receivables:                                                                                                  
      Balance at beginning of year...............  $ 7,165,000      $ 7,699,000      $    -
      Add (deduct)-
        Provision charged to income..............       -                -             7,699,000
        Receivables charged off as bad debts,                                                     
         net of recoveries.......................   (6,555,000)        (534,000)          -
                                                  ------------      -----------      -----------                                  
      Balance at end of year..................... $    610,000      $ 7,165,000      $ 7,699,000
                                                  ------------      -----------      ----------- 
                                                  ------------      -----------      ----------- 

</TABLE>




                                   SIGNATURES

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

                           ALLIED PRODUCTS CORPORATION
                           (Registrant)

March 25, 1998                          By:        /s/ RICHARD A. DREXLER
                                        ---------------------------------    
                                            Richard A. Drexler, Chairman,
                                         President and Chief Executive,Officer



       Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this report has been signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<S>                       <C>       <C>    

                          *                         /s/ [RICHARD A. DREXLER]
                                    -------------------------------------------
                                    Richard A. Drexler, Chairman, President and
                                          Chief Executive Officer; Director

March 25, 1998            *                          /s/ [ROBERT J. FLECK]
                                    -------------------------------------------           
                                    Robert J. Fleck, Vice President-Accounting,
                                    Chief Accounting and Administrative Officer

                          *                        /s/ [LLOYD DREXLER]
                                    -------------------------------------------            
                                                  Lloyd Drexler,
                                                    Director
                                                                                            
                                    -------------------------------------------
                                               William D. Fischer,
                                                   Director

                          *                        /s/ [STANLEY J. GOLDRING]
                                    -------------------------------------------
                                               Stanley J. Goldring,
                                                   Director
                                     
                          *                        /s/ [JOHN E. JONES]
                                    -------------------------------------------
                                                  John E. Jones,
                                                    Director

                          *                        /s/ [JOHN W. PUTH]
                                    -------------------------------------------
                                                      John W. Puth,
                                                        Director

                          *                        /s/ [MITCHELL I. QUAIN]
                                    -------------------------------------------
                                                       Mitchell I. Quain,
                                                           Director

                          *                        /s/ [S. S. SHERMAN]
                                    -------------------------------------------
                                                       S. S. Sherman,
                                                          Director

                          *         By:            /s/ [MARK C. STANDEFER]
                                    -------------------------------------------
                                                       Mark C. Standefer,
                                                         Attorney-in-fact



</TABLE>