UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-K
                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For the fiscal year ended                          Commission file number: 1-448
December 31, 1997

                                  MESTEK, INC.

             (Exact name of registrant as specified in its charter)


         Pennsylvania                                             25-0661650
(State or other jurisdiction of                                 (I.R.S Employer
incorporation or organization)                              (Identification No.)


                              260 North Elm Street
                         Westfield, Massachusetts 01085
                    (Address of principal executive offices)

Registrant's telephone number, including area code:  413-568-9571

Securities registered pursuant to Section 12(b) of the Act:


                                                          Name of each exchange
      Title of each class                                   on which registered
  Common Stock, no par value                            New York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.  YES   X         NO ___

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of 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. / /

The aggregate  market value of voting common shares held by nonaffiliates of the
registrant  as of  March  20,  1998,  based  upon  the  closing  price  for  the
registrant's common stock as reported in The Wall Street Journal as of such date
was $63,224,878.

The number of shares of the registrant's  common stock issued and outstanding as
of March 20,1998 was 8,926,305.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy  statement  relating to the annual meeting of shareholders
of the registrant to be held on May 12, 1998 are  incorporated by reference into
Part III hereof and the exhibits to filings referenced on Pages 43 through 45 of
Part IV hereof are incorporated by reference into Part IV hereof.




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                                     PART I


Item 1 - BUSINESS


GENERAL

         Mestek, Inc. ("Mestek" or the "Company") was incorporated in the
Commonwealth of Pennsylvania in 1898 as Mesta Machine Company.  It changed its
name to Mestek, Inc. in October, 1984, and merged with Reed National Corp. on
July 31, 1986.

         In April of 1993, the Company purchased a 46.8% interest in Eafco, Inc.
Eafco  produces  cast iron boiler  sections for the boiler  industry,  including
Mestek's boiler  subsidiaries.  The Company accounts for its investment in Eafco
under the equity method.

         On  August  17,   1993,   the  Company  sold  a  70%  interest  in  its
Environmental Engineering Segment, Chester Environmental,  Inc., ("Chester"), to
Duquesne  Enterprises,  Inc.,  a  Pennsylvania  corporation,   headquartered  in
Pittsburgh,  Pennsylvania.  The  Company  accounted  for this  transaction  as a
Disposal of a Discontinued Segment. The Company sold its remaining 30% interest
on August 31, 1995.

         On November 1, 1994, pursuant to a motion approved by the United States
Bankruptcy  Court  for  the  District  of  New  Mexico,   the  Company  acquired
substantially all of the inventory,  accounts receivable, and fixed tangible and
intangible  assets of Aztec Sensible  Cooling,  Inc.  (Aztec) a manufacturer  of
evaporative cooling and other custom air handling equipment in Albuquerque,  New
Mexico.  The  purchase  price  for the  assets  acquired,  was  $1,372,000.  The
operations of Aztec were  relocated to the Company's  Dallas,  Texas facility in
February 0f 1995.

         On October 30,  1995,  the Company  executed  an  agreement  to acquire
approximately  eighty-three  (83%) of the issued and  outstanding  voting common
stock  of  National  Northeast   Corporation  and  National  Southeast  Aluminum
Corporation  ("National").  National  operates  custom  aluminum  extrusion  and
fabrication  facilities  located in Lawrence,  Massachusetts  and Winter  Haven,
Florida.  The  transaction  was  accounted  for  under  the  purchase  method of
accounting as of October 30, 1995 and, accordingly, the company has included the
results of this acquired  business in its  consolidated  statement of operations
from this date.  The  transaction  was completed on January 2, 1996. The Company
itself is a user of aluminum  extrusions in its HVAC segment.  The consideration
paid for the  purchase  was $9.96  million  in cash plus  future  considerations
contingent  upon future levels of earnings.  In January of 1997 the Company paid
$4,028,000 to settle the contingent purchase price obligation. Since the date of
acquisition,  the Company,  through  National,  has purchased  additional common
shares  from its  minority  shareholders  raising  the  Company's  ownership  of
National to approximately 88% as of December 31, 1997.

         On November 15, 1995,  the Company  acquired  substantially  all of the
accounts receivable,  inventory, fixed and intangible assets of Heat Exchangers,
Inc., a  manufacturer  of temporary and portable air  conditioning  equipment in
Skokie,  Illinois.  The purchase price paid, including the assumption of certain
liabilities,  was  $6,764,000.  The  acquisition was accounted for as a purchase
and, accordingly, the Company has included the results of this acquired business
in its consolidated statement of operations since the date of the acquisition.

         On  February  2,  1996,  the  Company  acquired  all of the  issued and
outstanding  common stock of Omega Flex,  Inc. of Exton,  Pennsylvania  (Omega).
Omega is a manufacturer  of flexible  metal hose and related hose  fabrications.
The  purchase  price paid for the  acquired  stock was  $9,119,000.  Liabilities
assumed were $833,000.  The Company has accounted for this acquisition under the
purchase  method of accounting.  Omega has leased its  manufacturing  and office
facilities through December 31, 2001, for $268,000 per year.

         On February 5, 1996, the Company acquired certain assets of the press
feeding and cut-to-length line businesses of Rowe Machinery & Automation, Inc.
of Dallas, Texas (Rowe).  Rowe is a leading manufacturer of press feeding and
cut-to-length line equipment serving the appliance, office furniture,

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automotive,  and many other  markets.  The purchase  price paid was  $5,495,000,
including the assumed  liabilities of $1,900,000.  The Company has accounted for
this acquisition under the purchase method of accounting. The Company leased the
Rowe  facility in Dallas,  including  machinery and  equipment,  on a short term
basis through April of 1997.

         On August 30,  1996,  the  Company  acquired  substantially  all of the
operating  assets of Dahlstrom  Industries,  Inc.  (Dahlstrom) of Schiller Park,
Illinois.  Dahlstrom is a leading manufacturer of roll-forming equipment for the
metal  fabrication  industry.  The purchase price paid was $4,288,000  including
assumed   liabilities  of  $2,606,000.   The  Company  has  accounted  for  this
acquisition under the purchase method of accounting.

          On January 31,  1997,  the Company  acquired  91.01% of the issued and
outstanding  common  stock of Hill  Engineering,  Inc.  (Hill)  of  Villa  Park,
Illinois and Danville,  Kentucky.  Hill is a leading producer of precision tools
and dies for the gasket  manufacturing  and  roll-forming  industries  and other
specialty  equipment.  The  purchase  price  paid  for the  acquired  stock  was
$5,141,000.  The Company has accounted for this  acquisition  under the purchase
method of accounting.

          On  November  3, 1997 the  Company  acquired  100% of the  issued  and
outstanding   common  stock  of  Coilmate,   Inc.   (Coilmate)  of  Southington,
Connecticut.  Coilmate is the leading producer of pallet decoiling equipment for
the metal  stamping and roll  forming  industries.  The purchase  price paid was
$3,521,000.  The Company has accounted for this  acquisition  under the purchase
method of accounting.

         The  Company's  executive  offices are located at 260 North Elm Street,
Westfield, Massachusetts 01085. The Company's phone number is 413-568-9571.


OPERATIONS OF THE COMPANY

         The Company operates in three continuing  business  segments:  Heating,
Ventilating,  and Air Conditioning  Equipment ("HVAC")  manufacturing;  Computer
Software  Development  and Systems  Design;  and Metal  Products.  Each of these
segments is described below.

         Prior to 1994 the Company operated in a fourth segment, Environmental
Engineering, through its Chester Engineering, Inc. and Keystone Engineering,
Inc. subsidiaries.  These businesses were substantially disposed of in 1993
and the Company effectively exited the Environmental Engineering field at
that time.

         Through the purchases of National in 1995, Omega, Rowe and Dahlstrom in
1996 and Hill and Coilmate in 1997, the Company has  substantially  expanded its
former Coil  Handling  Equipment  Segment  (renamed  in 1996 the Metal  Products
Segment).

         The Company and its subsidiaries together employed  approximately 2,596
persons as of December 31, 1997.


HEATING, VENTILATING AND AIR CONDITIONING EQUIPMENT

         The  Company,  through  Mestek,  Inc.  and various of its  wholly-owned
subsidiaries,  (collectively,  the "Reed Division") manufactures and distributes
products in the HVAC industry.  These products include  residential,  commercial
and  industrial  hydronic  heat  distribution  products,  gas-fired  heating and
ventilating equipment,  louver and damper equipment,  commercial and residential
gas and oil-fired boilers,  air conditioning units, and related products used in
heating, ventilating and air conditioning systems.

         The Reed Division sells finned-tube and baseboard  radiation  equipment
under the names "Sterling", "Vulcan", "Heatrim",  "Petite-7",  "Hydrotherm", and
"Suntemp", and other hydronic heat

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distribution  products  under  the names  "Sterling"  and  "Beacon-Morris".  The
division sells gas-fired unit heaters under the name "Sterling", radiant heating
and  commercial  furnaces  under the name "Cox and gas-fired  indoor and outdoor
heating  and  ventilating  equipment  under the names  "Alton",  "Applied  Air",
"Wing",  "Air Fan", and "Temprite".  Cooling and air  conditioning  equipment is
sold under the "Alton",  "Applied Air", "Space Pak", "Aztec",  "Koldwave",  "Air
Fan",  and "Nesbitt"  names,  and gas and oil-fired  boilers are sold  primarily
under the names "Hydrotherm",  "Multi-Pulse",  and "Multi-Temp", and distributed
under the name "Smith Cast Iron  Boilers"  by  Westcast,  Inc. A number of these
trade  names  are  also  registered  trademarks  owned  by the  Company  and its
subsidiaries.  These  products  may be  used  to  heat,  ventilate  and/or  cool
structures  ranging in size from large office buildings,  industrial  buildings,
warehouses,  stores and residences, down to such small spaces as add-on rooms in
residences.  The division's  products are  manufactured  at plants in Westfield,
Massachusetts;  South Windsor,  Connecticut;  Farmville, North Carolina; Dallas,
Texas; Orangeville,  Ontario; Dundalk, Maryland; and Wrens, Georgia. The Company
closed its Skokie, Illinois and Ridgeville, Indiana plants in 1996 and relocated
these   operations  to  Dundalk,   Maryland  and  Farmville,   North   Carolina,
respectively.

         The Reed Division sells its many types of fire,  smoke, and air control
louvers and dampers, which are devices designed to facilitate the ventilation of
buildings  or to  control  or seal  off the  movement  of air  through  building
ductwork in the event of fire or smoke, under the names "Air Balance", "Phillips
Aire", "Pacific Air Balance",  "American Warming and Ventilating",  and "Arrow".
These products are manufactured at the Company's plants in Wrens,  Georgia;  Los
Angeles, California;  Bradner, Ohio; Waldron, Michigan;  Springfield,  Ohio, and
Wyalusing,  Pennsylvania.  The Reed Division also  manufactures  industrial  and
power plant  dampers in Los  Angeles,  California  under the name  "Pacific  Air
Products".

         Through  its  design  and  application  engineering  groups,  the  Reed
Division  custom  designs  and  manufactures  many HVAC  products to meet unique
customer  needs or  specifications  not met by  existing  products.  Such custom
designs  often  represent  improvements  on  existing  technology  and often are
incorporated into the Reed Division's standard line of products.

         The  Reed   division   sells  its  HVAC  products   primarily   through
approximately 2300 independent  representatives throughout the United States and
Canada,  many of  whom  sell  several  of  Reed's  products.  These  independent
representatives usually handle various HVAC products made by manufacturers other
than the Company.  These representatives  usually are granted an exclusive right
to solicit  orders for  specific  Reed  Division  products  from  customers in a
specific geographic  territory.  Because of the diversity of the Reed Division's
product lines, there is often more than one representative in a given territory.
Representatives  work closely with the Reed  Division's  sales  managers and its
technical personnel to meet customers' needs and specifications. The independent
representatives are compensated on a commission basis and generally they neither
stock Reed Division products nor purchase such products for resale.

         The Reed Division, directly, or through its representatives,  sells its
HVAC  products  primarily  to  contractors,  installers,  and end  users  in the
construction   industry,   wholesale   distributors   and   original   equipment
manufacturers.

         While the Reed Division's HVAC products are distributed  throughout the
United  States  and  Canada,  sales in the  northeast,  mid-atlantic  and  upper
mid-west  states are  somewhat  higher  than would be  suggested  by  unadjusted
construction  statistics  in any given year due to the  relative  popularity  of
hydronic products in these areas.

         The sale of heating and cooling  products is  inherently  sensitive  to
climatic  trends  in that  relatively  warm  winters  and/or  cool  summers  can
adversely effect sales volumes.

         The Reed Divison sells  gas-fired and hydronic  heating and ventilating
products, boilers and other HVAC equipment in Canada and also sells its products
in other  foreign  markets from time to time.  Total export sales did not exceed
ten  percent of total  revenues,  nor did foreign  assets  exceed ten percent of
total assets, in any of the most recent five years ending December 31, 1997.


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         The Reed Division  uses a wide variety of materials in the  manufacture
of its products,  such as copper,  aluminum and steel, as well as electrical and
mechanical components,  controls, motors and other products. Management believes
that it has adequate  sources of supply for its raw materials and components and
has not had  significant  difficulty in obtaining the raw  materials,  component
parts or finished goods from it suppliers. No industry segment of the Company is
dependent on a single supplier,  the loss of which would have a material adverse
effect on its business.

         The businesses of the HVAC segment are highly competitive.  The Company
believes that it is the largest  manufacturer of hydronic  baseboard heating for
residential   and   commercial   purposes  and  is  one  of  the  three  leading
manufacturers of gas-fired  heaters and fire and smoke dampers.  The Company has
established a substantial  market  position in the  commercial  and  residential
cast-iron   boiler  business   through  its   acquisitions  in  1991  and  1992.
Nevertheless,  in all of the  industries  in which it competes,  the Company has
competitors  with  substantially  greater  manufacturing,  sales,  research  and
financial  resources than the Company.  Competition in these industries is based
mainly on merchandising capability,  service, quality, price and ability to meet
customer  specifications.  The Reed  Division  believes that it has achieved and
maintained its position as a substantial competitor in the HVAC industry largely
through the strength of its extensive  distribution  network,  the breadth of it
product line and its ability to meet customer delivery and service requirements.
Most  of its  competitors  offer  their  products  in  some  but  not all of the
industries served by the Reed Division.

         The  quarterly  results  of  the  HVAC  segment  are  affected  by  the
construction  industry's demand for heating equipment,  which generally peaks in
the last four months of each year (the "heating season"). Accordingly, sales are
usually higher during the heating season, and such higher levels of sales may in
some years  continue  into the  following  calendar  year.  As a result of these
seasonal  factors,  the  Company's  inventories  of finished  goods reach higher
levels during the heating  season and are generally  lower during the balance of
the year.

         Management does not believe that backlog  figures  relating to the HVAC
segment are material to an  understanding of its business because most equipment
is shipped promptly after the receipt of orders.

         The  Company  owns a number  of  United  States  and  foreign  patents.
Although the Company usually seeks to obtain patents where appropriate,  it does
not consider any segment materially dependent upon any single patent or group of
related patents.

         The Reed Division has a number of trademarks important to its business,
including those relating to its Sterling, Vulcan, Beacon-Morris,  Heatrim, Wing,
Alton,  Applied Air, Arrow,  Aztec Sensible  Cooling,  Hydrotherm,  Temprite and
Dynaforce product lines.

         Expenditures for research and development for the HVAC segment in 1997,
1996,  and 1995 were $941,000,  $814,000,  and $894,000,  respectively.  Product
development efforts are necessary and ongoing in all product markets.

         The Company believes that compliance with  environmental  laws will not
have a financially material effect on its operations in 1998.

COMPUTER SOFTWARE DEVELOPMENT AND SYSTEM DESIGN

         The business of Mestek's wholly-owned subsidiary,  MCS, Inc. ("MCS") is
primarily related to business applications software and systems development. MCS
develops computer software applications to meet specific industry  requirements.
Services to customers  include  preparation of computer programs and software to
meet the customer needs,  providing computer hardware when required,  installing
the  system  at  the  customer's  business,  and  providing  continuing  support
services.



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         The most significant  systems which MCS has developed and has available
for sale are MestaMed,  a third-party  billing,  general ledger,  accounting and
inventory  control system for durable medical equipment  suppliers,  home health
providers and infusion therapy  providers and ProfitWorks,  a system utilized by
lumber, electrical, plumbing, and manufacturer's representatives to manage order
entry,  inventory,  purchasing,  accounts  receivable,  and  reporting.  Support
includes software  enhancements,  diagnostic access, and training seminars.  MCS
also  has  available  a  Telephone   Usage  System  which   analyses  usage  for
institutions with multiple telephones.  The hardware for these and other systems
is supplied primarily by Digital Equipment Corp., for which MCS is an Authorized
Solution Provider.

         New  enhancements  to  its  software  products  are  continually  being
developed by MCS. Notable developments in 1997 include the enchancement of MCS's
product  offering in the Home Health Agency  marketplace.  During 1997, 1996 and
1995  MCS   spent   approximately   $1,575,000,   $1,338,000,   and   $1,209,000
respectively,  for  software  development.  These  costs  related  primarily  to
customer sponsored development and improvements to existing products.


          In 1997,  MCS acquired a management  services  division and a conputer
based  training  division to enhance the  productivity  of the Profit  Works and
Mesta Med products.

         Because of the importance of systems  development  to MCS,  programming
and  sales  personnel  are a  primary  resource.  MCS's  main  office  is in the
Pittsburgh,  Pennsylvania  area and it has sales  offices in other  parts of the
country.

         The markets for business  applications software and systems development
are intensely  competitive and subject to rapid  technological  change. For this
reason  MCS faces  risks  and  enjoys  opportunities  which  are  somewhat  more
pronounced  than  in the  Company's  other  operating  segments.  MCS  has  many
competitors in the markets in which it operates, both on a regional and national
basis.  Foreign sales are not  significant.  On December 31, 1997, MCS's backlog
was $1,550,000.

         MCS's  inventory  consists  primarily of computer  hardware and related
equipment  which  is sold  together  with  applications  software  as a  turnkey
solution.  MCS  attempts  to  maintain a  sixty-day  supply so that  delivery of
completed systems can be made on a timely basis.


METAL PRODUCTS (formerly Coil Handling Equipment)

         The Company's  Metal  Products  Segment added two  additional  units in
1997: Hill Engineering,  Inc. a leading producer of precision tools and dies for
the gasket  manufacturing  and roll forming  industries,  and Coilmate,  Inc., a
leading producer of pallet  decoiling  equipment for the metal stamping and roll
forming industries.

         The  CWP,   Rowe  and   Dahlstrom   units   manufacture  a  variety  of
metal-forming  equipment  including  coil  straighteners,  reels,  press  feeds,
cut-to-length  lines,  roll-formers,  wing  benders and related  equipment.  The
Company  believes it has improved its competitive  position within this industry
by developing  servo- driven  feeders with  microprocessor  controls,  affording
diagnostic and operational  features,  as well as by the strategic  acquisitions
made in 1996 and 1997 which broadened the Company's overall product offerings.

         Certain   products  made  by  these  units  are  custom   designed  and
manufactured to meet unique customer needs or  specifications  not currently met
by existing  products.  These  products,  developed by the Company's  design and
application   engineering  groups,  often  represent  improvements  on  existing
technology  and are often then  incorporated  into the unit's  standard  product
line.

         The primary customers for such metal-forming equipment include contract
metal  stampers,  manufacturers  of large and small  appliances,  commercial and
residential  lighting  fixtures,  automobile  accessories,  office furniture and
equipment, metal construction and HVAC products.

         The businesses of CWP, Rowe, and Dahlstrom are highly  competitive and,
due to the nature of the products,  are subject to somewhat greater  cyclicality
than is  seen in the  Company's  other  operating  segments.  CWP has  become  a
substantial competitor in the manufacture of coil handling equipment

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through its broad and competitive  product line, its customer driven application
engineering,  and its ability to meet customer delivery and service requirements
through its  extensive  distribution  network.  The Company  expects  that these
strengths will be further  leveraged by the additions of the large customer base
of Rowe, Dahlstrom, Hill and Coilmate.

         National  competitively  extrudes  aluminum shapes for the construction
and other markets and extrudes and fabricates high precision aluminum heat sinks
(heat  dissipation  devices)  for  use  in a  wide  variety  of  power  control,
communications  and related  electronic and computer systems  applications.  Its
products  are made  through an  extrusion  process  supported by a broad line of
secondary, stamping and assembly machining capabilities.  National's application
engineering  and  fabrication  capabilities  have helped it become a substantial
competitor in the heat sink market place.

          Omega manufactures corrugated flexible stainless steel hose for use in
a wide  variety of  industrial  applications.  It's  products  include  annular,
helical  and braided  metal hose and hose  fabrications  and are sold  primarily
through  industrial  hose  distributors.  In January of 1997,  Omega  introduced
Trac-PipeTM, a corrugated stainless steel tubing developed for use in piping gas
appliances.  The Company expects that significant  synergies will be realized by
distributing Trac-PipeTM through its extensive HVAC distribution network.

         The Metals  Products  Segment  sells  equipment  in Canada and in other
foreign  markets.  Total export  sales,  however,  did not exceed ten percent of
total revenues, nor did foreign assets exceed ten percent of total assets in any
of the most recent five years ending December 31, 1997.

         The backlog  relating to this  segment as a whole at December  31, 1997
was approximately $12,736,000.

         Expenditures for research and development for this segment, independent
of research and  development  related to specific  customer  requests,  in 1997,
1996, and 1995 were $687,000, $204,000 and $0 respectively.


SEGMENT INFORMATION

         Selected financial  information regarding the operations of each of the
above segments is presented in Note 12 to the Consolidated Financial Statements.


Item 2 - PROPERTIES

         The Reed Division (HVAC segment) of the Company manufactures  equipment
at plants that the Company owns in Waldron, Michigan;  Bradner, Ohio; Wyalusing,
Pennsylvania;  Dundalk, Maryland, Springfield, Ohio; Wrens, Georgia, and Dallas,
Texas.  It  operates  plants  that it leases  from  entities  owned  directly or
indirectly  by certain  officers  and  directors  of the  Company in  Westfield,
Massachusetts;  Farmville,  North Carolina;  South Windsor,  Connecticut and Los
Angeles, California. The Reed Division leases manufacturing space from unrelated
parties  in  Orangeville,  Ontario,  Canada;  as  well  as  warehouse  space  in
Mississauga, Ontario, Canada.

         The metal products segment manufactures  products at plants the Company
owns in Clinton, Maine, Villa Park, Illinois, Pelham, New Hampshire and Schiller
Park,  Illinois  and at leased  facilities  in Lawrence,  Massachusetts,  Winter
Haven, Florida, Exton, Pennsylvania and Southington, Connecticut.

         During 1996 the Company constructed additions to its Dundalk, Maryland;
Farmville,  North  Carolina;  and Clinton,  Maine  facilities in anticipation of
product  relocations  from leased  facilities in Skokie,  Illinois;  Ridgeville,
Indiana; and Dallas, Texas. These transfers were completed in 1997.

         The Company's  computer  system's  segment (MCS) leases office space in
Monroeville,  Pennsylvania,  which  houses its  principal  offices and  computer
facility used in the computer software development and system design business.
MCS owns the computer equipment used in its operations

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         The Company's principal  executive offices in Westfield,  Massachusetts
are leased from an entity owned by an officer and  director of the Company.  The
Company also owns an office building in Holland, Ohio.

         In addition,  the Company and certain of its  subsidiaries  lease other
office space in various cities around the country for use as sales offices.

         Certain of the owned  facilities  are pledged as  security  for certain
long-term  debt  instruments.   See  Property  and  Equipment,  Note  4  to  the
Consolidated Financial Statements.




Item 3 - LEGAL PROCEEDINGS

         The  Company  is not  presently  involved  in any  litigation  which it
believes will materially and adversely affect its financial condition or results
of operations.


Item 4 - SUBMISSION OF MATTER TO A VOTE OF THE SECURITY HOLDERS

         No matters were submitted to the security  holders of the Company for a
vote during the fourth quarter of 1997.


                                     PART II


Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The  Company's  common stock is listed on the New York Stock  Exchange,
under the symbol MCC. The number of  shareholders of record as of March 20, 1998
was 1,408. The price range of the Company's common stock between January 1, 1998
and March 20, 1998 was between  $18-5/16  and 21-7/8,  and the closing  price on
March 20, 1998 was $21-1/2.


         The quarterly  price ranges of the  Company's  common stock during 1997
and 1996 as reported in the  consolidated  transaction  reporting system were as
follows:


                                   PRICE RANGE

                          1997                                 1996
                          ----                                 ----

     First Quarter     $18-1/8     $16-1/8      $ 13-3/4             $12
     Second Quarter    $20-7/8     $16-1/4      $ 14-7/8             $12-1/2
     Third Quarter     $21-3/8     $17-3/4      $ 14-7/8             $14-3/8
     Fourth Quarter    $19-3/8     $17-3/8      $ 16-1/2             $14-5/8



     The Company has not paid any dividends on its common stock since 1979.

     No securities issued by the Company, other than common stock, are listed on
a stock exchange or are publicly traded.

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Item 6 - SELECTED FINANCIAL DATA

Selected  financial  data for the Company for each of the last five fiscal years
is  shown  in the  following  table.  Selected  financial  data  reflecting  the
operations  of  acquired  businesses  is shown only for  periods  following  the
related acquisition.

SUMMARY OF FINANCIAL POSITION as of December 31,
     (dollars in thousands except per share data)
                           1997       1996         1995        1994        1993
                       ---------------------- ------------ ------------ --------

Total Assets            $191,117   $170,010    $141,431     $120,430   $126,625
Working capital           42,056     59,274      41,626       36,628     37,238
Long-term debt, incl
 current portion          19,329     15,362       3,031        5,548     20,860
Shareholders' equity     118,007    103,718      91,046       80,732     73,317
Commons shareholders'
   equity, per common
    share (1)          $   13.22     $11.61     $ 10.14      $ 8.93      $ 7.96
                       =========     ======     =======      ======      ======

SUMMARYOF OPERATIONS - for the year ended December 31, (2) (dollars in thousands
       except per share data)

                             1997       1996      1995         1994        1993
                         ----------   -------- ----------  ----------   --------

Total revenues from
 continuing operation(3) $327,778   $299,527    $245,865     $224,018  $231,386
Income from continuing
   operations              14,40      13,329      10,906        9,298     7,583
Net  income               14,405      13,329      10,906        9,298     4,265
Earnings per common share:
Income from continuing
Operations:
  Basic                   $ 1.61      $ 1.49     $  1.21       $ 1.02    $  .82
  Diluted                 $ 1.61      $ 1.49     $  1.21       $ 1.02    $  .82

Net Income:
  Basic                   $ 1.61      $ 1.49     $ 1.21        $ 1.02    $  .46
  Diluted                 $ 1.61      $ 1.49     $ 1.21        $ 1.02    $  .46

1)     Equity per common share amounts are computed  using the common shares and
       common stock equivalents outstanding as of December 31, 1997, 1996, 1995,
       1994, and 1993.

(2)    Includes the results of acquired companies or asset acquisitions from the
       date of such acquisition, as follows:

       * Coilmate, Inc., from November 3, 1997
       * Hill Engineering, Inc., from January 31, 1997
       * Dahlstrom Industries, Inc. from August 30, 1996.
       * Rowe Machinery & Automation, Inc., from February 5, 1996.
       * Omega Flex, Inc., from February 2, 1996.
       * National Northeast Corp and National Southeast Corp from Oct 30, 1995.
       * Heat Exchangers, Inc., from November 15, 1995.
       * Aztec Sensible Cooling, Inc., from November 1, 1994.

(3)    Revenues  have been adjusted in 1993 to reflect the  reclassification  of
       revenues related to the Company's  Environmental  Engineering  Segment to
       Discontinued Operations.

                                        9

<PAGE>




Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS


                      RETURN ON AVERAGE NET ASSETS EMPLOYED


                                1997, 1996, 1995


         The  Company's  Return on  Average  Net  Assets  Employed,  defined  as
operating profits before bonuses, over Average Net Assets Employed (total assets
less current  liabilities other than current portion of long-term debt, averaged
over 12 months) for the years 1997, 1996, and 1995 was as follows:


                                             1997          1996         1995
                                             ----          ----         ----

Operating Profits (as defined)       $  30,525,000  $ 25,925,000  $22,515,000

Average Net Assets Employed (as
   defined)                           $130,419,000  $113,594,000  $94,956,000
                                     ------------    -----------  -----------
Return on Average Net Assets
    Employed                                 23.4%         22.8%        23.7%
                                  =================   ======= ===============



         The 1997 return on Average Net Assets Employed  improved  slightly from
1996 despite product development,  plant relocation and other transitional costs
incurred in 1997 in the Company's  Metal  Products and HVAC  segments  which are
described in greater detail below, owing to strong  performances from certain of
the Company's  historical  hydronic and  gas-fired  products as well as from the
Company's  National  Northeast  subsidiary  which is contained in the  Company's
Metal Products Segment.


                             ANALYSIS: 1997 VS. 1996


         The Company's core HVAC Segment reported  comparative  results for 1997
and 1996 as follows:



                 1997         1997           1996
                ($000)        %             ($000)       %         $Net Change
                ------       ---------      ------      --------    -----------

Net Sales       $229,423      100.00%       $228,115      100.00%         +1.0%
Gross Profit      66,178       28.85%         62,164       27.25%         +6.5%
Operating Income  17,846        7.78%         16,142        7.08%        +10.6%


         Revenues in this Segment were  relatively  flat in 1997 as increases in
certain of the Company's historical hydronic and gas-fired heating products were
offset by reductions in certain  industrial and air conditioning  products which
were traceable to a variety of factors,  including the relatively mild summer of
1997. Gross profit margins were improved  overall in 1997 as product  relocation
costs were reduced and raw material  costs remained well  controlled.  Operating
income as a percentage of net sales was up slightly,  reflecting the improvement
in gross profit margins.



                                       10

<PAGE>




         The Company's Computer Systems Segment (MCS, Inc.) reported improved
revenues, gross profits and operating profits in 1997 as indicated in the
following table:


                    1997       1997      1996       1996
                   ($000)       %       ($000)       %             $Net Change
                    ------    --------  ------      -------        -----------

  Net Sales        $17,029    100.00%  $ 16,114     100.00%         +5.7%
  Gross Profit       7,238     42.50%     6,865      42.60%         +5.4%
  Operating Income   3,289     19.31%     3,063      19.01%         +7.4%


         MCS  continued  its  commitment  in 1997  to  product  enhancement  and
customer support in the Durable Medical  Equipment,  Home Infusion Therapy,  and
Home Health Services marketplaces. MCS's principal software products are now, or
will  shortly  be,  "Year 2000  compliant."  MCS does not expect  that its costs
related to "Year 2000 compliance will be material.

         The  Company's  Metal  Products   Segment   includes   Cooper-Weymouth,
Peterson,   (CWP),   Rowe  Machinery  &  Automation  Inc.,   (Rowe),  a  leading
manufacturer of press-feeding  and  cut-to-length  equipment,  acquired in 1996,
Dahlstrom  Industries,  (Dahlstrom),  a  leading  manufacturer  of roll  forming
equipment,  acquired in 1996, National Northeast,  Corporation,  (National),  an
aluminum  extruder and heat sink fabricator  acquired in 1995, Omega Flex, Inc.,
(Omega), an industrial metal hose fabricator acquired in 1996, Hill Engineering,
(Hill),  a leading producer of tools and dies for the gasket  manufacturing  and
roll  forming  industries  acquired on January 31,  1997,  and  Coilmate,  Inc.,
(Coilmate),  a leading  producer  of pallet  decoiling  equipment  for the metal
stamping and roll forming industries  acquired on November 3, 1997.  Comparative
results,  which  were  significantly  affected  by these  acquisitions,  were as
follows:


                      1997         1997        1996        1996
                     ($000)         %         ($000)        %       $Net Change
                     ------     --------      ------       -------- -----------

Net Sales            $81,326     100.00%     $ 55,298       100.00%      +47.1%
Gross Profit          21,033      25.86%       13,199        23.87%      +59.4%
Operating Income       4,260       5.24%        3,687         6.67%      +15.5%


         The  relocation  of the Rowe  manufacturing  operation  to our  Formtek
facility in Clinton, that also engineers and produces our product line which was
completed in 1997, imposed significant direct and indirect costs on this segment
in 1997 and overshadowed  otherwise solid  contributions  from  Cooper-Weymouth,
Peterson,  National  Northeast and Hill Engineering.  Significant  synergies are
expected to be derived from this  relocation in future  years.  Gross Profit and
Operating  Income  were also  negatively  effected  by  significant  new product
development and market  development costs undertaken by Omega in connection with
its introduction of Trac-PipeTM,  a corrugated  stainless steel tubing developed
especially for use in the piping and installation of gas appliances.


  As a whole the Company reported comparative results as follows:

                  1997          1997           1996       1996
                 ($000)         %             ($000)       %        $Net Change
                  ------     --------         ------     --------   -----------

  Net Sales      $327,778     100.00%         $299,527     100.00%      +9.4
  Gross Profit     94,449      28.81%           82,228      27.45%     +14.9%
  Operating Income 25,395       7.75%           22,892       7.64%     +10.9%

         Gross Profit and  Operating  Income  percentage  margins were  slightly
improved reflecting the effects described above.


                                       11

<PAGE>




         Sales  expense for the  Company as a whole,  as a  percentage  of total
revenues,  increased  from  11.85% to 12.48%  (Sales  Expense  and  General  and
Administrative  Expense  for 1995,  as reported  in the  accompanying  financial
statements, have been adjusted to reflect certain reclassifications for purposes
of  comparability).  General and  Administrative  Expenses,  as a percentage  of
revenues,  increased from 5.41% in 1996 to 6.13% in 1997,  principally due to an
increase in the provision for bonuses.  Engineering  expense, as a percentage of
total revenues,  decreased  slightly from 2.55% to 2.44%.  Interest  expense was
relatively  unchanged  in 1997,  despite  the various  acquisitions,  due to the
offsetting effect of positive cash flows from operations.

         Income tax expense for 1997,  as a  percentage  of pretax  income,  was
reduced slightly from 39.39% to 38.16%.

         Pretax  income  for 1996  included  gains  from  the  sale of  unneeded
manufacturing   facilities  totalling  $1,444,000;   there  were  no  comparable
transactions in 1997.


                             ANALYSIS: 1996 VS. 1995

The Company's core HVAC Segment reported  comparative  results for 1996 and 1995
as follows:


                     1996         1996        1995        1995
                    ($000)         %         ($000)          %      $Net Change
                    ------       --------     ------     --------    -----------
 Net Sales         $228,115       100.00%    $218,456     100.00%        +4.42
 Gross Profit        62,164        27.25%      60,052      27.49%        +3.52%
 Operating Income    16,142         7.08%      15,495       7.09%        +4.18%


         The growth in revenues in this Segment was principally  attributable to
the effect of added  sales from the  acquisition  of Heat  Exchangers,  Inc.  on
November  15,  1995.  Increases in volume in the  Company's  historical  boiler,
damper and cooling products were largely offset by reduced volumes in certain of
the Company's residential and commercial hydronic products. Gross profit margins
were  relatively  unchanged in 1996 despite  reductions  in certain raw material
costs due to the offsetting effect of relocation and other transitional expenses
incurred in relation to the Company's Nesbitt and Koldwave divisions.  Operating
income as a percentage of net sales was relatively unchanged from 1995.








                                       12

<PAGE>



         The Company's Computer Systems Segment (MCS, Inc.) reported improved
sales, margins and operating profits in  1996 as indicated in the following
table:


                   1996       1996           1995       1995
                  ($000)       %              ($000)     %          $Net Change
                   ------    --------        ------     --------     -----------

Net Sales        $16,114     100.00%         $ 15,255    100.00%        + 5.63%
Gross Profit       6,865      42.60%            6,444     42.24%         +6.53%
Operating Income   3,063      19.01%            2,749     18.02%        +11.42%

         MCS's  success  in 1996  reflects  its  ongoing  commitment  to product
enhancement and customer support in the Durable Medical Equipment, Home Infusion
Therapy, and Home Health Services marketplaces in which it competes.

         The  Company's  Coil Handling  Equipment  Segment,  which  historically
included only the Cooper-  Weymouth,  Peterson  division,  added four additional
units in 1996:  the assets of Rowe  Machinery  &  Automation,  Inc.,  (Rowe),  a
leading manufacturer of press-feeding and cut-to-length  equipment,  acquired on
February 5, 1996,  the assets of  Dahlstrom  Industries,  Inc.,  (Dahlstrom),  a
leading  manufacturer  of roll forming  equipment,  acquired on August 30, 1996,
National Northeast, Corporation,  (National), an aluminum extruder and heat sink
fabricator  on October 30, 1995,  and Omega Flex,  Inc.  (Omega),  an industrial
metal hose  fabircator,  acquired on February 2, 1996. The Company re-named this
segment  the  Metal  Products   Segment  in  1996  in   consideration  of  these
acquisitions.  Comparative results,  which were significantly  affected by these
acqusitions, were as follows:

                  1996         1996        1995      1995
                 ($000)         %         ($000)      %           $Net Change
                 ------      ---------    ------     --------      -----------

 Net Sales      $55,298       100.00%     $12,154     100.00%         +354.98%
Gross Profit     13,199        23.87%       4,549      37.43%         +190.15%
Operating Income  3,687         6.67%       1,926       15.85%         +91.43%

         The assimilation of the Rowe and Dahlstrom  businesses and planning for
the relocation of the Rowe  manufacturing  operation to Clinton,  Maine, home of
Cooper-Weymouth,  Peterson,  which is expected to be completed in 1997,  imposed
significant  direct and indirect costs on this segment in 1996 and  overshadowed
otherwise excellent results reported by Cooper-Weymouth,  Peterson.  Significant
synergies are expected to be derived from this relocation in future years. Gross
Profit and Operating  Income were also  negatively  effected by significant  new
product  development  costs  undertaken by Omega in  anticipation of its January
1997  introduction  of  Trac-Pipe(TM),   a  corrugated  stainless  steel  tubing
developed especially for use in the piping and installation of gas appliances.

  As a whole the Company reported comparative results as follows:

                           1996         1996       1995     1995
                          ($000)         %        ($000)     %       $Net Change
                          ------      --------    ------   --------  -----------

   Net Sales              $299,527     100.00%   $245,865   100.00%     +21.83%
   Gross Profit             82,228      27.45%     71,045    28.90%     +15.74%
   Operating Income         22,892       7.64%     20,170     8.20%     +13.49%

         Gross Profit and  Operating  Income  percentage  margins were  slightly
reduced overall  principally due to the plant relocation and product development
costs described above.

         Sales  expense for the  Company as a whole,  as a  percentage  of total
revenues,  was  reduced  from 13.08% to 11.85%.  (Sales  Expense and General and
Administrative  Expense  for 1995,  as reported  in the  accompanying  financial
statements,  have been adjusted to reflect certain  classifications for purposes
of  comparability).  General and  Administrative  Expenses,  as a percentage  of
revenues, increased from 5.23% in

                                       13

<PAGE>



1995 to 5.40% in 1996,  principally  due to an  increase  in the  provision  for
bonuses.  Engineering  expense,  as a percentage  of total  revenues,  increased
slightly  from  2.32%  to  2.55%.   Interest  expense  increased   substantially
reflecting the various acquisitions made in 1996.

         Income tax expense for 1996, as a percentage of pretax income, was
relatively unchanged at 39.39%

         The Company's Scranton, Pennsylvania manufacturing facility, classified
as Property Held for Sale at December 31, 1995 was sold on January 19, 1996 at a
gain of $854,000.  The Company's  Hagerstown Maryland facility was sold on April
1, 1996 at a gain of $590,000.


                    ANALYSIS: LIQUIDITY AND CAPITAL STRUCTURE


       While working capital decreased in 1997, from $59,274,000 at December 31,
1996 to  $42,056,000  at  December  31,  1997,  this  reflects  principally  the
reclassification of the $15,000,000 Senior Notes from long-term to current.  The
Notes  matured  on March 1, 1998 and were paid off by the  Company  through  its
Revolving Loan and Letter of Credit Facility.

       The Company's funded debt to equity ratio (including deferred liabilities
and  minority  interests in funded  debt)  decreased  from 16.2% at December 31,
1996,  to 2.4% at December 31, 1997,  despite the effect of the  Company's  1997
acquisitions  and other capital  spending,  due to the  reclassification  of the
Senior Notes to current, as well as the effect of positive cash flows.

       The principal  changes to the Company's Net Assets  Employed  during 1997
were as follows:


     Net Assets Employed 12/31/96                             $120,647
     Acquisition of Hill Engineering                         5,141,000
     Acquisition of Coilmate                                 3,521,000
     Capital spending in excess of depreciation              6,158,000
     National Northeast - additional purchase price paid     4,028,000
     All other                                                  54,000

     Net Assets Employed 12/31/97                         $139,549,000

         Management  regards the Company's current capital structure and banking
relationships  as fully adequate to meet  foreseeable  future needs. The Company
has not paid dividends on its common stock since 1979.

                            ACCOUNTING PRONOUNCEMENTS

     The Financial  Accounting Standards Board has issued Statement of Financial
Accounting  Standard No. 130 which will be effective for fiscal years  beginning
after December 15, 1997.  FAS 130 requires the  presentation  of  "comprehensive
income," a more broadly defined  measure of income,  in addition to conventional
"net income." The Company does not expect that it's "comprehensive  income" will
be materially  different  from it's "net income." The Company will adopt FAS 130
effective with 1998.

     The Financial  Accounting Standards Board has issued Statement of Financial
Accounting  Standard No. 131 which will be effective for fiscal years  beginning
after December 15, 1997. FAS 131 requires,  in general, a "management  approach"
rather than an "industry approach" to the disclosure of segment information. The
Company is  presently  studying  the  changes,  if any,  which will  result from
adoption of FAS 131 in 1998.


                          FORWARD LOOKING INFORMATION


     This  report  contains  forward  looking  statements  which are  subject to
inherent  uncertainties.  These uncertainties  include,  but are not limited to,
variations  in  weather,   changes  in  the  regulatory  environment,   customer
preferences,  general economic  conditions,  and increased  competition.  All of
these are difficult to predict,  and many of these are beyond the ability of the
Company to control.


                                       14

<PAGE>



                              YEAR 2000 DISCLOSURE

         The  Company's  exposure  to the "Year 2000  problem"  falls into three
principal categories, which are discussed separately below:

                  1.  Financial software systems
                  2.  Manufacturing,  order  processing and accounts  receivable
                  software systems 3. Engineering (CAD/CAM) systems

         1.  FINANCIAL SOFTWARE SYSTEMS
         The Company  performs most of its financial  reporting on a centralized
         basis in Westfield,  MA using standard accounting,  payroll,  payables,
         fixed assets and human resources  software packages which are supported
         by the  related  vendors  and are  believed  to be  fully  "Year  2000"
         compliant at this time. Certain of the Company's  subsidiaries maintain
         separate  financial  reporting  functions  using a variety of  personal
         computer based software  solutions which are also believed to be either
         fully "year 2000"  compliant at this time,  or expected to be compliant
         by December 31, 1999.

         2.  MANUFACTURING,   ORDER  PROCESSING,  ACCOUNTS  RECEIVABLE  SOFTWARE
         SYSTEMS  The  Company  uses  a  variety  of  manufacturing   and  order
         processing  software systems at various  locations today. The Company's
         needs in this area, while highly specific to each individual  division,
         have  sufficient  common ground that  commercially  available  software
         packages,  suitably customized,  have been used in the past rather than
         custom  written  code.  As  such,  the  Company  believes  that  it can
         successfully address the Year 2000 problem in this area
          by  upgrading  its  various  manufacturing/order   processing/accounts
         receivable software systems to "Year 2000 Compliant" versions, while at
         the same time adding enhanced functionality.

         The Company  adopted this  approach to the "Year 2000  Problem" in 1996
         and began a search at that time for a system which would meet the needs
         of as many of its divisions as possible.  A manufacturing  package with
         strong  "configure  to  order"  capabilities  was  chosen  in 1997  and
         modification and implementation of this system for two of the Company's
         Westfield  based  divisions has been  completed at this time. A plan to
         extend this system to all of the Company's  Westfield  based  divisions
         prior to 12/31/99 is presently  under study.  The  Company's  remote or
         "non-Westfield based" locations are implementing similar strategies and
         are in various stages of the process. It is expected that all will have
         completed the transition to Year 2000 compliant systems by December 31,
         1999.

         3.  ENGINEEERING(CAD/CAM) SYSTEMS
         The Company uses a variety of  commercially  available  engineering and
         manufacturing  design tools all of which are now, or are expected to be
         prior to December 31, 1999, "Year 2000 Compliant."

         SUMMARY:
         The Company  estimates  that its total cost of addressing the Year 2000
         issue,  including  software  licenses,   modifications,   training  and
         implementation will be approximately  $1,500,000 over the 3 year period
         ended  December  31,  1999.  Of this total,  the  Company has  incurred
         approximately $500,000 as of December 31, 1997.










                                       15

<PAGE>



                            ENVIRONMENTAL DISCLOSURE

         The Company is subject to numerous laws and regulations that govern the
discharge  and disposal of materials  into the  environment.  The Company is not
aware,  at present,  of any  material  administrative  or  judicial  proceedings
against the Company  arising  under any  federal,  state or local  environmental
protection laws or regulations  ("Environmental  Laws").  There are, however,  a
number of activities in which the Company is engaged under Environmental Laws.



Permitting Activities

         The Company is engaged in various  matters with  respect to  obtaining,
amending or renewing permits required under  Environmental  Laws to operate each
of its manufacturing facilities. Based on the information presently available to
it,  management  expects that all permit  applications will be routinely handled
and management does not believe that the denial of any currently  pending permit
application  will have a  material  adverse  effect on the  Company's  financial
position or the results of operations.

Potentially Responsible Parties (PRP) Actions

         The Company has been named or contacted by state authorities and/or the
Environmental Protection Agency (the "EPA") regarding the Company's liability as
a potentially  responsible  party ("PRP") for the  remediation of several sites,
none of which actions represent a material  proceeding.  The potential liability
of the Company is based upon records that show the Company or other corporations
from whom the Company or its subsidiaries acquired assets used the sites for the
lawful disposal of hazardous  waste pursuant to third party  agreements with the
operators of such sites. Such PRP actions generally arise when the operator of a
site lacks the financial  ability to address  compliance with the  Environmental
Laws,  decisions and orders affecting the site in a timely and effective manner.
The governmental  authority  responsible for the site looks to the past users of
the facility and their  successors  to address the costs of  remediation  of the
site.

         In High Point, North Carolina, the Company has been named as a PRP with
regard to the clean-up of groundwater  contamination allegedly due to dumping at
a land-fill.  The Company's activity at the site represented less than 1% of all
activity at the site.  State  authorities  continue to investigate the extent of
and remediation  methods for groundwater  contamination at or near the site, and
the  Company  joined  a  joint  defense  group  to help  define  and  limit  its
liabilities  whereby it may be required to  contribute  additional  non-material
sums as part of the remediation of groundwater contamination. The Company (along
with many other  corporations) is involved in PRP actions for the remediation of
a site  in  Southington,  Connecticut,  as a  result  of the  EPA's  preliminary
assignment of derivative  responsibility for the presence of hazardous materials
attributable to two other  corporations  from whom the Company  purchased assets
after the hazardous  materials had been disposed of at the Southington site. The
Company  is  currently  participating  as  part  of a  joint  defense  group  in
discussions  with  the EPA for a "de  minimis  settlement"  at the  Southington,
Connecticut site. The obligations of the Company in this matter are not expected
to be material to the Company's financial position or the results of operations.
The Company has received a notice from Pitt County,  North  Carolina that it may
(along with many  others) be a PRP at the Pitt County  Landfill  but the Company
believes  that any material  which it shipped to the site was not of a hazardous
nature.  The Company has also  received a request for  information  from the EPA
addressed to a predecessor  of the Company  regarding the  generation,  storage,
transportion and possible release of hazardous substances at a superfund site in
Coraopolis,  Pennsylvania,  and the Company has complied with such request.  The
Company continues to investigate  these matters,  but expects that they will not
be material to the Company's financial position or results of operations.

Releases of Hazardous Materials

         There have been  releases of  hazardous  materials  on a few parcels of
property  which  are  presently  leased or  operated  by the  Company.  All such
releases occurred prior to the occupation of the properties by the Company.  All
releases  are in  the  process  of  assessment  or  remediation.  At a  site  in
Massachusetts  leased by the  Company  the Lessor has  received  notice from two
abutters that  activities on the property prior to the Company's  occupation may
be the source of groundwater contamination on the abutters' property. Based upon

                                       16

<PAGE>



an  investigation  by the  Lessor,  the claims do not appear to be  supportable.
Based on the information  presently available to it, management does not believe
that the costs of addressing  any of the releases  will have a material  adverse
effect on the Company's financial position or the results of operations.

Changes to Environmental Laws Affecting Operations and Product Design

        The Company's  operations and its HVAC products that involve  combustion
as currently  designed and applied entail the risk of future  noncompliance with
the evolving  landscape of  Environmental  Laws.  The cost of complying with the
various  Environmental Laws is likely to increase over time, and there can be no
assurance  that the  cost of  compliance,  including  changes  to  manufacturing
processes  and design  changes to current  HVAC product  offerings  that involve
atmospheric  combustion,  will not over the  long-term  and in the future have a
material adverse effect on the Company's results of operations.














































                                       17

<PAGE>





Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                    The Board of Directors and Shareholders'
                                  Mestek, Inc.

         We have audited the accompanying consolidated balance sheets of Mestek,
Inc.  and  subsidiaries  as of  December  31,  1997 and  1996,  and the  related
consolidated statements of income, shareholders' equity, and cash flows for each
of  the  years  in  the  three  year  period  ended  December  31,  1997.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our 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 Mestek,
Inc. and  subsidiaries  as of December 31, 1997 and 1996,  and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
years in the three year  period  ended  December  31,  1997 in  conformity  with
generally accepted accounting principles.

         We have also audited Schedule II of Mestek, Inc. and subsidiaries as of
December  31,  1997 and for each of the years in the  three  year  period  ended
December 31, 1997. In our opinion, the schedule presents fairly, in all material
respects, the information required to be set forth therein.









/S/ GRANT THORNTON
    Grant Thornton

Boston, Massachusetts
March 6, 1998











                                       18

<PAGE>





                                  MESTEK, INC.
                           CONSOLIDATED BALANCE SHEETS
                               As of December 31,



                                                     1997              1996
                                                     ----             ----
                                                     (Dollars in thousands)
ASSETS

Current Assets
   Cash and Cash Equivalents                      $    2,494        $    11,649
   Accounts Receivable - less allowances of
     $2,529 and $1,701                                52,696             49,577
   Unbilled Accounts Receivable                          248                174
   Inventories                                        51,580             43,265
   Deferred Tax Benefit                                1,691              1,823
   Other Current Assets                                3,582              2,264
                                                   ----------     -------------

   Total Current Assets                               112,291           108,752

Property and Equipment - net                           40,715            31,439
Equity Investments                                      8,778             8,778
Other Assets and Deferred Charges  - net                5,516             5,832
Deferred Tax Benefit                                      -                 280
Excess of Cost over Net Assets of Acquired Companies   23,817            14,929
                                                     --------       -----------

   Total Assets                                      $191,117         $ 170,010
                                                     ========        ==========












See Accompanying Notes to Consolidated Financial Statements















                                       19

<PAGE>





                                  MESTEK, INC.
                     CONSOLIDATED BALANCE SHEETS (continued)
                               As of December 31,



                                                  1997                    1996
                                                  ----                    ----
                                                     (Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Current Portion of Long-Term Debt              $    18,667         $      115
  Accounts Payable                                    20,276             19,559
  Accrued Salaries and Bonuses                         6,100              4,886
  Accrued Commissions                                  3,283              3,404
  Progress Billings in Excess of Cost
   and Estimated Earnings                              3,205              2,899
  Customer Deposits                                    3,570              4,829
  Other Accrued Liabilities                           15,134             13,786
                                                    -----------      -----------

Total Current Liabilities                             70,235             49,478

Deferred Tax Liability                                   224                -
Long-Term Debt                                           662             15,247
Deferred Compensation                                     14                 18
                                                    ------------  --------------

Total Liabilities                                     71,135             64,743
                                                     ----------    -----------

Minority Interests                                     1,975              1,549
                                                     -----------    ------------

Shareholders' Equity:
  Common Stock - no par, stated value $0.05 per
   share, 9,610,135 shares issued                        479                479
  Paid in Capital                                     15,434             15,434
  Retained Earnings                                  109,199             94,794
  Treasury Shares, at cost (683,830 and
   680,364 common shares, respectively)           (    6,109)        (    6,040)
  Cumulative Translation Adjustment               (      996)        (      949)
                                                  ------------      ------------
  Total Shareholders' Equity                         118,007            103,718
                                                    ---------        ----------

     Total Liabilities and Shareholders'
         Equity                                     $191,117          $ 170,010
                                                    ========          =========



See Accompanying Notes to Consolidated Financial Statements.










                                       20

<PAGE>





                                  MESTEK, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                        For the years ended December 31,

                                   1997               1996                1995
                                   ----               ----                ----
                        (Dollars in thousands, Except Earnings Per Common Share)

Net Sales                         $ 310,749        $ 283,413          $ 230,610
Net Service Revenues                 17,029           16,114             15,255
                                  -----------      -----------      -----------

Total Revenues                      327,778          299,527            245,865

Cost of Goods Sold                  223,539          208,050            166,009
Cost of Service Revenues              9,790            9,249              8,811
                                  -------------    ------------     ------------

Gross Profit                         94,449           82,228             71,045

Selling Expense                      40,929           35,492             32,160
General and Administrative
     Expense                         20,096           16,202             13,004
Engineering Expense                   8,029            7,642              5,711
                                   ------------     ------------   ------------

Operating Profit                     25,395           22,892             20,170

Interest Expense                 (    1,434)     (     1,377)       (       718)
Gain on Sale of Property                -              1,444                -
Other Income (Expense), Net      (      668)     (       968)        (    1,317)
                                  -----------     --------------    ------------

Income Before Income Taxes           23,293           21,991             18,135
Income Taxes                          8,888            8,662              7,229
                                   -----------      ----------      -----------

Net Income                         $ 14,405         $ 13,329           $ 10,906
                                   =========        =========           ========

Basic Earnings per Common Share:  $    1.61         $   1.49           $   1.21
                                  ===========       ===========       ==========

Basic Weighted Average Shares         8,929            8,938              9,019
 Outstanding                       ==========       ===========     ===========

Diluted Earnings Per Common Share  $   1.61        $    1.49           $   1.21
                                  ===========      ==========        ==========

Diluted Weighted Average Shares       8,951            8,943              9,019
  Outstanding                      ==========      ===========       ==========

See Accompanying Notes to Consolidated Financial Statements.

















                                       21

<PAGE>





MESTEK, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31,
1997, 1996 and 1995




                            Common Paid In  Retain  Treasury    Trans     Cumul.
(Dollars In Thousands)      Stock  Capital  Earn    Shares      Adj       Total
----------------------     ------- -------  ------  --------   -----     ------




Bal-Dec 31, 1994            $479   $15,434  $70,559  $(4,808)   $(932)  $80,732

Net Income                                   10,906                      10,906
Common Stock Repurchased                              (  641)            (  641)
Cumulative Translation Adj                                         49        49
                            ------  ------- -------- ------   -------    -------
Bal-Dec 31, 1995            $479   $15,434  $81,465  $(5,449)  $( 883)  $91,046

Net Income                                   13,329                      13,329
Common Stock Repurchase                               (  591)            (  591)
Cumulative Translation Adj                                      (  66)   (   66)
                            ------  -------- -------- ------- --------  --------
Bal-Dec 31, 1996            $479   $15,434  $94,794  $(6,040)  $( 949) $103,718

Net Income                                   14,405                      14,405
Common Stock Repurchased                              (   69)            (   69)
Cumulative Translation Adj                                      (  47)   (   47)
                            ------ --------- -------- -------- -------- --------
Bal-Dec 31, 1997            $479   $15,434  $109,199 $(6,109)  $( 996) $118,007
                            =====  =======  ======== ========   ====== ========


See Accompanying Notes to Consolidated Financial Statements









                                       22

<PAGE>



                                  MESTEK, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the years ended December 31,

                                                1997         1996          1995
                                              ----------- ------------- --------
                                                       (Dollars in thousands)
Cash Flows from Operating Activities:
  Net Income                                    $  14,405   $ 13,329   $ 10,906
Adjustments to Reconcile Net Income
     to Net Cash Provided by Operating
     Activities:
 Depreciation and Amortization                      6,548      5,143      3,940
 Provision for Losses on Accounts
     Receivable, net of write offs                    828        324     (   63)
 Gain on Sale of Property                              -     ( 1,444)        -
 Net Change in Minority Interests                  (    82)  (   491)        -
 Changes in assets and liabilities net
     of effects of acquisitions and dispositions:
  Accounts Receivable                              ( 2,498)  (  5,047)   (2,972)
  Unbilled Accounts Receivable                     (    74)  (     35)   (    5)
  Inventory                                        ( 6,894)     1,002    (3,176)
  Accounts Payable                                     430      1,109    ( ,823)
  Other Liabilities                                    247    ( 2,212)   (2,101)
  Progress Billings                                    306    (     5)       183

  Deferred Compensation                            (     4)   (     4)   (    3)
  Other                                                109      4,399    (4,248)
                                                 ------------ ------------------
Net Cash Provided by Operating
     Activities                                     13,321     16,068       628
                                                  ----------- ---------   ------
Cash Flows from Investing Activities:
   Capital Expenditures                           ( 11,740)   ( 7,213)   (2,963)
   Disposition of Property & Equipment                 -        4,642     2,727
   Acquisition of Businesses and Other
     Assets Net of Cash Acquired                  ( 12,886)   (14,172)  (15,595)
   Disposition of Business Segment                     -          -       6,000
                                                -------------- --------- ------
Net Cash (Used in)
     Investing Activities                         ( 24,626)  (16,743)  ( 9,831)
                                                  ---------  ---------  -------
Cash Flows from Financing Activities:
   Net Borrowings (Repayments) Under
     Revolving Credit Agreement                       3,500   ( 1,725)    2,406
   Principal Payments Under Long
     Term Debt Obligations                          ( 1,234)  ( 1,699)  ( 5,367)
   Proceeds from Issuance of Long
     Term Debt                                         -       15,000        -
   Purchase Price Payable - National Northeast         -         -        9,960
   Repurchase of Common Stock                        (   69)  (   591)   (  641)
                                                   ---------- ---------  -------
Net Cash Provided by Financing Activities             2,197    10,985     6,358
                                                   ---------- ---------- -------

Net Increase (Decrease) in Cash and
      Cash Equivalents                              ( 9,108)  10,310   ( 2,845)
Translation effect on Cash                          (    47) (    66)       49
Cash and Cash Equivalents -
      Beginning of Year                              11,649    1,405     4,201
                                                   --------- ---------  -------

Cash and Cash Equivalents -
      End of Year                                  $  2,494  $ 11,649 $  1,405
                                                  =========  ========= ========

See Accompanying Notes to Consolidated Financial Statements.

                                       23

<PAGE>




                                  MESTEK, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

         The consolidated  financial  statements include the accounts of Mestek,
Inc. and its subsidiaries, collectively referred to as the Company. All material
intercompany accounts and transactions have been eliminated in consolidation.


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 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 and unbilled receivables

         Revenue  from  product  sales is  recognized  at the time of  shipment.
Revenue  from the  licensing  of  software  applications  and  software  systems
development is recognized on the basis of completed contracts.
         Unbilled receivables represent revenue earned in the current period but
not billed to the customer until future dates, usually within one month.


Cash equivalents

         The Company  considers all highly liquid  investments  with a remaining
maturity of 90 days or less at the time of purchase to be cash equivalents. Cash
equivalents  include  investments  in an  institutional  money market fund which
invests in U.S.Treasury  bills,  notes and bonds,  and/or repurchase  agreements
backed by such obligations.


Inventories

         Inventories  are valued at the lower of cost or  market.  Approximately
89% of the cost of  inventories is determined by the last-in,  first-out  (LIFO)
method.


Property and equipment

         Property  and   equipment  are  carried  at  cost.   Depreciation   and
amortization are computed using the straight-line  and accelerated  methods over
the estimated  useful lives of the assets or the life of the lease,  if shorter.
When  assets  are  retired  or  otherwise  disposed  of,  the cost  and  related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in income for the period.  The cost of maintenance and repairs
is charged to income as incurred; significant improvements are capitalized.





                                       24

<PAGE>



Excess of Cost Over Net Assets of Acquired Companies (Goodwill)

         The  Company  amortizes  goodwill on the  straight  line basis over the
estimated   period  to  be  benefitted.   The  acquisitions  of  stock  of  Hill
Engineering,  Inc., and Coilmate, Inc., and the additional consideration paid in
respect of National  Northeast  Corporation,  as more fully described in Note 2,
resulted in goodwill of approximately  $10,064,000  which will be amortized over
25 years. The Company continually evaluates the carrying value of goodwill.  Any
impairments  would be recognized when the expected  future  operating cash flows
derived from the underlying  acquired businesses is less than the carrying value
of the goodwill.  Accumulated amortization of goodwill and other intangibles was
$2,514,000 and $1,584,000 at December 31, 1997 and 1996, respectively.


Advertising Expense

         Advertising  costs are charged to operations as incurred.  Such charges
 aggregated $3,738,000,  $3,193,000, and $2,942,000 for the years ended December
 31, 1997, 1996 and 1995 respectively.


Equity Investments

         The Company's 48.6 percent interest in H. B. Smith Company,
Incorporated (HBS) and 46.8 percent interest in EAFCO, Inc., (EAFCO), are
accounted for under the equity method.


Research and Development Expense

         Research  and  development   expenses  are  charged  to  operations  as
incurred. Such charges aggregated $1,628,000,  $1,018,000, and $894,000, for the
years ended December 31, 1997, 1996 and 1995, respectively.


Software Development Expenses

         The Company's  MCS, Inc.  subsidiary is in the business of  application
software and systems  development.  SFAS No. 86 requires that development  costs
incurred  subsequent to the  establishment of technological  feasibility for the
product be capitalized,  however, the Company does not believe that such amounts
are  material  to  the  consolidated  financial  statements.   Accordingly,  all
development  costs are charged to expense as incurred.  Such charges  aggregated
$1,575,000,  $1,338,000,  and $1,209,000,  for the years ended December 31,1997,
1996, and 1995, respectively.


Treasury shares

         Common stock held in the Company's treasury has been recorded at cost.


Earnings per common share

         Basic earnings per share have been computed using the weighted  average
number of  common  shares  outstanding.  Common  stock  options,  as more  fully
described in Note 15, were considered in the computation of Diluted earnings per
share but had no effect.








                                       25

<PAGE>



Currency Translation

         Assets and liabilities denominated in foreign currencies are translated
into U.S.  dollars at exchange  rates  prevailing on the balance sheet date. Net
foreign currency  transactions are reported in the results of operations in U.S.
dollars at average  exchange  rates.  Adjustments  resulting  from balance sheet
translations  are excluded from the  determination of income and are accumulated
in a separate component of shareholders' equity.

Income Taxes

         Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

Reclassification

         Reclassifications  are made periodically to previously issued financial
statements to conform with the current year presentation.

2. BUSINESS ACQUISITIONS

        On January 2, 1997, the Company's  National  Northeast  subsidiary  paid
$4,028,000  in additional  consideration  related to the purchase on October 30,
1995 of approximately  83% of the issued and outstanding  voting common stock of
National Northeast  Corporation and National Southeast  Corporation  (National).
This payment completes the Company's acquisition of National.

          On January 31,  1997,  the Company  acquired  91.01% of the issued and
outstanding common stock of Hill Engineering, Inc.(Hill) of Villa Park, Illinois
and Danville,  Kentucky.  Hill is a leading producer of precision tools and dies
for the gasket  manufacturing  and  roll-forming  industries and other specialty
equipment.  The purchase price paid for the acquired stock was  $5,141,000.  The
Company  has  accounted  for this  acquisition  under  the  purchase  method  of
accounting.

          On  November  3, 1997 the  Company  acquired  100% of the  issued  and
outstanding   common  stock  of  Coilmate,   Inc.   (Coilmate)  of  Southington,
Connecticut.  Coilmate is the leading producer of pallet decoiling equipment for
the metal  stamping and roll  forming  industries.  The purchase  price paid was
$3,521,000.  The Company has accounted for this  acquisition  under the purchase
method of accounting.

         Proforma  unaudited  results of  operations  for Hill  Engineering  and
Coilmate  for 1997 and 1996 are not provided  herein as they are not  considered
material.

          On  February  2,  1996,  the  Company  acquired  all of the issued and
outstanding  common stock of Omega Flex,  Inc. of Exton,  Pennsylvania  (Omega).
Omega is a manufacturer  of flexible  metal hose and related hose  fabrications.
The purchase price paid for the acquired stock was  $9,119,000.  The Company has
accounted for this  acquisition  under the purchase method of accounting.  Omega
has leased its manufacturing  and office  facilities  through December 31, 2001,
for $268,000 per year.

            On February  5, 1996,  the Company  acquired  certain  assets of the
press feeding and cut-to-length  line businesses of Rowe Machinery & Automation,
Inc. of Dallas,  Texas (Rowe).  Rowe is a leading  manufacturer of press feeding
and  cut-to-length  line  equipment  serving the  appliance,  office  furniture,
automotive,  and many other  markets.  The purchase  price paid was  $5,495,000,
including the assumed  liabilities of $1,900,000.  The Company has accounted for
this acquisition under the purchase method of accounting. The Company leased the
Rowe  facility in Dallas,  including  machinery and  equipment,  on a short term
basis through April of 1997.



                                       26

<PAGE>



         On August 30,  1996,  the  Company  acquired  substantially  all of the
operating  assets of Dahlstrom  Industries,  Inc.  (Dahlstrom) of Schiller Park,
Illinois.  Dahlstrom is a leading manufacturer of roll-forming equipment for the
metal  fabrication  industry.  The purchase price paid was $4,288,000  including
assumed   liabilities  of  $2,606,000.   The  Company  has  accounted  for  this
acquisition under the purchase method of accounting.

         Proforma unaudited results of operations for Omega, Rowe, Dahlstrom,
and Heat Exchangers, Inc. for 1996 and 1995 are not provided herein, as they are
not considered material.

         On October 30,  1995,  the Company  executed  an  agreement  to acquire
approximately  eighty-three  (83%) of the issued and  outstanding  voting common
stock  of  National  Northeast   Corporation  and  National  Southeast  Aluminum
Corporation   (National).   National  operates  custom  aluminum  extrusion  and
fabrication facilities located in Pelham, New Hampshire, Lawrence, Massachusetts
and Winter Haven,  Florida. The transaction was accounted for under the purchase
method of  accounting as of October 30, 1995 and,  accordingly,  the Company has
included the results of this acquired business in its consolidated  statement of
operations  from this date. The Company itself is a user of aluminum  extrusions
in its HVAC  segment.  The  consideration  for the purchase was $9.96 million in
cash plus certain  additional  consideration,  contingent upon a future level of
earnings,  as described above. The transaction was completed on January 2, 1996.
Subsequent to that date, the Company, through National, has purchased additional
shares raising its ownership percentage to approximately 88%.

         Proforma unaudited results of operations for 1995 and 1994,  reflecting
a hypothetical acquisition date of January 1, 1994 are as follows:

                                                1995             1994
 Total Revenues                               $267,234          $242,197
 Net Income                                     11,652             9,657
 Earnings Per Share                              $1.30             $1.06


         On November 15, 1995,  the Company  acquired  substantially  all of the
accounts receivable,  inventory, fixed and intangible assets of Heat Exchangers,
Inc., a manufacturer of portable air conditioning equipment in Skokie, Illinois.
The purchase price paid,  including the  assumption of $812,000 of  liabilities,
was  $6,764,000.  The acquisition was accounted for under the purchase method of
accounting.

        Under the  purchase  method of  accounting,  results  of  operations  of
acquired  businesses are included in consolidated  operations  subsequent to the
date of acquisition.


3. INVENTORIES

Inventories consisted of the following at December 31:

                                      1997                            1996
                                -----------------                 -----------

 Finished Goods                     $18,012,000                  $   11,004,000
 Work-in-progress                    15,386,000                      14,877,000
 Raw materials                       25,842,000                      24,924,000
                                   --------------                 -------------
                                     59,240,000                      50,805,000
 Less provision for LIFO
     method of valuation             (7,660,000)                     (7,540,000)
                                   --------------                  -------------
                                    $51,580,000                    $ 43,265,000
                                   ==============                  ============

       Progress  billings  exceeded  related  contract costs by $3,205,000,  and
$2,899,000, at December 31, 1997 and 1996, respectively.  As such, these amounts
are  reported  as  a  liability  in  the  accompanying   consolidated  financial
statements.




                                       27

<PAGE>




4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:
                                                               Depreciation and
                                                               Amortization Est.
                          1997                 1996              Useful Lives
                  ------------------    ------------------     ----------------

 Land                  $  2,045,000       $   1,092,000
 Buildings               18,319,000          13,657,000            19-39 Years
 Leasehold Improvements   4,352,000           4,186,000            15-39 Years
 Equipment               60,260,000          51,183,000             3-10 Years
                      -------------        ------------

                         84,976,000          70,118,000
 Accum.Depreciation     (44,261,000)        (38,679,000)
                     --------------        ------------

                      $  40,715,000        $ 31,439,000
                    ===============        ============


       The above amounts include $1,939,000,  and $437,000, at December 31, 1997
and 1996, respectively, in assets that had not yet been placed in service by the
Company. No depreciation was recorded in the related periods for these assets.

       Depreciation and  amortization  expense was $6,548,000,  $5,143,000,  and
$3,864,000, for the years ended December 31, 1997, 1996, and 1995, respectively.


5. EQUITY  INVESTMENTS

H. B. Smith Company Incorporated (HBS)

         The Company's investment in HBS is carried at a zero balance reflecting
the Company's equity in HBS' cumulative losses. The Company has no obligation to
fund future HBS operating losses.

Eafco, Inc. (EAFCO)

       On April 7, 1993,  the  Company  acquired a 46.8%  interest  in EAFCO,  a
Pennsylvania  company,  located in Boyertown,  Pennsylvania  in return for cash,
notes and certain items of foundry equipment valued in total at $8,643,000.

       EAFCO produces cast iron boiler sections for the boiler  industry.  EAFCO
used a portion of the proceeds to modernize its foundry facilities and equipment
and began  supplying  cast iron boiler  sections  to the  Company in 1993.  This
investment is accounted for in accordance  with the equity method of accounting.
The Company  reported  its share of EAFCO's  operating  results,  which were not
material, in Other Income (Expense) in the consolidated  financial statements in
1997, 1996, and 1995.

       The Company  purchases  approximately  $19,000,000 on an annualized basis
from EAFCO and HBS together.  The Company's  net  receivable  from EAFCO and HBS
together  was   $2,568,000  and  $1,352,000  at  December  31,  1997  and  1996,
respectively.










                                       28

<PAGE>



6. LONG TERM DEBT

       Long-Term Debt consisted of the following:


                                               Dec. 31,              Dec. 31,
                                                 1997                  1996
                                              ----------            -------

Senior Notes                                 $15,000,000          $15,000,000
Revolving Loan Agreement                       3,500,000               -
Other Bonds and Notes Payable                    829,000              362,000
                                            ---------------       ------------
                                              19,329,000           15,362,000
    Less Current Maturities                 ( 18,667,000)        (    115,000)
                                            ----------------       -------------
                                             $   662,000          $15,247,000
                                            =============        ===============

       Senior Notes - On April 5, 1996, the Company borrowed  $15,000,000 from a
commercial  insurance  company on an unsecured basis,  executing a Note Purchase
Agreement and related Senior Notes, (the Notes).  The Notes mature March 1, 1998
and bear  interest at 5.53%.  The Note Purchase  Agreement  contains a number of
financial  covenants which limit the Company's overall debt, its dividends,  and
in  certain   circumstances,   its   ability  to  effect   acquisitions   and/or
divestitures.  The Company's  management does not believe that these limitations
will materially  affect the Company's future  operations or strategic plans. The
Company  intends  paid off the Notes at maturity  using its  Revolving  Loan and
Letter of Credit Facility.

       Revolving Loan Agreement - On January 1, 1992, the Company entered into a
Revolving Loan Agreement and Letter of Credit  Facility (the  Agreement)  with a
commercial bank. The Agreement, originally set to expire on January 1, 1993, has
been amended and extended  through  April 30,  1998.  It currently  provides $50
million of unsecured  revolving credit,  $10 million of standby letter of credit
capacity,  and  $5,000,000 of unsecured  revolving  credit in Canadian  dollars.
Borrowings  under the  Agreement  bear  interest at a floating rate based on the
bank's prime rate less 1.75% or, at the discretion of the borrower, LIBOR plus a
quoted market  factor.  Management  expects to renew the Agreement on a one year
basis prior to April 30, 1998. The Revolving Loan Agreement  contains  financial
covenants  which  require  that the Company  maintain  certain  current  ratios,
working capital amounts,  capital bases and leverage ratios. This Agreement also
contains restrictions regarding the creation of indebtedness,  the occurrence of
mergers or  consolidations,  the sale of  subsidiary  stock,  and the payment of
dividends in excess of 50% of net income.  Commitment  fees on letters of credit
are 3/4% annually.  Outstanding  letters of credit,  principally  related to the
Company's insurance programs, aggregated $3,284,000, and $3,233,000, at December
31, 1997 and 1996, respectively.

       Other Bonds and Notes Payable - The Company is obligated  under the terms
of an  Industrial  Revenue Bond (the Bond) secured by its facility in Wyalusing,
Pennsylvania.  The Bond bears  interest at 5% and matures on July 25, 2001.  The
outstanding  balance  under the Bond at  December  31,  1997 was  $142,000.  The
Company's  National  Northeast  subsidiary  is  obligated  under a  non-interest
bearing subordinated Note Payable on which interest was imputed at 8%. The notes
are secured by certain pieces of equipment.  The  outstanding  balance under the
note at December 31, 1997 was $107,490 and the note matures on May 1, 2001.  The
Company's Hill Engineering  subsidiary is obligated under two Industrial Revenue
Bonds secured by certain of its operating assets. The outstanding balances under
the bonds at December 31, 1997 were  $130,000 and  $450,000,  respectively.  The
former of these bears interest at 9% and matures on November 1, 2000; the latter
bears interest at 80% of the prime rate and matures on September 1, 2005.

          Cash paid for  interest  was  $1,434,000,  $1,377,000,  and  $718,000,
during the years ended December 31, 1997, 1996, and 1995, respectively.






                                       29

<PAGE>



Maturities of long-term debt in each of the next five years are as follows:

                             1998 - $18,667,000
                             1999 -     175,000
                             2000 -     157,000
                             2001 -      86,000
                             2002 -      60,000

       The fair value of the Company's  long-term debt is estimated based on the
current  interest  rates  offered to the Company for debt of the same  remaining
maturities.  Management  believes the carrying value of debt and the contractual
values of the outstanding  letters of credit approximate their fair values as of
December 31, 1997.


7. SHAREHOLDERS' EQUITY

       The Company has authorized  common stock of 20,000,000 shares with no par
value,  and a stated value of $0.05 per share.  As of December 31, 1997, John E.
Reed, Chairman, President and CEO of the Company and Stewart B. Reed, a Director
of the Company and son of John E. Reed, together  beneficially own a majority of
the outstanding shares of the Company's common stock.

       By a vote of its  shareholders  at its annual meeting of  shareholders on
May 22, 1996,  the Company  amended its Articles of  Incorporation  to authorize
10,000,000  shares of a new class (or classes) of preferred stock (the Preferred
Stock) and to eliminate both its $5.00 convertible, non-cumulative,  non-voting,
$100 par,  preferred stock (the Convertible  Preferred) and its $6.00, $100 par,
redeemable preferred stock (the Redeemable  Preferred).  As of December 31, 1997
no shares of the Preferred Stock have been issued.
































                                       30

<PAGE>



8. INCOME TAXES

       Income  before  income  taxes  included  foreign  earnings   (losses)  of
($730,000),  ($474,000)  and  $217,000 in 1997,  1996,  and 1995,  respectively.
Income tax expense (benefit) consisted of the following:

                                           1997           1996          1995
                                       ------------   ------------    ----------
       Federal Income Tax:
         Current                        $7,188,000    $7,259,000     $5,894,000
         Deferred                          527,000   (   134,000)   (   174,000)
       State Income Tax:
         Current                         1,045,000     1,551,000      1,543,000
         Deferred                          166,000   (    29,000)   (    46,000)
       Foreign Income Tax:
         Current                            18,000        15,000         12,000
         Deferred                       (   56,000)       -                -
                                      -------------   -------------- -----------

       Income Taxes                     $8,888,000    $8,662,000     $7,229,000
                                       ============    ============   ==========

       Total  income  tax  expense  from  continuing  operations  differed  from
"expected" income tax expense,  computed by applying the U.S. federal income tax
rate of 35 percent to earnings before income tax, as follows:

                                          1997             1996         1995
                                      ------------  -------------    -----------

Computed "expected" income tax          $8,218,000    $7,736,000     $6,347,000
State income tax, net of
       federal tax benefit                 787,000       989,000        973,000
Foreign tax rate differential           (   22,000)    (  14,000)    (   15,000)
Change in beginning year balance
       of the valuation allowance for
       deferred tax assets allocated
       to income tax expense                  -            -          (  76,000)
Other - net                             (   95,000)    (  49,000)          -
                                        ------------   ----------    -----------

Income Taxes                            $8,888,000    $8,662,000     $7,229,000
                                        ============   ==========     ==========
























                                       31

<PAGE>



A  deferred  income  tax  (expense)   benefit  results  from  temporary   timing
differences  in the  recognition  of  income  and  expense  for  income  tax and
financial reporting purposes.  The components of and changes in the net deferred
tax assets  (liability)  which give rise to this  deferred  income tax (expense)
benefit for the year ended December 31, 1997 are as follows:

                                     Change
                       December 31, (Expense) December 31,
                                      1996          Benefit            1997
                                    ------------   ------------      -----------
Deferred Tax Assets:
Warranty Reserve                     $  775,000     ($ 209,000)       $ 566,000
Compensated Absences                    821,000     (   99,000)         722,000
Inventory Valuation                     364,000        104,000          468,000
Accounts Receivable Valuation           682,000        176,000          858,000
State Tax Operating Loss
   Carryforward                         141,000         17,000          158,000
Foreign Tax Operating Loss
   Carryforward                         712,000         56,000          768,000
Deferred Income on Sale of Assets
   to Nonconsolidated Investees         213,000       ( 54,000)         159,000
Other                                     0             17,000           17,000
                                       -----------    -----------    -----------

Total Gross Deferred Tax Assets       3,708,000          8,000        3,716,000

Less Valuation Allowance            (   119,000)           -          ( 119,000)
                                     ------------   --------------    ----------
       Deferred Tax Assets            3,589,000          8,000        3,597,000
                                    ------------    -------------      ---------
Deferred Tax Liabilities:
Prepaid Expenses                    (   578,000)   (   155,000)     (   733,000)
Depreciation and Amortization       (   587,000)   (   810,000)     ( 1,397,000)
Other                               (   321,000)       321,000            0
                                    ------------     ----------     -----------

       Deferred Tax Liabilities      (1,486,000)   (   644,000)      (2,130,000)
                                    -----------      -------------   -----------
       Net Deferred Tax Assets      $ 2,103,000    ( $  36,000)      $1,467,000
                                    ===========       ===========   ============


       A valuation  allowance of $195,000 was  established at December 31, 1993.
This allowance reflects  uncertainties as to the realization of a portion of the
foreign  tax  operating  loss  carryforward  identified  above.  This  valuation
allowance  was  adjusted  downward to $119,000 on December  31, 1995 because the
foreign  operations  resulted in earnings for the year. At December 31, 1997, no
additional  valuation  allowance has been established  relative to the remaining
foreign  tax  operating   loss   carryforward   or  state  tax  operating   loss
carryforward.  It is  management's  belief  that it is more likely than not that
these carry forwards will be utilized prior to their expiration. The Company has
available  to it a number  of tax  planning  opportunities  which  support  this
conclusion.

       At  December  31,  1997,  the Company  has state tax  operating  loss and
foreign  tax  operating  loss  carryforwards  of  approximately  $3,288,000  and
$1,724,000,  respectively,  which are  available to reduce  future  income taxes
payable,  subject to  applicable  "carryforward"  rules and  limitations.  These
losses begin to expire after the following years:

                                  State                             Foreign

       2000                    $   410,000                        $1,724,000
       2007                      2,878,000                             -
                                 ---------                        ----------
                               $ 3,288,000                        $1,724,000
                                ==========                        ==========

       Cash paid for income taxes was $9,027,000, $7,354,000 and $8,222,000, for
the years ended December 31, 1997, 1996 and 1995 respectively.




                                       32

<PAGE>



9. LEASES

       The Company  leases various  manufacturing  facilities and equipment from
companies  owned by  certain  officers  and  directors  of the  Company,  either
directly or indirectly,  through  affiliates.  The leases generally provide that
the Company will bear the cost of property taxes and insurance.

       Details of the  principal  operating  leases with  related  parties as of
December  31, 1997  including  the effect of renewals  and  amendments  executed
subsequent to December 31, 1997 are as follows:

                                     Date                 Basic        Minimum
                                      of                  Annual       Future
                                    Lease     Term        Rental       Rentals
Sterling Realty Trust
Land and Building - Main           12/17/84  15 years    $ 192,000  $   384,000
Land and Building - Engineering    07/01/83  15 years       42,000       21,000
Land and Building - South Complex  01/01/94  15 years      256,800    2,824,800
Machinery & Equipment              01/01/93   5 years       41,460         *
(Westfield, Farmville and Wrens
     Locations)

Machinery Rental
Machinery & Equipment              01/01/93   5 years      223,980         *
(Westfield, Farmville, Wrens and
     South Windsor Locations)

Elizabeth C. Reed Trust
Machinery and Equipment            01/01/93   5 years       14,100         *

Production Realty
Land and Building                  01/01/97   2 years      114,000      114,000

Rudbeek Realty Corp.
(Farmville Location)               11/02/92 17.66 years    366,000    5,100,000

MacKeeber
(South Windsor Location)           01/01/97   8 years      324,600    2,272,200

     * Lease renewal  process  incomplete as of March 6, 1998;  rentals month to
month pending renewal.

     Rent expense for operating  leases,  including those with related  parties,
was $2,719,000, $3,454,000 and $2,581,000 for the years ended December 31, 1997,
1996 and 1995, respectively.

     Future minimum lease payments under all noncancelable leases as of December
31, 1997 are as follows:
                                                       Operating
       Year Ending December 31,                          Leases

                  1998                                 $ 2,542,000
                  1999                                   2,303,000
                  2000                                   1,814,000
                  2001                                   1,531,000
                  2002                                   1,263,000
            After 2002                                   5,250,000

                                                       ------------
Total minimum lease payments                           $14,703,000
                                                       ============


                                       33

<PAGE>



10. EMPLOYEE BENEFIT PLANS

       The Company maintains a qualified  non-contributory  profit-sharing  plan
covering all eligible  employees.  Contributions to the plan were $1,011,000,  $
872,000,  and $828,000,  for the years ended December 31, 1997,  1996, and 1995,
respectively. Contributions to the Plan are defined as 3.0% of gross wages up to
the current Old Age, Survivors,  and Disability,  (OASDI), limit and 6.0% of the
excess over the Old Age, Survivors,  and Disability,  (OASDI), limit, subject to
the maximum allowed under the Employee  Retirement Income Security Act, (ERISA).
The plan's  vesting terms are 20% vesting after 3 years of service,  40% after 4
years, 60% after 5 years, 80% after 6 years, and 100% vesting after 7 years.

       In  addition to the  profit-sharing  plan,  the  Company  also offers the
following defined contribution benefit plans:

       The Company maintains a Retirement  Savings Plan qualified under Internal
Revenue Code Section  401(k) for  employees  covered under  regional  collective
bargaining agreements.  Service eligibility  requirements differ by division and
collective  bargaining  agreement.  Participants  may elect to have up to 15% of
their compensation  withheld,  up to the maximum allowed by the Internal Revenue
Code.  Participants may also elect to make nondeductible voluntary contributions
up to an  additional  10% of their  gross  earnings  each year  within the legal
limits. The Company contributes  differing amounts depending upon the division's
collective  bargaining  agreement.  Contributions are funded on a current basis.
Contributions to the Plan were $269,000,  $247,000,  and $252,000, for the years
ended December 31, 1997, 1996, and 1995, respectively.

       The Company  maintains  a separate  qualified  401(k)  Plan for  salaried
employees  not  covered  by a  collective  bargaining  agreement,  who  chose to
participate, and who have at least one year of 1,000 hours or more of service at
the time of  participation.  Participants  may  elect to have up to 15% of their
compensation  withheld,  up to the maximum allowed by the Internal Revenue Code.
Participants may also elect to make nondeductible  voluntary contributions up to
an additional 10% of their gross earnings each year within the legal limits. The
Company  contributes  $0.25 of each $1.00 deferred by participants and deposited
to the Plan not to exceed 1.50% of an employee's compensation.  The Company does
not match any amounts for withholdings  from  participants in excess of 6.00% of
their   compensation   or  for  any   nondeductible   voluntary   contributions.
Contributions  are  funded on a current  basis.  Contributions  to the Plan were
$392,000,  $349,000,  and $243,000 for the years ended December 1997,  1996, and
1995, respectively.

       One  of  the  Company's   subsidiaries   maintains  a  qualified  defined
contribution target benefit pension plan which covers  substantially all of it's
employees.  Pension costs are accrued annually based on contributions  earned by
participants under plan provisions as determined by an independent  actuary. The
total expense  related to this pension plan for the twelve months ended December
31, 1997, 1996, and 1995 was $65,000, $70,000, and $64,000, respectively.

       The  Company  maintains  bonus  plans  for its  officers  and  other  key
employees. The plans generally allow for annual bonuses for individual employees
based  upon the  operating  results  of  related  profit  centers in excess of a
percentage of the Company's  investment in the respective  profit  centers.  The
Company maintains an employment agreement with it's chief executive officer.

       Approximately 28% of the Company's employees are covered under collective
bargaining agreements,  of which 17% are covered under agreements expected to be
renewed in 1998.











                                       34

<PAGE>



11. COMMITMENTS AND CONTINGENCIES

       The Company is subject to several legal actions and  proceedings in which
various monetary claims are asserted.  Management,  after  consultation with its
corporate  counsel and outside  counsel,  does not anticipate  that any ultimate
liability  arising  out of all  such  litigation  and  proceedings  will  have a
material adverse effect on the financial condition of the Company.

       The  Company  is  obligated  as  guarantor  with  respect  to the debt of
MacKeeber  Associates Limited  Partnership,  a Connecticut Limited  Partnership,
under  an  Industrial  Development  Bond  issued  in  1984  by  the  Connecticut
Development Authority. The balance outstanding under the bond as of December 31,
1997 was $1,060,000.

       The Company is subject to numerous laws and  regulations  that govern the
discharge  and  disposal of  materials  into the  environment.  Liabilities  for
environmental  remediation  and/or  restoration are recorded when it is probable
that obligations have been incurred and the amounts can be reasonably estimated.
The Company is not aware, at present, of any material administrative or judicial
proceedings  against  the  Company  arising  under any  federal,  state or local
environmental  protection laws or regulations  (Environmental  Laws). There are,
however,  a  number  of  activities  in  which  the  Company  is  engaged  under
Environmental  Laws.  The Company is engaged in various  matters with respect to
obtaining,  amending or renewing  permits required under  Environmental  Laws to
operate  each of its  manufacturing  facilities.  The  Company or various of its
subsidiaries  have been  named or  contacted  by state  authorities  and/or  the
Environmental Protection Agency (the EPA) regarding the Company's liability as a
potentially  responsible  party (PRP) for the remediation of several sites, none
of which, in the judgement of management,  would have a material  adverse impact
on the financial  condition or results of operations of the Company.  There have
been  releases of  hazardous  materials  on a few parcels of property  which are
presently leased or operated by the Company.  Based on the information presently
available to it, management does not believe that the costs of addressing any of
the releases  will have a material  adverse  effect on the  Company's  financial
position or the results of operations.


12. SEGMENT INFORMATION

       The Company operates in the following segments: heating,  ventilating and
air conditioning  equipment  (HVAC);  computer  software  development and system
design (Computer  Systems);  and the manufacture of metal handling machinery and
metal  fabricating,  (Metal  Products),  formerly  known  as the  Coil  Handling
Equipment Segment.

       The HVAC  segment  includes  the  design  and  manufacture  primarily  of
residential,  commercial and  industrial  hydronic heat  distribution  products,
including  finned-tube and baseboard radiation equipment,  gas-fired heating and
ventilating  equipment,  air damper  equipment and related  products used in air
distribution.

       The   Computer   Systems   segment   includes  the   development,   sale,
installation, and maintenance of business applications software.

       The Metal  Products  Segment  includes  the  design  and  manufacture  of
metal-forming equipment, the extrusion and fabrication of aluminum products, and
the fabrication of flexible metal hose.

       Intersegment  sales are not  significant.  Operating income is defined as
net sales directly related to a segment's  operations,  less operating expenses.
Identifiable  assets by segments are those assets used in the operations of that
segment. The Company has not identified any of its assets as corporate assets.








                                       35

<PAGE>



       The following  table  presents  segment  information  for the years ended
December 31, 1997, 1996, and 1995. Segment information reflecting the operations
of acquired businesses is shown only for the periods following acquisition.


                               1997                    1996                1995
                          -------------          -------------       ---------

                             (Dollars in thousands)
Total Revenues
     HVAC                     $229,423               $ 228,115        $ 218,456
     Computer Systems           17,029                  16,114           15,255
     Metal Products             81,326                  55,298           12,154
                               ----------             -----------     ----------

     Total Revenues           $327,778               $ 299,527         $245,865
                               ========               =========        =========

 Operating Profit
     HVAC                     $ 17,846                  16,142           15,495
     Computer Systems            3,289                   3,063            2,749
     Metal Products              4,260                   3,687            1,926
                             ----------             -----------      -----------

     Total Operating Profit   $ 25,395              $   22,892         $ 20,170
                              ========              ==========         ========



     Other information regarding the segments for the years 1997, 1996, and 1995
is as follows:

                                                     1997

                       Identifiable assets         Capital          Depreciation
                         (at year-end)          expenditures *         expense
                             (Dollars in thousands)

     HVAC                    $ 123,960          $  4,047                $  2,727
     Computer Systems            5,045               166                     119
     Metal Products             62,112             7,527                   2,736
                             ----------        ---------                --------

          Total               $191,117           $11,740                 $ 5,582
                              ========           =======                 =======



                                                     1996

                       Identifiable assets        Capital           Depreciation
                          (at year-end)        expenditures *          expense
                             (Dollars in thousands)

     HVAC                     $122,365          $   3,950              $   3,020
     Computer Systems            4,554                204                     20
     Metal Products             43,091              3,059                  1,818
                           -------------      --------------        ------------

         Total                $170,010           $  7,213              $   4,858
                             ===========         ===========        ============







                                       36

<PAGE>



                                                     1995

                            Identifiable assets      Capital        Depreciation
                                (at year-end)     expenditures *      expense
                             (Dollars in thousands)

     HVAC                     $   114,381        $      2,416       $      3,535
     Computer Systems               4,650                  25                 69
     Metal Products                22,400                 522                260
                              -----------       ----------------  --------------

         Total                $   141,431        $      2,963       $     3,864
                              ===========        ============        ===========

1996 and 1995 Segment data has been reclassified for purposes of comparability.

     * Excludes capital assets acquired by acquisition.

     The Company sells its HVAC products  primarily to contractors,  installers,
and end users in the construction industry, wholesale distributors, and original
equipment manufacturers. At December 31, 1997 and 1996, accounts receivable, net
of  allowances,  totaled  $52,696,000  and  $49,577,000,   respectively.   These
receivables  are  generally of high quality,  and the Company's  history is that
losses from bad debts are not excessive.  Management  believes that  established
reserves at December 31, 1997 are adequate to absorb any such losses.

13. SELECTED QUARTERLY  INFORMATION (UNAUDITED)

     The table below sets forth  selected  quarterly  information  for each full
quarter  of 1997 and  1996.  (Dollars  in  thousands  except  per  common  share
amounts).

1997                       1st            2nd           3rd                 4th
----                     Quarter       Quarter        Quarter            Quarter

Total Revenues          $ 75,216      $ 74,868       $ 87,327           $ 90,367
Gross Profit            $ 20,427      $ 20,016       $ 24,980           $ 29,026

Net Income              $  3,253      $  2,241       $  3,841           $  5,070
Per Common Share:
     Basic               $   .36      $   .25        $    .43            $   .57
     Diluted                 .36          .25             .43                .57

1996                        1st           2nd           3rd                4th
----                      Quarter     Quarter         Quarter            Quarter

Total Revenues           $66,317      $68,191         $79,067            $85,952
Gross Profit             $19,222      $18,678         $21,273            $23,055

Net Income               $ 3,142      $ 2,741         $ 3,228            $ 4,218
Per Common Share:
     Basic               $   .35      $   .31         $   .36            $   .47
     Diluted                 .35          .31             .36                .47


14. COMMON STOCK BUYBACK PROGRAM

     In  1997  and  1996  the  Company   continued   its  program  of  selective
"open-market"  and  odd-lot  purchases.  3,466 and  45,500 of such  shares  were
acquired in 1997 and 1996,  respectively.  All such shares are  accounted for as
treasury shares.



                                       37

<PAGE>





15. STOCK OPTION PLANS

     On March 20, 1996 the Company adopted a stock option plan, the Mestek, Inc.
1996 Stock Option Plan, (the Plan), which provides for the granting of incentive
and  nonqualified  stock  options  on up to  500,000  shares of stock to certain
employees  of the  Company  and  other  persons,  including  directors,  for the
purchase  of the  Company's  common  stock at fair  market  value at the date of
grant.  The Plan was  approved by the  Company's  shareholders  on May 22, 1996.
Options  granted  under the plan vest over a five-year  period and expire at the
end of ten years. During 1996, 90,000 options were granted, at an exercise price
of $13.75,  to four employees and these options are  outstanding at December 31,
1997.

     As of March 20, 1996, the date of grant,  the fair value of the options was
estimated  using the Black-  Scholes model with the following  weighted  average
assumptions:

     Expected life (years)                                             10
     Interest                                                       6.56%
     Volatility                                                     22.5%
     Dividend yield                                                    0%

     Effective  with 1996,  the Company  adopted the  provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation,
SFAS No. 123. As permitted by the statement,  the Company has chosen to continue
to account  for  stock-based  compensation  using the  intrinsic  value  method.
Accordingly,  no  compensation  expense has been  recognized for its stock-based
compensation  plan. Had the fair value method of accounting  been applied to the
Company's stock option plan, with  compensation  cost for the Plan determined on
the basis of the fair value at the grant  date for awards in 1997 and 1996,  the
Company's net income and earnings per share would have been as follows:

                                                   1997                1996
                                                   ----                ---
Net Earnings - as reported                        $14,405             $13,329
Net Earnings - pro forma                          $14,326             $13,268
Earnings per share - as reported                    $1.61               $1.49
Earnings per share - pro forma                      $1.61               $1.48


The application of SFAS 123 for pro forma  disclosure may not be  representative
of future effects of applying the statement.





















                                       38

<PAGE>






                                    PART III

     With  respect  to items 10  through  13,  the  Company  will  file with the
Securities and Exchange  Commission,  within 120 days of the close of its fiscal
year, a definitive proxy statement pursuant to Regulation 14-A.


Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information  regarding  directors  of the Company  will be set forth in the
Company's proxy  statement  relating to the annual meeting of shareholders to be
held May 12,  1998,  and to the  extent  required,  is  incorporated  herein  by
reference.  Information regarding executive officers of the Company is set forth
under the caption "Executive Officers".


Item 11 - EXECUTIVE COMPENSATION

     Information  regarding  executive  compensation  will be set  forth  in the
Company's proxy  statement  relating to the annual meeting of shareholders to be
held May 12,  1998,  and,  to the extent  required,  is  incorporated  herein by
reference.

     The report of the  Compensation  Committee of the Board of Directors of the
Company shall not be deemed  incorporated by reference by any general  statement
incorporating  by  reference  the  proxy  statement  into any  filing  under the
Securities  Exchange Act of 1934,  and shall not otherwise be deemed filed under
such Act.


Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information  regarding  security ownership of certain beneficial owners and
management will be set forth in the Company's  proxy  statement  relating to the
annual  meeting of  shareholders  to be held May 12,  1998,  and,  to the extent
required, is incorporated herein by reference.


Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information  regarding certain  relationships and related transactions will
be set forth in the Company's proxy statement  relating to the annual meeting of
shareholders  to be  held  May  12,  1998,  and,  to  the  extent  required,  is
incorporated herein by reference.
















                                       39

<PAGE>







                                     PART IV


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


                                      INDEX
                                                                     Pages of
                                                                    this report


Independent Auditors' Reports                                           Page 19

Financial Statements:

(a)(1)     Consolidated Balance Sheets as of December 31, 1997
           and 1996                                             Pages 20 and 21

     Consolidated Statements of Income for the Years Ended
     December 31, 1997, 1996, and 1995                                  Page 22

     Consolidated Statements of Shareholders' Equity for
     the Years Ended December 31, 1997, 1996, and 1995                  Page 23

     Consolidated Statements of Cash Flows for the Years
     Ended December 31, 1997, 1996, and 1995                            Page 24

     Notes to the Consolidated Financial Statements            Pages 25 thru 39

(a)(2)  Financial Statement Schedules


      II. Valuation and Qualifying Accounts                             Page 42

     All other financial statement schedules required by Item 14(a)(2) have been
     omitted because they are  inapplicable or because the required  information
     has  been  included  in the  consolidated  financial  statements  or  notes
     thereto.

(a)(3)   Exhibits
     The Exhibit Index is set forth on Pages 43 through 45

(b)    No reports on Form 8-K were filed during the three months ended  December
       31, 1997.


     No annual report to security  holders as of December 31, 1997 had been sent
to  security  holders  and no proxy  statement,  form of  proxy  or other  proxy
soliciting  material  has been  sent by the  registrant  to more than ten of the
registrant's  security  holders with  respect to any annual or other  meeting of
security  holders  held or to be held in 1998.  Such  annual  report to security
holders,  proxy statement or form of proxy will be furnished to security holders
subsequent to the filing of this Annual Report on Form 10-K.



                                       40

<PAGE>








                                                                  Schedule II




                                  MESTEK, INC.
                        Valuation and Qualifying Accounts
                  Years ended December 31, 1997, 1996 and 1995



                                      Charged
                          Bal. at     to cost                            Bal.
                          at Beg.     and          Other     Deduct.     at end
Year     Description      of Year     expense     (Desc.)   (Desc.)      of Year
----     -----------      -------      -------     -------   -------    --------

1997     Allowance
         for doubtful
         accounts        $1,701       $1,124      $16(1)     $(312)(2)   $2,529

1996    Allowance
            for doubtful
            accounts     $1,377       $  740      $26(1)     $(442)(2)    $1,701

1995     Allowance
         for doubtful
         accounts        $1,440       $  867      $76(1)   $(1,006)(2)    $1,377



(1)    Includes recoveries of amounts previously  written-off and allowances for
       doubtful accounts of acquired companies.

(2) Bad debts written off.
















                                       41

<PAGE>







EXHIBIT INDEX

         Those documents  followed by a parenthetical  notation are incorporated
herein by  reference  to  previous  filings  with the  Securities  and  Exchange
Commission as set forth below.

Exhibit No.
Description
****************

3.1     Restated Articles of Incorporation of Mestek, Inc., as amended       (K)

3.2     By-laws of Mestek, Inc. as amended through April 1, 1993             (D)

10.1     Employment Agreement dated January 1, 1982 between Mestek
         and John E. Reed                                                    (A)

10.2     Lease dated July 1, 1983 between Sterling Realty Trust (lessor)
         and Mestek, Inc. (lessee)                                           (D)

10.3     Lease dated  December  17, 1984  between  Mestek  (lessee) and Sterling
         Realty Trust (lessor), as amended on November 1, 1991 (D)

10.4     Lease dated January 1, 1994 between Mestek (lessee) and Sterling    (D)
         Realty Trust (lessor)

10.5     Amended and restated lease agreement dated as of July 1, 1997 between
         Mestek, Inc. (lessee) and Rudbeek Realty Corp. (lessor)             (K)

10.6     Amended and restated lease agreement dated as of January 1, 1997    (D)
         between Vulcan Radiator Division, Mestek, Inc. (lessee) and
         MacKeeber Associates Limited Partnership (lessor).

10.7     Equipment  Lease  Agreement  dated January 1, 1993,  between (D) Mestek
         (lessee) and Sterling Realty Trust (lessor)

10.8     Loan Agreement  dated as of December 1, 1984 among Reed National Corp.,
         Rudbeek  Realty Corp.  and The Pitt County  Industrial  Facilities  and
         Pollution  Control   Financing   Authority  and  the  Promissory  Notes
         thereunder,  two  Guaranty  Agreements  dated as of  December  1,  1984
         between Reed National Corp.,  NCNB National Bank of (A) North Carolina,
         and Rudbeek Realty Corp.

10.9     Loan  Agreement  dated  as of  May  1,  1984  among  the  Connecticut
         Development  Authority (the "CDA"),  MacKeeber  Limited  Partnership,
         Vulcan  Radiator  Corporation  and the Promissory  Notes  thereunder;
         Guaranty of Vulcan  Radiator  Corporation  and Reed National Corp. to
         the Connecticut Bank and Trust Company, N.A.                        (A)

10.10    Note Agreement dated as of July 1, 1987 between Mestek              (B)
         Inc. and Massachusetts Mutual Life Insurance Company.


                                       42

<PAGE>



10.11    Indemnification  Agreements entered into between Mestek, Inc. and its
         Directors  and  Officers  and  the  Directors  of  its   wholly-owned
         subsidiaries  incorporated by reference as provided herein, except as
         set forth in the attached schedule.                                 (C)
10.12    Acquisition Agreement dated July 29, 1993 for the Purchase
         of Stock of Chester Environmental, Inc. between Duquesne
         Enterprises, Inc. and Mestek, Inc.                                  (D)

10.13    Variable Interest Rate Cognovit Note dated December 15,
         1993 between Mestek, Inc. and The Mary Staebell Trust               (D)

10.14    Loan Agreement and Promissory Note between Mestek, Inc.
         and ABN Amro Bank, N.V., dated July 9, 1993                         (D)

10.15    Loan Agreement and Promissory Note dated June 7, 1993
         between The First National Bank of Boston and Mestek, Inc.          (D)

10.16    Mortgage Note dated  February 1, 1986 between Arrow United  Industries,
         Inc. and Chemical  Bank;  said Note assumed by (D) Mestek,  Inc. in the
         purchase of certain assets of Arrow United Industries, Inc.

10.17    Closing Agreement dated February 10, 1995 between Shougang          (E)
         Mechanical Equipment of Pennsylvania, Inc. and West Homestead
         Joint Venture Corporation.

10.18    Equipment Lease Agreement dated January 1, 1993 between             (E)
         Machinery Rental Company (Lessor) and Vulcan Radiator
         Corporation (Lessee).

10.19    Equipment Lease Agreement dated January 1, 1993 between Machinery   (E)
         Rental Company (Lessor) and Mestek, Inc. (Lessee).

10.20    Equipment Lease Agreement dated January 1, 1993 between Elizabeth   (E)

10.21    Asset Purchase  Agreement dated  September 9, 1994 between Mestek,  (E)
         Inc. and Aztec  International,  Ltd.,  debtor-in-possession;  and Aztec
         Sensible Cooling, Inc., debtor-in-possession, and the Amendment thereto
         dated October 31, 1994.

10.22    Stock Purchase  Agreement  relating to the  acquisition of stock of (F)
         National  Northeast  Corporation  dated October 30, 1995 by and between
         Mestek, Inc. as Buyer and David Weener,  Wayne Frerichs,  Mark McCrill,
         and Jon Morrison as Sellers; Stock Purchase Agreement dated October 30,
         1995  relating  to the  acquisition  of  stock  of  National  Southeast
         Aluminum  Corporation  by and between  Mestek,  Inc. as Buyer and David
         Weener, Wayne Frerichs, Mark McCrill, and Jon Morrison as Sellers.

10.23    Asset Purchase Agreement dated November 15, 1995 by and between Mestek,
         Inc. and Heat Exchangers, Inc. and Lease.                           (G)

10.24    Stock Purchase Agreement dated February 2, 1996 for the purchase of
         stock of Omega Flex, Inc. between Mestek, Inc. and Koji Shimada and
         Lease.                                                              (G)



                                       43

<PAGE>




10.25    Agreement for the Purchase and Sale of Assets dated January 12, 1996 by
         and between Mestex, Ltd., Rowe Machinery & Automation, Inc., and
         Met-Coil Systems Corporation, and the Amendment thereto dated
         February 5, 1996 and Lease.                                         (G)

10.26    Stock Purchase Agreement dated October 27, 1997 between Formtek, Inc.
         and Joseph Julian.                                                  (J)

10.27    Asset Purchase Agreement dated October 2, 1995 by and between Mestek,
         Inc. and Honeywell, Inc.                                            (H)

10.28    Agreement of Sale dated July 5, 1995 between The Hydrotherm Corporation
         and SET Realty, L.L.C. for the purchase and sale of real property in
         Northvale, New Jersey.                                              (H)

10.29    Purchase Contract dated November 15, 1995 for the purchase and sale of
         real property in Dunmore, Pennsylvania between Peritek, Inc. and
         R.R. Donnelly & Sons Company.                                       (H)

10.30    1996 Mestek, Inc. Stock Option Plan.                                (I)
10.31    Amended and Restated Revolving Loans and Foreign Exchange Facilities
         Agreement between Mestek, Inc. and Bank Boston dated July 15, 1997. (J)

10.31    Agreement for The Purchase and Sale of Assets between Formtek, Inc. (K)
         (Purchaser)and Dalhstrom Industries, Inc. (Seller) dated August 8,1996.

10.32    Lease dated January 1, 1997 between Pacific/ Air Balance, Inc. (Lessee)
         and Production Realty, Inc. (Lessor).                               (J)

10.33    Stock  Purchase  Agreement  between  Formtek,  Inc.(Purchaser)  and (K)
         Maurice Hill Trust dated August 16, 1991,  Thomas Nedbal,  Donald Hill,
         Robert  Martinelli,  Elmer  Utley,  and Allen  Reczek  (Sellers)  dated
         January 30, 1997.

10.34    Letter Agreement between Mestek,  Inc. and the Travelers  Insurance (K)
         Company, dated March 1, 1996, regarding 5.53% Senior Notes due March 1,
         1998.

10.35    Supplemental Executive Retirement Agreements entered into between   (J)
         Mestek, Inc. and certain of its officers.

11.1     Schedule of Computation of Earnings per Common Share.

22.1     Subsidiaries of Mestek, Inc.

         (A)    Filed  as an  Exhibit  to the  Registration  Statement  33-7101,
                effective July 31, 1986

         (B)    Filed as an Exhibit to the Current Report on Form 8-K dated July
                2, 1987

         (C)    Filed as an Exhibit  to the  Annual  Report on Form 10-K for the
                year ended December 31, 1987

         (D)    Filed as an Exhibit  to the  Annual  Report on Form 10-K for the
                year ended December 31, 1993

         (E)    Filed as an Exhibit  to the  Annual  Report on Form 10-K for the
                year ended December 31, 1994

         (F)    Filed as an  Exhibit  to the  Current  Report  on Form 8-K dated
                November 13, 1995.

         (G)    Filed as an  Exhibit  to the  Current  Report  on Form 8-K dated
                February 13, 1996.

         (H)    Filed as an Exhibit  to the  Annual  Report on Form 10-K for the
                year ended December 31, 1995.

         (I)    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the
                quarter ended September 30, 1996.

         (J)    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the
                quarter ended September 30, 1997.

         (K)    Filed as an Exhibit  to the  Annual  Report on Form 10-K for the
                year ended December 31, 1996.


                                       44

<PAGE>




                Exhibit 11.1


                                  MESTEK, INC.
              Schedule of Computation of Earnings Per Common Share




                            Years Ended December 31,
                                 1997 1996 1995
                                       ----            ----            ----


Net income for earnings per share    $ 14,405         $ 13,329        $10,906
                                    --------         --------        -------


Basic weighted average number of common shares
   outstanding                          8,929            8,938          9,019
                                      ========         ========      =========


Basic earnings per common share         $1.61            $1.49          $1.21
                                       ========         ========     ==========

Diluted weighted average number of common shares
  outstanding                           8,951            8,943          9,019
                                       ========         ========     ==========

Diluted earnings per common share       $1.61            $1.49          $1.21
                                       ========         ========      =========




























                                       45

<PAGE>



                                                                 Exhibit 22.1




                              LIST OF SUBSIDIARIES


                                                             Jurisdiction of
       Name                                                  Formation

   Advanced Thermal Hydronics, Inc.                          Delaware

   Alapco Holding, Inc.                                      Delaware

   Deltex Partners, Inc.                                     Delaware

   Formtek, Inc.                                             Delaware

        Cooper-Weymouth, Peterson, Inc.                      Delaware

        Hill Engineering, Inc.                               Illinois

        CoilMate, Inc.                                       Connecticut

   Gentex Partners, Inc.                                     Texas

        Mestex, Ltd. (Texas limited partnership)             Texas

        Yorktown Properties, Ltd. (Texas limited partnership)Texas

   HBS Acquisition Corporation                               Delaware

   Lexington Business Trust (Massachusetts business trust)   Massachusetts

   Mestek Canada, Inc.                                       Ontario

   Mestek Foreign Sales Corporation                          U.S. Virgin Islands

   Mestek Technology, Inc.                                   Delaware

   MCS, Inc.                                                 Pennsylvania

   National Northeast Corporation                            Delaware

   Omega Flex, Inc.                                          Pennsylvania

   Pacific/Air Balance, Inc.                                 California

   TEK Capital Corporation                                   Delaware

   Westcast, Inc.                                            Massachusetts




                                       46

<PAGE>



                                                         Exhibit 10.12

                         SCHEDULE OF DIRECTORS/OFFICERS
                           Indemnification Agreements

     The Indemnification Agreement entered into by the Directors and/or Officers
of Mestek, Inc. and certain Directors of Mestek's wholly-owned  subsidiaries are
identical in all respects,  except for the name of the  indemnified  director or
officer and the date of execution.

     Set forth  below is the  identity of each  director  and officer of Mestek,
Inc. and the date upon which the above Indemnification Agreement was executed by
the Director or Officer.

     Director and/or Officer                                 Year of Execution

     A. Warne Boyce                                                  1987
     E. Herbert Burk                                                 1987
     William J. Coad                                                 1987
     David R. Macdonald                                              1987
     David M. Kelly                                                  1996
     Winston R. Hindle, Jr.                                          1995
     David W. Hunter                                                 1987
     John E. Reed                                                    1987
     Stewart B. Reed                                                 1987
     James A. Burk                                                   1987
     R. Bruce Dewey                                                  1990
     Robert G. Dewey                                                 1988
     Nicholas Kakavis                                                1987
     Robert K. McCauley                                              1995
     Richard J. McKnight                                             1987
     Walter J. Markowski                                             1990
     John F. Melesko, Jr.                                            1987
     Jack E. Nelson                                                  1996
     William S. Rafferty                                             1990
     Stephen M. Shea                                                 1987
     Charles J. Weymouth                                             1995

                                       47

<PAGE>



     Kevin R. Hoben                                                  1996
     Stephen M. Schwaber                                             1997
     Phil K. LaRosa                                                  1997
     Robert P. Kandel                                                1997
     Robert F. Neveu                                                 1997
     Richard E. Kessler                                              1997
     Timothy P. Scanlan                                              1997













































                                       48

<PAGE>





                                   SIGNATURES


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

                                  MESTEK, INC.




Date: March 27, 1998                    By: /S/ John E. Reed
-------------------------------------   ----------------
                       John E. Reed, Chairman of the Board
                           and Chief Executive Officer

Date:  March 27, 1998                   By: /S/ Stephen M. Shea
------------------------------------   -------------------
                                        Stephen M. Shea, Senior Vice President
                        Finance, Chief Financial 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.




Date:  March 27, 1998                    By: /S/ A. Warne Bouce
--------------------------------------   ------------------
                                         A. Warne Boyce, Director




Date:  March 27, 1998                     By: /S/ E. Herbert Burk
------------------------------------      -------------------
                            E. Herbert Burk, Director




Date:  March 27, 1998                    By: /S/ William J. Coad
-----------------------------------      -------------------
                            William J. Coad, Director










                                       49

<PAGE>









Date:  March 27, 1998                     By: /S/ David M. Kelly
---------------------------------------   ------------------
                            David M. Kelly, Director




Date:  March 27, 1998                      By: /S/ Winston R. Hindle, Jr.
---------------------------------------    --------------------------
                                           Winston R. Hindle, Jr., Director




Date:  March 27, 1998                       By: /S/ David W. Hunter
-------------------------------------       -------------------
                            David W. Hunter, Director




Date:  March 27, 1998                        By: /S/ David R. Macdonald
------------------------------------         ----------------------
                                             David R. Macdonald, Director




Date:  March 27, 1998                          By: /S/ John E. Reed
------------------------------------           ----------------
                             John E. Reed, Director




Date: March 27, 1998                            By: /S/ Stewart B. Reed
--------------------------------------          -------------------
                                                Stewart B. Reed, Director




                                       50