business prior to its sale on March 1, 2005. For the full year, continuing operations accounts receivable levels were lowered by $7.2 million as the impact of increased balances reflecting higher sales levels was more than offset by the Company’s continued participation in customer sponsored payment programs and other collection actions. The Company intends to continue using these customer sponsored programs to accelerate the collection of customer receivables as long as they are offered at a cost effective discount rate. Continuing operations inventory levels for the full year were lowered by $8.7 million, due to actions undertaken by management in the second half of the year. Production levels at the Company’s manufacturing plants were lowered and the level of purchases from outside third parties was reduced in order to lower inventory levels which had risen due to a slow start to the normal selling season and inventory added by the merger with Modine. While these production cutbacks resulted in increased levels of unabsorbed overhead being changed against operations, the Company was able to generate cash which was utilized to pay down debt levels and fund operations. Accounts payable levels rose by $8.5 million as the Company attempted to balance vendor payments with the continuing trend towards longer customer payment terms. During the second half of 2005, continuing operations generated $20.8 million of cash flow from operating activities which offset the $19.4 million of cash flow used by operations during the first half of 2005. This cash flow in the second half of the year is largely due to inventory reduction programs initiated by the Company. These programs included cutbacks in production and purchasing levels and actions to lower inventory levels added as a result of the Modine Aftermarket merger. Additional funds were also generated by the collection of accounts receivable. Funds generated were utilized for operating activities and to fund restructuring actions with occurred in the second half of the year.

Cash flow generated from operating activities during 2004 was $13.5 million. Of this amount, $9.2 million was generated by continuing operations and $4.3 million by our discontinued operation. Income from continuing operations was a loss of $0.3 million compared to a net loss of $5.3 million in 2003 reflecting increased sales levels and the Company’s cost reduction activities. Continuing operations accounts receivable levels decreased by $7.0 million as the Company accelerated the collection of certain customer receivables utilizing cost effective customer sponsored payment programs administered by financial institutions, which offset the impact of increased receivable balances as a result of higher sales levels. These accelerated collections were done in an effort to offset the continuing trend towards longer customer payment terms by ‘‘blue chip’’ customers, at a cost effective discount rate. Inventory levels grew $3.6 million in order to support the higher anticipated sales levels and the sourcing of product from off shore suppliers. Inventory turns approximated the levels achieved in 2003 reflecting management’s efforts to balance inventory levels in line with customer service requirements. Accounts payable were reduced by $0.3 million. Accrued expenses rose by $1.7 million due in part to management incentive accruals which were zero a year ago.

In 2003, cash flow from operating activities was $8.7 million. Continuing operations provided $7.8 million and our discontinued operation provided $0.9 million. Accounts receivable levels decreased by $10.5 million as the Company accelerated the collection of certain customer receivables utilizing a cost effective customer sponsored payment program administered by a financial institution. Inventory levels grew by $6.2 million due to the soft market conditions experienced for most of the year, which included a shorter than normal peak selling season for heat exchanger and air conditioning products. In addition, the higher inventory levels reflected the purchase of a competitor’s inventory from a major customer during the fourth quarter and the requirement to build inventory in anticipation of new Automotive and Light Truck customer programs which were expected to commence in early 2004. Accounts payable rose by $8.4 million as a result of the growth in inventory levels as well as the Company’s efforts to balance payable outflows with cash collections.

Capital expenditures by continuing operations were $8.9 million for 2005, compared with $3.2 million in 2004. Expenditures for 2005 were primarily associated with the opening of a new distribution center located in Southaven, Mississippi, the implementation of new product introductions and cost reduction activities. At December 31, 2005, there are no material outstanding capital commitments. Capital expenditures are estimated to approximate $10.0 million to $11.0 million in 2006, which will include expenditures associated with the upgrade of computer systems in Mexico and Europe, the conversion

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of Modine computer systems in the U.S. to the Company’s, new product introductions and cost reduction actions. It is anticipated that these expenditures will either be funded by operations, leasing actions or from borrowings under the existing revolving credit agreement.

During 2005, in a non-cash transaction, the Company entered into a long-term capital lease for the purchase of racking to be used at its new distribution center. In addition, during the third quarter of 2004, in a non-cash transaction, the Company sold $1.6 million of inventory and fixed assets, associated with its condenser product line, at its net book value, to a vendor in return for a reduction in the Company’s accounts payable to that vendor and a 24-month supply agreement commencing on January 1, 2005.

As further disclosed in Note 5 of the Notes to Consolidated Financial Statements, on July 22, 2005, the Company completed its merger with Modine Aftermarket. Transaction costs approximated $8.7 million, of which $6.4 million has been paid during 2005, $0.9 million was payable at December 31, 2005 and $1.4 million had been paid during 2004. During 2005, the Company had expenditures of $3.0 million associated with restructuring activities impacting Modine facilities which were accrued on the acquisition balance sheet.

On March 1, 2005, the Company completed the sale of its Heavy Duty OEM business for $17 million in cash. These proceeds were utilized to lower outstanding borrowings under the revolving credit agreement and fund operations.

On May 1, 2003, the Company completed the sale of its Gando Drive headquarters facility in New Haven, Connecticut and entered into a lease of its currently occupied space used for offices, test facility and tube mill operations. As a result, the Company repaid the $5.0 million Industrial Revenue Bond on the facility, created greater availability of funds under its credit agreement and eliminated an underutilized asset. The gain on the sale of the building, of approximately $1.6 million, is being recognized equally over the six-year initial term of the lease on the facility.

Cash dividends paid to a preferred shareholder were approximately $0.1 million in 2005, 2004 and 2003.

At December 31, 2005, total debt outstanding was $41.9 million; $2.1 million lower than a year earlier. This reduction reflects the utilization of funds generated by operating activities and from the sale of the Heavy Duty OEM business. At December 31, 2005, the Company had $17.5 million available for future borrowings under its Loan Agreement and was in compliance with the covenants contained in the Loan Agreement.

Total debt at the end of 2004 was $44.0 million compared with $50.9 million at the end of 2003. This $6.9 million reduction reflects the utilization of funds generated by operating activities.

In 2003, total debt was lowered by $8.7 million reflecting the pay down of the $5.0 million Industrial Revenue Bond, at the time the Company’s headquarters facility was sold, and the utilization of cash flow generated by operations.

On November 19, 2004, the Company entered into an amendment to its Loan Agreement which increased loan availability by $1.0 million as a result of a reduction in an availability reserve contained in the Agreement. In addition, the minimum adjusted net worth requirement under the agreement was increased from $37.0 million to $40.0 million for all periods after September 30, 2004.

On July 22, 2005, in connection with the merger of the Company with the aftermarket business of Modine, the Company amended its $80.0 million credit facility (the ‘‘Loan Agreement’’) with Wachovia Capital Financial Corporation (New England), formerly known as Congress Financial Corporation (New England) effective July 21, 2005. The amended credit facility consists of a revolving credit line with maximum borrowings of $78.3 million and a $1.7 million term loan, each of which was amended to expire on July 21, 2009 (subject to renewal on an annual basis thereafter). Under the amended credit facility, the interest rate is 2% over a Eurodollar-based rate through April 21, 2006 and ranges from 1.75% to 2.25% over such rate thereafter. The amended credit facility also provides that the Company may pay dividends or repurchase capital stock of up to $3.0 million annually, as long as excess availability is at least $18.0 million for the 30 consecutive days both prior to and

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following the payment date. The amended credit facility also amends the borrowing base calculation such that (i) up to $55.0 million in respect of eligible inventory may be counted and (ii) availability reserves may be revised for dilution in respect of the Company’s accounts. The amended facility adds financial covenants for (i) minimum EBITDA (tested quarterly commencing September 30, 2005 and not required if excess availability exceeds $15.0 million), (ii) minimum excess availability ($5.0 million at all times through June 30, 2006 and $13.0 million immediately after giving effect to the Modine merger), and (iii) capital expenditures (not to exceed $12.0 million in any calendar year end, if financed under the credit facility). The Company was required to, and did, satisfy customary conditions to the amendment of the credit facility and obtained Wachovia’s consent to the merger.

On October 20, 2005, the Company further amended its Loan and Security Agreement. Under the amended Loan Agreement, the Unused Line Fee was reduced through June 30, 2006. The amended Loan Agreement also changes financial covenants for (i) minimum EBITDA (tested quarterly commencing September 30, 2005 and not required if Excess Availability exceeds $15.0 million) such that minimum EBITDA for the September 30, 2005 and December 31, 2005 test dates is a higher negative amount, and (ii) minimum Excess Availability ($5.0 million at all times through June 30, 2006) so as to give no effect to the limitations on Excess Availability imposed by the Maximum Credit under the amended Loan Agreement of $80.0 million or the Revolving Loan Ceiling. The amended Loan Agreement also added a financial covenant requiring that consolidated inventory, excluding the Company’s NRF and Mexpar subsidiaries, as of December 31, 2005 would not exceed $122.0 million. The Company was in compliance with this covenant. The Company was required to, and did, satisfy customary conditions to the amendment of the Loan Agreement.

The future liquidity and ordinary capital needs of the Company in the short term are expected to be met from a combination of cash flows from operations and borrowings under the Loan Agreement. The Company’s working capital requirements peak during the second and third quarters, reflecting the normal seasonality in the Automotive and Light Truck product lines. In addition, the Company’s future cash flow may be impacted by industry trends lengthening customer payment terms or the discontinuance of currently utilized customer sponsored payment programs. The loss of one or more of the Company’s significant customers or changes in payment terms to one or more major suppliers could also have a material adverse effect on the company’s results of operations and future liquidity. The Company utilizes customer-sponsored programs administered by financial institutions in order to accelerate the collection of funds and offset the impact of these lengthening customer payment terms. The Company intends to continue utilizing these programs as long as they are a cost effective tool to accelerate cash flow. The Company believes that its cash flow from operations, together with borrowings under its Loan Agreement, will be adequate to meet its near-term anticipated ordinary capital expenditures and working capital requirements. However, the Company believes that the amount of borrowings available under the Loan Agreement would not be sufficient to meet the capital needs for major growth initiatives, such as significant acquisitions. If the Company were to implement major new growth initiatives, it would have to seek other sources or forms of capital. However, no assurance can be given that the Company would be successful in securing such additional sources or forms of capital.

As a result of the merger with the aftermarket business of Modine, the Company’s liquidity improved as the assets being acquired were debt free and the acquired balance sheet included $6.3 million in cash. We presently estimate that the costs of the business realignment and other actions necessary to effectively integrate the business will be funded from cash transferred in the merger, generated by the operations acquired, including cost savings, or result from borrowings under the Company’s Loan Agreement.

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The following table summarizes the Company’s outstanding material contractual obligations as of December 31, 2005:

				Payments Due by Period
Type of Obligation				Less Than 1 Year				2-3 Years				4-5 Years				Over 5 Years				Total
				(in thousands)
Revolving credit facility(1)				$	38,805			$	—			$	—			$	—			$	38,805
Term loan					340				680				567				—				1,587
Pension plan contribution					3,305	(2)			—				—				—				3,305
Capital lease obligations					560				848				133				—				1,541
Operating leases					8,336				10,258				5,068				2,254				25,916
Purchase obligations					26,243	(3)			—				—				—				26,243
Total				$	77,589			$	11,786			$	5,768			$	2,254			$	97,397

(1)	Borrowings classified as a current liability in the Consolidated Balance Sheet included in this Report. Based upon year end borrowing levels and interest rates, annual interest cost would approximate $2.4 million.

(2)	Pension plan contributions reflect expected disbursements in 2006 as calculated by the Company’s third-party actuary. Estimated contributions for future years are not currently determinable as they will be impacted by changes in discount rates, pension plan performance and other factors.

(3)	Purchase obligations for goods and services outstanding at the end of the year which normally are consumed over a period of less than 12 months. This is not reflective of total consumption over a 12-month period.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. A company’s critical accounting estimates, as set forth by the U.S. Securities and Exchange Commission, are those which are most important to the portrayal of its financial condition and results of operations and often require the utilization of estimates or subjective judgment. Based upon this definition, we have identified the critical accounting estimates addressed below. Although we believe that our estimates and assumptions are reasonable, they are based upon information presently available. Actual results may differ from these estimates under different assumptions or conditions. The Company also has other key accounting policies, which involve the use of estimates, which are further described in Note 2, ‘‘Summary of Significant Accounting Policies’’, of the Notes to Consolidated Financial Statements contained herein.

Revenue Recognition.    Sales are recognized either when products are shipped to the customer or when products are received by the customer in accordance with the invoice shipping terms. Sales are recorded net of sales rebates, cash discounts, returns and advertising and other allowances. Accruals for warranty costs, sales returns and allowances are provided at the time of sale based upon historical experience or agreements currently in place with customers. The Company will also accrue for unusual warranty exposures at the time the exposure is identified and quantifiable based upon analyses of expected product failure rates and engineering cost estimates. In connection with multi-year agreements with certain customers, the Company incurs customer acquisition costs which are capitalized and amortized over the life of the agreement. The Company also establishes reserves for uncollectible trade accounts receivable based upon historical experience, anticipated business trends and the current economic conditions. Customer account balances are written off at the time they are deemed fully uncollectible. Changes in our customers’ financial condition or other factors could cause our estimates of uncollectible accounts receivable or the amortization periods of customer acquisition costs to vary.

Inventory Valuation.    Inventories are valued at the lower of cost (first-in, first-out method) or market. This requires the Company to make judgments about the likely method of disposition of its inventory and expected recoverable value upon disposition. Inventories are reviewed on a continuing basis, and

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provisions are also made for slow moving and obsolete inventory based upon estimates of historical or expected usage as well as the expected recoverable value upon disposition.

Impairment of Long-Lived Assets.    In the event that facts and circumstances indicate that the carrying amounts of a business unit’s long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows of the business unit, associated with the long-lived assets, would be compared to the asset’s carrying amount to determine if a write-down is required. If this review indicates that the assets will not be recoverable, the carrying value of the Company’s assets would be reduced to their estimated fair value. The estimates used in determining whether an impairment exists involve future cash flows of each business unit, which are based upon expected revenue trends, cost of production and operating expenses.

Income Taxes.    Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets if it is more likely than not that those such assets will not be realized. Changes to the valuation allowance are based on the evaluation of all available evidence supporting the Company’s ability to utilize tax benefits prior to their expiration.

Pension Plans.    The Company establishes and periodically reviews the assumptions used in the measurement of its retirement plans. The discount rate used in the assumption will change in relation to increases or decreases in applicable published bond indices. At December 31, 2005, the discount rate for domestic plans was 5.88%. The return on assets for domestic plans reflects the long-term rate of return on plan assets expected to be realized over a ten year or longer period. As such, it will normally not be adjusted for short-term trends in the stock or bond markets. In addition, the rate of return will reflect the investment allocation currently used to manage the pension portfolio. The Company’s domestic pension plan assumptions currently include a 9% long-term annual rate of return, which is based upon the current portfolio allocation, long-term rates of return for similar investment vehicles and economic and other indicators of future performance. Differences between actual and assumed portfolio performance as well as the impact of changes in discount rates are included in the calculation of the Company’s accrued pension costs by a third-party actuary. In the future, the unrecognized net loss, of $6.9 million at December 31, 2005, along with changes in any of the underlying pension assumptions, and the ongoing performance of the plan assets, will impact future funding requirements, minimum pension liability adjustments and net pension cost amounts. Absent any other changes, a 1% change in the discount rate increases or decreases pension expense by $0.3 million per year, the pension benefit obligation by $3.5 million and the minimum pension liability adjustment in Shareholders’ Equity by $4.1 million.

Loss Reserves.    The Company has other loss exposures such as self-insurance, environmental and litigation for which it determines the need and amount of reserves. Reserves are established using estimates, judgments and consistent methodologies to determine the exposure and ultimate potential liability.

Inflation

The overall impact of the low rate of United States inflation in recent years has resulted in no significant impact on labor costs and general services utilized by the Company. The principal raw materials used in the Company’s replacement radiator and heater core product lines are copper and brass. The Company also uses aluminum for its radiator, charge air cooler, condenser and heater core product lines. Copper, brass, aluminum and other primary metals used in the Company’s business are generally subject to commodity pricing and variations in the market prices for such materials. Although these materials are available from a number of vendors, the Company has chosen to concentrate its sources with a limited number of long-term suppliers. The Company typically executes purchase orders for its copper and brass requirements three to nine months prior to the actual delivery date. In periods of abnormally high commodity market prices, the Company will place orders

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only for its current requirements. In either case, the purchase price for such copper, brass and aluminum is established at the time such orders are placed by the Company and not at the time of delivery.

The Company also manages its metals commodity pricing exposure by attempting to pass through any cost increases to its customers. During 2003, 2004 and 2005, commodity prices increased significantly over the prior year. While the Company has been successful in passing through some price increases on its heavy duty products, on its automotive and light truck heat exchange products, it has been unable to do so. As a result, the Company has been forced to generate other cost reduction activities in order to offset these impacts. There is no assurance that the Company will be successful in raising prices to its customers in the future or that it will be able to generate sufficient cost reductions to offset rising commodity prices. The Company currently does not use financial derivatives or other methods to hedge transactions with respect to its metals consumption.

Environmental Matters

The Company is subject to Federal, foreign, state and local laws designed to protect the environment and believes that, as a general matter, its policies, practices and procedures are properly designed to reasonably prevent risk of environmental damage and financial liability to the Company. On January 27, 2003, the Company signed a Consent Agreement with the State of Connecticut Department of Environmental Protection. Under the agreement the Company will voluntarily initiate the investigation and cleanup of environmental contamination on property occupied by a wholly-owned subsidiary of the Company over 20 years ago. The Company also believes there will not be any material adverse impact to its financial results due to the investigation and cleanup activities. The Company also believes it is reasonably possible that environmental related liabilities might exist with respect to other industrial sites formerly owned or occupied by the Company. Based upon information currently available, the Company believes that the cost of any potential remediation for which the Company may ultimately be responsible will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.

The Company currently does not anticipate any material adverse effect on its consolidated results of operations, financial condition or competitive position as a result of compliance with Federal, state, local or foreign environmental laws or regulations. However, risk of environmental liability and charges associated with maintaining compliance with environmental laws is inherent in the nature of the Company's business, and there is no assurance that material environmental liabilities and compliance charges will not arise.

Recently Issued Accounting Standards

In December 2004, the FASB issued a revised SFAS No. 123(R), ‘‘Share-Based Payment.’’ SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services or incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments, focusing primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions) and recognize the cost over the period during which an employee is required to provide service in exchange for the award. The Company is required to adopt SFAS No. 123(R) as of January 1, 2006. The ultimate impact, of recording non-cash stock compensation expense, on the future results of operations as a result of adopting SFAS No 123(R) is not determinable as it is dependent on the number of options granted after the effective date.

Forward-Looking Statements and Cautionary Factors

Statements included in this filing, which are not historical in nature, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements relating to the future financial performance of the Company are subject to the detailed

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factors set forth in Item 1A – Risk Factors, included in this Form 10-K. Such statements are based upon the current beliefs and expectations of Proliance management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. When used in this filing the terms ‘‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘may,’’ ‘‘objective,’’ ‘‘plan,’’ ‘‘possible,’’ ‘‘potential,’’ ‘‘project,’’ ‘‘will’’ and similar expressions identify forward-looking statements. The forward-looking statements contained herein are made as of the date hereof, and we do not undertake any obligation to update any forward-looking statements, whether as a result of future events, new information or otherwise.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

The Company has certain exposures to market risk related to changes in interest rates, foreign currency exchange rates, credit and commodities.

The Company’s interest rate risk is sensitive to changes in interest rates. At December 31, 2005, the Company had a Loan Agreement, under which $40.4 million was outstanding. The weighted average interest rate on the Loan Agreement during 2005 was 5.85%. Interest on the Loan Agreement is based on, at the Company’s option, the Eurodollar loan rate plus a Eurodollar margin or the prime rate. The Eurodollar margin for the period July 21, 2005 through April 21, 2006 is 2% while thereafter it is between 1.75% and 2.25%. The impact of a 10% change in market interest rates would not have a material impact on the Company’s results of operations.

The Company has sales and manufacturing facilities in Europe and Mexico. As a result, changes in foreign currency exchange rates and changes in the economic conditions in Europe and Mexico could affect financial results. The Company has accounted for transactions associated with these foreign operations in accordance with the guidance established under Financial Accounting Standards No. 52, ‘‘Foreign Currency Translation.’’ As of December 31, 2005, the Company’s foreign subsidiaries had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of $32.8 million. The potential decrease in the net current assets from a hypothetical 10% adverse change in quoted foreign currency exchange rates at December 31, 2005 would be $3.2 million. This sensitivity analysis assumes a parallel shift in foreign currency exchange rates. Exchange rates rarely all move in the same direction relative to the dollar. This assumption may overstate or understate the impact of changing exchange rates on individual assets and liabilities denominated in a foreign currency.

The Company is subject to a concentration of credit risk primarily with its trade accounts receivable. The largest concentration is with retail customers in the Company’s Domestic segment where the top five customers comprise 47% of net sales in 2005 and 30% of the outstanding trade accounts receivable balance at December 31, 2005. The loss of one or more of these customers could have a material adverse effect on the Company’s results of operations. The Company grants credit to customers who meet pre-established credit requirements, and generally requires no collateral from its customers. Estimates of potential credit losses are based upon historical experience, customer information and management’s expectations of the industry and the overall economy. As of December 31, 2005, the Company had no other significant concentration of credit risk.

Certain risks may arise in the various commodity markets in which the Company participates. Commodity prices in the copper, brass and aluminum markets may be subject to changes based on availability. The Company conducts its purchasing of such commodities generally through three to nine month purchase order commitments; however, this practice may be modified in periods of rising prices. See ‘‘Raw Materials and Suppliers’’ in Item 1 of this Report and ‘‘Inflation’’ in Item 7 of this Report for additional information on commodity purchasing.

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Item 8.    Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

				Page
Financial Statements:
Reports of Independent Registered Public Accounting Firms				31
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003				33
Consolidated Balance Sheets at December 31, 2005 and 2004				34
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003				35
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003				36
Notes to Consolidated Financial Statements				37
Financial Statement Schedule:
Schedule II – Valuation and Qualifying Accounts for the Years Ended December 31, 2005, 2004 and 2003				62

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Proliance International, Inc.:

We have audited the accompanying consolidated balance sheets of Proliance International, Inc. and subsidiaries (formerly Transpro, Inc.) as of December 31, 2005 and 2004 and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended. We have also audited the information for the years ended December 31, 2005 and 2004 set forth in financial statement schedule II included herein. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial statement schedule are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Proliance International, Inc. and subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein for the years ended December 31, 2005 and 2004.

/s/ BDO Seidman, LLP
New York, NY March 30, 2006

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Proliance International, Inc. (formerly known as Transpro, Inc.):

In our opinion, the consolidated statements of operations, cash flows, and changes in stockholders’ equity for the year ended December 31, 2003 present fairly, in all material respects, the results of operations and cash flows of Proliance International, Inc. (formerly known as Transpro, Inc.) and its subsidiaries for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein for the year ended December 31, 2003 when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
Hartford, CT March 17, 2004, except for Note 4, for which the date is June 14, 2005

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PROLIANCE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

				Years Ended December 31,
				2005				2004				2003
Net sales				$	296,838			$	218,433			$	198,862
Cost of sales					247,430				174,575				164,398
Gross margin					49,408				43,858				34,464
Selling, general and administrative expenses					66,313				39,987				36,183
Restructuring charges					3,854				—				1,490
Operating (loss) income from continuing operations					(20,759	)			3,871				(3,209	)
Interest expense					7,958				4,812				3,739
Loss from continuing operations before taxes					(28,717	)			(941	)			(6,948	)
Income tax (benefit)					(986	)			(592	)			(1,641	)
Loss from continuing operations					(27,731	)			(349	)			(5,307	)
Income from discontinued operation, net of $506, $200 and $478 of income tax in 2005, 2004 and 2003					848				5,527				771
Gain on sale of discontinued operation, net of income tax of $2,331					3,899				—				—
Extraordinary income – negative goodwill					13,053				—				—
Net (loss) income				$	(9,931	)		$	5,178			$	(4,536	)
Basic (loss) income per common share:
From continuing operations				$	(2.59	)		$	(0.06	)		$	(0.76	)
From discontinued operation					0.08				0.78				0.11
From gain on sale of discontinued operation					0.36				—				—
From extraordinary income – negative goodwill					1.22				—				—
Net (loss) income per common share – basic				$	(0.93	)		$	0.72			$	(0.65	)
Diluted (loss) income per common share:
From continuing operations				$	(2.59	)		$	(0.06	)		$	(0.76	)
From discontinued operation					0.08				0.78				0.11
From gain on sale of discontinued operation					0.36				—				—
From extraordinary income – negative goodwill					1.22				—				—
Net (loss) income per common share – diluted				$	(0.93	)		$	0.72			$	(0.65	)
Weighted average common shares – basic					10,714				7,106				7,106
Weighted average common shares and equivalents – diluted					10,714				7,106				7,106

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

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PROLIANCE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

				December 31,
ASSETS				2005				2004
Current assets:
Cash and cash equivalents				$	4,566			$	297
Accounts receivable (less allowance of $5,391 and $2,746)					58,296				34,429
Inventories					121,050				71,211
Deferred income taxes					—				1,490
Other current assets					4,955				2,708
Current assets of discontinued operation					—				11,403
Total current assets					188,867				121,538
Property, plant and equipment, net					20,333				16,135
Long-term assets of discontinued operation					—				6,565
Other assets					8,139				5,621
Total assets				$	217,339			$	149,859
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving credit facility and current portion of long-term debt				$	39,705			$	43,904
Accounts payable					50,956				26,647
Accrued liabilities					29,702				17,453
Current liabilities of discontinued operation					—				8,176
Total current liabilities					120,363				96,180
Long-term debt					2,228				120
Retirement and postretirement obligations					5,822				4,896
Deferred income taxes					899				620
Other long-term liabilities					778				1,208
Total long-term liabilities					9,727				6,844
Commitments and contingent liabilities
Stockholders’ equity
Preferred stock, $.01 par value: Authorized 2,500,000 shares; issued and outstanding as follows:
Series A junior participating preferred stock, $.01 par value:
Authorized 200,000 shares; issued and outstanding – none at December 31, 2005 and 2004					—				—
Series B convertible preferred stock, $.01 par value:
Authorized 30,000 shares; issued and outstanding – 12,781 at December 31, 2005 and 2004 (liquidation preference $1,278)					—				—
Common stock, $.01 par value: Authorized 47,500,000 and 17,500,000 shares, issued 15,297,769 and 7,147,959 shares, outstanding 15,255,833 and 7,106,023 shares at December 31, 2005 and 2004, respectively					152				71
Paid-in capital					105,642				55,041
Accumulated deficit					(11,848	)			(1,853	)
Accumulated other comprehensive loss					(6,682	)			(6,409	)
Treasury stock, at cost, 41,936 shares at December 31, 2005 and 2004					(15	)			(15	)
Total stockholders’ equity					87,249				46,835
Total liabilities and stockholders’ equity				$	217,339			$	149,859

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

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PROLIANCE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

				Years Ended December 31,
(in thousands)				2005				2004				2003
Cash flows from operating activities:
Net (loss) income				$	(9,931	)		$	5,178			$	(4,536	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities from continuing operations:
Income from discontinued operation					(1,354	)			(5,727	)			(1,249	)
Gain on sale of discontinued operation					(6,230	)			—				—
Depreciation and amortization					4,547				4,707				4,626
Deferred income taxes					1,123				(870	)			—
Provision for uncollectible accounts receivable					2,433				509				499
Non-cash restructuring charges					1,851				—				68
Gain on sale of building					(276	)			(276	)			(181	)
Extraordinary income – negative goodwill					(13,053	)			—				—
Changes in operating assets and liabilities, net of acquisitions opening balance sheet:
Accounts receivable					7,182				6,987				10,509
Inventories					8,677				(3,596	)			(6,215	)
Accounts payable					8,538				(331	)			8,445
Accrued liabilities					771				1,665				326
Other					(2,456	)			938				(4,485	)
Net cash provided by operating activities of continuing operations					1,822				9,184				7,807
Net cash provided by operating activities of discontinued operation					852				4,278				897
Net cash provided by operating activities					2,674				13,462				8,704
Cash flows from investing activities:
Capital expenditures by continuing operations					(8,892	)			(3,188	)			(4,476	)
Capital expenditures by discontinued operation					—				(1,701	)			(694	)
Sales and retirements of fixed assets					901				194				115
Cash on Modine Aftermarket acquisition balance sheet					6,300				—				—
Cash expenditures for restructuring costs on Modine Aftermarket acquisition balance sheet					(3,039	)			—				—
Cash expenditures for merger transaction costs					(6,426	)			(1,369	)			—
Proceeds from sale of discontinued operation					17,000				—				—
Net proceeds from sale of building					—				—				5,178
Net cash provided by (used in) investing activities					5,844				(6,064	)			123
Cash flows from financing activities (all from continuing operations):
Dividends paid					(64	)			(64	)			(64	)
Net repayments under revolving credit facility					(2,525	)			(6,068	)			(2,695	)
Repayment of Industrial Revenue Bond					—				—				(5,000	)
Repayments under term loan and capitalized lease obligations					(1,278	)			(1,140	)			(957	)
Deferred debt issuance costs					(299	)			—				(71	)
Proceeds for stock option exercises					15				—				—
Net cash used in financing activities					(4,151	)			(7,272	)			(8,787	)
Effect of exchange rate changes on cash					(98	)			—				—
Net increase in cash and cash equivalents					4,269				126				40
Cash and cash equivalents at beginning of year					297				171				131
Cash and cash equivalents at end of year				$	4,566			$	297			$	171

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

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PROLIANCE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)

				Common Stock				Paid-in Capital				Treasury Stock				(Accumulated Deficit)				Accumulated Other Comprehensive (Loss)				Total Stockholders' Equity
Balance at December 31, 2002				$	71			$	55,041			$	(15	)		$	(2,367	)		$	(4,492	)		$	48,238
Net loss					—				—				—				(4,536	)			—				(4,536	)
Adjustment for minimum pension liability					—				—				—				—				(18	)			(18	)
Comprehensive loss					—				—				—				—				—				(4,554	)
Preferred stock dividends declared					—				—				—				(64	)			—				(64	)
Balance at December 31, 2003					71				55,041				(15	)			(6,967	)			(4,510	)			43,620
Net income					—				—				—				5,178				—				5,178
Adjustment for minimum pension liability					—				—				—				—				(1,899	)			(1,899	)
Comprehensive income					—				—				—				—				—				3,279
Preferred stock dividends declared					—				—				—				(64	)			—				(64	)
Balance at December 31, 2004					71				55,041				(15	)			(1,853	)			(6,409	)			46,835
Net loss					—				—				—				(9,931	)			—				(9,931	)
Adjustment for minimum pension liability					—				—				—				—				347				347
Foreign current translation adjustment					—				—				—				—				(620	)			(620	)
Comprehensive loss					—				—				—				—				—				(10,204	)
Common stock issued for option exercises (4,000 shares)					—				15				—				—				—				15
Common stock issued for merger (8,145,810 shares)					81				50,586				—				—				—				50,667
Preferred stock dividends declared					—				—				—				(64	)			—				(64	)
Balance at December 31, 2005				$	152			$	105,642			$	(15	)		$	(11,848	)		$	(6,682	)		$	87,249

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

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PROLIANCE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1    Description of Business

Proliance International, Inc., formerly known as Transpro, Inc., (the ‘‘Company’’ or ‘‘Proliance’’) designs, manufactures and markets radiators, radiator cores, heater cores, air conditioning parts (including condensers, compressors, accumulators and evaporators) and other heat transfer products for the automotive and light truck aftermarket. In addition, the Company designs, manufactures and distributes radiators, radiator cores, charge air coolers, oil coolers and other specialty heat exchangers for the heavy duty heat exchanger aftermarket.

Note 2    Summary of Significant Accounting Policies

Basis of Consolidation:    The Company’s consolidated financial statements include the accounts of all subsidiaries. Intercompany balances and transactions have been eliminated. As a result of the sale of the Company’s Heavy Duty OEM business on March 1, 2005, as discussed in Note 4, the accounts of the Heavy Duty OEM business unit have been segregated and are shown in the consolidated financial statements and notes thereto as a discontinued operation.

As a result of the merger with the Modine Aftermarket business on July 22, 2005 (see Note 5), the reported results include a subsidiary located in Europe. The operating results of this business are included in the Consolidated Statements of Operations on a one-month lag.

Cash and Cash Equivalents:    The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Cash overdrafts if any, are classified as current liabilities. The amount reported in the balance sheet for cash and cash equivalents approximates its fair value.

Accounts Receivable:    The Company participates in several customer-sponsored payment programs in order to accelerate the collection of outstanding accounts receivable and offset the impact of lengthening customer payment terms. When invoices are submitted to the financial institution designated in each customer program for payment, this is done without recourse. At the time cash is received, receivables are reduced, and a discounting fee, classified in interest expense on the Consolidated Statement of Operations is recorded. Discounting fee expense for the years ended December 31, 2005, 2004 and 2003 was $4.0 million, $1.5 million and $0.4 million, respectively. The Company establishes reserves for uncollectible trade accounts receivable based upon historical experience, anticipated business trends and current economic conditions. Customer account balances are written off at the time they are deemed fully uncollectible.

Inventories:    Inventories are valued at the lower of cost (first-in, first-out method) or market. Provisions are made for slow moving or obsolete inventory based upon historical usage and management estimates of expected recovery.

Property, Plant and Equipment:    Property, plant and equipment is recorded at cost. Ordinary maintenance and repairs are expensed, while replacements and betterments are capitalized. Land improvements, buildings and machinery are depreciated using the straight-line method over their estimated useful lives which range up to forty years for buildings and between three and ten years for machinery and equipment. Leasehold improvements are amortized over the lease term or the estimated useful lives of the improvements, whichever is shorter. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the Company’s consolidated statements of operations.

Goodwill:    Goodwill represents the excess of cost over the fair value of assets acquired. The Company follows Statement No. 142, ‘‘Goodwill and Other Intangible Assets’’ (‘‘SFAS 142’’), which requires that goodwill and certain other intangible assets having indefinite lives no longer be amortized to earnings, but instead be subject to periodic testing for impairment. Intangible assets determined to have definitive lives will continue to be amortized over their useful lives. At December 31, 2005 and 2004, no goodwill was recorded on the Consolidated Balance Sheet.

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Impairment of Long-Lived Assets:    In the event that facts and circumstances indicate that the carrying amounts of a business unit’s long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down is required. If this review indicates that the assets will not be recoverable, the carrying value of the Company’s assets would be reduced to their estimated fair value.

Foreign Currency Translation:    Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates, and income and expense items are translated at the average exchange rates for the year. Resulting translation adjustments are reported as other comprehensive income (loss) in Shareholders’ Equity on the Consolidated Balance Sheet. Foreign currency transaction gains or losses are included in the Consolidated Statement of Operations.

Revenue Recognition:    Sales are recognized either when products are shipped to the customer or when they are received by the customer in accordance with the invoice shipping terms. Accruals for warranty costs, sales returns and allowances are provided at the time of sale based upon historical experience or consistent with agreements currently in place with certain customers. In conjunction with multi-year agreements with certain customers, the Company incurs customer acquisition costs which are capitalized and amortized, as a reduction of net sales, over the life of the agreement. Delivery charges billed to customers were not significant in 2005, 2004 or 2003. Freight costs for shipments of product to customers are included in selling, general and administrative expenses and amounted to $9.0 million, $5.9 million and $5.0 million in 2005, 2004 and 2003, respectively.

Advertising Costs:    The Company offers certain customers advertising and marketing allowances as a fixed percentage of sales. These allowances are recorded as a reduction to net sales. In addition, the Company incurs costs to advertise and promote its products. These costs, which are not material, are included in selling, general and administrative expenses as incurred.

Research and Development:    Research and development costs are expensed as incurred and approximated $0.2 million, $0.1 million and $0.3 million in 2005, 2004 and 2003 respectively.

Stock Compensation Costs:    The Company applies APB Opinion No. 25 ‘‘Accounting for Stock Issued to Employees’’ and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized in the financial statements. Had compensation cost for the Company’s plans been determined based on the fair value at the grant dates for awards under the plans, consistent with Statement of Financial Accounting Standards No. 123 ‘‘Accounting for Stock Based Compensation,’’ as amended by SFAS No. 148 ‘‘Accounting for Stock-Based Compensation – Transition and Disclosure’’, the pro forma net (loss) income and (loss) income per share for the three years ended December 31, would have been as follows:

				2005				2004				2003
				(in thousands, except per share amounts)
Net (loss) income :
As reported				$	(9,931	)		$	5,178			$	(4,536	)
Stock based compensation costs					(491	)			(263	)			(240	)
Pro forma				$	(10,422	)		$	4,915			$	(4,776	)

				2005				2004				2003
				(in thousands, except per share amounts)
Basic net (loss) income per common share:
As reported				$	(0.93	)		$	0.72			$	(0.65	)
Pro forma					(0.98	)			0.69				(0.68	)
Diluted net (loss) income per common share:
As reported				$	(0.93	)		$	0.72			$	(0.65	)
Pro forma					(0.98	)			0.69				(0.68	)

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As a result of the merger with Modine Aftermarket on July 22, 2005, all outstanding unvested employee stock options became fully vested, thus the remaining unrecorded stock compensation costs related to these options were reflected in the table above in 2005.

Income Taxes:    Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A deferred tax valuation allowance is recorded to reduce the carrying amount of deferred tax assets if it is more likely than not that such assets will not be realized.

Concentration of Credit Risk and Availability of Funds:    The Company is subject to a concentration of credit risk primarily with its trade accounts receivable. The largest concentration is with customers in the Company’s Domestic segment where the top five customers comprise 47% of net sales in 2005. The loss of one or more of these customers could have a material adverse effect on the Company’s results of operations. The Company grants credit to customers who meet pre-established credit requirements, and generally requires no collateral from its customers. Estimates of potential credit losses are based upon historical experience, customer information and management’s expectations of the industry and the overall economy. As of December 31, 2005, the Company had no other significant concentrations of credit risk.

The Company’s financial statements have been prepared on the basis of continuity of operations as well as realization of assets and the satisfaction of liabilities in the ordinary course of business. The future liquidity and ordinary capital needs of the Company in the short term are expected to be met from a combination of cash flows from operations and borrowings under the Loan Agreement. The Company’s working capital requirements peak during the first and second quarters, reflecting the normal seasonality in the Domestic segment. In addition, the Company’s future cash flow may be impacted by industry trends towards lengthening customer payment terms or the extension of customer sponsored payment arrangements. The Company utilizes customer-sponsored payment programs administered by financial institutions in order to accelerate the collection of receivables and offset the impact of these longer terms. The Company intends to continue utilizing these programs as long as it is a cost effective tool to accelerate cash flow. Management believes that cash flow from operations, together with the debt financing described in Note 10 herein, will be adequate to finance ongoing operations. However, management believes that the amount of funds available under the Loan Agreement would not be sufficient to meet the capital needs for major growth initiatives, such as significant acquisitions. If the Company were to implement major new growth initiatives, it would have to seek additional sources of capital. However, no assurance can be given that the Company would be successful in securing such additional sources of capital.

Use of Estimates:    The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassification:    Certain prior period amounts have been reclassified to conform to the current year presentation.

Note 3    Recent Accounting Pronouncements

In December 2004, the FASB issued a revised SFAS No. 123(R), ‘‘Share-Based Payment’’. SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services or incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments, focusing primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions) and recognize the cost over the period during which an employee is required to provide service in

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exchange for the award. The Company will be required to adopt SFAS No. 123(R) as of January 1, 2006. The ultimate impact, of recording non-cash stock compensation expense, on the future results of operations as a result of adopting SFAS No. 123(R) is not determinable as it is dependent on the number of options granted after the effective date.

Note 4    Sale of Heavy Duty OEM Business

On March 1, 2005, the Company completed the sale of its Heavy Duty OEM business to Modine Manufacturing Company (‘‘Modine’’) for $17 million in cash. The Company recorded a gain of $3.9 million, which is net of $2.3 million of income tax, which is reported as a gain on sale of discontinued operation in the Consolidated Statements of Operations. The Heavy Duty OEM business manufactured and distributed heat exchangers to heavy duty truck and industrial and off-highway original equipment manufacturers. Net proceeds from the sale were used to reduce borrowings under the Company’s credit facility and to fund operating activities.

Heavy Duty OEM results for all periods are shown in the attached Consolidated Statements of Operations as results of discontinued operation. Net sales for the Heavy Duty OEM business were $9.3 million for the period January 1, 2005 through the date of the sale, March 1, 2005, while net sales for the years ended December 31, 2004 and 2003 were $49.7 million and $29.8 million, respectively. Income from discontinued operation for the period January 1, 2005 through the date of the sale, March 1, 2005, was $0.8 million, which is net of $0.5 million of tax, and $5.5 million and $0.8 million for the years ended December 31, 2004 and 2003, which are net of $0.2 million and $0.5 million of tax, respectively. The Company did not allocate any interest expense to the discontinued operation.

At December 31, 2004, discontinued operation’s current assets of $11.4 million included net accounts receivable of $5.8 million; net inventories of $5.2 million; and other current assets of $0.4 million. Discontinued operation’s non-current assets reflect gross property, plant and equipment of $22.5 million, less $15.9 million of accumulated depreciation. Discontinued operation’s current liabilities included $6.5 million of accounts payable and $1.7 million of accrued expenses.

In conjunction with the sale of the Heavy Duty OEM business to Modine, the Company entered into a supply agreement to continue providing Modine’s Jackson, Mississippi plant, which was acquired in the transaction, with products it had been purchasing from Proliance facilities. This agreement is anticipated to end in 2006. From the date of the sale through December 31, 2005, the Company recorded $6.4 million of net trade sales to Modine under this supply agreement. During the year ended December 31, 2004 and 2003, the Company's continuing operations had $6.9 million and $3.8 million, respectively of intercompany sales with the Heavy Duty OEM business.

Note 5    Merger with Modine Aftermarket Business

On July 22, 2005, following receipt of approval of the Company's stockholders, the Company completed its merger transaction pursuant to which Modine Aftermarket Holdings, Inc. (‘‘Modine Aftermarket’’) merged into the Company. Modine Aftermarket was spun off from Modine immediately prior to the merger and consisted of Modine's aftermarket business. The Modine Aftermarket business manufactured and distributed heat exchange and temperature control products in North and Central America and Europe. Upon effectiveness of the merger, the Company changed its name to ‘‘Proliance International, Inc.’’ (‘‘Proliance’’). In connection with the merger, the Company has issued a total of 8,145,810 shares of its common stock to Modine shareholders, or 0.235681 shares for each outstanding Modine common share. Immediately after the effectiveness of the merger, prior Transpro, Inc. shareholders owned 48% of the combined company on a fully diluted basis, while Modine shareholders owned the remaining 52%. For accounting purposes, the Company was the acquirer. As a result of the merger, the Company is focused predominantly on supplying heating and cooling components and systems to the automotive and heavy duty aftermarkets in North and Central America and Europe.

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The acquisition was accounted for as a purchase transaction, and accordingly, the assets and liabilities acquired were recorded at their estimated fair value on the date of the acquisition. The Consolidated Statements of Operations includes the results of the acquired business for the period subsequent to the acquisition date.

The aggregate consideration paid for the transaction was as follows:

				(in thousands)
Value of common stock issued
Common stock				$	81
Paid in capital					50,586
Total value of common stock issued					50,667
Proliance transaction costs					4,468
Modine transaction costs reimbursed by Proliance					4,239
Total consideration				$	59,374

The shares of stock issued were valued at $6.22 per share, which represented the average closing price of Proliance common stock for the two days before and after the merger agreement was announced.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at July 22, 2005. These amounts are based upon a preliminary opening balance sheet, which is still subject to review and adjustments. The initial purchase price allocations, recorded during the third quarter of 2005, have been adjusted for changes in the estimates of the fair value of the assets acquired and liabilities assumed.

				(in thousands)
Current assets				$	101,120
Property, plant and equipment					20,259
Other assets					4,932
Assets acquired					126,311
Current liabilities					30,948
Other liabilities					2,677
Liabilities assumed					33,625
Net assets acquired				$	92,686

Included in current liabilities assumed were accrued expenses associated with restructuring Modine facilities. The excess ($33.3 million) of the net assets acquired over the total consideration was first utilized to write-down to zero the acquired property, plant and equipment and intangible assets of the Modine Aftermarket business (totaling $20.2 million). The remaining amount, $13.1 million, was included as extraordinary income negative goodwill, in the determination of net income in the accompanying Consolidated Statements of Operations.

The following table summarizes unaudited pro forma financial information for the twelve months ended December 31, 2005 and 2004 assuming the Modine Aftermarket merger had occurred on January 1, 2004. The Modine Aftermarket year end was March 31. The unaudited pro forma financial information uses data corresponding to Proliance’s reporting period. This unaudited pro forma information does not represent what would have occurred if the transaction had taken place on January 1, 2004 and does not reflect our future consolidated results of operations or financial position. The unaudited pro forma combined financial statements do not include any adjustments to reflect any of the restructuring costs expected to be incurred in order to combine the operations of Proliance and the Modine Aftermarket business or the anticipated benefits from these synergy actions. These restructuring costs will result from actions taken with respect to both Proliance and Modine Aftermarket business operations, facilities and associates. The charges will be recorded based upon the nature and timing of these integration actions.

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				Years Ended December 31,
				2005				2004
				(in thousands, except per share data)
Net sales				$	420,616			$	430,141
Net loss from continuing operations				$	(30,358	)		$	(1,154	)
Net loss per share from continuing operations
– basic				$	(1.99	)		$	(0.08	)
– diluted				$	(1.99	)		$	(0.08	)

During September, 2005, the Company sold to Modine, surplus fixed assets, acquired in the merger, which had been written down to zero through the purchase accounting entry. As a result, the $0.5 million of proceeds were recorded as a gain on disposal of fixed assets and included as a reduction of selling, general and administrative expenses in the accompanying Consolidated Statements of Operations.

Note 6    Sale of Building

On May 1, 2003, the Company completed the sale of its headquarters facility in New Haven, Connecticut. In conjunction with the sale, the Company entered into a six-year lease for the office, test lab and tube mill space, which it currently occupies. The proceeds from the sale were used to repay the $5.0 million outstanding balance of the Industrial Revenue Bond (‘‘IRB’’) on the facility. The gain on the sale of the building, of approximately $1.6 million, is being recognized as income equally over the six-year term of the lease. During 2005, 2004 and 2003, the Company recorded a gain of $0.3 million, $0.3 million and $0.2 million, respectively, in its results from operations. The minimum lease obligation under the lease agreement is $0.3 million per year or $2.0 million for the full term of the lease.

Note 7    Restructuring Charges

On March 30, 2005, the Company announced that it would be closing two warehousing operations and a returns processing facility in Memphis, Tennessee in connection with the opening of a new distribution facility in Southaven, Mississippi. The Company took these actions in order to streamline its distribution network and enhance its commitment to customer service. The closing and relocation activities were completed by June 30, 2005 and resulted in the Company incurring $0.5 million of restructuring costs.

On April 8, 2005 the Company announced that it would close its aluminum heater manufacturing facility in Buffalo, New York and move all its aluminum heater production to its Nuevo Laredo, Mexico facility. The Company took these actions in order to improve its product cost position. The closing and relocation activities were completed by September 30, 2005 and resulted in the Company incurring $1.0 million of restructuring costs. This closure resulted in the termination of 54 employees.

In conjunction with the merger with Modine Aftermarket, the Company commenced a 12- to 18-month restructuring program expected to result in one-time charges of $10 million to $14 million. These actions are designed to lower costs and increase manufacturing and operating efficiencies and include activities impacting existing Proliance locations, which resulted in charges to the income statement, and activities impacting locations acquired in the Modine Aftermarket merger, which costs have been accrued on the opening balance sheet as a purchase accounting entry. Activities under this program were accelerated and a major portion of them have been completed as of December 31, 2005. The remainder will be completed during the first half of 2006. Actions completed in 2005 resulted in the elimination of 247 employee positions.

On July 25, 2005 the Company announced that it would close its Emporia, Kansas manufacturing facility and move its radiator and oil cooler production to two existing facilities in Mexico. In addition, two heavy duty regional plants and branch distribution centers in Denver, Colorado and Seattle, Washington were also closed and consolidated into existing facilities. The Company took these actions in order to lower its product costs and streamline its manufacturing capabilities. The closing and

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relocation actions related to the Emporia, Kansas facility were completed by the end of 2005. The closure and relocation of the regional plant facilities were completed by September 30, 2005. Costs associated with Modine facilities were accrued on the opening balance sheet as a purchase accounting entry while costs associated with Proliance facilities are or will be included in the Statements of Operations as restructuring expense as incurred. Cash expenditures for these activities will continue through 2006.

On July 29, 2005 the Company announced that it would be closing 22 branch locations throughout the United States as another phase of its merger restructuring program. These facilities were combined into other existing Company branch locations. These actions were taken in order to eliminate duplicate facilities and lower distribution costs. The closure and consolidation actions were completed by the end of 2005. Costs associated with Modine facilities were accrued on the opening balance sheet as a purchase accounting entry while costs associated with Proliance facilities have been included in the Statements of Operations as restructuring expense. Cash expenditures for these activities will continue through 2006.

On September 23, 2005, the Company announced the closing of its copper/brass tube mill operation located in New Haven, Connecticut, as another phase of its previously announced restructuring program. The Company took this action in order to lower ongoing costs. The closing activities were completed during the fourth quarter of 2005 and resulted in the Company incurring approximately $0.2 million of restructuring costs. These costs which are associated with relocating inventory and machinery and one-time personnel related expenses associated with the elimination of nine full-time positions are included in the Consolidated Statements of Operations as restructuring expense. Cash expenditures will be completed in 2006.

On October 7, 2005, the Company announced its decision to (i) close its distribution centers in Orlando, Florida and Kansas City, Missouri and consolidate these activities into two existing facilities in Arlington, Texas and Southaven, Mississippi and (ii) consolidate the portion of its copper/brass radiator production, performed at its Nuevo Laredo, Mexico plant, into its Mexico City plant location.

The distribution center closings in Kansas City and Orlando and the associated relocation actions were essentially completed by the end of 2005. In conjunction with these actions, the Company incurred between $0.3 million and $0.4 million in one-time cash costs related to the relocation of inventory, facility exit costs and personnel-related expenses associated with the elimination of 36 employment positions once these activities are completed. These costs have been accrued on the opening acquisition balance sheet, resulting in reduction of the negative goodwill generated by the transaction, as they related to the closure of acquired facilities. Cash expenditures for these activities will continue through 2006.

The relocation of the Nuevo Laredo copper/brass radiator production to Mexico City is expected to be completed during the first calendar quarter of 2006. When this action is completed, the Company will have centralized its copper/brass radiator production in Mexico City and its aluminum radiator production in Nuevo Laredo. Costs associated with this relocation, which are expected to be $3.0 million to $3.5 million, will be recorded in the Consolidated Statements of Operations as restructuring expenses as they are incurred. These include cash expenditures to relocate equipment and employee-related costs associated with the elimination of 194 positions, along with the non-cash write-off of certain inventory and the non-cash write-down of fixed assets, no longer required, to net realizable value. The write-off of inventory and fixed assets occurred in 2005. Other costs will be completed in 2006. With the relocation of production to Mexico City, the Company expects to add 42 associates.

During 2003, the Company completed the $7.0 million restructuring program that it had commenced during the third quarter of 2001. The program was designed around business initiatives to improve the Company’s operating performance, including the redesign of our distribution system, headcount reductions, the transfer of production between manufacturing facilities and a reevaluation of our product offerings. The Company also added approximately $0.9 million of new restructuring programs in 2003 to include the relocation of Fedco’s inventory and machinery (acquired at the end of

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2002) to Mexico and salaried headcount reductions made in order to lower overall operating costs. Restructuring and other special charges of $1.5 million were recorded during 2003 as a result of these activities.

Workforce related charges in 2003 represent the elimination of 82 salaried and hourly positions as a result of the closure of two Heavy Duty Aftermarket plants and salaried headcount reductions. Cash payments for severance programs were completed during 2004. Facility consolidation costs in 2003 are associated with the closure of two Heavy Duty Aftermarket plants in North Kansas City, Missouri and Phoenix, Arizona, the closure of the Charlotte, North Carolina Automotive and Light Truck branch and the relocation of the Fedco copper/brass inventory and machinery from Buffalo to our existing facility in Mexico. Cash payments were completed during 2004. In conjunction with the closure of two Heavy Duty Aftermarket plants in 2003, the Company also wrote down the related fixed assets and inventory to net realizable value and disposed of the assets.

The remaining restructuring reserve balance at December 31, 2003 and 2005 was classified in other accrued liabilities. At December 31, 2004, the restructuring reserve had a zero balance. A summary of restructuring charges and payments during the three years ended December 31, 2005 is as follows:

				Workforce Related				Facility Consolidation				Asset Write-down				Total
				(in thousands)
Balance at December 31, 2002				$	475			$	162			$	—			$	637
Charge to operations					922				500				68				1,490
Cash payments					(1,198	)			(639	)			—				(1,837	)
Non-cash write-off					—				—				(68	)			(68	)
Balance at December 31, 2003					199				23				—				222
Cash payments					(199	)			(23	)			—				(222	)
Balance at December 31, 2004				$	—			$	—			$	—			$	—
Charge to operations					1,041				1,388				1,851				4,280
Modine Aftermarket acquisition balance sheet					2,186				2,647				—				4,833
Cash payments					(2,944	)			(2,364	)			—				(5,308	)
Non-cash write-off					—				—				(1,851	)			(1,851	)
Balance at December 31, 2005				$	283			$	1,671			$	—			$	1,954

Of the $4.3 million of restructuring charges included in the Consolidated Statements of Operations for the year ended December 31, 2005, $0.4 million was included in cost of sales as it represents the write down of inventory to net realizable value.

The remaining accrual for facility consolidations at December 31, 2005 consists primarily of lease obligations and facility exit costs related to the acquired Modine facilities, which are expected to be paid primarily in 2006.

Note 8    Inventory 

Inventory at December 31 consists of the following:

				2005				2004
				(in thousands)
Raw material and component parts				$	21,813			$	16,437
Work in progress					4,070				3
Finished goods					95,167				54,771
Total inventory				$	121,050			$	71,211

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Note 9    Property, Plant and Equipment

Property, plant and equipment at December 31 consists of the following:

				2005				2004
				(in thousands)
Leasehold improvements				$	3,289			$	1,924
Machinery and equipment					38,748				46,366
Property, plant and equipment, gross					42,037				48,290
Accumulated depreciation and amortization					(21,704	)			(32,155	)
Property, plant and equipment, net				$	20,333			$	16,135

Assets acquired in the Modine Aftermarket merger have been recorded with a zero cost and accumulated depreciation due to the application of a portion of the excess of net assets acquired over the total consideration of the transaction.

The cost and accumulated depreciation of assets under capital lease obligations was $2.1 million and $0.4 million at December 31, 2005 and $0.2 million and $0.1 million at December 31, 2004, respectively.

Note 10    Debt

Debt at December 31 consists of the following:

				2005				2004
				(in thousands)
Revolving credit facility				$	38,805			$	42,530
Term loan					1,587				1,275
Capitalized lease obligations					1,541				219
Total debt					41,933				44,024
Less:
Revolving credit facility					38,805				42,530
Current portion of long-term debt					900				1,374
Total long-term debt				$	2,228			$	120

On July 22, 2005, in connection with the merger of the Company with the aftermarket business of Modine, the Company amended its $80.0 million credit facility with Wachovia Capital Financial Corporation (New England), formerly known as Congress Financial Corporation (New England) effective July 21, 2005. The amended credit facility consists of a revolving credit line with maximum borrowings of $78.3 million and a $1.7 million term loan, each of which was amended to expire on July 21, 2009 (subject to renewal on an annual basis thereafter). Under the amended credit facility, the interest rate is 2% over a Eurodollar-based rate through April 21, 2006 and ranges from 1.75% to 2.25% over such rate thereafter. The amended credit facility also provides that the Company may pay dividends or repurchase capital stock of up to $3.0 million annually, as long as excess availability, as defined in the agreement, is at least $18.0 million for the 30 consecutive days both prior to and following the payment date. The amended credit facility also amends the borrowing base calculation such that (i) up to $55.0 million in respect of eligible inventory may be counted and (ii) availability reserves, as defined in the agreement, may be revised for dilution in respect of the Company’s accounts. The amended facility adds financial covenants for (i) minimum EBITDA (tested quarterly commencing September 30, 2005 and not required if excess availability exceeds $15.0 million), (ii) minimum excess availability ($5.0 million at all times through June 30, 2006 and $13.0 million immediately after giving effect to the merger), and (iii) capital expenditures (not to exceed $12.0 million in any calendar year, if financed under the credit facility).

On October 20, 2005, the Company amended its Loan and Security Agreement (the ‘‘Loan Agreement’’) with Wachovia Capital Finance Corporation (New England), pursuant to a Thirteenth

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Amendment to Loan and Security Agreement. Under the amended Loan Agreement, the Unused Line Fee was reduced through June 30, 2006. The amended Loan Agreement changes financial covenants for (i) minimum EBITDA (tested quarterly commencing September 30, 2005 and not required if Excess Availability exceeds $15.0 million) such that minimum EBITDA for the September 30, 2005 and December 31, 2005 test dates was lowered and (ii) minimum Excess Availability ($5.0 million at all times through June 30, 2006) so as to give no effect to the limitations on Excess Availability imposed by the Maximum Credit under the amended Loan Agreement of $80.0 million or the Revolving Loan Ceiling. The amended Loan Agreement also included a financial covenant requiring that consolidated inventory, excluding the Company’s NRF and Mexpar subsidiaries, as of December 31, 2005 would not exceed $122.0 million. The Company was in compliance with these covenants at December 31, 2005.

On November 19, 2004, the Company entered into an amendment to its Loan Agreement which increased loan availability by $1.0 million as a result of a reduction in an Availability Reserve contained in the Loan Agreement. In addition, the minimum Adjusted Net Worth requirement, under the agreement, was increased from $37.0 million to $40.0 million for all periods after September 30, 2004.

The Loan Agreement, which was originally entered into on January 4, 2001, and amended thereafter, is collateralized by a blanket first security interest in substantially all of the Company’s assets plus a pledge of the stock of the Company’s subsidiaries. Available borrowings under the Revolving Credit Facility are determined by a borrowing base consisting of the Company’s eligible accounts receivable and inventory, adjusted by an advance rate. Borrowings under the Revolving Credit Facility are classified as short term in the accompanying consolidated balance sheet.

Amounts borrowed under the Loan Agreement prior to the amendment noted above, bore interest at variable rates based, at the Company’s option, on either the Eurodollar rate plus a margin of 2.0%, 2.25% or 2.50% depending on the Company’s pretax profit performance, or the Wachovia base lending rate. The Loan Agreement also contained covenants regarding working capital and net worth.

At December 31, 2005 and 2004, the interest rate on outstanding borrowings under the Loan Agreement was 6.29% and 4.83%, respectively. The weighted average interest rate during 2005 and 2004 was 5.85% and 4.29%, respectively. Available borrowings under the Revolving Credit facility at December 31, 2005 were $17.5 million.

The term loan requires monthly payments, totaling $0.3 million per year with a final payment in July, 2009.

Capitalized lease obligations relate primarily to computer equipment and racking at the Company’s distribution center in Southaven, Mississippi. The total future rental payments under the capital leases of $1.7 million include interest payments of $0.2 million.

Interest paid during 2005, 2004 and 2003 was $7.0 million, $3.9 million, and $2.9 million, respectively.

The Company’s NRF subsidiary in The Netherlands has an available credit facility of five million Euro. There were no borrowings under the arrangement at December 31, 2005.

The Company utilizes letters of credit in the amounts of $4.9 million at December 31, 2005 and 2004 to back certain insurance policies and certain trade purchases.

Minimum future debt repayments, excluding the Revolving Credit facility, will be $0.9 million in 2006, $0.8 million in 2007, $0.7 million in 2008 and $0.7 million in 2009.

Note 11    Stockholders’ Equity

Common Stock:    At the Company’s annual shareholders’ meeting, held on July 22, 2005, shareholders approved an increase in the Company’s authorized common stock from 17.5 million shares to 47.5 million shares.

Stockholder Rights Plan:    On September 14, 1995, the Board of Directors adopted a Stockholder Rights Plan (the ‘‘Rights Plan’’), under which one Right (the ‘‘Right’’) was issued and distributed for

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each share of common stock. The Rights Plan was intended to protect shareholders against unsolicited attempts to acquire control of the Company that do not offer what the Company believes to be an adequate price to all shareholders. Each Right entitled the registered holder to purchase from the Company one one-hundredth of a share of Series A Preferred Stock at a price of $60.00 per one one-hundredth of a share of Series A Preferred Stock subject to adjustment. The description and terms of the Rights were set forth in a Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent.

On April 29, 2004, the Company announced that its Board of Directors approved an amendment of the Company’s Shareholders’ Rights Agreement to accelerate its expiration date from September 29, 2005 to September 30, 2004. As a result, the Rights Plan was effectively terminated on October 1, 2004.

Preferred Stock:    In connection with the acquisition of Ready-Aire, the Company issued 30,000 shares of its Series B Convertible Preferred Stock (‘‘Preferred Stock’’). The purchase agreement provided for a potential additional payout for the Ready-Aire acquisition based on the earnings performance of the business for the period January 1, 1999 through December 31, 2000 that would, under certain circumstances, take the form of an increase in the liquidation preference of the Preferred Stock. The holder of the Preferred Stock has disputed the calculation of the payout amount, and the Company is attempting to resolve the differences in accordance with the arbitration provisions of the Ready-Aire stock purchase agreement. The Preferred Stock is non-transferable and is entitled to cumulative dividends of 5%. It is redeemable at the Company’s option, at the liquidation preference at the time of redemption. The Preferred Stock is convertible into common stock based upon the liquidation preference and the market value of common stock at the time of conversion, as further defined in the purchase agreement. The aggregate number of shares of common stock to be issued upon conversion of Preferred Stock may not exceed 7% of the total number of shares of common stock outstanding, after giving effect to the conversion.

Accumulated Other Comprehensive Loss:    Other comprehensive loss pertains to revenues, expenses, gains and losses that are not included in net income (loss), but rather are recorded directly in Stockholders’ Equity. For 2005, 2004 and 2003, other comprehensive loss reflected minimum pension liability adjustments. As a result of the Modine Aftermarket merger, in 2005, other comprehensive loss also reflects accumulated foreign currency translation adjustments. The adjustments for the three years ended December 31, were as follows:

				Minimum Pension Liability				Foreign Currency Translation				Total
				(in thousands)
Balance at December 31, 2002				$	(4,492	)		$	—			$	(4,492	)
Annual adjustment					(18	)			—				(18	)
Balance at December 31, 2003					(4,510	)			—				(4,510	)
Annual adjustment					(1,899	)			—				(1,899	)
Balance at December 31, 2004					(6,409	)			—				(6,409	)
Annual adjustment					347				(620	)			(273	)
Balance at December 31, 2005				$	(6,062	)		$	(620	)		$	(6,682	)

Note 12    Retirement and Post-retirement Plans

Domestic Retirement Plans:    A majority of the Company’s non-union full-time U.S. employees are covered by a cash balance defined benefit plan. Generally, employees become vested in their pension plan benefits after 5 years of employment. The Company also maintains a non-qualified retirement plan to supplement benefits for designated employees whose pension plan benefits are limited by the provisions of the Internal Revenue Code.

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The Company has recorded an additional minimum liability at the end of each year representing the excess of the accumulated benefit obligations over the fair value of plan assets and accrued pension liabilities. To the extent possible, an intangible asset, representing unrecognized prior service costs, has been recorded to offset the liabilities. The balance of the liability at the end of the period is reported as a separate reduction of Stockholders’ Equity.

Pension assets and liabilities associated with the Heavy Duty OEM business unit remained with the Company after the sale of this business unit in 2005.

Domestic Postretirement Plans:    The Company provides healthcare and life insurance benefits for certain retired employees who reach retirement age while working for the Company. The Company accrues for the cost of its postretirement healthcare and life insurance benefits based on actuarially determined costs recognized over the period from the date of hire to the full eligibility date of employees who are expected to qualify for these benefits. The Company funds these costs on a pay as you go basis.

Components of net periodic benefit cost of domestic retirement and postretirement plans for the three years ended December 31 are as follows:

				Retirement Plans												Postretirement Plans
				2005				2004				2003				2005				2004				2003
				(in thousands)
Service cost				$	807			$	813			$	801			$	2			$	5			$	5
Interest cost					1,842				1,821				1,824				25				31				37
Expected return on plan assets					(2,065	)			(2,062	)			(2,095	)			—				—				—
Curtailment (gain) loss					181				—				—				(30	)			—				—
Amortization of net loss					530				281				141				2				4				4
Net periodic benefit cost					1,295				853				671				(1	)			40				46
Allocated to discontinued operation					66				395				331				—				—				—
Allocated to continuing operations				$	1,229			$	458			$	340			$	(1	)		$	40			$	46

The curtailment charge incurred in 2005 relates to the closure of facilities in conjunction with the Company’s restructuring activities.

The following tables set forth the domestic plans’ combined funded status and amounts recognized in the Company’s consolidated balance sheets at the measurement date, December 31:

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				Retirement Plans								Postretirement Plans
				2005				2004				2005				2004
				(in thousands)
Change in benefit obligation:
Benefit obligation at January 1				$	32,319			$	30,212			$	515			$	526
Service cost					807				813				2				5
Interest cost					1,842				1,821				25				31
Curtailment and termination gain					(252	)			—				(78	)			—
Actuarial loss (gain)					502				984				(61	)			18
Actual gross benefits paid					(1,952	)			(1,511	)			(18	)			(65	)
Benefit obligation at December 31				$	33,266			$	32,319			$	385			$	515
Change in plan assets:
Fair value of plan assets at January 1				$	25,460			$	21,603			$	—			$	—
Actual return on plan assets					1,991				2,612				—				—
Company contributions					664				2,756				18				65
Actual gross benefits paid					(1,952	)			(1,511	)			(18	)			(65	)
Fair value of plan assets at December 31				$	26,163			$	25,460			$	—			$	—

				Retirement Plans								Postretirement Plans
				2005				2004				2005				2004
				(in thousands)
Reconciliation of funded status:
Funded status at December 31				$	(7,103	)		$	(6,859	)		$	(385	)		$	(515	)
Unrecognized transition obligation					4				11				—				—
Unrecognized prior service cost					154				206				—				50
Unrecognized net loss (gain)					6,882				7,175				(18	)			43
(Accrued) prepaid benefit cost				$	(63	)		$	533			$	(403	)		$	(422	)
Amounts recognized in statements of financial position:
Long-term pension asset				$	832			$	791			$	—			$	—
Accrued benefit liability					(6,957	)			(6,722	)			(403	)			(422	)
Intangible asset					—				55				—				—
Accumulated other comprehensive loss					6,062				6,409				—				—
Net amount recognized at December 31				$	(63	)		$	533			$	(403	)		$	(422	)

The assumptions used in the determination of the domestic retirement and postretirement benefit obligation at December 31 are as follows:

				Retirement Plans												Postretirement Plans
				2005				2004				2003				2005				2004				2003
Discount rate					5.88	%			6.00	%			6.25	%			6.00	%			6.00	%			6.25	%
Salary progression					4.25	%			4.00	%			4.00	%			—				—				—

The assumptions used in the determination of the net periodic benefit cost for the domestic retirement and postretirement plans for the years ended December 31 are as follows:

				Retirement Plans												Postretirement Plans
				2005				2004				2003				2005				2004				2003
Discount rate					6.00	%			6.25	%			6.75	%			6.00	%			6.25	%			6.75	%
Return on assets					9.00	%			9.00	%			9.00	%			—				—				—
Salary progression					4.25	%			4.25	%			4.25	%			—				—				—

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The return on assets reflects the long-term rate of return on plan assets expected to be realized over a ten-year or longer period. As such, it will normally not be adjusted for short-term trends in the stock or bond markets. In addition, the rate of return will reflect the investment allocation currently used to manage the pension portfolio. The Company’s pension assumptions currently include a 9% long-term annual rate of return, which is based upon the current portfolio allocation, long-term rates of return for similar investment vehicles and economic and other indicators of future performance.

The assumptions used to develop domestic postretirement plan healthcare costs at December 31 are as follows:

				2005				2004				2003
Initial trend rate					12.00	%			9.00	%			10.0	%
Ultimate trend rate					9.00	%			5.00	%			5.00	%
Years to ultimate trend					3				7				8

Assumed healthcare cost trend rates can have an effect on the amounts reported as expense for the healthcare plan. A one-percentage point change in the assumed healthcare cost trend rates would have a $0.1 thousand effect on total service and interest cost components and an immaterial effect on the post retirement benefit obligation.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $31.2 million, $31.0 million and $24.1 million as of December 31, 2005 and $30.4 million, $30.3 million and $23.5 million as of December 31, 2004, respectively.

Benefits expected to be paid to participants under the Company’s defined benefit pension plans are $2.2 million in 2006, $2.2 million in 2007, $2.4 million in 2008, $2.5 million in 2009, $2.6 million in 2010 and $13.9 million between 2011 and 2015.

Under the Company’s postretirement plans, expected benefit payments are $64 thousand in 2006, $66 thousand in 2007, $48 thousand in 2008, $28 thousand in 2009, $25 thousand in 2010 and $108 thousand between 2011 and 2015.

Assets of the Company’s pension plans and target allocations by category of investment are as follows:

								Percentage of Assets at December 31,
Asset Category				Target Allocation				2005				2004
Equity securities					70	%			71	%			72	%
Debt securities					30	%			29	%			28	%
Total					100	%			100	%			100	%

Equity securities are invested in a combination of U.S. and international investments. The plan assets do not include any shares of the Company’s common stock. An outside investment advisor is utilized to manage and act as trustee for the Company’s pension plan assets. The Company’s strategy is to invest in diverse asset classes to minimize risk and maintain liquidity to ensure adequate asset values to meet ongoing benefit obligations.

It is the Company’s policy to make contributions to its qualified retirement plans sufficient to meet the minimum funding requirements of applicable laws and regulations. During 2006, the Company currently estimates that pension contributions will be $3.3 million.

401(k) Investment Plan:    Under the Company’s 401(k) Plan, substantially all of the Company’s non-union employees and certain union employees are eligible to contribute a portion of their salaries into various investment options, which include the Company’s common stock. The Company matches a percentage of the amounts contributed by the employees. The Company’s matching contributions were $0.5 million in 2005 and $0.4 million in 2004 and 2003.

Foreign Plans:    As a result of the Modine Aftermarket merger, the Company has defined-benefit plans and/or termination indemnity plans covering substantially all of the eligible foreign employees.

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Benefits under these plans are based on years of service and final average compensation levels. Funding is limited to statutory requirements. The Company uses December 31 as the measurement date for the plans in Mexico and November 30 for the plans in Europe.

Components of net foreign plan periodic benefit cost for the period July 22, 2005 (the merger date) through December 31, 2005 is as follows:

				(in thousands)
Service cost				$	95
Interest cost					120
Expected return on plan assets					(48	)
Amortization of net loss (gain)					—
Net periodic benefit cost				$	167

The following tables set forth the foreign plans combined funded status and amounts recognized in the Company’s consolidated balance sheets at December 31, 2005:

				(in thousands)
Change in benefit obligation:
Benefit obligation at July 22				$3,793
Service cost				95
Interest cost				120
Actuarial loss				(10)
Actual gross benefits paid				(23)
Benefit obligation at December 31				$3,975
Change in plan assets:
Fair value of plan assets at July 22				$1,809
Actual return on plan assets				21
Company contributions				349
Actual gross benefits paid				(23)
Fair value of plan assets at December 31				$2,156
Reconciliation of funded status:
Funded status at December 31				$(1,819)
Unrecognized net loss				17
(Accrued) benefit cost				$(1,802)
Amounts recognized in statements of financial position:
Long-term pension asset				$—
Accrued benefit liability				(1,802)
Intangible asset				—
Accumulated other comprehensive loss				—
Net amount recognized at December 31				$(1,802)

The assumptions used in the determination of the foreign retirement benefit obligation at December 31, 2005 are a discount rate of 4.0% and salary progression of 2.5% in Europe and a discount rate of 10.25% and salary progression of 6.25% in Mexico.

The assumptions used in the determination of the net periodic benefit cost for the foreign retirement plans for the year ended December 31, 2005 were a discount rate of 4.0%, an expected rate of return of 4% and salary progression of 2.5% in Europe and a discount rate of 10.25%, an expected rate of return of 11.25% and salary progression of 6.25% in Mexico.

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The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the foreign pension plans with accumulated benefit obligations in excess of plan assets were $4.0 million, $3.2 million and $2.1 million as of December 31, 2005.

Company contributions to foreign plans in 2006 are estimated to be $0.4 million.

Benefits expected to be paid to participants under the Company’s foreign defined benefit pension plans are $0.4 million in 2006, $0.1 million in 2007, $0.1 million in 2008, $1.3 million in 2009, $0.2 million in 2010 and $1.2 million between 2011 and 2015.

Assets of the Company’s pension plans and target allocations by category of investment are as follows:

Asset Category				Target Allocation				As of December 31, 2005 Actual Allocation
Equity securities					0	%			0	%
Debt securities					100	%			100	%
Total					100	%			100	%

Note 13    Stock Compensation Plans

Stock Options:    At December 31, 2005 the Company had three stock option plans (Equity Incentive Plan, 1995 Stock Plan, Non-Employee Directors Stock Option Plan) under which key employees and directors have been granted options to purchase Proliance common stock. At the Company’s annual shareholders’ meeting, held on July 22, 2005, shareholders approved the Company’s new Equity Incentive Plan (the ‘‘Incentive Plan’’). The Incentive Plan became operative immediately after the merger. The Incentive Plan permits awards of incentive stock options, nonqualified stock options, restricted stock, stock units, performance shares, performance units, deferred shares and units, stock appreciation rights and other equity-linked awards, payable in cash or in shares of the Company stock. Under the Incentive Plan equity-based awards relating to up to 1.4 million shares of the Company’s common stock may be granted, in addition to 56,400 shares available for options replacing options under the Non-Employee Directors Stock Option Plan (the ‘‘Directors Plan’’). Awards under the Incentive Plan can be made to directors, officers or other key employees. Under the Plan, up to 200,000 shares, in addition to shares available for options replacing options issued under the Directors Plan, may be utilized for grants to non-employee directors. No new awards may be granted under the Company’s previously adopted equity-based plans, which expired in September, 2005. Under the 1995 Stock Plan (the ‘‘Stock Plan’’) options were granted at fair market value on the date of grant and were generally exercisable cumulatively at the rate of 25% one year from the date of grant, 50% two years from the date grant, 75% three years from the date of grant, and 100% four years from the date of grant. As a result of the Modine merger, all unvested outstanding options granted to key employees as of July 22, 2005 became fully vested. Options granted under the Stock Plan generally expire ten years from the date of the grant. The total number of shares of common stock with respect to which stock options may be granted and restricted shares may be awarded under the Stock Plan was not to exceed 600,000. At December 31, 2005 and 2004, respectively, 534,359 and 544,359 common shares were reserved for stock options and restricted shares granted under the Stock Plan. The Non-Employee Directors Stock Option Plan (the ‘‘Directors Plan’’) provides for the issuance of options at the fair market value of the common stock covered thereby on the date of grant. Subject to certain acceleration provisions, each option granted under the Directors Plan will be exercisable 50% after two years from the date of grant, 75% after three years from the date of grant and 100% after four years from the date of grant. Options granted under the Directors Plan expire ten years from the date of grant. The total number of shares of common stock with respect to which options may be granted under the Directors Plan was not to exceed 100,000 shares. At December 31, 2005 and 2004, respectively, 36,800 and 99,200 common shares were reserved for stock options granted under the Directors Plan.

In connection with the consummation of the merger, outstanding options under the Directors Plan that had an exercise price greater than or equal to the closing price of Company common stock on the day before the merger were, at the option of each director, replaced with options issued under the

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Incentive Plan having the same terms as the prior options, except that (1) the term of each option that would otherwise expire prior to the third anniversary of the merger was extended to the third anniversary of the merger closing and (2) the period during which such options may be exercised following the cessation of a director’s service was increased from three months to the earlier of the third anniversary of such cessation of service and the end of the remaining term of the options. Outstanding options under the Directors Plan that had an exercise price less than the closing price of Company common stock on the day before the merger remain outstanding. On July 22, 2005, non-employee directors exchanged options to purchase an aggregate of 56,400 Company shares with exercise prices ranging from $7.75 to $11.75 per share.

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

								Option Price Range
Stock Plan				Number of Options				Low				Weighted Average				High
Outstanding at December 31, 2002					441,859				2.50				3.88				5.88
Canceled					(9,500	)			5.88				5.88				5.88
Outstanding at December 31, 2003					432,359				2.50				3.85				5.88
Granted					112,000				4.51				4.56				5.25
Outstanding at December 31, 2004					544,359				2.50				4.00				5.88
Exercised					(2,500	)			4.51				4.51				4.51
Cancelled					(7,500	)			4.51				4.51				4.51
Outstanding at December 31, 2005					534,359				2.50				3.99				5.88
Exercisable at December 31, 2005					534,359				2.50				3.99				5.88

								Option Price Range
Directors Plan				Number of Options				Low				Weighted Average				High
Outstanding at December 31, 2002					99,200				2.70				7.50				11.75
Granted					—				—				—				—
Outstanding at December 31, 2003					99,200				2.70				7.50				11.75
Granted					—				—				—				—
Outstanding at December 31, 2004					99,200				2.70				7.50				11.75
Exercised					(1,500	)			2.70				2.70				2.70
Cancelled					(60,900	)			4.72				9.37				11.75
Outstanding at December 31, 2005					36,800				2.70				4.61				5.50
Exercisable at December 31, 2005					34,500				2.70				4.60				5.50

								Option Price Range
Equity Incentive Plan				Number of Options				Low				Weighted Average				High
Outstanding at December 31, 2004					0				—				—				—
Granted					56,400				7.75				9.70				11.75
Outstanding at December 31, 2005					56,400				7.75				9.70				11.75
Exercisable at December 31, 2005					56,400				7.75				9.70				11.75

Total options exercisable at December 31, 2004 and 2003 were 370,024 and 243,679, respectively.

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Additional information relating to outstanding options under the plans as of December 31, 2005 is as follows:

								Options Outstanding								Options Exercisable
Range of Exercise Price				Options Outstanding				Weighted Average Remaining Term (Years)				Weighted Average Exercise Price				Shares Exercisable				Weighted Average Exercise Price
$2.35 - $3.53					229,059				5.4			$	2.98				229,059			$	2.98
3.53 - 4.70					95,000				8.2				4.51				95,000				4.51
4.70 - 5.88					247,100				6.1				4.80				244,800				4.81
7.05 - 8.23					10,700				2.6				7.75				10,700				7.75
8.23 - 9.40					10,700				2.6				8.38				10,700				8.38
9.40 - 10.58					14,000				2.6				10.00				14,000				10.00
10.58 - 11.75					21,000				2.6				11.17				21,000				11.17

The fair value of each option grant, included in the pro forma disclosure of SFAS 123 in Note 2, is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

				2005				2004				2003
Dividend yield				0%				0%					—
Expected volatility				52.94%				54.8%					—
Risk-free interest rate				4.5%				4.7%					—
Expected life				3 Years				6 Years					—

The fair value per share of options granted in 2005 and 2004 was $1.67 and $2.89, respectively.

Restricted Stock:    Restricted stock awards vest four years from the date of the award. Unearned compensation, representing the fair value of the restricted shares at the date of the award, is charged to income over the period. At December 31, 2005, 2004 and 2003, there were no outstanding restricted stock awards.

Note 14    Income Taxes

The (benefit from) provision for income taxes for the three years ended December 31 is as follows:

				2005				2004				2003
				(in thousands)
Current:
Federal				$	—			$	43			$	(1,442	)
Foreign					338				236				276
State and local					390				199				3
Total current					728				478				(1,163	)
Deferred:
Federal					(6,851	)			1,264				(753	)
Foreign					253				—				—
State and local					(1,325	)			(16	)			(326	)
Valuation allowance					9,046				(2,118	)			1,079
Total deferred					1,123				(870	)			—
(Benefit from) income taxes					1,851				(392	)			(1,163	)
Provision for income taxes allocated to discontinued operation					506				200				478
Provision for income taxes allocated to gain on sale of discounted operation					2,331				—				—
(Benefit from) income taxes allocated to continuing operations				$	(986	)		$	(592	)		$	(1,641	)

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A reconciliation of the (benefit from) provision for income taxes at the Federal statutory rate of 34% to the reported tax (benefit from) income taxes in 2005, 2004 and 2003 is as follows:

				2005				2004				2003
				(in thousands)
Provision (benefit) computed at the Federal statutory rate				$	(2,748	)		$	1,627			$	(1,938	)
State and local income taxes, net of Federal income tax benefit					(935	)			183				(323	)
Foreign tax rate differential					103				63				112
Permanent difference—negative goodwill					(4,347	)			—				—
Permanent differences—other					69				63				55
Reduction in tax reserves based on tax review					—				—				(108	)
Valuation allowance included in provision					9,046				(2,118	)			1,079
Other					663				(210	)			(40	)
(Benefit from) income taxes					1,851				(392	)			(1,163	)
Provision for income taxes allocated to discontinued operation					506				200				478
Provision for income taxes allocated to gain on sale of discontinued operation					2,331				—				—
(Benefit from) income taxes allocated to continuing operations				$	(986	)		$	(592	)		$	(1,641	)

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

				2005				2004
				(in thousands)
Deferred tax assets:
Pensions				$	2,578				1,935
Postretirement benefits					162				172
Inventories					2,134				—
Allowance for bad debts					2,013				1,374
Self insurance reserves					943				1,021
Warranty reserves					1,393				281
Accrued vacation					743				713
Federal and state net operating loss					13,755				4,914
Deferred charges					364				478
Depreciation					2,559				—
Other					2,714				386
Valuation reserve					(24,285	)			(5,843	)
Total deferred tax assets					5,073				5,431
Deferred tax liabilities:
Depreciation					—				(3,649	)
Inventories					—				(23	)
Other					(1,473	)			(889	)
Total deferred tax liabilities					(1,473	)			(4,561	)
Net deferred tax assets				$	3,600			$	870

The net deferred tax asset at December 31, 2005 relates to the foreign operations and management believes that it is more likely than not that the deferred tax asset will be realized. The deferred tax assets associated with foreign operations ($4.5 million) are included in other assets in the accompanying balance sheet.

The Company’s federal net operating loss carry forwards at December 31, 2005 of approximately $30.6 million expire through 2025. The net operating losses prior to the merger are subject to limitation under Internal Revenue Code Section 382.

As a result of the Modine Aftermarket merger in July, 2005, the tax valuation reserve was increased by $9.4 million. The valuation reserve related to the minimum pension liability at December 31, 2005

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was $2.3 million. During the fourth quarter of 2004, the Company reversed $0.9 million of its tax valuation reserve in anticipation of the gain recorded in 2005 resulting from the sale of its Heavy Duty OEM business.

At the time of filing the Company’s 2002 tax return, the amount of net operating loss, which could be carried back, was adjusted due to the Company’s decision to change its method of tax accounting for several items and the finalization of other amounts which had been previously estimated. These items resulted in additional tax refunds of $1.4 million. As the Company’s net deferred tax assets are fully reserved, this refund resulted in a tax benefit which was included in the results of operations for 2003.

The earnings of foreign subsidiaries are considered permanently reinvested in the foreign operations and therefore no provision has been made for U.S. taxes related to these subsidiaries.

(Loss) income from continuing operations before taxes from United States and foreign sources for the three years ended December 31 is as follows:

				2005				2004				2003
				(in thousands)
United States				$	(30,150	)		$	(1,451	)		$	(7,430	)
Foreign					1,433				510				482
Loss before taxes				$	(28,717	)		$	(941	)		$	(6,948	)

Net income taxes paid (refunded) during 2005, 2004 and 2003 were $1.2 million, $0.4 million, and $(1.9) million, respectively.

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Note 15    (Loss) Income Per Share

The following table sets forth the computation of basic and diluted (loss) income per common share for the years ended December 31:

				2005				2004				2003
				(in thousands, except per share amounts)
Numerator:
Loss from continuing operations				$	(27,731	)		$	(349	)		$	(5,307	)
Less: preferred stock dividends					(64	)			(64	)			(64	)
Loss from continuing operations attributable to common stockholders					(27,795	)			(413	)			(5,371	)
Income from discontinued operation, net of tax					848				5,527				771
Gain on sale of discontinued operation, net of tax					3,899				—				—
Extraordinary income – negative goodwill					13,053				—				—
Net (loss) income (attributable) available to common stockholders – basic					(9,995	)			5,114				(4,600	)
Add back: preferred stock dividend					—				—				—
Net (loss) income (attributable) available to common stockholders – diluted				$	(9,995	)		$	5,114			$	(4,600	)
Denominator:
Weighted average common shares – basic					10,714				7,106				7,106
Dilutive effect of stock options					—				—				—
Dilutive effect of Series B Preferred Stock					—				—				—
Weighted average common shares – diluted					10,714				7,106				7,106
Basic (loss) income per common share:
From continuing operations				$	(2.59	)		$	(0.06	)		$	(0.76	)
From discontinued operation					0.08				0.78				0.11
From gain on sale of discontinued operation					0.36				—				—
From extraordinary income – negative goodwill					1.22				—				—
Net (loss) income per common share				$	(0.93	)		$	0.72			$	(0.65	)
Diluted (loss) income per common share:
From continuing operations				$	(2.59	)		$	(0.06	)		$	(0.76	)
From discontinued operation					0.08				0.78				0.11
From gain on sale of discontinued operation					0.36				—				—
From extraordinary income – negative goodwill					1.22				—				—
Net (loss) income per common share				$	(0.93	)		$	0.72			$	(0.65	)

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The weighted average basic common shares outstanding was used in the calculation of the diluted loss per common share for the years ended December 31, 2005, 2004 and 2003 as the use of weighted average diluted common shares outstanding would have an anti-dilutive effect on the loss from continuing operations per share. None of the options outstanding at December 31, 2005, 2004, or 2003 or Series B preferred stock were included in the loss per share calculation.

Note 16    Commitments and Contingencies

Leases:    The Company’s leases consist primarily of manufacturing and distribution facilities and equipment, which expire between 2006 and 2012. A number of leases require that the Company pay certain executory costs (taxes, insurance, and maintenance) and contain renewal and purchase options. Annual rental expense for operating leases approximated $8.2 million in 2005, $4.8 million in 2004 and $4.8 million in 2003.

Future minimum annual rental payments under non-cancelable operating leases as of December 31, 2005 were as follows:    $8.3 million in 2006, $5.8 million in 2007, $4.5 million in 2008, $3.4 million in 2009, $1.6 million in 2010 and $2.3 million thereafter.

Insurance:    The Company is self-insured for healthcare, workers compensation, general liability and product liability claims up to predetermined amounts above which third party insurance applies. The Company has reserved approximately $2.7 million and $2.8 million to pay such claims as of December 31, 2005 and 2004, respectively.

Product Warranties:    As a result of programs offered by Modine Aftermarket, the Company now provides product warranties for specific product lines and accrues for estimated future warranty costs in the period in which the sale is recorded. The most significant warranty expense estimates are forecasts based on the best information available using statistical analysis of both historical and current claim data.

Changes in the warranty liability are as follows:

				(in thousands)
Merger acquisition balance sheet				$	2,866
Accruals for warranties issued in current year					1,119
Settlements made					(1,100	)
Balance at December 31, 2005				$	2,885

Legal Proceedings:    Various legal actions are pending against or involve the Company in the ordinary course of business with respect to such matters as product liability, casualty, environmental and employment-related claims.

Pursuant to an Agreement and Plan of Merger dated July 23, 1998 (the ‘‘Purchase Agreement’’), the Company acquired from Paul S. Wilhide (‘‘Wilhide’’) all of the common stock of EVAP, Inc. The consideration for this transaction was a payment of $3 million in cash, the issuance of 30,000 shares of the Company’s Series B Convertible Redeemable Preferred Stock (the ‘‘Convertible Shares’’), and the potential for an ‘‘earn-out’’ payment to Wilhide based on a calculation relating to EVAP’s performance during the years 1999 and 2000. There is presently a dispute between the Company and Wilhide relating to the calculation of the earn-out. Wilhide claims that the value of his earn-out is $3.75 million, while the Company believes that Wilhide is not entitled to any earn-out. Under the payout formula in the Purchase Agreement, any earn-out may be payable to Wilhide in cash. The Purchase Agreement includes an arbitration provision and the arbitration is currently proceeding before an arbitrator in Ft. Worth, Texas. While the arbitration schedule has not been finalized, it is anticipated that the arbitration hearing will occur and a decision rendered during 2006. The Company intends to vigorously defend this matter. Depending on the amount and timing, an unfavorable resolution of this matter could materially affect the Company’s consolidated financial position, future operations or cash flows in a particular period. The ultimate outcome at this time, however, is unknown.

Environmental Matters:    The Company is subject to Federal, foreign, state and local laws designed to protect the environment and believes that, as a general matter, its policies, practices and procedures

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are properly designed to reasonably prevent risk of environmental damage and financial liability to the Company. On January 27, 2003, the Company announced that it had signed a Consent Agreement with the State of Connecticut Department of Environmental Protection. Under the agreement, the Company will voluntarily initiate the investigation and cleanup of environmental contamination on property occupied by a wholly-owned subsidiary of the Company over 20 years ago. The Company believes there will not be a material adverse impact to its financial results due to the investigation and cleanup activities. The Company also does not currently anticipate any material adverse effect on its consolidated results of operations, financial condition or competitive position as a result of compliance with Federal, state, local or foreign environmental laws or regulations. However, risk of environmental liability and charges associated with maintaining compliance with environmental laws is inherent in the nature of the Company's business and there is no assurance that material environmental liabilities and compliance charges will not arise. The Company also believes it is reasonably possible that environmental-related liabilities might exist with respect to other industrial sites formerly owned or occupied by the Company. Based upon environmental site assessments, the Company believes that the cost of any potential remediation, other than amounts already provided, for which the Company may ultimately be responsible will not have a material adverse effect on the consolidated financial position, results of operations, or liquidity of the Company.

In conjunction with the merger, Modine retained the environmental liability for environmental remediation of soil and groundwater contamination at the Mill facility in The Netherlands, which existed at the time of the merger. As part of the agreement to sell the Company’s Heavy Duty OEM business to Modine in March 2005, the Company retained responsibility for any environmental remediation which would result from contamination existing on the date of the sale at the facility in Jackson, Mississippi, which was included in the transaction.

Note 17    Supplemental Cash Flow Information

Supplemental cash flow information is as follows:

				For the Year Ended December 31,
				2005				2004				2003
				(in thousands)
Non-cash investing and financing activity:
Entered into capital lease obligation				$	1,713			$	288			$	—
Common stock issued for net assets of Modine Aftermarket business				$	50,667			$	—			$	—
Accrued expenses for unpaid merger transaction costs				$	912			$	370			$	—
Sale of inventory on fixed assets to reduce accounts payable				$	—			$	1,554			$	—
Supplemental disclosure of cash flow information:
Cash paid for interest				$	6,968			$	3,898			$	2,853
Cash paid for income taxes				$	1,303			$	452			$	331

Note 18    Business Segments

Subsequent to the merger with Modine Aftermarket and the sale of the Heavy Duty OEM business, the Company has been reorganized into two reporting segments, based upon the geographic area served – Domestic and International. The Domestic marketplace supplies heat exchange and air conditioning products to the automotive and light truck aftermarket and heat exchange products to the heavy duty aftermarket in the United States and Canada. The International segment includes heat exchange and air conditioning products for the automotive and light truck aftermarket and heat exchange products for the heavy duty aftermarket in Mexico, Europe and Central America. Each product group within the Domestic segment constitutes an operating segment and have been aggregated for reporting business segment information.

The table below sets forth information about the reported segments. Previous years’ data has been restated based upon the new segments.

The Company evaluates the performance of its segments and allocates resources accordingly based on operating income (loss) before interest and taxes. Intersegment sales are recorded at cost plus a normal manufacturing profit margin.

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The tables below set forth information about continuing operations reported segments for the three years ended December 31:

				Consolidated Revenues												Operating Income (Loss)
				2005				2004				2003				2005				2004				2003
				(in thousands)												(in thousands)
Domestic				$	265,241			$	218,433			$	198,862			$	(12,265	)		$	11,716			$	1,359
International					31,597				—				—				1,370				—				—
Inter-segment revenues:
Domestic					646				—				—				—				—				—
International					6,741				—				—				—				—				—
Elimination of inter-segment revenues					(7,387	)			—				—				—				—				—
Corporate expenses					—				—				—				(9,864	)			(7,845	)			(4,568	)
Consolidated continuing operations total				$	296,838			$	218,433			$	198,862			$	(20,759	)		$	3,871			$	(3,209	)

				Total Assets												Capital Expenditures												Depreciation and Amortization Expense
				2005				2004				2003				2005				2004				2003				2005				2004				2003
				(in thousands)												(in thousands)												(in thousands)
Domestic				$	162,216			$	126,518			$	134,762			$	7,852			$	3,188			$	4,476			$	4,458			$	4,686			$	4,530
International					52,021				—				—				1,040				—				—				47				—				—
Corporate					3,102				5,624				8,737				—				—				—				42				21				96
Consolidated continuing operations totals				$	217,539			$	132,142			$	143,499			$	8,892			$	3,188			$	4,476			$	4,547			$	4,707			$	4,626

Restructuring and other special charges included in operating income (loss) for the three years ended December 31 are as follows:

				2005				2004				2003
				(in thousands)
Domestic				$	4,024			$	—			$	1,490
International					256				—				—
Total restructuring and other special charges				$	4,280			$	—			$	1,490

In 2005, 2004 and 2003 sales to AutoZone accounted for approximately 17%, 25% and 23% of net sales, respectively. In addition, Advance Auto Parts accounted for approximately 13%, 17% and 14% of net sales for 2005, 2004 and 2003 respectively. These sales were in the Domestic segment. No other customer individually represented more than 10% of net trade sales from continuing operations in any of the years reported. The loss of one of the major Domestic customers, indicated above, could have a material adverse effect on the Company’s results of operations.

Trade sales by the Company’s product lines for the three years ended December 31 are as follows:

				2005				2004				2003
Heat exchange products				$	255,202			$	197,941			$	178,917
Temperature control products					41,636				20,492				19,945
Trade sales of continuing operations				$	296,838			$	218,433			$	198,862

The principal raw materials used by the Company in its Domestic and International segments are copper, brass and aluminum. Although these materials are available from a number of vendors, the Company has chosen to concentrate its sources with a limited number of long-term suppliers. The Company believes this strategy results in purchasing and operating economies. The Company has not experienced any significant supply problems for these commodities and does not anticipate any significant supply problems in the foreseeable future.

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Note 19    Quarterly Financial Data (Unaudited)

				Year Ended December 31, 2005
				1st Qtr				2nd Qtr				3rd Qtr				4th Qtr
				(in thousands, except per share amounts)
Net sales				$	48,308			$	58,962			$	101,953			$	87,615
Gross margin					8,967				11,425				15,060				13,956
(Loss) income from continuing operations					(2,272	)			(2,091	)			(9,869	)			(13,499	)
(Loss) income from discontinued operation					848				—				—				—
Gain on sale of discontinued operation					3,899				—				—				—
Extraordinary item – negative goodwill					—				—				13,207				(154	)
Net (loss) income				$	2,475			$	(2,091	)		$	3,338			$	(13,653	)
Basic (loss) income per common share:
Continuing operations				$	(0.32	)		$	(0.30	)		$	(0.75	)		$	(0.89	)
Discontinued operation					0.12				—				—				—
Gain on sale of discontinued operation					0.55				—				—				—
Extraordinary item – negative goodwill					—				—				1.00				(0.01	)
Net (loss) income				$	0.35			$	(0.30	)		$	0.25			$	(0.90	)
Diluted (loss) income per common share:
Continuing operations				$	(0.32	)		$	(0.30	)		$	(0.75	)		$	(0.89	)
Discontinued operation					0.12				—				—				—
Gain on sale of discontinued operation					0.55				—				—				—
Extraordinary item – negative goodwill					—				—				1.00				(0.01	)
Net (loss) income				$	0.35			$	(0.30	)		$	0.25			$	(0.90	)

				Year Ended December 31, 2004
				1st Qtr				2nd Qtr				3rd Qtr				4th Qtr
				(in thousands, except per share amounts)
Net sales				$	49,436			$	60,400			$	58,004			$	50,593
Gross margin					8,817				10,940				13,006				11,095
(Loss) income from continuing operations					(1,384	)			(161	)			1,388				(192	)
Income from discontinued operation					741				964				1,270				2,552
Net (loss) income				$	(643	)		$	803			$	2,658			$	2,360
Basic (loss) income per common share:
Continuing operations				$	(0.19	)		$	(0.03	)		$	0.19			$	(0.03	)
Discontinued operation					0.10				0.14				0.18				0.36
Net (loss) income				$	(0.09	)		$	0.11			$	0.37			$	0.33
Diluted (loss) income per common share:
Continuing operations				$	(0.19	)		$	(0.03	)		$	0.19			$	(0.03	)
Discontinued operation					0.10				0.14				0.17				0.36
Net (loss) income				$	(0.09	)		$	0.11			$	0.36			$	0.33

Restructuring expenses for the quarters ended December 31, 2005 were $0.3 million – 1st quarter; $1.1 million – 2nd quarter; $2.0 million – 3rd quarter; and $0.9 million – 4th quarter. There were no restructuring expenses in 2004.

During the fourth quarter of 2004, the Company reversed $0.9 million of its tax valuation reserve in anticipation of the gain to be recorded in 2005 resulting from the sale of its Heavy Duty OEM business, as described in Note 4.

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SCHEDULE II

Proliance International, Inc.
Valuation and Qualifying Accounts

				Balance at Beginning of Period(a)				Charged to Costs and Expenses(a)				Write-Offs(a)				Other(a)				Balance at End of Period(a)
				(in thousands)
Year Ended December 31, 2005
Allowance for doubtful accounts				$	2,746			$	2,433	(e)		$	(1,037	)		$	1,249	(b)		$	5,391
Allowance for excess/slow moving inventory					2,485				4,725				(1,831	)			6,196	(b)			11,575
Tax valuation reserve					5,843				9,046				—				9,396	(b)			24,285
Year Ended December 31, 2004
Allowance for doubtful accounts				$	2,353			$	509			$	(116	)		$	—			$	2,746
Allowance for excess/slow moving inventory					1,681				2,278				(1,474	)			—				2,485
Tax valuation reserve					7,961				(2,118)	(c)			—				—				5,843
Year Ended December 31, 2003
Allowance for doubtful accounts				$	2,348			$	499			$	(494	)		$	—			$	2,353
Allowance for excess/slow moving inventory					3,160				1,450				(2,929	)			—				1,681
Tax valuation reserve					6,875				1,079				—				7	(d)			7,961

(a)	Amounts reflect activity of continuing operations.

(b)	Amounts represent balances from the Modine Aftermarket business acquisition balance sheet.

(c)	Includes $0.9 million reversal resulting from the expected gain from the Heavy Duty OEM business sale in 2005.

(d)	Amount represents change in the valuation allowance and the deferred tax asset resulting from minimum pension liability adjustment included in Shareholders’ Equity.

(e)	Represents reserve required for adjustments associated with new customer added in 2005 and normal provisions.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of ‘‘disclosure controls and procedures’’ in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of December 31, 2005. Based upon the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.

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On July 22, 2005, the Company completed its merger with the aftermarket business of Modine Manufacturing Company. This acquired business contained over 150 facilities located in North America, Central America and Europe and involved the addition of 1,400 employees. As part of the post-closing integration of the merged entity, the Company is engaged in a process of refining and harmonizing the internal controls and processes of the acquired business with those of the Company’s historical operations in addition to closing and consolidating facilities. This process was ongoing during the quarter ended December 31, 2005, and the Company believes that it will be completed in 2006.

In addition, during 2005, the Company has begun its project to become compliant with the requirements of Section 404 of the Sarbanes-Oxley Act at the end of 2006. To date this involves reviewing the Company’s documentation of control procedures being followed and improving or strengthening these controls as appropriate.

Except as provided in the prior paragraphs, there have been no changes in the Company's internal controls over financial reporting during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B.    Other Information

None.

PART III

Item 10.    Directors and Executive Officers of the Registrant

Portions of the information required by this item are included in Part I of this Report. Other information required by this item will be contained in the Company’s 2006 Proxy Statement under the headings ‘‘Section 16(a) Beneficial Ownership Reporting Compliance’’, ‘‘Code of Ethics’’, ‘‘Board Information and Committees’’ and ‘‘Proposal 1: Election of Directors’’ and is incorporated herein by reference.

Item 11.    Executive Compensation

The information contained in the Company’s 2006 Proxy Statement under the headings ‘‘Executive Officer Compensation’’, ‘‘Executive Contracts and Severance and Change of Control Arrangements’’, ‘‘Retirement Plan’’, Directors’ Compensation’’ and ‘‘Compensation Committee Interlocks and Insider Participation’’ is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information contained in the Company’s 2006 Proxy Statement under the headings ‘‘Which stockholders own at least 5% of Proliance?’’, ‘‘How much stock is owned by directors and executive officers?’’ and ‘‘Table III Equity Compensation Plan Information’’ is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions

The information contained in the Company’s 2006 Proxy Statement under the heading ‘‘Additional Information-Certain Transactions’’ is incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services

The information contained in the Company’s 2006 Proxy Statement under the headings ‘‘Proposal 2: Approval of Appointment of Proliance’s Independent Accountants’’ and ‘‘Audit Committee Pre-Approval Policy’’ is incorporated herein by reference.

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a) (1)	Financial Statements of the Registrant

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See Consolidated Financial Statements under Item 8 of this Report.

(a) (2)	Financial Statement Schedules

See Schedule II - Valuation and Qualifying Accounts under Item 8 of this Report.

Schedules other than the schedule listed above are omitted because they are not applicable, or because the information is furnished elsewhere in the Consolidated Financial Statements or the Notes thereto.

(a) (3)	Exhibits

The information required by this Item relating to Exhibits to this Report is included in the Exhibit Index in (b) below.

(b)	Exhibits -The following exhibits are filed as part of this report:

2.1				Agreement and Plan of Merger, dated as of January 31, 2005, among Modine Manufacturing Company, Modine Aftermarket Holdings, Inc. and Transpro.(8)
2.2				Contribution Agreement, dated as of January 31, 2005, among Modine Aftermarket Holdings, Inc., Modine Manufacturing Company, Modine, Inc. and Transpro.(8)
2.3				OEM Acquisition Agreement, dated as of January 31, 2005, between Modine Manufacturing Company and Transpro.(8)
2.4				Amendment to OEM Acquisition Agreement, dated as of March 1, 2005, between Modine Manufacturing Company and Transpro.(9)
2.5				Amendment to Agreement and Plan of Merger by letter dated June 16, 2005 between Transpro, Inc., Modine Manufacturing Company and Modine Aftermarket Holdings, Inc.(15)
3.1(i)				Restated Certificate of Incorporation of Proliance International, Inc.(14)
3.1(ii)				By-laws of Proliance International, Inc., as amended.(14)
4.1				Loan and Security Agreement dated as of January 4, 2001, by and between Congress Financial Corporation (New England) as Lender and Transpro, Inc., Ready-Aire, Inc., and GO/DAN Industries, Inc. as Borrowers.(2)
4.2				First Amendment to Loan and Security Agreement with Congress Financial Corporation.(3)
4.3				Second Amendment to Loan and Security Agreement with Congress Financial Corporation.(3)
4.4				Third Amendment to Loan and Security Agreement with Congress Financial Corporation.(4)
4.5				Fourth Amendment to Loan and Security Agreement with Congress Financial Corporation.(4)
4.6				Fifth Amendment to Loan and Security Agreement with Congress Financial Corporation.(4)
4.7				Sixth Amendment to Loan and Security Agreement with Congress Financial Corporation.(4)
4.8				Seventh Amendment to Loan and Security Agreement with Congress Financial Corporation.(5)
4.9				Eighth Amendment to Loan and Security Agreement with Congress Financial Corporation.(6)
4.10				Ninth Amendment to Loan and Security Agreement with Congress Financial Corporation.(7)
4.11				Tenth Amendment to Loan and Security Agreement with Congress Financial Corporation.(10)
4.12				Eleventh Amendment to Loan and Security Agreement with Congress Financial Corporation.(9)
4.13				Twelfth Amendment to Loan and Security Agreement with Congress Financial Corporation.(14)

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4.14				Thirteenth Amendment to Loan and Security Agreement with Congress Financial Corporation.(12)
10.1				Transpro, Inc. 1995 Stock Plan.(1)
10.2				Form of Stock Option Agreement under the 1995 Stock Plan.(1)
10.3				Transpro, Inc. 1995 Non-employee Directors Stock Option Plan.(1)
10.4				Form of Stock Option Agreement under the 1995 Non-employee Directors Stock Option Plan.(1)
10.5				Form of Key Employee Severance Policy.(1)
10.6				Letter Agreement, dated December 15, 1992 between Jeffrey J. Jackson and GO/DAN Industries.(1)
10.7				Employment Agreement between the Company and Charles E. Johnson.(3)
10.8				Amendment No. 1 to Employment Agreement between the Company and Charles E. Johnson.(11)
10.9				Form of Nonqualified Stock Option Agreement (Director Replacement Option).(13)
10.10				Director and Officer Indemnification Agreement.(14)
10.11				Aftermarket License Agreement between Modine Manufacturing Company and Modine Aftermarket Holdings, Inc.(14)
10.12				Proliance International, Inc. Equity Incentive Plan.(14)
10.13				Tax Sharing Agreement between Modine Manufacturing Company and Transpro, Inc.(16)
21.1				Subsidiaries of the Company.
23.1				Consent of BDO Seidman, LLP.
23.2				Consent of PricewaterhouseCoopers LLP.
24				Powers of Attorney (included on signature page).
31.1				Certification of CEO in accordance with Section 302 of the Sarbanes-Oxley Act.
31.2				Certification of CFO in accordance with Section 302 of the Sarbanes-Oxley Act.
32.1				Certification of CEO in accordance with Section 906 of the Sarbanes-Oxley Act.
32.2				Certification of CFO in accordance with Section 906 of the Sarbanes-Oxley Act.

(1)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 33-96770).

(2)	Incorporated by reference to the Company’s 2000 Form 10-K.

(3)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 2001.

(4)	Incorporated by reference to the Company’s 2001 Form 10-K.

(5)	Incorporated by reference to the Company’s Form 8-K filed September 20, 2002.

(6)	Incorporated by reference to the Company’s Form 8-K filed November 22, 2002.

(7)	Incorporated by reference to the Company’s Form 8-K filed December 27, 2002.

(8)	Incorporated by reference to the Company’s Form 8-K filed February 1, 2005.

(9)	Incorporated by reference to the Company’s Form 8-K filed March 7, 2005.

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(10)	Incorporated by reference to the Company’s Form 8-K filed November 19, 2004.

(11)	Incorporated by reference to the Company’s Form 8-K filed November 3, 2004.

(12)	Incorporated by reference to the Company’s Form 8-K filed October 21, 2005.

(13)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 2005.

(14)	Incorporated by reference to the Company’s Form 8-K filed July 28, 2005.

(15)	Incorporated by reference to the Company’s Form 8-K filed June 20, 2005.

(16)	Incorporated by reference to the Company’s Form S-4 filed May 2, 2005.

(c)	Other Financial Information

None.

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SIGNATURES

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

				Proliance International, Inc.
Date: March 31, 2006				By				/s/ CHARLES E. JOHNSON
								Charles E. Johnson President and Chief Executive Officer

POWER OF ATTORNEY

Each of the undersigned hereby appoints Paul R. Lederer and Charles E. Johnson and each of them severally, his or her true and lawful attorneys to execute on behalf of the undersigned any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Each such attorney will have the power to act hereunder with or without the others. Each of the undersigned hereby ratifies and confirms all such attorneys, or any of them may lawfully do or cause to be done by virtue thereof.

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.

/s/ WILLIAM J. ABRAHAM, JR.				March 31, 2006
William J. Abraham, Jr., Director
/s/ BARRY R. BANDUCCI				March 31, 2006
Barry R. Banducci, Director
/s/ PHILIP WM. COLBURN				March 31, 2006
Philip Wm. Colburn, Director
/s/ CHARLES E. JOHNSON				March 31, 2006
Charles E. Johnson, President, Chief Executive Officer and Director
/s/ PAUL R. LEDERER				March 31, 2006
Paul R. Lederer, Director
/s/ VINCENT L. MARTIN				March 31, 2006
Vincent L. Martin, Director
/s/ BRADLEY C. RICHARDSON				March 31, 2006
Bradley C. Richardson, Director
/s/ JAMES R. RULSEH				March 31, 2006
James R. Rulseh, Director
/s/ F. ALAN SMITH				March 31, 2006
F. Alan Smith, Director
/s/ RICHARD A. WISOT				March 31, 2006
Richard A. Wisot Vice President, Treasurer, Secretary and Chief Financial Officer Principal Financial and Accounting Officer
/s/ MICHAEL T. YONKER				March 31, 2006
Michael T. Yonker, Director

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