NEW HAVEN, CT-- Proliance International has announced results for the fourth quarter and year, which ended Dec. 31, 2005.

Net sales in the fourth quarter of 2005 were $87.6 million, compared to $50.6 million in the fourth quarter of 2004, up 73.2 percent from last year, largely driven by the company's recent merger, as well as organic growth in some product lines. The fourth quarter included $34.3 million of net sales by businesses acquired in the merger and $53.3 million of net sales by historical Proliance business units. The company reported a net loss for the fourth quarter of 2005 of $13.7 million, or 90 cents per basic and diluted share, including a loss from continuing operations of $13.5 million, or 89 cents per basic and diluted share, and a reduction on the previously recorded extraordinary gain on negative goodwill of $0.1 million, or $0.01 per basic and diluted share. In the fourth quarter of 2004, the company reported net income of $2.4 million, or 33 cents per basic and diluted share, which included a loss from continuing operations of $0.2 million, or 3 cents per basic and diluted share, and income from discontinued operation of $2.6 million, or 36 cents per basic and diluted share. The company's reported loss from continuing operations in the fourth quarter of 2005 was heavily impacted by merger-related factors, described in more detail below.

For the year ended, net sales were $296.8 million, an increase of 35.9 percent from net sales of $218.4 million for the prior year. The company reported a net loss for the year of $9.9 million, or 93 cents per basic and diluted share, which included a loss from continuing operations of $27.7 million, or $2.59 per basic and diluted share, income from discontinued operation of $0.8 million, or 8 cents per basic and diluted share, an after-tax gain on the sale of the Heavy Duty OEM business of $3.9 million, or 36 cents per basic and diluted share, and extraordinary income on the recording of negative goodwill of $13.1 million, or $1.22 per basic and diluted share. For the prior year, including a loss from continuing operations of $0.3 million, or 6 cents per basic and diluted share, and income from discontinued operation of $5.5 million, or 78 cents per basic and diluted share, the company reported net income of $5.2 million, or 72 cents per basic and diluted share.

Charles Johnson, president and chief executive officer of Proliance stated, "2005 was a transitional year for Proliance in which we undertook a number of strategic steps to posture the business for the future. We successfully completed the merger of Modine Aftermarket Holdings into Transpro, thus creating Proliance International, Inc., and accelerated our activities related to the integration of the business into Proliance to the greatest extent possible. In this context, our fourth quarter continued to be impacted by a number of deal-related factors, including acquisition accounting, business restructuring and integration activities. Additionally, along with the usual seasonal softness we see in the fourth quarter, we continued to experience competitive pricing pressure on our heat exchange products, as well as further increases in key raw material costs, especially for aluminum and copper. From a market perspective, high fuel costs contributed to nearly flat miles driven for the full-year 2005 and a reduction in miles driven by 0.4 percent in the second half, thus contributing to underlying market softness. All this resulted in unacceptable financial results, which were, nonetheless, expected under the circumstances, given the acquisition-related issues that impacted the quarter, the fact that our synergy programs had not yet begun to take hold in a meaningful way and the market conditions we have been describing in recent periods."

Johnson continued, "Recognizing that market conditions have continued to be unfavorable, we redoubled our efforts to identify additional synergy and cost savings activities, even beyond those we have described in previous communications, to help us offset the negative impact of these factors on future periods. In this regard, we are pleased with our continued progress in integrating our recent merger and positioning the business for the future. Since the merger, we completed many of the major actions originally anticipated in the integration program, achieving our goal of accelerating most of those actions, which were expected to require 12 - 18 months into a 6 - 9 month time frame. This also had the effect of drawing about $3 million of the previously announced $30 million of annualized synergy benefits into 2005. As a result of our continued cost reduction efforts, we are now expecting nearly $37 million in incremental annual benefits from these programs for the full year 2006 and an additional $5 - 8 million in 2007, with additional improvement possible.

"Our sales increase in the fourth quarter came in large part from contributions of the merger, but also from organic growth in our domestic air conditioning products, as well as continued strength in sales of our domestic heavy duty aftermarket products, where our new products continued to gain traction and our customer base expanded. Our domestic heat exchange business was relatively flat as a result of the mild winter we are experiencing and significant pricing pressure during the period."

On July 22, 2005, as previously announced, the company successfully completed its merger with the aftermarket business of Modine Manufacturing Company and changed its name from Transpro, Inc. to Proliance International, Inc. The financial results discussed herein reflect the performance of Transpro up until the completion of the merger and include the combined results thereafter. The company had 15.3 million shares outstanding at the end of the fourth quarter of 2005, compared to 7.1 million in the prior year period, primarily as a result of the company's issuance of 8.1 million shares of its common stock in connection with the merger.

Subsequent to the merger with the Modine Aftermarket business, the company has been reorganized into two segments, based upon the geographic area served - domestic and international. The Domestic segment 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. The company's European operations are being reported on a one-month lag; and therefore, the company's results for the fourth quarter of 2005 include these operations from September 1, 2005 through November 30, 2005.

In addition, as previously announced, the company completed the sale of its Heavy Duty OEM business to Modine Manufacturing company on March 1, 2005. As a result, the statements of operations and related financial statement disclosures for all periods prior to the sale have been restated to present the Heavy Duty OEM business as a discontinued operation. The discussions and analyses herein are of continuing operations, unless otherwise noted.

In recording the merger opening balance sheet, the value of the common stock issued combined with the transaction costs were less than the net fair value of the assets acquired and liabilities assumed, which included $4.8 million of accrued expenses for restructuring activities associated with Modine facilities. This difference of $33.3 million in value was recorded as follows: (1) the acquired fixed assets of the Modine Aftermarket business, with a net book value of $20.2 million, were written down to zero and (2) the remaining amount of $13.1 million represents negative goodwill. The amount of negative goodwill at 2005 year end reflects a reduction of $0.1 million from the amount recorded at the time of the acquisition in the third quarter of 2005 due to adjustments of estimates made in the opening balance sheet. As the company noted in its 2005 third quarter earnings release, the calculation of negative goodwill is subject to change because it is based on estimates of the fair value of the assets acquired and liabilities assumed. In general, restructuring activities related to the former Transpro assets are charged to operations of the business, while restructuring activities related to the acquired Modine aftermarket assets are accrued on the opening balance sheet. Additionally, in conjunction with the merger, the company established a tax valuation reserve of $9.4 million on the U.S. deferred tax assets included on the acquisition balance sheet. With respect to the tax valuation reserve, the company will receive a benefit in future periods to the extent it generates U.S. pre-tax income.

Consolidated gross margin for the fourth quarter of 2005 was $14.0 million, or 15.9 percent of sales, versus a consolidated gross margin of $11.1 million, or 21.9 percent of sales, in the same period in 2004. Included in the company's gross margin in the fourth quarter of 2005 is the impact of pricing pressure on the company's domestic heat exchange product line and costs associated with the impact of production cutbacks that the company initiated to reduce inventories. Rising raw material costs and the write-off of the purchase accounting adjustment to reflect acquisition inventory at fair market value also had a negative effect on gross margins.

Selling, general and administrative expenses totaled $23.8 million, or 27.2 percent of net sales, in the 2005 fourth quarter, compared to $10.4 million, or 20.5 percent of net sales, in the same period in 2004. The increase in expenses primarily reflects the addition of the Modine aftermarket branch outlets, which represent a higher percentage of the acquired sales than was the company's pre-merger history, and support costs as a result of the merger. Higher freight costs caused by the rising price of fuel, integration costs from the merger and costs attributable to the Sarbanes-Oxley compliance activities initiated during the year also contributed to the year-over-year increase. Expense levels were lowered by a $0.3 million gain recorded during the quarter due to the sale of surplus machinery and equipment acquired in the merger.

The company reported an operating loss from continuing operations, before interest expense and income taxes, for the fourth quarter of 2005 of $10.8 million, versus operating income from continuing operations of $0.7 million in the fourth quarter of 2004. Included in the company's results for the fourth quarter of 2005 were $0.9 million in restructuring charges, which were part of the $10 - 14 million restructuring program announced by the company at the time of the merger. These included costs resulting from the closure of branch and plant locations and their consolidation into existing acquired facilities, the closure of the company's New Haven tube mill and the relocation of copper brass radiator production from the company's Nuevo Laredo facility to its Mexico City facility. These actions, once fully implemented, are expected to generate annual operating cost savings substantially in excess of associated restructuring charges. There were no restructuring charges in the fourth quarter of 2004.

The company's loss from continuing operations for the fourth quarter of 2005 of $13.5 million, after income taxes, included restructuring charges of $0.9 million, as noted above, and a number of other merger and business integration-related charges. These charges include, but are not limited to, integration expenses of $0.4 million, unabsorbed overhead variances as a result of production cutbacks to reduce inventories of $0.8 million, $1.4 million from the write-off of a portion of the inventory fair market value purchase accounting adjustment and a $0.3 million gain from the sale of fixed assets acquired in the merger. A measure of loss from continuing operations taking into account the listed items, each of which the company considers to be non-recurring, would constitute a "non-GAAP financial measure" as defined by the rules of the Securities and Exchange Commission. The company has provided the foregoing data as it believes that it provides the marketplace with additional information useful in evaluating the financial performance of the company during the fourth quarter and fiscal year 2005. Most of the listed adjustments are the result of the merger with Modine Aftermarket Holdings Inc. that closed during the third quarter. No separate tabular presentation of this information is provided herein, since a summary of merger and integration-related data can be determined based on the information provided in this paragraph.

Inventory levels at December 31, 2005 were $121.1 million, compared to $126.2 million at September 30, 2005 and $71.2 million at December 31, 2004. These levels reflect inventory increases associated with the merger, as well as safety stock built up prior to the merger to support preparation for plant consolidation activities and lower sales levels than anticipated in the first half of 2005. When compared to the inventory level prior to the merger at June 30, 2005 of $84.8 million plus the inventory of $59.4 million acquired in the merger, or a total of $144.2 million of inventory, the production adjustments initiated in the second half of 2005 resulted in a $23.1 million reduction in inventory in the second half.

In the fourth quarter of 2005, the company generated $10.2 million in cash flow provided by operating activities compared to $1.5 million of cash flow provided by operating activities in the comparable prior year period. The fourth quarter of 2005 benefited from inventory reductions, as well as increases in accounts receivable collections from the pay down of third quarter balances. Cash flow provided by operating activities for the year was $2.7 million, compared to a year ago when operations generated $13.5 million of cash flow.

Johnson continued, "We expect that we will begin to see the benefits of our efforts reflected in our performance as we move through 2006. Through 2005, we have completed $10.5 million of restructuring and integration activities and anticipate costs, in total, to be at the high end of our predicted range at around $14 million. Looking to the first quarter and beyond, we will continue to take additional cost reduction and integration actions to fully realize the synergy opportunities available to us. At the same time, we expect continued pricing pressure in our domestic heat exchange product line, continued high and rising raw material costs, as well as higher fuel and other inflationary costs will have an ongoing adverse impact on our operating environment in 2006 and will offset significant portions of our cost savings. As a result, we are initiating pricing actions wherever possible in order to mitigate some of this impact."

Johnson added that the company has defined five areas of focus for the coming months, including customer service; achieving synergy projections; continuing to look at ways to improve the stategic positioning of the business, adding new product in existing and areas; and selling down excess inventory.

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