The Heat Exchanger Unit, which we believe to be the largest seller of aftermarket radiators and heater cores in North America, has been the focus of many of the Company’s most far-reaching initiatives over the past three years. While market conditions in 2003 were as challenging as any we’ve faced in recent memory, the substantial underlying progress the Company has made in transforming this business in the face of continuing change will provide a strong foundation for the future.

Accomplishments in 2003 included:

• Successfully integrating the Fedco acquisition, including consolidating its copper and brass heater manufacturing capability, formerly located in Buffalo, New York, into Transpro’s lower-cost heater facility in Mexico. Fedco’s aluminum heater core manufacturing capability, which remains in Buffalo, was substantially reworked and transformed into a “center of excellence” for this product line.
• Expanding and strengthening the management and technological support team in our Mexico operation, thereby bringing about significant improvements in business performance.
• Relocating and increasing the production levels on a new aluminum tube mill acquired in 2002. This process took longer than anticipated, requiring us to take the costly step of purchasing finished goods in order to meet customer needs during the first half of the year. By July, however, the facility was producing high-quality aluminum tubing at a unit cost in line with our expectations.
• Expanding our roster of “blue-chip” customers with the addition of NAPA, the Automotive Parts Group of Genuine Parts Company. Under the agreement, Transpro will be supplying this customer a selection of the most popular radiator models under the NAPA brand name.
• Continuing to focus on cost reductions throughout the business.
• Rolling out new initiatives to further enhance our market leadership and differentiate our products. These activities range from introducing a line of performance radiators to improving application coverage on all product lines, and continuing to expand our served market leadership in electronic catalog capabilities.

Taken together, these accomplishments reflect our commitment to build on our leadership in the aftermarket for heat exchange products. In addition to our significant operations in North America, we’ve also expanded and concentrated sourcing of products and subassemblies from a number of global supplier partners. By adding these alternative product sources, we can enhance flexibility, reduce costs, react quickly to shifting customer demand, maintain product quality and better manage inventory.

As we enter 2004, our priorities for the Heat Exchanger Unit include driving new cost-reduction programs, focusing on inventory reduction strategies, and working with our supplier partners throughout the world to develop new programs to compete in the growing import application segment of the radiator and condenser market. In addition, we are evaluating other ways to improve the effectiveness of our hub-and-spoke distribution system.