WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x

For the fiscal year ended December 31, 20032004

OR

o

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the transition period from                         to                         

Commission file number 0-3134333-43005

PARK-OHIO INDUSTRIES, INC.

Registrant’s telephone number, including area code: (216) 692-7200

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

None

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

None

Pursuant to a corporate reorganization effective June 15, 1998, Park-Ohio Industries, Inc. became a wholly-owned subsidiary of Park-Ohio Holdings Corp.

The registrant meets the conditions set forth in General Instructions I 1(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format.

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

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

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yeso     Nox

All of the outstanding stock of the registrant is held by Park-Ohio Holdings Corp. As of March 25, 2004,15, 2005, 100 shares of the registrant’s common stock, $1 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None

Part I

Item 1. Business

Item 1.	Business

The CompanyOverview

      Park-Ohio Industries, Inc. (“Park-Ohio”), a wholly-owned subsidiary of Park-Ohio Holdings Corp. (“Holdings”), was incorporated as an Ohio corporation in 1998.1984. Park-Ohio, primarily through theits subsidiaries, is a leading provider ofan industrial supply chain logistics services and a manufacturer of highly engineered products. Reference herein to the “Company” includes, where applicable, Holdings, Park-Ohio and its direct and indirect subsidiaries.

      The Company operates throughdiversified manufacturing business operating in three segments,segments: Integrated Logistics Solutions (“ILS”), Aluminum Products and Manufactured Products. ILS is a leading supply chain logistics provider of production components

      References herein to large, multinational manufacturers. In connection with the supply of such production components,“we” or “the Company” include, where applicable, Holdings, Park-Ohio and its other direct and indirect subsidiaries.

      ILS provides a variety of value-added, cost-effectiveour customers with integrated supply chain management services. The principal customers of ILS are in the heavy-duty truck, semiconductor equipment, industrial equipment, aerospace and defense, electrical controls, heating, ventilating and air-conditioning (“HVAC”), vehicle parts and accessories, appliances and lawn and garden equipment industries. Aluminum Products manufactures cast aluminum componentsservices for automotive, agricultural equipment, heavy-duty truck and construction equipment manufacturers. Aluminum Products also provides value-added services such as design and engineering, machining and assembly. Manufactured Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of high quality products engineered for specific customer applications. The principal customers ofhigh-volume, specialty production components and has a leading market position in North America. Our Aluminum Products business manufactures cast and machined aluminum components, and our Manufactured Products arebusiness is a major manufacturer of highly-engineered industrial products. Our businesses serve large, industrial original equipment manufacturers (“OEMs”) in a variety of industrial sectors, including the automotive, heavy-duty truck, industrial equipment, steel, rail, electrical controls, aerospace and end-users in the aerospace, automotive, steel, forging, railroad, truck, oil, food processingdefense, lawn and consumer appliancegarden and semiconductor industries. As of December 31, 2003, the Company2004, we employed approximately 2,5003,200 persons.

Operations

      The following chart highlights the Company’s three business segments, the primary industries they serve andtable summarizes the key attributes of each of our business segments:

(1)	Results are for the year ended December 31, 2004 and exclude the results of operations related to the assets of the Amcast Components Group prior to the date of acquisition on August 23, 2004.

      We have established leading market positions across a variety of industries, and we believe we maintain a #1 or #2 market position in products they sell.

Integrated Logistics Solutions

      Our ILS business provides our customers with integrated supply chain management services for a broad range of high-volume, specialty production components. Our ILS customers receive various value-added services, such as engineering and design services, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery,

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Integrated Logistics Solutions

      ILS is a leading provider of cross-industry

     Products and Services.Supply chain management services, which is ILS’ILS’s primary focus for future growth, involves offering customers comprehensive, on-site management for most of their production component needs. Some production components are characterized by low per unit supplier prices relative to the indirect costs of supplier management, quality assurance, inventory management and delivery to the production line. In addition, ILS delivers an increasingly broad range of higher costhigher-cost production components including valves, fittings, steering components and many others. Supply chain management customers receive various value-added services, such as part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time delivery, electronic billing services and ongoing technical support. ILS also provides engineering and design services to its customers. Applications-engineering specialists and the direct sales force work closely with the engineering staff of OEM customers to recommend the appropriate production components for a new product or to suggest alternative components that reduce overall production costs, streamline assembly or enhance the appearance or performance of the end product. Recently, ILS also provides asAs an additional service, ILS recently began providing spare parts and aftermarket products to the final end userusers of its customers’ products.

      Supply chain management services are typically provided to customers pursuant to sole-source arrangements. We believe our services distinguish us from traditional buy/sell distributors, as well as manufacturers who supply products directly to customers, because we outsource our customers’ high-volume production components supply chain services contracts. These agreements enable ILS’management, providing processes customized to each customer’s needs and replacing numerous current suppliers with a sole-source relationship. Our highly-developed, customized, information systems provide transparency and flexibility through the complete supply chain. This enables our customers to bothto: (1) significantly reduce procurement coststhe direct and better focus on their core manufacturing competencies by: (i) significantly reducing theindirect cost of production component procurementprocesses by outsourcing many internal purchasing, quality assurance and inventory fulfillment responsibilities; (ii) reducing(2) reduce the amount of working capital invested in inventory; (iii) achievinginventory and floor space; (3) reduce component costs through purchasing efficiencies, including bulk buying and cost reductionssupplier consolidation; and (4) receive technical expertise in production component selection and design and engineering. Our sole-source arrangements foster long-term, entrenched supply relationships with our customers and, as a result, the average tenure of supplier consolidation; and

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      ILS also engineers and manufactures precision cold formed and cold extruded products, including locknuts, SPAC® nuts and wheel hardware, whichthat are principally used in applications where controlled tightening is required due to high vibration. ILS produces both standard items and specialty products to customer specifications whichthat are used in large volumes by customers in the automotive, heavy-duty truck and railroadrail industries.

     Markets and Customers.In 2003, For the year ended December 31, 2004, approximately 88%79% of ILS’ILS’s net sales were to domestic customers. Remaining sales were primarily to manufacturing facilities of large, multinational customers located in Asia, Canada, Mexico and Europe. Supply chain management services and production components are used extensively in a variety of industries, and demand is generally related to the state of the economy and to the overall level of manufacturing activity.

      ILS markets and sells its services to over 7,5006,500 customers domestically and internationally. The principal markets served by ILS are heavy-duty truck, semiconductor equipment,electrical controls, automotive, other vehicle, industrial equipment, aerospace and defense, electrical controls, HVAC, vehicle parts and accessories, appliances, andpower sports equipment, lawn and garden equipmentand semiconductor industries. The five largest customers, within which ILS sells through sole-source contracts to multiple operating divisions or locations, accounted for approximately 32% and 38% of sales of ILS infor 2003 and 2004, respectively, with Navistar International Corp. (“Navistar”)Truck representing 15% and 19%, respectively, of segment sales. Two of the five largest customers are in the heavy-duty truck industry. The loss of the NavistarInternational Truck account or any two of the remaining top five customers could have a material adverse effect on this segment.

     Competition.There are a limited number of companies who compete with ILS for supply chain service contracts. ILS competes mainly with domestic competitors primarily on the basis of its value-added services, which includes sourcing, engineering and delivery capabilities, geographic reach, extensive product selection, price and reputation for high service levels with primarily domestic competitors who are capable of providing supply chain logistics services.levels.

2

Aluminum Products

      The Aluminum Products segment generated net sales of $90.1 million, or 14% of the Company’s net sales, for the year ended December 31, 2003. Management believes Aluminum Products isWe believe that we are one of the few part suppliers that has the capability to provide a wide range of high volume, high qualityhigh-volume, high-quality products utilizing a broad range of processes, including permanent mold, low-pressure, die-cast, sand-cast die-cast and lost-foam, products.as well as a proprietary sub-liquidous process. Our ability to offer our customers this comprehensive range of capabilities at a low cost provides us with a competitive advantage. We produce our aluminum components at six manufacturing facilities in Ohio, Indiana and Wisconsin.

Products and Services. Our Aluminum Products business casts and machines these products at three plants in two states. During the past two years, Aluminum Products substantially improved its operating efficiency by consolidating manufacturing facilities.

      Aluminum Products’ cast aluminum parts are manufacturedengine, transmission, brake, suspension and other components for automotive, agricultural equipment, heavy-duty truck and construction equipment OEMs, primarily located in North America.on a sole-source basis. Aluminum Products’ principal products include:include transmission pump housings, intake manifolds, planetary pinion carriers, oil filter adapters, clutch retainers, bearing cups, brackets, oil pans and flywheel spacers. Aluminum ProductsIn addition, we also providesprovide value-added services such as design engineering, machining drilling, tapping and part assembly. Although these parts are lightweight, they possess high durability and integrity characteristics even under extreme pressure and temperature conditions.

      Demand by automotive OEMs for aluminum castings has increased in recent years as OEMsthey have sought lighter alternatives to heavier steel and iron, components. Lighter aluminum cast componentsprimarily to increase an automobile’s fuel efficiency without decreasingcompromising structural integrity. Management believesWe believe that this replacement trend will continue as end-users and government standards regardingthe regulatory environment require greater fuel efficiency. To capitalize on this trend, in August 2004, we acquired substantially all of the assets of the Amcast Components Group, a producer of aluminum automotive fuel efficiency become increasingly stringent.components. This acquisition significantly increased our production capacity and added attractive new customers, product lines and production technologies. We believe that the acquisition of the Amcast Components Group will significantly increase the net sales of our Aluminum Products business. The historical financial data contained throughout this annual report on Form 10-K exclude the results of operations of the Amcast Components Group other than for the period from August 23, 2004 through December 31, 2004.

Markets and Customers. The five largest customers, of which Aluminum Products sells to multiple operating divisions through sole source

3

Manufactured Products

      TheOur Manufactured Products segment includesoperates a diverse group of niche manufacturing businesses involved in the manufacturingthat design and manufacture a broad range of highly-engineered products, including induction heating and melting systems, and other capital equipment,pipe threading systems, rubber products and forged and machined products. Manufactured Products generated net sales of $156.6 million, or 25% ofWe manufacture these products in eleven domestic facilities and eight international facilities in Canada, Mexico, the Company’s net sales, for the year ended December 31, 2003. The five largest customers, within which Manufactured Products sells primarily through sole-source contracts to multiple operating divisions, accounted for approximately 17% of Manufactured Products sales in 2003. The loss of business from any one of these customers would not have a material adverse effect on this segment.United Kingdom, Belgium, Germany, China and Japan.

     The Company’sProducts and Services. Our induction heating and melting business Ajax Tocco Magnethermic (“Ajax Tocco”),utilizes proprietary technology and specializes in the engineering, construction, service and repair of induction heating and melting systems, primarily for the steel, coatings, forging, foundry, automotive and construction equipment industries. Ajax Tocco’sOur induction heating and melting systems are engineered and built to customer specifications and are used primarily for melting, heating, and surface hardening of metals and curing of coatings. Approximately half35%-40% of Ajax Tocco’s revenueour induction heating and melting systems’ revenues is derived from the sale of replacement parts and provision of field service, primarily for the installed base of itsour own products. The CompanyWe also producesproduce and provide services and spare parts for other capital equipment includingsuch as pipe threading equipment and related parts for the oil drillingand gas industry, and complete oven systems that combine heat processing and curing technologies with material handlingmechanical forging presses,

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      The Company manufacturesWe manufacture injection molded rubber and silicone products for use in automotive and industrial applications. The rubber products facilities manufacture products for customers in the automotive, food processing and consumer appliance industries. Their products include wire harnesses, shock and vibration mounts, spark plug boots and nipples and general sealing gaskets. During 2002, the Companywe reduced rubber products’ costs and discontinued underperforming products by selling one business unit and closing onea manufacturing plant.

Markets and Customers. In our Manufactured Products’ capital equipment business, approximately 38% of net sales for the year ended December 31, 2004 was derived from replacement parts and the provision of field service. In addition, we manufacture forged and machined products produced from closed-die metal forgings of up to 6,000 pounds. Aerospace forgings are sold primarily to machining companies and sub-assemblers who finish the products for sale to OEMs. We also machine, induction harden and surface finish crankshafts and camshafts used primarily in locomotives. In the fourth quarter of 2003, we decided to shut down our locomotive crankshaft forging plant and entered into a long-term supply contract to purchase locomotive crankshaft forgings at a more favorable price from a third-party supplier. Forged rail products are sold primarily to railcar builders and maintenance providers. Forged and machined products are sold to a wide variety of domestic and international OEMs and other manufacturing plant. Themanufacturers, primarily in the transportation industries.

Competition. Our capital equipment units compete with small to medium-sized domestic and international equipment manufacturers on the basis of service capability, ability to meet customer specifications, delivery performance and engineering expertise. Our rubber products operating units compete primarily on the basis of price and product quality with other domestic small- to medium-sized manufacturers of injection molded rubber and silicone products.

      The Company manufactures forged and machined products produced from closed-die metal forgings of up to 6,000 pounds. These products include crankshafts, aircraft structural components such as landing gears and rail products such as railcar center plates. Aerospace forgings are sold primarily to machining companies, and sub-assemblers who finish the products for sale to OEMs. The Company also machines, induction hardens and surface finishes crankshafts and camshafts used primarily in locomotives. In fourth quarter 2003, the Company decided to shut down its locomotive crankshaft forging plant, and entered into a long-term supply contract to purchase these forgings at a more favorable price from a third-party supplier. The 2003 restructuring is expected to increase both profitability and cash flow by approximately $15.0 million over the next five years. Forged rail products are sold primarily to railcar builders and maintenance providers. Forged and machined products are sold to a wide variety of

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Sales and Marketing

      ILS markets its products and services in the United States, Mexico, Canada and Europe, primarily through its direct sales force, which is assisted by applications engineers who provide the technical expertise necessary to assist the engineering staff of OEM customers in designing new products and improving existing products. Aluminum Products primarily markets and sells its products in North America through internal sales personnel. Manufactured Products primarily markets and sells its products in North America through both internal sales personnel and independent sales representatives. Induction heating and pipe threading equipment is also marketed and sold in Europe, Asia, Latin America and Northnorthern Africa through both internal sales personnel and independent sales representatives. In some instances, the internal engineering staff assists in the sales and marketing effort through joint design and applications-engineering efforts with major customers.

Raw Materials and Suppliers

      ILS purchases substantially all of its production components from third-party suppliers. Aluminum Products and Manufactured Products purchase substantially all of their raw materials, principally metals and certain component parts incorporated into their products, from third-party suppliers and manufacturers. Management believes that raw materials and component parts other than certain specialty products are available from alternative sources. ILS has multiple sources of supply for its products. Approximately 25%An increasing portion of ILS’ILS’s delivered components are purchased from suppliers in foreign countries, primarily Taiwan, China, South Korea, India and China. The Company isEastern Europe. We are dependent upon the ability of such suppliers to meet stringent quality and performance standards and to conform to delivery schedules. Most raw materials required by Aluminum Products and Manufactured Products are commodity products available from several domestic suppliers.

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Customer Dependence

      The Company hasWe have thousands of customers who demand quality, delivery and service. Numerous customers have recognized our performance by awarding the Companyus with supplier quality awards. Navistar is the onlyNo customer accountingaccounted for more than 10% of consolidated sales withinin any of the past three years, (onlyexcept for International Truck in the year 2003).2004 and 2003.

Backlog

      Management believes that backlog is not a meaningful measure for ILS, as a majority of ILS’ILS’s customers require just-in-time delivery of production components. Management believes that Aluminum Products’ and Manufactured Products’ backlog as of any particular date is not a meaningful measure of sales for any future period as a significant portion of sales are on a release or firm order basis.

Environmental, Health and Safety Regulations

      The Company isWe are subject to numerous federal, state and local laws and regulations designed to protect public health and the environment, (“Environmental Laws”), particularly with regard to discharges and emissions, as well as handling, storage, treatment and disposal, of various substances and wastes. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil and criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures. Pursuant to certain Environmental Laws,environmental laws, owners or operators of facilities may be liable for the costs of response or other corrective actions for contamination identified at or emanating from current or former locations, without regard to whether the owner or operator knew of, or was responsible for, the presence of any such contamination, and for related damages to natural resources. Additionally, persons who arrange for the disposal or treatment of hazardous substances or materials may be liable

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      From time to time, we have incurred and are presently incurring costs and obligations for correcting environmental noncompliance and remediating environmental conditions at certain of our properties. In general, the Company haswe have not experienced difficulty in complying with Environmental Lawsenvironmental laws in the past, and compliance with Environmental Lawsenvironmental laws has not had a material adverse effect on the Company’sour financial condition, liquidity and results of operations. The Company’sOur capital expenditures on environmental control facilities were not material during the past five years and such expenditures are not expected to be material to the Companyus in the foreseeable future.

      The Company hasWe are currently, and may in the future, be required to incur costs relating to the investigation or remediation of property, including property where we have disposed of our waste, and for addressing environmental conditions. For instance, we have been identified as a potentially responsible party at third-party sites under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or comparable state laws, which provide for strict and, under certain circumstances, joint and several liability. The Company isWe are participating in the cost of certain clean-up efforts at several of these sites. The availability of third-party payments or insurance for environmental remediation activities is subject to risks associated with the willingness and ability of the third party to make payments. However, the Company’sour share of such costs has not been material and, based on available information, the Company doeswe do not expect itsour exposure at any of these locations to have a material adverse effect on itsour results of operations, liquidity or financial condition.

Information as to Industry Segment Reporting and Geographic Areas

      The information contained under the heading of “Note L—Industry Segments” of the notes to the consolidated financial statements included herein, relating to (i) net sales, income (loss) before income taxes and change in accounting principles, identifiable assets and other information by industry segment and (ii) net sales and assets by geographic region for the years ended December 31, 2004, 2003, 2002, and 20012002 is incorporated herein by reference.

Recent Developments

      The information contained under the heading of “Note D—Acquisitions and Dispositions” and “Note N—Restructuring and Unusual Charges”Acquisitions” of the notes to the consolidated financial statements included herein, is incorporated by reference.

Available Information5

      The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other information with the Securities and Exchange Commission (“SEC”). The public can obtain copies of these materials by visiting the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330, or by accessing the SEC’s website at http://www.sec.gov. In addition, as soon as reasonably practicable after such materials are filed with or furnished to the SEC, the Company makes copies available to the public, free of charge.

Item 2.	Properties

       The Company’sAs of December 31, 2004, our operations includeincluded numerous manufacturing and supply chain logistics services facilities located in twenty-three23 states in the United States, and in Puerto Rico, as well as in Asia, Canada, Europe and Mexico. Approximately 91%90% of the available square footage iswas located in the United States. Approximately 49% of the available square footage iswas owned. In 2003,2004, approximately 32%35% of the available domestic square footage was used by the ILS segment, 51%38% was used by the Manufactured Products segment and 17%27% by the Aluminum Products segment. Approximately 33%27% of the available foreign square footage was used by the ILS segment and 67%73% was used by the Manufactured Products segment. In the opinion of management, Park-Ohio’sour facilities are generally well maintained and are suitable and adequate for their intended uses.

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      The following table provides information relative to theour principal facilities as of Park-Ohio and its subsidiaries.December 31, 2004.

Related Industry

Owned or

Approximate

Segment

Location

Leased

Square Footage

Use

ILS SEGMENT

Cleveland, OH

Leased

41,000

*

(1)

ILS Corporate Office

Dayton, OH

Leased

84,700

Logistics

Lawrence, PA

Leased

116,000

Logistics and Manufacturing

St. Paul, MN

Leased

74,425

Logistics

Atlanta, GA

Leased

56,000

Logistics

Dallas, TX

Leased

49,985

Logistics

Nashville, TN

Leased

44,900

Logistics

Charlotte, NC

Leased

36,800

Logistics

Kent, OH

Leased

225,000

Manufacturing

Mississauga, Ontario, Canada

Leased

56,000

Manufacturing

Solon, OH

Leased

42,600

Logistics

Cleveland, OH

Leased

40,000

Manufacturing

Delaware, OH

Owned

45,000

Manufacturing

The ILS Segment has thirty-one31 other facilities, none of which is deemed to be a principal facility of the Company.facility.

ALUMINUM(2)

Conneaut, OH

Leased

82,300

Manufacturing

PRODUCTS

Conneaut, OH

Leased

64,000

Manufacturing

SEGMENT

Conneaut, OH

Leased

45,700

Manufacturing

Conneaut, OH

Owned

91,800

Manufacturing

Huntington, IN

Leased

132,000

Manufacturing

Fremont, IN

Owned

108,000

ManufacturingIncludes 10,000 square feet used by Park-Ohio Corporate Office.

MANUFACTURED(3)

Cuyahoga Hts, OH

Owned

427,000

Manufacturing

PRODUCTS

Le Roeulx, Belgium

Owned

120,000

Manufacturing

SEGMENT

Euclid, OH

Owned

154,000

ManufacturingIncludes three leased properties with square footage of 82,300, 64,000 and 45,700 and one owned property of 91,800 square feet.

(4)

Wickliffe, OH

Owned

110,000

Manufacturing

Boaz, AL

Owned

100,000

Manufacturing

Warren, OH

Owned

195,000

Manufacturing

Oxted, England

Owned

135,000

Manufacturing

Cicero, IL

Owned

450,000

Manufacturing

Cleveland, OH

Leased

150,000

Manufacturing

Shanghai, China

Leased

40,000

Manufacturing

The Manufactured Products Segment has sixteen18 other owned and leased facilities, none of which is deemed to be a principal facility of the Company.

*

Includes 10,000 square feet used by Park-Ohio Corporate Office.facility.

Item 3. Legal Proceedings

       The Company isWe are subject to various pending and threatened lawsuits in which claims for monetary damages are asserted in the ordinary course of business. While any litigation involves an element of uncertainty,

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Item 4. Submission of Matters to a Vote of Security Holders

       Information required by this item has been omitted pursuant to General Instruction I of Form 10-K.

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Part II

       The registrant is a wholly-owned subsidiary of Park-Ohio Holdings Corp. and has no equity securities that trade.

       Information required by this item has been omitted pursuant to General Instruction I of Form 10-K.

       TheOur consolidated financial statements of the Company include the accounts of Park-Ohio Industries, Inc. and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The historical financial information is not directly comparable on a year-to-year basis, primarily due to debt extinguishment costs and writeoff of deferred financing costs associated with the tender and early redemption during 2004 of our 9.25% Senior Subordinated Notes due 2007, restructuring and unusual charges in all three years,2002 and 2003, a goodwill impairment charge in 2002 to reflect the cumulative effect of an accounting change, and acquisitions and divestitures during the elimination of goodwill amortization starting in 2002, divestitures and acquisitions.three years ended December 31, 2004.

Executive Overview

      The Company operates throughWe are an industrial supply chain logistics and diversified manufacturing business, operating in three segments,segments: ILS, Aluminum Products and Manufactured Products. ILS is a leading supply chain logistics provider of production components to large, multinational manufacturers. In connectionprovides customers with the supply of such production components, ILS provides a variety of value-added, cost-effectiveintegrated supply chain management services.services for a broad range of high-volume, specialty production components. ILS customers receive various value-added services, such as engineering and design services, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of use delivery, electronic billing and ongoing technical support. The principal customers of ILS are in the heavy-duty truck, semiconductor equipment,electrical controls, automotive and other vehicle, industrial equipment, aerospace and defense, electrical controls, HVAC, vehicle parts and accessories, appliances, andpower sports equipment, lawn and garden equipment, and semiconductor equipment industries. Aluminum Products manufactures castcasts and machines aluminum engine, transmission, brake, suspension and other components primarily for automotive, manufactures,agricultural equipment, construction equipment and heavy-duty truck OEMs, primarily on a sole-source basis. Aluminum Products also provides value-added services such as design and engineering machining and assembly. Manufactured Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of high qualityhighly-engineered products engineeredincluding induction heating and melting systems, pipe threading systems, industrial oven systems, rubber products, and forged and machined products. Manufactured Products also produces and provides services and spare parts for specific customer applications.the equipment it manufactures. The principal customers of Manufactured Products are OEMs and end-users in the steel, automotive, oil and gas, rail, and aerospace automotive, steel, forging, railroad, truck, oil, food processing and consumer appliancedefense industries. Sales, earnings and other relevant financial data for these three segments are provided in Note L to the consolidated financial statements.

      The Company is positioned forDuring 2004, we experienced the increased sales and profitability in 2004 and beyond,previously forecast, as the manufacturing economy stabilizes and returnsreturned to growth, particularly in twothree of our customer industries: heavy-duty truck; semiconductor equipment; and equipment for steel manufacturing. Net sales increased 30% compared to 2003. Profitability increased more than proportionally to sales, based on cost reductions from our restructuring during the Company’s significant customer segments, heavy-duty truck and semiconductor equipment. The Company grew strongly from 1993 through the first half of 2000 (see table below), through both internal growth and acquisition. Startingdownturn in the second half of 2000, both sales and profitability declined due to overall weakness in the manufacturing economy, and particularly to contraction in the heavy-duty truck and automotive industries. Despite these sales declines, the Company retained or gained market share in most major markets served. The Company’s sales stabilized in2001, 2002 and declined only slightly in 2003, and pretax income began to recover.

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     The Company responded to the economic downturn by reducing costs, increasing prices on targeted products, restructuring many of its businesses and selling non-core manufacturing assets.2003. During 2001 through 2003, the Companythose years, we consolidated 28 supply chain logistics facilities, and closed or sold 11 manufacturing plants. With regard to these actions, the Company recorded restructuring

      During 2004, we reinforced our long-term availability and impairment charges in 2001, 2002attractive pricing of funds by refinancing both of our major sources of borrowed funds: senior subordinated notes and 2003 (see table above and Note N to the consolidated financial statements). Management’s actions aimed to increase operational earnings during the economic downturn and position the Company for increased profitability when the manufacturing economy stabilizes and returns to growth. These actions resulted in increased income (as adjusted) in 2002 and 2003 despite flat to declining sales.

      The Company’s 2003 non-cash restructuring and impairment charges totaled $19.4our revolving credit agreement. In November 2004, we sold $210.0 million of which 90%8.375% Senior Subordinated Notes due 2014. We used the net proceeds to fund the tender and early redemption of $199.9 million of our 9.25% Senior Subordinated Notes due 2007. We incurred debt extinguishment costs primarily related to restructuring ofpremiums and other transaction costs associated with the Forge Group, primarily impairment of propertytender and equipment idled whenearly redemption and wrote off deferred financing costs totaling $6.0 million associated with the Company began purchasing crankshaft forgings instead of manufacturing them internally. Charges outside the Forge Group, totaling $1.9 million, consisted primarily of pension withdrawal charges for manufacturing units executing previously announced restructuring. The 2003 restructuring is expected to increase both profitability and cash flow by approximately $15.0 million over the next five years.repurchased senior subordinated notes.

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      In July 2003, the Company entered into a four-year bankDecember 2004, we amended our revolving credit agreement, under whichextending its maturity to six years so that it now expires in December 2010, increasing the credit limit so that we may borrow up to $165.0$200.0 million subject to an asset based formula. Theformula, and providing lower interest rate levels. Borrowings under the credit agreement isare secured by substantially all the assetsour assets. We had approximately $53.9 million of the Company. The Company has paid down its revolving bank borrowings by $53.0 million, or 34%, from $154.0 million at June 30, 2001 to $101.0 millionunused borrowing availability at December 31, 2003, when it had approximately $47.0 million of excess borrowing availability. The Company’s $199.9 million of outstanding Senior Subordinated Notes mature in November, 2007.2004. Funds provided by operations plus available borrowings under the bankrevolving credit facilityagreement are expected to be adequate to meet the Company’sour cash requirements until 2007, by which time management expects to have entered into replacement financing agreements.requirements.

      The CompanyWe acquired substantially all of the assets of the Amcast Components Group on August 23, 2004 for $10.0 million cash and the assumption of approximately $9.0 million of operating liabilities. We sold substantially all the assets of St. Louis Screw and Green Bearing in first quarter 2003, for cash totaling approximately $7.3 million, and Castle Rubber Company in second quarter 2002, for cash of approximately $2.5 million. The CompanyWe purchased substantially all the assets of Ajax Magnethermic Corp. in third quarter 2002, for cash of approximately $5.5 million. The Company sold substantially all the assets of Cleveland City Forge in fourth quarter 2001, for cash of approximately $6.1 million. During 2001, the Company expensed $1.9 million of non-recurring business interruption costs, caused by the June 2000 fire that destroyed the Cicero Flexible Products plant, which were not covered by insurance.

Accounting Changes and Goodwill

      On January 1, 2002, the Companywe adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). Under FAS 142, the Companywe reviewed its goodwill and other intangible assets and recorded a non-cash goodwill impairment charge of $48.8 million, which was recorded as the cumulative effect of a change in accounting principle effective January 1, 2002. Circumstances which led to this goodwill impairment included reduced sales, profitability and growth rates of the units with goodwill (see Note C to the consolidated financial statements), and reduced transaction prices for comparable businesses, which were themselves results of the downturn in the manufacturing economy. The effects of these circumstances on the Company’sour operations, financial condition and liquidity are reflected in 2002 and 2003 results. The goodwill impairment itself did not have any effect on operations. Under FAS 142, goodwill was not amortized, starting in 2003 or 2002, compared to $3.7 million in 2001.2002.

      In accordance with FAS 142, goodwill is now reviewed annually for potential impairment. This review was performed as of October 1, 2004, 2003 and 2002, using forecasted discounted cash flows, and it was determined that no further impairment is required.

      At December 31, 2003,2004, the balance sheet reflected $82.3$82.6 million of goodwill in the ILS and Aluminum Products segments. In 2003,2004, discount rates

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      The Company2003, we changed itsour method of accounting for the 15% of its inventories utilizing the LIFO method to the FIFO method. As required by accounting principles generally accepted in the United States, the Company has restated its balance sheet as of December 31, 2002 to increaseand increased inventories by the recorded LIFO reserve ($4.4 million), increaseincreased deferred tax liabilities ($1.7 million), and increaseincreased shareholders’ equity ($2.7 million). Previously reported results of operations havewere not been restated because the impact of utilizing the LIFO method had an insignificant impact on the Company’s reported amounts for consolidated net income (loss). See also Note B to the consolidated financial statements.

Results of Operations

      Net sales increased by 30% in 2004, compared to 2003. ILS sales increased due to general economic growth, in particular due to significant growth in the heavy-duty truck and semiconductor industries, the addition of new customers, and increases in product range to existing customers. ILS growth was partially offset by a $1.0 million sales decrease related to the 2003 sale of Green Bearing. Aluminum

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      Cost of products sold increased 29% in 2004 compared to 2003, while gross margin increased to 15.6% from 15.5% in 2003. ILS gross margin decreased modestly, primarily due to steel price increases and mix changes, and the negative impact of $1.1 million resulting from the bankruptcy of a significant customer, Murray, Inc. Aluminum Products gross margin decreased due to a combination of the addition of lower-margin Amcast business, product mix and pricing changes, and specific one-time costs incurred in 2004 for product startup, scrap and reserves. The $30.4 million of sales from the acquired Amcast business generated significantly lower margins than the existing Aluminum Products business. We expect margins at the acquired plants to increase over time, as a result of post-acquisition cost reductions, price increases and new business. Gross margin in the Manufactured Products segment increased, primarily as a result of increased sales and overhead efficiencies achieved in the induction equipment, pipe threading equipment and forging businesses. Gross margins in both the Aluminum Products and Manufactured Products segments were negatively impacted by rising natural gas costs.

      Consolidated SG&A expenses increased by 23% in 2004 compared to 2003. Approximately $5.5 million of the SG&A increase was due to acquisitions, primarily Jamco and Amcast Components Group, and compliance costs associated with Section 404 of the Sarbanes-Oxley Act, while the remainder was primarily due to increased sales and production volumes. Despite this increase, SG&A expenses as a percent of sales decreased by 50 basis points due both to cost reductions from restructuring and to the absorption of these expenses over increased sales. SG&A expenses were reduced in 2004 compared to 2003 by a $2.3 million increase in net pension credits reflecting improved returns on pension plan assets.

      Interest expense increased in 2004 compared to 2003, primarily due to the fourth quarter 2004 debt extinguishment costs. These costs primarily related to premiums and other transaction costs associated with the tender and early redemption and writeoff of deferred financing costs associated with the 9.25% Senior Subordinated Notes. Excluding these costs, interest decreased due to lower average interest rates in 2004, partially offset by higher average outstanding borrowings. The lower average

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      The effective income tax rate for 2004 was 19%. Primarily foreign and certain state income taxes were provided for in both years, because federal income taxes were not owed due to the recognition of net operating loss carryforwards for which valuation allowances had been provided. At December 31, 2004, our subsidiaries had $47.7 million of net operating loss carryforwards for federal tax purposes. We have not recognized any tax benefit for these loss carryforwards. In accordance with the provision of Statement of Financial Accounting Standards No. 109 (“FAS 109”), “Accounting for Income Taxes,” we recorded no tax benefit for the 2003 net loss because we had incurred three years of cumulative losses. Income taxes of $.9 million were provided in 2003, primarily for state and foreign taxes on profitable operations.

      Net sales declined by 2% in 2003. $10.4 million of the ILS sales decline related to the sale of Green Bearing and the termination of thea high-margin pharmaceutical sales contract, while the remainder reflected general economic weakness. Aluminum Products net sales were lower primarily due to the ending of $10.0 million of sales contracts, the majority of which relate to the closure of the Tupelo and Hudson plants. Manufactured Products net sales increased $26.4 million primarily in the induction business. The acquisition of Ajax Magnethermic increased 2003 net sales by $29.6 million and the divestiture of Castle Rubber and St. Louis Screw decreased 2003 net sales by $6.8 million.

Note: 25% of increase in Induction gross profit attributed to non-acquisition actions.

      Cost of products sold declined 4% in 2003, and gross profit increased 10%, while gross margin increased to 15.5% in 2003, from 13.8% in 2002. ILS gross margin decreased primarily due to reduced absorption of fixed overhead over a smaller sales base and the positive effect on 2002 of the early termination of a high marginhigh-margin pharmaceutical sales contract, partially offset by lower inventory costs, facility costs and other cost reductions. Aluminum Products gross margin increased significantly, primarily as a result of restructuring and cost reductions and higher margins on new contracts. Gross margin in the Manufactured Products segment increased, primarily as a result of increased sales and overhead efficiencies achieved in the induction business.

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Selling, General & Administrative (“SG&A”)

      Consolidated SG&A expenses increased by 9%8% in 2003, while SG&A expenses as a percentage of net sales increased to 10.0% for 2003 compared to 9.1% for 2002. This increase was due primarily to the net impact of acquisitions and divestitures and the $2.6 million reduction of net pension credits reflecting less favorable returns on pension plan assets, partially offset by reductions in other SG&A costs in all three segments.

      Interest expense decreased by 5% due to lower average debt outstanding and lower average interest rates during 2003. The decrease in average borrowings resulted primarily from the sale of two manufacturing units and lower working capital requirements. The lower average borrowing rate in 2003 was due primarily to decreased rates on the Company’s new revolving credit facility,agreement, beginning in August 2003.

      In accordance with the provision of Statement of Financial Accounting Standards No.FAS 109, (“FAS 109”), “Accounting for Income Taxes,” the Company recorded no tax benefit for the 2003 or 2002 net losses, because in both years it had incurred three years of cumulative losses. Income taxes of $.9 million were provided in 2003 and 2002, primarily for state and foreign taxes on profitable operations. At December 31, 2003, subsidiaries of the Company had $35.7 million of net operating loss carryforwards for federal tax purposes. The Company has not recognized any tax benefit for these loss carryforwards.

2002 versus 2001

Net Sales by Segment:

      Net sales declined less than 1% in 2002. The ILS net sales decline of 5% was due primarily to the sales volume reductions in heavy truck and other customer industries. The Aluminum Products net sales increase of 25% was due primarily to the initiation or ramp-up of new production contracts. The Manufactured Products net sales decline of 3% or $4.4 million was due primarily to divestitures. The divestitures of Castle Rubber and Cleveland City Forge decreased 2002 net sales by $13.0 million and the acquisition of Ajax Magnethermic increased 2002 net sales by $6.1 million.

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Cost of Products Sold & Gross Profit:

      Cost of products sold declined 1% in 2002. Inventory write-downs included in cost of products sold primarily related to discontinued product lines. Gross profit increased 4% in 2002, while gross margin increased to 13.8% in 2002, from 13.2% in 2001. This increase reflected increased margins in Aluminum Products, partially offset by decreased margins in the ILS and Manufactured Products segments. Declines in ILS and Manufactured Products gross margins related primarily to reduced volumes resulting in the absorption of fixed operational overheads over a smaller sales or production base. The increase in Aluminum Products gross margin related to new, higher-margin contracts, discontinuation of low margin contracts, cost reductions, plant closures and the absorption of fixed manufacturing overheads over a larger production base.

Selling, General & Administrative (“SG&A”) Expenses:

      Consolidated SG&A expenses decreased by 13% in 2002, while SG&A expenses as a percentage of net sales decreased to 9.1% during 2002 as compared to 10.4% for 2001. This decrease was primarily due to cost reductions in all three segments resulting from business restructuring initiatives implemented by the Company. During 2003, SG&A expenses were negatively affected by a decrease in net pension credits of $.8 million, reflecting less favorable investment returns on pension plan assets.

Interest Expense:

      Interest expense decreased by 11% in 2002 due to lower average debt outstanding and lower average interest rates. The decrease in borrowings related primarily to working capital reductions in the course of 2001, which were retained in 2002. The lower average borrowing rate in 2002 was due primarily to decreased rates on the Company’s revolving credit facility.

      In accordance with the provision of Statement of Financial Accounting Standards No. 109 (“FAS 109”), “Accounting for Income Taxes,” the Company recorded no tax benefit for the 2003 net loss, because it had incurred three years of cumulative losses. Income taxes of $.9 million were provided in 2003, primarily for state and foreign taxes on profitable operations. The effective tax rate for 2001 was 30.5%, which was less than the statutory rate due to the amortization of non-deductible goodwill and other non-deductible items. At December 31, 2003, subsidiaries of the Company had $25.6 million of net operating loss carryforwards for federal tax purposes. The Company has not recognized any tax benefit for these loss carryforwards.

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Critical Accounting Policies

      Preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”)GAAP requires management to make certain estimates and assumptions which affect amounts reported in the Company’sour consolidated financial statements. Management has made their best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. The Company doesWe do not believe that there is great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

     Revenue Recognition:The Company recognizes We recognize more than 95%93% of itsour revenue when title is transferred to unaffiliated customers, typically upon shipment. The Company’sOur remaining revenue, from long-term contracts, is recognized using the percentage of completion method of accounting. Selling prices are fixed based on purchase orders or contractual arrangements. The Company’sOur revenue recognition policies are in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition.”

     Allowance for Uncollectible Accounts Receivable:Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future. Allowances are developed by the individual operating units based on historical losses, adjusting for economic conditions. The Company’sOur policy is to identify and reserve for specific collectibility concerns based on customers’ financial condition and payment history. The establishment of reserves requires the use of judgment and assumptions regarding

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     Allowance for Obsolete and Slow Moving Inventory:Inventories are stated at the lower of cost or market value and have been reduced by an allowance for obsolete and slow-moving inventories. The estimated allowance is based on management’s review of inventories on hand with minimal sales activity, over the past twelve months, which is compared to estimated future usage and sales. Inventories identified by management as slow-moving or obsolete are reserved for based on estimated selling prices less disposal costs. Though the Company considerswe consider these allowances adequate and proper, changes in economic conditions in specific markets in which the Company operateswe operate could have a material effect on reserve allowances required.

     Impairment of Long-Lived Assets:Long-lived assets are reviewed by management for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. During 2003, 2002 and 2001, the Company decided to exit certain under-performing product lines and to close or consolidate certain operating facilities and, accordingly, recorded restructuring and impairment charges as discussed above and in Note N to the consolidated financial statements.statements included elsewhere herein.

     Restructuring:The Company recognizes We recognize costs in accordance with Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring)” (“EITF 94-3”), and the SEC Staff Accounting BulletinSAB No. 100, “Restructuring and Impairment Charges” for charges prior to 2003. Detailed contemporaneous documentation is maintained and updated on a quarterly basis to ensure that accruals are properly supported. If management determines that there is a change in the estimate, the accruals are adjusted to reflect the changes.

      In 2003, the Company adopted Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“FAS 146”), which nullified EITF 94-3 and requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at the fair value only when the liability is incurred. FAS 146 has no effect on charges recorded for exit activities begun prior to 2002.

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     Goodwill:Through December 31, 2001, the Company amortized goodwill primarily over forty years using the straight-line method. The Company We adopted Financial Accounting Standard (“FAS”) No.FAS 142 “Goodwill and Other Intangible Assets” as of January 1, 2002. Under FAS 142, the Company no longer amortizes goodwill, but iswe are required to review goodwill for impairment annually or more frequently if impairment indicators arise.

      The Company, with assistance of an outside consultant,We completed the transitional impairment review of goodwill during the fourth quarter of 2002 and recorded a non-cash charge of $48.8 million. The charge has been reported as a cumulative effect of a change in accounting principle. The Company hasWe have also completed the annual impairment test as of October 1, 2004, 2003 and 2002 and hashave determined that no additional goodwill impairment existed as of those dates.

     Deferred Income Tax Assets and Liabilities:The Company accounts We account for income taxes under the liability method, whereby deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax bases of assets and liabilities and are measured using the currently enacted tax rates. In determining these amounts, management determined the probability of realizing deferred tax assets, taking into consideration factors including historical operating results, expectations of future earnings and taxable income and the extended period of time over which the postretirement benefits will be paid.

      At December 31, 2003,2004, the Company hashad net operating loss carryforwards for income tax purposes of approximately $35.7$47.7 million, which will expire inbetween 2021 or 2023and 2024. In accordance with the provisions of FAS 109, “Accounting for Income Taxes”, the tax benefits related to these carryforwards have been fully reserved as of December 31, 2003 since2004 because the Company is in a three yearthree-year cumulative loss position.

     Pension and Other Postretirement Benefit Plans:The Company We and itsour subsidiaries have pension plans, principally noncontributory defined benefit or noncontributory defined contribution plans and postretirement benefit plans covering substantially all employees. The measurement of liabilities related to these plans is based on management’s assumptions related to future events, including interest rates, return on pension plan assets, rate of compensation increases and health care cost trends. Pension plan asset performance in the future will directly impact our net income of the Company. The Company hasincome. We have evaluated itsour pension and other postretirement benefit assumptions, considering current trends in interest rates and market conditions and believes itsbelieve our assumptions are appropriate.

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Seasonality; Variability of Operating Results

      The Company’sOur results of operations are typically stronger in the first six months rather than the last six months of each calendar year due to scheduled plant maintenance in the third quarter to coincide with customer plant shutdowns and due to holidays in the fourth quarter.

      The timing of orders placed by the Company’sour customers has varied with, among other factors, orders for customers’ finished goods, customer production schedules, competitive conditions and general economic conditions. The variability of the level and timing of orders has, from time to time, resulted in significant periodic and quarterly fluctuations in the operations of the Company’sour business units. Such variability is particularly evident at the capital equipment businesses, included in the Manufactured Products segment, which typically ship a few large systems per year.

Forward-Looking Statements

      This Annual Report on Form 10-K contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Certain statements in this Management’s DiscussionThe words “believes”, “anticipates”, “plans”, “expects”, “intends”, “estimates” and Analysis of Financial Condition and Results of Operations containsimilar expressions are intended to identify forward-looking statements. These forward-looking statements including without limitation, discussion regarding the Company’s anticipated amounts of restructuring chargesinvolve known and its expected impact on profitability and cash flow, credit availability, levels and funding of capital expenditures and trends for 2004. Forward-looking statements are necessarily subject tounknown risks, uncertainties and other factors many of which are

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