UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



þ☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2023



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 333-43005-01

Park-Ohio Industries, Inc.

(Exact name of registrant as specified in its charter)

Ohio

34-6520107

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6065 Parkland Boulevard, ~~Cleveland, Ohio~~

Cleveland,

Ohio

44124

(Address of principal executive offices)

(Zip Code)

(440) 947-2000

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

The registrant meets the conditions set forth in general instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form in reduced disclosure format.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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. ¨ Yes þ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

¨☐

Accelerated filer

¨☐

Non-accelerated filer

þ ~~(Do not check if a smaller reporting company)~~☑

Smaller reporting company

¨☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountings standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨☐ Yes þ☑ No

Table of Contents

All of the outstanding capital stock of the registrant is held by Park-Ohio Holdings Corp. As of October 31, ~~2017,~~2023, 100 shares of the registrant’s common stock, $1 par value, were outstanding.

Table of Contents

Park-Ohio Industries, Inc. and Subsidiaries

Index


					Page
			Part I. Financial Information

				~~Page~~
Item 1.	~~Part I. Financial Information~~

~~Item 1.~~	Financial Statements	34
			~~Condensed consolidated balance sheets — September 30, 2017 (unaudited) and December 31, 2016~~		3
	~~Condensed consolidated statements of income (unaudited) — Three and nine months ended September 30, 2017 and 2016~~	4
	~~Condensed consolidated statements of comprehensive income (unaudited) — Three and nine months ended September 30, 2017 and 2016~~	5
	~~Condensed consolidated statements of cash flows (unaudited) — Nine months ended September 30, 2017 and 2016~~	6
	Notes to unaudited condensed consolidated financial statements — September 30, ~~2017~~2023	79
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2419
Item 3.			Quantitative and Qualitative Disclosure About Market Risk		3128
Item 4.			Controls and Procedures		3229

			Part II. Other Information
Item 1.			Legal Proceedings		3331
Item 1A.			Risk Factors		3432

Item 6.			Exhibits		3432
Signatures					3533

Table of Contents

Part I. Financial Information

Table of Contents



Item 1.			Financial Statements

Park-Ohio Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


	(Unaudited)
	September 30, 2023		December 31, 2022
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	41.0	$	49.3
Accounts receivable, net	265.8		246.3
Inventories, net	404.2		406.5


Receivable from affiliates	33.3		31.1
Other current assets	140.9		113.9
Current assets held-for-sale - discontinued operations1	102.5		107.2
Total current assets	987.7		954.3
Property, plant and equipment, net	182.4		180.7
Operating lease right-of-use assets	46.8		54.7
Goodwill	108.8		108.9
Intangible assets, net	73.8		78.7
Other long-term assets	79.1		80.3
Total assets	$	1,478.6	$	1,457.6
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Trade accounts payable	$	202.1	$	221.0
Payable to affiliates	7.2		7.2
Current portion of long-term debt and short-term debt	12.2		10.9
Current portion of operating lease liabilities	10.9		11.2
Accrued expenses and other	192.2		162.1
Current liabilities held-for-sale - discontinued operations1	34.4		43.8
Total current liabilities	459.0		456.2
Long-term liabilities, less current portion:
Long-term debt	659.1		655.1

Long-term operating lease liabilities	36.3		43.7
Other long-term liabilities	22.5		21.3
Total long-term liabilities	717.9		720.1





Total Park-Ohio Industries, Inc. and Subsidiaries shareholder's equity	290.9		269.8
Noncontrolling interests	10.8		11.5
Total equity	301.7		281.3
Total liabilities and shareholder's equity	$	1,478.6	$	1,457.6

(Unaudited)
September 30,
2017 December 31,
2016
(In millions)
ASSETS
Current assets:
Cash and cash equivalents $ 72.6
$ 54.4
Accounts receivable, net 231.4
194.4
Inventories, net 268.3
240.6
Receivable from affiliates 17.2
12.8
Other current assets 70.3
53.3
Total current assets 659.8
555.5
Property, plant and equipment, net 173.7
169.6
Goodwill 92.0
86.6
Intangible assets, net 97.5
96.6
Other long-term assets 79.3
71.3
Total assets $ 1,102.3
$ 979.6
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Trade accounts payable $ 169.4
$ 133.7
Payable to affiliates 7.1
7.0
Current portion of long-term debt and short-term debt 18.1
30.8
Accrued expenses and other 89.2
78.6
Total current liabilities 283.8
250.1
Long-term liabilities, less current portion:
Debt 492.3
439.0
Deferred income taxes 29.0
29.0
Other long-term liabilities 21.3
29.8
Total long-term liabilities 542.6
497.8
Total Park-Ohio Industries, Inc. and Subsidiaries shareholder's equity 265.5
221.7
Noncontrolling interests 10.4
10.0
Total equity 275.9
231.7
Total liabilities and shareholder's equity $ 1,102.3
$ 979.6

(1) - Our continuing operations exclude the results of our Aluminum Products business unit, which is held-for-sale as of September 30, 2023 and December 31, 2022 and presented in discontinued operations for all periods presented.

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.

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Park-Ohio Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In millions)
Net sales	$	418.8	$	383.8	$	1,270.4	$	1,111.3
Cost of sales	348.8		331.4		1,063.1		956.3

Selling, general and administrative expenses	43.0		36.4		135.2		116.7
Restructuring and other special charges	—		4.3		6.6		9.9
Gains on sales of assets	—		—		—		(2.9)


Operating income	27.0		11.7		65.5		31.3

Other components of pension income and other postretirement benefits expense, net	0.6		2.7		1.9		8.3
Interest expense, net	(11.7)		(9.0)		(33.7)		(23.7)

Income from continuing operations before income taxes	15.9		5.4		33.7		15.9
Income tax (expense) benefit	(3.8)		2.2		(8.5)		2.9


Income from continuing operations	12.1		7.6		25.2		18.8
Loss (income) attributable to noncontrolling interests	0.3		(0.4)		0.7		(1.1)
Income from continuing operations attributable to Park-Ohio Industries, Inc. common shareholder	12.4		7.2		25.9		17.7
Loss from discontinued operations, net of tax (Note 5)	(1.4)		(4.4)		(4.8)		(7.4)
Net income attributable to Park-Ohio Industries, Inc. common shareholder	$	11.0	$	2.8	$	21.1	$	10.3

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
Net sales $ 352.2
$ 312.7
$ 1,046.9
$ 970.1
Cost of sales 295.0
258.4
873.9
813.7
Gross profit 57.2
54.3
173.0
156.4
Selling, general and administrative expenses 36.2
33.2
108.8
99.0
Litigation settlement gain —
—
(3.3 ) —
Asset impairment charge —
—
—
4.0
Operating income 21.0
21.1
67.5
53.4
Interest expense 7.8
7.2
23.1
21.3
Loss on extinguishment of debt —
—
11.0
—
Income before income taxes 13.2
13.9
33.4
32.1
Income tax expense 2.8
—
9.6
6.1
Net income 10.4
13.9
23.8
26.0
Net income attributable to noncontrolling interests (0.2 ) (0.3 ) (0.7 ) (0.3 )
Net income attributable to Park-Ohio Industries Inc. common shareholder $ 10.2
$ 13.6
$ 23.1
$ 25.7

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.

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Park-Ohio Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In millions)
Net income attributable to Park-Ohio Industries, Inc. common shareholder before noncontrolling interest	$	10.7	$	3.2	$	20.4	$	11.4
Other comprehensive income (loss), net of tax:
Currency translation	(9.3)		(17.0)		(3.8)		(35.5)
Foreign currency forward contracts	(0.1)		—		(0.5)		0.5
Pension and other postretirement benefits	1.0		0.1		3.9		0.2
Total other comprehensive loss	(8.4)		(16.9)		(0.4)		(34.8)
Total comprehensive income (loss), net of tax	2.3		(13.7)		20.0		(23.4)
Comprehensive loss (income) attributable to noncontrolling interests	0.3		(0.4)		0.7		(1.1)
Comprehensive income (loss) attributable to Park-Ohio Industries, Inc. common shareholder	$	2.6	$	(14.1)	$	20.7	$	(24.5)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
Net income $ 10.4
$ 13.9
$ 23.8
$ 26.0
Other comprehensive income (loss):
Foreign currency translation adjustment 7.5
(1.3 ) 18.9
(5.3 )
Pension and other postretirement benefit adjustments, net of tax 0.2
0.3
0.6
0.7
Total other comprehensive income (loss) 7.7
(1.0 ) 19.5
(4.6 )
Total comprehensive income, net of tax 18.1
12.9
43.3
21.4
Comprehensive income attributable to noncontrolling interests (0.2 ) (0.3 ) (0.7 ) (0.3 )
Comprehensive income attributable to Park-Ohio Industries Inc. common shareholder $ 17.9
$ 12.6
$ 42.6
$ 21.1

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.

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Park-Ohio Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of ~~Cash Flows~~Shareholder's Equity (Unaudited)

Nine Months Ended September 30,
2017 2016
(In millions)
OPERATING ACTIVITIES
Net income $ 23.8
$ 26.0
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization 23.5
22.3
Loss on extinguishment of debt 11.0
—
Litigation settlement gain (3.3 ) —
Asset impairment charge —
4.0
Share-based compensation expense 6.3
8.1
Changes in operating assets and liabilities:
Accounts receivable (29.9 ) (1.6 )
Inventories (15.7 ) (3.5 )
Other current assets (14.2 ) (5.4 )
Accounts payable and accrued expenses 34.5
1.8
Litigation settlement payment (4.0 ) —
Other (8.7 ) (11.9 )
Net cash provided by operating activities 23.3
39.8
INVESTING ACTIVITIES
Purchases of property, plant and equipment (18.9 ) (20.3 )
Business acquisition (10.5 ) —
Net cash used by investing activities (29.4 ) (20.3 )
FINANCING ACTIVITIES
Payments on revolving credit facility, net (32.5 ) (17.4 )
Payments on term loans and other debt (27.7 ) (3.4 )
Proceeds from term loans and other debt —
7.3
Proceeds from (payments on) capital lease facilities, net 0.1
(2.5 )
Issuance of 6.625% Senior Notes due 2027 350.0
—
Debt financing costs (7.5 ) —
Repurchase of 8.125% Senior Notes due 2021 (250.0 ) —
Premium on early extinguishment of debt (8.0 ) —
Payment of acquisition earn-out —
(2.0 )
Dividend paid to Parent (5.0 ) —
Dividend (0.2 ) —
Net cash provided (used) by financing activities 19.2
(18.0 )
Effect of exchange rate changes on cash 5.1
(0.4 )
Increase (decrease) in cash and cash equivalents 18.2
1.1
Cash and cash equivalents at beginning of period 54.4
48.4
Cash and cash equivalents at end of period $ 72.6
$ 49.5
Income taxes paid $ 1.6
$ 7.0
Interest paid $ 16.5
$ 14.7


	Common Stock	Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
	(In millions)
Balance at January 1, 2023	—	$	144.9	$	186.7	$	(61.8)	$	11.5	$	281.3
Other comprehensive income	—	—		4.5		5.1		0.1		9.7
Stock-based compensation expense	—	1.6		—		—		—		1.6

Dividend paid to parent	—	—		(1.5)		—		—		(1.5)

Balance at March 31, 2023	—	146.5		189.7		(56.7)		11.6		291.1
Other comprehensive income (loss)	—	—		5.6		2.9		(0.5)		8.0
Stock-based compensation expense	—	1.7		—		—		—		1.7
Dividend paid to parent	—	—		(1.5)		—		—		(1.5)
Balance at June 30, 2023	—	148.2		193.8		(53.8)		11.1		299.3
Other comprehensive income (loss)	—	—		11.0		(8.4)		(0.3)		2.3
Stock-based compensation expense	—	1.6		—		—		—		1.6
Dividend paid to parent	—	—		(1.5)		—		—		(1.5)
Balance at September 30, 2023	—	$	149.8	$	203.3	$	(62.2)	$	10.8	$	301.7


	Common Stock	Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
	(In millions)
Balance at January 1, 2022	—	$	137.7	$	206.7	$	(19.2)	$	10.8	$	336.0
Other comprehensive income (loss)	—	—		6.3		(3.1)		0.2		3.4
Stock-based compensation expense	—	1.6		—		—		—		1.6

Dividend paid to parent	—	—		(1.5)		—		—		(1.5)

Balance at March 31, 2022	—	139.3		211.5		(22.3)		11.0		339.5
Other comprehensive income (loss)	—	—		1.2		(14.8)		0.5		(13.1)
Stock-based compensation expense	—	1.8		—		—		—		1.8
Dividend paid to parent	—	—		(2.0)		—		—		(2.0)
Balance at June 30, 2022	—	141.1		210.7		(37.1)		11.5		326.2
Other comprehensive income (loss)	—	—		2.8		(16.9)		0.4		(13.7)
Stock-based compensation expense	—	2.0		—		—		—		2.0
Dividend paid to parent	—	—		(1.5)		—		—		(1.5)
Dividend	—	—		—		—		(0.6)		(0.6)
Balance at September 30, 2022	—	$	143.1	$	212.0	$	(54.0)	$	11.3	$	312.4

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.

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Park-Ohio Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
	2023		2022
	(In millions)
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Income from continuing operations	$	25.2	$	18.8
Adjustments to reconcile income from continuing operations to net cash used by operating activities from continuing operations:
Depreciation and amortization	23.4		22.7

Stock-based compensation expense	4.9		5.4

Gains on sales of assets	—		(2.9)




Changes in operating assets and liabilities:
Accounts receivable	(20.2)		(34.0)
Inventories	2.5		(51.2)
Prepaid and other current assets	(31.1)		(2.0)
Accounts payable and accrued expenses	14.3		23.6


Other	3.1		(8.3)
Net cash used in operating activities from continuing operations	22.1		(27.9)
INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Purchases of property, plant and equipment	(20.8)		(20.0)
Proceeds from sale of assets	0.6		4.0
Business acquisitions, net of cash acquired	(1.2)		(21.9)



Net cash used in investing activities from continuing operations	(21.4)		(37.9)
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Proceeds from revolving credit facility, net	1.4		90.0
Payments on other debt	(1.4)		(3.1)
Proceeds from other debt	5.1		2.7
Proceeds from (payments on) finance lease facilities, net	0.3		(2.0)





Contingent consideration payment related to prior acquisition	(2.1)		—
Dividends paid to Parent	(4.5)		(5.0)


Dividends	—		(0.6)

Net cash (used) provided by financing activities from continuing operations	(1.2)		82.0
DISCONTINUED OPERATIONS1:
Total used by operating activities	(3.4)		(4.4)
Total used by investing activities	(2.0)		(3.7)
Total used by financing activities	(1.9)		(2.5)
Decrease in cash and cash equivalents from discontinued operations	(7.3)		(10.6)
Effect of exchange rate changes on cash	(0.5)		(5.9)
Decrease in cash and cash equivalents	(8.3)		(0.3)
Cash and cash equivalents at beginning of period	49.3		44.9
Cash and cash equivalents at end of period	$	41.0	$	44.6

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.

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Park-Ohio Industries, Inc. and Subsidiaries

Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (Unaudited)

September 30, ~~2017~~2023

NOTE 1 — Basis of Presentation

The condensed consolidated financial statements include the accounts of Park-Ohio Industries, Inc. and its subsidiaries (collectively, ~~“we”,~~“we,” “our” or the “Company”). All intercompany accounts and transactions have been eliminated in consolidation. Park-Ohio Industries, Inc. is a wholly-owned subsidiary of Park-Ohio Holdings Corp. (“Holdings”).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles ~~generally accepted~~ in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and nine-month periods ended September 30, ~~2017~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017~~.2023. The balance sheet at December 31, ~~2016~~2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2022.

We determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria, as of December 31, 2022 and September 30, 2023. Accordingly, the Company has reported the held-for-sale assets and liabilities, the operating results and the cash flows of Aluminum Products in discontinued operations for all periods presented throughout this Form 10-Q. Unless otherwise indicated, amounts and activity in this Form 10-Q are presented on a continuing operations basis. See Note 5, “Discontinued Operations,” in the Notes to Consolidated Financial Statements (Unaudited) for further information.

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States~~U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 2 — New Accounting Pronouncements

~~Accounting Pronouncements Adopted~~

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The ASU simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The Company adopted this ASU effective January 1, 2017.

ASU 2016-09 requires prospective recognition of excess tax benefits and deficiencies resulting from share-based compensation awards vesting and exercises be recognized as a discrete income tax adjustment in the income statement. Previously, these amounts were recognized in Additional paid-in capital. In the nine months ended September 30, 2017, the Company recognized income tax expense of $0.1 million for excess tax deficiencies upon vesting of awards. In addition, ASU 2016-09 requires excess tax benefits and shortfalls to be prospectively excluded from the assumed future proceeds in the calculation of diluted shares, resulting in an insignificant increase in diluted weighted average shares outstanding for the nine months ended September 30, 2017 and an immaterial impact on earnings per share. ASU 2016-09 also requires that excess tax benefits from share-based compensation awards be reported as operating activities in the Condensed Consolidated Statements of Cash Flows. Previously, this activity was included in financing activities on the Condensed Consolidated Statements of Cash Flows. The Company has elected to apply this change on a prospective basis. This change has an immaterial impact on our Condensed Consolidated Statements of Cash Flows. Also, we elected to continue to estimate forfeitures rather than account for them as they occur.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendments in the ASU simplify how an entity is required to test goodwill for impairment by

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

eliminating Step 2 from the goodwill impairment test. The ASU is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company early adopted this guidance for any impairment test performed after January 1, 2017.

~~Recent Accounting Pronouncements Not Yet Adopted~~

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which was the result of a joint project by the FASB and International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. generally accepted accounting principles and International Financial Reporting Standards. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ASU will require either retrospective application to each prior reporting period presented or modified retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. The Company is in the process of analyzing the impact of ASU 2014-09, and the related ASUs, across all its businesses. This includes performing contract reviews and reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. The Company expects to adopt the new standard using the modified retrospective approach, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to the opening balance of retained earnings upon adoption effective January 1, 2018. We are still evaluating the impact and an estimation of the impact cannot be made at this time. In addition, the standard requires new substantial disclosures and we continue to evaluate these requirements.

In January 2016, the FASB issued ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The amendments in the ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The FASB also is addressing measurement of credit losses on financial assets in a separate project. The ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is not permitted. The new guidance will be applied prospectively. The Company is currently evaluating the impact of adopting this guidance.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The ASU establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease term of more than twelve months. The ASU is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The Company is currently evaluating the impact of adopting this guidance.

In March 2017, the FASB issued ASU 2017-07 “Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The Company is planning to adopt this standard in the first quarter of 2018. The Company is currently evaluating the impact of adopting this guidance.

No ~~other recently issued ASUs~~recently-issued accounting standards updates are expected to have a material impact on our results of operations, financial condition or liquidity.

NOTE 3 — Revenue

We disaggregate our revenue by product line and geographic region of our customer as we believe these metrics best depict how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. See details in the tables below.

Table of Contents

Park-Ohio Industries, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In millions)
PRODUCT LINE
Supply Technologies	$	166.3	$	159.1	$	508.2	$	459.5
Engineered specialty fasteners and other products	26.5		26.8		77.7		71.0
Supply Technologies Segment	192.8		185.9		585.9		530.5

Fuel, rubber and plastic products	108.4		101.0		330.8		294.3
Assembly Components Segment	108.4		101.0		330.8		294.3

Industrial equipment	81.4		67.3		253.9		201.1
Forged and machined products	36.2		29.6		99.8		85.4
Engineered Products Segment	117.6		96.9		353.7		286.5

Total revenues	$	418.8	$	383.8	$	1,270.4	$	1,111.3


	Supply Technologies Segment		Assembly Components Segment		Engineered Products Segment		Total Revenues
	(In millions)
Three Months Ended September 30, 2023
GEOGRAPHIC REGION
United States	$	117.7	$	73.0	$	64.2	$	254.9
Europe	37.5		4.2		21.4		63.1
Asia	16.1		8.2		15.3		39.6
Mexico	17.4		13.4		3.0		33.8
Canada	2.9		8.2		10.3		21.4
Other	1.2		1.4		3.4		6.0
Total	$	192.8	$	108.4	$	117.6	$	418.8

Three Months Ended September 30, 2022
GEOGRAPHIC REGION
United States	$	115.1	$	73.0	$	54.8	$	242.9
Europe	29.2		3.7		19.7		52.6
Asia	18.4		6.4		14.1		38.9
Mexico	19.2		10.6		3.4		33.2
Canada	3.2		6.6		4.5		14.3
Other	0.8		0.7		0.4		1.9
Total	$	185.9	$	101.0	$	96.9	$	383.8

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Park-Ohio Industries, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023


	Supply Technologies Segment		Assembly Components Segment		Engineered Products Segment		Total Revenues
	(In millions)
Nine Months Ended September 30, 2023
GEOGRAPHIC REGION
United States	$	358.1	$	236.8	$	201.0	$	795.9
Europe	115.1		13.3		51.9		180.3
Asia	46.5		20.1		51.2		117.8
Mexico	54.1		33.3		11.6		99.0
Canada	10.0		23.7		25.6		59.3
Other	2.1		3.6		12.4		18.1
Total	$	585.9	$	330.8	$	353.7	$	1,270.4

Nine Months Ended September 30, 2022
GEOGRAPHIC REGION
United States	$	324.7	$	214.8	$	165.6	$	705.1
Europe	91.8		12.2		50.2		154.2
Asia	50.2		15.8		39.1		105.1
Mexico	51.9		29.0		11.4		92.3
Canada	9.3		20.6		14.6		44.5
Other	2.6		1.9		5.6		10.1
Total	$	530.5	$	294.3	$	286.5	$	1,111.3

For over time arrangements, contract liabilities primarily relate to advances or deposits received from the Company’s customers before revenue is recognized. These amounts, which totaled $67.9 million and $52.6 million at September 30, 2023 and December 31, 2022, respectively, are recorded in Accrued expenses and other in the Condensed Consolidated Balance Sheets.

For over time arrangements, contract assets primarily relate to revenue recognized in advance of billings to customers under long-term contracts accounted for under percentage of completion. These amounts, which totaled $79.3 million and $56.7 million at September 30, 2023 and December 31, 2022, respectively, are recorded in Other current assets in the Condensed Consolidated Balance Sheets.

NOTE 4 — Segments

Our operating segments are defined as components of the enterprise for which separate financial information is available and evaluated on a regular basis by our chief operating decision maker to allocate resources and assess performance.

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

For purposes of measuring business segment performance, the Company utilizes segment operating income, which is defined as revenues less expenses identifiable to the product lines within each segment. The Company does not allocate items that are non-operating; unusual in nature; or ~~are~~ corporate costs, which include but are not limited to executive and share-based compensation and corporate office costs. Segment operating income reconciles to consolidated income before income taxes by ~~deducting~~adjusting for corporate ~~costs, certain non-cash items~~costs; gains on sales of assets; other components of pension income and other postretirement benefits expense, net; and interest ~~expense.~~expense, net.

Results by business segment were as follows:

Table of Contents

Park-Ohio Industries, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
Net sales:
Supply Technologies $ 140.2
$ 122.0
$ 415.8
$ 384.8
Assembly Components 127.9
133.4
393.2
399.4
Engineered Products 84.1
57.3
237.9
185.9
$ 352.2
$ 312.7
$ 1,046.9
$ 970.1
Segment operating income:
Supply Technologies $ 10.9
$ 9.7
$ 34.6
$ 30.8
Assembly Components 11.4
13.9
37.0
38.3
Engineered Products 6.0
4.0
13.5
8.6
Total segment operating income 28.3
27.6
85.1
77.7

Corporate costs (7.3 ) (6.5 ) (20.9 ) (20.3 )
Litigation settlement gain —
—
3.3
—
Asset impairment charge —
—
—
(4.0 )
Operating income 21.0
21.1
67.5
53.4
Interest expense (7.8 ) (7.2 ) (23.1 ) (21.3 )
Loss on extinguishment of debt —
—
(11.0 ) —
Income before income taxes $ 13.2
$ 13.9
$ 33.4
$ 32.1


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In millions)
NET SALES OF CONTINUING OPERATIONS:
Supply Technologies	$	192.8	$	185.9	$	585.9	$	530.5
Assembly Components1	108.4		101.0		330.8		294.3
Engineered Products	117.6		96.9		353.7		286.5
	$	418.8	$	383.8	$	1,270.4	$	1,111.3
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
Supply Technologies	$	15.6	$	10.7	$	45.0	$	35.4
Assembly Components1	11.2		2.6		26.9		0.7
Engineered Products	7.1		5.8		14.9		14.7
Total segment operating income	33.9		19.1		86.8		50.8

Corporate costs	(6.9)		(7.4)		(21.3)		(22.4)

Gains on sales of assets	—		—		—		2.9


Operating income	27.0		11.7		65.5		31.3
Other components of pension income and other postretirement benefits expense, net	0.6		2.7		1.9		8.3
Interest expense, net	(11.7)		(9.0)		(33.7)		(23.7)

Income from continuing operations before income taxes1	$	15.9	$	5.4	$	33.7	$	15.9

~~NOTE 4 — Acquisitions~~

~~In April 2017,~~(1) - Our continuing operations exclude the ~~Company, through its wholly-owned subsidiary Apollo Aerospace Components, completed the~~

~~acquisition of Aero-Missile Components Inc. (“AMC”) for $10.5 million in cash. AMC is a supply chain management business~~

~~providing high-quality specialty fasteners and other components to the defense and aerospace markets. The~~ results of ~~AMC are included in the Supply Technologies segment from the date of acquisition. As~~our Aluminum Products business unit, which is held-for-sale as of September 30, ~~2017,~~2023 and December 31, 2022 and presented in discontinued operations for all periods presented. Aluminum Products was previously included in our Assembly Components segment.

NOTE 5 — Discontinued Operations

A business is classified as held-for-sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value, and certain other criteria of ASC 360 are met. A business classified as held-for-sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. When the carrying amount of the business exceeds its estimated fair value less costs to sell, a loss is recognized and updated each reporting period as appropriate. A business held-for-sale is classified as discontinued operations if the disposal group is a component of an entity; the component of an entity meets the held-for-sale criteria of ASC 360; and disposal of the component of an entity represents a strategic shift that will have a major effect on the entity's operations and financial results.

During the fourth quarter of 2022, the Company ~~recorded goodwill~~determined that the Aluminum Products business met the held-for-sale and discontinued operations accounting criteria.Accordingly, the Company has reported the held-for-sale assets and liabilities and the operating results of ~~$2.1 million~~Aluminum Products in discontinued operations for all periods presented in this Quarterly Report on Form 10-Q.The Aluminum Products business was previously reported in the Company’s Assembly Components segment until meeting the discontinued operations criteria. See Note 10 for further discussion related to the potential sale of this ~~transaction.~~business.

~~In December 2016, the Company acquired all the outstanding capital stock~~

Table of ~~GH Electrotermia S.A. (“GH”), headquartered in Valencia, Spain, for $23.4~~Contents

Park-Ohio Industries, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Net sales	$	45.4	$	51.9	$	137.7	$	171.5
Cost of sales	41.6		52.8		129.6		165.5

Selling, general and administrative	4.9		3.3		12.5		10.6
Restructuring and other special charges	—		0.5		—		3.7

Operating loss	(1.1)		(4.7)		(4.4)		(8.3)
Interest expense1	(1.1)		(0.6)		(2.6)		(2.0)



Loss from operation of discontinued operations	(2.2)		(5.3)		(7.0)		(10.3)

Income tax benefit	0.8		0.9		2.2		2.9
Loss from discontinued operations, net of tax	$	(1.4)	$	(4.4)	$	(4.8)	$	(7.4)

(1) - Interest expense includes an allocation of interest that is not directly attributable to our Aluminum Products business. The allocations were $1.0 million and $0.5 million in ~~cash (net of $6.3~~the three months ended September 30, 2023 and 2022, respectively, and $2.3 million ~~cash acquired), plus the assumption of $13.9~~and $1.7 million in ~~debt. During~~ the ~~third quarter 2017,~~nine months ended September 30, 2023 and 2022, respectively.

The following represents the ~~Company revised its initial estimated fair values for certain property, plant and equipment, intangibles and other~~details of assets and ~~liabilities. The impact~~liabilities held-for-sale in each period:


	September 30, 2023		December 31, 2022
	(In millions, except share data)
ASSETS
Current assets:
Accounts receivable, net	$	29.2	$	24.9
Inventories, net	20.5		30.2

Other current assets	1.8		1.2
Current assets held-for-sale1	51.5		56.3

Property, plant and equipment, net	47.9		46.1
Operating lease right-of-use assets	3.1		4.8
Long-term assets held-for-sale1	51.0		50.9

Total assets held-for-sale	$	102.5	$	107.2
LIABILITIES
Current liabilities:
Trade accounts payable	$	19.9	$	22.8
Current portion of finance lease liabilities	1.7		2.4
Current portion of operating lease liabilities	1.4		2.3
Other accrued expenses	7.7		10.7
Current liabilities held-for-sale1	$	30.7	$	38.2

Long-term liabilities, less current portion:
Long-term finance lease liabilities	2.0		3.1
Long-term operating lease liabilities	1.7		2.5
Long-term liabilities held-for-sale1	3.7		5.6

Total liabilities held-for-sale	$	34.4	$	43.8

(1) - We reasonably expect to finalize the sale of the ~~revisions made~~Aluminum Products business in the ~~third quarter 2017 is immaterial~~next twelve months, and therefore we have presented all assets and liabilities held-for-sale as current in the Condensed Consolidated Balance Sheet.

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Park-Ohio Industries, Inc. and Subsidiaries

Notes to ~~the consolidated balance sheet~~Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023

NOTE 6 — Plant Closure and ~~results of operations for~~Consolidation

During the three and nine months ended September 30, ~~2017. The~~2023 and 2022, the Company ~~expects~~incurred the following expenses related to ~~finalize~~plant closure and consolidation in connection with its ~~valuation of real property~~profit-improvement actions across its segments. These charges are included in Restructuring and ~~income taxes~~other special charges in the ~~fourth quarter~~Condensed Consolidated Statements of ~~2017.~~ Income.


	Facility-Related Costs		Severance and Other		Total

Three months ended September 30, 2023:
Assembly Components	$	—	$	—	$	—
Engineered Products	—		—		—
Total	$	—	$	—	$	—

Three months ended September 30, 2022:
Assembly Components	$	1.2	$	—	$	1.2
Engineered Products	1.4		—		1.4
Total	$	2.6	$	—	$	2.6


	Facility-Related Costs		Severance and Other		Total

Nine months ended September 30, 2023:
Assembly Components	$	0.5	$	—	$	0.5
Engineered Products	2.7		1.9		4.6
Total	$	3.2	$	1.9	$	5.1

Nine months ended September 30, 2022:
Assembly Components	$	4.2	$	—	$	4.2
Engineered Products	2.7		0.1		2.8
Total	$	6.9	$	0.1	$	7.0

The ~~purchase agreement stipulates potential contingent consideration~~actions in the Assembly Components segment were primarily in connection with actions taken to close and consolidate its extrusion operations in Tennessee and its fuel operations in Michigan, relocate certain production to lower-cost facilities with open capacity, and complete other cost-reduction actions.

The actions in the Engineered Product segment were primarily in connection with plant closure and consolidation of upmultiple locations, and to ~~$2.1 million based on achievement~~complete other cost-reduction actions.

As of ~~certain EBITDA targets~~September 30, 2023, the Company was substantially complete with these actions.

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Park-Ohio Industries, Inc. and Subsidiaries

Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (Unaudited)

September 30, ~~2017~~2023

for 2016 and 2017. The EBITDA target for 2016 was not achieved. The estimated fair value of the contingent consideration, valued using level 3 inputs, was approximately $0.4 million as of September 30, 2017.

NOTE 57 — Inventories

~~The components of inventory~~Inventories, net consist of the following:


	September 30, 2023		December 31, 2022
	(In millions)
Raw materials and supplies	$	103.8	$	105.0
Work-in-process	52.6		42.9
Finished goods	247.8		258.6

Inventories, net	$	404.2	$	406.5

September 30, 2017 December 31, 2016
(In millions)
Finished goods $ 150.3
$ 131.4
Work in process 47.1
43.4
Raw materials and supplies 70.9
65.8
Inventories, net $ 268.3
$ 240.6

NOTE 68 — Accrued Warranty Costs

The Company estimates warranty claims ~~on products sold~~ that may be incurred based on current and historical ~~data.~~data of products sold. Actual warranty expense could differ from the estimates made by the Company based on product performance. The following table presents changes in the Company’s product warranty liability for the three and nine months ended September 30, ~~2017~~2023 and ~~2016:~~2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In millions)
Beginning balance	$	5.8	$	6.4	$	5.2	$	7.2
Claims paid	(0.4)		(0.5)		(1.7)		(1.3)
Warranty expense	0.1		0.1		2.4		0.6
Foreign currency translation	(0.3)		(0.3)		(0.7)		(0.8)
Ending balance	$	5.2	$	5.7	$	5.2	$	5.7

2017 2016
(In millions)
January 1 $ 7.1
$ 6.1
Claims paid (3.0 ) (1.7 )
Warranty expense, net 3.6
1.1
September 30 $ 7.7
$ 5.5

NOTE 79 — Income Taxes

The Company’s tax provision for interim periods is determined using an estimate of its annual effective ~~income tax~~ rate, adjusted for discrete items ~~if any,~~ in each ~~period. Each quarter,~~period, if any.

In the ~~Company updates its estimated annual~~three months ended September 30, 2023, income tax expense was $3.8 million on pre-tax income from continuing operations of $15.9 million, representing an effective income tax rate of 24%. In the three months ended September 30, 2022, income tax benefit was $2.2 million on pre-tax income of $5.4 million. The benefit in 2022 included a discrete tax benefit of $2.7 million related to various tax credits and ifa reduction to the ~~estimated~~Global Intangible Low-Taxed Income (“GILTI”) inclusion.

In the nine months ended September 30, 2023, income tax expense was $8.5 million on pre-tax income from continuing operations of $33.7 million, representing an effective income tax rate ~~changes, a cumulative adjustment is made. The effective~~of 25%. In the nine months ended September 30, 2022, income tax ~~rates for the first~~ ~~nine~~ ~~months~~benefit was $2.9 million on pre-tax income of ~~2017~~ ~~and~~ ~~2016~~ ~~were 28.7% and~~ ~~19.0%, respectively.~~$15.9 million. The ~~rates for both periods reflect the reversal~~benefit in 2022 included a discrete tax benefit of ~~various income tax accruals, totaling $1.4~~$5.9 million ~~in 2017 and $4.0 million in 2016, relating to previous uncertain tax positions for which the statutes of limitations expired. The Company recognizes accrued interest and penalties~~ related to ~~uncertain~~various tax ~~positions in income tax expense.~~credits and a reduction to the GILTI inclusion.

NOTE 810 — Financing Arrangements

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Park-Ohio Industries, Inc. and Subsidiaries

Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (Unaudited)

September 30, ~~2017~~2023

~~Long-term debt~~Debt consists of the following:


				Carrying Value at
	Maturity Date	Interest Rate at September 30, 2023		September 30, 2023		December 31, 2022
				(In millions)
Senior Notes	April 15, 2027	6.625	%	$	350.0	$	350.0

Revolving credit facility	January 14, 2027	7.17	%	286.8		285.3


Finance Leases	Various	Various		18.8		18.5
Other	Various	Various		18.8		15.3
Total debt				674.4		669.1
Less: Current portion of long-term debt and short-term debt				(12.2)		(10.9)

Less: Unamortized debt issuance costs				(3.1)		(3.1)
Total long-term debt				$	659.1	$	655.1

Carrying Value at
Maturity Date
Interest Rate at
September 30 2017
September 30, 2017 December 31, 2016
(In millions)
Senior Notes due 2027 April 15, 2027 6.625 % $ 350.0
$ —
Senior Notes due 2021 April 1, 2021 8.125 % —
250.0
Revolving credit facility April 17, 2022 3.08 % 100.3
132.8
Term Loan

—
23.4
Industrial Equipment Group European Facilities December 21, 2021 3.25 % 28.0
26.4
Capital Leases Various Various
18.9
18.8
Other Various Various
22.1
23.6
Gross debt 519.3
475.0
Less current portion of long-term debt (14.2 ) (25.8 )
Less short-term debt (3.9 ) (5.0 )
Less unamortized debt issuance costs (8.9 ) (5.2 )
Total long-term debt, net $ 492.3
$ 439.0

In addition to debt listed above, on December 30, 2022, the Company entered into a memorandum of understanding (the “MOU”) with a third party pursuant to which the third party would purchase our Aluminum Products business.The sale of the Aluminum Products business is subject to the successful completion of a definitive purchase agreement and other customary conditions. In connection with the MOU, the Company also entered into a financing arrangement with the third party pursuant to which the Company received a portion of the estimated purchase price of the Aluminum Products business, including $20.0 million of cash and a promissory note in the principal amount of $25.0 million, and recorded a financing arrangement liability of $45.0 million. The Company used the $20.0 million from this financing arrangement to repay indebtedness under its revolving credit facility. If a definitive purchase agreement between the parties is not entered into or the sale is not successfully consummated, the promissory note will be cancelled and the Company will repay the third party $20.0 million.

On ~~April 17,~~September 13, 2023, the Company amended its Eighth Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility in the amount of $405.0 million, including a $40.0 million Canadian revolving subcommitment and a European revolving subcommitment in the amount of $30.0 million. Pursuant to the Credit Agreement, the Company has the option to increase the availability under the revolving credit facility by an aggregate incremental amount up to $70.0 million. The Credit Agreement matures on January 14, 2027. As of September 30, 2023, we had borrowing availability of $99.2 million under the Credit Agreement.

We had outstanding bank guarantees and letters of credit under our credit arrangements of approximately $42.5 million at September 30, 2023 and $41.0 million at December 31, 2022.

In 2017, the Company completed the issuance, in a private placement, of $350.0 million aggregate principal amount of 6.625% Senior Notes due 2027 (the “Notes”). ~~Interest on the Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2017, and the Notes mature on April 15, 2027.~~ The Notes are unsecured senior obligations of the Company and are guaranteed on an unsecured senior basis by the 100% owned material domestic subsidiaries of the Company. Proceeds from the Notes issuance were used to repay in full the previously-outstanding 8.125% Senior Notes due 2021 in the aggregate principal amount of $250.0 million, the term loan and a portion of the borrowings outstanding under the revolving credit facility.

~~On April 17, 2017, the Company also entered into a seventh amended and restated credit agreement (the “Amended Credit~~

~~Agreement”) with a group of banks to increase the revolving credit facility to $350.0 million and extend the maturity date of~~

~~borrowings under the facility to April 17, 2022. Furthermore, the Company has the option, pursuant to the Amended Credit~~

~~Agreement, to increase the availability under the revolving credit facility by an aggregate incremental amount up to $100.0~~

~~million.~~

~~In connection with the April 2017 repurchase of Senior Notes due 2021 and amendment of our credit agreement, we~~

~~recorded an $11.0 million loss on extinguishment of debt, representing premiums paid on early extinguishment of $8.0 million,~~

~~the write-off of unamortized prior debt issuance costs of $2.5 million, and related fees and expenses of $0.5 million.~~

On December 21, 2016, the Company, through its subsidiary, IEGE Industrial Equipment Holding Company Limited, entered into a financing agreement with Banco Bilbao Vizcaya Argentaria, S.A. The financing agreement provides the Company a loan up to $28.0 million as of September 30, 2017, as well as a revolving credit facility for up to $11.8 million to fund working capital and general corporate needs. The full $28.0 million loan is outstanding as of September 30, 2017. No amounts have been drawn on the revolving credit facility as of September 30, 2017.

On August 13, 2015, the Company entered into a Capital Lease Agreement (the “Lease Agreement”). The Lease Agreement provides the Company up to $50.0 million for capital leases. Capital lease obligations of $18.9 million were borrowed under the Lease Agreement to acquire machinery and equipment as of September 30, 2017.

On October 21, 2015, the Company, through its Southwest Steel Processing LLC subsidiary, entered into a financing agreement with the Arkansas Development Finance Authority. The financing agreement provides the Company the ability to

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

borrow up to $11.0 million for expansion of its manufacturing facility in Arkansas. The financing agreement matures in September 2025. The Company had $5.6 million of borrowings outstanding under this agreement as of September 30, 2017, which is included in Other above.

The following table represents fair value information of the Notes, classified as Level 1 using estimated quoted market prices.


	September 30, 2023		December 31, 2022
	(In millions)
Carrying amount	$	350.0	$	350.0
Fair value	$	306.0	$	227.5

Table of Contents

Park-Ohio Industries, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023

September 30, 2017
(In millions)
Carrying amount $ 350.0
Fair value $ 378.9
The fair value of the revolving credit facility is equal to its carrying value as the Company has the ability to repay the outstanding principal at par value at any time. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.

NOTE 911 — Stock-Based Compensation

~~A summary of Holdings' stock option activity for the nine months ended September 30, 2017 is as follows:~~

2017
Number of Shares Weighted Average
Exercise Price
(In whole shares)
Outstanding - beginning of year 38,000
$ 19.30
Granted —
—
Exercised (24,907 ) 21.22
Canceled or expired —
—
Outstanding - end of period 13,093
15.61
Options exercisable 13,093
$ 15.61

A summary of Holdings' restricted share activity for the nine months ended September 30, ~~2017~~2023 is as follows:


	2017									2023
	Time-Based				Performance-Based					Time-Based			Performance-Based
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
	(In whole shares)				(In whole shares)					(In whole shares)			(In whole shares)
Outstanding - beginning of year	216,916		$	36.94	165,000		$	34.78	Outstanding - beginning of year	716,242	$	20.53	50,000	$	32.55
Granted	104,670		38.41		165,000		38.10
Granted(a)									Granted(a)	369,238	16.12		—	—
Vested	(89,404	)	44.39		(55,000	)	34.78		Vested	(306,433)	19.83		—	—
Performance-based to time-based^(a)	110,000		34.78		(110,000	)	34.78

Canceled or expired	(2,000	)	37.87		—		—		Canceled or expired	(4,517)	19.91		—	—
Outstanding - end of period	340,182		$	34.73	165,000		$	38.10	Outstanding - end of period	774,530	$	18.71	50,000	$	32.55

(a) ~~During~~- Included in this amount is 9,000 restricted share units.

Stock-based compensation is included in Selling, general and administrative expenses in the first quarter of 2017, 55,000 of the performance-based restricted shares granted in 2016 fully vested based on the achievement of the performance criteria. In accordance with the grant agreements, the remaining 110,000 shares became time-based, vesting over the remaining two years of the requisite service period.

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited~~ Condensed Consolidated ~~Financial~~ Statements

~~September 30, 2017~~

of Income. Total stock-based compensation expense ~~included in selling, general~~was $1.6 million and ~~administrative expenses during~~$2.0 million for the ~~first~~three months ended September 30, 2023 and 2022, respectively. Total stock-based compensation expense was $4.9 million and $5.4 million for the nine months of ~~2017~~ended September 30, 2023 and ~~2016~~ ~~was~~ ~~$6.3 million~~ ~~and~~ ~~$8.1 million~~,2022, respectively. As of September 30, ~~2017~~,2023, there was ~~$11.4~~$9.0 million of unrecognized compensation cost related to non-vested stock-based compensation, which cost is expected to be recognized over a weighted-average period of ~~1.8~~2.0 years.

NOTE 1012 — Commitments ~~Contingencies~~ and ~~Litigation Settlement~~Contingencies

The Company is subject to ~~various pending~~a variety of claims, suits, investigations and ~~threatened legal~~administrative proceedings with respect to commercial, premises liability, product liability, employment, personal injury and environmental matters arising infrom the ordinary course of business. The Company records a liability for loss contingencies in the consolidated financial statements when a loss is known or considered probable and the amount can be reasonably estimated. Our provisions are based on historical experience, current information and legal advice, and they may be adjusted in the future based on new developments. Estimating probable losses requires the analysis of multiple forecasted factors that often depend on judgments and potential actions by third parties. Although it is not possible to predict with certainty the ultimate outcome or cost of these matters, the Company believes they will not have a material adverse effect on our consolidated financial statements.

IPSCO Tubulars Inc. d/b/a TMK IPSCO sued Ajax Tocco Magnethermic Corporation (“ATM”), a subsidiary of the Company, in the United States District Court for the Eastern District of Arkansas claiming that equipment supplied by ATM for heat treating certain steel pipe at IPSCO's Blytheville, Arkansas facility did not perform as required by the contract. The complaint alleged causes of action for breach of contract, gross negligence and constructive fraud. IPSCO sought approximately $10.0 million in damages plus an unspecified amount of punitive damages. In September 2013, the district court issued a judgment in favor of IPSCO in the amount of $5.2 million, which the Company recognized and accrued for at that time. In March 2016, the district court issued an order granting, in part, IPSCO's motion for fees and costs and awarding $2.2 million to IPSCO, which the Company accrued for as of December 31, 2015. ATM filed a third appeal of that decision. On March 28, 2017, the Company and IPSCO agreed to a settlement and release of all claims for the payment by the Company of $4.0 million to IPSCO, which was made in March 2017. As of the settlement date, the Company had $7.3 million accrued for this matter. The Company reversed the excess liability and recognized $3.3 million in income in the first quarter of 2017.

Our subsidiaries are involved in a number of contractual and ~~warranty related~~warranty-related disputes. We believe that appropriate liabilities for these contingencies have been recorded; however, actual results may differ materially from our estimates.

In August 2013, the Company received a subpoena from the staff of the Securities and Exchange Commission (“SEC”) in connection with the staff’s investigation of a third party. At that time, the Company also learned that the U.S. Department of Justice (“DOJ”) is conducting a criminal investigation of the third party. In connection with its initial responseaddition to the ~~staff’s subpoena, the Company disclosed to the staff of the SEC that,~~routine lawsuits and asserted claims noted above, we are also a co-defendant in ~~November 2007, the third party participated in a payment~~128 cases asserting claims on behalf of 178 plaintiffs alleging personal injury as a result of exposure to asbestos. In every asbestos case in which we are named as a party, the ~~Company~~complaints are filed against multiple named defendants. Historically, we have been dismissed from asbestos cases. We intend to ~~a foreign tax official that implicates the Foreign Corrupt Practices Act.~~vigorously defend these cases and believe we will continue to be successful in being dismissed from such cases.

The Board of Directors of the Company formed a special committee to review the Company’s transactions with the third party and to make any recommendations to the Board of Directors with respect thereto. The Company intends to cooperate fully with the SEC and the DOJ in connection with their investigations of the third party and with the SEC in light of the Company’s disclosure. The Company is unable to predict the outcome or impact of the special committee’s investigation or the length, scope or results of the SEC’s review or the impact on its results of operations.

Table of Contents

Park-Ohio Industries, Inc. and Subsidiaries

Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (Unaudited)

September 30, ~~2017~~2023

While it is not possible to predict the ultimate outcome of asbestos-related lawsuits, claims and proceedings due to the unpredictable nature of personal injury litigation, and although our results of operations and cash flows for a particular period could be adversely affected by asbestos-related lawsuits, claims and proceedings, management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial condition, liquidity or results of operations.

NOTE 1113 — Pension and Postretirement Benefits

The components of net periodic benefit (income) expense costs recognized ~~during interim periods~~for the three and nine months ended September 30, 2023 and 2022 were as follows:


	Pension Benefits								Postretirement Benefits
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022		2023		2022
	(In millions)
Service costs	$	0.9	$	1.1	$	3.4	$	3.3	$	—	$	—	$	—	$	—
Interest costs	0.9		0.4		2.6		1.3		—		—		0.2		0.1
Expected return on plan assets	(2.5)		(3.2)		(7.5)		(9.7)		—		—		(0.1)		(0.2)
Recognized net actuarial loss	0.9		—		2.7		—		0.1		0.1		0.2		0.2
Net periodic benefit expense (income)	$	0.2	$	(1.7)	$	1.2	$	(5.1)	$	0.1	$	0.1	$	0.3	$	0.1

Pension Benefits Postretirement Benefits
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016 2017 2016 2017 2016
(In millions)
Service costs $ 0.6
$ 0.6
$ 1.9
$ 1.8
$ —
$ —
$ —
$ —
Interest costs 0.4
0.5
1.3
1.4
0.1
0.1
0.2
0.3
Expected return on plan assets (2.4 ) (2.3 ) (7.2 ) (7.1 ) —
—
—
—
Recognized net actuarial loss 0.3
0.3
0.9
0.9
—
—
0.1
0.2
Net periodic benefit (income) costs $ (1.1 ) $ (0.9 ) $ (3.1 ) $ (3.0 ) $ 0.1
$ 0.1
$ 0.3
$ 0.5
Weighted average:
Discount rate 3.91 % 4.13 % 3.63 % 3.80 %
Expected return on plan assets 8.25 % 8.25 %

NOTE 1214 — Accumulated Other Comprehensive Loss

The components of and changes in accumulated other comprehensive loss for the ~~nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~were as follows:~~

Cumulative Translation Adjustment Pension and Postretirement Benefits Total
(In millions)
January 1, 2017 $ (30.8 ) $ (11.9 ) $ (42.7 )
Foreign currency translation adjustments ^(a)
18.9
—
18.9
Pension and OPEB activity, net of tax adjustments ^(b)
—
0.6
0.6
September 30, 2017 $ (11.9 ) $ (11.3 ) $ (23.2 )

January 1, 2016 $ (16.9 ) $ (13.1 ) $ (30.0 )
Foreign currency translation adjustments ^(a)
(5.3 ) —
(5.3 )
Pension and OPEB activity, net of tax adjustments ^(b)
—
0.7
0.7
September 30, 2016 $ (22.2 ) $ (12.4 ) $ (34.6 )


~~(a)~~	~~No income taxes are provided on foreign currency translation adjustments as foreign earnings are considered permanently re-invested.~~


~~(b)~~	~~The tax adjustments are reclassified out of accumulated other comprehensive income and included in income tax expense.~~

~~NOTE 13 — Asset Impairment~~

~~In the first quarter of 2016, due to the accelerated end of production in certain programs with an automotive customer,~~

~~the Company evaluated its long-lived assets in accordance with ASU 360, "Property, Plant and Equipment." As the carrying~~

~~value of the assets exceeded the expected undiscounted cash flows, the Company estimated the fair value of these assets to~~

~~determine whether impairment existed. The fair value of the assets was estimated, using Level 2 inputs, based on the expected~~

~~sale proceeds of similar machinery and equipment as determined using third party quotes and appraisals. As a result of its~~

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

~~analysis, the Company recorded an asset impairment charge of $4.0 million.~~

~~NOTE 14 — Supplemental Guarantor Information~~

Each of the material domestic direct and indirect wholly-owned subsidiaries of the Company (the “Guarantor Subsidiaries”) has fully and unconditionally guaranteed, on a joint and several basis, to pay principal, premium, and interest with respect to the Company's Notes. Each of the Guarantor Subsidiaries is ~~“100% owned,” as defined by Rule 3-10(h)(1) of Regulation S-X~~.

~~The guarantee of a Guarantor Subsidiary will automatically terminate, and the obligations of such Guarantor Subsidiary under its guarantee of Notes will be released:~~

~~(a) in the event of any sale or other disposition of all or substantially all of the assets or all of the capital stock of any Subsidiary Guarantor, by way of merger, consolidation or otherwise;~~

~~(b) upon designation of any Subsidiary Guarantor as an “unrestricted subsidiary” (as defined in the indenture governing the Senior Notes (the “Indenture”);~~

~~(c) upon defeasance or satisfaction and discharge of the Indenture; and~~

~~(d) upon the release of such Subsidiary Guarantor's guarantees under all credit facilities of the Company (other than a release as a result of payment under or a discharge of such guarantee).~~

~~The following supplemental condensed consolidating financial statements present condensed consolidating balance sheets as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, condensed consolidating statements of income and other comprehensive income (loss) for the~~ three and nine months ended September 30, ~~2017~~2023 and ~~2016, condensed consolidating statements of cash flows for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~, and reclassification and elimination entries necessary to consolidate the Parent and all of its subsidiaries. The condensed consolidating financial statements present investments in subsidiaries using the equity method of accounting. The “Parent” reflected in the accompanying supplemental guarantor information is the Company, who is also an obligor of the Notes.2022 were as follows:


	Cumulative Translation Adjustment		Cash Flow Hedges		Pension and Postretirement Benefits		Total		Cumulative Translation Adjustment		Cash Flow Hedges		Pension and Postretirement Benefits		Total
	(In millions)
	Three Months Ended September 30, 2023								Three Months Ended September 30, 2022
Beginning balance	$	(33.2)	$	0.1	$	(20.7)	$	(53.8)	$	(36.8)	$	0.5	$	(0.8)	$	(37.1)
Currency translation(a)	(9.3)		—		—		(9.3)		(17.0)		—		—		(17.0)
Foreign currency forward contracts, net of tax	—		(0.1)		—		(0.1)		—		—		—		—
Pension and OPEB activity, net of tax	—		—		1.0		1.0		—		—		0.1		0.1


Ending balance	$	(42.5)	$	—	$	(19.7)	$	(62.2)	$	(53.8)	$	0.5	$	(0.7)	$	(54.0)

	Nine Months Ended September 30, 2023								Nine Months Ended September 30, 2022
Beginning balance	$	(38.7)	$	0.5	$	(23.6)	$	(61.8)	$	(18.3)	$	—	$	(0.9)	$	(19.2)
Currency translation(a)	(3.8)		—		—		(3.8)		(35.5)		—		—		(35.5)
Foreign currency forward contracts	—		(0.5)		—		(0.5)		—		0.5		—		0.5
Pension and OPEB activity, net of tax	—		—		3.9		3.9		—		—		0.2		0.2


Ending balance	$	(42.5)	$	—	$	(19.7)	$	(62.2)	$	(53.8)	$	0.5	$	(0.7)	$	(54.0)

(a)No income taxes were provided on currency translation as foreign earnings are considered permanently reinvested.

Table of Contents

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Condensed Consolidating Balance Sheets
September 30, 2017
Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Reclassifications/
Eliminations
Consolidated
(In millions)
ASSETS
Current assets:
Cash and cash equivalents $ —
$ —
$ 72.6
$ —
$ 72.6
Accounts receivable, net —
150.6
80.8
—
231.4
Inventories, net —
190.2
78.1
—
268.3
Receivable from affiliates —
—
17.2
—
17.2
Other current assets 0.6
40.2
29.5
—
70.3
Total current assets 0.6
381.0
278.2
—
659.8
Investments in subsidiaries 546.4
249.4
—
(795.8 ) —
Intercompany advances 300.1
83.0
107.2
(490.3 ) —
Property, plant and equipment, net 6.1
101.5
66.1
—
173.7
Goodwill —
58.9
33.1
—
92.0
Intangible assets, net —
61.3
36.2
—
97.5
Other long-term assets 67.1
4.6
7.6
—
79.3
Total assets $ 920.3
$ 939.7
$ 528.4
$ (1,286.1 ) $ 1,102.3

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ —
$ 122.8
$ 46.6
$ —
$ 169.4
Payable to affiliates —
—
7.1
—
7.1
Current portion of long-term and short-term debt —
6.6
11.5
—
18.1
Accrued expenses and other 13.4
35.0
40.8
—
89.2
Total current liabilities 13.4
164.4
106.0
—
283.8
Long-term liabilities, less current portion:
Debt 442.7
10.6
39.0
—
492.3
Deferred income taxes —
19.4
9.6
—
29.0
Other long-term liabilities 15.2
1.0
5.1
—
21.3
Total long-term liabilities 457.9
31.0
53.7
—
542.6
Intercompany advances 173.1
226.6
90.6
(490.3 ) —
Total Park-Ohio Industries, Inc. and Subsidiaries shareholder's equity 265.5
517.7
267.7
(785.4 ) 265.5
Noncontrolling interests 10.4
—
10.4
(10.4 ) 10.4
Total equity 275.9
517.7
278.1
(795.8 ) 275.9
Total liabilities and equity $ 920.3
$ 939.7
$ 528.4
$ (1,286.1 ) $ 1,102.3

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Condensed Consolidating Balance Sheets
December 31, 2016
Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Reclassifications/
Eliminations
Consolidated
(In millions)
ASSETS
Current assets:
Cash and cash equivalents $ —
$ —
$ 54.4
$ —
$ 54.4
Accounts receivable, net —
125.2
69.2
—
194.4
Inventories, net —
172.9
67.7
—
240.6
Receivable from affiliates —
—
12.8
—
12.8
Other current assets 0.7
28.3
24.3
—
53.3
Total current assets 0.7
326.4
228.4
—
555.5
Investments in subsidiaries 492.8
213.8
—
(706.6 ) —
Intercompany advances 296.5
78.1
110.5
(485.1 ) —
Property, plant and equipment, net 6.2
98.2
65.2
—
169.6
Goodwill —
56.8
29.8
—
86.6
Intangible assets, net —
64.8
31.8
—
96.6
Other long-term assets 62.8
4.5
4.0
—
71.3
Total assets $ 859.0
$ 842.6
$ 469.7
$ (1,191.7 ) $ 979.6

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ —
$ 100.3
$ 33.4
$ —
$ 133.7
Payable to affiliates —
—
7.0
—
7.0
Current portion of long-term and short-term debt 13.2
6.4
11.2
—
30.8
Accrued expenses and other 10.5
36.8
31.3
—
78.6
Total current liabilities 23.7
143.5
82.9
—
250.1
Long-term liabilities, less current portion:
Debt 389.2
12.2
37.6
—
439.0
Deferred income taxes —
20.4
8.6
—
29.0
Other long-term liabilities 16.1
8.5
5.2
—
29.8
Total long-term liabilities 405.3
41.1
51.4
—
497.8
Intercompany advances 198.3
192.2
94.6
(485.1 ) —
Total Park-Ohio Industries, Inc. and Subsidiaries shareholder's equity 221.7
465.8
230.8
(696.6 ) 221.7
Noncontrolling interests 10.0
—
10.0
(10.0 ) 10.0
Total equity 231.7
465.8
240.8
(706.6 ) 231.7
Total liabilities and shareholder's equity $ 859.0
$ 842.6
$ 469.7
$ (1,191.7 ) $ 979.6

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Consolidating Statements of Income (Loss)
and Comprehensive Income (Loss)
Nine Months Ended September 30, 2017
Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries
Eliminations Consolidated
(In millions)
Net sales $ —
$ 774.6
$ 272.3
$ —
$ 1,046.9
Cost of sales —
660.1
213.8
—
873.9
Gross profit —
114.5
58.5
—
173.0
Selling, general and administrative expenses 19.5
55.7
33.6
—
108.8
Litigation settlement gain —
(3.3 ) —
—
(3.3 )
Income (loss) from subsidiaries 75.4
16.1
—
(91.5 ) —
Operating income (loss) 55.9
78.2
24.9
(91.5 ) 67.5
Interest expense 21.1
—
2.0
—
23.1
Loss on debt extinguishment 11.0
—
—
—
11.0
Income (loss) before income taxes 23.8
78.2
22.9
(91.5 ) 33.4
Income tax expense —
4.0
5.6
—
9.6
Net income (loss) 23.8
74.2
17.3
(91.5 ) 23.8
Net (income) loss attributable to noncontrolling interests (0.7 ) —
(0.7 ) 0.7
(0.7 )
Net income (loss) attributable to Park-Ohio Industries Inc. common shareholder $ 23.1
$ 74.2
$ 16.6
$ (90.8 ) $ 23.1

Other comprehensive income (loss) (see note 12):
Net income (loss) $ 23.8
$ 74.2
$ 17.3
$ (91.5 ) $ 23.8
Foreign currency translation adjustment 18.9
—
18.9
(18.9 ) 18.9
Pension and OPEB activity, net of tax adjustments 0.6
0.6
—
(0.6 ) 0.6
Comprehensive income (loss), net of tax 43.3
74.8
36.2
(111.0 ) 43.3
Comprehensive (income) loss attributable to noncontrolling interest (0.7 ) —
(0.7 ) 0.7
(0.7 )
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder $ 42.6
$ 74.8
$ 35.5
$ (110.3 ) $ 42.6

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Consolidating Statements of Income (Loss) and Comprehensive Income (Loss)
Nine Months Ended September 30, 2016
Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries
Eliminations Consolidated
(In millions)
Net sales $ —
$ 751.7
$ 218.4
$ —
$ 970.1
Cost of sales —
645.8
167.9
—
813.7
Gross profit —
105.9
50.5
—
156.4
Selling, general and administrative expenses 18.0
54.3
26.7
—
99.0
Asset impairment —
4.0
—
—
4.0
Income (loss) from subsidiaries 64.2
13.9
—
(78.1 ) —
Operating income (loss) 46.2
61.5
23.8
(78.1 ) 53.4
Interest expense 20.2
—
1.1
—
21.3
Income (loss) before income taxes 26.0
61.5
22.7
(78.1 ) 32.1
Income tax (benefit) expense —
(1.3 ) 7.4
—
6.1
Net income (loss) 26.0
62.8
15.3
(78.1 ) 26.0
Net income attributable to noncontrolling interests (0.3 ) —
(0.3 ) 0.3
(0.3 )
Net income (loss) attributable to Park-Ohio Industries Inc. common shareholder $ 25.7
$ 62.8
$ 15.0
$ (77.8 ) $ 25.7

Other comprehensive income (loss) (see note 12):
Net income (loss) $ 26.0
$ 62.8
$ 15.3
$ (78.1 ) $ 26.0
Foreign currency translation adjustment (5.3 ) —
(5.3 ) 5.3
(5.3 )
Pension and OPEB activity, net of tax adjustments 0.7
0.4
—
(0.4 ) 0.7
Comprehensive income (loss), net of tax 21.4
63.2
10.0
(73.2 ) 21.4
Comprehensive income attributable to noncontrolling interests (0.3 ) —
(0.3 ) 0.3
(0.3 )
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder $ 21.1
$ 63.2
$ 9.7
$ (72.9 ) $ 21.1

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Consolidating Statement of Operations
and Comprehensive Income (Loss)
Three Months Ended September 30, 2017
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations Consolidated
Net sales $ —
$ 258.4
$ 93.8
$ —
$ 352.2
Cost of sales —
220.6
74.4
—
295.0
Gross profit —
37.8
19.4
—
57.2
Selling, general and administrative expenses 7.0
18.4
10.8
—
36.2
Income (loss) from subsidiaries 24.6
6.8
—
(31.4 ) —
Operating income (loss) 17.6
26.2
8.6
(31.4 ) 21.0
Interest expense 7.2
—
0.6
—
7.8
Loss on extinguishment of debt —
—
—
—
—
Income (loss) before income taxes 10.4
26.2
8.0
(31.4 ) 13.2
Income tax expense —
1.9
0.9
—
2.8
Net income (loss) 10.4
24.3
7.1
(31.4 ) 10.4
Net (income) loss attributable to noncontrolling interest (0.2 ) —
(0.2 ) 0.2
(0.2 )
Net income(loss) attributable to Park-Ohio Industries Inc. common shareholder $ 10.2
$ 24.3
$ 6.9
$ (31.2 ) $ 10.2

Other comprehensive income (loss) (see note 12):
Net income (loss) $ 10.4
$ 24.3
$ 7.1
$ (31.4 ) $ 10.4
Foreign currency translation adjustment 7.5
—
7.5
(7.5 ) 7.5
Pension and OPEB activity, net of tax adjustments 0.2
0.2
—
(0.2 ) 0.2
Comprehensive income (loss), net of tax 18.1
24.5
14.6
(39.1 ) 18.1
Comprehensive (income) loss attributable to noncontrolling interest (0.2 ) —
(0.2 ) 0.2
(0.2 )
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder $ 17.9
$ 24.5
$ 14.4
$ (38.9 ) $ 17.9

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Consolidating Statements of Income (Loss) and Comprehensive Income (Loss)
Three Months Ended September 30, 2016
Parent Combined
Guarantor
Subsidiaries Combined
Non-Guarantor
Subsidiaries Eliminations Consolidated
Net sales $ —
$ 242.1
$ 70.6
$ —
$ 312.7
Cost of sales —
205.3
53.1
—
258.4
    Gross profit —
36.8
17.5
—
54.3
Selling, general and administrative expenses 7.7
17.8
7.7
—
33.2
Income (loss) from subsidiaries 28.4
5.8
—
(34.2 ) —
    Operating income (loss) 20.7
24.8
9.8
(34.2 ) 21.1
Interest expense 6.8
—
0.4
—
7.2
   Income (loss) before income taxes 13.9
24.8
9.4
(34.2 ) 13.9
Income tax expense —
(3.0 ) 3.0
—
—
    Net income (loss) $ 13.9
$ 27.8
$ 6.4
$ (34.2 ) $ 13.9
Net income attributable to noncontrolling interest (0.3 ) —
(0.3 ) 0.3
(0.3 )
Net income attributable to Park-Ohio Industries Inc. common shareholder $ 13.6
$ 27.8
$ 6.1
$ (33.9 ) $ 13.6

Other comprehensive income (loss) (see note 12):
Net income (loss) $ 13.9
$ 27.8
$ 6.4
$ (34.2 ) $ 13.9
Foreign currency translation adjustment (1.3 ) —
(1.3 ) 1.3
(1.3 )
Pension and OPEB activity, net of tax adjustments 0.3
—
—
—
0.3
Comprehensive income (loss), net of tax 12.9
27.8
5.1
(32.9 ) 12.9
Comprehensive income attributable to noncontrolling interest (0.3 ) —
(0.3 ) 0.3
(0.3 )
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder $ 12.6
$ 27.8
$ 4.8
$ (32.6 ) $ 12.6

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Condensed Consolidating Statements of
Cash Flows
Nine Months Ended September 30, 2017
Parent
Combined
Guarantor
Subsidiaries

Combined
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(In millions)
OPERATING ACTIVITIES
Net cash (used) provided by operating activities $ (32.8 ) $ 36.2
$ 18.9
$ 1.0
$ 23.3
INVESTING ACTIVITIES
Purchases of property, plant and equipment (0.3 ) (13.7 ) (4.9 ) —
(18.9 )
Business acquisition —
(10.5 ) —
—
(10.5 )
Net cash used in investing activities (0.3 ) (24.2 ) (4.9 ) —
(29.4 )
FINANCING ACTIVITIES
Intercompany account change 9.5
(10.6 ) 2.1
(1.0 ) —
Payments on revolving credit facility, net (32.5 ) —
—
—
(32.5 )
Payments on term loans and other debt (23.4 ) (0.4 ) (3.9 ) —
(27.7 )
Proceeds from capital lease facilities, net —
(1.0 ) 1.1
—
0.1
Issuance of 6.625% Senior Notes due 2027 350.0
—
—
—
350.0
Debt financing costs (7.5 ) —
—
—
(7.5 )
Redemption of 8.125% Senior Notes due 2021 (250.0 ) —
—
—
(250.0 )
Premium on early extinguishment of debt (8.0 ) —
—
—
(8.0 )
Dividend paid to Parent (5.0 ) —
—
—
(5.0 )
Dividend —
—
(0.2 ) —
(0.2 )
Net cash provided (used) by financing activities 33.1
(12.0 ) (0.9 ) (1.0 ) 19.2
Effect of exchange rate changes on cash —
—
5.1
—
5.1
Increase in cash and cash equivalents —
—
18.2
—
18.2
Cash and cash equivalents at beginning of period —
—
54.4
—
54.4
Cash and cash equivalents at end of period $ —
$ —
$ 72.6
$ —
$ 72.6

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

Condensed Consolidating Statements of
Cash Flows
Nine Months Ended September 30, 2016
Parent
Combined
Guarantor
Subsidiaries

Combined
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(In millions)
OPERATING ACTIVITIES
Net cash (used) provided by operating activities $ (36.8 ) $ 81.5
$ 11.4
$ (16.3 ) $ 39.8
INVESTING ACTIVITIES
Purchases of property, plant and equipment (0.1 ) (6.3 ) (13.9 ) —
(20.3 )
Net cash used in investing activities (0.1 ) (6.3 ) (13.9 ) —
(20.3 )
FINANCING ACTIVITIES
Intercompany account change 57.7
(74.4 ) 0.4
16.3
—
Payments on revolving credit facility, net (17.4 ) —
—
—
(17.4 )
Payments on term loans and other debt (3.4 ) —
—
—
(3.4 )
Proceeds from term loans and other debt —
1.3
6.0
—
7.3
Payments on capital leases, net —
(2.2 ) (0.3 ) —
(2.5 )
Payment of acquisition earn-out —
—
(2.0 ) —
(2.0 )
Net cash provided (used) by financing activities 36.9
(75.3 ) 4.1
16.3
(18.0 )
Effect of exchange rate changes on cash —
—
(0.4 ) —
(0.4 )
Increase in cash and cash equivalents —
(0.1 ) 1.2
—
1.1
Cash and cash equivalents at beginning of period —
0.1
48.3
—
48.4
Cash and cash equivalents at end of period $ —
$ —
$ 49.5
$ —
$ 49.5

~~Table of Contents~~

~~Park-Ohio Industries, Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2017~~

~~NOTE 15 — Subsequent Event~~

In October 2017, the Company completed the acquisition of Heads & All Threads Ltd. (“HAT”). Headquartered in Birmingham, United Kingdom, HAT is a leading European supplier of supply chain management services with operations in the United Kingdom, Czech Republic, Poland, and India. HAT, which has annual revenues of approximately $35.0 million, specializes in developing vendor-managed inventory programs of fasteners, machined parts and other class C components to many end markets, including construction, automotive and various electronics manufacturing services markets. HAT is a direct complement to and will be reporting in our Supply Technologies segment from the date of acquisition.



Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our condensed consolidated financial statements include the accounts of Park-Ohio Industries, Inc. and its subsidiaries (collectively, “we,” “our,” or the “Company”). All significant intercompany transactions have been eliminated in consolidation. Park-Ohio Industries, Inc. is a wholly-owned subsidiary of Park-Ohio Holdings Corp. (“Holdings”).

EXECUTIVE OVERVIEW

We are ~~an industrial Total Supply Management™~~a diversified international company providing world-class customers with a supply chain management outsourcing service, capital equipment used on their production lines, and ~~diversified manufacturing business, operating in~~manufactured components used to assemble their products. We operate through three reportable segments: Supply Technologies, Assembly Components and Engineered Products.

As of September 30, 2023 and December 31, 2022, we determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the held-for-sale assets and liabilities, the operating results and the cash flows of Aluminum Products in discontinued operations for all periods presented throughout this Quarterly Report on Form 10-Q. Unless otherwise indicated, amounts and activity in this Quarterly Report on Form 10-Q are presented on a continuing operations basis. See Note 5 to the condensed consolidated financial statements, included elsewhere herein. On December 30, 2022, we entered into a memorandum of understanding (the “MOU”) with a third party pursuant to which the third party would purchase our Aluminum Products business. The sale of the Aluminum Products business is subject to the entry into a definitive purchase agreement and other customary conditions. See Note 10 to the condensed consolidated financial statements, included elsewhere herein, for further discussion of the MOU.

Supply Technologies provides our customers with Total Supply Management™, a proactive solutions approach that manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation. Total Supply Management™ includes such services as engineering and design support, 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 services and ongoing technical support. Our Supply Technologies business services customers in the following principal industries: heavy-duty truck; ~~automotive, truck and vehicle parts; power~~ sports and recreational equipment; ~~bus~~aerospace and ~~coaches;~~defense; semiconductor equipment; electrical distribution and controls; consumer electronics; bus and coaches; automotive; agricultural and ~~construction~~industrial equipment; ~~consumer electronics;~~ HVAC; lawn and garden; ~~semiconductor equipment; aerospace~~plumbing; and ~~defense; and plumbing.~~medical.

Assembly Components (which excludes the discontinued Aluminum Products business) manufactures ~~parts and assemblies and provides value-added design, engineering and assembly services that are incorporated into our customer’s end~~ products ~~and~~ oriented ~~toward improving~~towards fuel efficiency and ~~reducing weight in~~reduced emission standards. Assembly Components designs, develops and manufactures aluminum products and highly efficient, high pressure direct fuel injection fuel rails and pipes; fuel filler pipes that route fuel from the ~~customer's end products.~~gas cap to the gas tank; flexible multi-layer plastic and rubber assemblies used to transport fuel from the vehicle's gas tank and then, at extreme high pressure, to the engine's fuel injector nozzles. Our product offerings include gasoline direct injection systems and fuel filler assemblies, and industrial hose and injected molded rubber and plastic components. Additional products include cast and machined aluminum engine, transmission, brake, suspension and other components, such as pump housings, clutch retainers/pistons, control arms, knuckles, master cylinders, pinion housings, brake calipers, oil pans and flywheel spacers. Our products are primarily used in the following industries: automotive, including ~~SUV/minivan/light-truck; agricultural; construction;~~automotive and light-vehicle; agricultural equipment; construction equipment; heavy-duty truck; and marine original equipment manufacturers (“OEMs”), on a sole-source basis.

Engineered Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of highly-engineered products, including induction heating and melting systems, pipe threading ~~systems, industrial oven~~ systems and forged and machined products. Engineered Products also produces and provides services and spare parts for the equipment it manufactures. The principal customers of Engineered Products are OEMs, sub-assemblers and end users in the following industries: ferrous and non-ferrous metals; silicon; coatings; forging; foundry; heavy-duty truck; construction equipment; automotive; oil and gas; locomotive and rail manufacturing; and aerospace and ~~defense industries.~~defense.

Sales and ~~segment~~ operating income for these three segments are provided in Note 34 to the condensed consolidated financial statements, included elsewhere herein.

~~Subsequent Event~~

Table of Contents

RESULTS OF CONTINUING OPERATIONS

Three Months Ended September 30, ~~2017~~2023 Compared with Three Months Ended September 30, ~~2016~~2022

Three Months Ended
September 30,
2017 2016 $ Change % Change
(Dollars in millions)
Net sales $ 352.2
$ 312.7
$ 39.5
12.6 %
Cost of sales 295.0
258.4
36.6
14.2 %
Gross profit 57.2
54.3
2.9
5.3 %
Gross margin 16.2 % 17.4 %
SG&A expenses 36.2
33.2
3.0
9.0 %
SG&A as a percentage of net sales 10.3 % 10.6 %
Operating income 21.0
21.1
(0.1 ) (0.5 )%
Interest expense 7.8
7.2
0.6
8.3 %
Income before income taxes 13.2
13.9
(0.7 ) (5.0 )%
Income tax expense 2.8
—
2.8
*
Net income 10.4
13.9
(3.5 ) (25.2 )%
Net income attributable to noncontrolling interest (0.2 ) (0.3 ) 0.1
(33.3 )%
Net income attributable to Park-Ohio Industries Inc. common shareholder $ 10.2
$ 13.6
$ (3.4 ) (25.0 )%


	Three Months Ended September 30,
	2023			2022			$ Change		% Change
	(Dollars in millions)
Net sales	$	418.8		$	383.8		$	35.0	9.1	%
Cost of sales	348.8			331.4			17.4		5.3	%


Selling, general and administrative (“SG&A”) expenses	43.0			36.4			6.6		18.1	%
SG&A expenses as a percentage of net sales	10.3		%	9.5		%
Restructuring and other special charges	—			4.3			(4.3)		*


Operating income	27.0			11.7			15.3		*
Other components of pension income and other postretirement benefits expense, net	0.6			2.7			(2.1)		(77.8)	%
Interest expense, net	(11.7)			(9.0)			(2.7)		30.0	%

Income before income taxes	15.9			5.4			10.5		*
Income tax (expense) benefit	(3.8)			2.2			(6.0)		*


Income from continuing operations	12.1			7.6			4.5		59.2	%
Loss (income) attributable to noncontrolling interest	0.3			(0.4)			0.7		*
Income from continuing operations attributable to Park-Ohio Industries, Inc. common shareholder	$	12.4		$	7.2		$	5.2	72.2	%

*Calculation not meaningful

Net Sales

Net sales increased ~~12.6%,~~9.1% to ~~$352.2~~$418.8 million in the third quarter of ~~2017,~~2023 compared to ~~$312.7~~$383.8 million in the same period in ~~2016,~~2022. This increase was primarily due ~~primarily~~ to higher ~~end market~~customer demand ~~for~~in all three of our ~~products in our Supply Technologies and Engineered Products~~business segments and ~~sales from GH Electrotermia S.A. (“GH”), which was acquired in December 2016. In our Assembly Components segment, lower sales volumes in our rubber and plastic~~increased product ~~lines were partially offset by higher sales volumes in our filler pipe and fuel rail product lines.~~pricing.

The factors explaining the changes in segment net sales for the three months ended September 30, ~~2017~~2023 compared to the corresponding ~~2016~~2022 period are contained within the “Segment Results” section below.

Cost of Sales &and Gross ~~Profit~~Margin

Cost of sales increased 5.3% to ~~$295.0~~$348.8 million in the third quarter of ~~2017,~~2023 compared to ~~$258.4~~$331.4 million in the same period in ~~2016.~~2022. The increase incost of sales was primarily due to the increase in net sales for the ~~2017~~2023 period compared to the ~~third quarter of 2016.~~

corresponding period in 2022. Gross margin was ~~16.2%~~16.7% in the ~~third quarter of 2017~~2023 period compared to ~~17.4%~~13.7% in the ~~same~~corresponding 2022 period, in 2016. The decrease was largely due to start-up costs related to our new facilities in China; lower absorption due to lower sales in our extruded rubber and plastics business in Assembly Components; and unfavorable mix of product sales as well as incremental costs to prepare for the build-out of significant new orders in Engineered Products. These factors more than offset the higherdriven by profit flow-through from the higher sales inlevels and the impact of our ~~Supply Technologies business.~~profit-enhancement initiatives, including increased product pricing.

~~Table of Contents~~

~~Selling, General & Administrative ("~~SG~~&A")~~&A Expenses

SG&A expenses ~~increased to $36.2~~were $43.0 million in the third quarter of ~~2017~~2023 compared to ~~$33.2~~$36.4 million in the ~~same~~comparable period in ~~2016. The~~2022, an increase ~~is primarily due to~~of 18.1%. As a percentage of net sales, SG&A expenses ~~associated with GH. SG&A expenses as a percent of sales~~ was 10.3% in the third quarter of ~~2017~~2023 compared to ~~10.6%~~9.5% in corresponding 2022 period. The SG&A expense increase as a percentage of net sales was driven by higher selling expenses as a result of higher sales levels; higher costs due to ongoing inflation; and higher employee costs.

Table of Contents

Other Components of Pension Income and Other Postretirement Benefits Expense (“OPEB”), Net

Other components of pension income and OPEB expense, net was $0.6 million in the ~~third quarter of 2016. The percentage~~three months ended September 30, 2023 compared to $2.7 million in the corresponding period in 2022. This decrease was due ~~primarily~~ to ~~fixed SG&A expenses over a higher sales base.~~lower returns on plan assets impacting 2023 compared to 2022.

Interest Expense, Net

Interest expense, net was higher in the 2017 quarter due primarily to higher outstanding borrowings in the third quarter of 2017 compared to the third quarter a year ago. Interest expense on the outstanding senior notes was higher in the third quarter due to the higher principal amount, which more than offset the lower interest rate due to the April 2017 refinancing. In addition, the third quarter of 2017 included interest expense on the GH-related debt, which the Company incurred in December 2016.

~~Income Tax Expense~~

The effective income tax rates were 21.2%, in the 2017 period and 0.0% in the 2016 period. The rates in both periods reflect the reversal of various income tax accruals totaling approximately $1.4 million in 2017 and $4.0 million in 2016 relating to previous uncertain tax positions for which the statues of limitations expired. The rates in both periods were also favorably impacted by earnings in foreign jurisdictions in which the income tax rates are lower than the U.S. statutory income tax rate.

~~Net Income~~

~~Net income decreased to $10.4~~$11.7 million in the third quarter of ~~2017,~~2023 compared to ~~$13.9~~$9.0 million in the ~~third quarter~~2022 period. The increase was due to higher interest rates and higher average outstanding borrowings during the 2023 period.

Income Tax Expense/Benefit

In the three months ended September 30, 2023, income tax expense was $3.8 million on pre-tax income from continuing operations of ~~2016, due primarily~~$15.9 million, representing an effective income tax rate of 24%. In the three months ended September 30, 2022, income tax benefit was $2.2 million on pre-tax income of $5.4 million. The benefit in 2022 included a discrete tax benefit of

$2.7 million related to various tax credits and a reduction to the ~~larger 2016 tax accrual reversal noted above.~~Global Intangible Low-Taxed Income (“GILTI”) inclusion.

Table of Contents

~~RESULTS OF OPERATIONS~~

Nine Months Ended September 30, ~~2017~~2023 Compared with Nine Months Ended September 30, ~~2016~~2022

Nine Months Ended
September 30,
2017 2016 $ Change % Change
(Dollars in millions)
Net sales $ 1,046.9
$ 970.1
$ 76.8
7.9 %
Cost of sales 873.9
813.7
60.2
7.4 %
Gross profit 173.0
156.4
16.6
10.6 %
Gross margin 16.5 % 16.1 %
SG&A expenses 108.8
99.0
9.8
9.9 %
SG&A as a percentage of net sales 10.4 % 10.2 %
Litigation settlement gain (3.3 ) —
(3.3 ) *
Asset impairment charge —
4.0
(4.0 ) *
Operating income 67.5
53.4
14.1
26.4 %
Interest expense 23.1
21.3
1.8
8.5 %
Loss on extinguishment of debt 11.0
—
11.0
*
Income before income taxes 33.4
32.1
1.3
4.0 %
Income tax expense 9.6
6.1
3.5
57.4 %
Net income 23.8
26.0
(2.2 ) (8.5 )%
Net income attributable to noncontrolling interests (0.7 ) (0.3 ) (0.4 ) *
Net income attributable to Park-Ohio Industries Inc. common shareholder $ 23.1
$ 25.7
$ (2.6 ) (10.1 )%


	Nine Months Ended September 30,
	2023			2022			$ Change		% Change
	(Dollars in millions)
Net sales	$	1,270.4		$	1,111.3		$	159.1	14.3	%
Cost of sales	1,063.1			956.3			106.8		11.2	%


SG&A expenses	135.2			116.7			18.5		15.9	%
SG&A expenses as a percentage of net sales	10.6		%	10.5		%
Restructuring and other special charges	6.6			9.9			(3.3)		(33.3)	%
Gains on sales of assets	—			(2.9)			2.9		*


Operating income	65.5			31.3			34.2		109.3	%

Other components of pension income and other postretirement benefits expense, net	1.9			8.3			(6.4)		(77.1)	%
Interest expense, net	(33.7)			(23.7)			(10.0)		42.2	%

Income from continuing operations before income taxes	33.7			15.9			17.8		111.9	%
Income tax (expense) benefit	(8.5)			2.9			(11.4)		*


Income from continuing operations	25.2			18.8			6.4		34.0	%
Loss (income) attributable to noncontrolling interests	0.7			(1.1)			1.8		*
Income from continuing operations attributable to Park-Ohio Industries, Inc. common shareholder	$	25.9		$	17.7		$	8.2	46.3	%

* Calculation not meaningful

Net Sales

Net sales increased ~~7.9%,~~14.3% to ~~$1,046.9~~$1,270.4 million in the first nine months of ~~2017,~~2023 compared to ~~$970.1~~$1,111.3 million in the same period in ~~2016, mainly~~2022. This increase was primarily due to higher ~~end market~~customer demand ~~for~~in all three of our ~~products in our Supply Technologies and Engineered Products~~business segments and ~~sales from GH, which was acquired in December 2016. In our Assembly Components segment, lower sales volumes in our rubber and plastic and aluminum~~increased product ~~lines were partially offset by higher sales volumes in our filler pipe and fuel rail product lines.~~pricing.

The factors explaining the changes in segment net sales for the nine months ended September 30, ~~2017~~2023 compared to the corresponding ~~2016~~2022 period are contained in the “Segment Results” section below.

Cost of Sales &and Gross ~~Profit~~Margin

Cost of sales increased 11.2% to ~~$873.9~~$1,063.1 million in the first nine months of ~~2017,~~2023 compared to ~~$813.7~~$956.3 million in the same period in ~~2016.~~2022. The increase incost of sales was primarily due to the increase in net sales ~~during~~described above. Gross margin was 16.3% in the ~~2017~~2023 period compared to 13.9% in the corresponding 2022 period, driven by profit flow-through from the higher sales levels and the impact of our profit-enhancement initiatives, including increased product pricing.

SG&A Expenses

Table of Contents

SG&A expenses were $135.2 million in the first nine months of 2023, compared to $116.7 million in the same period in 2022, an increase of 15.9%. As a percentage of net sales, SG&A expenses were 10.6% in the first nine months of 2023 compared to 10.5% in the comparable period in 2022. SG&A expenses as a percentage of net sales was driven by higher selling expenses as a result of higher sales levels; higher costs due to ongoing inflation; SG&A expenses of our 2022 acquisitions; and higher employee costs.

Restructuring and Other Special Charges

During the first nine months of 2023, the Company recorded restructuring and other special charges of $6.6 million compared to $9.9 million in 2022. The charges in both periods relate primarily to plant closure and consolidation activities, including severance, and other initiatives in the Company’s Assembly Components and Engineered Products segments.

Gains on Sales of Assets

During the nine months ended September 30, 2022, in connection with the plant closure and consolidation initiatives, the Company sold real estate within its Engineered Products segment for cash proceeds of $3.6 million, resulting in a gain of $2.5 million, and within the Assembly Components segment for cash proceeds of $0.4 million, resulting in a gain of $0.4 million.

Other Components of Pension Income and Other Postretirement Benefits Expense, Net

Other components of pension income and other postretirement benefits expense, net was $1.9 million in the first nine months of 2023 compared to $8.3 million in the corresponding period in 2022. This decrease was due to lower returns on plan assets impacting 2023 compared to 2022.

Interest Expense, Net

Interest expense, net was $33.7 million in the first six months of 2023 compared to $23.7 million in the 2022 period. The increase was due primarily to higher interest rates and higher average outstanding debt balances in the 2023 period compared to the same period a year ago.

Gross margin was 16.5% in the first nine months of 2017 compared to 16.1% in the same period in 2016. The increase in gross margin was largely due to the higher profit flow-through from higher overall sales in the 2017 period.

~~Table of Contents~~

~~SG&A Expenses~~

SG&A expenses increased to $108.8 million in the first nine months of 2017, compared to $99.0 million in the same period in 2016. SG&A expenses as a percent of sales increased to 10.4% in the first nine months of 2017 compared to 10.2% in the first nine months of 2016. These increases were primarily due to the SG&A associated with GH.

~~Litigation Settlement Gain~~

During the first nine months of 2017, the Company paid $4.0 million to settle the IPSCO litigation. In connection with the settlement, the Company recognized $3.3 million of income related to the reversal of its excess litigation liability.

~~Asset Impairment Charge~~

An asset impairment charge of $4.0 million was recognized in the first nine months of 2016 due to the accelerated end of production in certain programs with an automotive customer in our aluminum products business.

~~Interest Expense~~

Interest expense was higher in the first nine months of 2017 due primarily to higher outstanding borrowings in the first nine months of 2017 compared to the first nine months a year ago. Interest expense on the outstanding senior notes was higher due to the higher principal amount, which more than offset the lower interest rate due to the April 2017 refinancing. In addition, the first nine months of 2017 included interest expense on the GH-related debt, which the Company incurred in December 2016. With respect to the revolving credit facility and term loan, higher interest rates in 2016 offset the benefit of lower outstanding borrowings as a result of debt repayments in connection with the debt refinancing in April 2017.

~~Loss on Extinguishment of Debt~~

During the first nine months of 2017, we incurred $11.0 million of expenses related to our debt refinancing activities. Such expenses included tender premiums, bank and other fees and accelerated amortization of certain debt issuance costs related to our former borrowings that were previously capitalized.

Income Tax ~~Expense~~Expense/Benefit

~~The effective income tax rate was 28.7% in~~In the nine months ended September 30, ~~2017 compared to 19.0% in the corresponding period of 2016. The rates in both periods reflect the reversal of various~~2023, income tax ~~accruals totaling approximately $1.4~~expense was $8.5 million ~~in 2017 and $4.0~~on pre-tax income from continuing operations of $33.7 million, in 2016 relating to previous uncertain tax positions for which the statues of limitations expired. The rates in both periods were also favorably impacted by earnings in foreign jurisdictions in which therepresenting an effective income tax ~~rates are lower than~~rate of 25%. In the ~~U.S. statutory~~nine months ended September 30, 2022, income tax ~~rate.~~

~~Net Income~~

~~Net~~benefit was $2.9 million on pre-tax income ~~decreased~~of $15.9 million. The benefit in 2022 included a discrete tax benefit of $5.9 million related to ~~$23.8 million in the first nine months of 2017, compared to $26.0 million in the first nine months of 2016, due primarily~~various tax credits and a reduction to the ~~larger 2016 tax accrual reversal noted above.~~GILTI inclusion.

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SEGMENT RESULTS

For purposes of business segment performance measurement, the Company utilizes segment operating income, which is defined as revenues less expenses identifiable to the product lines within each segment. The Company does not allocate items that are non-operating or unusual in nature or are corporate costs, which include but are not limited to executive and share-based compensation and corporate office costs. ~~Segment operating income reconciles to consolidated income before income taxes by deducting corporate costs, certain non-cash items and interest expense.~~

Supply Technologies Segment


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(Dollars in millions)
Net sales	$	192.8		$	185.9		$	585.9		$	530.5
Segment operating income	$	15.6		$	10.7		$	45.0		$	35.4
Segment operating income margin	8.1		%	5.8		%	7.7		%	6.7		%

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in millions)
Net sales $ 140.2
$ 122.0
$ 415.8
$ 384.8
Segment operating income $ 10.9
$ 9.7
$ 34.6
$ 30.8
Segment operating income margin 7.8 % 8.0 % 8.3 % 8.0 %

Three months ended September 30:

Net sales increased 3.7% in the three months ended September 30, ~~2017~~2023 compared to the ~~2016~~2022 period due primarily to higher customer demand in many of the Company's key end markets, with the largest increases in the heavy-duty truck and ~~truck-related market, which was up 24% year-over-year; the semiconductor market, which was up 43% year-over-year; the~~bus, military and civilian aerospace, power sports, and ~~recreational~~industrial and agricultural equipment market, which was up 10% year-over-year; and the aerospace market, which was up 33% year-over-year. In addition, sales were higher in our fastener manufacturing business in the 2017 period due to increasing customer demand of our proprietary products.markets.

Segment operating income increased ~~by $1.2~~$4.9 million ~~due~~to $15.6 million for the three months ended September 30, 2023 compared to the ~~favorable impact of higher sales~~same period in 2022, and segment operating income margin increased 230 basis points in the ~~2017~~2023 period compared to the same period a year ago. ~~Segment operating income margin decreased slightly to 7.8% compared to 8.0%~~These increases were driven by the higher sales levels, customer price increases and other profit-enhancement actions in ~~the corresponding period of 2016, due to timing of sales mix.~~this segment.

Nine months ended September 30:

Net sales increased 10.4% in the ~~first~~ nine months ~~of 2017~~ended September 30, 2023 compared to the ~~2016~~2022 period due primarily to higher customer demand in many of the Company's key end markets, with the largest increases in the power sports, heavy-duty truck, industrial and ~~recreational~~agricultural equipment, ~~market, which was up 14% year-over-year; the semiconductor market, which was up 52% year-over-year;~~ and ~~the~~civilian aerospace ~~market, which was up 29% year-over-year. In addition, sales were higher in our fastener manufacturing business in the 2017 period due to increasing customer demand of our proprietary products.~~markets.

Segment operating income increased ~~by $3.8~~$9.6 million to $45.0 million for the nine months ended September 30, 2023 compared to the same period in 2022, and segment operating income margin increased ~~to 8.3% compared to 8.0%~~100 basis points in the ~~corresponding~~2023 period ~~of 2016. These increases were driven by the sales volume increases noted above.~~

~~Assembly Components Segment~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in millions)
Net sales $ 127.9
$ 133.4
$ 393.2
$ 399.4
Segment operating income $ 11.4
$ 13.9
$ 37.0
$ 38.3
Segment operating income margin 8.9 % 10.4 % 9.4 % 9.6 %

~~Three months ended September 30:~~

Net sales were lower in the 2017 period compared to the 2016 period due primarily to lower sales volumes in our extruded rubber and plastic product lines, which more than offset higher sales volumes in our fuel filler pipe and fuel rail product lines. The lower sales in our extruded rubber and plastics product lines was due to the end of life in certain programs. The higher sales volumes in our fuel products businesses were driven by new product launches and higher foreign sales.

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Segment operating income in the 2017 period decreased by $2.5 million, driven by the lower sales levels noted above. The segment operating income margin for the quarter was also down due to start-up costs related to our new facilities in China; and lower absorption due to lower sales in our extruded rubber and plastics business in the third quarter of 2017 compared to the same period a year ago.

~~Nine months ended September 30:~~

Net sales were lower in the 2017 period compared to the 2016 period due primarily to lower sales volumes in our extruded rubber and plastic and aluminum product lines, which more than offset higher sales volumes in our fuel filler pipe and fuel rail product lines. The lower sales in our extruded rubber and plastic product lines were due to the end of life in certain programs. The lower sales in aluminum were due to the end of production in certain programs in 2016. The higher sales volumes in our fuel products businesses were driven by new product launches and higher foreign sales.

Segment operating income in the first nine months of 2017 decreased by $1.3 million, and segment operating income margin decreased to 9.4% compared to 9.6% in the corresponding period of 2016. These decreases were driven by the lower sales volumes noted above.

~~Engineered Products Segment~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in millions)
Net sales $ 84.1
$ 57.3
$ 237.9
$ 185.9
Segment operating income $ 6.0
$ 4.0
$ 13.5
$ 8.6
Segment operating income margin 7.1 % 7.0 % 5.7 % 4.6 %

~~Three months ended September 30:~~

Net sales were 47% higher in the 2017 period compared to the 2016 period due primarily to sales from GH of $13.2 million, which was acquired in December 2016, and increased customer demand for our induction heating and pipe threading products.

~~Segment operating income in the 2017 period increased by $2.0 million and segment operating income margin improved to 7.1% compared to 7.0% in the corresponding 2016 period.~~ These increases were driven by the higher sales levels and the impact of profit-enhancement actions, which more than offset certain inflationary supply chain costs.

Assembly Components Segment


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(Dollars in millions)
Net sales	$	108.4		$	101.0		$	330.8		$	294.3
Segment operating income	$	11.2		$	2.6		$	26.9		$	0.7
Segment operating income margin	10.3		%	2.6		%	8.1		%	0.2		%

Three months ended September 30:

Net sales increased 7.3% in the ~~2017 quarter~~three months ended September 30, 2023 compared to the 2022 period. The sales increase was driven by higher customer demand and increased product pricing.

Segment operating income was $11.2 million in the three months ended September 30, 2023 compared to $2.6 million in the 2022 period. The improvement in segment operating results in the 2023 period compared to the same ~~quarter~~period a year ~~ago.~~ago was

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driven by profit flow-through from the higher sales levels; the benefit of profit-improvement initiatives implemented over the past two years, including increased product pricing.

Nine months ended September 30:

Net sales increased 12.4% in the nine months ended September 30, 2023 compared to the 2022 period. The sales increase was driven by higher customer demand and increased product pricing.

Segment operating income was $26.9 million in the 2023 period compared to $0.7 million in the 2022 period. The improvement in segment operating results in the 2023 period compared to the same period a year ago was driven by profit flow-through from the higher sales levels; the benefit of profit-improvement initiatives implemented over the past two years, including increased product pricing. Restructuring and other special charges were $1.5 million in 2023 compared to $4.2 million in the 2022 period.

Engineered Products Segment


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(Dollars in millions)
Net sales	$	117.6		$	96.9		$	353.7		$	286.5
Segment operating income	$	7.1		$	5.8		$	14.9		$	14.7
Segment operating income margin	6.0		%	6.0		%	4.2		%	5.1		%

Three months ended September 30:

Net sales were ~~28%~~21.3% higher in the ~~2017~~2023 period compared to the ~~2016 period due primarily to sales from GH of $37.3 million, which~~2022 period. The increase was ~~acquired in December 2016, and increased~~driven by strong customer demand ~~for~~in both our ~~induction heating~~capital equipment business and ~~pipe threading products.~~our forged and machined products business.

Segment operating income in the ~~2017~~2023 period increased $1.3 million compared to the 2022 period. In our capital equipment business, operating income increased year-over-year, as we converted our robust backlog levels into higher sales levels and achieved higher margins driven by implemented operational improvements. In the 2022 period, we also incurred restructuring and other special charges of $1.4 million that did not recur in the 2023 period.

Nine months ended September 30:

Net sales were 23.5% higher in the 2023 period compared to the 2022 period. The increase was driven by strong customer demand in both our capital equipment business and our forged and machined products business.

Segment operating income in the 2023 period increased $0.2 million, as profit flow-through from higher sales levels and implemented operational improvement initiatives contributed to higher profit and margins in this business. These factors were partially offset by restructuring and other special charges of $4.9 million ~~and segment operating income margin improved to 5.7% compared to 4.6%~~ in the ~~corresponding 2016~~2023 period and $2.8 million in the 2022 period. ~~These increases were driven~~

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Information about our Guarantors and the Issuer of our Guaranteed Securities

The accompanying summarized financial information has been prepared and presented pursuant to Rule 3-10 of Regulation S-X, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” and Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant’s Securities.” Each of the material domestic direct and indirect wholly-owned subsidiaries (the “Guarantor subsidiaries”) of the Company have fully and unconditionally, and jointly and severally, guaranteed the obligations under the $350.0 million aggregate principal amount of 6.625% Senior Notes due 2027 issued by the ~~higher sales~~Company (the “Notes”).

The following presents the summarized financial information on a combined basis for Park-Ohio Industries, Inc. (parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, which are collectively referred to as the “obligated group.” Transactions between the obligated group have been eliminated. Information for the non-Guarantor subsidiaries has been excluded from the combined summarized financial information of the obligated group.

Each Guarantor subsidiary is consolidated by Park-Ohio Industries, Inc. as of September 30, 2023. Refer to Exhibit 22.1 to this Quarterly Report on Form 10-Q for the detailed list of entities included within the obligated group as of September 30, 2023 and December 31, 2022.

The guarantee of a Guarantor subsidiary with respect to the Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the indenture pursuant to which the Notes were issued (the “Indenture”), will be automatically and unconditionally released and discharged, upon the occurrence of any of the following:

(a) any sale or other disposition of all or substantially all of the assets or all of the capital stock of such Guarantor subsidiary, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of such Guarantor subsidiary, in ~~2017 compared~~each case to a ~~year ago.~~person that is not (either before or after giving effect to such transaction) the Company or a subsidiary of the Company; provided that the net proceeds of such sale or other disposition are applied in accordance with the terms of the Indenture;

(b) the designation of any Guarantor subsidiary as an Unrestricted Subsidiary” (as defined in the Indenture);

(d) the release of such Guarantor subsidiary’s guarantee under all credit facilities of the Company (other than a release as a result of payment under or a discharge of such guarantee).

Each entity in the summarized combined financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries. The financial information of the obligated group is presented on a combined basis; intercompany balances and transactions within the obligated group have been eliminated. The obligated group’s amounts due from, amounts due to, and transactions with, non-Guarantor subsidiaries and related parties have been presented in separate line items.

Summarized Combined Financial Information of the Issuer and Guarantor Subsidiaries:

The following table contains summarized combined financial information from the Statements of Unaudited Condensed Consolidated Financial Position of the obligated group:

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	September 30, 2023		December 31, 2022
	(In millions)
Total current assets	$	617.7	$	620.3
Total noncurrent assets	309.4		321.6
Amounts due from subsidiaries that are non-Guarantors, net	33.3		31.1

Total current liabilities	305.6		312.5
Total noncurrent liabilities	674.7		680.0

The following table contains summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In millions)
Net sales	$	331.0	$	308.7	$	993.8	$	918.5
Cost of sales	271.3		274.5		825.9		809.9
SG&A expenses	46.0		40.0		142.3		119.7
Income (loss) before income taxes	6.2		(10.2)		4.6		(20.2)
Net income (loss)	3.4		(8.4)		1.6		(13.1)

Seasonality; Variability of Operating Results

The timing of orders placed by our 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 our businesses. Such variability is particularly evident in our capital equipment business, included in the Engineered Products segment, which typically ships large systems at a relatively lower pace than our other businesses.

Critical Accounting Policies

Our critical accounting policies are described in ~~Item~~"Item. 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations," and in the notes to our consolidated financial statements for the year ended December 31, ~~2016,~~2022, both

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contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022. There were no new critical accounting policies or updates to existing critical accounting policies as a result of new accounting pronouncements in this Quarterly Report on Form 10-Q.

The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

Forward-Looking Statements

This Quarterly Report on Form 10-Q 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. The words “believes”, “anticipates”, “plans”, “expects”, “intends”, “estimates” and similar expressions are intended to identify forward-looking statements.

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These forward-looking statements, including statements regarding future performance of the Company, that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors that could cause actual results to differ materially from expectations include, but are not limited to, the following: our ability to consummate the sale of our Aluminum Products business for any reason, including the inability to enter into a definitive purchase agreement; the impact supply chain issues such as the global semiconductor micro-chip shortage and logistic issues have on our business, results of operations, financial position and liquidity; our substantial indebtedness; the uncertainty of the global economic environment; general business conditions and competitive factors, including pricing pressures and product innovation; demand for our products and services; the impact of labor disturbances affecting our customers, including the UAW strike; raw material availability and pricing; fluctuations in energy costs; component part availability and pricing; changes in our relationships with customers and suppliers; the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate recent and future acquisitions into existing operations; ~~the amounts and timing, if any, of purchases of our common stock;~~ changes in general ~~domestic~~ economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations, including those related to the current global uncertainties and ~~crises;~~crises, such as tariffs and surcharges; adverse impacts to us, our suppliers and customers from acts of terrorism or ~~hostilities;~~hostilities, including the conflict between Russia and Ukraine and in the Middle East, or political unrest, including the rising tension between China and the United States; public health issues, including the outbreak of infectious diseases and any impact on our facilities and operations and our customers and suppliers; our ability to meet various covenants, including financial covenants, contained in the agreements governing our indebtedness; disruptions, uncertainties or volatility in the credit markets that may limit our access to capital; potential disruption due to a partial or complete reconfiguration of the European Union; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment or import and export controls and other trade barriers; inherent uncertainties involved in assessing our potential liability for environmental remediation-related activities; the outcome of pending and future litigation and other claims and disputes with customers; ~~the outcome of the review conducted by the special committee of our board of directors;~~ our dependence on the automotive and heavy-duty truck industries, which are highly cyclical; the dependence of the automotive industry on consumer spending; our ability to negotiate contracts with labor unions; our dependence on key management; our dependence on information systems; ~~our ability to continue to pay cash dividends,~~ and the other factors we describe under “Item 1A. Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by us that our plans and objectives will be achieved.



Item 3.			Quantitative and Qualitative Disclosure About Market Risk

We are exposed to market risk, including changes in interest rates. As of September 30, ~~2017,~~2023, we are subject to interest rate risk on borrowings under the floating rate revolving credit facility provided by our Credit ~~Agreement, which consisted of borrowings of~~ ~~$100.3 million~~ at ~~September 30, 2017~~.Agreement. A 100-basis-point increase in the interest rate would have resulted in an increase in interest expense on these borrowings of approximately ~~$0.8~~$2.2 million during the ~~nine-month~~nine-month period ended September 30, ~~2017~~.2023.

Our foreign subsidiaries generally conduct business in local currencies. ~~During~~We face translation risks related to the ~~first nine months of~~ ~~2017, we recorded a favorable~~changes in foreign currency exchange rates. Amounts invested in our foreign operations are translated in U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting translation ~~adjustment in accumulated~~adjustments are recorded as a component of Accumulated other comprehensive loss in the ~~condensed consolidated balance sheets related~~Shareholder's Equity section of the accompanying Condensed Consolidated Balance Sheets. Sales and expenses at our foreign operations are translated into U.S. dollars at the applicable monthly average exchange rates. Therefore, changes in exchange rates may either positively or negatively affect our net sales and expenses from foreign operations as expressed in U.S. dollars.

Our largest exposures to ~~net assets located outside~~commodity prices relate to metal and rubber compound, which have fluctuated widely in recent years. In 2023 and 2022, we entered into agreements to hedge foreign currency. These agreements will not have a material impact on the ~~United States. This foreign currency translation adjustment~~results of ~~$18.9~~the Company. We have no other commodity swap agreements or forward purchase contracts.

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million resulted primarily from the weakening of the U.S. Dollar against the Euro, the Canadian Dollar and the British Pound. Our foreign operations are also subject to other customary risks of operating in a global environment, such as unstable political situations, the effect of local laws and taxes, tariff increases and regulations and requirements for export licenses, the potential imposition of trade or foreign exchange restrictions and transportation delays.



Item 4.			Controls and Procedures

Evaluation of disclosure controls and procedures.

Under the supervision of and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting.

~~There have been~~During the quarter ended September 30, 2023, there were no changes in our internal control over financial reporting ~~that occurred during the third quarter of 2017~~ that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

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Item 1.			Legal Proceedings

We are ~~subject~~involved in a variety of claims, suits, investigations and administrative proceedings with respect to ~~various pending~~commercial, premises liability, product liability, employment, personal injury and ~~threatened lawsuits in which claims for monetary damages are asserted in~~environmental matters arising from the ordinary course of business. While any ~~litigation involves~~such claims, suits, investigations and proceedings involve an element of uncertainty, in the opinion of management, liabilities, if any, arising from currently pending or threatened litigation are not expected to have a material adverse effect on our financial condition, liquidity or results of operations.

In addition to the routine lawsuits and asserted claims noted above, we were a party to the lawsuits and legal proceedings described below as of September 30, ~~2017~~:2023:

We were a co-defendant in ~~approximately 89~~128 cases asserting claims on behalf of ~~approximately 143~~178 plaintiffs alleging personal injury as a result of exposure to asbestos. These asbestos cases generally relate to production and sale of asbestos-containing products and allege various theories of liability, including negligence, gross negligence and strict liability, and seek compensatory and, in some cases, punitive damages.

In every asbestos case in which we are named as a party, the complaints are filed against multiple named defendants. In substantially all of the asbestos cases, the plaintiffs either claim damages in excess of a specified amount, typically a minimum amount sufficient to establish jurisdiction of the court in which the case was filed (jurisdictional minimums generally range from $25,000 to $75,000), or do not specify the monetary damages sought. To the extent that any specific amount of damages is sought, the amount applies to claims against all named defendants.

There are ~~four~~three asbestos cases, involving 2119 plaintiffs, that plead specified damages against named defendants. In each of the ~~four~~three cases, the plaintiff is seeking compensatory and punitive damages based on a variety of potentially alternative causes of action. In ~~three~~two cases, the plaintiff has alleged three counts at $3.0 million compensatory and punitive damages each; one count at $3$3.0 million compensatory and $1$1.0 million punitive damages; one count at $1.0 million. In the ~~fourth~~third case, the plaintiff has alleged compensatory and punitive damages, each in the amount of $20.0 million, for three separate causes of action, and $5.0 million compensatory damages for the ~~fourth~~fifth cause of action.

Historically, we have been dismissed from asbestos cases on the basis that the plaintiff incorrectly sued one of our subsidiaries or because the plaintiff failed to identify any asbestos-containing product manufactured or sold by us or our subsidiaries. We intend to vigorously defend these asbestos cases, and believe we will continue to be successful in being dismissed from such cases. However, it is not possible to predict the ultimate outcome of asbestos-related lawsuits, claims and proceedings due to the unpredictable nature of personal injury litigation. Despite this uncertainty, and although our results of operations and cash flows for a particular period could be adversely affected by asbestos-related lawsuits, claims and proceedings, management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial condition, liquidity or results of operations. Among the factors management considered in reaching this conclusion were: (a) our historical success in being dismissed from these types of lawsuits on the bases mentioned above; (b) many cases have been improperly filed against one of our subsidiaries; (c) in many cases the plaintiffs have been unable to establish any causal relationship to us or our products or premises; (d) in many cases, the plaintiffs have been unable to demonstrate that they have suffered any identifiable injury or compensable loss at all or that any injuries that they have incurred did in fact result from alleged exposure to asbestos; and (e) the complaints assert claims against multiple defendants and, in most cases, the damages alleged are not attributed to individual defendants. Additionally, we do not believe that the amounts claimed in any of the asbestos cases are meaningful indicators of our potential exposure because the amounts claimed typically bear no relation to the extent of the plaintiff's injury, if any.

Our cost of defending these lawsuits has not been material to date and, based upon available information, our management does not expect its future costs for asbestos-related lawsuits to have a material adverse effect on our results of operations, liquidity or financial position.

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In August 2013, we received a subpoena from the staff of the SEC in connection with the staff’s investigation of a third party. At that time, we also learned that the Department of Justice (“DOJ”) is conducting a criminal investigation of the third party. In connection with its initial response to the staff’s subpoena, we disclosed to the staff of the SEC that, in November 2007, the third party participated in a payment on behalf of us to a foreign tax official that implicates the Foreign Corrupt Practices Act. The Board of Directors formed a special committee to review our transactions with the third party and to make any recommendations to the Board of Directors with respect thereto. The Company intends to cooperate fully with the SEC and the DOJ in connection with their investigations of the third party and with the SEC in light of the Company’s disclosure. The Company is unable to predict the outcome or impact of the special committee’s investigation or the length, scope or results of the SEC’s review or the impact on its results of operations.



Item 1A.			Risk Factors

There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2022 Investors should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.



Item 6.			Exhibits

The following exhibits are included herein:



~~31.1~~













4.1			Amendment no. 8 to the Seventh Amended and Restated Credit Agreement, dated September 13, 2023, among Park-Ohio Industries, Inc., RB&W Corporation of Canada, the European Borrowers (as defined therein) party thereto, the other Loan Parties (as defined therein), the Lenders (as defined therein), JPMorgan Chase Bank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian agent, J.P. Morgan Europe Limited, as European agent and J.P. Morgan Securities Inc., as sole lead arranger and bookrunning manager. (filed as Exhibit 4.1 to Form 8-K of Park-Ohio Holdings Corp. filed on September 18, 2023, SEC File No. 000-03134 and incorporated herein by reference).

22.1			Schedule of the obligated group, including the issuer and the subsidiary guarantors that have guaranteed our obligations under the 6.625% Senior Notes due 2027 issued by Park-Ohio Industries, Inc. (filed as Exhibit 22.1 to Form 10-Q of Park-Ohio Industries, Inc. filed November 10, 2020, SEC File No. 333-43005 and incorporated by reference and made a part hereof).

31.1			Principal Executive Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2			Principal Financial Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32			Certification requirement under Section 906 of the Sarbanes-Oxley Act of 2002

101.INS			Inline XBRL Instance Document

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements 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.


PARK-OHIO INDUSTRIES, INC.
(Registrant)

~~PARK-OHIO INDUSTRIES, INC.~~
~~(Registrant)~~
By:
~~By:~~	/s/ Patrick W. Fogarty
Name:		Patrick W. Fogarty
Title:		Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Date: November ~~13, 2017~~

2, 2023



	(Unaudited)
	September 30, 2017		December 31, 2016
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	72.6	$	54.4
Accounts receivable, net	231.4		194.4
Inventories, net	268.3		240.6
Receivable from affiliates	17.2		12.8
Other current assets	70.3		53.3
Total current assets	659.8		555.5
Property, plant and equipment, net	173.7		169.6
Goodwill	92.0		86.6
Intangible assets, net	97.5		96.6
Other long-term assets	79.3		71.3
Total assets	$	1,102.3	$	979.6
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Trade accounts payable	$	169.4	$	133.7
Payable to affiliates	7.1		7.0
Current portion of long-term debt and short-term debt	18.1		30.8
Accrued expenses and other	89.2		78.6
Total current liabilities	283.8		250.1
Long-term liabilities, less current portion:
Debt	492.3		439.0
Deferred income taxes	29.0		29.0
Other long-term liabilities	21.3		29.8
Total long-term liabilities	542.6		497.8
Total Park-Ohio Industries, Inc. and Subsidiaries shareholder's equity	265.5		221.7
Noncontrolling interests	10.4		10.0
Total equity	275.9		231.7
Total liabilities and shareholder's equity	$	1,102.3	$	979.6



	Nine Months Ended September 30,
	2017			2016
	(In millions)
OPERATING ACTIVITIES
Net income	$	23.8		$	26.0
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization	23.5			22.3
Loss on extinguishment of debt	11.0			—
Litigation settlement gain	(3.3		)	—
Asset impairment charge	—			4.0
Share-based compensation expense	6.3			8.1
Changes in operating assets and liabilities:
Accounts receivable	(29.9		)	(1.6		)
Inventories	(15.7		)	(3.5		)
Other current assets	(14.2		)	(5.4		)
Accounts payable and accrued expenses	34.5			1.8
Litigation settlement payment	(4.0		)	—
Other	(8.7		)	(11.9		)
Net cash provided by operating activities	23.3			39.8
INVESTING ACTIVITIES
Purchases of property, plant and equipment	(18.9		)	(20.3		)
Business acquisition	(10.5		)	—
Net cash used by investing activities	(29.4		)	(20.3		)
FINANCING ACTIVITIES
Payments on revolving credit facility, net	(32.5		)	(17.4		)
Payments on term loans and other debt	(27.7		)	(3.4		)
Proceeds from term loans and other debt	—			7.3
Proceeds from (payments on) capital lease facilities, net	0.1			(2.5		)
Issuance of 6.625% Senior Notes due 2027	350.0			—
Debt financing costs	(7.5		)	—
Repurchase of 8.125% Senior Notes due 2021	(250.0		)	—
Premium on early extinguishment of debt	(8.0		)	—
Payment of acquisition earn-out	—			(2.0		)
Dividend paid to Parent	(5.0		)	—
Dividend	(0.2		)	—
Net cash provided (used) by financing activities	19.2			(18.0		)
Effect of exchange rate changes on cash	5.1			(0.4		)
Increase (decrease) in cash and cash equivalents	18.2			1.1
Cash and cash equivalents at beginning of period	54.4			48.4
Cash and cash equivalents at end of period	$	72.6		$	49.5
Income taxes paid	$	1.6		$	7.0
Interest paid	$	16.5		$	14.7



	September 30, 2017		December 31, 2016
	(In millions)
Finished goods	$	150.3	$	131.4
Work in process	47.1		43.4
Raw materials and supplies	70.9		65.8
Inventories, net	$	268.3	$	240.6



				Carrying Value at
	Maturity Date	Interest Rate at September 30 2017		September 30, 2017			December 31, 2016
				(In millions)
Senior Notes due 2027	April 15, 2027	6.625	%	$	350.0		$	—
Senior Notes due 2021	April 1, 2021	8.125	%	—			250.0
Revolving credit facility	April 17, 2022	3.08	%	100.3			132.8
Term Loan				—			23.4
Industrial Equipment Group European Facilities	December 21, 2021	3.25	%	28.0			26.4
Capital Leases	Various	Various		18.9			18.8
Other	Various	Various		22.1			23.6
Gross debt				519.3			475.0
Less current portion of long-term debt				(14.2		)	(25.8		)
Less short-term debt				(3.9		)	(5.0		)
Less unamortized debt issuance costs				(8.9		)	(5.2		)
Total long-term debt, net				$	492.3		$	439.0



	2017
	Number of Shares		Weighted Average Exercise Price
	(In whole shares)
Outstanding - beginning of year	38,000		$	19.30
Granted	—		—
Exercised	(24,907	)	21.22
Canceled or expired	—		—
Outstanding - end of period	13,093		15.61
Options exercisable	13,093		$	15.61



	Condensed Consolidating Balance Sheets
	September 30, 2017
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Reclassifications/ Eliminations			Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—	$	72.6	$	—		$	72.6
Accounts receivable, net	—		150.6		80.8		—			231.4
Inventories, net	—		190.2		78.1		—			268.3
Receivable from affiliates	—		—		17.2		—			17.2
Other current assets	0.6		40.2		29.5		—			70.3
Total current assets	0.6		381.0		278.2		—			659.8
Investments in subsidiaries	546.4		249.4		—		(795.8		)	—
Intercompany advances	300.1		83.0		107.2		(490.3		)	—
Property, plant and equipment, net	6.1		101.5		66.1		—			173.7
Goodwill	—		58.9		33.1		—			92.0
Intangible assets, net	—		61.3		36.2		—			97.5
Other long-term assets	67.1		4.6		7.6		—			79.3
Total assets	$	920.3	$	939.7	$	528.4	$	(1,286.1	)	$	1,102.3

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Trade accounts payable	$	—	$	122.8	$	46.6	$	—		$	169.4
Payable to affiliates	—		—		7.1		—			7.1
Current portion of long-term and short-term debt	—		6.6		11.5		—			18.1
Accrued expenses and other	13.4		35.0		40.8		—			89.2
Total current liabilities	13.4		164.4		106.0		—			283.8
Long-term liabilities, less current portion:
Debt	442.7		10.6		39.0		—			492.3
Deferred income taxes	—		19.4		9.6		—			29.0
Other long-term liabilities	15.2		1.0		5.1		—			21.3
Total long-term liabilities	457.9		31.0		53.7		—			542.6
Intercompany advances	173.1		226.6		90.6		(490.3		)	—
Total Park-Ohio Industries, Inc. and Subsidiaries shareholder's equity	265.5		517.7		267.7		(785.4		)	265.5
Noncontrolling interests	10.4		—		10.4		(10.4		)	10.4
Total equity	275.9		517.7		278.1		(795.8		)	275.9
Total liabilities and equity	$	920.3	$	939.7	$	528.4	$	(1,286.1	)	$	1,102.3



	Consolidating Statements of Income (Loss) and Comprehensive Income (Loss)
	Nine Months Ended September 30, 2017
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In millions)
Net sales	$	—		$	774.6		$	272.3		$	—		$	1,046.9
Cost of sales	—			660.1			213.8			—			873.9
Gross profit	—			114.5			58.5			—			173.0
Selling, general and administrative expenses	19.5			55.7			33.6			—			108.8
Litigation settlement gain	—			(3.3		)	—			—			(3.3		)
Income (loss) from subsidiaries	75.4			16.1			—			(91.5		)	—
Operating income (loss)	55.9			78.2			24.9			(91.5		)	67.5
Interest expense	21.1			—			2.0			—			23.1
Loss on debt extinguishment	11.0			—			—			—			11.0
Income (loss) before income taxes	23.8			78.2			22.9			(91.5		)	33.4
Income tax expense	—			4.0			5.6			—			9.6
Net income (loss)	23.8			74.2			17.3			(91.5		)	23.8
Net (income) loss attributable to noncontrolling interests	(0.7		)	—			(0.7		)	0.7			(0.7		)
Net income (loss) attributable to Park-Ohio Industries Inc. common shareholder	$	23.1		$	74.2		$	16.6		$	(90.8	)	$	23.1

Other comprehensive income (loss) (see note 12):
Net income (loss)	$	23.8		$	74.2		$	17.3		$	(91.5	)	$	23.8
Foreign currency translation adjustment	18.9			—			18.9			(18.9		)	18.9
Pension and OPEB activity, net of tax adjustments	0.6			0.6			—			(0.6		)	0.6
Comprehensive income (loss), net of tax	43.3			74.8			36.2			(111.0		)	43.3
Comprehensive (income) loss attributable to noncontrolling interest	(0.7		)	—			(0.7		)	0.7			(0.7		)
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder	$	42.6		$	74.8		$	35.5		$	(110.3	)	$	42.6



	Consolidating Statements of Income (Loss) and Comprehensive Income (Loss)
	Nine Months Ended September 30, 2016
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In millions)
Net sales	$	—		$	751.7		$	218.4		$	—		$	970.1
Cost of sales	—			645.8			167.9			—			813.7
Gross profit	—			105.9			50.5			—			156.4
Selling, general and administrative expenses	18.0			54.3			26.7			—			99.0
Asset impairment	—			4.0			—			—			4.0
Income (loss) from subsidiaries	64.2			13.9			—			(78.1		)	—
Operating income (loss)	46.2			61.5			23.8			(78.1		)	53.4
Interest expense	20.2			—			1.1			—			21.3
Income (loss) before income taxes	26.0			61.5			22.7			(78.1		)	32.1
Income tax (benefit) expense	—			(1.3		)	7.4			—			6.1
Net income (loss)	26.0			62.8			15.3			(78.1		)	26.0
Net income attributable to noncontrolling interests	(0.3		)	—			(0.3		)	0.3			(0.3		)
Net income (loss) attributable to Park-Ohio Industries Inc. common shareholder	$	25.7		$	62.8		$	15.0		$	(77.8	)	$	25.7

Other comprehensive income (loss) (see note 12):
Net income (loss)	$	26.0		$	62.8		$	15.3		$	(78.1	)	$	26.0
Foreign currency translation adjustment	(5.3		)	—			(5.3		)	5.3			(5.3		)
Pension and OPEB activity, net of tax adjustments	0.7			0.4			—			(0.4		)	0.7
Comprehensive income (loss), net of tax	21.4			63.2			10.0			(73.2		)	21.4
Comprehensive income attributable to noncontrolling interests	(0.3		)	—			(0.3		)	0.3			(0.3		)
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder	$	21.1		$	63.2		$	9.7		$	(72.9	)	$	21.1



	Consolidating Statement of Operations and Comprehensive Income (Loss)
	Three Months Ended September 30, 2017
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	258.4	$	93.8		$	—		$	352.2
Cost of sales	—			220.6		74.4			—			295.0
Gross profit	—			37.8		19.4			—			57.2
Selling, general and administrative expenses	7.0			18.4		10.8			—			36.2
Income (loss) from subsidiaries	24.6			6.8		—			(31.4		)	—
Operating income (loss)	17.6			26.2		8.6			(31.4		)	21.0
Interest expense	7.2			—		0.6			—			7.8
Loss on extinguishment of debt	—			—		—			—			—
Income (loss) before income taxes	10.4			26.2		8.0			(31.4		)	13.2
Income tax expense	—			1.9		0.9			—			2.8
Net income (loss)	10.4			24.3		7.1			(31.4		)	10.4
Net (income) loss attributable to noncontrolling interest	(0.2		)	—		(0.2		)	0.2			(0.2		)
Net income(loss) attributable to Park-Ohio Industries Inc. common shareholder	$	10.2		$	24.3	$	6.9		$	(31.2	)	$	10.2

Other comprehensive income (loss) (see note 12):
Net income (loss)	$	10.4		$	24.3	$	7.1		$	(31.4	)	$	10.4
Foreign currency translation adjustment	7.5			—		7.5			(7.5		)	7.5
Pension and OPEB activity, net of tax adjustments	0.2			0.2		—			(0.2		)	0.2
Comprehensive income (loss), net of tax	18.1			24.5		14.6			(39.1		)	18.1
Comprehensive (income) loss attributable to noncontrolling interest	(0.2		)	—		(0.2		)	0.2			(0.2		)
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder	$	17.9		$	24.5	$	14.4		$	(38.9	)	$	17.9



	Consolidating Statements of Income (Loss) and Comprehensive Income (Loss)
	Three Months Ended September 30, 2016
	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	242.1		$	70.6		$	—		$	312.7
Cost of sales	—			205.3			53.1			—			258.4
Gross profit	—			36.8			17.5			—			54.3
Selling, general and administrative expenses	7.7			17.8			7.7			—			33.2
Income (loss) from subsidiaries	28.4			5.8			—			(34.2		)	—
Operating income (loss)	20.7			24.8			9.8			(34.2		)	21.1
Interest expense	6.8			—			0.4			—			7.2
Income (loss) before income taxes	13.9			24.8			9.4			(34.2		)	13.9
Income tax expense	—			(3.0		)	3.0			—			—
Net income (loss)	$	13.9		$	27.8		$	6.4		$	(34.2	)	$	13.9
Net income attributable to noncontrolling interest	(0.3		)	—			(0.3		)	0.3			(0.3		)
Net income attributable to Park-Ohio Industries Inc. common shareholder	$	13.6		$	27.8		$	6.1		$	(33.9	)	$	13.6

Other comprehensive income (loss) (see note 12):
Net income (loss)	$	13.9		$	27.8		$	6.4		$	(34.2	)	$	13.9
Foreign currency translation adjustment	(1.3		)	—			(1.3		)	1.3			(1.3		)
Pension and OPEB activity, net of tax adjustments	0.3			—			—			—			0.3
Comprehensive income (loss), net of tax	12.9			27.8			5.1			(32.9		)	12.9
Comprehensive income attributable to noncontrolling interest	(0.3		)	—			(0.3		)	0.3			(0.3		)
Comprehensive income (loss) attributable to Park-Ohio Industries Inc. common shareholder	$	12.6		$	27.8		$	4.8		$	(32.6	)	$	12.6



	Three Months Ended September 30,
	2017			2016			$ Change			% Change
	(Dollars in millions)
Net sales	$	352.2		$	312.7		$	39.5		12.6	%
Cost of sales	295.0			258.4			36.6			14.2	%
Gross profit	57.2			54.3			2.9			5.3	%
Gross margin	16.2		%	17.4		%
SG&A expenses	36.2			33.2			3.0			9.0	%
SG&A as a percentage of net sales	10.3		%	10.6		%
Operating income	21.0			21.1			(0.1		)	(0.5	)%
Interest expense	7.8			7.2			0.6			8.3	%
Income before income taxes	13.2			13.9			(0.7		)	(5.0	)%
Income tax expense	2.8			—			2.8			*
Net income	10.4			13.9			(3.5		)	(25.2	)%
Net income attributable to noncontrolling interest	(0.2		)	(0.3		)	0.1			(33.3	)%
Net income attributable to Park-Ohio Industries Inc. common shareholder	$	10.2		$	13.6		$	(3.4	)	(25.0	)%



	Nine Months Ended September 30,
	2017			2016			$ Change			% Change
	(Dollars in millions)
Net sales	$	1,046.9		$	970.1		$	76.8		7.9	%
Cost of sales	873.9			813.7			60.2			7.4	%
Gross profit	173.0			156.4			16.6			10.6	%
Gross margin	16.5		%	16.1		%
SG&A expenses	108.8			99.0			9.8			9.9	%
SG&A as a percentage of net sales	10.4		%	10.2		%
Litigation settlement gain	(3.3		)	—			(3.3		)	*
Asset impairment charge	—			4.0			(4.0		)	*
Operating income	67.5			53.4			14.1			26.4	%
Interest expense	23.1			21.3			1.8			8.5	%
Loss on extinguishment of debt	11.0			—			11.0			*
Income before income taxes	33.4			32.1			1.3			4.0	%
Income tax expense	9.6			6.1			3.5			57.4	%
Net income	23.8			26.0			(2.2		)	(8.5	)%
Net income attributable to noncontrolling interests	(0.7		)	(0.3		)	(0.4		)	*
Net income attributable to Park-Ohio Industries Inc. common shareholder	$	23.1		$	25.7		$	(2.6	)	(10.1	)%