Park Ohio Industries 10-Q 2010 Q2 Quarterly report

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 June 30, 2010
or
o	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
(State or other jurisdiction of
incorporation or organization)

6065 Parkland Boulevard, Cleveland, Ohio
(Address of principal executive offices) 34-6520107
(I.R.S. Employer
Identification No.)

44124
(Zip Code)

440/947-2000

(Registrant’s telephone number, including area code)

Pursuant to a corporate reorganization effective June 15, 1998,

Park-Ohio Industries, Inc. became a wholly-owned subsidiary of Park-Ohio Holdings Corp.

The registrant meets the conditions set forth in general 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 o     No þ

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 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

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

Large accelerated filero   Accelerated filero Non-accelerated filer þ Smaller reporting Company o

                    (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).  Yes o     No þ

All of the outstanding capital stock of the registrant is held by Park-Ohio Holdings Corp. As of July 31, 2010, 100 shares of the registrant’s common stock, $1 par value, were outstanding.

The Exhibit Index is located on page 27.

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Condensed consolidated balance sheets — June 30, 2010 and December 31, 2009		3
	Condensed consolidated statements of operations — Three and six months ended June 30, 2010 and 2009		4
	Condensed consolidated statement of shareholder’s equity — Six months ended June 30, 2010		5
	Condensed consolidated statements of cash flows — Six months ended June 30, 2010 and 2009		6
	Notes to unaudited condensed consolidated financial statements — June 30, 2010		7
	Report of independent registered public accounting firm		17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		22
Item 4.	Controls and Procedures		23
PART II.OTHER INFORMATION
Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		25
Item 6.	Exhibits		25
SIGNATURE			26
EXHIBIT INDEX			27
EX-31.1
EX-31.2
EX-32

2

PART I. Financial Information

ITEM 1.   Financial Statements

PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	June 30,			December 31,
	2010			2009
	(Dollars in thousands)
ASSETS
Current Assets
Cash and cash equivalents	$	27,136		$	21,976
Accounts receivable, less allowances for doubtful accounts of $4,182 at June 30, 2010 and $8,388 at December 31, 2009		119,878			104,643
Inventories		169,115			182,116
Deferred tax assets		8,104			8,104
Unbilled contract revenue		15,263			19,411
Other current assets		2,507			13,783
Total Current Assets		342,003			350,033
Property, Plant and Equipment		246,454			242,505
Less accumulated depreciation		176,531			167,546
		69,923			74,959
Other Assets
Goodwill		3,738			4,155
Other		78,943			70,695
	$	494,607		$	499,842
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Trade accounts payable	$	83,687		$	75,078
Accrued expenses		46,424			39,074
Current portion of long-term debt		11,882			10,894
Current portion of other postretirement benefits		2,197			2,197
Total Current Liabilities		144,190			127,243
Long-Term Liabilities, less current portion
8.375% Senior Subordinated Notes due 2014		183,835			183,835
Revolving credit and term loan facility		117,300			134,600
Other long-term debt		4,562			4,668
Deferred tax liability		7,200			7,200
Other postretirement benefits and other long-term liabilities		23,562			21,831
		336,459			352,134
Shareholder’s Equity
Common Stock		-0-			-0-
Additional paid-in capital		47,850			55,362
Retained deficit		(23,278	)		(29,783	)
Accumulated other comprehensive (loss)		(10,614	)		(5,114	)
		13,958			20,465
	$	494,607		$	499,842

Note:  The balance sheet at December 31, 2009 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.

See accompanying notes to these unaudited condensed consolidated financial statements. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010		2009			2010		2009
	(Amounts in thousands, except per share data)
Net sales	$	198,303	$	163,405		$	390,004	$	344,655
Cost of products sold		165,005		134,077			327,368		291,464
Gross profit		33,298		29,328			62,636		53,191
Selling, general and administrative expenses		21,786		21,277			42,242		42,608
Operating income		11,512		8,051			20,394		10,583
Gain on purchase of 8.375% senior subordinated notes		-0-		(3,096	)		-0-		(3,096	)
Interest expense		6,187		6,387			11,642		12,588
Income before income taxes		5,325		4,760			8,752		1,091
Income taxes		1,379		810			2,247		1,542
Net income (loss)	$	3,946	$	3,950		$	6,505	$	(451	)

See accompanying notes to these unaudited condensed consolidated financial statements. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY (UNAUDITED)

									Accumulated
			Additional						Other
	Common		Paid-In			Retained			Comprehensive
	Stock		Capital			Deficit			Income (Loss)			Total
			(Dollars in thousands)
Balance at January 1, 2010	$	-0-	$	55,362		$	(29,783	)	$	(5,114	)	$	20,465
Comprehensive income:
Net income							6,505						6,505
Foreign currency translation adjustment										(5,890	)		(5,890	)
Pension and post retirement benefit adjustments, net of tax										390			390
Comprehensive income													1,005
Capital contribution from shareholder				(6,762	)								(6,762	)
Distribution of capital to shareholder				(750	)								(750	)
Balance at June 30, 2010	$	-0-	$	47,850		$	(23,278	)	$	(10,614	)	$	13,958

See accompanying notes to these unaudited condensed consolidated financial statements. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended
	June 30,
	2010			2009
	(Dollars in thousands)
OPERATING ACTIVITIES
Net income (loss)	$	6,505		$	(451	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization		8,433			9,589
Gain on purchase of 8.375% senior subordinated notes		-0-			(3,096	)
Changes in operating assets and liabilities:
Accounts receivable		(15,235	)		42,537
Inventories and other current assets		28,425			29,847
Accounts payable and accrued expenses		15,958			(76,605	)
Other		(9,151	)		(3,595	)
Net Cash Provided (Used) by Operating Activities		34,935			(1,774	)
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net		(1,999	)		(3,295	)
Net Cash (Used) by Investing Activities		(1,999	)		(3,295	)
FINANCING ACTIVITIES
(Payments on) proceeds from debt, net		(16,417	)		1,588
Debt issue costs		(3,847	)		-0-
Distribution of capital to shareholder		(750	)		(750	)
Capital contribution from parent		(6,762	)		-0-
Purchase of 8.375% senior subordinated notes		-0-			(3,029	)
Net Cash (Used) by Financing Activities		(27,776	)		(2,191	)
Increase (Decrease) in Cash and Cash Equivalents		5,160			(7,260	)
Cash and Cash Equivalents at Beginning of Period		21,976			17,623
Cash and Cash Equivalents at End of Period	$	27,136		$	10,363
Taxes paid	$	945		$	3,743
Interest paid		11,268			11,500

See accompanying notes to these condensed consolidated financial statements. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2010
(Dollars in thousands)

NOTE A — Basis of Presentation

The condensed consolidated financial statements include the accounts of Park-Ohio Industries, Inc. and its subsidiaries (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.

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 toForm 10-Q and Article 10 ofRegulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States 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-month and six-month periods ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2009.

NOTE B — Segments

The Company operates through three segments: Supply Technologies, Aluminum Products and Manufactured Products. Supply Technologies provides our customers with Total Supply Management^tm services for a broad range of high-volume, specialty production components. Total Supply Management^tm manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation and 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 andpoint-of-use delivery, electronic billing services and ongoing technical support. Aluminum Products manufactures cast aluminum components for automotive, agricultural equipment, construction equipment, heavy-duty truck and marine equipment industries. Aluminum Products also provides value-added services such as design and engineering, machining and assembly. Manufactured Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of high quality products engineered for specific customer applications.

Results by business segment were as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Net sales:
Supply Technologies	$	97,185		$	77,444		$	191,423		$	160,415
Aluminum products		37,572			21,635			74,160			43,993
Manufactured products		63,546			64,326			124,421			140,247
	$	198,303		$	163,405		$	390,004		$	344,655
Income (loss) before income taxes:
Supply Technologies	$	5,311		$	2,885		$	9,795		$	3,431
Aluminum products		2,299			(1,794	)		4,235			(5,456	)
Manufactured products		7,597			9,373			12,529			17,085
		15,207			10,464			26,559			15,060
Corporate costs		(3,695	)		683			(6,165	)		(1,381	)
Interest expense		(6,187	)		(6,387	)		(11,642	)		(12,588	)
Income (loss) before income taxes	$	5,325		$	4,760		$	8,752		$	1,091

7

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	June 30,		December 31,
	2010		2009
Identifiable assets were as follows:
Supply Technologies	$	212,538	$	207,729
Aluminum products		77,198		76,443
Manufactured products		168,631		178,715
General corporate		36,240		36,955
	$	494,607	$	499,842

NOTE C — Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance as codified inASC 810-10, “Consolidation of Variable Interest Entities” (previously Statement of Financial Accounting Standards (“SFAS”) No. 167, “Amendments to FASB Interpretation No. 46(R)”). This guidance is intended to improve financial reporting by providing additional guidance to companies involved with variable interest entities (“VIEs”) and by requiring additional disclosures about a company’s involvement with variable interest entities. This guidance is generally effective for annual periods beginning after November 15, 2009 and for interim periods within that first annual reporting period. The adoption of this guidance did not have a material impact on the financial statements of the Company.

NOTE D — Inventories

The components of inventory consist of the following:

	June 30,		December 31,
	2010		2009
Finished goods	$	96,223	$	100,309
Work in process		24,584		26,778
Raw materials and supplies		48,308		55,029
	$	169,115	$	182,116

NOTE E — Pension Plans and Other Postretirement Benefits

The components of net periodic benefit cost recognized during interim periods was as follows:

	Pension Benefits												Postretirement Benefits
	Three Months						Six Months						Three Months					Six Months
	Ended June 30,						Ended June 30,						Ended June 30,					Ended June 30,
	2010			2009			2010			2009			2010			2009		2010			2009
Service costs	$	81		$	123		$	162		$	246		$	9		$	24	$	18		$	48
Interest costs		643			694			1,286			1,388			248			296		496			592
Expected return on plan assets		(1,984	)		(1,758	)		(3,968	)		(3,517	)		-0-			-0-		-0-			-0-
Transition obligation		(10	)		(10	)		(20	)		(20	)		-0-			-0-		-0-			-0-
Amortization of prior service cost		15			32			30			64			(24	)		-0-		(48	)		-0-
Recognized net actuarial loss		82			231			164			462			107			119		214			238
Benefit (income) costs	$	(1,173	)	$	(688	)	$	(2,346	)	$	(1,377	)	$	340		$	439	$	680		$	878

8

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During March 2009, the Company suspended indefinitely its voluntary contribution to its 401(k) defined contribution plan covering substantially all U.S. employees.

NOTE F — Comprehensive Income

Total comprehensive income (loss) was as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010			2009		2010			2009
Net income (loss)	$	3,946		$	3,950	$	6,505		$	(451	)
Foreign currency translation		(3,863	)		3,525		(5,890	)		(352	)
Pension and post retirement benefit adjustments, net of tax		195			372		390			743
Total comprehensive income (loss)	$	278		$	7,847	$	1,005		$	(60	)

The components of accumulated comprehensive loss at June 30, 2010 and December 31, 2009 are as follows:

	June 30,			December 31,
	2010			2009
Foreign currency translation adjustment	$	1,060		$	6,950
Pension and postretirement benefit adjustments, net of tax		(11,674	)		(12,064	)
	$	(10,614	)	$	(5,114	)

NOTE G — Accrued Warranty Costs

The Company estimates the amount of warranty claims on sold products that may be incurred based on current and historical data. The actual warranty expense could differ from the estimates made by the Company based on product performance. The following table presents the changes in the Company’s product warranty liability:

	2010			2009
Balance at January 1	$	2,760		$	5,402
Claims paid during the year		(541	)		(786	)
Additional warranties issued during the first six months		907			740
Balance at June 30	$	3,126		$	5,356

NOTE H — 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, that are taken into account in the relevant period. Each quarter, the Company updates the estimated annual effective income tax rate, and if the estimated income tax rate changes, a cumulative adjustment is made.

The 2010 annual effective income tax rate is estimated to be approximately 25% and is lower than the 35% United States federal statutory rate primarily due to anticipated income in the United States for which the Company will record no tax expense and anticipated income earned in jurisdictions outside of the United States, where the effective income tax rate is lower than in the United States.

The effective income tax rate in the first six months of 2010 and 2009 was 26% and 141%, respectively. The primary reason for the variance in the effective income tax rate is because the Company anticipates full-year 2010

9

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

income in the United States at June 30, 2010 and anticipated full-year 2009 losses in the United States with no tax benefit at June 30, 2009.

There have been no material changes to the balance of unrecognized tax benefits reported at December 31, 2009.

NOTE I — Fair Value Measurements

The Company measures financial assets and liabilities at fair value in three levels of inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The fair value of the 8.375% Subordinated Notes due 2014 is estimated based on a third party’s bid price. The fair value approximated $170,967 at June 30, 2010. At June 30, 2010, the Company had other investments having Level 2 inputs totaling $10,231.

NOTE J — Financing Arrangement

The Company was a party to a credit and security agreement dated November 5, 2003, as amended (“Credit Agreement”), with a group of banks, under which it may borrow or issue standby letters of credit or commercial letters of credit. On March 8, 2010, the Credit Agreement was amended and restated to, among other things, extend its maturity date to June 30, 2013 and reduce the loan commitment from $270,000 to $210,000, which includes a term loan A for $28,000 that is secured by real estate and machinery and equipment and an unsecured term loan B for $12,000. Amounts borrowed under the revolving credit facility may be borrowed at either (i) LIBOR plus 3% to 4% or (ii) the bank’s prime lending rate plus 1%, at the Company’s election. The LIBOR-based interest rate is dependent on the Company’s debt service coverage ratio, as defined in the Credit Agreement. Under the Credit Agreement, a detailed borrowing base formula provides borrowing availability to the Company based on percentages of eligible accounts receivable and inventory. Interest on the term loan A is at either (i) LIBOR plus 4% to 5% or (ii) the bank’s prime lending rate plus 2%, at the Company’s election. Interest on the term loan B is at either (i) LIBOR plus 6% to 7% or (ii) the bank’s prime lending rate plus 4.5%, at the Company’s election. The term loan A is amortized based on a ten-year schedule with the balance due at maturity. The term loan B is amortized over a two-year period, plus 50% of debt service coverage excess capped at $3,500.

10

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Long-term debt consists of the following:

	June 30,		December 31,
	2010		2009
8.375% senior subordinated notes due 2014	$	183,835	$	183,835
Revolving credit		86,800		101,200
Term loan A		27,300		28,000
Term loan B		10,800		12,000
Other		8,844		8,962
		317,579		333,997
Less current maturities		11,882		10,894
Total	$	305,697	$	323,103

NOTE K — Accounts Receivable

During the first six months of 2010 and 2009, the Company sold approximately $12,825 and $9,335, respectively, of accounts receivable to mitigate accounts receivable concentration risk and to provide additional financing capacity and recorded a loss in the amount of $42 and $47, respectively in the Condensed Consolidated Statements of Operations. These losses represented implicit interest on the transactions.

NOTE L — 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 8.375% Senior Subordinated Notes due 2014. Each of the Guarantor Subsidiaries is “100% owned” as defined by Rule 3-10(h)(1) of Regulation S-X.

The following supplemental condensed consolidating financial statements present condensed consolidating balance sheets as of June 30, 2010 and December 31, 2009, condensed consolidating statements of operations for the three months and six months ended June 30, 2010 and 2009, condensed consolidating statements of cash flows for the six months ended June 30, 2010 and 2009 and reclassification and elimination entries necessary to consolidate the Parent and all of its subsidiaries. The “Parent” reflected in the accompanying supplemental guarantor information is Park-Ohio Industries, Inc.

11

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2010

				Combined		Combined
				Guarantor		Non-Guarantor			Reclassifications/
	Parent			Subsidiaries		Subsidiaries			Eliminations			Consolidated
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	(3,845	)	$	1,431	$	27,835		$	1,715		$	27,136
Accounts receivable, net		(1,300	)		91,125		30,053			-0-			119,878
Inventories		-0-			140,093		29,022			-0-			169,115
Other current assets		8,656			17,561		7,319			(15,766	)		17,770
Deferred tax assets		-0-			-0-		-0-			8,104			8,104
Total Current Assets		3,511			250,210		94,229			(5,947	)		342,003
Investment in subsidiaries		333,115			26,193		(25,176	)		(334,132	)		-0-
Inter-company advances		364,101			301,360		27,645			(693,106	)		-0-
Property, Plant and Equipment, net		2,369			69,127		4,472			(6,045	)		69,923
Other Assets:
Goodwill		-0-			1,346		2,392			-0-			3,738
Other		30,449			41,753		15,614			(8,873	)		78,943
Total Other Assets		30,449			43,099		18,006			(8,873	)		82,681
Total Assets	$	733,545		$	689,989	$	119,176		$	(1,048,103	)	$	494,607
LIABILITIES AND SHAREHOLDER’S (DEFICIT) EQUITY
Current Liabilities:
Trade accounts payable	$	3,924		$	66,141	$	13,304		$	318		$	83,687
Accrued expenses		3,077			31,616		11,731			-0-			46,424
Current portion of long-term liabilities		6,600			228		3,950			3,301			14,079
Total Current Liabilities		13,601			97,985		28,985			3,619			144,190
Long-Term Liabilities, less current portion
8.375% Senior Subordinated Notes due 2014		210,000			-0-		-0-			(26,165	)		183,835
Revolving credit maturing on June 30, 2013		118,300			-0-		-0-			(1,000	)		117,300
Other long-term debt		-0-			4,000		-0-			562			4,562
Deferred tax liability		6,007			-0-		1,234			(41	)		7,200
Other postretirement benefits and other long-term liabilities		5,289			51,790		272			(33,789	)		23,562
Total Long-Term Liabilities		339,596			55,790		1,506			(60,433	)		336,459
Inter-company advances		382,126			264,504		42,231			(688,861	)		-0-
Shareholder’s (Deficit) Equity		(1,778	)		271,710		46,454			(302,428	)		13,958
Total Liabilities and Shareholder’s (Deficit) Equity	$	733,545		$	689,989	$	119,176		$	(1,048,103	)	$	494,607

12

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2009

				Combined		Combined
				Guarantor		Non-Guarantor			Reclassifications/
	Parent			Subsidiaries		Subsidiaries			Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	(2,876	)	$	1,613	$	21,839		$	1,400		$	21,976
Accounts receivable, net		(1,300	)		84,669		24,477			(3,203	)		104,643
Inventories		-0-			148,658		33,458			-0-			182,116
Other current assets		8,769			18,365		9,878			(3,818	)		33,194
Deferred tax assets		-0-			-0-		-0-			8,104			8,104
Total Current Assets		4,593			253,305		89,652			2,483			350,033
Investment in subsidiaries		313,315			26,129		(26,129	)		(313,315	)		-0-
Inter-company advances		383,098			292,128		21,935			(697,161	)		-0-
Property, Plant and Equipment, net		(464	)		70,962		10,506			(6,045	)		74,959
Other Assets:
Goodwill		-0-			1,346		2,809			-0-			4,155
Other		25,864			38,660		14,528			(8,357	)		70,695
Total Other Assets		25,864			40,006		17,337			(8,357	)		74,850
Total Assets	$	726,406		$	682,530	$	113,301		$	(1,022,395	)	$	499,842
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities:
Trade accounts payable	$	3,360		$	55,920	$	14,375		$	1,423		$	75,078
Accrued expenses		1,581			25,889		11,604			-0-			39,074
Current portion of long-term liabilities		6,600			102		2,163			4,226			13,091
Total Current Liabilities		11,541			81,911		28,142			5,649			127,243
Long-Term Liabilities, less current portion
8.375% Senior Subordinated Notes due 2014		210,000			-0-		-0-			(26,165	)		183,835
Revolving credit maturing on June 30, 2013		134,600			-0-		-0-			-0-			134,600
Other long-term debt		-0-			4,409		1,623			(1,364	)		4,668
Deferred tax liability		6,007			-0-		1,193			-0-			7,200
Other postretirement benefits and other long-term liabilities		2,710			52,637		314			(33,830	)		21,831
Total Long-Term Liabilities		353,317			57,046		3,130			(61,359	)		352,134
Inter-company advances		361,789			286,093		37,505			(685,387	)		-0-
Shareholder’s Equity		(241	)		257,480		44,524			(281,298	)		20,465
Total Liabilities and Shareholder’s Equity	$	726,406		$	682,530	$	113,301		$	(1,022,395	)	$	499,842

13

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2010

				Combined		Combined
				Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-		$	320,925	$	69,079	$	-0-		$	390,004
Cost of sales		-0-			275,138		52,230		-0-			327,368
Gross profit		-0-			45,787		16,849		-0-			62,636
Selling, general and administrative expenses		(18,623	)		28,397		8,388		24,080			42,242
Operating income		18,623			17,390		8,461		(24,080	)		20,394
Interest expense		12,170			324		458		(1,310	)		11,642
Income before income taxes		6,453			17,066		8,003		(22,770	)		8,752
Income taxes		820			39		1,388		-0-			2,247
Net income	$	5,633		$	17,027	$	6,615	$	(22,770	)	$	6,505

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2009

				Combined		Combined
				Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-		$	287,488	$	57,167	$	-0-		$	344,655
Cost of sales		-0-			248,721		42,743		-0-			291,464
Gross profit		-0-			38,767		14,424		-0-			53,191
Selling, general and administrative expenses		(4,749	)		26,491		10,000		10,866			42,608
Gain on purchase of 8.375% senior subordinated rates		-0-			-0-		-0-		(3,096	)		(3,096	)
Operating income		4,749			12,276		4,424		(7,770	)		13,679
Interest expense		11,926			529		327		(194	)		12,588
Income (loss) before income taxes		(7,177	)		11,747		4,097		(7,576	)		1,091
Income taxes		(128	)		24		1,646		-0-			1,542
Net income (loss)	$	(7,049	)	$	11,723	$	2,451	$	(7,576	)	$	(451	)

14

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2010

				Combined		Combined
				Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-		$	162,981	$	35,322	$	-0-		$	198,303
Cost of sales		-0-			138,477		26,528		-0-			165,005
Gross profit		-0-			24,504		8,794		-0-			33,298
Selling, general and administrative expenses		(10,709	)		14,868		3,848		13,779			21,786
Operating income		10,709			9,636		4,946		(13,779	)		11,512
Interest expense		6,604			93		136		(646	)		6,187
Income before income taxes		4,105			9,543		4,810		(13,133	)		5,325
Income taxes		80			-0-		1,299		-0-			1,379
Net income	$	4,025		$	9,543	$	3,511	$	(13,133	)	$	3,946

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2009

				Combined		Combined
				Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-		$	134,725	$	28,680	$	-0-		$	163,405
Cost of sales		-0-			112,947		21,130		-0-			134,077
Gross profit		-0-			21,778		7,550		-0-			29,328
Selling, general and administrative expenses		(3,708	)		11,166		5,439		8,380			21,277
Gain on purchase of 8.375% senior subordinated notes		-0-			-0-		-0-		(3,096	)		(3,096	)
Operating income		3,708			10,612		2,111		(5,284	)		11,147
Interest expense		5,963			315		100		9			6,387
Income (loss) before income taxes		(2,255	)		10,297		2,011		(5,293	)		4,760
Income taxes		160			-0-		650		-0-			810
Net income (loss)	$	(2,415	)	$	10,297	$	1,361	$	(5,293	)	$	3,950

15

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2010

				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries		Eliminations		Consolidated
	(In thousands)
Net cash provided (used) by operations	$	26,930		$	7,709		$	296	$	-0-	$	34,935
Cash flows from investing activities:
Purchases of property, plant and equipment, net		(25	)		(7,510	)		5,536		-0-		(1,999	)
Net cash provided (used) in investing activities		(25	)		(7,510	)		5,536		-0-		(1,999	)
Cash flows from financing activities:
(Payments) Proceeds on debt		(16,200	)		(381	)		164		-0-		(16,417	)
Distribution of capital to shareholder		(750	)		-0-			-0-		-0-		(750	)
Capital contributions from parent		(6,762	)		-0-			-0-		-0-		(6,762	)
Debt issue costs		(3,847	)		-0-			-0-		-0-		(3,847	)
Net cash provided (used) by financing activities		(27,559	)		(381	)		164		-0-		(27,776	)
(Decrease) increase in cash and cash equivalents		(654	)		(182	)		5,996		-0-		5,160
Cash and cash equivalents at beginning of period		(1,476	)		1,613			21,839		-0-		21,976
Cash and cash equivalents at end of period	$	(2,130	)	$	1,431		$	27,835	$	-0-	$	27,136

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2009

				Combined			Combined
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
	(In thousands)
Net cash provided (used) by operations	$	(22,027	)	$	10,586		$	9,667		$	-0-	$	(1,774	)
Cash flows from investing activities:
Purchases of property, plant and equipment, net		226			(2,740	)		(781	)		-0-		(3,295	)
Net cash provided (used) in investing activities		226			(2,740	)		(781	)		-0-		(3,295	)
Cash flows from financing activities:
Distribution of capital to shareholder		(750	)		-0-			-0-			-0-		(750	)
Purchase of 8.375% senior subordinated notes		-0-			-0-			(3,029	)		-0-		(3,029	)
Proceeds (Payments) on debt		3,500			4,582			(6,494	)		-0-		1,588
Net cash provided (used) by financing activities		2,750			4,582			(9,523	)		-0-		(2,191	)
Increase (decrease) in cash and cash equivalents		(19,051	)		12,428			(637	)		-0-		(7,260	)
Cash and cash equivalents at beginning of period		6,780			339			10,504			-0-		17,623
Cash and cash equivalents at end of period	$	(12,271	)	$	12,767		$	9,867		$	-0-	$	10,363

16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholder

Park-Ohio Industries, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of Park-Ohio Industries, Inc. and subsidiaries as of June 30, 2010, and the related condensed consolidated statements of operations for the three-month and six-month periods ended June 30, 2010 and 2009, and the condensed consolidated statement of shareholder’s equity for the six-month period ended June 30, 2010 and cash flows for the six-month periods ended June 30, 2010 and 2009. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based upon our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Park-Ohio Industries, Inc. and subsidiaries as of December 31, 2009 and the related consolidated statements of operations, shareholder’s equity, and cash flows for the year then ended, not presented herein; and in our report dated March 15, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/  Ernst & Young LLP

Cleveland, Ohio

August 6, 2010

17

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. All significant intercompany transactions have been eliminated in consolidation.

Executive Overview

We are an industrial Total Supply Management^tm and diversified manufacturing business, operating in three segments: Supply Technologies, Aluminum Products and Manufactured Products. Our Supply Technologies business provides our customers with Total Supply Management^tm, 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^tm 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 andpoint-of-use delivery, electronic billing services and ongoing technical support. The principal customers of Supply Technologies are in the heavy-duty truck, automotive and vehicle parts, electrical distribution and controls, consumer electronics, power sports/fitness equipment, HVAC, agricultural and construction equipment, semiconductor equipment, plumbing, aerospace and defense, and appliance industries. Aluminum Products casts and machines 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 for automotive, agricultural equipment, construction equipment, heavy-duty truck and marine equipment original equipment manufacturers (“OEMs”), primarily on a sole-source basis. Aluminum Products also provides value-added services such as design and engineering and assembly. Manufactured 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, injection molded rubber components, and forged and machined products. Manufactured Products also produces and provides services and spare parts for the equipment it manufactures. The principal customers of Manufactured Products are OEMs,sub-assemblers and end users in the ferrous and non-ferrous metals, silicon, coatings, forging, foundry, heavy-duty truck, construction equipment, automotive, oil and gas, rail and locomotive manufacturing and aerospace and defense industries. Sales, earnings and other relevant financial data for these three segments are provided in Note B to the condensed consolidated financial statements.

On March 8, 2010, we amended our revolving credit facility to, among other things, extend its maturity to June, 2013 and reduce the loan commitment from $270.0 million to $210.0 million, which amount includes the borrowing under a term loan A for $28.0 million that is secured by real estate and machinery and equipment, and an unsecured term loan B for $12.0 million. See Note J to the Condensed Consolidated Financial Statements.

During the fourth quarter of 2009, the Company recorded $7.0 million of asset impairment charges associated with general weakness in the economy, including the railroad industry. The charges were composed of $1.8 million of inventory impairment in Cost of Products Sold and $5.2 million for impairment of property and equipment.

Critical Accounting Policies

Our critical accounting policies are described in 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, 2009 contained in our 2009 Annual Report onForm 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our Condensed Consolidated Financial Statements in this Quarterly Report onForm 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.

18

Results of Operations

Six Months 2010 versus Six Months 2009

Net Sales by Segment:

	Six Months
	Ended
	June 30,							Percent
	2010		2009		Change			Change
	(Dollars in millions)
Supply Technologies	$	191.4	$	160.4	$	31.0			19	%
Aluminum Products		74.2		44.0		30.2			69	%
Manufactured Products		124.4		140.3		(15.9	)		(11	)%
Consolidated Net Sales	$	390.0	$	344.7	$	45.3			13	%

Net sales increased $45.3 million to $390.0 million in the first six months of 2010 compared to $344.7 million in the same period in 2009 as the Company experienced volume increases in the Supply Technologies and Aluminum Products segments. Supply Technologies sales increased 19% primarily due to volume increases in the semi-conductor, power sports, HVAC, agricultural and construction equipment industries offset by declines in theheavy-duty truck, lawn and garden and automotive industries. Aluminum Products sales increased 69% as volumes increased to customers in the auto industry along with additional sales from new contracts. Manufactured Products sales decreased 11% from the declining volume in capital equipment and forged and machined products business units offset by increases in the rubber products business unit.

Cost of Products Sold & Gross Profit:

	Six Months
	Ended
	June 30,								Percent
	2010			2009			Change		Change
	(Dollars in millions)
Consolidated cost of products sold	$	327.4		$	291.5		$	35.9		12	%
Consolidated gross profit	$	62.6		$	53.2		$	9.4		18	%
Gross Margin		16.1	%		15.4	%

Cost of products sold increased $35.9 million in the first six months of 2010 to $327.4 million compared to $291.5 million in the same period in 2009, while gross margin increased to 16.1% in the first six months of 2010 from 15.4% in the same period in 2009.

Supply Technologies and Aluminum Products gross margin increased resulting from volume increases. Gross margin in the Manufactured Products segment decreased primarily from reduced sales volume.

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

	Six Months
	Ended
	June 30,									Percent
	2010			2009			Change			Change
	(Dollars in millions)
Consolidated SG&A expenses	$	42.2		$	42.6		$	(.4	)		(1	)%
SG&A percent		10.8	%		12.4	%

Consolidated SG&A expenses were essentially flat in the first six months of 2010 compared to the same period in 2009, representing a 160 basis point decrease in SG&A expenses as a percent of sales. SG&A expenses decreased in the first six months of 2010 compared to the same period in 2009 primarily due to an increase in pension income and the $2.0 million charge in 2009 for a reserve for an account receivable from a customer in bankruptcy partially offset by a bonus accrual recorded in 2010.

19

Gain on Purchase of 8.375% Senior Subordinated Notes:

During the second quarter of 2009, the Company recorded a gain of $3.1 million on the purchase of $6.125 million principal amount of Park-Ohio Industries, Inc. 8.375% senior subordinated notes due 2014.

Interest Expense:

	Six Months
	Ended
	June 30,									Percent
	2010			2009			Change			Change
	(Dollars in millions)
Interest expense	$	11.6		$	12.6		$	(1.0	)	(8)%
Average outstanding borrowings	$	328.3		$	379.2		$	(50.9	)	(13)%
Average borrowing rate		7.07	%		6.64	%		43		basis points

Interest expense decreased $1.0 million in the first six months of 2010 compared to the same period of 2009, primarily due to lower average outstanding borrowings partially offset by a higher average borrowing rate during the first six months of 2010. The decrease in average borrowings in the first six months of 2010 resulted primarily from earnings and decreased working capital. The higher average borrowing rate in the first six months of 2010 was due primarily to increased interest rates under our revolving credit facility compared to the same period in 2009.

Income Tax:

The provision for income taxes was $2.2 million in the first half of 2010, a 26% effective income tax rate, compared to an income tax provision of $1.5 million in the corresponding period of 2009, a 141% effective income tax rate. We estimate that the effective tax rate for full-year 2010 will be approximately 25%.

Results of Operations

Second Quarter 2010 versus Second Quarter 2009

Net Sales by Segment:

	Three Months
	Ended
	June 30,							Percent
	2010		2009		Change			Change
	(Dollars in millions)
Supply Technologies	$	97.2	$	77.4	$	19.8			26	%
Aluminum Products		37.6		21.7		15.9			73	%
Manufactured Products		63.5		64.3		(.8	)		(1	)%
Consolidated Net Sales	$	198.3	$	163.4	$	34.9			21	%

Consolidated net sales increased $34.9 million in the second quarter of 2010 to $198.3 compared to $163.4 million in the same quarter of 2009 as the Company experienced volume increases in the Supply Technologies and Aluminum Products segments. Supply Technologies sales increased 26% primarily due to volume increases in the truck, consumer electronics, semi-conductor, HVAC, agricultural and construction equipment industries offset by declines in the automotive industry. Aluminum Products sales increased 73% as auto industry sales volumes increased along with additional sales from new contracts. Manufactured Products sales were essentially flat during the quarter.

20

Cost of Products Sold & Gross Profit:

	Three Months
	Ended
	June 30,								Percent
	2010			2009			Change		Change
	(Dollars in millions)
Consolidated cost of products sold	$	165.0		$	134.1		$	30.9		23	%
Consolidated gross profit	$	33.3		$	29.3		$	4.0		14	%
Gross Margin		16.8	%		17.9	%

Cost of products sold increased $30.9 million to $165.0 million in the second quarter of 2010 compared to $134.1 million for the same quarter of 2009, while gross margin decreased to 16.8% in the second quarter of 2010 from 17.9% in the same quarter of 2009.

Supply Technologies and Aluminum Products gross margin increased resulting from volume increases. Gross margin in the Manufactured Products segment decreased primarily from slightly lower sales volume.

SG&A Expenses:

	Three Months
	Ended
	June 30,								Percent
	2010			2009			Change		Change
	(Dollars in millions)
Consolidated SG&A expenses	$	21.8		$	21.3		$	.5		2	%
SG&A percent		11.0	%		13.0	%

Consolidated SG&A expenses were essentially flat in the second quarter of 2010 compared to the same quarter in 2009, representing a decrease in SG&A expenses as a percent of sales of 200 basis points from 13.0% to 11.0%. SG&A expenses decreased in the second quarter of 2010 compared to the same quarter in 2009 on a percentage basis primarily due to an increase in pension income and a $2.0 million charge in the second quarter of 2009 for a reserve for an account receivable from a customer in bankruptcy partially offset by an increase in salaries and benefits levels resulting from restoration to 2008 salary levels during the second quarter of 2010 along with a bonus accrual.

Gain on Purchase of 8.375% Senior Subordinated Notes:

During the second quarter of 2009, the Company recorded a gain of $3.1 million on the purchase of $6.125 million principal amount of Park-Ohio Industries, Inc. 8.375% senior subordinated notes due 2014.

Interest Expense:

	Three Months
	Ended
	June 30,									Percent
	2010			2009			Change			Change
	(Dollars in millions)
Interest expense	$	6.2		$	6.4		$	(.2	)	(3)%
Average outstanding borrowings	$	325.9		$	376.9		$	(51.0	)	(14)%
Average borrowing rate		7.57	%		6.79	%		78		basis points

Interest expense decreased $0.2 million in the second quarter of 2010 compared to the same period of 2009, primarily due to lower average outstanding borrowings in 2010 offset by a higher average borrowing rate during the second quarter of 2010. The decrease in average borrowings in the second quarter of 2010 resulted primarily from earnings and a reduction in working capital. The higher average borrowing rate in the second quarter of 2010 was due primarily to increased interest rates under our revolving credit facility compared to the same period in 2009.

21

Income Tax:

The provision for income taxes was $1.4 million in the second quarter of 2010, a 26% effective income tax rate, compared to an income tax provision of $.8 million in the corresponding quarter of 2009, a 20% effective income tax rate. We estimate that the effective tax rate for full-year 2010 will be approximately 25%.

Seasonality; Variability of Operating Results

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

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 business units. Such variability is particularly evident at the capital equipment businesses, included in the Manufactured Products segment, which typically ship a few large systems per year.

Forward-Looking Statements

ThisForm 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. These forward-looking statements involve 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 uncertainties and other factors include such things as: general business conditions and competitive factors, including pricing pressures and product innovation; demand for our products and services; raw material 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; changes in general domestic economic conditions such as inflation rates, interest rates, and tax rates; adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities; our ability to meet various covenants, including financial covenants, contained in our revolving credit agreement and the indenture governing our senior subordinated notes; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment; inherent uncertainties involved in assessing our potential liability for environmental remediation-related activities; the outcome of pending and future litigation and other claims; dependence on the automotive and heavy-duty truck industries, which are highly cyclical; dependence on key management; and dependence on information systems. 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.

Review By Independent Registered Public Accounting Firm

The condensed consolidated financial statements at June 30, 2010, and for the three-month and six-month periods ended June 30, 2010 and 2009, have been reviewed, prior to filing, by Ernst & Young LLP, our independent registered public accounting firm, and their report is included herein.

Item 3.   Quantitative and Qualitative Disclosure About Market Risk

We are exposed to market risk including changes in interest rates. We are subject to interest rate risk on borrowings under our floating rate revolving credit agreement, which consisted of borrowings of $124.9 million at June 30, 2010. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.6 million during the six-month period ended June 30, 2010.

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Our foreign subsidiaries generally conduct business in local currencies. During the first six months of 2010, we recorded an unfavorable foreign currency translation adjustment of $5.9 million related to net assets located outside the United States. This foreign currency translation adjustment resulted primarily from the strengthening of the U.S. dollar. 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.

The Company periodically enters into forward contracts on foreign currencies, primarily the euro and the British Pound Sterling, purely for the purpose of hedging exposure to changes in the value of accounts receivable in those currencies against the U.S. dollar. The Company currently uses no other derivative instruments. At June 30, 2010, there were no such currency hedge contracts outstanding.

Item 4.   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 inRules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) 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.

There have been no changes in our internal control over financial reporting that occurred during the second quarter of 2010 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

Item 1.   Legal Proceedings

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

At June 30, 2010, we were a co-defendant in approximately 290 cases asserting claims on behalf of approximately 1,200 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 only five asbestos cases, involving 25 plaintiffs, that plead specified damages. In each of the five cases, the plaintiff is seeking compensatory and punitive damages based on a variety of potentially alternative causes of action. In three cases, the plaintiff has alleged compensatory damages in the amount of $3.0 million for four separate causes of action and $1.0 million for another cause of action and punitive damages in the amount of $10.0 million. In the fourth case, the plaintiff has alleged against each named defendant, compensatory and punitive damages each in the amount of $10.0 million for seven separate causes of action. In the fifth case, the plaintiff has alleged compensatory damages in the amount of $20.0 million for three separate causes of action and $5.0 million for another cause of action and punitive damages in the amount of $20.0 million.

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, 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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Item 1A.   Risk Factors

There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009.

Item 6.   Exhibits

The following exhibits are included herein:

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

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SIGNATURE

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)

By  /s/  Jeffrey L. Rutherford

Name:     Jeffrey L. Rutherford

Title:  Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: August 6, 2010

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EXHIBIT INDEX
QUARTERLY REPORT ONFORM 10-Q
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
FOR THE QUARTER ENDED JUNE 30, 2010

Exhibit
	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

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