Park Ohio Industries 10-Q 2005 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, 2005
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

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.)
23000 Euclid Avenue, Cleveland, Ohio (Address of principal executive offices)	44117 (Zip Code)

216/692-7200

(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 þ          No o

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

      Yes o          No þ

All of the outstanding capital stock of the registrant is held by Park-Ohio Holdings Corp. As of July 31, 2005, 100 shares of the registrant’s common stock, $1 par value, were outstanding.

The Exhibit Index is located on page 28.

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Consolidated balance sheets — June 30, 2005 and December 31, 2004		3
	Consolidated statements of income — Three months and six months ended June 30, 2005 and 2004		4
	Consolidated statement of shareholder’s equity — Six months ended June 30, 2005		5
	Consolidated statements of cash flows — Six months ended June 30, 2005 and 2004		6
	Notes to consolidated financial statements — June 30, 2005		7
	Report of Independent Registered Public Accounting Firm		19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 4.	Controls and Procedures		25
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		25
Item 6.	Exhibits		26
SIGNATURE			27
EXHIBIT INDEX			28
EX-31.1 Certification 302 - CEO
EX-31.2 Certification 302 - CFO
EX-32.1 Certifications 906 - CEO and CFO

2

PART I. Financial Information

Item 1. Financial Statements

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			(Unaudited)
			June 30,			December 31,
			2005			2004
			(Dollars in thousands)
ASSETS
Current Assets
	Cash and cash equivalents		$	664		$	6,407
	Accounts receivable, less allowances for doubtful accounts of $3,653 at June 30, 2005 and $3,976 at December 31, 2004			154,656			145,475
	Inventories			190,722			177,294
	Other current assets			20,295			20,655
		Total Current Assets		366,337			349,831
Property, Plant and Equipment				234,606			228,494
	Less accumulated depreciation			124,941			118,613
				109,665			109,881
Other Assets
	Goodwill			82,442			82,565
	Net assets held for sale			-0-			1,035
	Other			68,528			68,535
			$	626,972		$	611,847
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
	Trade accounts payable		$	90,399		$	108,862
	Accrued expenses			64,062			59,745
	Current portion of long-term liabilities			7,540			5,812
		Total Current Liabilities		162,001			174,419
Long-Term Liabilities, less current portion
	8.375% Senior Subordinated Notes due 2014			210,000			210,000
	Revolving credit			135,600			120,600
	Other long-term debt			5,524			4,776
	Other postretirement benefits and other long-term liabilities			26,098			27,570
				377,222			362,946
Shareholder’s Equity
Common Stock				-0-			-0-
Additional paid-in capital				64,844			64,844
Retained earnings				25,270			11,314
Accumulated other comprehensive loss				(2,365	)		(1,676	)
				87,749			74,482
			$	626,972		$	611,847

Note:  The balance sheet at December 31, 2004 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 notes to consolidated financial statements.

3

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2005		2004		2005		2004
		(Amounts in thousands except per share data)
Net sales		$	228,795	$	200,908	$	457,678	$	393,278
Cost of products sold			193,429		167,256		387,216		329,388
	Gross profit		35,366		33,652		70,462		63,890
Selling, general and administrative expenses			20,264		19,684		41,823		37,328
	Operating income		15,102		13,968		28,639		26,562
Interest expense			6,715		6,196		13,174		12,332
	Income before income taxes		8,387		7,772		15,465		14,230
Income taxes			710		1,035		1,509		1,626
	Net income	$	7,677	$	6,737	$	13,956	$	12,604

See notes to consolidated financial statements.

4

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY

								Accumulated
								Other
				Additional				Comprehensive
		Common		Paid-In		Retained		Income
		Stock		Capital		Earnings		(Loss)			Total
		(Dollars in thousands)
Balance at January 1, 2005		$	-0-	$	64,844	$	11,314	$	(1,676	)	$	74,482
Comprehensive income:
	Net income						13,956					13,956
	Foreign currency translation adjustment								(689	)		(689	)
	Comprehensive income											13,267
Balance at June 30, 2005		$	-0-	$	64,844	$	25,270	$	(2,365	)	$	87,749

See notes to consolidated financial statements.

5

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

				Six Months Ended
				June 30,
				2005			2004
				(Dollars in thousands)
OPERATING ACTIVITIES
	Net income			$	13,956		$	12,604
	Adjustments to reconcile net income to net cash used by operating activities:
		Depreciation and amortization			8,876			7,863
	Changes in operating assets and liabilities:
		Accounts receivable			(9,181	)		(41,307	)
		Inventories and other current assets			(13,068	)		(22,774	)
		Accounts payable and accrued expenses			(14,147	)		37,433
		Other			(3,090	)		(2,531	)
			Net Cash Used by Operating Activities		(16,654	)		(8,712	)
INVESTING ACTIVITIES
	Purchases of property, plant and equipment, net				(7,665	)		(3,566	)
	Proceeds from sale of assets held for sale				1,100			-0-
		Net Cash Used by Investing Activities			(6,565	)		(3,566	)
FINANCING ACTIVITIES
	Proceeds from debt, net				17,476			12,247
		Net Cash Provided by Financing Activities			17,476			12,247
Decrease in Cash and Cash Equivalents					(5,743	)		(31	)
Cash and Cash Equivalents at Beginning of Period					6,407			2,191
Cash and Cash Equivalents at End of Period				$	664		$	2,160
Taxes paid				$	1,334		$	1,457
Interest paid					11,328			12,076

See notes to consolidated financial statements.

6

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2005

(Amounts in Thousands — except per share data)

NOTE A — Basis of Presentation

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

      The accompanying unaudited 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 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, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. 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, 2004.

NOTE B — Recent Accounting Pronouncements

      In the fourth quarter of 2004, the FASB issued SFAS No. 151, “Inventory Costs”, an amendment of Accounting Research Bulletin No. 43, Chapter 4. The amendments made by SFAS No. 151 clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) are to be recognized as current-period charges and will require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The Company does not expect the adoption will have a material impact on the Company’s financial position, results of operations or cash flows.

      The American Jobs Creation Act of 2004 (the “Jobs Act”) was signed into law in October 2004. The Jobs Act provides, among other things, for a tax deduction on qualified domestic production activities and introduced a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer, provided certain criteria are met. The FASB issued FASB Staff Position 109-1 to provide guidance on the application of FAS 109 and FASB Staff Position 109-2 to provide accounting and disclosure guidance for the repatriation provision. The Company is reviewing the implication of the Jobs Act, recently released treasury guidance and the FASB staff positions and does not expect the Jobs Act will have a material impact on the Company’s financial position, results of operations or cash flows.

NOTE C — Acquisitions

      On August 23, 2004, the Company acquired substantially all of the assets of the Automotive Components Group (the “Amcast Components Group”) of Amcast Industrial Corporation. The purchase price was approximately $10.0 million in cash and the assumption of approximately $9.0 million of operating liabilities. The acquisition was funded with borrowings under the Company’s revolving credit facility. The purchase price and the results of operations of Amcast Components Group prior to its date of acquisition were not deemed significant as defined in Regulation S-X. The results of operations for Amcast Components Group have been included in the Company’s consolidated results since August 23, 2004.

      The tentative allocation of the purchase price has been performed based on the assignment of fair values to assets acquired and liabilities assumed.

7

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

      The tentative allocation of the purchase price is as follows:

Cash acquisition price		$	10,000
Assets
	Accounts receivable		(8,931	)
	Inventories		(1,677	)
	Property and equipment		(16,964	)
	Other		(115	)
Liabilities
	Accounts payable		4,041
	Compensation accruals		5,504
	Other accruals		8,142
Goodwill		$	-0-

      The Company has a plan for integration activities and plant rationalization. In accordance with FASB EITF Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination”, the Company recorded accruals for severance, exit and relocation costs in the purchase price allocation. A reconciliation of the beginning and ending accrual balances is as follows:

	Severance		Exit		Relocation		Total
Balance at June 30, 2004	$	-0-	$	-0-	$	-0-	$	-0-
Add: Accruals		1,916		100		265		2,281
Less: Payments		295		-0-		2		297
Balance at December 31, 2004		1,621		100		263		1,984
Less: Payments		777		32		96		905
Balance at June 30, 2005	$	844	$	68	$	167	$	1,079

      On April 1, 2004, the Company acquired the remaining 66% of the common stock of Japan Ajax Magnethermic Company (“Jamco”) for cash existing on the balance sheet of Jamco at that date. No additional purchase price was paid by the Company. The purchase price and the results of operations of Jamco prior to its date of acquisition were not deemed significant as defined in Regulation S-X. The results of operations for Jamco have been included in the Company’s consolidated results since April 1, 2004.

NOTE D — Inventories

      The components of inventory consist of the following:

	June 30,		December 31,
	2005		2004
Finished goods	$	138,405	$	121,832
Work in process		21,822		27,959
Raw materials and supplies		30,495		27,503
	$	190,722	$	177,294

8

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

NOTE E — Pension Plans and Other Postretirement Benefits

      The Company adopted SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” which requires the disclosure of the components of net periodic benefit cost recognized during interim periods.

													Postretirement Benefits
	Pension Benefits
													Three Months
	Three Months						Six Months						Ended						Six Months
	Ended June 30,						Ended June 30,						June 30,						Ended June 30,
	2005			2004			2005			2004			2005			2004			2005			2004
Service costs	$	97		$	78		$	194		$	156		$	35		$	40		$	70		$	80
Interest costs		796			834			1,592			1,668			348			421			696			842
Expected return on plan assets		(2,211	)		(2,093	)		(4,422	)		(4,186	)		-0-			-0-			-0-			-0-
Transition obligation		(12	)		(12	)		(24	)		(24	)		-0-			-0-			-0-			-0-
Amortization of prior service cost		41			32			82			64			(17	)		(20	)		(34	)		(40	)
Recognized net actuarial (gain) loss		(60	)		(81	)		(120	)		(162	)		50			59			100			118
Benefit (income) costs	$	(1,349	)	$	(1,242	)	$	(2,698	)	$	(2,484	)	$	416		$	500		$	832		$	1,000

NOTE F — Segments

      The Company operates through three segments: Integrated Logistics Solutions (“ILS”), Aluminum Products and Manufactured Products. ILS is a leading supply chain logistics provider of production components to large, multinational manufacturing companies, other manufacturers and distributors. In connection with the supply of such production components, ILS provides a variety of value-added, cost-effective supply chain management services. Aluminum Products manufactures cast aluminum components for automotive, agricultural equipment, heavy-duty truck and construction equipment. 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.

9

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

      Results by business segment were as follows:

		Three Months						Six Months
		Ended June 30,						Ended June 30,
		2005			2004			2005			2004
Net sales:
	ILS	$	129,515		$	114,849		$	256,402		$	231,114
	Aluminum products		43,094			28,269			85,984			55,850
	Manufactured products		56,186			57,790			115,292			106,314
		$	228,795		$	200,908		$	457,678		$	393,278
Income before income taxes:
	ILS	$	8,271		$	8,269		$	16,475		$	17,478
	Aluminum products		3,481			2,744			5,904			4,331
	Manufactured products		5,949			5,229			11,762			8,521
			17,701			16,242			34,141			30,330
Corporate costs			(2,599	)		(2,274	)		(5,502	)		(3,768	)
Interest expense			(6,715	)		(6,196	)		(13,174	)		(12,332	)
		$	8,387		$	7,772		$	15,465		$	14,230

		June 30,		December 31,
		2005		2004
Identifiable assets were as follows:
	ILS	$	325,299	$	297,002
	Aluminum products		112,084		105,535
	Manufactured products		174,777		163,230
	General corporate		14,812		46,080
		$	626,972	$	611,847

NOTE G — Comprehensive Income

      Total comprehensive income was as follows:

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
Net income	$	7,677		$	6,737		$	13,956		$	12,604
Foreign currency translation		(1,018	)		(721	)		(689	)		93
Total comprehensive income	$	6,659		$	6,016		$	13,267		$	12,697

      The components of accumulated comprehensive loss at June 30, 2005 and December 31, 2004 are as follows:

	June 30,			December 31,
	2005			2004
Foreign currency translation adjustment	$	(2,473	)	$	(3,162	)
Minimum pension liability		4,838			4,838
	$	2,365		$	1,676

10

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

NOTE H — Restructuring Activities

      The Company has responded to the economic downturn in 2001, 2002 and 2003 by reducing costs in a variety of ways, including restructuring businesses and selling non-core manufacturing assets. These activities generated restructuring and asset impairment charges in these years, as the Company’s restructuring efforts continued and evolved. For further details on the restructuring activities, see Note N to the audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

      The accrued liability balance for severance and exit costs and related cash payments during the six months ended June 30, 2005 consisted of:

Balance at December 31, 2004	$	462
Cash payments		(236	)
Balance at June 30, 2005	$	226

NOTE I — 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:

		2005			2004
Balance at January 1		$	4,281		$	5,614
	Claims paid during the year		(1,545	)		(2,742	)
	Additional warranties issued during the year		1,538			1,252
	Acquired warranty liabilities		-0-			501
Balance at June 30		$	4,274		$	4,625

NOTE J — Income Taxes

      The effective income tax rate for the six-month period ended June 30, 2005 was 10% compared to 11% for the corresponding period in 2004. Only foreign and state income taxes were provided for in both periods because federal income taxes were offset by net operating loss carryforwards that were not recognized previously. At December 31, 2004, the Company had net operating loss carryforwards of approximately $47.7 million. In accordance with the provisions of SFAS No. 109 “Accounting for Income Taxes”, the tax benefits related to these carryforwards and other deferred tax assets have been reserved as of December 31, 2004.

      The Company believes, based on the weight of available evidence, it is more likely than not that all of the Company’s deferred tax assets will not be realized as required by SFAS No. 109.

NOTE K — Subsequent Event

      On July 20, 2005, the Company completed the acquisition of the assets of Purchased Parts Group, Inc. (“PPG”) for $7.0 million in cash, $2.0 million in a short-term note payable and the assumption of approximately $12.0 million of trade liabilities. The acquisition was funded with borrowings under the Company’s bank revolving credit agreement. The purchase price and the results of operations of PPG prior to its date of acquisition were not deemed significant as defined in Regulation S-X. The Company is currently evaluating the assignment of fair values to assets acquired and liabilities assumed.

11

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

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 consolidating condensed financial statements present consolidating condensed balance sheets as of June 30, 2005 and December 31, 2004, consolidating condensed statements of income for the three months and six months ended June 30, 2005 and 2004, consolidating condensed statements of cash flows for the six months ended June 30, 2005 and 2004 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.

12

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2005

						Combined		Combined
						Guarantor		Non-Guarantor		Reclassifications/
			Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
			(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	(30,981	)	$	24,235	$	7,410	$	-0-		$	664
	Accounts receivable, net			-0-			130,817		24,206		(367	)		154,656
	Inventories			-0-			161,099		29,623		-0-			190,722
	Other current assets			1,154			11,166		5,015		2,960			20,295
		Total Current Assets		(29,827	)		327,317		66,254		2,593			366,337
Investment in subsidiaries				343,852			-0-		-0-		(343,852	)		-0-
Inter-company advances				271,488			281,358		6,409		(559,255	)		-0-
Property, Plant and Equipment, net				2,378			94,776		12,511		-0-			109,665
Other Assets:
	Goodwill			-0-			78,424		4,018		-0-			82,442
	Other			44,859			37,187		1,128		(14,646	)		68,528
		Total Other Assets		44,859			115,611		5,146		(14,646	)		150,970
		Total Assets	$	632,750		$	819,062	$	90,320	$	(915,160	)	$	626,972
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities:
	Trade accounts payable		$	3,317		$	90,583	$	7,525	$	(11,026	)	$	90,399
	Accrued expenses			11,352			41,570		11,334		(194	)		64,062
	Current portion of long-term liabilities			-0-			544		4,115		2,881			7,540
		Total Current Liabilities		14,669			132,697		22,974		(8,339	)		162,001
Long-Term Liabilities, less current portion
	8.375% Senior Subordinated Notes due 2014			210,000			-0-		-0-		-0-			210,000
	Revolving credit maturing on December 31, 2010			135,600			-0-		-0-		-0-			135,600
	Other long-term debt			-0-			34,856		1,636		(30,968	)		5,524
	Other postretirement benefits and other long-term liabilities			3,893			21,094		3,992		(2,881	)		26,098
		Total Long-Term Liabilities		349,493			55,950		5,628		(33,849	)		377,222
Inter-company advances				183,692			337,028		20,269		(540,989	)		-0-
Shareholder’s Equity				84,896			293,387		41,449		(331,983	)		87,749
		Total Liabilities and Shareholder’s Equity	$	632,750		$	819,062	$	90,320	$	(915,160	)	$	626,972

13

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2004

						Combined		Combined
						Guarantor		Non-Guarantor		Reclassifications/
			Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
			(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	(14,387	)	$	199	$	6,851	$	13,744		$	6,407
	Accounts receivable, net			114			117,097		30,208		(1,944	)		145,475
	Inventories			(81	)		151,187		26,188		-0-			177,294
	Other current assets			499			12,215		1,799		6,142			20,655
		Total Current Assets		(13,855	)		280,698		65,046		17,942			349,831
Investment in subsidiaries				341,088			-0-		-0-		(341,088	)		-0-
Inter-company advances				251,357			224,918		5,145		(481,420	)		-0-
Property, Plant and Equipment, net				2,266			95,494		12,121		-0-			109,881
Other Assets:
	Goodwill			-0-			78,424		4,141		-0-			82,565
	Net assets held for sale			-0-			1,035		-0-		-0-			1,035
	Other			43,908			37,316		1,490		(14,179	)		68,535
		Total Other Assets		43,908			116,775		5,631		(14,179	)		152,135
		Total Assets	$	624,764		$	717,885	$	87,943	$	(818,745	)	$	611,847
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities:
	Trade accounts payable		$	4,347		$	87,291	$	16,130	$	1,094		$	108,862
	Accrued expenses			6,291			44,529		8,925		-0-			59,745
	Current portion of long-term liabilities			-0-			587		2,344		2,881			5,812
		Total Current Liabilities		10,638			132,407		27,399		3,975			174,419
Long-Term Liabilities, less current portion
	8.375% Senior Subordinated Notes due 2014			210,000			-0-		-0-		-0-			210,000
	9.25% Senior Subordinated Notes due 2007			-0-			-0-		-0-		-0-			-0-
	Revolving credit maturing on December 31, 2010			120,600			-0-		-0-		-0-			120,600
	Other long-term debt			-0-			35,037		707		(30,968	)		4,776
	Other postretirement benefits and other long-term liabilities			5,315			21,875		3,261		(2,881	)		27,570
		Total Long-Term Liabilities		335,915			56,912		3,968		(33,849	)		362,946
Inter-company advances				206,503			242,202		17,425		(466,130	)		-0-
Shareholder’s Equity				71,708			286,364		39,151		(322,741	)		74,482
		Total Liabilities and Shareholder’s Equity	$	624,764		$	717,885	$	87,943	$	(818,745	)	$	611,847

14

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2005

					Combined		Combined
					Guarantor		Non-Guarantor
		Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
		(In thousands)
Net sales		$	-0-		$	203,545	$	26,984	$	(1,734	)	$	228,795
Cost of sales			-0-			173,373		21,790		(1,734	)		193,429
Gross profit			-0-			30,172		5,194		-0-			35,366
Operating Expenses:
	Selling, general and administrative expenses		392			16,520		3,202		150			20,264
Operating Income (loss)			(392	)		13,652		1,992		(150	)		15,102
Interest expense			(1,482	)		7,811		536		(150	)		6,715
Income (loss) before income taxes			1,090			5,841		1,456		-0-			8,387
Income taxes			146			-0-		564		-0-			710
	Net income (loss)	$	944		$	5,841	$	892	$	-0-		$	7,677

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2004

					Combined		Combined
					Guarantor		Non-Guarantor
		Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
		(In thousands)
Net sales		$	-0-		$	175,078	$	28,940	$	(3,110	)	$	200,908
Cost of sales			-0-			148,819		21,547		(3,110	)		167,256
Gross profit			-0-			26,259		7,393		-0-			33,652
Operating Expenses:
	Selling, general and administrative expenses		1,544			15,458		2,682		-0-			19,684
Operating Income (loss)			(1,544	)		10,801		4,711		-0-			13,968
Interest expense			(686	)		5,845		1,037		-0-			6,196
Income (loss) before income taxes			(858	)		4,956		3,674		-0-			7,772
Income taxes			200			-0-		835		-0-			1,035
	Net income (loss)	$	(1,058	)	$	4,956	$	2,839	$	-0-		$	6,737

15

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2005

					Combined		Combined
					Guarantor		Non-Guarantor
		Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
		(In thousands)
Net sales		$	-0-		$	406,194	$	55,635	$	(4,151	)	$	457,678
Cost of sales			-0-			346,870		44,497		(4,151	)		387,216
Gross profit			-0-			59,324		11,138		-0-			70,462
Operating Expenses:
	Selling, general and administrative expenses		2,513			32,652		6,358		300			41,823
Operating Income (loss)			(2,513	)		26,672		4,780		(300	)		28,639
Interest expense			(2,906	)		15,308		1,072		(300	)		13,174
Income (loss) before income taxes			393			11,364		3,708		-0-			15,465
Income taxes			(515	)		-0-		2,024		-0-			1,509
	Net income (loss)	$	908		$	11,364	$	1,684	$	-0-		$	13,956

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2004

					Combined		Combined
					Guarantor		Non-Guarantor
		Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
		(In thousands)
Net sales		$	-0-		$	342,827	$	56,180	$	(5,729	)	$	393,278
Cost of sales			-0-			291,354		43,763		(5,729	)		329,388
Gross profit			-0-			51,473		12,417		-0-			63,890
Operating Expenses:
	Selling, general and administrative expenses		2,205			29,901		5,222		-0-			37,328
Operating Income (loss)			(2,205	)		21,572		7,195		-0-			26,562
Interest expense			(917	)		11,256		1,993		-0-			12,332
Income (loss) before income taxes			(1,288	)		10,316		5,202		-0-			14,230
Income taxes			450			-0-		1,176		-0-			1,626
	Net income (loss)	$	(1,738	)	$	10,316	$	4,026	$	-0-		$	12,604

16

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2005

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
		(In thousands)
Net cash provided (used ) by operations		$	(45,135	)	$	29,496		$	(1,015	)	$	-0-	$	(16,654	)
Cash flows from investing activities:
	Purchases of property, plant and equipment, net		(203	)		(6,335	)		(1,127	)		-0-		(7,665	)
	Proceeds from sale of assets held for sale		-0-			1,100			-0-			-0-		1,100
Net cash provided (used ) in investing activities			(203	)		(5,235	)		(1,127	)		-0-		(6,565	)
Cash flows from financing activities:
	Proceeds from revolving credit arrangements		15,000			-0-			2,701			-0-		17,701
	Principal payments on revolving credit and long-term debt		-0-			(225	)		-0-			-0-		(225	)
Net cash provided (used ) by financing activities			15,000			(225	)		2,701			-0-		17,476
Increase (decrease) in cash and cash equivalents			(30,338	)		24,036			559			-0-		(5,743	)
Cash and cash equivalents at beginning of period			(643	)		199			6,851			-0-		6,407
Cash and cash equivalents at end of period		$	(30,981	)	$	24,235		$	7,410		$	-0-	$	664

17

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2004

					Combined			Combined
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
		(In thousands)
Net cash provided (used) by operations		$	(28,041	)	$	15,113		$	4,216		$	-0-	$	(8,712	)
Cash flows from investing activities:
	Purchases of property, plant and equipment, net		(27	)		(2,505	)		(1,034	)		-0-		(3,566	)
Net cash provided (used) in investing activities			(27	)		(2,505	)		(1,034	)		-0-		(3,566	)
Cash flows from financing activities:
	Proceeds from bank arrangements		11,700			-0-			771			-0-		12,471
	Principal payments on revolving credit and long-term debt		-0-			(224	)		-0-			-0-		(224	)
Net cash provided (used ) by financing activities			11,700			(224	)		771			-0-		12,247
Increase (decrease) in cash and cash equivalents			(16,368	)		12,384			3,953			-0-		(31	)
Cash and cash equivalents at beginning of period			(1,392	)		881			2,702			-0-		2,191
Cash and cash equivalents at end of period		$	(17,760	)	$	13,265		$	6,655		$	-0-	$	2,160

18

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholder

Park-Ohio Industries, Inc.

      We have reviewed the accompanying consolidated balance sheet of Park-Ohio Industries, Inc. and subsidiaries as of June 30, 2005 and the related consolidated statements of income for the three-month and six-month periods ended June 30, 2005 and 2004, the consolidated statement of shareholder’s equity for the six-month period ended June 30, 2005 and the consolidated statements of cash flows for the six-month periods ended June 30, 2005 and 2004. 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 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, 2004 and the related consolidated statements of income, shareholder’s equity, and cash flows for the year then ended, not presented herein, and in our report dated March 10, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2004, 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 8, 2005

19

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

      Our consolidated financial statements include the accounts of Park-Ohio Industries, Inc. and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Financial information for the three-month and six-month periods ended June 30, 2005 is not directly comparable to the financial information for the same period in 2004 primarily due to acquisitions.

Executive Overview

      We are an industrial supply chain logistics and diversified manufacturing business, operating in three segments: ILS, Aluminum Products and Manufactured Products. ILS provides customers with integrated supply chain management services for a broad range of high-volume, specialty production components. ILS customers receive various value-added services, such as engineering and design services, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of use delivery, electronic billing and ongoing technical support. The principal customers of ILS are in the heavy-duty truck, electrical controls, automotive and other vehicle, industrial equipment, power sports equipment, lawn and garden equipment, and semiconductor equipment industries. Aluminum Products casts and machines aluminum engine, transmission, brake, suspension and other components for automotive, agricultural equipment, construction equipment and heavy-duty truck 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, rubber products, 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 and end-users in the steel, automotive, oil and gas, rail, and aerospace and defense industries. Sales, earnings and other relevant financial data for these three segments are provided in Note F to the consolidated financial statements.

      In the first six months of 2005, we experienced continued growth, with record-high sales of $457.7 million and increased earnings compared to the same period in 2004.

      During 2004, we experienced the increased sales and profitability previously forecast, as the manufacturing economy returned to growth, particularly in three of our customer industries; heavy-duty truck, semiconductor equipment and equipment for steel manufacturing. Net sales in 2004 increased 30% compared to 2003. Profitability increased at a rate higher than that of sales, primarily due to cost reductions from our restructuring during the downturn in 2001, 2002 and 2003. During those years, we consolidated 28 supply chain logistics facilities and closed or sold 11 manufacturing plants.

      During 2004, we reinforced the long-term availability and attractive pricing of our liquidity, by refinancing both of our major sources of borrowed funds: senior subordinated notes and the bank revolving credit agreement. In November 2004, we sold $210.0 million of 8.375% Senior Subordinated Notes due 2014. We used the net proceeds to fund the tender and early redemption of $199.9 million of 9.25% Senior Subordinated Notes due 2007. We incurred debt extinguishment costs primarily related to premiums and other transaction costs associated with the tender and early redemption and wrote off deferred financing costs totaling $6.0 million associated with the repurchased senior subordinated notes. In December 2004, we amended our bank revolving credit agreement, extending its maturity to six years so that it now expires in December 2010, increasing the credit limit so that we may borrow up to $200.0 million subject to an asset based formula, and providing lower interest rate levels. Borrowings under the bank revolving credit agreement are secured by substantially all our assets. We had approximately $52.3 million of unused borrowing availability at June 30, 2005. Funds provided by operations plus available borrowings under the bank revolving credit agreement are expected to be adequate to meet our cash requirements.

      We acquired substantially all of the assets of the Amcast Components Group on August 23, 2004 for $10.0 million cash and the assumption of approximately $9 million of operating liabilities. We acquired the remaining 66% of the common stock of Japan Ajax Magnethermic Company (“Jamco”) on April 1, 2004 for cash existing on the balance sheet of Jamco at that date. On July 20, 2005, we completed the acquisition of the

20

assets of Purchased Parts Group, Inc. for $7.0 million in cash funded with borrowings under the Company’s bank revolving credit agreement, $2.0 million in a short-term note payable and the assumption of approximately $12.0 million of trade liabilities.

Results of Operations

Six Months 2005 versus Six Months 2004

Net Sales by Segment:

	Six Months
	Ended June 30,									Acquired/
							Percent			(Divested)
	2005		2004		Change		Change			Sales
ILS	$	256.4	$	231.1	$	25.3		11	%	$	0.0
Aluminum products		86.0		55.9		30.1		54	%		37.7
Manufactured products		115.3		106.3		9.0		8	%		3.5
Consolidated net sales	$	457.7	$	393.3	$	64.4		16	%	$	41.2

      Net sales increased by 16% in the first six months of 2005 compared to the same period in 2004. ILS sales increased primarily due to general economic growth, particularly as a result of significant growth in the heavy-duty truck industry, the addition of new customers, and increases in product range sold to existing customers. Aluminum Products sales increased in the first six months of 2005 primarily due to $37.7 million of sales from manufacturing plants acquired in August 2004 from the Amcast Components Group, partially offset by volume decreases in the automotive industry. Manufactured Products sales increased primarily in the induction, pipe threading equipment and forging businesses. Of this increase, $3.5 million was due to the April 2004 acquisition of the remaining 66% of the common stock of Jamco.

Cost of Products Sold & Gross Profit:

	Six Months
	Ended June 30,
									Percent
	2005			2004			Change		Change
Consolidated cost of products sold	$	387.2		$	329.4		$	57.8		18	%
Consolidated gross profit	$	70.5		$	63.9		$	6.6		10	%
Gross margin		15.4	%		16.2	%

      Cost of products sold increased 18% in the first six months of 2005 compared to the same period in 2004, while gross margin decreased to 15.4% from 16.2% in 2004. ILS gross margin decreased primarily due to steel price increases and changes in product mix. Aluminum Products gross margin decreased primarily due to a combination of the addition of the lower-margin Amcast business and product mix and pricing changes. The $37.7 million of sales from the acquired Amcast business generated significantly lower margins than the existing Aluminum Products business. We expect margins at the acquired plants to increase over time as a result of anticipated post-acquisition cost reductions, price increases and new business. Gross margin in the Manufactured Products segment increased, primarily as a result of increased sales and overhead efficiencies achieved in the induction equipment, pipe threading equipment and forging businesses.

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

	Six Months
	Ended June 30,
									Percent
	2005			2004			Change		Change
Consolidated SG&A expenses	$	41.8		$	37.3		$	4.5		12	%
SG&A percent		9.1	%		9.5	%

21

      Consolidated SG&A expenses increased 12% in the first six months of 2005 compared to the same period in 2004. Approximately $2.3 million of the SG&A increase was due to the acquisitions of Jamco and Amcast Components Group, while bonus expenses of $1.1 million and Sarbanes-Oxley compliance costs of $.6 million also contributed to the increased SG&A expenses. The remainder of the increase was primarily due to increased sales and production volumes. SG&A expenses as a percent of sales decreased by .4%. SG&A expenses were reduced in the first six months 2005 compared to 2004 by a $.2 million increase in net pension credits reflecting improved returns on pension plan assets.

Interest Expense:

	Six Months
	Ended June 30,
										Percent
	2005			2004			Change			Change
Interest expense	$	13.2		$	12.3		$	0.9			7	%
Average outstanding borrowings	$	356.8		$	316.4		$	40.4			13	%
Average borrowing rate		7.39	%		7.80	%		(41	)		basis points

      Interest expense increased $.9 million in the first six months of 2005 compared to the same period in 2004, primarily due to higher average debt outstanding, partially offset by lower average interest rates during the first six months of 2005. The increase in average borrowings resulted primarily from higher working capital requirements and the purchase of Amcast Components Group in August 2004. The lower average borrowing rate in the first six months of 2005 was due primarily to the lower interest rate of 8.375% on our senior subordinated notes sold in November 2004 compared to the 9.25% interest rate on the senior subordinated notes outstanding during the first six months of 2004. The average borrowing rate in the first six months of 2005 was also reduced by decreased interest rates under our bank revolving credit agreement.

Income Tax:

      Income taxes of $1.5 million were provided in the six-month period ended June 30, 2005, a 10% effective income tax rate, compared to income taxes of $1.6 million provided in the corresponding period of 2004, an 11% effective income tax rate. In both periods, these taxes consisted primarily of state and foreign taxes on profitable operations. In neither period did the income tax provision include federal income taxes. At December 31, 2004, our subsidiaries had $47.7 million of net operating loss carryforwards for federal tax purposes. We have recognized a tax benefit for these loss carryforwards only to the extent that they offset our first and second quarter 2005 federal tax provisions.

Second Quarter 2005 versus Second Quarter 2004

Net Sales by Segment:

	Three Months
	Ended June 30,										Acquired/
								Percent			(Divested)
	2005		2004		Change			Change			Sales
ILS	$	129.5	$	114.8	$	14.7			13	%	$	0.0
Aluminum products		43.1		28.3		14.8			52	%		18.7
Manufactured products		56.2		57.8		(1.6	)		(3	)%		0.0
Consolidated net sales	$	228.8	$	200.9	$	27.9			14	%	$	18.7

      Net sales increased 14% in the second quarter of 2005, compared to the same quarter in 2004. ILS sales increased primarily due to general economic growth, particularly as a result of significant growth in the heavy-duty truck industry, the addition of new customers, and increases in product range sold to existing customers. Aluminum Products sales increased in the second quarter of 2005 due to $18.7 million of sales from manufacturing plants acquired in August 2004 from the Amcast Components Group, partially offset by volume decreases in the automotive industry. Manufactured Products sales decreased in the induction and

22

pipe threading equipment businesses, primarily due to timing of capital equipment orders, and in the rubber products business primarily due to weak sales in the automotive industry.

Cost of Products Sold & Gross Profit:

	Three Months
	Ended June 30,
									Percent
	2005			2004			Change		Change
Consolidated cost of products sold	$	193.4		$	167.3		$	26.1		16	%
Consolidated gross profit	$	35.4		$	33.7		$	1.7		5	%
Gross margin		15.5	%		16.8	%

      Cost of products sold increased 16% in the second quarter of 2005 compared to the same quarter in 2004, while gross margin decreased to 15.5% from 16.8% in 2004. ILS gross margin decreased primarily due to steel price increases and changes in product mix. Aluminum Products gross margin decreased primarily due to a combination of the addition of the lower-margin Amcast business and product mix and pricing changes. The $18.7 million of sales from the acquired Amcast business generated significantly lower margins than the existing Aluminum Products business. We expect margins at the acquired plants to increase over time, as a result of anticipated post-acquisition cost reductions, price increases and new business. Gross margin in the Manufactured Products segment increased, primarily as a result of slightly higher margins on capital equipment contracts in the second quarter of 2005.

SG&A Expenses:

	Three Months
	Ended June 30,
									Percent
	2005			2004			Change		Change
Consolidated SG&A expenses	$	20.3		$	19.7		$	0.6		3	%
SG&A percent		8.9	%		9.8	%

      Consolidated SG&A expenses increased 3% in the second quarter of 2005 compared to the same quarter in 2004 primarily due to a $.8 million increase due to the acquisition of Amcast Components Group. SG&A expenses as a percent of sales decreased by .9%. SG&A expenses were reduced in the second quarter of 2005 compared to the same period in 2004 by a $.1 million increase in net pension credits reflecting improved returns on pension plan assets.

Interest Expense:

	Three Months
	Ended June 30,
									Percent
	2005			2004			Change		Change
Interest expense	$	6.7		$	6.2		$	0.5		8	%
Average outstanding borrowings	$	361.4		$	319.2		$	42.2		13	%
							(33)
Average borrowing rate		7.43	%		7.76	%				basis points

      Interest expense increased $.5 million in the second quarter of 2005 compared to the same period in 2004, primarily due to higher average debt outstanding, partially offset by lower average interest rates during the second quarter of 2005. The increase in average borrowings resulted primarily from higher working capital requirements and the purchase of Amcast Components Group in August 2004. The lower average borrowing rate in the second quarter of 2005 was due primarily to the lower interest rate of 8.375% on our senior subordinated notes sold in November 2004 compared to the 9.25% interest rate on the senior subordinated notes outstanding during the second quarter of 2004. The average borrowing rate in the second quarter of 2005 was also reduced by decreased interest rates under our bank revolving credit agreement.

23

Income Tax:

      Income taxes of $.7 million were provided in the three-month period ended June 30, 2005, an 8% effective income tax rate, compared to income taxes of $1.0 million provided in the corresponding period of 2004, a 13% effective income tax rate. In both periods, these taxes consisted primarily of state and foreign taxes on profitable operations. In neither period did the income tax provision include federal income taxes. At December 31, 2004, our subsidiaries had $47.7 million of net operating loss carryforwards for federal tax purposes. We have recognized a tax benefit for these loss carryforwards only to the extent that they offset our first and second quarter 2005 federal tax provisions.

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 scheduled plant maintenance in the third quarter, which coincide with customer plant shutdowns, and 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

      This 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. 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, but are not limited to, 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, including our recent acquisition of the assets of Purchased Parts Group, Inc.; changes in general domestic economic conditions such as inflation rates, interest rates, tax rates and 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, including without limitation, asbestos 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. 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 Registered Public Accounting Firm

      The consolidated financial statements at June 30, 2005, and for the three-month and six-month periods ended June 30, 2005 and 2004, have been reviewed, prior to filing, by Ernst & Young LLP, our registered public accounting firm, and their report is included herein.

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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 in Rules 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 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 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 will not have a material adverse effect on our financial condition, liquidity or results of operations.

      At June 30, 2005, we were a co-defendant in approximately 1,000 cases asserting claims on behalf of approximately 9,000 plaintiffs alleging personal injury as a result of exposure to asbestos. These asbestos cases generally relate to the 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 22 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 another 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. In the final case, the plaintiff has alleged compensatory damages in the amount of $0.41 million and punitive damages in the amount of $2.5 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

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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.

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/Richard P. Elliott
 

Name: Richard P. Elliott

Title: Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Date  August 10, 2005

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EXHIBIT INDEX

QUARTERLY REPORT ON FORM 10-Q

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

FOR THE QUARTER ENDED JUNE 30, 2005

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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