Park Ohio Industries 10-Q 2011 Q3 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 September 30, 2011

or

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

For the transition period from                to                

Commission file number 333-43005-01

Park-Ohio Industries, Inc.

(Exact name of registrant as specified in its charter)

Ohio	34-6520107
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6065 Parkland Boulevard, Cleveland, Ohio	44124
(Address of principal executive offices)	(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  ¨    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 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

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 filer  ¨	Accelerated filer  ¨	Non-accelerated filer  þ	Smaller reporting company  ¨
	(Do not check if a smaller reporting company)

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

All of the outstanding capital stock of the registrant is held by Park-Ohio Holdings Corp. As of October 31, 2011, 100 shares of the registrant’s common stock, $1 par value, were outstanding.

The Exhibit Index is located on page 30.

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Condensed consolidated balance sheets — September 30, 2011 and December 31, 2010		3
	Condensed consolidated statements of income — Three and nine months ended September 30, 2011 and 2010		4
	Condensed consolidated statement of shareholder’s equity — Nine months ended September 30, 2011		5
	Condensed consolidated statements of cash flows — Nine months ended September 30, 2011 and 2010		6
	Notes to unaudited condensed consolidated financial statements — September 30, 2011		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 3.	Quantitative and Qualitative Disclosure About Market Risk		26
Item 4.	Controls and Procedures		26
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		27
Item 1A.	Risk Factors		28
Item 6.	Exhibits		28
SIGNATURES			29
EXHIBIT INDEX			30

2

PART I. Financial Information

ITEM 1. Financial Statements

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited) September  30, 2011			December 31, 2010
	(Dollars in thousands)
ASSETS
Current Assets
Cash and cash equivalents	$	63,632		$	35,075
Accounts receivable, less allowances for doubtful accounts of $5,885 at September 30, 2011 and $6,011 at December 31, 2010		144,664			126,409
Inventories		208,592			192,542
Deferred tax assets		10,496			10,496
Unbilled contract revenue		18,557			12,751
Other current assets		13,867			12,797
Total Current Assets		459,808			390,070
Property, Plant and Equipment		260,005			256,053
Less accumulated depreciation		194,403			184,284
		65,602			71,769
Other Assets
Goodwill		9,573			9,100
Other		90,055			84,340
	$	625,038		$	555,279
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Trade accounts payable	$	115,479		$	95,690
Payable to affiliates		1,691			11,879
Accrued expenses		76,912			59,200
Current portion of long-term debt		1,289			13,756
Current portion of other postretirement benefits		2,178			2,178
Total Current Liabilities		197,549			182,703
Long-Term Liabilities, less current portion
Senior Notes		250,000			183,835
Credit facility		91,200			113,300
Other long-term debt		4,836			5,322
Deferred tax liability		9,721			9,721
Other postretirement benefits and other long-term liabilities		22,138			22,863
		377,895			335,041
Shareholder’s Equity
Common Stock, par value $1 per share		-0-			-0-
Additional paid-in capital		47,100			47,850
Retained deficit		(508	)		(12,723	)
Accumulated other comprehensive income		3,002			2,408
		49,594			37,535
	$	625,038		$	555,279

Note: The balance sheet at December 31, 2010 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 INCOME (UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011		2010			2011		2010
	(Amounts in thousands)
Net sales	$	243,544	$	202,986		$	731,980	$	592,990
Cost of products sold		201,670		168,006			602,942		495,374
Gross profit		41,874		34,980			129,038		97,616
Selling, general and administrative expenses		25,642		21,727			79,065		63,969
Restructuring and asset impairment charges		5,359		3,539			5,359		3,539
Operating income		10,873		9,714			44,614		30,108
Gain on acquisition of business		-0-		(2,210	)		-0-		(2,210	)
Interest expense		6,218		6,488			26,331		18,130
Income before income taxes		4,655		5,436			18,283		14,188
Income taxes		1,178		(1,152	)		6,068		1,095
Net income	$	3,477	$	6,588		$	12,215	$	13,093

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)

	Common Stock		Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Income		Total
	(Dollars in thousands)
Balance at January 1, 2011	$	-0-	$	47,850		$	(12,723	)	$	2,408	$	37,535
Comprehensive income:
Net income							12,215					12,215
Foreign currency translation adjustment										245		245
Pension and post retirement benefit adjustments, net of tax										349		349
Comprehensive income												12,809
Distribution of capital to shareholder				(750	)							(750	)
Balance at September 30, 2011	$	-0-	$	47,100		$	(508	)	$	3,002	$	49,594

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)

	Nine Months Ended September 30,
	2011			2010
	(Dollars in thousands)
OPERATING ACTIVITIES
Net income	$	12,215		$	13,093
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,833			12,099
Gain on acquisition of business		-0-			(2,210	)
Restructuring and asset impairment charge		5,359			3,539
Debt extinguishment costs		7,335			-0-
Changes in operating assets and liabilities:
Accounts receivable		(18,255	)		(21,403	)
Inventories and other current assets		(22,926	)		29,107
Accounts payable and accrued expenses		37,501			35,552
Other		(14,722	)		(11,240	)
Net Cash Provided by Operating Activities		18,340			58,537
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net		(8,316	)		(3,516	)
Acquisitions		-0-			(16,000	)
Net Cash Used by Investing Activities		(8,316	)		(19,516	)
FINANCING ACTIVITIES
Payments on term loans and other debt		(36,052	)		-0-
(Payments on) proceeds from revolving credit facility		1,000			(13,800	)
Issuance of 8.125% senior notes due 2021, net of deferred financing costs		244,970			-0-
Redemption of 8.375% senior subordinated notes due 2014		(189,555	)		-0-
Bank debt issue costs		(1,080	)		(4,141	)
Distribution of capital to shareholder		(750	)		(750	)
Capital contribution from parent		-0-			(6,762	)
Net Cash Provided (Used) by Financing Activities		18,533			(25,453	)
Increase in Cash and Cash Equivalents		28,557			13,568
Cash and Cash Equivalents at Beginning of Period		35,075			21,976
Cash and Cash Equivalents at End of Period	$	63,632		$	35,544
Taxes paid	$	2,466		$	1,241
Interest paid (includes $5,720 of senior subordinated notes redemption costs in 2011)		10,449			13,169

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

September 30, 2011

(Dollars in thousands)

NOTE A — Basis of Presentation

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by 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 nine-month periods ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. 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, 2010.

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 and point-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.

7

Results by business segment were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net sales:
Supply Technologies	$	124,835		$	103,885		$	373,583		$	295,308
Aluminum products		30,259			35,554			102,752			109,714
Manufactured products		88,450			63,547			255,645			187,968
	$	243,544		$	202,986		$	731,980		$	592,990
Income before income taxes:
Supply Technologies	$	8,545		$	6,428		$	25,597		$	16,223
Aluminum products		58			1,913			4,676			6,148
Manufactured products		11,838			8,258			31,717			20,787
		20,441			16,599			61,990			43,158
Corporate expenses		(4,209	)		(3,346	)		(12,017	)		(9,511	)
Gain on acquisition of business		-0-			2,210			-0-			2,210
Asset impairment charge		(5,359	)		(3,539	)		(5,359	)		(3,539	)
Interest expense (includes $7,335 of debt extinguishment costs in 2011)		(6,218	)		(6,488	)		(26,331	)		(18,130	)
Income before income taxes	$	4,655		$	5,436		$	18,283		$	14,188

Identifiable assets were as follows:

	September 30, 2011		December 31, 2010
Supply Technologies	$	237,515	$	217,915
Aluminum products		69,368		66,219
Manufactured products		206,344		188,017
General corporate		111,811		83,128
	$	625,038	$	555,279

For the nine months ended September 30, 2011, sales of the Manufactured Products segment consisted of capital equipment (75%), forged and machined products (18%) and rubber products (7%). Engineered specialty products sales represent approximately 13% of the Supply Technologies segment sales for the nine months ended September 30, 2011.

NOTE C — Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) amended Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill and Other.” This amendment allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendment will be effective for the Company in 2012, with early adoption permitted. The adoption of this amendment will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

8

In June 2011, the FASB amended ASC 220, “Presentation of Comprehensive Income.” This amendment will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amended guidance, which must be applied retroactively, is effective for interim and annual periods beginning after December 15, 2011, with earlier adoption permitted. This Accounting Standards Update impacts presentation only and will have no effect on our financial position, results of operations or cash flows.

In May 2011, the FASB amended ASC 820, “Fair Value Measurement.” This amendment is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. This guidance clarifies the application of existing fair value measurements and disclosures, and changes certain principles or requirements for fair value measurements and disclosures. The amendment is effective for interim and annual periods beginning after December 15, 2011. The adoption of this amendment will not have a material impact on our consolidated financial statements.

NOTE D — Inventories

The components of inventory consist of the following:

	September 30, 2011		December 31, 2010
Finished goods	$	124,820	$	116,202
Work in process		24,584		24,339
Raw materials and supplies		59,188		52,001
	$	208,592	$	192,542

NOTE E — Pension Plans and Other Postretirement Benefits

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

	Pension Benefits												Postretirement Benefits
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010			2011			2010			2011			2010
Service costs	$	604		$	81		$	1,317		$	243		$	12		$	9		$	36		$	27
Interest costs		596			643			1,787			1,929			228			248			683			744
Expected return on plan assets		(2,239	)		(1,984	)		(6,707	)		(5,952	)		-0-			-0-			-0-			-0-
Transition obligation		(10	)		(10	)		(30	)		(30	)		-0-			-0-			-0-			-0-
Amortization of prior service cost		11			15			33			45			(24	)		(24	)		(72	)		(72	)
Recognized net actuarial loss		-0-			82			-0-			246			129			107			388			321
Benefit (income) costs	$	(1,038	)	$	(1,173	)	$	(3,600	)	$	(3,519	)	$	345		$	340		$	1,035		$	1,020

9

NOTE F — Comprehensive Income

Total comprehensive income (loss) was as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011		2010
Net income	$	3,477		$	6,588	$	12,215	$	13,093
Foreign currency translation		(3,191	)		5,115		245		(775	)
Pension and post retirement benefit adjustments, net of tax		137			447		349		837
Total comprehensive income	$	423		$	12,150	$	12,809	$	13,155

The components of accumulated comprehensive income at September 30, 2011 and December 31, 2010 were as follows:

	September 30, 2011			December 31, 2010
Foreign currency translation adjustment	$	6,454		$	6,209
Pension and postretirement benefit adjustments, net of tax		(3,452	)		(3,801	)
	$	3,002		$	2,408

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:

	2011			2010
Balance at January 1	$	4,046		$	2,760
Claims paid during the year		(3,260	)		(789	)
Additional warranties issued during the first six months		3,265			1,416
Balance at September 30	$	4,051		$	3,387

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 reported effective tax rate for full-year 2011, including discrete items, is estimated to be approximately 31% and is lower than the 35% U.S. federal statutory rate primarily due to anticipated income in the United States for which the Company will record no tax expense due to a full valuation allowance against its U.S. net deferred tax assets 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 reported effective tax rate in the first nine months of 2011 and 2010 was 33.2% and 7.8%, respectively. The primary reason for the variance is due to a provision for foreign income taxes of $2,100 resulting from the retirement of our 8.375% Senior Subordinated Notes due 2014 (the “Senior Subordinated Notes”) that were held by a foreign affiliate. The underlying effective tax rate on operations for the first nine months of 2011 and 2010 was 21.8% and 7.8%, respectively. The primary reason for the variance is due to a change in the mix of income of foreign affiliates.

10

There have been no material changes to the balance of unrecognized tax benefits reported at December 31, 2010.

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 Senior Subordinated Notes approximated $187,512 at December 31, 2010. The fair value of the 8.125% Senior Notes due 2021 (the “Notes”) approximated $237,500 at September 30, 2011. The fair value estimates are based on a third party’s bid price.

NOTE J — Financing Arrangements

Long-term debt consists of the following:

	September 30, 2011		December 31, 2010
8.125% senior notes due 2021	$	250,000	$	-0-
8.375% senior subordinated notes due 2014		-0-		183,835
Revolving credit		91,200		90,200
Term loan A		-0-		25,900
Term loan B		-0-		8,400
Other		6,125		7,878
		347,325		316,213
Less current maturities		1,289		13,756
Total	$	346,036	$	302,457

On April 7, 2011, the Company completed the sale of $250,000 in the aggregate principal amount of the Notes. The Notes bear an interest rate of 8.125% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2011. The Notes mature on April 1, 2021. In connection with the sale of the Notes, the Company also entered into a fourth amended and restated credit agreement (the “Amended Credit Agreement”). The Amended Credit Agreement, among other things, provides an increased credit facility up to $200,000, extends the maturity date of the facility to April 7, 2016 and amends fee and pricing terms. Furthermore, the Company has the option, pursuant to the Amended Credit Agreement, to increase the availability under the revolving credit facility by $50,000. At September 30, 2011, the Company had approximately $74,011 of unused borrowing capacity available under the revolving credit facility. The Company also purchased all of its outstanding $183,835 in the aggregate principal amount of Senior Subordinated Notes that were not held by its affiliates pursuant to a tender offer and subsequent redemption, repaid all of the term loan A and term loan B outstanding under its then existing credit facility and retired the Senior Subordinated Notes totaling $26,165 in aggregate principal amount that were held by an affiliate. The Company incurred debt extinguishment costs related primarily to premiums and other transaction costs associated with the tender offer and subsequent redemption of the Senior Subordinated Notes, wrote off deferred financing costs totaling $7,335 and recorded a provision for foreign income taxes of $2,100 resulting from the retirement of the Senior Subordinated Notes that were held by an affiliate.

11

NOTE K — Accounts Receivable

During the first nine months of 2011 and 2010, the Company sold approximately $43,087 and $24,637, respectively, of accounts receivable to mitigate accounts receivable concentration risk and to provide additional financing capacity and recorded a loss in the amount of $190 and $102, respectively, in the Condensed Consolidated Statements of Income. These losses represented implicit interest on the transactions.

NOTE L — Acquisition

On December 31, 2010, the Company, through its subsidiary Ajax Tocco Magnathermic, acquired the assets and the related induction heating intellectual property of ABP Induction’s United States heating business operating as Pillar Induction (“Pillar”). Pillar provides complete turnkey automated induction power systems and aftermarket parts and service to a worldwide market.

The assets of Pillar have been integrated into the Company’s manufactured products segment. The acquisition was accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total estimated purchase price is allocated to Pillar’s net tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values as of December 31, 2010, the effective date of the acquisition. Based on management’s valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the purchase price is allocated as follows:

Accounts receivable	$ 3,164
Inventories		2,782
Prepaid expenses and other current assets		178
Property, plant and equipment		447
Customer relationships		3,480
Technological know how		1,890
Trade name and other intangible assets		710
Accounts payable		(1,202	)
Accrued expenses		(2,133	)
Goodwill		990
Total purchase price	$	10,306

The purchase price allocation was finalized during March 2011 and reflects the working capital adjustment as of December 31, 2010. There were no significant direct transaction costs included in selling, general and administrative expenses during the first nine months of 2011.

During the third quarter of 2010, the Company also completed the acquisition of the ACS business (“ACS”) of Lawson Products, Inc. and substantially all of the assets of Rome Die Casting LLC (“Rome”). The following unaudited pro forma information is provided to present a summary of the combined results of the Company’s operations with ACS, Rome and Pillar as if the acquisitions had occurred on January 1, 2010. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of what the results would have been had the acquisitions been completed at the date indicated above.

	Three Months  Ended September 30, 2010		Nine Months  Ended September 30, 2010
Pro forma revenues	$	223,397	$	657,721
Pro forma net income		7,294		13,314

12

NOTE M — Restructuring and Asset Impairment Charges

As a result of incurred losses in the third quarter of 2011, projected losses for fiscal year 2011 and planned restructuring, the Company evaluated the long-lived assets of its rubber products business unit for impairment. Based on management’s analysis, certain long-lived assets were deemed abandoned and were written down to their scrap or liquidation value and the Company recorded a charge of $5,359.

During the third quarter of 2010, the Company reviewed one of its investments, determined there was diminution in value and, therefore, recorded an asset impairment charge of $3,539.

NOTE O — Commitments and Contingencies

We are subject to various pending and threatened legal proceedings arising in the ordinary course of business. Although we cannot precisely predict the amount of any liability that may ultimately arise with respect to any of these matters, we record provisions when we consider the liability probable and reasonably estimable. Our provisions are based on historical experience and legal advice, reviewed quarterly and adjusted according to developments. Estimating probable losses requires the analysis of multiple forecasted factors that often depend on judgments about potential actions by third parties, such as regulators, courts, and state and federal legislatures. Changes in the amounts of our loss provisions, which can be material, affect our financial condition. Due to the inherent uncertainties in the process undertaken to estimate potential losses, we are unable to estimate an additional range of loss in excess of our accruals. While it is reasonably possible that such excess liabilities, if they were to occur, could be material to operating results in any given quarter or year of their recognition, we do not believe that it is reasonably possible that such excess liabilities would have a material adverse effect on our long-term results of operations, liquidity or consolidated financial position.

Our subsidiaries are involved in a number of contractual and warranty related disputes. At this time, we cannot reasonably determine the probability of a loss, and the timing and amount of loss, if any, cannot be reasonably estimated. We believe that appropriate liabilities for these contingencies have been recorded; however, actual results may differ materially from our estimates.

NOTE P — Supplemental Guarantor Information

Each of the material domestic direct and indirect wholly-owned subsidiaries of the Company (collectively the “Guarantor Subsidiaries”) has fully and unconditionally guaranteed, on a joint and several basis, to pay principal, premium and interest with respect to the Notes. 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 September 30, 2011 and December 31, 2010, condensed consolidating statements of operations for the three months and nine months ended September 30, 2011 and 2010, condensed consolidating statements of cash flows for the nine months ended September 30, 2011 and 2010 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.

Certain comparative amounts in the accompanying supplemental condensed consolidated financial statements as of December 31, 2010 and for the three-month and nine-month periods ended September 30, 2010 have been reclassified to conform to the current year presentation and to properly present the Parent’s investment and earnings in subsidiaries. These classification adjustments did not affect the Company’s previously reported interim or annual consolidated balance sheets, consolidated statements of income, consolidated statements of stockholder’s equity or consolidated statements of cash flows.

13

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

September 30, 2011

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Reclassifications/ Eliminations			Consolidated
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	629		$	-0-		$	63,003		$	-0-		$	63,632
Accounts receivable, net		-0-			110,029			34,635			-0-			144,664
Inventories		-0-			171,629			36,963			-0-			208,592
Other current assets		542			23,741			8,141			-0-			32,424
Deferred tax assets		(6,430	)		16,459			467			-0-			10,496
Total Current Assets		(5,259	)		321,858			143,209			-0-			459,808
Investment in subsidiaries		331,986			101,722			-0-			(433,708	)		-0-
Inter-company advances		51,583			-0-			47,884			(99,467	)		-0-
Property, Plant and Equipment, net		5,352			55,351			4,899			-0-			65,602
Other Assets:
Goodwill		-0-			6,908			2,665			-0-			9,573
Other		70,837			17,528			1,690			-0-			90,055
Total Assets	$	454,499		$	503,367		$	200,347		$	(533,175	)	$	625,038
LIABILITIES AND SHAREHOLDER’S (DEFICIT) EQUITY
Current Liabilities:
Trade accounts payable	$	11,184		$	87,127		$	17,168		$	-0-		$	115,479
Payable to affiliates		1,691			-0-			-0-			-0-			1,691
Accrued expenses		15,659			43,125			18,128			-0-			76,912
Current portion of long-term liabilities		2,178			1,289			-0-			-0-			3,467
Total Current Liabilities		30,712			131,541			35,296			-0-			197,549
Long-Term Liabilities, less current portion
8.125% Senior Notes due 2021		250,000			-0-			-0-			-0-			250,000
Revolving credit		91,200			-0-			-0-			-0-			91,200
Other long-term debt		-0-			4,836			-0-			-0-			4,836
Deferred tax liability		11,267			(1,238	)		(308	)		-0-			9,721
Other postretirement benefits and other long-term liabilities		20,437			970			731			-0-			22,138
Total Long-Term Liabilities		372,904			4,568			423			-0-			377,895
Inter-company advances		1,289			35,272			62,906			(99,467	)		-0-
Shareholder’s (Deficit) Equity		49,594			331,986			101,722			(433,708	)		49,594
Total Liabilities and Shareholder’s (Deficit) Equity	$	454,499		$	503,367		$	200,347		$	(533,175	)	$	625,038

14

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2010

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Reclassifications/ Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,339		$	-0-		$	33,736		$	-0-		$	35,075
Accounts receivable, net		-0-			101,268			25,141			-0-			126,409
Inventories		-0-			159,962			32,580			-0-			192,542
Other current assets		1,947			9,110			14,491			-0-			25,548
Deferred tax assets		(6,430	)		16,459			467			-0-			10,496
Total Current Assets		(3,144	)		286,799			106,415			-0-			390,070
Investment in subsidiaries		289,007			80,059			-0-			(369,066	)		-0-
Inter-company advances		80,416			-0-			36,926			(117,342	)		-0-
Property, Plant and Equipment, net		5,505			60,782			5,482			-0-			71,769
Other Assets:
Goodwill		-0-			6,503			2,597			-0-			9,100
Other		63,536			19,974			14,466			(13,636	)		84,340
Total Assets	$	435,320		$	454,117		$	165,886		$	(500,044	)	$	555,279
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities:
Trade accounts payable	$	9,726		$	69,108		$	16,856		$	-0-		$	95,690
Payable to affiliates		11,879			-0-			-0-			-0-			11,879
Accrued expenses		3,496			39,464			16,240			-0-			59,200
Current portion of long-term liabilities		13,378			1,327			1,229			-0-			15,934
Total Current Liabilities		38,479			109,899			34,325			-0-			182,703
Long-Term Liabilities, less current portion
8.375% Senior Subordinated Notes due 2014		210,000			-0-			-0-			(26,165	)		183,835
Revolving credit		113,300			-0-			-0-			-0-			113,300
Other long-term debt		-0-			5,322			-0-			-0-			5,322
Deferred tax liability		11,267			(1,238	)		(308	)		-0-			9,721
Other postretirement benefits and other long-term liabilities		21,017			1,630			216			-0-			22,863
Total Long-Term Liabilities		355,584			5,714			(92	)		(26,165	)		335,041
Inter-company advances		16,251			49,497			51,594			(117,342	)		-0-
Shareholder’s Equity		25,006			289,007			80,059			(356,537	)		37,535
Total Liabilities and Shareholder’s Equity	$	435,320		$	454,117		$	165,886		$	(500,044	)	$	555,279

15

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2011

	Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-	$	602,732		$	129,248		$	-0-		$	731,980
Cost of sales		-0-		503,343			99,599			-0-			602,942
Gross profit		-0-		99,389			29,649			-0-			129,038
Selling, general and administrative expenses		8,618		51,196			19,251			-0-			79,065
Restructuring and asset impairment charges		-0-		5,148			211			-0-			5,359
Income (loss) from subsidiaries		47,030		14,671			-0-			(61,701	)		-0-
Operating income		38,412		57,716			10,187			(61,701	)		44,614
Gain on bond redemption		-0-		-0-			(12,656	)		12,656			-0-
Interest expense		26,197		(245	)		379			-0-			26,331
Income (loss) before income taxes		12,215		57,961			22,464			(74,357	)		18,283
Income taxes		-0-		375			7,793			(2,100	)		6,068
Net income (loss)	$	12,215	$	57,586		$	14,671		$	(72,257	)	$	12,215

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2010

	Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-	$	491,400		$	101,590	$	-0-		$	592,990
Cost of sales		-0-		418,302			77,072		-0-			495,374
Gross profit		-0-		73,098			24,518		-0-			97,616
Selling, general and administrative expenses		9,083		41,148			13,738		-0-			63,969
Income (loss) from subsidiaries		39,010		7,950			-0-		(46,960	)		-0-
Asset impairment charge		-0-		3,539			-0-		-0-			3,539
Operating income		29,927		36,361			10,780		(46,960	)		30,108
Gain on acquisition of business		-0-		(2,210	)		-0-		-0-			(2,210	)
Interest expense		16,834		555			741		-0-			18,130
Income before income taxes		13,093		38,016			10,039		(46,960	)		14,188
Income taxes		-0-		(994	)		2,089		-0-			1,095
Net income	$	13,093	$	39,010		$	7,950	$	(46,960	)	$	13,093

16

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2011

	Parent		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-	$	197,886	$	45,658	$	-0-		$	243,544
Cost of sales		-0-		166,135		35,535		-0-			201,670
Gross profit		-0-		31,751		10,123		-0-			41,874
Selling, general and administrative expenses		2,752		16,752		6,138		-0-			25,642
Restructuring and asset impairment charges		-0-		5,148		211		-0-			5,359
Income (loss) from subsidiaries		12,325		2,636		-0-		(14,961	)		-0-
Operating income		9,573		12,487		3,774		(14,961	)		10,873
Interest expense		6,096		37		85		-0-			6,218
Income (loss) before income taxes		3,477		12,450		3,689		(14,961	)		4,655
Income taxes		-0-		125		1,053		-0-			1,178
Net income (loss)	$	3,477	$	12,325	$	2,636	$	(14,961	)	$	3,477

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2010

	Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
Net sales	$	-0-	$	170,475		$	32,511	$	-0-		$	202,986
Cost of sales		-0-		143,164			24,842		-0-			168,006
Gross profit		-0-		27,311			7,669		-0-			34,980
Selling, general and administrative expenses		3,626		12,751			5,350		-0-			21,727
Income (loss) from subsidiaries		16,188		1,954			-0-		(18,142	)		-0-
Asset impairment charge		-0-		3,539			-0-		-0-			3,539
Operating income		12,562		12,975			2,319		(18,142	)		9,714
Gain on acquisition of business		-0-		(2,210	)		-0-		-0-			(2,210	)
Interest expense		5,974		231			283		-0-			6,488
Income before income taxes		6,588		14,954			2,036		(18,142	)		5,436
Income taxes		-0-		(1,234	)		82		-0-			(1,152	)
Net income	$	6,588	$	16,188		$	1,954	$	(18,142	)	$	6,588

17

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2011

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Net cash provided (used) by operations	$	(20,646	)	$	36,753		$	(592	)		2,825		$	18,340
Cash flows from investing activities:
Purchases of property, plant and equipment, net		(99	)		(7,883	)		(334	)		-0-			(8,316	)
Proceeds from bond redemption		-0-			-0-			26,165			(26,165	)		-0-
Net cash (used) provided in investing activities		(99	)		(7,883	)		25,831			(26,165	)		(8,316	)
Cash flows from financing activities:
Bank debt issue cost		(1,080	)		-0-			-0-			-0-			(1,080	)
Intercompany account change		26,400			(28,832	)		5,257			(2,825	)		-0-
Issuance of 8.125% senior notes net of deferred financing costs		244,970			-0-			-0-			-0-			244,970
Redemption of 8.375% senior subordinated notes due 2014		(215,720	)		-0-			-0-			26,165			(189,555	)
Distribution of capital to shareholder		(750	)		-0-			-0-			-0-			(750	)
Proceeds from revolving credit facility		1,000			-0-			-0-			-0-			1,000
(Payments) on term loans and other debt		(34,785	)		(38	)		(1,229	)		-0-			(36,052	)
Net cash provided (used) by financing activities		20,035			(28,870	)		4,028			23,340			18,533
Increase (decrease) in cash and cash equivalents		(710	)		-0-			29,267			-0-			28,557
Cash and cash equivalents at beginning of period		1,339			-0-			33,736			-0-			35,075
Cash and cash equivalents at end of period	$	629			-0-		$	63,003		$	-0-		$	63,632

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2010

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Net cash provided (used) by operations	$	113		$	50,740		$	9,766		$	(2,082	)	$	58,537
Cash flows from investing activities:
Purchases of property, plant and equipment, net		(23	)		(8,164	)		4,671			-0-			(3,516	)
Acquisitions		-0-			(16,000	)		-0-			-0-			(16,000	)
Net cash provided (used) in investing activities		(23	)		(24,164	)		4,671			-0-			(19,516	)
Cash flows from financing activities:
Intercompany account change		25,226			(26,576	)		(732	)		2,082			-0-
(Payments on) revolving credit facility		(13,800	)		-0-			-0-			-0-			(13,800	)
Distribution of capital to shareholder		(750	)		-0-			-0-	��		-0-			(750	)
Capital contributions from parent		(6,762	)		-0-			-0-			-0-			(6,762	)
Debt issue costs		(4,141	)		-0-			-0-			-0-			(4,141	)
Net cash provided (used) by financing activities		(227	)		(26,576	)		(732	)		2,082			(25,453	)
(Decrease) increase in cash and cash equivalents		(137	)		-0-			13,705			-0-			13,568
Cash and cash equivalents at beginning of period		137			-0-			21,839			-0-			21,976
Cash and cash equivalents at end of period	$	-0-		$	-0-		$	35,544		$	-0-		$	35,544

18

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 September 30, 2011, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2011 and 2010, and the condensed consolidated statements of shareholder’s equity for the nine-month period ended September 30, 2011 and cash flows for the nine-month periods ended September 30, 2011 and 2010. 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, 2010 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 8, 2011, 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, 2010, 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

November 14, 2011

19

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 and point-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 consolidated financial statements, included elsewhere herein.

During the third quarter of 2010, Supply Technologies completed the acquisition of certain assets and assumed specific liabilities relating to the ACS business (“ACS”) of Lawson Products, Inc. for $16.0 million in cash and a $2.2 million subordinated promissory note payable in equal quarterly installments over three years ($1.2 million outstanding at September 30, 2011). ACS is a provider of supply chain management solutions for a broad range of production components through its service centers throughout North America.

On September 30, 2010, the Company entered a Bill of Sale with Rome Die Casting LLC (“Rome”), a producer of aluminum high pressure die castings, pursuant to which Rome agreed to transfer to the Company substantially all of its assets in exchange for approximately $7.5 million of notes receivable due from Rome.

On December 31, 2010, the Company, through its subsidiary Ajax Tocco Magnathermic, acquired the assets and the related induction heating intellectual property of ABP Induction’s United States heating business operating as Pillar Induction (“Pillar”) for $10.3 million in cash. Pillar provides complete turnkey automated induction power systems and aftermarket parts and service to a worldwide market.

On April 7, 2011, the Company completed the sale of $250 million in aggregate principal amount of 8.125% Senior Notes due 2021 (the “Notes”). The Notes bear an interest rate of 8.125% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2011. The Notes mature on April 1, 2021. In connection with the sale of the Notes, the Company entered into a fourth amended and restated credit agreement (the “Amended Credit Agreement”). The Amended Credit Agreement, among other things, provides an increased credit facility up to $200 million, extends the maturity date of the borrowings under the facility to April 7, 2016 and amends fee and pricing terms. Furthermore, the Company has the option, pursuant to the Amended Credit Agreement, to increase the availability under the revolving credit facility by

20

$50 million. The Company also purchased all of its outstanding $183.8 million aggregate principal amount of 8.375% Senior Subordinated Notes due 2014 (the “Senior Subordinated Notes”) that were not held by its affiliates pursuant to a tender offer and subsequent redemption, repaid all of the term loan A and term loan B outstanding under its then existing credit facility and retired the Senior Subordinated Notes in the aggregate principal amount of $26.2 million that were held by an affiliate. The Company incurred debt extinguishment costs related to premiums and other transaction costs associated with the tender offer and subsequent redemption of the Senior Subordinated Notes and wrote off deferred financing costs totaling $7.3 million and recorded a provision for foreign income taxes of $2.1 million resulting from the retirement of the Senior Subordinated Notes that were held by an affiliate.

During the third quarter of 2011, the Company recorded an asset impairment charge of $5.4 million associated with the underperformance of the assets of its rubber products business unit.

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, 2010, contained in our 2010 Annual Report on Form 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 on Form 10-Q. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the Condensed Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

Results of Operations

Nine Months 2011 versus Nine Months 2010

Net Sales by Segment:

	Nine Months
	Ended
	September 30,							Percent Change
	2011		2010		Change
	(Dollars in millions)
Supply Technologies	$	373.6	$	295.3	$	78.3			27	%
Aluminum Products		102.8		109.7		(6.9	)		(6	)%
Manufactured Products		255.6		188.0		67.6			36	%
Consolidated Net Sales	$	732.0	$	593.0	$	139.0			23	%

Net sales increased $139.0 million to $732.0 million in the first nine months of 2011 compared to $593.0 million in the same period in 2010 as the Company experienced volume increases in the Supply Technologies and Manufactured Products segments. Supply Technologies sales increased 27% primarily due to volume increases in the heavy-duty truck, electrical, industrial equipment, auto, power sports, HVAC, furniture, agricultural and construction equipment industries, offset primarily by declines in the instruments, medical and semi-conducto industries. In addition, there were $31.6 million of incremental sales resulting from the acquisition of ACS. Aluminum Products sales decreased 6%, resulting primarily from the completion of certain automotive supply contracts offset by sales of $9.5 million resulting from the acquisition of Rome. Manufactured Products sales increased 36% primarily due to increased business in the capital equipment, forged and machined products and rubber products business units. In addition, there were $11.4 million of incremental sales resulting from the acquisition of Pillar. Approximately $10.4 million of the increases in consolidated net sales was due to price increases of which $5.3 million relates to the Supply Technologies segment and $5.1 million relates to the Aluminum Products segment.

21

Cost of Products Sold & Gross Profit:

	Nine Months
	Ended
	September 30,								Percent Change
	2011			2010			Change
	(Dollars in millions)
Consolidated cost of products sold	$	602.9		$	495.4		$	107.5		22	%
Consolidated gross profit	$	129.0		$	97.6		$	31.4		32	%
Gross Margin		17.6	%		16.5	%

Cost of products sold increased $107.5 million in the first nine months of 2011 to $602.9 million compared to $495.4 million in the same period in 2010, while gross margin increased to 17.6% in the first nine months of 2011 from 16.5% in the same period in 2010. The increase in cost of products sold was due primarily to higher sales levels and higher commodity prices (which we expect to remain at this level through the end of the year) offset by higher production levels, which contributed to improved absorption of fixed costs in the Manufactured Products segment.

Supply Technologies and Manufactured Products gross margin increased due primarily to sales volume increases and product mix. Gross margin in the Aluminum Products segment remained level primarily because of reduced sales volume and mix of products sold.

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

	Nine Months
	Ended
	September 30,								Percent Change
	2011			2010			Change
	(Dollars in millions)
Consolidated SG&A expenses	$	79.1		$	64.0		$	15.1		24	%
SG&A percent		10.8	%		10.8	%

Consolidated SG&A expenses increased 24% in the first nine months of 2011 compared to the same period in 2010. SG&A expenses increased in the first nine months of 2011 compared to the same period in 2010 primarily due to increases in payroll and payroll related expenses of $8.8 million and to $5.1 million of incremental expenses resulting from the acquisitions of ACS, Rome and Pillar.

Interest Expense:

	Nine Months
	Ended
	September 30,										Percent Change
	2011				2010				Change
	(Dollars in millions)
Interest expense		$	26.3			$	18.1			$8.2		45	%
Debt extinguishment costs included in interest expense		$	7.3				—			7.3		NM
Amortization of deferred financing costs and bank service charges		$	1.8			$	1.9			(.1)		(5	)%
Average outstanding borrowings		$	332.6			$	324.2			$8.4		3	%
Average borrowing rate			6.90	%			6.67	%		23 basis points

22

Interest expense increased $8.2 million in the first nine months of 2011 compared to the same period of 2010, primarily due to debt extinguishment costs of $7.3 million related to premiums and other transaction costs associated with the tender offer and subsequent redemption and write off of deferred financing costs associated with the Senior Subordinated Notes. Excluding these costs, interest increased due primarily to a higher average borrowing rate during the first nine months of 2011 and by higher average outstanding borrowings. The higher average borrowing rate in the first nine months of 2011 was due primarily to the interest rate mix of our revolving credit facility and the Notes when compared to the mix in the same period in 2010.

Income Tax:

The provision for income taxes was $6.1 million in the first nine months of 2011 and the reported effective tax rate for that period was 33% and the underlying effective tax rate on operations was 22%, compared to a provision for income taxes of $1.1 million and reported effective tax rate and underlying effective tax rate on operations of 8% in the corresponding period of 2010. The variance between the reported rate and the underlying rate in the first nine months of 2011 was primarily due to the tax impact resulting from the retirement of the Senior Subordinated Notes that were held by a foreign affiliate. We estimate that our reported effective tax rate for full-year 2011 will be approximately 31%.

Third Quarter 2011 versus Third Quarter 2010

Net Sales by Segment:

	Three Months Ended September 30,							Percent Change
	2011		2010		Change
	(Dollars in millions)
Supply Technologies	$	124.8	$	103.9	$	20.9			20	%
Aluminum Products		30.2		35.6		(5.4	)		(15	)%
Manufactured Products		88.5		63.5		25.0			39	%
Consolidated Net Sales	$	243.5	$	203.0	$	40.5			20	%

Consolidated net sales increased $40.5 million in the third quarter of 2011 to $243.5 million compared to $203.0 million in the same quarter of 2010 as the Company experienced volume increases in the Supply Technologies and Manufactured Products segments. Supply Technologies sales increased 20% primarily due to volume increases in the heavy-duty truck, electrical, industrial equipment, power sports, HVAC, agricultural and construction equipment industries offset by declines in the semi-conductor, instruments, medical and appliance industries. In addition, there were $5.9 million of incremental sales resulting from the acquisition of ACS. Aluminum Products sales decreased 15%, resulting primarily from the completion of certain automotive contracts. Manufactured Products sales increased 39% primarily due to increased business in the capital equipment and forged and machined products business units. In addition, there were $3.9 million of incremental sales resulting from the acquisition of Pillar.

Cost of Products Sold & Gross Profit:

	Three Months Ended September 30,								Percent Change
	2011			2010			Change
	(Dollars in millions)
Consolidated cost of products sold	$	201.7		$	168.0		$	33.7		20	%
Consolidated gross profit	$	41.9		$	35.0		$	6.9		20	%
Gross Margin		17.2	%		17.2	%

23

Cost of products sold increased $33.7 million to $201.7 million in the third quarter of 2011 compared to $168.0 million for the same quarter of 2010, while gross margin remained unchanged from 17.2% in the same quarter of 2010. The increase in cost of products sold was due primarily to higher sales levels and higher commodity prices offset by higher production levels, which contributed to improved absorption of fixed costs in the Manufactured Products segment.

Supply Technologies and Manufactured Products gross margin increased due primarily to volume increases. Gross margin in the Aluminum Products segment decreased primarily from a lower sales volume and mix of products sold.

SG&A Expenses:

	Three Months Ended September 30,								Percent Change
	2011			2010			Change
	(Dollars in millions)
Consolidated SG&A expenses	$	25.6		$	21.7		$	3.9		18	%
SG&A percent		10.5	%		10.7	%

Consolidated SG&A expenses increased 18% in the third quarter of 2011 compared to the same quarter in 2010, representing a decrease in SG&A expenses as a percent of sales of 20 basis points from 10.7% to 10.5%. SG&A expenses increased in the third quarter of 2011 compared to the same quarter in 2010 primarily due to increases in payroll and payroll related expenses of $2.4 million and to $1.2 million of incremental expenses resulting from the acquisitions of ACS, Rome and Pillar.

Interest Expense:

	Three Months Ended September 30,									Percent Change
	2011				2010				Change
	(Dollars in millions)
Interest expense		$	6.2			$	6.5		$(.3)		(5)	%
Amortization of deferred financing costs and bank service charges		$	.3			$	.8		(.5)		(63)	%
Average outstanding borrowings		$	347.8			$	315.9		$31.9		10	%
Average borrowing rate			6.79	%			7.20	%	(41) basis points

Interest expense decreased $.3 million in the third quarter of 2011 compared to the same period of 2010, primarily due to lower interest rates on the Company’s revolving credit facility in the third quarter of 2011 offset by higher average outstanding borrowings in the third quarter of 2011 compared to the same period in 2010 and to lower amortization of deferred financing costs and bank service charges in the third quarter of 2011 compared to the same period in 2010.

Income Tax:

The provision for income taxes was $1.2 million in the third quarter of 2011 and the reported effective tax rate and the underlying effective tax rate on operations was 25%, compared to a provision for income taxes of $(1.2) million and a reported effective tax rate and underlying effective tax rate on operations of (21)% in the corresponding period of 2010. We estimate that our reported effective tax rate for full-year 2011 will be approximately 31%.

24

Seasonality; Variability of Operating Results

The timing of orders placed by our customers has varied with, among other factors, orders for customers’ finished goods, customer production schedules, competitive conditions and general economic conditions. The variability of the level and timing of orders has, from time to time, resulted in significant periodic and quarterly fluctuations in the operations of our 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 Quarterly Report on Form 10-Q contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words “believes”, “anticipates”, “plans”, “expects”, “intends”, “estimates” and similar expressions are intended to identify forward-looking statements. 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 factors include, but are not limited to the following: our substantial indebtedness; continuation of the current negative global economic environment; general business conditions and competitive factors, including pricing pressures and product innovation; demand for our products and services; raw material availability and pricing; component part availability and pricing; changes in our relationships with customers and suppliers; the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate recent and future acquisitions into existing operations; changes in general domestic economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations, including the uncertainties related to the current global financial crisis; 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 the agreements governing our indebtedness; disruptions, uncertainties or volatility in the credit markets that may limit our access to capital; 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 and disputes with customers; our dependence on the automotive and heavy-duty truck industries, which are highly cyclical; the dependence of the automotive industry on consumer spending, which could be lower due to the effects of the current financial crisis; our ability to negotiate contracts with labor unions; dependence on key management; dependence on information systems; and the other factors we describe under the “Item 1A. Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. 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 September 30, 2011, and for the three-month and nine-month periods ended September 30, 2011 and 2010, have been reviewed, prior to filing, by Ernst & Young LLP, our independent registered public accounting firm, and their report is included herein.

25

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 facility, which consisted of borrowings of $91.2 million at September 30, 2011. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.7 million during the nine-month period ended September 30, 2011.

Our foreign subsidiaries generally conduct business in local currencies. During the first nine months of 2011, we recorded a favorable foreign currency translation adjustment of $.2 million related to net assets located outside the United States. This foreign currency translation adjustment resulted primarily from the weakening 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 September 30, 2011, 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 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 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 third quarter of 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26

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.

In addition to the routine lawsuits and asserted claims noted above, we were a party to the lawsuits and legal proceedings described below at September 30, 2011:

We were a co-defendant in approximately 300 cases asserting claims on behalf of approximately 1,230 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 seven asbestos cases, involving 26 plaintiffs, that plead specified damages. In each of the seven 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. In the sixth case, the plaintiff has alleged against each named defendant compensatory and punitive damages, each in the amount of $10.0 million, for six separate causes of action and $5.0 million for the seventh cause of action. In the seventh case, the plaintiff has alleged against each named defendant compensatory and punitive damages, each in the amount of $50.0 million, for four separate causes of action.

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

27

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.

One of our subsidiaries, Ajax Tocco Magnethermic (“ATM”), was a party to a binding arbitration in South Africa with one of its customers, Evraz Highveld Steel and Vanadium Limited (“Evraz”). The arbitration involves a dispute over the design and installation of a melting furnace. Evraz sought binding arbitration in September of 2011 for breach of contract and seeks compensatory damages in the amount of $20.8 million, as well as fees and expenses related to the arbitration. ATM intends to counterclaim in the arbitration, alleging breach of contract for nonpayment and seeking damages in the amount of $2.7 million, as well as fees and expenses related to the arbitration. We believe we have meritorious defenses to these claims and intend to vigorously defend such allegations.

Item 1A. Risk Factors

There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PARK-OHIO INDUSTRIES, INC.
	(Registrant)
	By	/S/    JEFFREY L. RUTHERFORD
		Name:	Jeffrey L. Rutherford
		Title:	Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)
Date: November 14, 2011

29

EXHIBIT INDEX

QUARTERLY REPORT ON FORM 10-Q

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

FOR THE QUARTER ENDED SEPTEMBER 30, 2011

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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

30