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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NO. 0-3134
SEPTEMBER 30, 1997
PARK-OHIO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-6520107
- ----------------------------------------- -----------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
23000 EUCLID AVENUE, CLEVELAND, OHIO 44117
- ----------------------------------------- -----------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 216/692-7200
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 [X] NO [ ]
Number of shares outstanding of registrant's Common Stock, par value $1.00
per share, as of September 30, 1997: 11,147,462 including 187,500 shares held in
escrow.
The Exhibit Index is located on page 16.
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets--September 30, 1997 and December 31, 1996
Consolidated Condensed Statements of Income--Nine Months and Three Months Ended
September 30, 1997 and 1996
Consolidated Condensed Statement of Shareholders' Equity--Nine Months Ended
September 30, 1997
Consolidated Condensed Statements of Cash Flows--Nine Months Ended September 30,
1997 and 1996
Notes to Consolidated Condensed Financial Statements--September 30, 1997
Independent Accountants' Review Report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
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PART I
FINANCIAL INFORMATION
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
(UNAUDITED)
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------
ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 3,786 $ 4,659
Accounts receivable, less allowances for doubtful accounts of
$1,335 at September 30, 1997 and $1,048 at December 31, 1996.... 82,234 58,764
Inventories........................................................ 111,720 83,758
Deferred taxes..................................................... 4,640 3,000
Other current assets............................................... 11,222 5,718
-------- ---------
Total Current Assets....................................... 213,602 155,899
Property, Plant and Equipment........................................ 126,716 106,862
Less accumulated depreciation...................................... 58,719 53,054
-------- ---------
67,997 53,808
Other Assets:
Excess purchase price over net assets acquired, net................ 68,705 40,305
Deferred taxes..................................................... 13,100 14,100
Other.............................................................. 25,378 18,798
-------- ---------
$388,782 $ 282,910
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable............................................. $ 41,161 $ 28,545
Accrued expenses................................................... 31,602 20,695
Current portion of long-term liabilities........................... 7,165 6,936
-------- ---------
Total Current Liabilities.................................. 79,928 56,176
Long-Term Liabilities, less current portion:
Long-term debt..................................................... 127,584 55,571
Other postretirement benefits...................................... 27,416 28,442
Other.............................................................. 4,714 4,788
-------- ---------
159,714 88,801
Convertible Senior Subordinated Debentures........................... 21,125 22,235
Shareholders' Equity:
Capital stock, par value $1 a share:
Serial preferred stock.......................................... 0 0
Common stock.................................................... 10,960 10,433
Additional paid-in capital......................................... 53,481 49,337
Retained earnings.................................................. 65,506 57,703
Treasury stock, at cost............................................ (1,932) (1,775)
-------- ---------
128,015 115,698
-------- ---------
$388,782 $ 282,910
======== =========
- ---------------
Note: The balance sheet at December 31, 1996 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 condensed financial statements.
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands -- except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- ---------------------
1997 1996 1997 1996
-------- ------- -------- --------
Net sales........................................ $114,325 $79,750 $311,916 $261,297
Cost of products sold............................ 96,332 66,706 262,060 217,293
-------- ------- -------- --------
Gross profit................................... 17,993 13,044 49,856 44,004
Selling, general and administrative expenses..... 11,512 9,482 31,613 28,314
-------- ------- -------- --------
Operating income............................... 6,481 3,562 18,243 15,690
Other income..................................... -0- (1,521) (320) (1,521)
Interest expense................................. 2,473 1,627 6,078 5,478
-------- ------- -------- --------
Income from continuing operations before income
taxes....................................... 4,008 3,456 12,485 11,733
Income taxes..................................... 1,482 1,343 4,682 4,488
-------- ------- -------- --------
Income from continuing operations.............. 2,526 2,113 7,803 7,245
Income from discontinued operations, net of
tax............................................ -0- 8,817 -0- 11,642
-------- ------- -------- --------
Net income..................................... $ 2,526 $10,930 $ 7,803 $ 18,887
======== ======= ======== ========
Per common share:
Continuing operations.......................... $ .23 $ .19 $ .70 $ .66
Discontinued operations........................ -0- .81 -0- 1.06
-------- ------- -------- --------
Net income..................................... $ .23 $ 1.00 $ .70 $ 1.72
-------- ------- -------- --------
Common shares used in the computation............ 11,101 10,924 11,021 10,977
======== ======= ======== ========
See notes to consolidated condensed financial statements.
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in thousands)
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
-------- ---------- -------- -------- --------
Balance January 1, 1997................ $ 10,433 $ 49,337 $ 57,703 $ (1,775) $115,698
Issuance of General Aluminum Mfg.
Company earnout shares............... 375 3,600 3,975
Exercise of stock options.............. 152 544 2,658 3,354
Purchase of treasury stock............. (2,815) (2,815)
Net income............................. 7,803 7,803
-------- -------- -------- -------- --------
Balance September 30, 1997............. $ 10,960 $ 53,481 $ 65,506 $ (1,932) $128,015
======== ======== ======== ======== ========
See notes to consolidated condensed financial statements.
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
NINE MONTHS ENDED
SEPTEMBER 30
---------------------
1997 1996
-------- --------
OPERATING ACTIVITIES
Net income........................................................... $ 7,803 $ 18,887
Adjustments to reconcile net income to net cash provided (used) by
continuing operations:
Discontinued operations......................................... -0- (11,642)
Depreciation and amortization................................... 7,371 5,512
Deferred taxes.................................................. 1,000 4,500
Gain on sales of investments.................................... (320) (1,521)
-------- --------
15,854 15,736
Changes in operating assets and liabilities of continuing operations
excluding acquisitions of businesses:
Accounts receivable............................................. (10,013) (1,524)
Inventories and other current assets............................ (12,245) (346)
Accounts payable and accrued expenses........................... 4,528 (8,820)
Other........................................................... (6,830) (6,755)
-------- --------
Net Cash Used by Continuing Operations....................... (8,706) (1,709)
Net Cash Provided by Discontinued Operations................. -0- 1,474
-------- --------
Net Cash Used by Operations.................................. (8,706) (235)
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net...................... (9,244) (8,600)
Cost of acquisitions, net of cash acquired........................... (53,933) -0-
Investments.......................................................... (419) (4,763)
Proceeds from sales of investments................................... 551 6,065
Proceeds from sale of discontinued operation......................... -0- 48,522
-------- --------
Net Cash (Used) Provided by Investing Activities............. (63,045) 41,224
FINANCING ACTIVITIES
Proceeds from bank arrangements for acquisitions..................... 54,000 -0-
Proceeds from bank arrangements for operations....................... 22,000 9,500
Payments on debt..................................................... (5,096) (50,976)
Purchase of treasury stock........................................... (2,815) -0-
Issuance of common stock under stock option plan..................... 2,789 57
-------- --------
Net Cash Provided (Used) by Financing Activities............. 70,878 (41,419)
Increase (Decrease) in Cash and Cash Equivalents..................... (873) (430)
Cash and Cash Equivalents at Beginning of Period..................... 4,659 2,662
-------- --------
Cash and Cash Equivalents at End of Period........................... $ 3,786 $ 2,232
======== ========
See notes to consolidated condensed financial statements.
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
(Dollars in thousands -- except per share data)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles 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 months and nine months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996.
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
NOTE B--SALE OF BENNETT INDUSTRIES
On July 31, 1996, the Company completed the sale of substantially all of
the assets of Bennett Industries, Inc. ("Bennett"), a wholly owned subsidiary
which manufactures plastic containers, to North American Packaging Corporation,
a wholly owned subsidiary of Southcorp Holdings Limited, an Australian company,
for $50.8 million in cash, resulting in a pretax gain of $13.8 million
recognized in the third quarter of 1996. The results of operations and changes
in cash flows for Bennett for the three months and nine months ended September
30, 1996, have been presented as discontinued operations. Interest expense has
been allocated to discontinued operations based on the ratio of net assets
discontinued to the total net assets of the consolidated entity plus
consolidated debt.
Summary operating results of the discontinued operations, excluding the
above gain on sale of assets for the three months and nine months ended
September 30, 1996 were as follows:
NINE MONTHS ENDED
THREE MONTHS ENDED SEPTEMBER 30,
SEPTEMBER 30, 1996 1996
------------------ -----------------
Sales............................................... $7,897 $49,448
Costs and expenses.................................. 7,481 44,502
------ -------
Income from discontinued operations before income
taxes............................................. 416 4,946
Income taxes........................................ 115 1,820
------ -------
Net income from discontinued operations............. $ 301 $ 3,126
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NOTE C--INVENTORIES
The components of inventory consist of the following:
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------
In process and finished goods.............................. $ 86,904 $60,587
Raw materials and supplies................................. 24,816 23,171
-------- -------
$111,720 $83,758
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE D--FINANCING ARRANGEMENTS
In June 1997 the Company amended its credit agreement with a group of five
banks in order to increase its credit availability by $50 million to $170
million and extend the maturity date to March 31, 2001.
NOTE E--SHAREHOLDERS' EQUITY
At September 30, 1997, capital stock consists of (i) Serial Preferred Stock
of which 632,470 shares were authorized and none were issued and (ii) Common
Stock of which 20,000,000 shares were authorized and 11,147,462 shares were
issued and outstanding, including 187,500 shares held in escrow.
NOTE F--NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of
common shares outstanding and assumes the exercise of outstanding dilutive stock
options and the issuance of certain additional shares subject to earn-out
provisions. On a fully diluted basis, both net income and common shares
outstanding are adjusted to assume the conversion of the convertible senior
subordinated debentures. Fully diluted earnings per share were as follows for
the three months and nine months ended September 30, 1997 and September 30,
1996, respectively.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
Continuing operations....................... $ .22 $ .20 $ .69 $ .66
Discontinued operations..................... -0- .73 -0- .96
------- ------- ------- -------
Net income.................................. $ .22 $ .93 $ .69 $ 1.62
======= ======= ======= =======
Common shares used in the computation....... 12,213 12,075 12,211 12,128
======= ======= ======= =======
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact of Statement 128 on the
calculation of primary earnings per share and fully diluted earnings per share
for the three months and nine months ended September 30, 1997 and 1996 is not
expected to be material.
NOTE G--ACQUISITIONS
On August 1, 1997, the Company acquired substantially all of the shares of
Arden Industrial Products, Inc. ("Arden") for cash of approximately $44,000,000.
The transaction has been accounted for as a purchase. Arden is headquartered in
Vadnais Heights, Minnesota and is a national distributor of specialty and
standard fasteners to the industrial market. Arden is included in the Company's
Logistics segment. On August 11, 1997, the Company filed a current report on
Form 8-K to report this acquisition.
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
The following is the estimated value of the net assets of Arden as of
August 1, 1997:
Cash....................................................................... $ 2,711
Accounts receivable........................................................ 11,503
Inventories................................................................ 17,764
Property, plant and equipment.............................................. 4,468
Excess purchase price over net assets acquired............................. 20,955
Other assets............................................................... 2,222
Trade accounts payable..................................................... (6,437)
Accrued expenses........................................................... (2,828)
Long-term liabilities...................................................... (6,358)
-------
Total estimated cost of acquisition.............................. $44,000
=======
During the nine months ended September 30, 1997, the Company acquired three
other businesses for an aggregate purchase price of approximately $13 million.
On October 3, 1997, the Company acquired Arcon Fastener Corporation for $5.6
million. The following unaudited pro forma results of operations assume the
acquisitions of Arden and the other businesses discussed above occurred on
January 1, 1996. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisitions occurred on the date
indicated, or which may result in the future.
NINE MONTHS ENDED
SEPTEMBER 30
---------------------
1997 1996
-------- --------
Net sales...................................................... $379,530 $360,656
Gross profit................................................... 71,027 74,739
Income from continuing operations.............................. 8,961 8,083
Income from continuing operations per common share............. $ .81 $ .74
======== ========
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
Park-Ohio Industries, Inc.
We have reviewed the accompanying consolidated condensed balance sheet of
Park-Ohio Industries, Inc. and subsidiaries as of September 30, 1997, and the
related consolidated condensed statements of income for the three months and
nine months ended September 30, 1997 and 1996, the consolidated condensed
statement of shareholders' equity for the nine months ended September 30, 1997,
and the consolidated condensed statements of cash flows for the nine months
ended September 30, 1997 and 1996. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated condensed financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Park-Ohio Industries, Inc. and
subsidiaries as of December 31, 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended, not
presented herein, and in our report dated February 17, 1997, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of December 31, 1996, 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
October 20, 1997
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The financial information of the Company's continuing operations is not
directly comparable for the periods discussed below due to acquisitions made
during 1997. See Note G to Consolidated Condensed Financial Statements
(unaudited).
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1996
On August 1, 1997, the Company acquired substantially all of the shares of
Arden for $44.0 million in cash. The transaction was accounted for as a
purchase. Arden is included in the Company's Logistics segment.
On July 31, 1996, the Company completed the sale for $50.8 million in cash
of substantially all of the assets of Bennett, a manufacturer of plastic
containers, which resulted in a pre-tax gain of $13.8 million recognized in the
third quarter of 1996. The results of operations and changes in cash flow of
Bennett for the nine months ended September 30, 1996 have been presented as
discontinued operations.
Net sales from continuing operations increased by $50.6 million, or 19.4%,
from $261.3 million for the nine months ended September 30, 1996 to $311.9
million for the nine months ended September 30, 1997. Approximately 51% of this
increase was attributable to internal growth and the remainder was a result of
acquisitions made during 1997. Of the internal sales growth, approximately 67%
was primarily attributable to the addition of total fastening service customers
and the remainder was due to increased orders from Manufactured Products'
customers. Approximately 49% of the growth in net sales was due to acquisitions
made during 1997, a majority of which was attributable to the acquisition of
Arden.
Gross profit from continuing operations increased by $5.9 million, or
13.4%, from $44.0 million for the nine months ended September 30, 1996 to $49.9
million for the nine months ended September 30, 1997. Of this increase, 81.9%
was attributable to acquisitions made during 1997 and 18.1% was due to internal
growth. A majority of the increase attributable to acquisitions made during 1997
was related to Arden. The Company's consolidated gross margin from continuing
operations decreased to 16.0% for the nine months ended September 30, 1997 from
16.8% for the nine months ended September 30, 1996. This decrease in
consolidated gross margin was primarily due to a change in the Company's revenue
mix and the timing of certain large product shipments.
Selling, general and administrative expenses from continuing operations
increased by $3.3 million, or 11.7%, from $28.3 million for the nine months
ended September 30, 1996 to $31.6 million for the nine months ended September
30, 1997. Approximately 73% of such increase was related to acquisitions made
during 1997 and the remainder was attributable to higher overhead costs to
support higher sales levels. Consolidated selling, general and administrative
expenses decreased as a percentage of net sales to 10.1% for the nine months
ended September 30, 1997 from 10.8% for the nine months ended September 30, 1996
due to economies of scale resulting from higher sales volume.
The Company had other income of $1.5 million for the nine months ended
September 30, 1996 as compared to $320,000 for the nine months ended September
30, 1997, primarily due to gains on the sales of securities.
Interest expense from continuing operations increased by $0.6 million from
$5.5 million for the nine months ended September 30, 1996 to $6.1 million for
the nine months ended September 30, 1997. This increase was primarily due to the
reclassification of approximately $0.8 million of interest expense in 1996 to
discontinued operations as a result of the sale of Bennett. The Company's
average debt outstanding and cost of borrowings were approximately the same in
both periods.
THIRD QUARTER 1997 VERSUS THIRD QUARTER 1996
Net sales from continuing operations increased by $34.5 million, or 43.2%,
from $79.8 million for the three months ended September 30, 1996 to $114.3
million for the three months ended September 30, 1997. Approximately 43% of this
increase was attributable to internal growth and the remainder was a result of
the
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acquisitions made during 1997, primarily Arden. Of the internal sales growth,
approximately 60% was primarily attributable to the addition of Logistics' total
fastening service customers and the remainder was due to increased orders from
Manufactured Products' customers.
Gross profit from continuing operations increased by $5.0 million, or
38.5%, from $13.0 million for the three months ended September 30, 1996 to $18.0
million for the three months ended September 30, 1997. Of the increase, 74.6%
was attributable to the acquisitions made during 1997, primarily Arden, and,
25.4% was due to internal growth. The Company's consolidated gross margin from
continuing operations decreased to 15.7% for the three months ended September
30, 1997 from 16.4% for the three months ended September 30, 1996. This decrease
in consolidated gross margin was primarily due to a change in the Company's
revenue mix.
Selling, general and administrative expenses from continuing operations
increased by $2.0 million, or 21.0%, from $9.5 million for the three months
ended September 30, 1996 to $11.5 million for the three months ended September
30, 1997. Approximately 85% of such increase was related to the acquisitions
made during 1997 and the remainder was attributable to higher overhead cost to
support higher sales levels. Consolidated selling, general and administrative
expenses decreased as a percentage of net sales to 10.1% for the three months
ended September 30, 1997 from 11.9% for the three months ended September 30,
1996 due to economies of scale resulting from higher sales volume.
The Company had other income of $1.5 million for the three months ended
September 30, 1996 primarily due to a gain on the sale of securities.
Interest expense from continuing operations increased by $0.8 million from
$1.6 million for the three months ended September 30, 1996 to $2.4 million for
the three months ended September 30, 1997. Average debt outstanding increased by
approximately $42.0 million from $89.8 million for the three months ended
September 30, 1996 to $131.8 million for the three months ended September 30,
1997. A majority of the increase in average debt outstanding was attributable to
the acquisitions made during 1997, primarily Arden. The cost of borrowings was
approximately the same in both periods.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's liquidity needs are primarily for working capital and capital
expenditures. The Company's primary sources of liquidity have been funds
provided by operations and proceeds from financing activities.
Management believes that cash provided by operating activities supplemented
as necessary from time to time by borrowings under available bank arrangements
will be sufficient to finance its operations, service the interest payments on
its debt and fund capital expenditures.
In June 1997, the Company increased its credit availability with its group
of five banks by $50.0 million to $170.0 million, for the purpose of acquiring
Arden. As of September 30, 1997, the Company had $129.8 million outstanding
under its credit agreement with the banks. On November 3, 1997, the Company
announced that it is proceeding with a Rule 144A offering, to be completed
during the fourth quarter of 1997, of up to $150 million of senior subordinated
notes due in 2007. The proceeds from the offering are expected to be used to
reduce current indebtedness under existing bank facilities and to redeem the
convertible senior subordinated debentures due on June 15, 2004. In connection
with the notes, the Company anticipates entering into a new $200 million senior
bank facility with an initial term of five years with one year renewal options
thereafter.
A registration statement relating to these securities has not been filed
with the Securities and Exchange Commission. These securities may not be sold
absent registration or an applicable exemption from registration. This Quarterly
Report on Form 10-Q shall not constitute an offer to sell or the solicitation of
an offer to buy, nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any State.
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During the nine months ended September 30, 1997, the Company generated
$15.9 million from continuing operations before changes in operating assets and
liabilities. After giving effect to the use of $24.6 million in the operating
accounts, the Company used $8.7 million for operating activities. During the
period, the Company invested $9.2 million in capital expenditures and $53.9
million for acquisitions and investments, including the acquisition of Arden for
$44.0 million. The Company also bought 210,279 shares of its common stock in the
open market for $2.8 million during the period. In addition, 350,000 shares of
common stock were issued under stock option agreements for which the Company
received $2.8 million from the option holders. The Company also purchased $1.1
million principal amount of its Convertible Senior Subordinated Debentures in
the open market. These activities were funded by a net increase in bank
borrowings of $72.0 million and a decrease in cash balances of $0.9 million.
FORWARD-LOOKING STATEMENTS
This report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such statements include,
without limitation, discussion regarding the Company's sufficiency of cash flow
from operations and certain borrowings to finance operations, service interest
payments on its debt and fund capital expenditures. Investors in the Company are
cautioned hereby that reliance on any forward-looking statement involves risks
and uncertainties, and that although the Company believes that the assumptions
on which the forward-looking statements contained herein are reasonable, any of
those assumptions could prove to be inaccurate, and as a result, the
forward-looking statements based on those assumptions also could be materially
incorrect. In light of the risks and uncertainties surrounding forward-looking
statements, the inclusion of a forward-looking statement herein should not be
regarded as a representation by the Company that the Company's plans and
objectives will be achieved.
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at September 30, 1997, and
for the three months and nine months then ended have been reviewed, prior to
filing, by Ernst & Young LLP, the Company's independent accountants, and their
report is included herein.
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PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
third quarter of 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included herein:
(11) Computation of net income per common share
(15) Letter re: unaudited financial information
(27) Financial data schedule (Electronic Filing Only)
(99) Press release dated November 3, 1997
(b) Reports on Form 8-K
On August 11, 1997, the Company filed a Form 8-K regarding the Company's
acquisition of Arden Industrial Products, Inc. See Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 12 herein.
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.
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(Registrant)
By /s/ J. S. WALKER
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Name: J. S. Walker
Title: Vice President and Chief
Financial Officer
Dated November 4, 1997
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EXHIBIT INDEX
QUARTERLY REPORT ON FORM 10-Q
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
EXHIBIT
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11 Computation of net income per common share
15 Letter re: unaudited financial information
27 Financial data schedule (Electronic filing only)
99 Press release dated November 3, 1997
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