<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
<TABLE>
<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1999, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NO. 333-43005
PARK-OHIO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
OHIO 34-6520107
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23000 EUCLID AVENUE, CLEVELAND, OHIO 44117
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(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 216/692-7200
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 THE REDUCED DISCLOSURE FORMAT.
Indicate by check mark whether the registrant:
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<S> <C>
(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 [ ]
</TABLE>
All of the outstanding capital stock of the registrant is held by Park-Ohio
Holdings Corp. As of October 31, 1999, 100 shares of the registrant's common
stock, $1 par value, was outstanding.
The Exhibit Index is located on page 18.
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<PAGE> 2
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -- September 30, 1999 and
December 31, 1998
Consolidated statements of income -- Nine months and three
months ended September 30, 1999 and 1998
Consolidated statements of shareholder's equity -- Nine
months ended September 30, 1999
Consolidated statements of cash flows -- Nine months ended
September 30, 1999 and 1998
Notes to consolidated financial statements -- September 30,
1999
Independent accountants' review report
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
</TABLE>
2
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PART I
FINANCIAL INFORMATION
3
<PAGE> 4
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 1,901 $ 4,320
Accounts receivable, less allowances for doubtful accounts
of $2,805 at September 30, 1999 and $2,803 at December
31, 1998............................................... 116,080 95,718
Inventories............................................... 183,706 150,052
Deferred tax assets....................................... 2,232 2,232
Other current assets...................................... 7,040 5,468
-------- --------
Total Current Assets................................. 310,959 257,790
Property, Plant and Equipment............................... 213,670 160,625
Less accumulated depreciation............................. 82,174 70,468
-------- --------
131,496 90,157
Other Assets
Excess purchase price over net assets acquired, net of
accumulated amortization of $10,831 at September 30,
1999 and $8,105 at December 31, 1998................... 131,328 99,351
Deferred taxes............................................ 8,900 8,900
Other..................................................... 48,561 33,356
-------- --------
$631,244 $489,554
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Trade accounts payable.................................... $ 63,437 $ 46,755
Accrued expenses.......................................... 57,386 32,076
Current portion of long-term liabilities.................. 2,120 2,372
-------- --------
Total Current Liabilities............................ 122,943 81,203
Long-Term Liabilities, less current portion
Long-term debt............................................ 327,708 237,483
Other postretirement benefits............................. 25,625 26,286
Other..................................................... 3,688 3,740
-------- --------
357,021 267,509
Shareholder's Equity
Common stock, par value $1 per share...................... -0- -0-
Additional paid-in capital................................ 64,844 64,844
Retained earnings......................................... 87,430 77,580
Accumulated other comprehensive earnings (loss)........... (994) (1,582)
-------- --------
151,280 140,842
-------- --------
$631,244 $489,554
======== ========
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to consolidated financial statements.
4
<PAGE> 5
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales....................................... $178,087 $133,370 $536,407 $410,638
Cost of products sold........................... 146,542 109,474 440,082 339,824
-------- -------- -------- --------
Gross profit.................................. 31,545 23,896 96,325 70,814
Selling, general and administrative expenses.... 18,048 14,547 56,165 42,077
-------- -------- -------- --------
Operating income.............................. 13,497 9,349 40,160 28,737
Interest expense................................ 6,658 4,233 17,729 12,727
-------- -------- -------- --------
Income before income taxes.................... 6,839 5,116 22,431 16,010
Income taxes.................................... 2,903 2,200 9,581 6,885
-------- -------- -------- --------
Net income.................................... $ 3,936 $ 2,916 $ 12,850 $ 9,125
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
5
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED EARNINGS
STOCK CAPITAL EARNINGS (LOSS) TOTAL
------ ---------- -------- ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance January 1, 1999............ $-0- $64,844 $77,580 $(1,582) $140,842
Comprehensive income:
Net income....................... 12,850 12,850
Foreign currency translation
adjustment.................... 588 588
--------
Comprehensive income.......... 13,438
Dividends Paid..................... (3,000) (3,000)
---- ------- ------- ------- --------
Balance September 30, 1999......... $-0- $64,844 $87,430 $ (994) $151,280
==== ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
6
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 12,850 $ 9,125
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization.......................... 15,090 10,393
-------- --------
27,940 19,518
Changes in operating assets and liabilities excluding
acquisitions of businesses:
Accounts receivable.................................... (8,312) (5,599)
Inventories and other current assets................... (25,268) (15,930)
Accounts payable and accrued expenses.................. 12,535 6,990
Other.................................................. (9,147) (1,670)
-------- --------
Net Cash (Used) Provided by Operating Activities..... (2,252) 3,309
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net........... (13,226) (20,677)
Costs of acquisitions, net of cash acquired............... (65,237) (6,036)
Other..................................................... (445) (101)
-------- --------
Net Cash (Used) by Investing Activities................ (78,908) (26,814)
FINANCING ACTIVITIES
Proceeds from bank arrangements........................... 88,500 36,500
Issuance of 9.25% Senior Subordinated Notes, net of
deferred financing costs............................... 49,508 -0-
Payments on debt.......................................... (56,267) (11,039)
Purchase of treasury stock................................ -0- (238)
Issuance of common stock under stock option plan.......... -0- 239
Dividends Paid............................................ (3,000) -0-
-------- --------
Net Cash Provided by Financing Activities.............. 78,741 25,462
-------- --------
(Decrease) Increase in Cash and Cash Equivalents....... (2,419) 1,957
Cash and Cash Equivalents at Beginning of Period....... 4,320 1,814
-------- --------
Cash and Cash Equivalents at End of Period............. $ 1,901 $ 3,771
======== ========
</TABLE>
See notes to consolidated financial statements.
7
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
NOTE A -- BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Park-Ohio
Industries, Inc. and its subsidiaries ("Park-Ohio","the Company"). Park-Ohio is
a wholly owned subsidiary of Park-Ohio Holdings, Corp. as of June 10, 1998. All
significant intercompany transactions have been eliminated in consolidation.
The accompanying unaudited consolidated 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 and nine-month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. 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, 1998.
NOTE B -- ACQUISITIONS AND DISPOSITION
During the first nine months of 1999, the Company acquired all of the stock
of The Metalloy Corporation ("Metalloy"), Columbia Nut and Bolt Corp.
("Columbia"), Industrial Fasteners Corporation ("Industrial") and M.P. Colinet
("Colinet") and substantially all of the assets of St. Louis Screw & Bolt Co.
("St. Louis Screw") and PMC Industries ("PMC") for cash. Metalloy is a full
service aluminum casting and machining company. Columbia and Industrial are
logistics providers of fastener related components. St. Louis Screw is a
manufacturer of bolts and PMC and Colinet provide capital equipment and
associated parts for the oil drilling industry. Each of these transactions has
been accounted for as a purchase. The purchase price and the results of
operations of each of these businesses prior to their respective dates of
acquisition were not deemed to be significant as defined in Regulation S-X.
During 1998, the Company completed the acquisitions of Direct Fasteners
Limited ("Direct") and GIS Industries, Inc. ("Gateway"). The transactions have
been accounted for as purchases. Direct is a logistics provider of fastener
related components. Gateway is a logistics provider of fastener related
components and a manufacturer of fabricated metal products and fasteners. The
aggregate purchase price and the results of operations of Direct and Gateway
prior to their respective dates of acquisition were not deemed to be significant
as defined in Regulation S-X.
During September 1998, the Company completed the sale of the assets of
Friendly and Safe Packaging Systems, Inc. to Kerr Group. The transaction had an
immaterial effect on the consolidated results of operations and financial
position of the Company.
NOTE C -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
In process and finished goods.............................. $152,898 $124,783
Raw materials and supplies................................. 30,808 25,269
-------- --------
$183,706 $150,052
======== ========
</TABLE>
8
<PAGE> 9
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE D -- ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use". The SOP requires
companies to capitalize qualifying computer software costs incurred during the
application development stage. This statement was applied prospectively and is
effective for financial statements for fiscal years beginning after December 15,
1998. The impact of this new standard did not have a significant effect on the
Company's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Accounting for the Costs of
Start-up Activities". The SOP requires that costs of start-up activities be
expensed as incurred. The SOP is effective for fiscal years beginning after
December 15, 1998. The Company adopted the SOP in the first quarter of 1999. The
impact of adoption of the SOP on the Company's financial position, results of
operations or cash flows was immaterial.
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June 1998. Statement 133 requires derivatives to be
recorded on the balance sheet at fair value and establishes accounting for three
different types of hedges: hedges of changes in fair value of assets,
liabilities, or firm commitments; hedges of the variable cash flows of
forecasted transactions; and hedges of foreign currency exposures of net
investments in foreign operations. Statement 133 is effective for years
beginning after June 15, 2000 and is not expected to have a significant impact
on the Company's financial position or results of operations.
NOTE E -- SEGMENTS
During the first quarter of 1999 the Company, upon completion of the
acquisition of Metalloy, redefined its operating segments. The Company retained
its Integrated Logistics Solutions ("ILS") segment and further segregated its
former Manufactured Products segment into an Aluminum Products segment and a
Manufactured Products segment. ILS is a leading national supplier of fasteners
(e.g., nuts, bolts and screws) and other industrial products to original
equipment manufacturers, other manufacturers and distributors. In connection
with the supply of such industrial products, ILS provides a variety of
value-added, cost-effective procurement solutions. Aluminum Products
manufactures cast aluminum components primarily for automotive original
equipment manufacturers. In addition, Aluminum Products also provides
value-added services such as design and engineering, machining and assembly.
Manufactured Products is a diverse group of manufacturing businesses that design
and manufacture a broad range of high quality products which includes capital
equipment, rubber products and forged and machined products for specific
customer applications.
9
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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
Results by Business Segment were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS -- EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales, including intersegment sales:
ILS....................................... $112,710 $ 86,781 $328,245 $270,243
Aluminum products......................... 29,686 9,620 98,433 29,383
Manufactured products..................... 35,691 36,969 109,729 111,012
-------- -------- -------- --------
$178,087 $133,370 $536,407 $410,638
======== ======== ======== ========
Income before income taxes:
ILS....................................... $ 10,215 $ 8,421 $ 31,210 $ 25,125
Aluminum products......................... 1,860 306 8,975 1,411
Manufactured products..................... 3,957 2,860 6,694 7,305
-------- -------- -------- --------
16,032 11,587 46,879 33,841
Amortization of excess purchase price over
net assets acquired..................... (1,018) (506) (2,726) (1,496)
Corporate costs........................... (1,517) (1,732) (3,993) (3,608)
Interest expense.......................... (6,658) (4,233) (17,729) (12,727)
-------- -------- -------- --------
$ 6,839 $ 5,116 $ 22,431 $ 16,010
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C> <C> <C>
Identifiable assets were as follows:
ILS................................... $357,702 $288,713
Aluminum products..................... 93,875 40,063
Manufactured products................. 162,138 147,009
General corporate..................... 17,529 13,769
-------- --------
$631,244 $489,554
======== ========
</TABLE>
NOTE F -- FINANCING ARRANGEMENTS
On June 3, 1999, the Company sold an additional $50 million of its 9.25%
Senior Subordinated Notes due 2007. The Company used the net proceeds to reduce
the amount borrowed under its credit facility. Interest on the Senior
Subordinated Notes is payable semi-annually on June 1 and December 1 of each
year.
On November 1, 1999, the Company amended its credit agreement with a group
of banks under which it may borrow up to $175 million on an unsecured basis.
Interest is payable quarterly at the prime lending rate less 1% to plus .2% or
at Park-Ohio's election at LIBOR plus .9% to 2.2%. The interest rate is
dependent on the aggregate amounts borrowed under the agreement.
10
<PAGE> 11
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholder
Park-Ohio Industries, Inc.
We have reviewed the accompanying consolidated balance sheet of Park-Ohio
Industries, Inc. and subsidiaries as of September 30, 1999, and the related
consolidated statements of income for the three months and nine months ended
September 30, 1999 and 1998, the consolidated statement of shareholder's equity
for the nine months ended September 30, 1999 and the consolidated statements of
cash flows for the nine months ended September 30, 1999 and 1998. These
financial statements are the responsibility of the Company's management.
We conducted our review 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 upon our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated 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, 1998 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 February 15, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 1998, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it is derived.
/s/ Ernst & Young LLP
Cleveland, Ohio
October 20, 1999
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The consolidated financial statements of the Company include the accounts
of Park-Ohio Industries, Inc., a wholly-owned subsidiary of Park-Ohio Holdings
Corp., and its subsidiaries. All significant intercompany transactions have been
eliminated in consolidation. The financial information for the nine and three-
month periods ended September 30, 1999 is not directly comparable on a
period-to-period basis to the financial information for the nine and three-month
periods ended September 30, 1998 due to acquisitions made in 1998 and 1999.
During 1998, the Company acquired two businesses for $40.2 million. In October
the Company acquired all of the shares of GIS Industries, Inc. ("Gateway").
Gateway is a logistics provider of fastener related components and a
manufacturer of metal products and fasteners. In April the Company acquired all
of the shares of Direct Fasteners Limited ("Direct"), a logistics provider of
fastener related components located in Ontario, Canada. During the first nine
months of 1999, the Company acquired six businesses for an aggregate purchase
price of $65.2 million. In January, the Company acquired all of the shares of
The Metalloy Corporation ("Metalloy") and substantially all of the assets of St.
Louis Screw & Bolt Co. ("St. Louis Screw"). Metalloy is a full service aluminum
casting and machining company. St. Louis Screw is a manufacturer of bolts. In
February, the Company acquired substantially all of the assets of PMC Industries
("PMC") and, in September, the Company acquired all of the shares of M.P.
Colinet ("Colinet"). PMC and Colinet provide capital equipment and associated
parts for the oil drilling industry. In July, the Company acquired all of the
shares of Columbia Nut and Bolt Corp. ("Columbia") and Industrial Fasteners
Corporation ("Industrial"). Columbia and Industrial are logistics providers of
fastener related components. Each of these transactions has been accounted for
as a purchase and consequently their results are included in the consolidated
financial statements from their respective dates of acquisition.
OVERVIEW
The Company operates diversified manufacturing and logistics businesses
that serve a wide variety of industrial markets. The Company manages its
businesses based upon three operating segments: Integrated Logistics Solutions
("ILS"), Aluminum Products, and Manufactured Products. ILS is a leading national
supplier of fasteners (e.g., nuts, bolts and screws) and other industrial
products to original equipment manufacturers ("OEMs"), other manufacturers and
distributors. In connection with the supply of such industrial products, ILS
provides a variety of value-added, cost-effective procurement solutions. The
principal customers of ILS are in the transportation, industrial, electrical and
lawn and garden equipment industries. Aluminum Products manufactures cast
aluminum components primarily for automotive OEMs. 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. The principal customers of
Manufactured Products are OEMs and end-users in the automotive, railroad, truck
and aerospace industries.
Between 1993 and 1998, the Company has grown significantly, both internally
and through acquisitions. Over this period, the Company's net sales increased at
a 42% compounded annual growth rate ("CAGR"), from $94.5 million to $551.8
million, and income from continuing operations on a fully taxed basis increased
at a 40% CAGR from $2.4 million to $12.9 million.
Recent growth has been primarily attributable to the Company's strategy of
making selective acquisitions in order to complement internal growth. The
Company has acquired businesses with potential for: (i) significant cost
reductions through improved labor, supplier and customer relations and increased
purchasing power and (ii) revenue enhancement due to better asset utilization
and management practices, as well as increased access to capital. The Company's
internal growth has been driven primarily by the addition of ILS customers under
total fastening service ("TFS") contracts and by the leveraging of existing
customer relationships in the Aluminum and Manufactured Products segments.
Between January 1, 1994 and September 30, 1999, the Company's continuing
operations incurred $77.4 million of capital expenditures, the majority of which
was used to expand and upgrade existing manufacturing facilities and enhance the
Company's management information systems.
12
<PAGE> 13
RESULTS OF OPERATIONS
FIRST NINE MONTHS OF 1999 VERSUS FIRST NINE MONTHS OF 1998
Net sales increased by $125.8 million, or 31%, from $410.6 million for the
first nine months of 1998 to $536.4 million for the first nine months of 1999.
This growth results primarily from acquisitions that the Company has made
subsequent to September 30, 1998 and relates primarily to the ILS and the
Aluminum Products segments. For ILS, the growth in net sales amounted to $55.8
million of which $42.5 million related to acquisitive growth and the remainder
to internal growth. For Aluminum Products, net sales increased by $69.0 million
and related primarily to the acquisition of Metalloy.
Gross profit increased by $25.5 million, or 36%, from $70.8 million for the
first nine months of 1998 to $96.3 million for the first nine months of 1999 and
is directly related to acquisitions made in the preceding twelve months. The
Company's consolidated gross margin increased to 18.0% for the first nine months
of 1999 from 17.2% for the first nine months of 1998. This increase in
consolidated gross margin was due to increased margins in both the Aluminum
Products and ILS segments offset by a slight decline in gross margins in the
Manufactured Products segment. The increase in Aluminum Products was due to
increased production at General Aluminum thereby allocating fixed manufacturing
overhead over a greater production base and to the acquisition of Metalloy that
has a higher overall gross margin than the existing business. The increase in
margins in the ILS segment is primarily the result of the acquisitions having a
higher gross margin than the existing business.
Selling, general and administrative costs increased by 34% to $56.2 million
for the first nine months of 1999 from $42.1 million for the first nine months
of 1998. The increase was related to the acquisitions consummated subsequent to
September 30, 1998. Consolidated selling, general and administrative expenses as
a percentage of net sales were 10.5% during the current period and 10.2% for the
first nine months of 1998. The increase in rate for 1999 is caused by the
acquisitions having a higher administrative expense relationship to sales than
the existing core operations.
Interest expense increased by $5.0 million from $12.7 million for the
nine-month period ended September 30, 1998 to $17.7 million for the nine-month
period ended September 30, 1999 due to higher average debt outstanding during
the current period offset by lower average interest rates in 1999 versus 1998.
For the nine-month period ended September 30, 1999, the Company averaged
outstanding borrowings of $284.0 million as compared to $196.7 million for the
nine months ended September 30, 1998. The $87.3 million increase related
primarily to acquisitions completed during the latter part of 1998 and the first
nine months of 1999. The average borrowing rate of 8.3% for the nine months
ended September 30, 1999 is 31 basis points lower than the average rate of 8.6%
for the nine months ended September 30, 1998 primarily because of increased
borrowings under the Company's bank revolving credit which carries a lower
effective interest rate.
The effective income tax rate for the nine-month periods ended September
30, 1999 and 1998 was 43%. At December 31, 1998, subsidiaries of the Company had
$1.1 million of net operating loss carryforwards for federal tax purposes.
THIRD QUARTER 1999 VERSUS THIRD QUARTER 1998
Net sales increased by $44.7 million, or 34%, from $133.4 million for the
quarter ended September 30, 1998 to $178.1 million for the three months ended
September 30, 1999. This growth results primarily from acquisitions made
subsequent to September 30, 1998 and relates primarily to the ILS and the
Aluminum Products segments. For ILS, the growth in net sales amounted to $25.1
million of which $20.5 million related to acquisitive growth and the remainder
to internal growth. For Aluminum Products, net sales increased by $20.1 million
of which $18.3 related to the acquisition of Metalloy and the remaining $1.8
million related to internal growth.
Gross profits increased by $7.6 million, or 32%, from $23.9 million for the
quarter ended September 30, 1998 to $31.5 million for the quarter ended
September 30, 1999. This increase was a result of acquisitions made in the last
twelve months increasing gross profit by $10.5 million offsetting a decline in
gross profit from
13
<PAGE> 14
the existing businesses of $2.9 million. The decrease in gross profit from the
existing businesses primarily related to ILS and was the result of production
decreases at two agricultural customers, product mix changes and not realizing
certain costs of goods improvements with vendors. All segments experienced
increased margins compared to the year earlier period and were primarily due to
acquisitions made in the preceding twelve months which had higher overall gross
margins than the existing business. However, the Company's consolidated gross
margin decreased slightly to 17.7% for the current period from 17.9% for the
quarter ended September 30, 1998. This decrease in overall gross margins results
from increased sales in the ILS and Aluminum Products segments which have lower
gross margins compared to Manufactured Products.
Selling, general and administrative costs increased by 24% to $18.0 million
for the quarter ended September 30, 1999 from $14.5 million for the quarter
ended September 30, 1998. The entire increase was related to acquisitions that
have been consummated subsequent to the third quarter of 1998. Consolidated
selling, general and administrative expenses as a percentage of net sales were
10.1% in the current period and 10.9% in the corresponding period of the prior
year. The decrease in rates results from cost reduction efforts and efficiencies
realized in the core operations.
Interest expense increased by $2.4 million from $4.2 million for the
quarter ended September 30, 1998 to $6.6 million for the quarter ended September
30, 1999 due to higher average debt outstanding during the current period and
higher average interest rates in 1999 versus 1998. For the quarter ended
September 30, 1999, the Company averaged outstanding borrowings of $308.0
million as compared to $203.9 million outstanding for the quarter ended
September 30, 1998. The $104.1 million increase related to acquisitions
completed during the latter part of 1998 and the first nine months of 1999. The
average borrowing rate of 8.7% for the quarter ended September 30, 1999 is 40
basis points higher than the average rate of 8.3% for the quarter ended
September 30, 1998 primarily because of the $50 million add-on in June 1999, to
the Company's Senior Subordinated Notes which carries a rate of 9.25% versus
6.6% on the bank debt it replaced.
SEASONALITY; VARIABILITY OF OPERATING RESULTS
As a result of the significant growth in our net sales and operating income
in recent years, seasonal fluctuations have been mitigated. However, the
Company's results of operations are stronger in the first six months rather than
the last six months due to scheduled plant maintenance in the third quarter to
coincide with customer plant shut downs and holidays in the fourth quarter.
The timing of orders placed by our customers has varied with, among other
factors, orders for customers' finished goods, customer production schedules,
competitive conditions and general economic conditions. The variability of the
level and timing of orders has, from time to time, resulted in significant
periodic and quarterly fluctuations in the operations of our business units.
This variability is particularly evident at the capital equipment businesses,
included in the Manufactured Products segment, which typically ship a few large
systems per year.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Certain statements in this Management's Discussion and
Analysis of Financial Condition and Results of Operations contain forward-
looking statements, including without limitation, discussion regarding the
Company's anticipated levels of capital expenditures, financial resources and
the Year 2000 conversion. Forward-looking statements are necessarily subject to
risks, uncertainties and other factors, many of which are outside our control,
which could cause actual results to differ materially from such statements.
These uncertainties and other factors include such things as: general business
conditions, competitive factors, including pricing pressures and product
innovation and quality; raw material availability and pricing; changes in our
relationships with customers and suppliers; our ability to successfully
integrate recent and future acquisitions into existing operations; changes in
general domestic economic conditions such as inflation rates, interest rates and
tax rates; 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
14
<PAGE> 15
of pending and future litigation and other claims; dependence on the automotive
industry; dependence on key management; dependence on information systems; and
our ability, as well as the ability of our vendors and customers to achieve Year
2000 compliance. Any forward-looking statement speaks only as of the date on
which such statement is made, and we undertake no obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise. In light of these and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
us that our plans and objectives will be achieved.
REVIEW BY INDEPENDENT ACCOUNTANTS
The consolidated financial statements at September 30, 1999, and for the
nine and three-month periods ended September 30, 1999 and 1998, have been
reviewed, prior to filing, by Ernst & Young LLP, our independent accountants,
and their report is included herein.
15
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
(4) Second Amendment Agreement to the Amended and Restated Credit
Agreement among Park-Ohio Industries, Inc. and various financial
institutions dated November 1, 1999.
(15) Letter re: unaudited financial information
(27) Financial data schedule (Electronic filing only)
We did not file any reports on Form 8-K during the three months ended
September 30, 1999.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PARK-OHIO INDUSTRIES, INC.
------------------------------------
(Registrant)
By /s/ J. S. WALKER
-----------------------------------
Name: J. S. Walker
Title: Vice President and Chief
Financial Officer
Dated November 12, 1999
---------------------------------
17
<PAGE> 18
EXHIBIT INDEX
QUARTERLY REPORT ON FORM 10-Q
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
4 Second Amendment Agreement to the Amended and Restated
Credit Agreement among Park-Ohio Industries, Inc. and
various financial institutions dated November 1, 1999.
15 Letter re: unaudited financial information
27 Financial data schedule (Electronic filing only)
</TABLE>
18
<PAGE> 1
EXHIBIT 4
SECOND AMENDMENT AGREEMENT
This Second Amendment Agreement is made as of the 1st day of November,
1999, among PARK-OHIO INDUSTRIES, INC., an Ohio corporation ("Borrower"), the
banking institutions listed on SCHEDULE 1 to the Credit Agreement, as
hereinafter defined ("Banks"), KEYBANK NATIONAL ASSOCIATION, as administrative
agent for the Banks ("Administrative Agent"), and THE HUNTINGTON NATIONAL BANK,
as co-agent for the Banks ("Co-Agent" and, together with Administrative Agent,
"Agents").
WHEREAS, Borrower, Agents and the Banks are parties to a certain
Amended and Restated Credit Agreement dated as of November 2, 1998, as amended
and as it may from time to time be further amended, restated or otherwise
modified, which provides, among other things, for loans aggregating One Hundred
Fifty Million Dollars ($150,000,000), all upon certain terms and conditions (the
"Credit Agreement");
WHEREAS, Borrower, Agents and the Banks desire to amend the Credit
Agreement to provide for an additional revolving credit tranche thereunder and
to modify certain other provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement:
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other valuable considerations, Borrower, Agents and the
Banks agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the
definitions of "Advantage", "Applicable Margin", "Commitment", "Commitment
Percentage", "Commitment Period", "Indenture", "Loan", "Note", "Senior
Subordinated Note", "Senior Subordinated Noteholders", "Total Commitment Amount"
and "Total Senior Funded Indebtedness" therefrom and
to insert in place thereof the following:
"Advantage" shall mean any payment (whether made voluntarily
or involuntarily, by offset of any deposit or other indebtedness or
otherwise) received by any Bank in respect of the Debt, if such payment
results in that Bank having less than its Pro Rata Share of the
Applicable Debt then outstanding, than was the case immediately before
such payment.
"Applicable Margin" shall mean, with respect to any Loan, the
number of basis points (depending upon whether such Loan is a Prime
Rate Loan or a LIBOR Loan) set forth in the following matrix:
<PAGE> 2
<TABLE>
<CAPTION>
APPLICABLE BASIS APPLICABLE BASIS
TYPE OF LOAN POINTS FOR LIBOR POINTS FOR PRIME
LOANS RATE LOANS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tranche A Loan 90 basis points -100 basis points
- --------------------------------------------------------------------------------------------------------
Tranche B Loan 150 basis points -50 basis points
- --------------------------------------------------------------------------------------------------------
Tranche C Loan (at any time that there 170 basis points -30 basis points
is no Tranche D Loan outstanding)
- --------------------------------------------------------------------------------------------------------
Tranche C Loan (at any time that there 185 basis points -15 basis points
is a Tranche D Loan outstanding)
- --------------------------------------------------------------------------------------------------------
Tranche D Loan 220 basis points 20 basis points
</TABLE>
Each change in the Applicable Margin with respect to any Tranche C Loan
shall be effective immediately. The above matrix does not modify or
waive, in any respect, the requirements of Section 5.7 hereof, the
rights of the Banks to charge the Default Rate, or the rights and
remedies of Agents and the Banks pursuant to Articles VII and VIII
hereof.
"Commitment" shall mean the obligation hereunder of the Banks,
during the applicable Commitment Period, to make Loans pursuant to the
Tranche A Commitments, the Tranche B Commitments, the Tranche C
Commitments and the Tranche D Commitments, up to the Total Commitment
Amount.
"Commitment Percentage" shall mean Applicable Commitment
Percentage.
"Commitment Period" shall mean (a) with respect to the Tranche
A Commitments, the Tranche B Commitments and the Tranche C Commitments,
the period from the Closing Date to April 30, 2001, and (b) with
respect to the Tranche D Commitments, the period from the Tranche D
Closing Date to April 30, 2001; or such earlier date on which the
Commitment shall have been terminated pursuant to Article VIII hereof.
"Indenture" shall mean both of the following and any thereof
(a) the 1997 Indenture and (b) the 1999 Indenture; as either of the
foregoing may, with the prior written consent of Administrative Agent
and the Majority Banks, be from time to time amended, restated or
otherwise modified or replaced.
"Loan" shall mean the credit extended to Borrower by the Banks
in accordance with Section 2.1A, B, C or D hereof.
"Note" shall mean any Tranche A Note, Tranche B Note, Tranche
C Note, Tranche D Note or other note delivered pursuant to this
Agreement.
"Senior Subordinated Noteholder" shall mean any one of the
Senior Subordinated Noteholders under any Indenture.
<PAGE> 3
"Senior Subordinated Notes" shall mean the Senior Subordinated
Notes issued pursuant to any Indenture.
"Total Commitment Amount" shall mean the principal amount of
One Hundred Seventy-Five Million Dollars ($175,000,000) (or such lesser
amount as shall be determined pursuant to Section 2.5 hereof).
"Total Senior Funded Indebtedness" shall mean, on a
Consolidated basis and in accordance with GAAP, (a) Total Funded
Indebtedness minus (b) all Subordinated Indebtedness.
2. Article I of the Credit Agreement is hereby amended to add the
following new definitions thereto:
"Applicable Commitment Percentage" shall mean, for each Bank,
(a) with respect to the Tranche A Commitments, the Tranche B
Commitments and the Tranche C Commitments, the percentage set forth
opposite such Bank's name under the column headed "Tranche A through
Tranche C Commitment Percentage" as described in SCHEDULE 1 hereof; and
(b) with respect to the Tranche D Commitments, the percentage set forth
opposite such Bank's name under the column headed "Tranche D Commitment
Percentage" as described in SCHEDULE 1 hereof.
"Applicable Debt" shall mean (a) with respect to the Tranche A
Commitments, the Tranche B Commitments and the Tranche C Commitments,
collectively, (i) all Indebtedness incurred by Borrower to Agents or
the Banks pursuant to this Agreement (other than pursuant to the
Tranche D Commitments) and includes the principal of and interest on
all Notes (other than the Tranche D Notes), (ii) each extension,
renewal or refinancing thereof in whole or in part, and (iii) the
commitment fees, other fees and any prepayment fees payable hereunder
(other than the commitment fees and any prepayment fees payable in
connection with the Tranche D Commitments); and (b) with respect to the
Tranche D Commitments, collectively, (i) all Indebtedness incurred by
Borrower to Agents or the Banks pursuant to the Tranche D Commitments
and includes the principal of and interest on the Tranche D Notes, (ii)
each extension, renewal or refinancing thereof in whole or in part, and
(iii) the commitment fees and any prepayment fees payable in connection
with the Tranche D Commitments.
"Fixed Charge Coverage Ratio Condition" shall mean any time
that (a) Borrower's Consolidated Fixed Charge Coverage Ratio (as
defined in the Indenture) is less than 2.25 to 1.00, as calculated in
accordance with the terms and conditions of the Indenture, or (b) any
Subsidiary's Consolidated Fixed Charge Coverage Ratio (as defined in
the Indenture) is less than 2.50 to 1.00, as calculated in accordance
with the terms and conditions of the Indenture.
"1997 Indenture" shall mean that certain Indenture dated as of
November 25, 1997, between Borrower and Norwest Bank Minnesota,
National Association, as trustee, pursuant to which the Senior
Subordinated Notes were issued to the Senior Subordinated Noteholders,
<PAGE> 4
as the same may, with the prior written consent of Administrative Agent
and the Majority Banks, be from time to time amended, restated or
otherwise modified or replaced.
"1999 Indenture" shall mean that certain Indenture dated as of
June 2, 1999, between Borrower and Norwest Bank Minnesota, National
Association, as trustee, pursuant to which the Senior Subordinated
Notes were issued to the Senior Subordinated Noteholders, as the same
may, with the prior written consent of Administrative Agent and the
Majority Banks, be from time to time amended, restated or otherwise
modified or replaced.
"Pro Rata Basis" or "pro rata basis" shall mean distribution
to the Banks by Administrative Agent in accordance with the Applicable
Commitment Percentages.
"Pro Rata Share" or "pro rata share" shall mean, with respect
to the Applicable Debt, a Bank's share in accordance with such Bank's
Applicable Commitment Percentage.
"Ratable Account" or "ratable account" shall mean each Bank's
share of the Applicable Debt in accordance with such Bank's Applicable
Commitment Percentage.
"Ratable Share" or "ratable share" shall mean each Bank's
share of the Applicable Debt in accordance with such Bank's Applicable
Commitment Percentage.
"Ratably" or "ratably" shall mean in accordance with each
Bank's Ratable Share.
"Tranche D Bank" shall mean any Bank with a Tranche D
Commitment.
"Tranche D Closing Date" shall mean November 1, 1999.
"Tranche D Commitments" shall mean the obligation hereunder of
each Tranche D Bank to make Tranche D Loans, during the applicable
Commitment Period, up to the amount set forth opposite such Tranche D
Bank's name under the column headed "Tranche D Commitment Amount" as
set forth on SCHEDULE 1 hereof (or such lesser amount as shall be
determined pursuant to Section 2.5 hereof); provided that the aggregate
amount of the Tranche D Commitments shall not exceed Twenty-Five
Million Dollars ($25,000,000).
"Tranche D Conditions" shall include the following: (a) any
payment of principal under this Agreement shall be applied first to the
principal then outstanding on the Tranche D Commitments; (b) any
payment of interest under this Agreement shall be applied first to the
interest then outstanding on the Tranche D Commitments; and (c) any
payment of commitment fees or other fees owing under this Agreement
shall be applied first to the commitment and other fees then owing with
respect to the Tranche D Commitments.
"Tranche D Leverage Ratio Condition" shall mean any time that
a Tranche D Loan is outstanding.
4
<PAGE> 5
"Tranche D Loan" shall mean a Loan granted to Borrower by the
Tranche D Banks in accordance with Section 2.1D hereof.
"Tranche D Note" shall mean the Tranche D Note executed and
delivered pursuant to Section 2.1D hereof.
3. Section 2.1 of the Credit Agreement is hereby amended to delete the
second and third paragraphs therefrom and to insert in place thereof the
following:
Each Bank, for itself and not one for any other, agrees to
participate in Loans made hereunder during the Commitment Period on
such basis that (a) immediately after the completion of any borrowing
by Borrower, the aggregate principal amount then outstanding on the
Notes issued to such Bank shall not be in excess of the Maximum Amount
for such Bank, and (b) such aggregate principal amounts outstanding on
the Tranche A Note, the Tranche B Note and the Tranche C Note,
respectively, issued to such Bank shall represent that percentage of
the aggregate principal amount then outstanding on all Tranche A Notes,
Tranche B Notes and Tranche C Notes (including all such Notes held by
such Bank), respectively, which is such Bank's Applicable Commitment
Percentage; and (c) such aggregate principal amount outstanding on the
Tranche D Note issued to such Bank shall represent that percentage of
the aggregate principal amount then outstanding on all Tranche D Notes
(including the Tranche D Note held by such Bank) which is such Bank's
Applicable Commitment Percentage.
Each borrowing from the Banks hereunder shall be made pro rata
according to the Banks' respective Applicable Commitment Percentages.
The Loans may be made as Tranche A Loans, Tranche B Loans, Tranche C
Loans and Tranche D Loans as follows:
4. Section 2.1 of the Credit Agreement is hereby amended to add the
following new subsection D thereto:
D. Tranche D Loans. Subject to the terms and conditions of
this Agreement, during the applicable Commitment Period, the Tranche D
Banks shall make a Tranche D Loan or Tranche D Loans to Borrower in
such amount or amounts as Borrower may from time to time request, but
not exceeding in aggregate principal amount at any time outstanding
hereunder the aggregate amount of the Tranche D Commitments; provided,
however, that Borrower shall not request any Tranche D Loan hereunder
unless the Tranche A Commitments, Tranche B Commitments and Tranche C
Commitments have been fully funded. Borrower shall have the option,
subject to the terms and conditions set forth herein, to borrow Tranche
D Loans, maturing on the last day of the Commitment Period, by means of
any combination of (a) Prime Rate Loans, or (b) LIBOR Loans.
Borrower shall pay interest, for the benefit of the Tranche D
Banks, on the unpaid principal amount of Prime Rate Loans outstanding
from time to time from the date thereof until paid at the Derived Prime
Rate from time to time in effect. Interest on such Prime Rate
5
<PAGE> 6
Loans shall be payable, commencing December 31, 1999, and on the last
day of each succeeding March, June, September and December of each year
and at the maturity thereof.
Borrower shall pay interest, for the benefit of the Tranche D
Banks, on the unpaid principal amount of each LIBOR Loan outstanding
from time to time, from the date thereof until paid, at the Derived
LIBOR Rate, fixed in advance for each Interest Period as herein
provided for each such Interest Period. Interest on such LIBOR Loans
shall be payable on each Interest Adjustment Date with respect to an
Interest Period (provided that if an Interest Period exceeds three (3)
months, the interest must be paid every three (3) months, commencing
three (3) months from the beginning of such Interest Period).
The obligation of Borrower to repay the Prime Rate Loans and
the LIBOR Loans made by each Tranche D Bank and to pay interest thereon
shall be evidenced by a Tranche D Note of Borrower in the form of
EXHIBIT F hereto, dated as of the Tranche D Closing Date, and payable
to the order of such Tranche D Bank in the principal amount of its
Tranche D Commitment, or, if less, the aggregate unpaid principal
amount of Tranche D Loans made hereunder by such Bank. Subject to the
provisions of this Agreement, Borrower shall be entitled under this
Section 2.1D to borrow funds, repay the same in whole or in part and
re- borrow hereunder at any time and from time to time during the
applicable Commitment Period.
5. The Credit Agreement is hereby amended to delete Section 2.3
therefrom and to insert in place thereof the following:
SECTION 2.3. PAYMENT ON NOTES, ETC. Each payment made on Loans
hereunder shall be applied first to Tranche D Loans, if any are
outstanding, then to Tranche C Loans, if any are outstanding, then to
Tranche B Loans, if any are outstanding, and then to Tranche A Loans.
All payments of principal, interest and commitment and other fees shall
be made to Administrative Agent in immediately available funds for the
account of the Banks on a Pro Rata Basis (except as to payments made
exclusively for the benefit of Administrative Agent pursuant to the
Agent Fee Letter), and Administrative Agent, within one (1) Business
Day, shall distribute to each Bank, in accordance with the Tranche D
Conditions, its Ratable Share of the amount of principal, interest, and
commitment and other fees received by it for the account of such Bank.
Whenever payments are made to Administrative Agent "for the benefit of
the Banks", "for the benefit of the Banks" shall mean on a Pro Rata
Basis. Each Bank shall record (a) any principal, interest or other
payment, and (b) the principal amount of the Prime Rate Loans and the
LIBOR Loans and all prepayments thereof and the applicable dates with
respect thereto, by such method as such Bank may generally employ;
provided, however, that failure to make any such entry shall in no way
detract from Borrower's obligations under each such Note. The aggregate
unpaid amount of Loans set forth on the records of Administrative Agent
shall be rebuttably presumptive evidence of the principal and interest
owing and unpaid on each Note. Whenever any payment to be made
hereunder, including, without limitation, any payment to be made on any
Note, shall be stated to be due on a day that is not a Business Day,
such
6
<PAGE> 7
payment shall be made on the next succeeding Business Day and such
extension of time shall in each case be included in the computation of
the interest payable on such Note; provided, however, that with respect
to any LIBOR Loan, if the next succeeding Business Day falls in the
succeeding calendar month, such payment shall be made on the preceding
Business Day and the relevant Interest Period shall be adjusted
accordingly.
6. Section 2.4 of the Credit Agreement is hereby amended to delete the
first paragraph therefrom and to insert in place thereof the following:
SECTION 2.4. PREPAYMENT. Borrower shall have the right at any
time or from time to time to prepay, on a Pro Rata Basis for all of the
Banks, all or any part of the principal amount of the Notes then
outstanding as designated by Borrower, plus interest accrued on the
amount so prepaid to the date of such prepayment, subject, however, to
the Tranche D Conditions. Borrower shall give Administrative Agent
notice of prepayment of any Prime Rate Loan by not later than 11:00
A.M. (Cleveland, Ohio time) on the Business Day such prepayment is to
be made and written notice of the prepayment of any LIBOR Loan not
later than 1:00 P.M. (Cleveland, Ohio time) three (3) Business Days
before the Business Day on which such prepayment is to be made.
Prepayments of Prime Rate Loans shall be without any premium or
penalty.
7. Section 2.5 of the Credit Agreement is hereby amended to delete
subsection (e) therefrom and to insert in place thereof the following:
(e) Borrower may at any time or from time to time permanently
reduce in whole or in part the Commitment of the Banks hereunder to an
amount not less than the aggregate principal amount of the Loans then
outstanding, by giving Agents not fewer than five (5) Business Days'
notice, provided that (i) any partial reduction shall be applied, on a
Pro Rata Basis for all of the Banks, first to the Tranche D
Commitments, then to the Tranche C Commitments, then to the Tranche B
Commitments and, finally, to the Tranche A Commitments, and (ii) any
partial reduction shall be in an aggregate amount of Five Million
Dollars ($5,000,000) or any multiple thereof. Administrative Agent
shall promptly notify each Bank of the date of each such reduction and
such Bank's proportionate share thereof. After each such reduction, the
commitment fees payable hereunder shall be calculated upon the
Commitment of the Banks as so reduced. If Borrower reduces in whole the
Commitment of the Banks, on the effective date of such reduction
(Borrower having prepaid in full the unpaid principal balance, if any,
of the Notes, together with all interest and commitment and other fees
accrued and unpaid), all of the Notes shall be delivered to
Administrative Agent marked "Canceled" and Administrative Agent shall
redeliver such Notes to Borrower. Any partial reduction in the
Commitment of the Banks shall be effective during the remainder of the
Commitment Period.
8. Section 2.5 of the Credit Agreement is hereby amended to add new a
subsection (f) thereto as follows:
7
<PAGE> 8
(f) Borrower shall pay to Administrative Agent, for the
account of the Tranche D Banks, as a consideration for the Tranche D
Commitments, a commitment fee from the Tranche D Closing Date to and
including the last day of the Commitment Period equal to (i) one-half
percent (1/2%) per annum, times (ii) the average daily unborrowed
amount of the Tranche D Commitments. The commitment fee shall be
payable, in arrears, on December 31, 1999 and on the last day of each
March, June, September and December thereafter, and on the last day of
the Commitment Period.
9. The Credit Agreement is hereby amended to add a new Section 2.9
thereto as follows:
SECTION 2.9. FIXED CHARGE COVERAGE RATIO CONDITION. Borrower
shall provide immediate written notice to Agents and the Banks at any
time that the Fixed Charge Coverage Ratio Condition exists or, within
the next three (3) months, is likely to exist, and, so long as the
Fixed Charge Coverage Ratio exists, Borrower shall not request any
Loan, and the Banks shall not be obligated to make any Loan, unless (a)
the proceeds of such Loan shall constitute Permitted Indebtedness (as
defined in the Indenture), and (b) upon request of Administrative
Agent, Borrower shall provide to the Banks such evidence of use of
proceeds of the Loans and such opinion of counsel with respect to the
Indenture, as Administrative Agent may require in its reasonable
discretion.
10. Section 5.7 of the Credit Agreement is hereby amended to delete
subsection (c) therefrom and to insert in place thereof the following:
(c) LEVERAGE RATIO. Borrower shall not suffer or permit at any
time the Leverage Ratio to exceed (i) 5.00 to 1.00 for the period from
the Closing Date through December 30, 1999 at any time that the
Leverage Ratio Condition exists during such period, (ii) on December
31, 1999 through June 29, 2000, 5.00 to 1.00 or, in the event that the
Tranche D Leverage Ratio Condition exists, 4.50 to 1.00, and (iii) on
June 30, 2000 and thereafter, 5.00 to 1.00 or, in the event that the
Tranche D Leverage Ratio Conditions exists, 4.00 to 1.00.
11. The Credit Agreement is hereby amended to delete Section 6.18
therefrom and to insert in place thereof the following:
SECTION 6.18. INDENTURE. (a) No Event of Default (as defined
in the Indenture) or Default (as defined in the Indenture) exists, nor
will any such Event of Default or Default exist immediately after the
granting of any Loan, under the Indenture, the Senior Subordinated
Notes or any agreement executed by Borrower in connection therewith;
(b) no Company has incurred (as defined in the Indenture) any
Designated Senior Indebtedness (as defined in the Indenture) other than
the Debt; and (c) no Company has "incurred" (as defined in the
Indenture) either prior to or after the granting of any Loan, any
Indebtedness
8
<PAGE> 9
(as defined in the Indenture) in violation of Section 4.06 (Limitation
on Additional Indebtedness) of the Indenture.
12. The Credit Agreement is hereby amended to delete Section 6.19
therefrom and to insert in place thereof the following:
SECTION 6.19. REVOLVING CREDIT FACILITY. This Agreement (a)
constitutes "Revolving Credit Facility" (as defined in the 1999
Indenture), and (b) is a replacement of the Credit Agreement dated as
of April 11, 1995, as amended, among Borrower, KeyBank National
Association (successor by merger to Society National Bank), as Agent,
and the banking institutions listed on Annex 1 attached thereto, and
the Credit Agreement dated as of January 14, 1998 among Borrower,
KeyBank National Association, as Administrative Agent, The Huntington
National Bank, as Co-Agent, and the banking institutions listed on
Schedule 1 attached thereto.
13. The Credit Agreement is hereby amended to delete Section 7.10
therefrom and to insert in place thereof the following:
SECTION 7.10. INDENTURE. If (a) any Event of Default (as
defined in the Indenture), or any event or condition that with the
lapse of time or giving of notice or both would constitute an Event of
Default (as defined in the Indenture), shall exist under the Indenture,
the Senior Subordinated Notes or any agreement executed by Borrower in
connection therewith, (b) without the prior written consent of Agents
and the Majority Banks, the Indenture or the Senior Subordinated Notes
shall be amended or modified in any respect or replaced, or (c) the
Senior Subordinated Notes shall be accelerated for any reason.
14. The Credit Agreement is hereby amended to delete Section 8.4
therefrom and to insert in place thereof the following:
SECTION 8.4. EQUALIZATION PROVISION. Each Bank agrees with the
other Banks that if it, at any time, shall obtain any Advantage over
the other Banks or any thereof in respect of the Debt (except under
Article III hereof), it shall purchase from the other Banks, for cash
and at par, such additional participation in the Applicable Debt as
shall be necessary to nullify the Advantage. If any such Advantage
resulting in the purchase of an additional participation as aforesaid
shall be recovered in whole or in part from the Bank receiving the
Advantage, each such purchase shall be rescinded, and the purchase
price restored (but without interest unless the Bank receiving the
Advantage is required to pay interest on the Advantage to the Person
recovering the Advantage from such Bank) to the extent of the recovery.
Each Bank further agrees with the other Banks that if it at any time
shall receive any payment for or on behalf of Borrower on any
indebtedness owing by Borrower to that Bank by reason of offset of any
deposit or other indebtedness, it will apply such payment first to the
Debt owing by Borrower to that Bank (including, without limitation, any
participation purchased or to be purchased pursuant to this Section or
any
9
<PAGE> 10
other Section of this Agreement), subject to the Tranche D Conditions.
Borrower agrees that any Bank so purchasing a participation from the
other Banks or any thereof pursuant to this Section may exercise all
its rights of payment (including the right of set-off) with respect to
such participation as fully as if such Bank was a direct creditor of
Borrower in the amount of such participation.
15. The Credit Agreement is hereby amended to delete Section 9.9
therefrom and to insert in place thereof the following:
SECTION 9.9. INDEMNIFICATION OF AGENTS. The Banks agree to
indemnify Agents (to the extent not reimbursed by Borrower), in
accordance with their Commitment Percentages applicable to the Tranche
A Commitments from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Agents in their capacity as agent
in any way relating to or arising out of this Agreement or any Loan
Document or any action taken or omitted by Agents with respect to this
Agreement or any Loan Document, provided that no Bank shall be liable
for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including
attorney fees) or disbursements resulting from Agents' respective gross
negligence, willful misconduct or from any action taken or omitted by
Agents, or either thereof, in any capacity other than as agent under
this Agreement.
16. The Credit Agreement is hereby amended to delete Section 10.13
therefrom and to insert in place thereof the following:
SECTION 10.13. ENTIRE AGREEMENT. This Agreement, any Note and
any other Loan Document or other agreement, document or instrument
attached hereto or referred to herein or executed on or as of the
Closing Date integrate all of the terms and conditions mentioned herein
or incidental hereto and supersede all oral representations and
negotiations and prior writings with respect to the subject matter
hereof. This Agreement is intended to, and Borrower, Agents and the
Banks agree that this Agreement shall, (a) constitute "Revolving Credit
Facility" (as defined in the Indenture), and (b) be a replacement of
the Credit Agreement dated as of April 11, 1995, as amended, among
Borrower, KeyBank National Association (successor by merger to Society
National Bank), as Agent, and the banking institutions listed on Annex
1 attached thereto, and the Credit Agreement dated as of January 14,
1998 among Borrower, KeyBank National Association, as Administrative
Agent, The Huntington National Bank, as Co-Agent, and the banking
institutions listed on Schedule 1 attached thereto.
17. The Credit Agreement is hereby amended to delete SCHEDULE 1 and
SCHEDULE 2 thereof in their entirety and to insert in place thereof a new
SCHEDULE 1 and a new SCHEDULE 2, in the form of SCHEDULE 1 and SCHEDULE 2,
respectively, attached hereto.
10
<PAGE> 11
18. The Credit Agreement is hereby amended to add a new EXHIBIT F
thereto in the form of EXHIBIT F attached hereto.
19. In connection with the fee specified in Section 2.8 of the Credit
Agreement, Borrower, Agents and the Banks agree that Borrower shall not be
obligated to pay the one-fourth percent (1/4%) increase fee set forth in such
Section 2.8 with respect to the increase of the Commitment as a result of the
addition of the Tranche D Commitments contemplated in this Second Amendment
Agreement, provided that nothing contained in this paragraph shall affect
Borrower's obligations with respect to the commitment fees relating to the
Tranche D Commitments set forth in subpart (f) of Section 2.5 of the Credit
Agreement (as amended by this Second Amendment Agreement).
20. Concurrently with the execution of this Second Amendment Agreement,
Borrower shall:
(a) execute and deliver to each Tranche D Bank a Tranche D Note dated
as of the Tranche D Closing Date, and such Tranche D Note shall be in the form
and substance of EXHIBIT F attached hereto;
(b) pay to Administrative Agent, for the pro rata benefit of the
Tranche D Banks, a facility fee in the amount of One Hundred Sixty Thousand
Dollars ($160,000);
(c) deliver to Administrative Agent a Guaranty of Payment executed by
each of Columbia Nut & Bolt Corp., Geneva Rubber Company, Industrial Fasteners
Corporation, Integrated Logistics Solutions, Inc., Integrated Logistics Holding
Company, Park-Ohio Structural Hardware LLC, Pharmaceutical Logistics, Inc., and
Pharmacy Wholesale Logistics, Inc., together with such other corporate
governance and authorization documents as requested by Agents;
(d) cause each Guarantor of Payment to consent and agree to and
acknowledge the terms of this Second Amendment Agreement; and
(e) pay all legal fees and expenses of Administrative Agent in
connection with this Second Amendment Agreement.
21. Borrower hereby represents and warrants to Agents and the Banks
that (a) Borrower has the legal power and authority to execute and deliver this
Second Amendment Agreement, (b) the officers executing this Second Amendment
Agreement have been duly authorized to execute and deliver the same and bind
Borrower with respect to the provisions hereof, (c) the execution and delivery
hereof by Borrower and the performance and observance by Borrower of the
provisions hereof do not violate or conflict with the organizational agreements
of Borrower or any law applicable to Borrower or result in a breach of any
provision of or constitute a default under any other agreement, instrument or
document binding upon or enforceable against Borrower, (d) no Unmatured Event of
Default or Event of Default exists under the Credit Agreement, nor will any
occur immediately after the execution and delivery of this Second Amendment
Agreement or by the
11
<PAGE> 12
performance or observance of any provision hereof, (e) Borrower is not aware of
any claim or offset against, or defense or counterclaim to, any of Borrower's
obligations or liabilities under the Credit Agreement or any Related Writing,
and (f) this Second Amendment Agreement constitutes a valid and binding
obligation of Borrower in every respect, enforceable in accordance with its
terms.
22. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby. This Second Amendment Agreement is a Related
Writing as defined in the Credit Agreement.
23. Borrower and each Guarantor of Payment, by signing below, hereby
waives and releases Administrative Agent, Co-Agent and each of the Banks and the
respective directors, officers, employees, attorneys, affiliates and
subsidiaries of each of the foregoing from any and all claims, offsets, defenses
and counterclaims of which Borrower or such Guarantor of Payment is aware, such
waiver and release being with full knowledge and understanding of the
circumstances and effect thereof and after having consulted legal counsel with
respect thereto.
24. This Second Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
25. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws.
[Remainder of page intentionally left blank.]
12
<PAGE> 13
26. JURY TRIAL WAIVER. BORROWER, AGENTS AND EACH OF THE BANKS WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENTS AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY AGENTS' OR ANY BANK'S ABILITY
TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG BORROWER,
AGENTS AND THE BANKS, OR ANY THEREOF.
PARK-OHIO INDUSTRIES, INC.
By: _____________________________
James S. Walker, Vice President
and ______________________________
Ronald J. Cozean, Secretary
KEYBANK NATIONAL ASSOCIATION,
as a Bank and as Administrative Agent
By: _________________________________
Kenneth M. Merhar, Vice President
THE HUNTINGTON NATIONAL BANK,
as a Bank and as Co-Agent
By: __________________________________
Timothy M. Ward, Vice President
13
<PAGE> 14
SCHEDULE 1
<TABLE>
<CAPTION>
BANKING TRANCHE A TRANCHE B TRANCHE C TRANCHE A TRANCHE D TRANCHE D MAXIMUM
INSTITUTIONS COMMITMENT COMMITMENT COMMITMENT THROUGH COMMITMENT COMMITMENT AMOUNT
AMOUNT AMOUNT AMOUNT TRANCHE C AMOUNT PERCENTAGE
COMMITMENT
PERCENTAGE
<S> <C> <C> <C> <C> <C> <C> <C>
KeyBank $50,000,000 $12,500,000 $12,500,000 50% $25,000,000 100% $100,000,000
National
Association
The Huntington $50,000,000 $12,500,000 $12,500,000 50% $0 0% $75,000,000
National Bank
Total $100,000,000 $25,000,000 $25,000,000 100% $25,000,000 100%
Total $175,000,000
Commitment
Amount
</TABLE>
14
<PAGE> 15
SCHEDULE 2
GUARANTORS OF PAYMENT
Advance Vehicles, Inc.
Blue Falcon Forge, Inc.
Castle Rubber Company
Cicero Flexible Products, Inc.
Columbia Nut & Bolt Corp.
GIS Industries, Inc. (formerly known as Charken Company, Inc.)
General Aluminum Manufacturing Company II
General Aluminum Mfg. Company
Geneva Rubber Company
Industrial Fasteners Corporation
Integrated Logistics Solutions, Inc.
Integrated Logistics Solutions LLC (successor by merger to Arden Industrial
Products, Inc.)
Integrated Logistics Holding Company
Kay Home Products, Inc.
Park-Ohio Structural Hardware LLC
Pharmaceutical Logistics, Inc.
Pharmacy Wholesale Logistics, Inc.
RB&W Manufacturing LLC (successor by merger to RB&W Corporation)
The Ajax Manufacturing Company
The Metalloy Corporation
Tocco, Inc.
15
<PAGE> 16
EXHIBIT F
TRANCHE D NOTE
$__________________ Cleveland, Ohio
November 1, 1999
FOR VALUE RECEIVED, the undersigned, PARK-OHIO INDUSTRIES, INC.
("Borrower") promises to pay on the last day of the Commitment Period, as
defined in the Credit Agreement (as hereinafter defined), to the order of
_______________________ ("Bank") at the Main Office of KEYBANK NATIONAL
ASSOCIATION, as Administrative Agent, 127 Public Square, Cleveland, Ohio
44114-1306 the principal sum of
...................................................................... DOLLARS
or the aggregate unpaid principal amount of all Tranche D Loans made by Bank to
Borrower pursuant to Section 2.1D of the Credit Agreement, whichever is less, in
lawful money of the United States of America. As used herein, "Credit Agreement"
means the Amended and Restated Credit Agreement dated as of November 2, 1998, as
amended, among Borrower, the banks named therein, KeyBank National Association,
as Administrative Agent, and The Huntington National Bank, as Co- Agent, as the
same may from time to time be further amended, restated or otherwise modified.
Capitalized terms used herein shall have the meanings ascribed to them in the
Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of each Tranche D Loan from time to time outstanding, from the date of such
Tranche D Loan until the payment in full thereof, at the rates per annum which
shall be determined in accordance with the provisions of Section 2.1D of the
Credit Agreement. Such interest shall be payable on each date provided for in
such Section 2.1D; provided, however, that interest on any principal portion
which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Prime Rate Loans and LIBOR Loans, and payments of principal of any thereof, will
be shown on the records of Bank by such method as Bank may generally employ;
provided, however, that failure to make any such entry shall in no way detract
from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be the Default Rate. All payments of principal of and interest
on this Note shall be made in immediately available funds. In the event of a
failure to pay interest or principal, when the same becomes due, Bank may
collect and Borrower agrees to pay a late charge of an amount equal to the
greater of (a) ten percent (10%) of the amount of such late payment, or (b)
Twenty Five Dollars ($25).
16
<PAGE> 17
This Note is one of the Tranche D Notes referred to in the Credit
Agreement. Reference is made to the Credit Agreement for a description of the
right of the undersigned to anticipate payments hereof, the right of the holder
hereof to declare this Note due prior to its stated maturity, and other terms
and conditions upon which this Note is issued.
Except as expressly provided in the Credit Agreement, Borrower
expressly waives presentment, demand, protest and notice of any kind.
The undersigned authorizes any attorney at law at any time or times
after the maturity hereof (whether maturity occurs by lapse of time or by
acceleration) to appear in any state or federal court of record in the United
States of America, to waive the issuance and service of process, to admit the
maturity of this Note and the nonpayment thereof when due, to confess judgment
against the undersigned in favor of the holder of this Note for the amount then
appearing due, together with interest and costs of suit, and thereupon to
release all errors and to waive all rights of appeal and stay of execution. The
foregoing warrant of attorney shall survive any judgment, and if any judgment be
vacated for any reason, the holder hereof nevertheless may thereafter use the
foregoing warrant of attorney to obtain an additional judgment or judgments
against the undersigned. The undersigned agrees that Agents' or the Banks'
attorney may confess judgment pursuant to the foregoing warrant of attorney. The
undersigned further agrees that the attorney confessing judgment pursuant to the
foregoing warrant of attorney may receive a legal fee or other compensation from
Agents or the Banks.
PARK-OHIO INDUSTRIES, INC.
By: _____________________________
James S. Walker, Vice President
and ______________________________
Ronald J. Cozean, Secretary
"WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE
POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS
OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY
WITH THE AGREEMENT OR ANY OTHER CAUSE."
17
<PAGE> 18
GUARANTOR ACKNOWLEDGMENT
------------------------
Each of the undersigned consents and agrees to and acknowledges the
terms of the foregoing Second Amendment Agreement. Each of the undersigned
further agrees that the obligations of the undersigned pursuant to the Guaranty
of Payment executed by the undersigned shall remain in full force and effect and
be unaffected hereby.
ADVANCE VEHICLES, INC.
INTEGRATED LOGISTICS SOLUTIONS
LLC (successor by merger to Arden
Industrial Products, Inc.)
BLUE FALCON FORGE, INC.
CASTLE RUBBER COMPANY
GIS INDUSTRIES, INC.,
(formerly known as Charken Company, Inc.)
CICERO FLEXIBLE PRODUCTS, INC.
GENERAL ALUMINUM
MANUFACTURING COMPANY II
GENERAL ALUMINUM MFG. COMPANY
KAY HOME PRODUCTS, INC.
RB&W MANUFACTURING LLC (successor
by merger to RB&W Corporation)
THE AJAX MANUFACTURING COMPANY
TOCCO, INC.
THE METALLOY CORPORATION
By:____________________________________
James S. Walker, Vice President
of each of the foregoing Companies
By: ___________________________________
Ronald J. Cozean, Secretary
of each of the foregoing Companies
18
<PAGE> 1
EXHIBIT 15
EXHIBIT (15) LETTER RE: UNAUDITED FINANCIAL INFORMATION
Board of Directors and Shareholders
Park-Ohio Industries, Inc.
We are aware of the incorporation by reference in the Registration
Statement (Form S-4 No. 333-83117) and the Registration Statement (Form S-4 No.
333-43005) of Park-Ohio Industries, Inc. for the registration of its 9.25%
Senior Subordinated Notes due 2007 of our report dated October 20, 1999 relating
to the unaudited consolidated interim financial statements of Park-Ohio
Industries, Inc., which are included in its Form 10-Q for the quarter ended
September 30, 1999.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
Cleveland, Ohio
November 12, 1999
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001068148
<NAME> PARK-OHIO INDUSTRIES INC./OH
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,901
<SECURITIES> 0
<RECEIVABLES> 116,080
<ALLOWANCES> 2,805
<INVENTORY> 183,706
<CURRENT-ASSETS> 310,959
<PP&E> 213,670
<DEPRECIATION> 82,174
<TOTAL-ASSETS> 631,244
<CURRENT-LIABILITIES> 122,943
<BONDS> 327,708
0
0
<COMMON> 0
<OTHER-SE> 151,280
<TOTAL-LIABILITY-AND-EQUITY> 631,244
<SALES> 536,407
<TOTAL-REVENUES> 536,407
<CGS> 440,082
<TOTAL-COSTS> 440,082
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,729
<INCOME-PRETAX> 22,431
<INCOME-TAX> 9,581
<INCOME-CONTINUING> 12,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,850
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
