<PAGE> 1
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
June 30, 1995
PARK-OHIO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
OHIO 34-6520107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 TOWER EAST 44122
20600 CHAGRIN BOULEVARD (Zip Code)
CLEVELAND, OHIO
(Address of principal executive offices)
Registrant's telephone number, including 216/991-9700
area code
</TABLE>
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 July 31, 1995: 10,964,331 including 562,500 shares held in
escrow.
The Exhibit Index is located on page 13.
1
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INDEX
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated condensed balance sheets - June 30, 1995 and
December 31, 1994
Consolidated condensed statements of income - Six months and
three months ended June 30, 1995 and 1994
Consolidated condensed statements of cash flows - Six months
ended June 30, 1995 and 1994
Notes to consolidated condensed financial statements -
June 30, 1995
Independent accountants' review report
Item 2. Management's Discussion
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
2
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PART I
FINANCIAL INFORMATION
3
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CONSOLIDATED CONDENSED BALANCE SHEETS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
June 30 December 31
1995 1994
----------- -----------
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,141 $ 2,172
Accounts receivable, less allowances for
doubtful accounts of $870,000 at June 30,
1995 and $394,000 at December 31, 1994 68,082 27,165
Inventories 69,507 25,651
Prepaid expenses 1,877 1,845
-------- --------
Total Current Assets 141,607 56,833
Property, Plant and Equipment 127,234 111,881
Less accumulated depreciation 64,778 61,246
-------- --------
62,456 50,635
Excess Purchase Price Over Net Assets Acquired, net 54,313 16,727
Other Assets 25,864 10,420
-------- --------
$284,240 $134,615
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 37,228 $ 15,353
Accrued expenses 18,857 8,884
Current portion of long-term liabilities 2,590 2,469
-------- --------
Total Current Liabilities 58,675 26,706
Long-Term Liabilities, less current portion
Long-term debt 83,197 9,513
Other postemployment benefits 30,982 27,800
Other 8,670 1,646
-------- --------
122,849 38,959
Convertible Senior Subordinated Debentures 22,235 22,235
Shareholders' Equity
Capital stock, par value $1 a share:
Serial Preferred Stock -0- -0-
Common Stock 10,402 8,192
Additional paid-in capital 49,183 26,189
Retained earnings 20,896 12,334
-------- --------
80,481 46,715
-------- --------
$284,240 $134,615
======== ========
</TABLE>
Note: The balance sheet at December 31, 1994 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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CONSOLIDATED CONDENSED STATEMENTS OF
INCOME (UNAUDITED)
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
(In Thousands - Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ----------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $109,420 $49,394 $172,230 $101,682
Cost and expenses:
Cost of products sold 93,395 40,818 145,723 83,568
Selling, general and administrative expenses 9,128 4,818 15,168 10,737
Interest expense 1,885 455 2,537 883
-------- ------- -------- --------
104,408 46,091 163,428 95,188
-------- ------- -------- --------
Income before Federal Income Taxes 5,012 3,303 8,802 6,494
Federal income taxes 191 30 241 84
-------- ------- -------- --------
Net Income $ 4,821 $ 3,273 $ 8,561 $ 6,410
======== ======= ======== ========
Net income per common share: $ .45 $ .39 $ .88 $ .79
======== ======= ======== ========
Shares used in calculation 10,734 8,080 9,710 7,892
======== ======= ======== ========
</TABLE>
See notes to consolidated condensed financial statements.
5
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CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS (UNAUDITED)
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,561 $ 6,410
Adjustments to reconcile net income to net
cash provided (used):
Depreciation and amortization 4,726 2,819
Changes in noncurrent assets and liabilities (2,840) (1,191)
Changes in operating assets and liabilities (15,610) (6,190)
-------- --------
Net Cash Provided (Used) by Operations (5,163) 1,848
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net (6,446) (3,646)
Cost of acquisitions, net of cash acquired (33,383) -0-
-------- --------
Net Cash Used by Investing Activities (39,829) (3,646)
FINANCING ACTIVITIES
Proceeds from bank arrangements for acquisitions 33,383 -0-
Proceeds from bank arrangements for operations 11,660 4,350
Proceeds from Convertible Senior Subordinated
Debentures, net -0- 21,356
Payments on bank borrowings (82) (26,844)
Issuance of common stock, net -0- 4,005
-------- --------
Net Cash Provided from Financing Activities 44,961 2,867
-------- --------
Increase (Decrease)in Cash and Cash Equivalents (31) 1,069
Cash and Cash Equivalents at Beginning
of Year 2,172 133
-------- --------
Cash and Cash Equivalents at End of
Period $ 2,141 $ 1,202
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
June 30, 1995
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 and
six-month periods ended June 30, 1995 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1995. 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, 1994.
NOTE B - ACQUISITIONS
On March 31, 1995, the Company acquired all of the shares of RB&W
Corporation in exchange for 2,023,000 shares of the Company's common stock
($11.50 market value as of March 31, 1995) and cash of $30,968. The
transaction has been accounted for as a purchase and, accordingly, the
operations of RB&W have been included since that date.
The following is the current value of the net assets acquired as of March
31, 1995:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Cash $ 510
Accounts receivable 29,551
Inventories 36,731
Property, plant and equipment 5,591
Excess purchase price over net assets acquired 35,200
Other assets 15,620
Notes payable (28,739)
Trade accounts payable (21,524)
Accrued expenses (8,398)
Long-term liabilities (10,300)
--------------
Total Cost of Acquisition $ 54,242
==============
</TABLE>
The following unaudited pro forma results of operations assume the
acquisition occurred on January 1, 1994. 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
acquisition occurred on the date indicated, or which may result in the future.
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------------------
1995 1994
-------------- --------------
(In Thousands - Except Per Share Data)
<S> <C> <C>
Net sales $ 219,262 $ 186,947
Gross profit 32,002 29,807
Net income 7,545 6,426
Net income per common share $ .70 $ .63
</TABLE>
The Company purchased certain assets of two companies for a total cost
during the period of $2,925. The operations of these businesses prior to the
dates of acquisition were not material to the Company.
NOTE C - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
-------------- --------------
(In thousands)
<S> <C> <C>
In process and finished goods $ 53,642 $ 14,496
Raw materials and supplies 15,865 11,155
-------------- --------------
$ 69,507 $ 25,651
============== ==============
</TABLE>
7
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NOTE D - SHAREHOLDERS' EQUITY
Capital stock consists of the following:
Serial Preferred Stock:
Authorized - 632,470 shares; none issued
Common Stock:
Authorized - 20,000,000 shares
Issued and outstanding - 10,401,831 shares at June 30, 1995 and
8,191,810 at December 31, 1994.
The increase in outstanding shares results from the issuance of 2,023,000
shares as discussed in Note B, and 187,500 shares relating to the earn-out
provision in connection with the acquisition of General Aluminum Mfg. Company.
NOTE E - NET INCOME PER COMMON SHARE
Net income per common share is based on the 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.
NOTE F - BANK ARRANGEMENTS
On April 11, 1995, the Company entered into a new credit agreement with a
group of banks under which it may borrow up to $100 million on an unsecured
basis. The agreement, which replaced the Company's existing credit facility,
consists of a $65 million revolving credit and a $35 million term loan payable
over seven years. Interest is payable quarterly at the prime lending rate or at
LIBOR plus a percentage which fluctuates based on specific financial ratios.
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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 June 30, 1995, and the
related consolidated condensed statements of income for the three-month and
six-month periods ended June 30, 1995 and 1994, and the consolidated
condensed statements of cash flows for the six-month periods ended June 30,
1995 and 1994. 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, 1994, 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 22, 1995, 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, 1994,
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
July 24, 1995
9
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MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS
- ---------------------
FIRST HALF 1995 VERSUS FIRST HALF 1994
- --------------------------------------
Effective March 31, 1995, the Company acquired all of the shares of RB&W
Corporation (RB&W) in exchange for $31 million and 2.0 million of its common
shares in a transaction valued at $54.2 million. The combination has been
accounted for as a purchase and, accordingly, the operations of RB&W are
included in the consolidated financial statements as of that date. The metal
forming business of RB&W will be included with the transportation group and the
distribution business will be included in a newly formed group, logistics. The
Logistics Group distributes various products associated with the fastener
industry, primarily components to original equipment manufacturers.
Net sales increased by $70.5 million during the period of which $49.8 million
pertained to RB&W whose results are included for the period April through June
1995. Of the sales increase applicable to RB&W, $37.7 million relate to the
logistics group and $12.1 million relate to the transportation group. The
remainder of the sales increase was attributable to the transportation group as
well as the container products group. Net sales for the transportation group
increased by $8.1 million primarily as a result of two other acquisitions that
contributed $5.6 million in sales. In the container products group, net sales
increased by $12.8 million, all of which were internally generated. Containers
shipped for the period increased by 23% with average prices per container
increasing by 23% largely offsetting increases in raw material costs.
Gross profit rose to $26.5 million in the current period from $18.1 million
in the first half of 1994. Of the $8.4 million increase in gross profits, RB&W
accounted for 89% of the increase. Consolidated gross margins were 15% of
sales in the first half of 1995 compared with 18% of sales during the prior
period. The decline in gross margins was due, in part, to RB&W that
historically has lower gross margins than the Company as a whole. In
addition, margins in both the consumer and container products groups declined
as a result of increased raw material costs that could not be adequately
reflected in pricing and to product mix changes, particularly in the consumer
products group.
Selling, general and administrative costs increased by 41% in the period
largely as a result of including RB&W in the consolidated results for the
period. As a percentage of sales, consolidated selling, general and
administrative costs accounted for 8.8% of the sales dollar in the current
period as compared to 10.6% in the first half of 1994.
Interest expense increased by $1.7 million in the first half of 1995 due to
higher levels of debt outstanding during the period and to higher average
interest rates. Average debt outstanding for the period increased from $27.2
million in 1994 to $73.2 million in 1995. The increase in borrowings was
caused by the acquisition of RB&W, higher levels of revolving credit debt to
support increased sales and to the convertible subordinated debentures issued
in May, 1994, being outstanding for the entire current period. Interest rates
averaged 7.31% versus 6.50% in the first half of 1994.
Federal income taxes related primarily to the alternative minimum tax due as
a result of utilizing available net operating loss carryforwards. At December
31, 1994, the Company had net operating loss carryforwards for tax purposes of
$21.6 million available to offset future taxable income. Additionally, net
operating loss carryforwards of $21.1 million pertaining to RB&W and $2.5
million related to General Aluminum Mfg. Company, a wholly owned subsidiary,
are available to offset future taxable income subject to certain limitations.
For financial reporting purposes, the Company has additional net operating loss
carryforwards relating to deductible temporary differences, the most
significant of which relates to other postretirement benefits. Federal income
tax expense for the 1995 period has been reduced by $3.0 million ($2.2 million
in 1994) due to the utilization of net operating loss carryforwards.
SECOND QUARTER 1995 VERSUS SECOND QUARTER 1994
- ----------------------------------------------
Net sales increased by $60.0 million of which $49.8 million pertained to
RB&W; $37.7 million relate to the logistics group and $12.1 million relate to
the transportation group. The remainder of the sales increase was
attributable to the transportation group as well as the container products
group. Net sales for the transportation group increased by $5.2 million
primarily as a result of two other acquisitions that contributed $4.1 million
in net sales for the period. In the container products group, net sales
increased by $5.2 million all of which was due to internal growth. Containers
shipped for the period increased by 15% with average prices per container
increasing by 24% offsetting increases in raw material costs.
Gross profit rose to $16.0 million in the current period from $8.6 million in
the second quarter of 1994. Of the $7.4 million increase in gross profits for
the period, RB&W accounted for almost the entire increase. Consolidated gross
margins were 15% of sales compared with 17% of sales during the second quarter
of 1994. The decline in gross margin was due, in part, to RB&W that
historically has lower gross margins than the Company as a whole. Margins in
both the container and consumer products groups declined due to the inability
to sufficiently pass along price increases which would have offset increased
raw material costs.
10
<PAGE> 11
The increase of 89% in selling, general and administrative costs is largely
a result of including RB&W in the consolidated results. As a percentage of
sales, consolidated selling, general and administrative costs accounted for
8.3% of the sales dollar in the current period as compared to 9.8% in the
second quarter of 1994.
Interest expense increased by $1.4 million in the second quarter of 1995 due
to increased debt during the period and to higher average interest rates.
Average debt outstanding for the period increased from $28.0 million in 1994 to
$102.5 million in 1995. The increase in borrowings was caused by the
acquisition of RB&W, increased borrowings under the Company's revolving credit
arrangements to support increased sales and to the convertible subordinated
debentures issued in May, 1994, being outstanding for the entire current
period. Interest rates averaged 7.65% versus 6.48% in the corresponding period
of the prior year.
LIQUIDITY AND SOURCES OF CAPITAL
On April 11, 1995, the Company entered into a Credit Agreement with three
banks that replaced the Company's existing agreement with the same three banks.
The new agreement provides $100 million in unsecured credit consists of a $65
million revolving credit facility to be used for general corporate purposes,
including working capital and acquisitions, and a $35 million term facility
which replaced RB&W's current lender. As of June 30, 1995, $80 million was
outstanding under this facility.
Current financial resources (working capital and available bank borrowing
arrangements) and anticipated funds from operations are expected to be adequate
to meet current cash requirements, including capital expenditures. The
Company's recent growth has largely been fueled by acquisitions. In the event
additional capital resources are needed for other opportunities in the near
future, the Company believes adequate financing is either in place or would be
available.
During the period, the Company increased its borrowings under its working
capital facility by $11.7 million which was used to fund operations by $5.2
million, primarily accounts receivable and inventories and to invest $6.5
million in machinery and equipment. During the period the Company completed
the acquisition of RB&W by issuing 2.0 million of its common shares and paying
$31.0 million for all the outstanding common stock of RB&W. The cash component
of the acquisition was provided under the Company's $100 million credit
facility.
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at June 30, 1995, and for the
three and six-month periods then ended have been reviewed, prior to filing, by
Ernst & Young LLP, the Company's independent accountants, and their report is
included herein.
11
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PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders was held on May 25, 1995.
(c) The following matters were voted upon at the annual meeting of
shareholders:
Proposal to approve the Amended and Restated 1992 Stock Option Plan.
7,425,643 Affirmative votes
125,464 Negative votes
58,830 Abstentions
1,414,019 Non votes
Proposal to ratify the appointment of Ernst & Young as independent
auditors for the current year ending December 31, 1995.
8,998,511 Affirmative votes
7,860 Negative votes
17,585 Abstentions
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
(10)(a) Employment Agreement between Park-Ohio Industries, Inc. and John J.
Murray dated effective January 1, 1995
(10)(b) Park-Ohio Industries, Inc. Amended and Restated 1992 Stock Option
Plan
(11) Computation of net income per common share
(15) Letter re: unaudited financial information
(27) Financial data schedule (Electronic Filing Only)
On April 17, 1995, the Company filed a Form 8-K regarding the Company's
acquisition of RB&W Corporation. See Note B to the Consolidated Condensed
Financial Statements (unaudited) on page 7 and Management's discussion on
page 10.
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 - Treasurer
and Controller
Dated August 14, 1995
--------------------------------------
12
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EXHIBIT INDEX
QUARTERLY REPORT ON FORM 10-Q
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
FOR THE QUARTER ENDED JUNE 30, 1995
EXHIBIT
(10)(a) Employment Agreement between Park-Ohio Industries, Inc. and John J.
Murray dated effective January 1, 1995
(10)(b) Park-Ohio Industries, Inc. Amended and Restated 1992 Stock Option
Plan
11 Computation of net income per common share
15 Letter re: unaudited financial information
27 Financial data schedule (Electronic filing only)
13
<PAGE> 1
Exhibit 10(a)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "AGREEMENT") is made effective the 1st day
of January, 1995 between PARK-OHIO INDUSTRIES, INC., an Ohio corporation (the
"Company"), and JOHN J. MURRAY (the "Executive").
WHEREAS, the Company desires to employ and utilize the experience
ability and services of the Executive as its President and Chief Operating
Officer, and the Executive desires to be so employed, on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the respective covenants
and agreements of the parties contained in this Agreement, the parties hereto
agree as follows:
1. EMPLOYMENT. The Company agrees to employ the Executive and the Executive
agrees to be so employed, in the capacity of President and Chief Operating
Officer of the Company.
2. TIME AND EFFORTS. During the Executive's employment, the Executive shall
diligently and conscientiously devote his full time and attention and best
efforts in discharging his duties as the Company's President and Chief
Operating Officer, provided that the Executive shall be permitted to
participate in his existing business activities if and to the extent that such
activities do not interfere with the performance of his duties hereunder.
3. PERFORMANCE OF SERVICES. The Executive's duties shall be performed at
the Company's principal place of business, and the Executive shall not be
required to relocate during the term of his employment.
4. COMPENSATION.
(A) CASH COMPENSATION. The Company shall pay to the Executive salary at a
rate of $250,000 per year (the "Base Salary"), subject to all applicable
withholding taxes, payable at the same times as salary payments to other
salaried corporate employees. Such Base Salary may be increased from time to
time at the discretion of the Board.
(B) STOCK OPTIONS. The Company shall grant to the Executive an option to
purchase 150,000 Shares, subject to the approval by the Company's
shareholders of the amendment to the Company's 1992 Stock Option Plan
("Plan"). The grant shall be pursuant to and in accordance with the Plan,
and the Stock Option Agreement with respect to such option grant shall be in
the form attached hereto as Exhibit A.
(C) MANAGEMENT INCENTIVE PLAN. The Executive will be entitled to participate
in any current or future management incentive plan of the Company, and the
Company shall pay or cause to be paid to the Executive, as a bonus, the
amount or amounts determined by the Compensation Committee of the Board and
approved by the Board to be payable. Such bonus shall be consistent with the
bonus program available to other executives in the Company.
5. BENEFITS. The Executive shall be entitled to benefits and perquisites
generally provided by the Company to its executive officers and such benefits
and perquisites as are recommended by the Compensation and Stock Option
Committee of the Company's Board of Directors and approved by the Board of
Directors and, if applicable, the Company's shareholders. The Executive shall
be entitled to health insurance on terms no less favorable than those currently
provided to any other executive of the
1
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EMPLOYMENT AGREEMENT JANUARY 1, 1995
Company. The Company will pay or reimburse the Executive for the costs
incurred by him for annual physical examinations of the Executive performed by
the physicians at the medical facilities of his choice in Northeast Ohio
including all tests, procedures and analysis as the Executive or such
physicians may reasonably select. The Company will provide the Executive with
an American-built automobile in accordance with Company policy. The Company
will pay or reimburse the Executive for all reasonable costs incurred by him
and his family in moving to Cleveland.
6. DISABILITY. If the Executive is disabled for a consecutive period of not
less than six months during the Term to the extent that he is unable to perform
his regular duties as an employee of the Company, the Company may, at its sole
discretion, at any time after the expiration of such six-month period and prior
to the termination of such disability, terminate the Executive's employment
hereunder by giving him written notice of such termination. Such termination
shall not affect the Executive's rights under any long-term disability
insurance policy maintained by the Company. In the event that the Executive's
employment hereunder is terminated by the Company under this Section 6, the
Executive shall be entitled to a severance payment in an amount equal to the
then current Base Salary.
7. TERMINATION OF EMPLOYMENT.
(A) Anything herein to the contrary notwithstanding, the Company and the
Executive may by mutual consent, evidenced in a writing signed by both
parties, agree to the termination of the Executive's employment hereunder.
Also, the Executive may unilaterally determine to terminate his employment
upon 30 days written notice to the Company, and the Company shall have the
right, upon 30 days notice to the Executive, to terminate the Executive's
employment hereunder for cause. For purposes hereof, termination for "cause"
shall mean that the Executive has been convicted of a felony or has engaged
in the commission of a fraud or embezzlement upon the Company. Subject to
Section 7(b), the Company shall at all times have the right, upon 30 days
notice to the Executive, to terminate his employment without cause.
(B) In the event of the termination of the Executive's employment with the
Company due to the Executive's resignation, the Executive shall be entitled
to receive from the Company a severance payment in an amount equal to fifty
percent (50%) of the then current Base Salary. Further, in the event that
the Executive's employment hereunder is terminated by the Company without
cause, the Executive shall be entitled to a severance payment in an amount
equal to the then current Base Salary.
(C) If the Executive's employment with the Company is terminated due to the
Executive's death, the beneficiaries designated by the Executive shall be
entitled to receive the proceeds from the Company paid life insurance.
(D) In the event of the termination of Executive's employment with the
Company for any reason whatsoever, any outstanding stock options of the
Company previously granted to the Executive shall become immediately
exercisable by the Executive.
8. CHANGE OF CONTROL. In the event of a Change in Control, as defined
below, Executive shall have the right within six months of such occurrence to
consider such event a termination of his employment as if the Executive was
terminated by the Company without cause and receive a severance payment in the
amount equal to the then current Base Salary. For purposes of this Agreement,
a "Change in Control" (assuming such event has not been previously reported)
shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
2
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EMPLOYMENT AGREEMENT JANUARY 1, 1995
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"); provided, without limitation, that a Change in Control shall be deemed
to have occurred if and at such times as (i) any "person" within the meaning
of Section 14(d) of the Exchange Act becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 40% or more of the
combined voting power of the Company's then outstanding securities, or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved
by a vote of at least two-thirds of the directors then still in office who
were directors at the beginning of the period, or (iii) the consummation of
the sale of substantially all of the assets of the Company.
9. BUSINESS EXPENSES. The Company shall reimburse the Executive for all
reasonable and necessary expenses incurred in carrying out his duties under
this Agreement, consistent with the Company's reimbursement policy generally
applicable to its executive officers. The Executive shall present to the
Company from time to time itemized accounts of such expenses in the usual form
required by the Company.
10. INDEMNIFICATION. The Executive shall be covered by the Company's
indemnification policies for Directors and Officers and shall be offered an
indemnification agreement in the form as may from time to time be in effect
with other Directors and Officers of the Company.
11. CONFIDENTIALITY; NON-COMPETITION; NON-SOLICITATION.
(A) It is expressly understood by the Company and the Executive that the
covenants contained in this Section 11 are an essential element of this
Agreement and that but for the agreement by the Executive to comply with
these covenants, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(B) The Executive hereby acknowledges that he will have (during the
Executive's employment) access, as a result of his duties and
responsibilities with the Company, to confidential information of the Company
and may have access, as a result of his duties and responsibilities with the
Company, to confidential information of affiliates or shareholders of the
Company, concerning matters affecting or relating to the business of the
Company, its affiliates or shareholders (collectively, "Confidential
Information") including but not limited to its corporate books and records,
its financial information, its personnel information, its customers and
suppliers, its prices or proceeds from sales, its products, its manner of
operation, its plans, processes, know-how, or other data, its trade secrets,
or any other information concerning the business of the Company, its
affiliates or its shareholders; provided, however, that the term
"Confidential Information" shall not include any information that is in the
public domain or is generally known to the public through no fault of the
Executive. To ensure the continued secrecy of this Confidential Information,
the Executive agrees that he will not at any time during the Executive's
employment, or at any time thereafter, in any manner, either directly or
indirectly, divulge, disclose or communicate to any person, firm, corporation
or entity in any manner whatsoever any Confidential Information, except as
directed by the Company. Upon the termination of Executive's employment with
the Company, the Executive shall deliver to the Company all Confidential
Information and all other documents, material or property of the Company in
the possession or under the control of the Executive. The Executive agrees
(i) not to engage in any business which directly or indirectly competes with
the Company or any of its affiliates or subsidiaries and (ii) except in his
performance of his duties as
3
<PAGE> 4
EMPLOYMENT AGREEMENT JANUARY 1, 1995
President and Chief Operating Officer of the Company, not to induce or
attempt to persuade any current or future employee of the Company or
any of its affiliates or subsidiaries not to be employed by, or to terminate
such employee's employment with, such employee's employer.
(C) This Paragraph 11 shall remain in full force and effect after termination
of this Agreement for one year.
(D) Without intending to limit the remedies available to the Company, the
Executive agrees that damages at law will be an insufficient remedy to the
Company in the event that the Executive violates any of the provisions of
this Section 11, and that the Company may apply for and, upon the requisite
showing, have injunctive relief in any court of competent jurisdiction to
restrain the breach or threatened breach of or otherwise to specifically
enforce any of the covenants contained in this Section 11. The Executive
further agrees that the Company, in seeking a remedy for any such violation
of this Section 11 (including the relief described in the preceding
sentence), shall not be required to make a showing as to the materiality or
importance of any such violation.
12. SUCCESSORS; BINDING AGREEMENT. This Agreement and all rights of the
Company hereunder shall inure to the benefit of and be enforceable by the
Company, its successors and assigns. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of, and be enforceable by him,
his personal or legal representatives.
13. MODIFICATIONS AND WAIVERS. No provisions of this Agreement may be
modified or amended unless such modification or amendment is authorized by the
Company's Board of Directors and is agreed to in writing, signed by the
Executive and by another executive officer of the Company. No waiver by either
party hereto of any breach by the other party hereto or any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
14. NOTICES. All notices, demands and other communications made or given in
connection with this Agreement shall be in writing and personally delivered,
sent by telecopy, or mailed by registered or certified mail, postage paid,
addressed to the respective parties as follows:
To the Company: Park-Ohio Industries, Inc.
600 Tower East
20600 Chagrin Boulevard
Cleveland, Ohio 44122
To the Executive: Mr. John J. Murray
1730 Governors Way
Blue Bell, Pennsylvania 19422
or to such other addresses as either party may furnish to the other in writing
in the manner set forth above. All notices shall be effective upon receipt.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto relating to the subject matter hereof and there are no
written or oral terms or representations made by either party other than those
contained herein.
16. GOVERNING LAW. The validity, interpretation, construction, performance
and enforcement of this Agreement shall be governed by the laws of the State of
Ohio.
4
<PAGE> 5
EMPLOYMENT AGREEMENT JANUARY 1, 1995
17. ARBITRATION. Except as otherwise provided in Section 11 hereof with
respect to injunctive relief for certain acts, any controversy or claim arising
out of or relating to this Agreement shall be settled by arbitration in
Cleveland, Ohio in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "Rules"). The arbitration proceeding
shall be conducted by three arbitrators, two of whom shall be selected in
accordance with a procedure set forth in Section 13 of the Rules and the third
of whom shall be a retired judge selected by mutual agreement of the other
selected arbitrators, provided such a person is a member in good standing of
the bar of any state of the United States of America. The decision of the
arbitrators shall be in writing and presented in separate findings of fact and
conclusions of law. The award of the arbitrators shall be final and binding
on the parties from which no appeal may be taken unless clearly erroneous as a
matter of law, and judgment upon such award may be entered in any court having
jurisdiction thereof. The arbitrators, in the award, may assess the fees and
expenses of the arbitrators, and the arbitration proceeding, and the witnesses
and attorneys' fees of the parties, or any part thereof, against any party or
parties, taking into account the circumstances of the case; provided, however,
that all fees and expenses shall be assessed against the Company if the Employee
prevails on any issue raised.
18. INVALIDITY. The invalidity or unenforceability of any term or terms of
this Agreement shall not invalidate, make unenforceable or otherwise affect any
other term of this Agreement which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
PARK-OHIO INDUSTRIES, INC.
By: /s/ Edward F. Crawford
-------------------------------------------
Title: Chairman and Chief Executive Officer
----------------------------------------
/s/ John J. Murray
----------------------------------------------
John J. Murray
5
<PAGE> 1
EXHIBIT 10(b)
PARK-OHIO INDUSTRIES, INC.
AMENDED AND RESTATED
1992 STOCK OPTION PLAN
1. PURPOSE OF PLAN. The purpose of this Plan is to advance the
interests of Park-Ohio Industries, Inc. (the "Company") and its shareholders by
providing means whereby officers (including officers who are directors) and key
employees of the Company and its subsidiaries may be furnished with additional
incentive by being given an opportunity to purchase shares of Common Stock of
the Company ("Shares") pursuant to the exercise of options granted under this
Plan. The options granted under this Plan shall either be options which are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision ("Incentive Stock Options") or options which do not qualify as
Incentive Stock Options ("Non-Statutory Options").
2. SHARES SUBJECT TO PLAN. The aggregate number of Shares for which
options may be granted under this Plan shall not exceed 850,000, and the
maximum aggregate number of shares for which options may be granted to any
officer or key employee in any calendar year shall be 200,000, except to the
extent of adjustment authorized by Section 7. The Shares to be issued upon
exercise of options granted under the Plan shall be made available, at the
discretion of the Board of Directors, from the authorized but unissued Shares
or from Shares reacquired by the Company, including Shares purchased in the
open market. Any Shares for which an option is granted hereunder which are
released from such option for any reason shall be available for other options
under this Plan.
3. PLAN ADMINISTRATION. This Plan shall be administered by the
Compensation and Stock Option Committee (the "Committee") composed of not less
than two directors appointed by the Board of Directors. The Board of Directors
may also appoint one or more directors as alternate members of the Committee,
who may take the place of any absent member or members at any meeting of the
Committee. The members and alternate members of the Committee shall at all
times be "disinterested persons" within the meaning of Rule 16b-3(c)(2)(i)
promulgated under the Securities Exchange Act of 1934. The Committee shall
have full power to construe and interpret the Plan, to establish rules for its
administration and to grant options under the Plan. A majority of the
Committee shall constitute a quorum, and the action of a majority of the
members (including alternate members) of the Committee present at any meeting
at which a quorum is present, or acts unanimously approved in writing by all
members shall be acts of the Committee.
4. OPTION GRANTS. The Committee may from time to time and upon such
terms and conditions as it may determine, authorize the granting of Incentive
Stock Options and Non-Statutory Options to purchase Shares from the Company to
officers and key employees (as determined by the Committee) of the Company or
any subsidiary of the Company (as defined in Section 424 of the Code) and may
determine the number of Shares to be covered by each such option. The term
"employees" includes officers and directors who are full-time employees of the
Company or any subsidiary of the Company. The aggregate fair market value
(determined as of the date the option is granted) of Shares for which Incentive
Stock Options are exercisable for the first time by an individual during any
calendar year (under this Plan or any other plan of the company or of a parent
or subsidiary of the Company which provides for the granting of Incentive Stock
Options) shall not exceed $100,000. Any Incentive Stock Option granted to any
employee who is, at the time the option is granted, deemed for purposes of
Section 422 of the Code, or any successor provision, to own shares of the
Company possessing more than 10% of the total combined voting power of all
classes of shares of the Company or of a parent or subsidiary of the Company
shall have an option exercise price that is at least 110% of the fair market
value of the Shares at the Date of grant and shall not be exercisable after the
expiration of five years from the date it is
<PAGE> 2
granted. All actions of the Committee under this Section shall be
conclusive; provided such actions are not inconsistent with the provisions of
the Plan. Nothing in the Plan or in any option granted thereunder shall confer
any right on an employee to continue in the employ of the Company or shall
interfere in any way with the right of the Company or any subsidiary of the
Company, at any time to terminate his or her employment with or without cause
or to adjust his or her compensation.
5. OPTION PRICE. The option price shall be determined by the
Committee and set forth in the option agreement, but in no event shall the
option price be less than 100 percent of the fair market value of the Shares
covered by the option at the time the option is granted. The date on which the
Committee approves the granting of an option shall be deemed the date on which
the option is granted. The fair market value shall be the closing price of the
Shares on the NASDAQ National Market on the trading day immediately preceding
the date on which the option is granted.
6. PAYMENT. Upon the exercise of an option, payment of the option
exercise price may be made in cash or Shares or a combination of cash and
Shares. The Committee shall establish appropriate procedures for the
acceptance of Shares in payment or partial payment of an option exercise price.
7. ADJUSTMENTS. The Committee may make or provide for such
adjustments in the option price and in the number or kind of Shares or other
securities available for or covered by options as the Committee, in its sole
discretion, may determine are equitably required as the result of any change in
the number or kind of Shares or of other securities into which Shares shall
have been changed or for which they shall have been exchanged.
8. OPTION PERIOD. No option granted under this Plan may be
exercised later than 10 years after the date on which the option is granted.
9. OPTION AGREEMENT. The option agreement in which option rights
are granted to an employee shall be in the applicable form (consistent with
this Plan) from time to time approved by the Committee and shall be signed on
behalf of the Company by the Chairman of the Board, the President, the
Secretary or any Vice President of the Company, other than the employee who is
a party thereto, and shall be dated as of the date of the granting of the
option, as determined in Section 5. Except as permitted by applicable law, no
option shall be transferable by the optionee except by will or the laws of
descent and distribution, and options may be exercised during the employee's
lifetime only by him or her or his or her guardian or legal representative.
10. AMENDMENT OF PLAN. The Board of Directors shall have the right
to amend, modify, suspend or terminate this Plan at any time; provided,
however, that no such action shall, without the consent of any optionee, affect
or in any way impair the rights of such optionee under any option theretofore
granted under the Plan. In addition, no amendment or change shall be made in
the Plan, without further stockholder approval, (A) increasing the total number
of Shares as to which options may be granted under the Plan; (B) changing the
minimum option price hereinbefore specified for the optioned Shares or
otherwise materially increasing the benefits accruing to participants under the
Plan; or (C) changing the class of employees to whom options may be granted
under the Plan. Notwithstanding any other provision hereof, no action may be
taken by the Company which will impair the validity of any option then
outstanding or which will prevent the options issued or to be issued under this
Plan intended as Incentive Stock Options from being Incentive Stock Options
under Section 422 of the Code, or any successor provision, or prevent options
issued pursuant to this Plan from meeting the requirements for exemption from
Section 16(b) of the Securities Exchange Act of 1934, or subsequent comparable
statute, as set forth in Rule 16b-3 under said Act or subsequent comparable
Rule.
11. EXPIRATION OF PLAN. Options may be granted under this Plan at
any time on or prior to February 18, 2002, on which date the Plan shall expire
but without affecting any options then outstanding.
12. APPROVAL OF PLAN BY SHAREHOLDERS. The Amended and Restated Plan
was adopted by resolution of the Board of Directors on March 16, 1995 and
submitted for approval by the shareholders of the Company at the 1995 Annual
Meeting.
<PAGE> 1
EXHIBIT 11
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(In Thousands - Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 4,821 $ 3,273 $ 8,561 $ 6,410
Amortization of imputed goodwill
associated with the earnout shares (21) (150) (42) (185)
----------- ----------- ----------- -----------
Net income related to shareholders of
Common Stock (Primary) 4,800 3,123 8,519 6,225
Interest associated with convertible
senior subordinated debentures 403 202 806 202
----------- ----------- ----------- -----------
Net income related to shareholders of
Common Stock (Fully diluted) $ 5,203 $ 3,325 $ 9,325 $ 6,427
=========== =========== =========== ===========
PRIMARY COMPUTATION
Average shares outstanding during the period 10,402 6,942 9,361 6,858
Effect of Kay Home Products, Inc.
earnout shares deemed to be issued
(Note A) -0- 793 -0- 688
Effect of General Aluminum Mfg.
Company earnout shares deemed to
be issued 188 188 188 188
Effect of dilutive stock options based
on the treasury stock method using
the average market price for the
period 144 157 161 158
----------- ----------- ----------- -----------
Shares used 10,734 8,080 9,710 7,892
=========== =========== =========== ===========
Net income per share of Common Stock $ .45 $ .39 $ .88 $ .79
=========== =========== =========== ===========
FULLY DILUTED COMPUTATION
Average shares outstanding per primary
computation above 10,734 8,080 9,710 7,892
Additional effect of dilutive stock
options based on the treasury stock
method using the end of period market
price, if higher than the average
market price -0- 1 -0- 4
Effect of assuming conversion of the
convertible senior subordinated
debentures 1,151 576 1,151 288
----------- ----------- ----------- -----------
Shares used 11,885 8,657 10,861 8,184
=========== =========== =========== ===========
Net income per share of Common Stock* $ .44 $ .38 $ .86 $ .79
=========== =========== =========== ===========
<FN>
*Disclosure not presented in the consolidated condensed statement of income
because the effect is not material.
NOTE A - Shares issued in January, 1995, and are included in average shares
outstanding for the three and six-month periods ended June 30, 1995.
</TABLE>
<PAGE> 1
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 Statements
on Forms S-3 and S-8 (relating to the 1992 Stock Option Plan) of Park-Ohio
Industries, Inc. for the registration of 363,094 shares and 350,000 shares,
respectively, of its common stock of our report dated July 24, 1995, relating
to the unaudited condensed consolidated interim financial statements of
Park-Ohio Industries, Inc., which is included in its Form 10-Q for the quarter
ended June 30, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is 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
July 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000076282
<NAME> PARK-OHIO INDUSTRIES INC.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<CASH> 2,141
<SECURITIES> 0
<RECEIVABLES> 68,082
<ALLOWANCES> 870
<INVENTORY> 69,507
<CURRENT-ASSETS> 141,607
<PP&E> 127,234
<DEPRECIATION> 64,778
<TOTAL-ASSETS> 284,240
<CURRENT-LIABILITIES> 58,675
<BONDS> 105,432
<COMMON> 10,402
0
0
<OTHER-SE> 70,079
<TOTAL-LIABILITY-AND-EQUITY> 284,240
<SALES> 172,230
<TOTAL-REVENUES> 172,230
<CGS> 145,723
<TOTAL-COSTS> 145,723
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,537
<INCOME-PRETAX> 8,802
<INCOME-TAX> 241
<INCOME-CONTINUING> 8,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,561
<EPS-PRIMARY> .88
<EPS-DILUTED> .86
</TABLE>
